497 1 a2237657z497.htm 497

Use these links to rapidly review the document
TABLE OF CONTENTS
INDEX TO FINANCIAL STATEMENTS
TABLE OF CONTENTS
INDEX TO FINANCIAL STATEMENTS

Table of Contents


Filed Pursuant to Rule 497
File No. 333-218040

This preliminary prospectus supplement relates to an effective registration statement under the Securities Act of 1933, as amended, but the information in this preliminary prospectus supplement is not complete and may be changed. This preliminary prospectus supplement and the accompanying prospectus are not an offer to sell and are not soliciting an offer to buy these securities in any jurisdiction where the offer and sale is not permitted.

Subject to Completion, Dated February 11, 2019

PRELIMINARY PROSPECTUS SUPPLEMENT
(to Prospectus dated July 13, 2018)

3,750,000 Shares


New Mountain Finance Corporation

Common Stock



            New Mountain Finance Corporation ("NMFC," the "Company," "we," "us," and "our") is a Delaware corporation that was originally incorporated on June 29, 2010. We are a closed-end, non-diversified management investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended (the "1940 Act"). 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. Our 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.

            The investments that we invest in are almost entirely rated below investment grade or may be unrated, which are often referred to as "leveraged loans", "high yield" or "junk" debt investments, and may be considered "high risk" or speculative compared to debt investments that are rated investment grade. 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 our net asset value and income distributions. Our investments are also primarily floating rate debt investments that contain interest reset provisions that may make it more difficult for borrowers to make debt repayments to us if interest rates rise. In addition, some of our 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. Our debt investments may also lose significant market value before a default occurs. Furthermore, an active trading market may not exist for these securities. This illiquidity may make it more difficult to value our investments.

            We are offering for sale 3,750,000 shares of our common stock. We have granted the underwriters a 30-day option to purchase up to 562,500 additional shares of our common stock at the public offering price, less underwriting discounts and commissions.

            Our common stock is listed on the New York Stock Exchange under the symbol "NMFC". On February 8, 2019, the last reported sales price on the New York Stock Exchange for our common stock was $13.95 per share, and the net asset value per share of our common stock on September 30, 2018 (the last date prior to the date of this prospectus supplement on which we determined our net asset value per share) was $13.58.

            An investment in our common stock is very risky and highly speculative. Shares of closed-end investment companies, including business development companies, frequently trade at a discount to their net asset value. In addition, the companies in which we invest in are subject to special risks. See "Risk Factors" beginning on page S-25 of this prospectus supplement and beginning on page 27 of the accompanying prospectus to read about factors you should consider, including the risk of leverage, before investing in our common stock.

            This prospectus supplement and the accompanying prospectus contain important information about us that a prospective investor should know before investing in our common stock. Please read this prospectus supplement and the accompanying prospectus before investing and keep it for future reference. We file annual, quarterly and current reports, proxy statements and other information with the United States Securities and Exchange Commission (http://www.sec.gov), which are available free of charge by contacting us by mail at 787 Seventh Avenue, 48th Floor, New York, New York 10019 or on our website at http://www.newmountainfinance.com. Information contained on our website is not incorporated by reference into this prospectus supplement and the accompanying prospectus, and you should not consider that information to be part of this prospectus supplement and the accompanying prospectus.



            Neither the United States Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities, or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

    Per Share     Total(2)  

Public Offering Price

  $             $            

Sales Load paid by us (Underwriting Discounts and Commissions)(1)(3)

  $             $            

Proceeds to us (before expenses)(1)

  $     $    

Sales Load payable to the underwriters by Investment Adviser (Underwriting Discounts and Commissions)(1)(2)(3)

  $     $    

(1)
New Mountain Finance Advisers BDC, L.L.C. (the "Investment Adviser") has agreed to bear $             , or $             per share, of the sales load in connection with this offering, which is reflected in the above table. All payments made by the Investment Adviser will not be subject to reimbursement by us. All other expenses of the offering will be borne by us. We will incur approximately $0.3 million of estimated expenses in connection with this offering.

(2)
To the extent that the underwriters sell more than 3,750,000 shares of our common stock, the underwriters have the option to purchase up to an additional 562,500 shares of our common stock at the public offering price, less the sales load, within 30 days of the date of this prospectus supplement. If the underwriters exercise this option in full, the total public offering price, sales load payable by us, proceeds to us and sales load payable by the Investment Adviser will be $             , $             , $              and $             , respectively. See "Underwriting".

(3)
See "Underwriting" for details of compensation to be received by the underwriters

            The underwriters expect to deliver the shares against payment in New York, New York on or about                      , 2019.



Joint-Lead Bookrunners

Wells Fargo Securities

 

Morgan Stanley

 

Goldman Sachs & Co. LLC

 

Keefe, Bruyette & Woods
                    
A Stifel Company
Co-Managers

Janney Montgomery Scott

 

 

 

Oppenheimer & Co.



Prospectus Supplement dated                          , 2019


Table of Contents


TABLE OF CONTENTS

PROSPECTUS SUPPLEMENT

PROSPECTUS

ABOUT THIS PROSPECTUS

    ii  

PROSPECTUS SUMMARY

    1  

THE OFFERING

    11  

FEES AND EXPENSES

    16  

SELECTED FINANCIAL AND OTHER DATA

    19  

SELECTED QUARTERLY FINANCIAL DATA

    23  

DESCRIPTION OF RESTRUCTURING

    24  

RISK FACTORS

    27  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

    64  

USE OF PROCEEDS

    66  

PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS

    67  

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    70  

SENIOR SECURITIES

    101  

BUSINESS

    103  

PORTFOLIO COMPANIES

    118  

MANAGEMENT

    126  

PORTFOLIO MANAGEMENT

    136  

INVESTMENT MANAGEMENT AGREEMENT

    138  

ADMINISTRATION AGREEMENT

    146  

LICENSE AGREEMENT

    146  

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    147  

CONTROL PERSONS AND PRINCIPAL STOCKHOLDERS

    149  

DETERMINATION OF NET ASSET VALUE

    151  

DIVIDEND REINVESTMENT PLAN

    154  

DESCRIPTION OF SECURITIES

    156  

S-i


Table of Contents

S-ii


Table of Contents

ABOUT THIS PROSPECTUS SUPPLEMENT

          You should rely only on the information contained in this prospectus supplement and the accompanying prospectus. Neither we nor the underwriters have authorized any other person to provide you with different information from that contained in this prospectus supplement or the accompanying prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus supplement and the accompanying prospectus do not constitute an offer to sell, or a solicitation of an offer to buy, any shares of our common stock by any person in any jurisdiction where it is unlawful for that person to make such an offer or solicitation or to any person in any jurisdiction to whom it is unlawful to make such an offer or solicitation. The information contained in this prospectus supplement and the accompanying prospectus is complete and accurate only as of their respective dates, regardless of the time of their delivery or sale of our common stock. This prospectus supplement supersedes the accompanying prospectus to the extent it contains information different from or additional to the information in that prospectus.

          This document is in two parts. The first part is this prospectus supplement, which describes the terms of this offering of common stock and also adds to and updates information contained in the accompanying prospectus. The second part is the accompanying prospectus, which gives more general information and disclosure. To the extent the information contained in this prospectus supplement differs from the information contained in the accompanying prospectus, the information in this prospectus supplement shall control. Please carefully read this prospectus supplement and the accompanying prospectus together with any exhibits and the additional information described under "Available Information" and in the "Prospectus Supplement Summary", "Prospectus Summary" and "Risk Factors" sections of this prospectus supplement and the accompanying prospectus before you make an investment decision. Unless otherwise indicated, all information included in this prospectus supplement assumes no exercise by the underwriters of their option to purchase up to an additional 562,500 shares of our common stock.

S-iii


Table of Contents


PROSPECTUS SUPPLEMENT SUMMARY

          This summary highlights some of the information in this prospectus supplement and the accompanying prospectus. It may not contain all the information that is important to you. For a more complete understanding, we encourage you to read this entire prospectus supplement and the accompanying prospectus and the documents to which we have referred in this prospectus supplement, together with the accompanying prospectus, including the risks set forth under "Risk Factors" and the other information included in this prospectus supplement and the accompanying prospectus.

          In this prospectus supplement, unless the context otherwise requires, references to:

    "NMFC", the "Company", "we", "us" and "our" refers to New Mountain Finance Corporation, a Delaware corporation, which was incorporated on June 29, 2010, including, where appropriate, its wholly-owned direct and indirect subsidiaries;

    "NMF Holdings" and "Predecessor Operating Company" refers to New Mountain Finance Holdings, L.L.C., a Delaware limited liability company.;

    "NMF SLF" refers to New Mountain Finance SPV Funding, L.L.C., a Delaware limited liability company;

    "NMNLC" refers to New Mountain Net Lease Corporation, a Maryland corporation;

    "NMFDB" refers to New Mountain Finance DB, L.L.C., a Delaware limited liability company;

    "SBIC I GP" refers to New Mountain Finance SBIC G.P. L.L.C., a Delaware limited liability company;

    "SBIC I" refers to New Mountain Finance SBIC L.P., a Delaware limited partnership;

    "SBIC II GP" refers to New Mountain Finance SBIC II G.P. L.L.C., a Delaware limited liability company;

    "SBIC II" refers to New Mountain Finance SBIC II L.P., a Delaware limited partnership;

    "Guardian AIV" refers to New Mountain Guardian AIV, L.P.;

    "AIV Holdings" refers to New Mountain Finance AIV Holdings Corporation, a Delaware corporation which was incorporated on March 11, 2011, of which Guardian AIV was the sole stockholder;

    "Investment Adviser" refers to New Mountain Finance Advisers BDC, L.L.C., our investment adviser;

    "Administrator" refers to New Mountain Finance Administration, L.L.C., our administrator;

    "New Mountain Capital" refers to New Mountain Capital Group, L.P. together with New Mountain Capital L.L.C. and its affiliates whose ultimate owners include Steven B. Klinsky and other related vehicles;

    "Predecessor Entities" refers to New Mountain Guardian (Leveraged), L.L.C. and New Mountain Guardian Partners, L.P., together with their respective direct and indirect wholly-owned subsidiaries prior to our initial public offering;

    "NMFC Credit Facility" refers to our Senior Secured Revolving Credit Agreement with Goldman Sachs Bank USA, Morgan Stanley Bank, N.A. and Stifel Bank & Trust, dated June 4, 2014, as amended (together with the related guarantee and security agreement);

S-1


Table of Contents

    "Holdings Credit Facility" refers to NMF Holdings' Third Amended and Restated Loan and Security Agreement with Wells Fargo Bank, National Association, dated October 24, 2017, as amended;

    "DB Credit Facility" refers to our Secured Revolving Credit Agreement with Deutsche Bank AG, New York Branch, dated December 14, 2018;

    "Predecessor Holdings Credit Facility" refers to NMF Holdings' Amended and Restated Loan and Security Agreement with Wells Fargo Bank, National Association, dated May 19, 2011, as amended;

    "SLF Credit Facility" refers to NMF SLF's Loan and Security Agreement with Wells Fargo Bank, National Association, dated October 27, 2010, as amended;

    "2014 Convertible Notes" refers to our 5.00% convertible notes due June 15, 2019 issued on June 3, 2014 and September 30, 2016 under an indenture dated June 3, 2014, between us and U.S. Bank National Association, as trustee;

    "2016 Unsecured Notes" refers to our 5.313% unsecured notes due May 15, 2021 issued on May 6, 2016 and September 30, 2016 to institutional investors in a private placement;

    "2017A Unsecured Notes" refers to our 4.760% unsecured notes due July 15, 2022 issued on June 30, 2017 to institutional investors in a private placement;

    "2018A Unsecured Notes" refers to our 4.870% unsecured notes due January 30, 2023 issued on January 30, 2018 to institutional investors in a private placement;

    "2018B Unsecured Notes" refers to our 5.36% unsecured notes due June 28, 2023 issued on July 5, 2018 to institutional investors in a private placement;

    "2018 Convertible Notes" refers to our 5.75% convertible notes due August 15, 2023 issued on August 20, 2018 and August 30, 2018 under an indenture and a first supplemental indenture, both dated August 20, 2018, between us and U.S. Bank National Association, as trustee;

    "5.75% Unsecured Notes" refers to our 5.75% unsecured notes due October 1, 2023, issued on September 25, 2018 and October 17, 2018 under an indenture, dated August 20, 2018, as supplemented by a second supplemental indenture thereto, dated September 25, 2018, between us and U.S. Bank National Association, as trustee; and

    "Unsecured Notes" refers to the 2016 Unsecured Notes, the 2017A Unsecured Notes, the 2018A Unsecured Notes, 2018B Unsecured Notes and the 5.75% Unsecured Notes.

          For the periods prior to and as of December 31, 2013, all financial information provided in this prospectus supplement and the accompanying prospectus reflect our organizational structure prior to the restructuring on May 8, 2014 described under "Description of Restructuring" in the accompanying prospectus, where NMF Holdings functioned as the operating company.


Overview

New Mountain Finance Corporation

          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

S-2


Table of Contents

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").

          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 Administrator, a wholly-owned subsidiary of New Mountain Capital, provides the administrative services necessary to conduct our day-to-day operations.

          Our wholly-owned subsidiary, NMF Holdings, is a Delaware limited liability company whose assets are used to secure NMF Holdings' credit facility. For additional information about our organizational structure prior to May 8, 2014, see "Description of Restructuring" in the accompanying prospectus. NMF Ancora Holdings Inc. ("NMF Ancora"), NMF QID NGL Holdings, Inc. ("NMF QID") and NMF YP Holdings Inc. ("NMF YP"), our wholly-owned subsidiaries, are structured as Delaware entities that serve as tax blocker corporations which hold 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. 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. Additionally, our wholly-owned subsidiary, New Mountain Finance Servicing, L.L.C. ("NMF Servicing"), serves as the administrative agent on certain investment transactions. SBIC I, and its general partner, SBIC I GP, are organized in Delaware as a limited partnership and limited liability company, respectively. During the year ended December 31, 2017, SBIC II and its general partner, SBIC II GP, were organized in Delaware as a limited partnership and limited liability company, respectively. SBIC I, SBIC I GP, SBIC II and SBIC II GP are our consolidated wholly-owned direct and indirect subsidiaries. SBIC I and SBIC II each received a license from the United States ("U.S.") Small Business Administration (the "SBA") to operate as a small business investment company ("SBIC") under Section 301(c) of the Small Business Investment Act of 1958, as amended (the "1958 Act"). Our wholly-owned subsidiary, NMNLC, a Maryland corporation, was formed to acquire commercial real properties that are subject to "triple net" leases and has qualified and intends to continue to qualify as a real estate investment trust ("REIT") within the meaning of Section 856(a) of the Code. During the year ended December 31, 2018, NMFDB was organized in Delaware as a limited liability company whose assets are used to secure NMFDB's credit facility.

          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, 2018, our top five industry concentrations were business services, software, healthcare services, education and investment funds.

S-3


Table of Contents

          The investments that we invest in are almost entirely rated below investment grade or may be unrated, which are often referred to as "leveraged loans", "high yield" or "junk" debt investments, and may be considered "high risk" or speculative compared to debt investments that are rated investment grade. 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 our net asset value and income distributions. Our investments are also primarily floating rate debt investments that contain interest reset provisions that may make it more difficult for borrowers to make debt repayments to us if interest rates rise. In addition, some of our 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. Our debt investments may also lose significant market value before a default occurs. Furthermore, an active trading market may not exist for these securities. This illiquidity may make it more difficult to value our investments.

          As of September 30, 2018, our net asset value was $1,033.5 million and our portfolio had a fair value of approximately $2,294.8 million in 92 portfolio companies, with a weighted average yield to maturity at cost for income producing investments ("YTM at Cost") of approximately 11.0% and a weighted average yield to maturity at cost for all investments ("YTM at Cost for Investments") of approximately 10.9%. 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 as 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 uses 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

Originations and Repayments

          We had approximately $332.0 million of originations and commitments since September 30, 2018 through February 8, 2019. This was offset by approximately $79.2 million of repayments and $119.1 million of sales during the same period.

5.75% Unsecured Notes

          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.

Distribution

          On November 1, 2018, our board of directors declared a fourth quarter 2018 distribution of $0.34 per share which was paid on December 28, 2018 to holders of record as of December 14, 2018.

Holdings Credit Facility

          On November 19, 2018, we entered into the Second Amendment to Loan and Security Agreement (the "Second Amendment"), which amended the Holdings Credit Facility. Among other changes, the Second Amendment: increased the maximum facility amount from $495.0 million to $695.0 million; made certain technical changes to facilitate further increases should any new or existing lender and NMF Holdings mutually agree to do so; modified certain eligibility criteria and concentration limits for loans acquired by NMF Holdings; lowered the concentration limit for non-first lien loans from 50% to 35%; changed the minimum asset coverage ratio for us and our consolidated subsidiaries from 2:1 to 1.5:1, changed the cure level to 1.75:1; and changed the default basket for tax liens and other governmental liens from $50,000 to $250,000.

S-4


Table of Contents

          On December 13, 2018, January 8, 2019 and January 25, 2019, NMF Holdings entered into certain Joinder Supplements (the "Joinders") to add TIAA, FSB, Old Second National Bank and Sumitomo Mitsui Trust Bank, Limited, New York, respectively, as new lenders under the Holdings Credit Facility. After giving effect to each of the Joinders, the aggregate commitments of the lenders under the Holdings Credit Facility equals $675.0 million. The Holdings Credit Facility continues to have a revolving period ending on October 24, 2020, and will still mature on October 24, 2022.

Deutsche Bank Facility

          On December 14, 2018, our newly formed wholly-owned subsidiary, NMFDB, as the borrower (the "DB Facility Borrower"), entered into a secured revolving credit facility with Deutsche Bank AG, New York Branch ("Deutsche Bank") pursuant to a Loan Financing and Servicing Agreement (together with the exhibits and schedules thereto, the "DB Facility Agreement" and the secured revolving credit facility thereunder, the "DB Credit Facility"), by and among the DB Facility Borrower, us, as equityholder and servicer, the lenders from time to time party thereto, Deutsche Bank, as the facility agent (the "Facility Agent"), the other agents from time to time party thereto and U.S. Bank National Association, as collateral agent and collateral custodian. The facility amount and the commitment of Deutsche Bank is $100.0 million. With the consent of the Facility Agent (which may be made subject to conditions), Deutsche Bank and the DB Facility Borrower may in the future agree to increase the commitments and the facility amount by up to $200.0 million or add additional lenders. The lenders under the DB Credit Facility will make advances to the DB Facility Borrower during a revolving period (the "Revolving Period") that will expire on December 14, 2021, provided that the Revolving Period may be extended with the consent of the lenders and may also terminate early if an event of default or other adverse events, specified in the DB Facility Agreement, occur. The maturity date for the DB Credit Facility is December 14, 2023.

Preliminary Estimates of Net Asset Value and Net Investment Income

          Set forth below is a preliminary estimate of our net asset value per share as of December 31, 2018 and a preliminary estimate of our net investment income per share range for the three months ended December 31, 2018. The following estimates are not a comprehensive statement of our financial condition or results for the period ended December 31, 2018. We advise you that our actual results for the three months ended December 31, 2018 may differ materially from these estimates, which are given only as of the date of this prospectus supplement, as a result of the completion of our financial closing procedures, final adjustments and other developments, including changes in interest rates, changes in the businesses to whom we have made loans or market and industry fluctuations, which may arise between now and the time that our financial results for the three months ended December 31, 2018 are finalized. This information is inherently uncertain.

          As of the date of this prospectus supplement, we estimate that our net asset value per share as of December 31, 2018 was approximately $13.20 to $13.25. We also estimate that as of the date of this prospectus supplement our net asset value per share has increased since December 31, 2018 due to changes in market conditions. The offering price per share of our common stock, net of the sales load (underwriting discounts and commissions), will be in excess of the net asset value per share of our common stock at the time we make this offering.

          As of the date of this prospectus supplement, we currently expect that our net investment income per share was between $0.35 and $0.36 for the three months ended December 31, 2018.

          The preliminary financial estimates provided herein have been prepared by, and are the responsibility of, management. Neither Deloitte & Touche LLP, our independent registered public accounting firm, nor any other independent accountants have audited, reviewed, compiled, or performed any procedures with respect to the accompanying preliminary financial data.

S-5


Table of Contents

Accordingly, Deloitte & Touche LLP does not express an opinion or any form of assurance with respect thereto and assumes no responsibility for, and disclaims any association with, this information.

Share Repurchase Program

          On January 3, 2019, our board of directors extended our common stock repurchase program and we expect our common stock repurchase program to be in place until the earlier of December 31, 2019 or until $50.0 million of our outstanding shares of common stock have been repurchased.


The Investment Adviser

          The Investment Adviser, a wholly-owned subsidiary of New Mountain Capital, manages our day-to-day operations and provides us with investment advisory and management services. In particular, the Investment Adviser is responsible for identifying attractive investment opportunities, conducting research and due diligence on prospective investments, structuring our investments and monitoring and servicing our investments. We currently do not have, and do not intend to have, any employees. The Investment Adviser also manages New Mountain Guardian Partners II, L.P., a Delaware limited partnership, and New Mountain Guardian Partners II Offshore, L.P., a Cayman Islands exempted limited partnership, (together "Guardian II"), which commenced operations in April 2017. As of September 30, 2018, the Investment Adviser was supported by over 140 employees and senior advisors of New Mountain Capital.

          The Investment Adviser is managed by a five member investment committee (the "Investment Committee"), which is responsible for approving purchases and sales of our investments above $10.0 million in aggregate by issuer. The Investment Committee currently consists of Steven B. Klinsky, Robert A. Hamwee, Adam B. Weinstein and John R. Kline. The fifth and final member of the Investment Committee will consist of a New Mountain Capital Managing Director who will hold the position on the Investment Committee on an annual rotating basis. Beginning in August 2018, Andre V. Moura was appointed to the Investment Committee for a one year term. In addition, our executive officers and certain investment professionals of the Investment Adviser are invited to all Investment Committee meetings. Purchases and dispositions below $10.0 million may be approved by our Chief Executive Officer. These approval thresholds are subject to change over time. We expect to benefit from the extensive and varied relevant experience of the investment professionals serving on the Investment Committee, which includes expertise in private equity, primary and secondary leveraged credit, private mezzanine finance and distressed debt.


Competitive Advantages

          We believe that we have the following competitive advantages over other capital providers to middle market companies:

Proven and Differentiated Investment Style With Areas of Deep Industry Knowledge

          In making its investment decisions, the Investment Adviser applies New Mountain Capital's long-standing, consistent investment approach that has been in place since its founding in 1999. We focus on companies in defensive growth niches of the middle market space where we believe few debt funds have built equivalent research and operational size and scale.

          We benefit directly from New Mountain Capital's private equity investment strategy that seeks to identify attractive investment sectors from the top down and then works to become a well positioned investor in these sectors. New Mountain Capital focuses on companies and industries with sustainable strengths in all economic cycles, particularly ones that are defensive in nature, that

S-6


Table of Contents

have secular tailwinds and can maintain pricing power in the midst of a recessionary and/or inflationary environment. New Mountain Capital focuses on companies within sectors in which it has significant expertise (examples include software, education, niche healthcare, business services, federal services and distribution & logistics) while typically avoiding investments in companies with products or services that serve markets that are highly cyclical, have the potential for long-term decline, are overly-dependent on consumer demand or are commodity-like in nature.

          In making its investment decisions, the Investment Adviser has adopted the approach of New Mountain Capital, which is based on three primary investment principles:

    1.
    A generalist approach, combined with proactive pursuit of the highest quality opportunities within carefully selected industries, identified via an intensive and structured ongoing research process;

    2.
    Emphasis on strong downside protection and strict risk controls; and

    3.
    Continued search for superior risk adjusted returns, combined with timely, intelligent exits and outstanding return performance.

Experienced Management Team and Established Platform

          The Investment Adviser's team members have extensive experience in the leveraged lending space. Steven B. Klinsky, New Mountain Capital's Founder, Chief Executive Officer and Managing Director and Chairman of our board of directors, was a general partner of Forstmann Little & Co., a manager of debt and equity funds totaling multiple billions of dollars in the 1980s and 1990s. He was also a co-founder of Goldman Sachs & Co. LLC's Leverage Buyout Group in the period from 1981 to 1984. Robert A. Hamwee, our Chief Executive Officer and Managing Director of New Mountain Capital, was formerly President of GSC Group, Inc. ("GSC"), where he was the portfolio manager of GSC's distressed debt funds and led the development of GSC's CLOs. John R. Kline, our President and Chief Operating Officer and Managing Director of New Mountain Capital, worked at GSC as an investment analyst and trader for GSC's control distressed and corporate credit funds and at Goldman Sachs & Co. LLC in the Credit Risk Management and Advisory Group.

          Many of the debt investments that we have made to date have been in the same companies with which New Mountain Capital has already conducted months of intensive acquisition due diligence related to potential private equity investments. We believe that private equity underwriting due diligence is usually more robust than typical due diligence for loan underwriting. In its underwriting of debt investments, the Investment Adviser is able to utilize the research and hands-on operating experience that New Mountain Capital's private equity underwriting teams possess regarding the individual companies and industries. Business and industry due diligence is led by a team of investment professionals of the Investment Adviser that generally consists of three to seven individuals, typically based on their relevant company and/or industry specific knowledge. Additionally, the Investment Adviser is also able to utilize its relationships with operating management teams and other private equity sponsors. We believe this differentiates us from many of our competitors.

Significant Sourcing Capabilities and Relationships

          We believe the Investment Adviser's ability to source attractive investment opportunities is greatly aided by both New Mountain Capital's historical and current reviews of private equity opportunities in the business segments we target. To date, a significant majority of the investments that we have made are in the debt of companies and industry sectors that were first identified and reviewed in connection with New Mountain Capital's private equity efforts, and the majority of our current pipeline reflects this as well. Furthermore, the Investment Adviser's investment professionals have deep and longstanding relationships in both the private equity sponsor community and the lending/agency community which they have and will continue to utilize to generate investment opportunities.

S-7


Table of Contents


Risk Management through Various Cycles

          New Mountain Capital has emphasized tight control of risk since its inception. To date, New Mountain Capital has never experienced a bankruptcy of any of its portfolio companies in its private equity efforts. The Investment Adviser seeks to emphasize tight control of risk with our investments in several important ways, consistent with New Mountain Capital's historical approach. In particular, the Investment Adviser:

    Emphasizes the origination or purchase of debt in what the Investment Adviser believes are defensive growth companies, which are less likely to be dependent on macro-economic cycles;

    Targets investments in companies that are preeminent market leaders in their own industries, and when possible, investments in companies that have strong management teams whose skills are difficult for competitors to acquire or reproduce; and

    Targets investments in companies with significant equity value in excess of our debt investments.

Access to Non Mark to Market, Seasoned Leverage Facility

          The amount available under the Holdings Credit Facility and the DB Credit Facility are generally not subject to reduction as a result of mark to market fluctuations in our portfolio investments. None of our credit facilities mature prior to June 2022. For a detailed discussion of our credit facilities, see "Management's Discussion and Analysis of Financial Conditions and Results of Operations — Liquidity and Capital Resources" in this prospectus supplement.


Market Opportunity

          We believe that the size of the market for investments that we target, coupled with the demands of middle market companies for flexible sources of capital at competitive terms and rates, create an attractive investment environment for us.

    Large pool of uninvested private equity capital available for new buyouts.  We expect that private equity firms will continue to pursue acquisitions and will seek to leverage their equity investments with mezzanine loans and/or senior loans (including traditional first and second lien, as well as unitranche loans) provided by companies such as ours.

    The leverage finance market has a high level of financing needs over the next several years due to significant bank debt maturities.  We believe that the large dollar volume of loans that need to be refinanced will present attractive opportunities to invest capital in a manner consistent with our stated objectives.

    Middle market companies continue to face difficulties in accessing the capital markets.  We believe opportunities to serve the middle market will continue to exist. While many middle market companies were formerly able to raise funds by issuing high-yield bonds, we believe this approach to financing has become more difficult as institutional investors have sought to invest in larger, more liquid offerings.

    Increased regulatory scrutiny of banks has reduced middle market lending.  We believe that many traditional bank lenders to middle market businesses have either exited or de-emphasized their service and product offerings in the middle market. These traditional lenders have instead focused on lending and providing other services to large corporate clients. We believe this has resulted in fewer key players and the reduced availability of debt capital to the companies we target.

S-8


Table of Contents

    Conservative loan to value.  As a result of the credit crisis, many lenders are requiring larger equity contributions from financial sponsors. Larger equity contributions create an enhanced margin of safety for lenders because leverage is a lower percentage of the implied enterprise value of the company.

    Attractive pricing.  Reduced access to, and availability of, debt capital typically increases the interest rates, or pricing, of loans for middle market lenders. Recent primary debt transactions in this market often include upfront fees, original issue discount, prepayment protections and, in some cases, warrants to purchase common stock, all of which should enhance the profitability of new loans to lenders.


Operating and Regulatory Structure

          We are a closed-end, non-diversified management investment company that has elected to be regulated as a BDC under the 1940 Act and are required to maintain an asset coverage ratio, as defined in the 1940 Act, of at least 150.0%, which was reduced from 200% effective as of June 9, 2018 by approval of our stockholders. Changing the asset coverage ratio permits us to double our leverage, which may result in increased leverage risk and increased expenses. We include the assets and liabilities of our consolidated subsidiaries for purposes of satisfying the requirements under the 1940 Act. See "Regulation — Senior Securities" in the accompanying prospectus.

          We have elected to be treated, and intend to comply with the requirements to continue to qualify annually, as a RIC under Subchapter M of the Code. See "Material U.S. Federal Income Tax Considerations" in the accompanying prospectus. As a RIC, we generally will not be subject to corporate-level U.S. federal income taxes on any net ordinary income or capital gains that we timely distribute to our stockholders as dividends if it meets certain source-of-income, distribution and asset diversification requirements. We intend to distribute to our stockholders substantially all of our annual taxable income except that we may retain certain net capital gains for reinvestment.


Risks

          An investment in our securities involves risk, including the risk of leverage and the risk that our operating policies and strategies may change without prior notice to our stockholders or prior stockholder approval. See "Risk Factors" and the other information included in this prospectus supplement and the accompanying prospectus for a discussion of factors you should carefully consider before deciding to invest in our securities. The value of our assets, as well as the market price of our securities, will fluctuate. Our investments may be risky, and you may lose all or part of your investment. Investing in us involves other risks, including the following:

    We may suffer credit losses;

    We do not expect to replicate the Predecessor Entities' historical performance or the historical performance of other entities managed or supported by New Mountain Capital;

    There is uncertainty as to the value of our portfolio investments because most of our investments are, and may continue to be, in private companies and recorded at fair value;

    Our ability to achieve our investment objective depends on key investment personnel of the Investment Adviser. If the Investment Adviser were to lose any of its key investment personnel, our ability to achieve our investment objective could be significantly harmed;

    The Investment Adviser has limited experience managing a BDC or a RIC, which could adversely affect our business;

    We operate in a highly competitive market for investment opportunities and may not be able to compete effectively;

S-9


Table of Contents

    Our investments in securities rated below investment grade are speculative in nature and are subject to additional risk factors such as increased possibility of default, illiquidity of the security, and changes in value based on changes in interest rates;

    Our business, results of operations and financial condition depend on our ability to manage future growth effectively;

    We borrow money, which could magnify the potential for gain or loss on amounts invested in us and increase the risk of investing in us;

    Changes in interest rates may affect our cost of capital and net investment income;

    Regulations governing the operations of BDCs will affect our ability to raise additional equity capital as well as our ability to issue senior securities or borrow for investment purposes, any or all of which could have a negative effect on our investment objectives and strategies;

    We may experience fluctuations in our annual and quarterly results due to the nature of our business;

    Our board of directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse to your interests;

    We will be subject to corporate-level U.S. federal income tax on all of our income if we are unable to maintain tax treatment as a RIC under Subchapter M of the Code, which would have a material adverse effect on our financial performance;

    We cannot predict how tax reform legislation will affect us, our investments, or our stockholders, and any such legislation could adversely affect our business;

    Recent legislation may allow us to incur additional leverage, which could increase the risk of investing in the Company;

    Internal and external cyber threats, as well as other disasters, could impair our ability to conduct business effectively;

    We may not be able to pay you distributions on our common stock, our distributions to you may not grow over time and a portion of our distributions to you may be a return of capital for U.S. federal income tax purposes;

    Our investments in portfolio companies may be risky, and we could lose all or part of any of our investments;

    The lack of liquidity in our investments may adversely affect our business;

    Economic recessions, downturns or government spending cuts could impair our portfolio companies and harm our operating results;

    The market price of our common stock may fluctuate significantly; and

    Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock.


Company Information

          Our administrative and executive offices are located at 787 Seventh Avenue, 48th Floor, New York, New York 10019, and our telephone number is (212) 720-0300. We maintain a website at www.newmountainfinance.com. Information contained on our website is not incorporated by reference into this prospectus supplement or the accompanying prospectus, and you should not

S-10


Table of Contents

consider information contained on our website to be part of this prospectus supplement or the accompanying prospectus.


Presentation of Historical Financial Information and Market Data

Historical Financial Information

          Unless otherwise indicated, historical references contained in this prospectus supplement and the accompanying prospectus for periods prior to and as of December 31, 2013 in "Selected Financial and Other Data", "Selected Quarterly Data", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Senior Securities" relate to NMF Holdings. The consolidated financial statements of New Mountain Finance Holdings, L.L.C., formerly known as New Mountain Guardian (Leveraged), L.L.C., and New Mountain Guardian Partners, L.P. are NMF Holdings' historical consolidated financial statements.

Market Data

          Statistical and market data used in this prospectus supplement and the accompanying prospectus has been obtained from governmental and independent industry sources and publications. We have not independently verified the data obtained from these sources, and we cannot assure you of the accuracy or completeness of the data. Forward-looking information obtained from these sources is subject to the same qualifications and the additional uncertainties regarding the other forward-looking statements contained in this prospectus supplement and accompanying prospectus. See "Cautionary Statement Regarding Forward-Looking Statements" in this prospectus supplement and the accompanying prospectus.

S-11


Table of Contents

 

THE OFFERING

Common Stock Offered

  We are offering 3,750,000 shares of our common stock. To the extent that the underwriters sell more than 3,750,000 shares of our common stock, the underwriters have the option to purchase up to an additional 562,500 shares of our common stock at the initial public offering price, less the underwriting discounts and commissions (sales load), within 30 days of the date of this prospectus supplement.

Shares of Our Common Stock Currently Outstanding

 

76,106,372 shares.

Shares of Our Common Stock Outstanding After This Offering

 

79,856,372 shares, excluding 562,500 shares of common stock issuable pursuant to the option to purchase additional shares granted to the underwriters. This amount does not include any shares which may be issuable upon conversion of existing securities.

Use of Proceeds

 

Our net proceeds from this offering will be approximately $             million, after deducting $             million of sales load and estimated offering expenses of approximately $0.3 million payable by us. In addition, the Investment Adviser has agreed to bear $              million of sales load in connection with this offering, which will not be subject to reimbursement by us. If the underwriters' option to purchase additional shares is exercised in full, our net proceeds from this offering will be approximately $             million, after deducting $             million of sales load and estimated offering expenses of approximately $0.3 million payable by us. In addition, if the underwriters' option to purchase additional shares is exercised in full, the Investment Adviser has agreed to bear $              million of sales load in connection with this offering, which will not be subject to reimbursement by us. We intend to use the net proceeds from this offering primarily for new investments in portfolio companies in accordance with our investment objective and strategies described in this prospectus supplement and the accompanying prospectus. We may also use a portion of the net proceeds from the sale of shares of our common stock sold in this offering for other general corporate purposes, including to temporarily repay indebtedness (which will be subject to reborrowing), and other working capital requirements. We are continuously identifying, reviewing and, to the extent consistent with our investment objective, funding new investments. As a result, we typically raise capital as we deem appropriate to fund such new investments. We expect that it will take up to three months for us to substantially invest the net proceeds of this offering, depending on the availability of attractive opportunities and market conditions. However, we can offer no assurance that we will be able to achieve this goal. Proceeds not immediately used for new investments or the temporary repayment of debt will be invested primarily in cash, cash equivalents, U.S. government securities and other high-quality investments that mature in one year or less from the date of the investment. These temporary investments are expected to provide a lower net return than we hope to achieve from our target investments and, accordingly, may result in lower distributions, if any, during such period. See "Use of Proceeds" in this prospectus supplement.

   

S-12


Table of Contents

New York Stock Exchange Symbol of Common Stock

 

"NMFC"

Investment Advisory Fees

 

We pay the Investment Adviser a fee for its services under an investment advisory and management agreement (the "Investment Management Agreement") consisting of two components — a base management fee and an incentive fee. Pursuant to the Investment Management Agreement, the base management fee is calculated at an annual rate of 1.75% of our gross assets, which equals our total assets on the Consolidated Statements of Assets and Liabilities, less (i) the borrowings under 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 our gross assets, which equals our total assets, as determined in accordance with accounting principles generally accepted in the United States of America ("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. We have not invested, and currently do not invest, in derivatives. To the extent we invest in derivatives in the future, we will use the actual value of the derivatives, as reported on our Consolidated Statements of Assets and Liabilities, for purposes of calculating our base management fee. Since our 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 our existing credit facilities with Wells Fargo Bank, National Association, the SLF Credit Facility merged with the Predecessor Holdings Credit Facility and into the Holdings Credit Facility on December 18, 2014. Post credit facility merger and to be consistent with the methodology since our IPO, the Investment Adviser will continue to waive management fees on the leverage associated with those assets that share the same underlying yield characteristics with investments leveraged under the legacy SLF Credit Facility. The incentive fee consists of two parts. The first part is calculated and payable quarterly in arrears and equals 20.0% of our "Pre-Incentive Fee Adjusted Net Investment Income" for the immediately preceding quarter, subject to a "preferred return", or "hurdle", and a "catch-up" feature each as described in the Investment Management Agreement. The second part 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 our "Adjusted Realized Capital Gains", if any, on a cumulative basis from inception through the end of the year, computed net of all "Adjusted Realized Capital Losses" and "Adjusted Unrealized Capital Depreciation" on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fee each as described in the Investment Management Agreement. The Investment Adviser cannot recoup management fees that the Investment Adviser has previously waived. See "Investment Management Agreement" in the accompanying prospectus.

S-13


Table of Contents

Administrator

 

The Administrator serves as our administrator and arranges our office space and provides us with office equipment and administrative services. The Administrator performs, or oversees the performance of, our financial records, prepares reports to our stockholders and reports filed by us with the SEC, monitors the payment of our expenses, and oversees the performance of administrative and professional services rendered to us by others. We reimburse the Administrator for our allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations to us under an administration agreement, as amended and restated (the "Administration Agreement"). The Administrator cannot recoup any expenses that the Administrator has previously waived. For the three and nine months ended September 30, 2018 approximately $0.5 million and $1.7 million, respectively, of indirect administrative expenses were included in administrative expenses, of which approximately $0.0 million and $0.3 million, respectively, of indirect administrative expenses were waived by the Administrator. As of September 30, 2018, $0.8 million of indirect administrative expenses were included in payable to affiliates. See "Administration Agreement" in the accompanying prospectus.

Distributions

 

We intend to pay quarterly distributions to our stockholders out of assets legally available for distribution. The quarterly distributions, if any, will be determined by our board of directors. The distributions we pay to our stockholders in a year may exceed our taxable income for that year and, accordingly, a portion of such distributions may constitute a return of capital, which is a return of a portion of a shareholder's original investment in our common stock, for U.S. federal income tax purposes. Generally, a return of capital will reduce an investor's basis in our stock for U.S. federal income tax purposes, which will result in a higher tax liability when the stock is sold. The specific tax characteristics of our distributions will be reported to stockholders after the end of the calendar year. See "Price Range of Common Stock and Distributions" in this prospectus supplement and the accompanying prospectus.

Taxation of NMFC

 

We have elected to be treated, and intend to comply with the requirements to continue to qualify annually, as a RIC under Subchapter M of the Code. As a RIC, we generally will not pay corporate-level U.S. federal income taxes on any net ordinary income or capital gains that are timely distributed to our stockholders as dividends. To maintain our RIC tax treatment, we must meet specified source-of-income and asset diversification requirements and distribute annually to our stockholders at least 90.0% of our net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. See "Price Range of Common Stock and Distributions" in this prospectus supplement and in the accompanying prospectus and "Material U.S. Federal Income Tax Considerations" in the accompanying prospectus.

S-14


Table of Contents

Dividend Reinvestment Plan

 

We have adopted an "opt out" dividend reinvestment plan for our stockholders. As a result, if we declare a distribution, then your cash distributions will be automatically reinvested in additional shares of our common stock, unless you specifically "opt out" of the dividend reinvestment plan so as to receive cash distributions. Stockholders who receive distributions in the form of stock will be subject to the same U.S. federal income tax consequences as stockholders who elect to receive their distributions in cash. We will use only newly issued shares to implement the plan if the price at which newly issued shares are to be credited is equal to or greater than 110.0% of the last determined net asset value of our shares. We reserve the right to either issue new shares or purchase shares of our common stock in the open market in connection with our implementation of the plan if the price at which newly issued shares are to be credited to stockholders' accounts does not exceed 110.0% of the last determined net asset value of the shares. See "Dividend Reinvestment Plan" in the accompanying prospectus.

Trading at a Discount

 

Shares of closed-end investment companies frequently trade at a discount to their net asset value. The possibility that our common stock may trade at a discount to our net asset value per share is separate and distinct from the risk that our net asset value per share may decline. We cannot predict whether our common stock will trade above, at or below net asset value.

License Agreement

 

We have entered into a royalty-free license agreement with New Mountain Capital, pursuant to which New Mountain Capital has agreed to grant us a non-exclusive license to use the names "New Mountain" and "New Mountain Finance". See "License Agreement" in the accompanying prospectus.

Leverage

 

We expect to continue to use leverage to make investments. As a result, we may continue to be exposed to the risks of leverage, which include that leverage may be considered a speculative investment technique. The use of leverage magnifies the potential for gain and loss on amounts we invest and therefore, indirectly, increases the risks associated with investing in shares of our common stock. See "Risk Factors" in this prospectus supplement and the accompanying prospectus.

Anti-Takeover Provisions

 

Our board of directors is divided into three classes of directors serving staggered three-year terms. This structure is intended to provide us with a greater likelihood of continuity of management, which may be necessary for us to realize the full value of our investments. A staggered board of directors also may serve to deter hostile takeovers or proxy contests, as may certain other measures that we may adopt. These measures may delay, defer or prevent a transaction or a change in control that might otherwise be in the best interests of our stockholders. See "Description of Capital Stock — Delaware Law and Certain Certificate of Incorporation and Bylaw Provisions; Anti-Takeover Measures" in the accompanying prospectus.

S-15


Table of Contents

Available Information

 

We have filed with the SEC a registration statement on Form N-2 together with all amendments and related exhibits under the Securities Act of 1933, as amended (the "Securities Act"). The registration statement contains additional information about us and the shares of common stock being offered by this prospectus supplement and the accompanying prospectus.

 

We are required to file annual, quarterly and current reports, proxy statements and other information with the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). This information is available on the SEC's website at http://www.sec.gov. This information is also available free of charge by contacting us at New Mountain Finance Corporation, 787 Seventh Avenue, 48th Floor, New York, New York 10019, by telephone at (212) 720-0300, or on our website at www.newmountainfinance.com. Information contained on our website or on the SEC's website about us is not incorporated into this prospectus supplement and the accompanying prospectus and you should not consider information contained on our website or on the SEC's website to be part of this prospectus supplement and the accompanying prospectus.

S-16


Table of Contents

FEES AND EXPENSES

          The following table is intended to assist you in understanding the costs and expenses that you will bear directly or indirectly. We caution you that some of the percentages indicated in the table below are estimates and may vary. Except where the context suggests otherwise, whenever this prospectus supplement and the accompanying prospectus contains a reference to fees or expenses paid by "you", "NMFC", or "us" or that "we", "NMFC", or the "Company" will pay fees or expenses, we will pay such fees and expenses out of our net assets and, consequently, you will indirectly bear such fees or expenses as an investor in us. However, you will not be required to deliver any money or otherwise bear personal liability or responsibility for such fees or expenses.

Stockholder transaction expenses:

       

Sales load borne by us (as a percentage of offering price)

    % (1)

Offering expenses borne by us (as a percentage of offering price)

             % (2)

Dividend reinvestment plan fees

  $ 15.00 (3)

Total stockholder transaction expenses (as a percentage of offering price)

              %

Annual expenses (as a percentage of net assets attributable to common stock):

       

Base management fees

    3.94% (4)

Incentive fees payable under the Investment Management Agreement

    2.41% (5)

Interest payments on borrowed funds

    5.98% (6)

Other expenses

    0.95% (7)

Acquired fund fees and expenses

    1.30% (8)

Total annual expenses

    14.58% (9)

(1)
Represents the sales load to be paid by us with respect to the shares of common stock to be sold by us in this offering for which the calculation is adjusted. The Investment Adviser has agreed to bear $             per share, or approximately         % of the offering price, of the sales load in connection with this offering, which is not reflected in the above table and will not be subject to reimbursement by us. There is no guaranty that there will be any sales of our common stock pursuant to this prospectus supplement or the accompanying prospectus.

(2)
The offering expenses of this offering are estimated to be approximately $0.3 million.

(3)
If a participant elects by written notice to the plan administrator to have the plan administrator sell part or all of the shares held by the plan administrator in the participant's account and remit the proceeds to the participant, the plan administrator is authorized to deduct a $15.00 transaction fee plus a $0.10 per share brokerage commission from the proceeds. The expenses of the dividend reinvestment plan are included in "other expenses." The plan administrator's fees will be paid by us. There will be no brokerage charges or other charges to stockholders who participate in the plan.

(4)
The base management fee under the Investment Management Agreement is based on an annual rate of 1.75% of our average gross assets for the two most recent quarters, which equals our total assets on the Consolidated Statements of Assets and Liabilities, less (i) the borrowings under the SLF Credit Facility and (ii) cash and cash equivalents. We have not invested, and currently do not invest, in derivatives. To the extent we invest in derivatives in the future, we will use the actual value of the derivatives, as reported on our Consolidated Statements of Assets and Liabilities, for purposes of calculating our base management fee. Since our 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 our existing credit facilities with Wells Fargo Bank, National Association, the SLF Credit Facility merged with the Predecessor Holdings Credit Facility and into the Holdings Credit Facility on December 18, 2014. Post credit facility merger and to be consistent with the methodology since our IPO, the Investment Adviser will continue to waive management fees on the leverage associated with those assets that share the same underlying yield characteristics with investments leveraged under the legacy SLF Credit Facility. The Investment Adviser cannot recoup management fees that the Investment Adviser has previously waived. The base management fee reflected in the table above

S-17


Table of Contents

    is based on the three months ended September 30, 2018 and is calculated without deducting any management fees waived. The annual base management fee after deducting the management fee waiver as a percentage of net assets would be 3.22% based on the three months ended September 30, 2018. See "Investment Management Agreement" in the accompanying prospectus.

(5)
Assumes that annual incentive fees earned by the Investment Adviser remain consistent with the gross incentive fees earned by the Investment Adviser during the three months ended September 30, 2018 and includes accrued capital gains incentive fee and calculated without deducting any incentive fees waived. For the three months ended September 30, 2018, no incentive fees were waived by the Investment Adviser. The Investment Adviser cannot recoup incentive fees that the Investment Adviser has previously waived. As of September 30, 2018, we did not have a capital gains incentive fee accrual. As we cannot predict whether we will meet the thresholds for incentive fees under the Investment Management Agreement, the incentive fees paid in subsequent periods, if any, may be substantially different than the fees incurred during the three months ended September 30, 2018. For more detailed information about the incentive fee calculations, see the "Investment Management Agreement" section of the accompanying prospectus.

(6)
We may borrow funds from time to time to make investments to the extent we determine that additional capital would allow us to take advantage of additional investment opportunities or if the economic situation is otherwise conducive to doing so. The costs associated with these borrowings are indirectly borne by our stockholders. As of September 30, 2018, we had $466.0 million, $135.0 million, $270.3 million, $335.0 million and $165.0 million of indebtedness outstanding under the Holdings Credit Facility, the NMFC Credit Facility, the Convertible Notes, the Unsecured Notes and the SBA-guaranteed debentures, respectively. For purposes of this calculation, we have assumed the September 30, 2018 amounts outstanding under the credit facilities, the Convertible Notes, the Unsecured Notes and the SBA-guaranteed debentures, and have computed interest expense using an assumed interest rate of 4.6% for the Holdings Credit Facility, 4.6% for the NMFC Credit Facility, 5.3% for the Convertible Notes, 5.2% for the Unsecured Notes and 3.3% for the SBA-guaranteed debentures, which were the rates payable as of September 30, 2018. See "Senior Securities" in this prospectus supplement and the accompanying prospectus.

(7)
"Other expenses" include our overhead expenses, including payments by us under the Administration Agreement based on the allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations to us under the Administration Agreement. Pursuant to the Administration Agreement, 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. This expense ratio is calculated without deducting any expenses waived or reimbursed by the Administrator. Assuming the expenses waived or reimbursed by the Administrator at September 30, 2018 of $0.3 million, the annual expense ratio after deducting the expenses waived or reimbursed by the Administrator as a percentage of net assets would be 0.91%. For the nine months ended September 30, 2018, we reimbursed the Administrator approximately $1.4 million for indirect administrative expenses, which represents approximately 0.18% of our net assets on an annulized basis. See "Administration Agreement" in the accompanying prospectus.

(8)
The holders of shares of our common stock indirectly bear the expenses of our investment in NMFC Senior Loan Program I, LLC ("SLP I"), NMFC Senior Loan Program II, LLC ("SLP II") and NMFC Senior Loan Program III, LLC ("SLP III"). No management fee is charged on our investment in SLP I in connection with the administrative services provided to SLP I. As SLP II and SLP III are structured as private joint ventures, no management fees are paid by SLP II or SLP III. Future expenses for SLP I, SLP II and SLP III may be substantially higher or lower because certain expenses may fluctuate over time.

(9)
The holders of shares of our common stock indirectly bear the cost associated with our annual expenses.


Example

          The following example, required by the SEC, demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock. In calculating the following expense amounts, we

S-18


Table of Contents

have assumed that our borrowings and annual operating expenses would remain at the levels set forth in the table above. See Note 6 below for additional information regarding certain assumptions regarding our level of leverage.

    1 Year     3 Years     5 Years     10 Years
 

You would pay the following expenses on a $1,000 investment, assuming a 5.0% annual return

  $             $             $             $            

          The example should not be considered a representation of future expenses, and actual expenses may be greater or less than those shown.

          While the example assumes, as required by the applicable rules of the SEC, a 5.0% annual return, our performance will vary and may result in a return greater or less than 5.0%. The incentive fee under the Investment Management Agreement, which, assuming a 5.0% annual return, would either not be payable or would have an insignificant impact on the expense amounts shown above, is not included in the above example. The above illustration assumes that we will not realize any capital gains (computed net of all realized capital losses and unrealized capital depreciation) in any of the indicated time periods. If we achieve sufficient returns on our investments, including through the realization of capital gains, to trigger an incentive fee of a material amount, our expenses and returns to our investors would be higher. For example, if we assumed that we received our 5.0% annual return completely in the form of net realized capital gains on our investments, computed net of all cumulative unrealized depreciation on our investments, the projected dollar amount of total cumulative expenses set forth in the above illustration would be as follows:

    1 Year     3 Years     5 Years     10 Years
 

You would pay the following expenses on a $1,000 investment, assuming a 5.0% annual return

  $             $             $             $            

          The example assumes a sales load borne by us of         %. In addition, while the examples assume reinvestment of all distributions at net asset value, participants in our dividend reinvestment plan will receive a number of shares of our common stock determined by dividing the total dollar amount of the distribution payable to a participant by the market price per share of our common stock at the close of trading on the dividend payment date. The market price per share of our common stock may be at, above or below net asset value. See "Dividend Reinvestment Plan" in the accompanying prospectus for additional information regarding the dividend reinvestment plan.

S-19


Table of Contents

SELECTED FINANCIAL AND OTHER DATA

          The selected financial data should be read in conjunction with the respective consolidated financial statements and related consolidated notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in this prospectus supplement. Financial information for the years ended December 31, 2017, December 31, 2016, December 31, 2015, December 31, 2014 and December 31, 2013 has been derived from the Predecessor Operating Company's and our financial statements and the related notes thereto that were audited by Deloitte & Touche LLP, an independent registered public accounting firm. The financial information at and for the nine months ended September 30, 2018 was derived from our unaudited consolidated financial statements and related consolidated notes. 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 periods, have been included. Our results for the interim periods may not be indicative of our results for any future interim period or the full year. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Senior Securities" in this prospectus supplement and the accompanying prospectus for more information.

          The below selected financial and other data is for NMFC.

S-20


Table of Contents

(in thousands except shares and per share data)

    Nine Months
Ended
September 30,
  Year Ended December 31,    

New Mountain Finance Corporation
  2018     2017     2016     2015     2014     2013    

Statement of Operations Data:

                                     

Investment income

  $ 167,956   $ 197,806   $ 168,084   $ 153,855   $ 91,923   $  

Investment income allocated from NMF Holdings

                    43,678     90,876  

Net expenses

    89,382     95,602     79,976     71,360     34,727      

Net expenses allocated from NMF Holdings

                    20,808     40,355  

Net investment income

    78,574     102,204     88,108     82,495     80,066     50,521  

Net realized (losses) gains on investments

    (3,149 )   (39,734 )   (16,717 )   (12,789 )   357      

Net realized and unrealized gains (losses) allocated from NMF Holdings

                    9,508     11,443  

Net change in unrealized appreciation (depreciation) of investments

    (690 )   50,794     40,131     (35,272 )   (43,863 )    

Net change in unrealized (depreciation) appreciation of securities purchased under collateralized agreements to resell

    (12 )   (4,006 )   (486 )   (296 )        

Net change in unrealized (depreciation) appreciation of investment in NMF Holdings

                        (44 )

(Provision) benefit for taxes

    (986 )   140     642     (1,183 )   (493 )    

Net increase in net assets resulting from operations

    73,737     109,398     111,678     32,955     45,575     61,920  

Per share data:

                                     

Net asset value

  $ 13.58   $ 13.63   $ 13.46   $ 13.08   $ 13.83   $ 14.38  

Net increase in net assets resulting from operations (basic)

    0.97     1.47     1.72     0.55     0.88     1.76  

Net increase in net assets resulting from operations (diluted)(1)

    0.91     1.38     1.60     0.55     0.86     1.76  

Distributions declared(2)

    1.02     1.36     1.36     1.36     1.48     1.48  

Balance sheet data:

                                     

Total assets(3)

  $ 2,521,774   $ 1,928,018   $ 1,656,018   $ 1,588,146   $ 1,500,868   $ 650,107  

Holdings Credit Facility

    465,963     312,363     333,513     419,313     468,108     N/A  

Convertible Notes

    270,329     155,412     155,523     115,000     115,000     N/A  

SBA-guaranteed debentures

    165,000     150,000     121,745     117,745     37,500     N/A  

Unsecured Notes

    335,000     145,000     90,000             N/A  

NMFC Credit Facility

    135,000     122,500     10,000     90,000     50,000     N/A  

Total net assets

    1,033,530     1,034,975     938,562     836,908     802,170     650,107  

Other data:

                                     

Total return based on market value(4)

    7.38 %   5.54 %   19.68 %   (4.00 )%   9.66 %   11.62 %

Total return based on net asset value(5)

    7.30 %   11.77 %   13.98 %   4.32 %   6.56 %   13.27 %

Number of portfolio companies at period end

    92     84     78     75     71     N/A  

Total new investments for the period(6)

  $ 1,056,668   $ 999,677   $ 558,068   $ 612,737   $ 720,871     N/A  

Investment sales and repayments for the period(6)

  $ 599,218   $ 767,360   $ 547,078   $ 483,936   $ 384,568     N/A  

Weighted average YTM at Cost on debt portfolio at period end (unaudited)(7)

    11.0 %   10.9 %   11.1 %   10.7 %   10.7 %   N/A  

Weighted average YTM at Cost for Investments at period end (unaudited)(8)

    10.9 %   10.9 %   10.5 %   10.7 %   10.6 %   N/A  

Weighted average shares outstanding for the period (basic)

    75,994,068     74,171,268     64,918,191     59,715,290     51,846,164     35,092,722  

Weighted average shares outstanding for the period (diluted)

    86,983,697     83,995,395     72,863,387     66,968,089     56,157,835     35,092,722  

Portfolio turnover(6)

    28.21 %   41.98 %   36.07 %   33.93 %   29.51 %   N/A  

(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. For the year ended December 31, 2015, there was anti-dilution. For the nine months ended September 30, 2018 and the years ended December 31, 2017, December 31, 2016 and December 31, 2014, there was no anti-dilution. For the year ended December 31, 2013, due to reflecting earnings for the full year of operations of the

S-21


Table of Contents

    Predecessor Operating Company assuming 100.0% NMFC ownership of Predecessor Operating Company and assuming all of New Mountain Finance AIV Holdings Corporation's ("AIV Holdings") units in the Predecessor Operating Company were exchanged for public shares of NMFC during the year then ended, the earnings per share would be $1.79.

(2)
Distributions declared in the year ended December 31, 2014 include a $0.12 per share special dividend related to realized capital gains attributable to NMF Holdings' warrant investments in Learning Care Group (US), Inc. Distributions declared in the year ended December 31, 2013 include a $0.12 per share special dividend related to a distribution received attributable to NMF Holdings' investment in YP Equity Investors LLC.

(3)
On January 1, 2016, we adopted Accounting Standards Update No. 2015-03, Interest — Imputation of Interest Subtopic 835-30 — Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03"). Upon adoption, we revised our presentation of deferred financing costs from an asset to a liability, which is a direct deduction to our debt on the Consolidated Statements of Assets and Liabilities. In addition, as of December 31, 2015 and December 31, 2014, we retrospectively revised our presentation of $14.0 million and $14.1 million, respectively, of deferred financing costs that were previously presented as an asset, which resulted in a decrease to total assets and total liabilities as of December 31, 2015 and December 31, 2014. For the years ended December 31, 2013 and December 31, 2012, NMFC was a holding company with no direct operations of its own and its sole asset was its ownership in the Predecessor Operating Company and, as such, ASU 2015-03 did not apply to NMFC.

(4)
Total return is calculated assuming a purchase of common stock at the opening of the first day of the period and a sale on the closing of the last business day of the respective period ends. Dividends and distributions, if any, are assumed for purposes of this calculation, to be reinvested at prices obtained under our dividend reinvestment plan.

(5)
Total return is calculated assuming a purchase at net asset value on the opening of the first day of the period 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.

(6)
For the year ended December 31, 2014, amounts include our investment activity and the investment activity of the Predecessor Operating Company.

(7)
The weighted average YTM at Cost calculation assumes that all investments, including secured collateralized agreements, not on non-accrual are purchased at the adjusted cost on the respective period ends and held until their respective maturities with no prepayments or losses and exited at par at maturity. Adjusted cost reflects the cost for post-IPO investments in accordance with GAAP and a stepped up cost basis of pre-IPO investments (assuming a step-up to fair market value occurred on the IPO date).

(8)
The weighted average YTM at Cost for Investments calculation assumes that all investments, including secured collateralized agreements, are purchased at the adjusted cost on the respective period ends and held until their respective maturities with no prepayments or losses and exited at par at maturity. Adjusted cost reflects the cost for post-IPO investments in accordance with GAAP and a stepped up cost basis of pre-IPO investments (assuming a step-up to fair market value occurred on the IPO date).

S-22


Table of Contents

          As of May 8, 2014, NMFC assumed all operating activities previously undertaken by NMF Holdings. The following table sets forth selected financial and other data for NMF Holdings when it was the Predecessor Operating Company.

          (in thousands except units and per unit data)

New Mountain Finance Holdings, L.L.C.
  Year Ended
December 31,
2013
 
 

Statement of Operations Data:

       

Total investment income

  $ 114,912  

Net expenses

    51,235  

Net investment income

    63,677  

Net realized and unrealized gains (losses)

    15,247  

Net increase in net assets resulting from operations

    78,924  

Per unit data:

       

Net asset value

  $ 14.38  

Net increase in net assets resulting from operations (basic and diluted)

    1.79  

Distributions declared(1)

    1.48  

Balance sheet data:

       

Total assets

  $ 1,147,841  

Holdings Credit Facility

    221,849  

SLF Credit Facility

    214,668  

Total net assets

    688,516  

Other data:

       

Total return at net asset value(2)

    13.27 %

Number of portfolio companies at period end

    59  

Total new investments for the period

  $ 529,307  

Investment sales and repayments for the period

  $ 426,561  

Weighted average YTM at Cost on debt portfolio at period end (unaudited)(3)

    11.0 %

Weighted average YTM at Cost for Investments at period end (unaudited)(5)

    11.0 %

Weighted average YTM on debt portfolio at period end (unaudited)(4)

    10.6 %

Weighted average common membership units outstanding for the period

    44,021,920  

Portfolio turnover

    40.52 %

(1)
Distributions declared in the year ended December 31, 2013 include a $0.12 per unit special dividend related to a distribution received attributable to NMF Holdings' investment in YP Equity Investors LLC. Actual cash payments on the distributions declared to AIV Holdings only, for the quarter ended March 31, 2013 was made on April 5, 2013.

(2)
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 respective period ends. 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. 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.

(3)
The weighted average YTM at Cost calculation assumes that all investments not on non-accrual are purchased at the adjusted cost on the respective period ends and held until their respective maturities with no prepayments or losses and exited at par at maturity. Adjusted cost reflects the GAAP cost for post-IPO investments and a stepped up cost basis of pre-IPO investments (assuming a step-up to fair market value occurred on the IPO date).

(4)
The weighted average YTM calculation assumes that all investments not on non-accrual are purchased at fair value on the respective period ends and held until their respective maturities with no prepayments or losses and exited at par at maturity. The weighted average YTM was not calculated subsequent to December 31, 2013.

(5)
The weighted average YTM at Cost for Investments calculation assumes that all investments, including secured collateralized agreements, are purchased at the adjusted cost on the respective period ends and held until their respective maturities with no prepayments or losses and exited at par at maturity. Adjusted cost reflects the cost for post-IPO investments in accordance with GAAP and a stepped up cost basis of pre-IPO investments (assuming a step-up to fair market value occurred on the IPO date).

S-23


Table of Contents

SELECTED QUARTERLY FINANCIAL DATA

          The selected quarterly financial data should be read in conjunction with our respective consolidated financial statements and related consolidated notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in this prospectus supplement and the accompanying prospectus. The following table sets forth certain quarterly financial data for the quarters ended September 30, 2018, June 30, 2018 and March 31, 2018 and each of the quarters for the fiscal years ended December 31, 2017 and December 31, 2016. This data is derived from our unaudited financial statements. Results for any quarter are not necessarily indicative of results for the full year or for any future quarter. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Senior Securities" included in this prospectus supplement and the accompanying prospectus for more information.

          The below selected quarterly financial data is for NMFC.

    (in thousands except for per share data)

    Total Investment
Income
    Net Investment
Income
    Total Net Realized
Gains (Losses)
and
Net Changes in
Unrealized
Appreciation
(Depreciation) of
Investments(1)
    Net Increase
(Decrease)
in Net Assets
Resulting from
Operations
 

Quarter Ended
  Total     Per Share     Total     Per Share     Total     Per Share     Total     Per Share    

September 30, 2018

  $ 60,469   $ 0.79   $ 27,117   $ 0.36   $ (357 ) $ (0.01 ) $ 26,760   $ 0.35  

June 30, 2018

    54,598     0.72     25,721     0.34     (2,588 )   (0.04 )   23,133     0.30  

March 31, 2018

    52,889     0.70     25,736     0.34     (1,892 )   (0.03 )   23,844     0.31  

December 31, 2017

 
$

53,244
 
$

0.70
 
$

26,683
 
$

0.35
 
$

194
 
$

 
$

26,877
 
$

0.35
 

September 30, 2017

    51,236     0.68     26,292     0.35     (1,516 )   (0.02 )   24,776     0.33  

June 30, 2017

    50,019     0.66     25,798     0.34     1,530     0.02     27,328     0.36  

March 31, 2017

    43,307     0.62     23,431     0.34     6,986     0.10     30,417     0.44  

December 31, 2016

 
$

43,784
 
$

0.64
 
$

22,980
 
$

0.34
 
$

10,875
 
$

0.16
 
$

33,855
 
$

0.50
 

September 30, 2016

    41,834     0.66     21,729     0.34     3,350     0.05     25,079     0.39  

June 30, 2016

    41,490     0.65     21,832     0.34     22,861     0.36     44,693     0.70  

March 31, 2016

    40,976     0.64     21,567     0.34     (13,516 )   (0.21 )   8,051     0.13  

(1)
Includes securities purchased under collateralized agreements to resell, benefit (provision) for taxes and the accretive effect of common stock issuances per share, if applicable.

S-24


Table of Contents

RISK FACTORS

          Investing in our securities involves a number of significant risks. In addition to the other information contained in this prospectus supplement and the accompanying prospectus, you should consider carefully the following risks before making an investment in our securities. The risks set out below are not the only risks we face and you should read the risks set out in "Risk Factors" beginning on page 30 of the accompanying prospectus. Additional risks and uncertainties not presently known to us or not presently deemed material by us might also impair our operations and performance. If any of the following events occur, our business, financial condition and results of operations could be materially and adversely affected. In such case, our net asset value and the trading price of our common stock could decline and you may lose all or part of your investment.

RISKS RELATED TO OUR BUSINESS AND STRUCTURE

Global economic, political and market conditions may adversely affect our business, results of operations and financial condition, including our revenue growth and profitability.

          The current worldwide financial market situation, as well as various social and political tensions in the U.S. and around the world, may contribute to increased market volatility, may have long-term effects on the U.S. and worldwide financial markets, and may cause economic uncertainties or deterioration in the U.S. and worldwide. Since 2010, several European Union ("EU") countries, including Greece, Ireland, Italy, Spain, and Portugal, have faced budget issues, some of which may have negative long-term effects for the economies of those countries and other EU countries. There is continued concern about national-level support for the Euro and the accompanying coordination of fiscal and wage policy among European Economic and Monetary Union member countries. In June 2016, the United Kingdom ("U.K.") held a referendum in which voters approved an exit from the EU ("Brexit"), and, accordingly, on February 1, 2017, the U.K. Parliament voted in favor of allowing the U.K. government to begin the formal process of Brexit. The initial negotiations on Brexit commenced in June 2017. Brexit created political and economic uncertainty and instability in the global markets (including currency and credit markets), and especially in the United Kingdom and the European Union, and this uncertainty and instability may last indefinitely. Because the U.K. Parliament rejected Prime Minister Theresa May's proposed Brexit deal with the European Union in January 2019, there is increased uncertainty on the outcome of Brexit. There is continued concern about national-level support for the Euro and the accompanying coordination of fiscal and wage policy among European Economic and Monetary Union member countries. In addition, the fiscal policy of foreign nations, such as Russia and China, may have a severe impact on the worldwide and U.S. financial markets. We cannot predict the effects of these or similar events in the future on the U.S. economy and securities markets or on our investments. We monitor developments and seek to manage our investments in a manner consistent with achieving our investment objective, but there can be no assurance that we will be successful in doing so.

          The Republican Party currently controls the executive branch and the Senate portion of the legislative branch of government, which increases the likelihood that legislation may be adopted that could significantly affect the regulation of U.S. financial markets. Areas subject to potential change, amendment or repeal include the Dodd-Frank Act and the authority of the Federal Reserve and the Financial Stability Oversight Council. For example, in March 2018, the U.S. Senate passed a bill that eased financial regulations and reduced oversight for certain entities. The U.S. may also potentially withdraw from or renegotiate various trade agreements and take other actions that would change current trade policies of the U.S. We cannot predict which, if any, of these actions will be taken or, if taken, their effect on the financial stability of the U.S. Such actions could have a significant adverse effect on our business, financial condition and results of operations. We cannot predict the effects of these or similar events in the future on the U.S. economy and securities

S-25


Table of Contents

markets or on our investments. We monitor developments and seek to manage our investments in a manner consistent with achieving our investment objective, but there can be no assurance that we will be successful in doing so.

Our ability to achieve our investment objective depends on key investment personnel of the Investment Adviser. If the Investment Adviser were to lose any of its key investment personnel, our ability to achieve our investment objective could be significantly harmed.

          We depend on the investment judgment, skill and relationships of the investment professionals of the Investment Adviser, particularly Steven B. Klinsky, Robert A. Hamwee and John R. Kline, as well as other key personnel to identify, evaluate, negotiate, structure, execute, monitor and service our investments. The Investment Adviser, as an affiliate of New Mountain Capital, is supported by New Mountain Capital's team, which as of September 30, 2018 consisted of over 140 staff members of New Mountain Capital and its affiliates to fulfill its obligations to us under the Investment Management Agreement. The Investment Adviser may also depend upon New Mountain Capital to obtain access to investment opportunities originated by the professionals of New Mountain Capital and its affiliates. Our future success depends to a significant extent on the continued service and coordination of the key investment personnel of the Investment Adviser. The departure of any of these individuals could have a material adverse effect on our ability to achieve our investment objective.

          The Investment Committee, which provides oversight over our investment activities, is provided by the Investment Adviser. The Investment Committee currently consists of five members. The loss of any member of the Investment Committee or of other senior professionals of the Investment Adviser and its affiliates without suitable replacement could limit our ability to achieve our investment objective and operate as we anticipate. This could have a material adverse effect on our financial condition, results of operation and cash flows. To achieve our investment objective, the Investment Adviser may hire, train, supervise and manage new investment professionals to participate in its investment selection and monitoring process. If the Investment Adviser is unable to find investment professionals or do so in a timely manner, our business, financial condition and results of operations could be adversely affected.

We borrow money, which could magnify the potential for gain or loss on amounts invested in us and increase the risk of investing in us.

          We borrow money as part of our business plan. Borrowings, also known as leverage, magnify the potential for gain or loss on invested equity capital and may, consequently, increase the risk of investing in us. We expect to continue to use leverage to finance our investments, through senior securities issued by banks and other lenders. Lenders of these senior securities have fixed dollar claims on our assets that are superior to claims of our common stockholders. If the value of our assets decreases, leveraging would cause our net asset value to decline more sharply than it otherwise would have had it not leveraged. Similarly, any decrease in our income would cause our net income to decline more sharply than it would have had it not borrowed. Such a decline could adversely affect our ability to make common stock dividend payments. In addition, because our investments may be illiquid, we may be unable to dispose of them or to do so at a favorable price in the event we need to do so if we are unable to refinance any indebtedness upon maturity and, as a result, we may suffer losses. Leverage is generally considered a speculative investment technique.

          Our ability to service any debt that we incur depends largely on our financial performance and is subject to prevailing economic conditions and competitive pressures. Moreover, as the Investment Adviser's management fee is payable to the Investment Adviser based on gross assets, including those assets acquired through the use of leverage, the Investment Adviser may have a

S-26


Table of Contents

financial incentive to incur leverage which may not be consistent with our interests and the interests of our common stockholders. In addition, holders of our common stock will, indirectly, bear the burden of any increase in our expenses as a result of leverage, including any increase in the management fee payable to the Investment Adviser.

          At September 30, 2018, we had $466.0 million, $135.0 million, $270.3 million, $335.0 million and $165.0 million of indebtedness outstanding under the Holdings Credit Facility, the NMFC Credit Facility, the Convertible Notes, the Unsecured Notes and the SBA-guaranteed debentures, respectively. The Holdings Credit Facility, NMFC Credit Facility and the SBA-guaranteed debentures had weighted average interest rates of 4.2%, 4.7% and 3.2%, respectively, for the three months ended September 30, 2018. The interest rate on the 2014 Convertible Notes and 2018 Convertible Notes is 5.00% and 5.75% per annum, respectively, and the interest rate on the 2016 Unsecured Notes, 2017A Unsecured Notes, 2018A Unsecured Notes, 2018B Unsecured Notes and 5.75% Unsecured Notes is 5.313%, 4.760%, 4.870%, 5.360% and 5.75% per annum, respectively. In order for us to cover our annual interest payments on our outstanding indebtedness at September 30, 2018, we must achieve annual returns on our September 30, 2018 total assets of at least 2.5%.

          Illustration.    The following table illustrates the effect of leverage on returns from an investment in our common stock assuming various annual returns, net of expenses and adjusted for unsettled securities purchased. The calculations in the table below are hypothetical. Actual returns may be higher or lower than those appearing below. The calculation assumes (i) $2,521.8 million in total assets, (ii) a weighted average cost of borrowings of 4.5%, which assumes the weighted average interest rates as of September 30, 2018 for the Holdings Credit Facility, the NMFC Credit Facility and the SBA-guaranteed debentures and the interest rate as of September 30, 2018 for the Convertible Notes and Unsecured Notes, (iii) $1,371.3 million in debt outstanding and (iv) $1,033.5 million in net assets.


Assumed Return on Our Portfolio
(net of expenses)

  (10.0)%     (5.0)%     0%     5.0%     10.0%    

Corresponding return to stockholder

    (30.4 )%   (18.2 )%   (6.0 )%   6.2%     18.4%  

If we are unable to obtain additional debt financing, or if our borrowing capacity is materially reduced, our business could be materially adversely affected.

          We may want to obtain additional debt financing, or need to do so upon maturity of our credit facilities, in order to obtain funds which may be made available for investments. The Holdings Credit Facility, the NMFC Credit Facility, the 2014 Convertible Notes and the 2018 Convertible Notes mature on October 24, 2022, June 4, 2022, June 15, 2019 and August 15, 2023, respectively. Our $90.0 million in aggregate principal amount of the 2016 Unsecured Notes will mature on May 15, 2021, our $55.0 million in aggregate principal amount of the 2017A Unsecured Notes will mature on July 15, 2022, our $90.0 million in aggregate principal amount of the 2018A Unsecured Notes will mature on January 30, 2023, our $50.0 million in aggregate principal amount of 2018B Unsecured Notes will mature on June 28, 2023, and our $50.0 million in aggregate principal amount of 5.75% Unsecured Notes will mature on October 1, 2023. The SBA-guaranteed debentures have ten year maturities and will begin to mature on March 1, 2025. If we are unable to increase, renew or replace any such facilities and enter into new debt financing facilities or other debt financing on commercially reasonable terms, our liquidity may be reduced significantly. In addition, if we are unable to repay amounts outstanding under any such facilities and are declared in default or are unable to renew or refinance these facilities, we may not be able to make new investments or operate our business in the normal course. These situations may arise due to circumstances that

S-27


Table of Contents

we may be unable to control, such as lack of access to the credit markets, a severe decline in the value of the U.S. dollar, an economic downturn or an operational problem that affects us or third parties, and could materially damage our business operations, results of operations and financial condition.

Uncertainty relating to the LIBOR calculation process may adversely affect the value of our portfolio of the 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. The future of LIBOR at this time is uncertain. 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.

Regulations governing the operations of BDCs will affect our ability to raise additional equity capital as well as our ability to issue senior securities or borrow for investment purposes, any or all of which could have a negative effect on our investment objectives and strategies.

          Our business requires a substantial amount of capital. We may acquire additional capital from the issuance of senior securities, including borrowing under a credit facility or other indebtedness. In addition, we may also issue additional equity capital, which would in turn increase the equity capital available to us. However, we may not be able to raise additional capital in the future on favorable terms or at all.

          We may issue debt securities, preferred stock, and we may borrow money from banks or other financial institutions, which we refer to collectively as "senior securities", up to the maximum amount permitted by the 1940 Act. The 1940 Act permits us to issue senior securities in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 150.0% after each issuance of senior securities. As a result of our SEC exemptive relief, we are permitted to exclude our SBA-guaranteed debentures from the definition of senior securities in the 150.0% asset coverage ratio we are required to maintain under the 1940 Act. If our asset coverage ratio is not at least 150.0%, we would be unable to issue senior securities, and if we had senior securities outstanding (other than any indebtedness issued in consideration of a privately arranged loan, such as any indebtedness outstanding under the Holdings Credit Facility and NMFC Credit Facility), we would be unable to make distributions to our stockholders. However, at September 30, 2018, our only senior securities outstanding were indebtedness under the Holdings Credit Facility, NMFC Credit Facility, Convertible Notes and Unsecured Notes. Therefore, at September 30, 2018, we would not have been precluded from paying distributions. If the value of our assets declines, we

S-28


Table of Contents

may be unable to satisfy this test. If that happens, we may be required to liquidate a portion of our investments and repay a portion of our indebtedness at a time when such sales may be disadvantageous.

          The Holdings Credit Facility matures on October 24, 2022 and permits borrowings of $495.0 million as of September 30, 2018. The Holdings Credit Facility had $466.0 million in debt outstanding as of September 30, 2018. The NMFC Credit Facility matures on June 4, 2022 and permits borrowings of $135.0 million as of September 30, 2018. The NMFC Credit Facility had $135.0 million in debt outstanding as of September 30, 2018. The 2014 Convertible Notes mature on June 15, 2019. The 2014 Convertible Notes had $155.3 million in debt outstanding as of September 30, 2018. The 2018 Convertible Notes were issued on August 20, 2018 and August 30, 2018 and mature on August 15, 2023. The 2018 Convertible Notes had $115.0 million in debt outstanding as of September 30, 2018. The 2016 Unsecured Notes, 2017A Unsecured Notes, 2018A Unsecured Notes, 2018B Unsecured Notes and 5.75% Unsecured Notes mature on May 15, 2021, July 15, 2022, January 30, 2023, June 28, 2023 and October 1, 2023, respectively, and had $90.0 million, $55.0 million, $90.0 million, $50.0 million and $50.0 million, respectively, in debt outstanding as of September 30, 2018. The SBA-guaranteed debentures have ten year maturities and will begin to mature on March 1, 2025. As of September 30, 2018, $165.0 million of SBA-guaranteed debentures were outstanding.

          In addition, we may in the future seek to securitize other portfolio securities to generate cash for funding new investments. To securitize loans, we would likely create a wholly-owned subsidiary and contribute a pool of loans to the subsidiary. We would then sell interests in the subsidiary on a non-recourse basis to purchasers and we would retain all or a portion of the equity in the subsidiary. If we are unable to successfully securitize its loan portfolio, which must be done in compliance with the relevant restrictions in the Holdings Credit Facility, our ability to grow our business or fully execute our business strategy could be impaired and our earnings, if any, could decrease. The securitization market is subject to changing market conditions, and we may not be able to access this market when it would be otherwise deemed appropriate. Moreover, the successful securitization of our portfolio might expose us to losses as the residual investments in which we do not sell interests will tend to be those that are riskier and more apt to generate losses. The 1940 Act also may impose restrictions on the structure of any securitization.

          We may also obtain capital through the issuance of additional equity capital. As a BDC, we generally are not able to issue or sell our common stock at a price below net asset value per share. If our common stock trades at a discount to our net asset value per share, this restriction could adversely affect our ability to raise equity capital. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below our net asset value per share of the common stock if our board of directors and independent directors determine that such sale is in our best interests and the best interests of our stockholders, and our stockholders approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our board of directors, closely approximates the market value of such securities (less any underwriting commission or discount). If we raise additional funds by issuing more shares of our common stock, or if we issue senior securities convertible into, or exchangeable for, our common stock, the percentage ownership of our stockholders may decline and you may experience dilution.

S-29


Table of Contents

RISKS RELATING TO OUR INVESTMENTS

Our portfolio may be concentrated in a limited number of industries, which may subject us to a risk of significant loss if there is a downturn in a particular industry in which a number of our investments are concentrated.

          Our portfolio may be concentrated in a limited number of industries. For example, as of September 30, 2018, our investments in the business services and the software industries represented approximately 27.98% and 19.35%, respectively, of the fair value of our portfolio. A downturn in any particular industry in which we are invested could significantly impact the portfolio companies operating in that industry, and accordingly, the aggregate returns that we realize from our investment in such portfolio companies.

          Specifically, companies in the business services industry are subject to general economic downturns and business cycles, and will often suffer reduced revenues and rate pressures during periods of economic uncertainty. In addition, companies in the software industry often have narrow product lines and small market shares. Because of rapid technological change, the average selling prices of products and some services provided by software companies have historically decreased over their productive lives. As a result, the average selling prices of products and services offered by software companies in which we invest may decrease over time. If an industry in which we have significant investments suffers from adverse business or economic conditions, as these industries have to varying degrees, a material portion of our investment portfolio could be affected adversely, which, in turn, could adversely affect our financial position and results of operations.

S-30


Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

          This prospectus supplement and the accompanying prospectus contain forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as "anticipate", "believe", "continue", "could", "estimate", "expect", "intend", "may", "plan", "potential", "project", "seek", "should", "target", "will", "would" or variations of these words and similar expressions are intended to identify forward-looking statements. The forward-looking statements contained in this prospectus supplement and the accompanying prospectus involve risks and uncertainties, including statements as to:

    the preliminary estimates of our net asset value and net investment income;

    our future operating results;

    our business prospects and the prospects of our portfolio companies;

    the impact of investments that we expect to make;

    our contractual arrangements and relationships with third parties;

    the dependence of our future success on the general economy and its impact on the industries in which we invest;

    the ability of our portfolio companies to achieve their objectives;

    our expected financings and investments;

    the adequacy of our cash resources and working capital; and

    the timing of cash flows, if any, from the operations of our portfolio companies.

          These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:

    an economic downturn could impair our portfolio companies' ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies;

    a contraction of available credit and/or an inability to access the equity markets could impair our lending and investment activities;

    interest rate volatility could adversely affect our results, particularly if we elect to use leverage as part of our investment strategy;

    currency fluctuations could adversely affect the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S. dollars;

    the risks, uncertainties and other factors we identify in "Risk Factors" and elsewhere in this prospectus supplement, the accompanying prospectus and in our filings with the SEC; and

    the results of our financial closing procedures.

          Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include our ability to originate new loans and investments, certain margins and levels

S-31


Table of Contents

of profitability and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this prospectus supplement or the accompanying prospectus should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in "Risk Factors" and elsewhere in this prospectus supplement and the accompanying prospectus. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this prospectus supplement. However, we will update this prospectus supplement to reflect any material changes to the information contained herein. The forward-looking statements and projections contained in this prospectus supplement are excluded from the safe harbor protection provided by Section 27A of the Securities Act.

S-32


Table of Contents

CAPITALIZATION

          The following table sets forth our capitalization as of September 30, 2018:

    on an actual basis;

    on an as adjusted basis to give effect to the sale of 3,750,000 shares of our common stock by us in this offering at a public offering price of $         per share, after deducting the estimated sales load (underwriting discounts and commissions) of approximately $              million and estimated offering expenses of approximately $0.3 million payable by us.

          You should read this table together with "Use of Proceeds" and the financial statements and related notes thereto included elsewhere in this prospectus supplement.

    Actual     As Adjusted
(unaudited)
 

    (in thousands)  

Assets:

             

Cash and cash equivalents

  $ 146,345   $    

Investments at fair value

    2,294,759        

Other assets

    80,670        

Total assets

  $ 2,521,774   $    

Liabilities:

             

Net borrowings

  $ 1,354,386   $    

Other liabilities

    133,858        

Total liabilities

  $ 1,488,244   $    

Net assets

  $ 1,033,530   $    

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; 100,000,000 shares authorized, 76,106,372 shares issued and outstanding, respectively

    761        

Paid in capital in excess of par

    1,055,796        

Accumulated undistributed net investment income

    40,227        

Accumulated undistributed net realized losses on investments

    (79,830 )      

Net unrealized appreciation (depreciation) (net of provision for taxes)

    16,576        

Total net assets

    1,033,530        

S-33


Table of Contents

USE OF PROCEEDS

          We estimate that we will receive net proceeds from the sale of the 3,750,000 shares of our common stock in this offering of approximately $              million, after deducting underwriting discounts and commissions of approximately $              million and estimated offering expenses of approximately $0.3 million payable by us. In addition, the Investment Adviser has agreed to bear $          million of sales load in connection with this offering, which will not be subject to reimbursement by us. If the underwriters' option to purchase additional shares is exercised in full, our net proceeds from this offering will be approximately $              million, after deducting underwriting discounts and commissions of approximately $              million and estimated offering expenses of approximately $0.3 million payable by us. In addition, if the underwriters' option to purchase additional shares is exercised in full, the Investment Adviser has agreed to bear $          million of sales load in connection with this offering, which will not be subject to reimbursement by us.

          We intend to use the net proceeds from this offering primarily for new investments in portfolio companies in accordance with our investment objective and strategies described in this prospectus supplement and the accompanying prospectus. We may also use a portion of the net proceeds from the sale of shares of our common stock sold in this offering for other general corporate purposes, including to temporarily repay indebtedness (which will be subject to reborrowing), and other working capital requirements. We are continuously identifying, reviewing and, to the extent consistent with our investment objective, funding new investments. As a result, we typically raise capital as we deem appropriate to fund such new investments.

          We expect that it will take up to three months for us to substantially invest the net proceeds from this offering, depending on the availability of attractive opportunities and market conditions. However, we can offer no assurance that we will be able to achieve this goal.

          Proceeds not immediately used for new investments or the temporary repayment of debt will be invested primarily in cash, cash equivalents, U.S. government securities and other high-quality investments that mature in one year or less from the date of investment. These temporary investments are expected to provide a lower net return than we hope to achieve from our target investments and, accordingly, may result in lower distributions, if any, during such period.

S-34


Table of Contents

PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS

          Our common stock is traded on the New York Stock Exchange ("NYSE") under the symbol "NMFC". The following table sets forth, for each fiscal quarter during the last two fiscal years and the current fiscal year to date, the net asset value ("NAV") per share of our common stock, the high and low closing sale price for our common stock, the closing sale price as a percentage of NAV and the quarterly distributions per share.

   


NAV
 

Closing Sales
Price(3)
 
    Premium
(Discount)
of
High Closing
Sales Price
to
    Premium
(Discount) of
Low Closing
Sales Price
to
   

Declared
Distributions
 
Fiscal Year Ended
  Per Share(2)   High   Low   NAV(4)   NAV(4)   Per Share(5)(6)  

December 30, 2019

                                     

First Quarter(1)

      * $ 14.05   $ 12.78       *     *     *

December 31, 2018

                                     

Fourth Quarter

      * $ 13.83   $ 12.25       *     * $ 0.34  

Third Quarter

  $ 13.58   $ 14.25   $ 13.50     4.93 %   (0.59 )% $ 0.34  

Second Quarter

  $ 13.57   $ 13.95   $ 13.25     2.80 %   (2.36 )% $ 0.34  

First Quarter

  $ 13.60   $ 13.75   $ 12.55     1.10 %   (7.72 )% $ 0.34  

December 31, 2017

                                     

Fourth Quarter

  $ 13.63   $ 14.50   $ 13.55     6.38 %   (0.59 )% $ 0.34  

Third Quarter

  $ 13.61   $ 14.70   $ 13.55     8.01 %   (0.44 )% $ 0.34  

Second Quarter

  $ 13.63   $ 14.95   $ 14.35     9.68 %   5.28 % $ 0.34  

First Quarter

  $ 13.56   $ 14.90   $ 14.00     9.88 %   3.24 % $ 0.34  

(1)
Period from January 2, 2019 through February 8, 2019.

(2)
NAV is determined as of the last date in the relevant quarter and therefore may not reflect the NAV per share on the date of the high and low closing sales prices. The NAVs shown are based on outstanding shares at the end of each period.

(3)
Closing sales price is determined as the high or low closing sales price noted within the respective quarter, not adjusted for distributions.

(4)
Calculated as of the respective high or low closing sales price divided by the quarter end NAV.

(5)
Represents the distributions declared or paid for the specified quarter.

(6)
Tax characteristics of all distributions paid are reported to stockholders on Form 1099 after the end of the calendar year. For the year ended December 31, 2017, total distributions were $100.9 million, of which the distributions were comprised of approximately 71.50% of ordinary income, 0.00% of long-term capital gains and approximately 28.50% of a return of capital.

*
Not determinable at the time of filing.

          On February 8, 2019, the last reported sales price of our common stock was $13.95 per share. As of February 8, 2019, we had approximately 14 stockholders of record and approximately one beneficial owner whose shares are held in the names of brokers, dealers, funds, trusts and clearing agencies.

          Shares of BDCs may trade at a market price that is less than the value of the net assets attributable to those shares. The possibility that our shares of common stock will trade at a discount from NAV or at premiums that are unsustainable over the long term are separate and distinct from the risk that our NAV will decrease. Since our initial public offering on May 19, 2011, our shares of common stock have traded at times at both a discount and a premium to the net assets attributable to those shares. As of February 8, 2019, our shares of common stock traded at a premium of

S-35


Table of Contents

approximately 2.7% of the NAV attributable to those shares as of September 30, 2018. It is not possible to predict whether the shares offered hereby will trade at, above, or below NAV.

          We intend to pay quarterly distributions to our stockholders in amounts sufficient to maintain our status as a RIC. We intend to distribute approximately our entire Adjusted Net Investment Income (defined as net investment income adjusted to reflect income as if the cost basis of investments held at the IPO date had stepped-up to fair market value as of the IPO date) 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. The distributions we pay to our stockholders in a year may exceed our taxable income for that year and, accordingly, a portion of such distributions may constitute a return of capital, which is a return of a portion of a stockholders original investment in our common stock, for U.S. federal tax purposes. Generally, a return of capital will reduce an investor's basis in our stock for U.S. federal income tax purposes, which will result in a higher tax liability when the stock is sold. The specific tax characteristics of our distributions will be reported to stockholders after the end of the calendar year.

          We apply 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 NAV of the shares, we will use only newly issued shares to implement the 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 our common stock on the 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 NAV of the shares, we 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 our 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 our stockholders have been tabulated.

S-36


Table of Contents

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

Date Declared
  Record Date    Payment Date    Per Share
Amount
 
 

November 1, 2018

  December 14, 2018   December 28, 2018   $ 0.34  

August 1, 2018

  September 14, 2018   September 28, 2018     0.34  

May 2, 2018

  June 15, 2018   June 29, 2018     0.34  

February 21, 2018

  March 15, 2018   March 29, 2018     0.34  

          $ 1.36  

November 2, 2017

  December 15, 2017   December 28, 2017   $ 0.34  

August 4, 2017

  September 15, 2017   September 29, 2017     0.34  

May 4, 2017

  June 16, 2017   June 30, 2017     0.34  

February 23, 2017

  March 17, 2017   March 31, 2017     0.34  

          $ 1.36  

November 4, 2016

  December 15, 2016   December 29, 2016   $ 0.34  

August 2, 2016

  September 16, 2016   September 30, 2016     0.34  

May 3, 2016

  June 16, 2016   June 30, 2016     0.34  

February 22, 2016

  March 17, 2016   March 31, 2016     0.34  

          $ 1.36  

          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, 2017 and December 31, 2016, total distributions were $100.9 million and $88.8 million, respectively, of which the distributions were comprised of approximately 71.50% and 89.46%, respectively, of ordinary income, 0.00% and 0.00%, respectively, of long-term capital gains and approximately 28.50% and 10.54%, respectively, of a return of capital. Future quarterly distributions, if any, will be determined by our board of directors.

S-37


Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

          The information contained in this section should be read in conjunction with the Selected Financial and Other Data and our Financial Statements and notes thereto appearing elsewhere in this prospectus supplement. For the periods prior to and as of May 8, 2014, all financial information provided in this section reflects our organizational structure prior to the restructuring on May 8, 2014 described under "Description of Restructuring" in the accompanying prospectus, where NMF Holdings functioned as the operating company. In addition to historical information, the following discussion and other parts of this prospectus supplement and the accompanying prospectus contain forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking information due to the factors discussed under "Risk Factors" and "Cautionary Statement Regarding Forward-Looking Statements" appearing elsewhere in this prospectus supplement and the accompanying prospectus.

Overview

          We are a Delaware corporation that was originally incorporated on June 29, 2010 and completed IPO on May 19, 2011. We are a closed-end, non-diversified management investment company that has elected to be regulated as a BDC under the 1940 Act. We have elected to be treated, and intend to comply with the requirements to continue to qualify annually, as a RIC under Subchapter M of the Code. NMFC is also registered as an investment adviser under the Advisers Act. Since our IPO, and through September 30, 2018, we raised approximately $614.6 million in net proceeds from additional offerings of 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 Administrator, a wholly-owned subsidiary of New Mountain Capital, provides the administrative services necessary to conduct our day-to-day operations.

          Our wholly-owned subsidiary, New Mountain Holdings, is a Delaware limited liability company whose assets are used to secure NMF Holdings' credit facility. NMF Ancora, NMF QID and NMF YP, our wholly-owned subsidiaries, are structured as Delaware entities that serve as tax blocker corporations which hold 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. 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. Additionally, our wholly-owned subsidiary, NMFC Servicing, serves as the administrative agent on certain investment transactions. SBIC I and its general partner, SBIC I GP, were organized in Delaware as a limited partnership and limited liability company, respectively. New Mountain Finance SBIC II, L.P. SBIC II and its general partner, SBIC II GP, were also organized in Delaware as a limited partnership and limited liability company, respectively. SBIC I, SBIC I GP, SBIC II and SBIC II GP are our consolidated wholly-owned direct and indirect subsidiaries. SBIC I and SBIC II received licenses from the SBA to operate as an SBIC under Section 301(c) of the 1958 Act. Our wholly-owned subsidiary, NMNLC, a Maryland corporation, was formed to acquire commercial real properties that are subject to "triple net" leases and intends to qualify as a real estate investment trust, or REIT, within the meaning of Section 856(a) of the Code.

S-38


Table of Contents

          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, 2018, our top five industry concentrations were business services, software, healthcare services, education and investment funds.

          As of September 30, 2018, our net asset value was $1,033.5 million and our portfolio had a fair value of approximately $2,294.8 million in 92 portfolio companies, with a weighted average yield to maturity at cost for income producing investments ("YTM at Cost") of approximately 11.0% and a weighted average yield to maturity at cost for all investments ("YTM at Cost for Investments") of approximately 10.9%. 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 as 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 uses 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

Originations and Repayments

          We had approximately $332.0 million of originations and commitments since September 30, 2018 through February 8, 2019. This was offset by approximately $79.2 million of repayments and $119.1 million of sales during the same period.

5.75% Unsecured Notes

          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.

Distribution

          On November 1, 2018, our board of directors declared a fourth quarter 2018 distribution of $0.34 per share payable on December 28, 2018 to holders of record as of December 14, 2018.

S-39


Table of Contents

Holdings Credit Facility

          On November 19, 2018, we entered into the Second Amendment to Loan and Security Agreement (the "Second Amendment"), which amended the Holdings Credit Facility. Among other changes, the Second Amendment: increased the maximum facility amount from $495.0 million to $695.0 million; made certain technical changes to facilitate further increases should any new or existing lender and NMF Holdings mutually agree to do so; modified certain eligibility criteria and concentration limits for loans acquired by NMF Holdings; lowered the concentration limit for non-first lien loans from 50% to 35%; changed the minimum asset coverage ratio for us and our consolidated subsidiaries from 2:1 to 1.5:1, changed the cure level to 1.75:1; and changed the default basket for tax liens and other governmental liens from $50,000 to $250,000.

          On December 13, 2018, January 8, 2019 and January 25, 2019, NMF Holdings entered into certain Joinder Supplements (the "Joinders") to add TIAA, FSB, Old Second National Bank and Sumitomo Mitsui Trust Bank, Limited, New York, respectively, as new lenders under the Holdings Credit Facility. After giving effect to each of the Joinders, the aggregate commitments of the lenders under the Holdings Credit Facility equals $675.0 million. The Holdings Credit Facility continues to have a revolving period ending on October 24, 2020, and will still mature on October 24, 2022.

Deutsche Bank Facility

          On December 14, 2018, our newly formed wholly-owned subsidiary, New Mountain Finance DB, L.L.C., as the borrower (the "DB Facility Borrower"), entered into a secured revolving credit facility with Deutsche Bank AG, New York Branch ("Deutsche Bank") pursuant to a Loan Financing and Servicing Agreement (together with the exhibits and schedules thereto, the "DB Facility Agreement" and the secured revolving credit facility thereunder, the "DB Credit Facility"), by and among the DB Facility Borrower, us, as equityholder and servicer, the lenders from time to time party thereto, Deutsche Bank, as the facility agent (the "Facility Agent"), the other agents from time to time party thereto and U.S. Bank National Association, as collateral agent and collateral custodian. The facility amount and the commitment of Deutsche Bank is $100.0 million. With the consent of the Facility Agent (which may be made subject to conditions), Deutsche Bank and the DB Facility Borrower may in the future agree to increase the commitments and the facility amount by up to $200.0 million or add additional lenders. The lenders under the DB Credit Facility will make advances to the DB Facility Borrower during a revolving period (the "Revolving Period") that will expire on December 14, 2021, provided that the Revolving Period may be extended with the consent of the lenders and may also terminate early if an event of default or other adverse events, specified in the DB Facility Agreement, occur. The maturity date for the DB Credit Facility is December 14, 2023.

Preliminary Estimates of Net Asset Value and Net Investment Income

          Set forth below is a preliminary estimate of our net asset value per share as of December 31, 2018 and a preliminary estimate of our net investment income per share range for the three months ended December 31, 2018. The following estimates are not a comprehensive statement of our financial condition or results for the period ended December 31, 2018. We advise you that our actual results for the three months ended December 31, 2018 may differ materially from these estimates, which are given only as of the date of this prospectus supplement, as a result of the completion of our financial closing procedures, final adjustments and other developments, including changes in interest rates, changes in the businesses to whom we have made loans or market and industry fluctuations, which may arise between now and the time that our financial results for the three months ended December 31, 2018 are finalized. This information is inherently uncertain.

S-40


Table of Contents

          As of the date of this prospectus supplement, we estimate that our net asset value per share as of December 31, 2018 was approximately $13.20 to $13.25. We also estimate that as of the date of this prospectus supplement our net asset value per share has increased since December 31, 2018 due to changes in market conditions. The offering price per share of our common stock, net of the sales load (underwriting discounts and commissions), will be in excess of the net asset value per share of our common stock at the time we make this offering.

          As of the date of this prospectus supplement, we currently expect that our net investment income per share was between $0.35 and $0.36 for the three months ended December 31, 2018.

          The preliminary financial estimates provided herein have been prepared by, and are the responsibility of, management. Neither Deloitte & Touche LLP, our independent registered public accounting firm, nor any other independent accountants have audited, reviewed, compiled, or performed any procedures with respect to the accompanying preliminary financial data. Accordingly, Deloitte & Touche LLP does not express an opinion or any form of assurance with respect thereto and assumes no responsibility for, and disclaims any association with, this information.

Share Repurchase Program

          On January 3, 2019, our board of directors extended our common stock repurchase program and we expect our common stock repurchase program to be in place until the earlier of December 31, 2019 or until $50.0 million of our outstanding shares of common stock have been repurchased.

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, 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

S-41


Table of Contents

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

    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

S-42


Table of Contents

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.

          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. Reclassifications impacting the fair value hierarchy are reported as transfers in/out of the respective leveling categories as of the beginning of the period in which the reclassifications occur.

S-43


Table of Contents

          The following table summarizes the levels in the fair value hierarchy that our portfolio investments fall into as of September 30, 2018:

(in thousands)
  Total     Level I     Level II     Level III    

First lien

  $ 1,030,033   $   $ 143,479   $ 886,554  

Second lien

    681,910         358,727     323,183  

Subordinated

    64,606         26,262     38,344  

Equity and other

    518,210     6         518,204  

Total investments

  $ 2,294,759   $ 6   $ 528,468   $ 1,766,285  

          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

S-44


Table of Contents

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, 2018, we used the relevant EBITDA multiple ranges 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, 2018, 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, 2018 were as follows:

    Fair Value                            

    as of           Range    

(in thousands)
Type
  September 30,
2018
 
  Approach     Unobservable Input     Low     High     Weighted
Average
 
 

First lien

  $ 594,309   Market & income approach   EBITDA multiple     2.0x     32.0x     12.0x  

            Revenue multiple     3.5x     6.5x     5.5x  

            Discount rate     6.9 %   14.3 %   9.7 %

    163,957   Market quote   Broker quote     N/A     N/A     N/A  

    128,288   Other   N/A(1)     N/A     N/A     N/A  

Second lien

    105,801   Market & income approach   EBITDA multiple     7.5x     17.0x     12.2x  

            Revenue multiple     2.5x     3.3x     2.9x  

            Discount rate     11.1 %   13.6 %   11.7 %

    217,382   Market quote   Broker quote     N/A     N/A     N/A  

Subordinated

    38,344   Market & income approach   EBITDA multiple     6.5x     11.0x     10.0x  

            Revenue multiple     2.5x     3.3x     2.9x  

            Discount rate     8.1 %   22.0 %   19.0 %

Equity and other

    517,709   Market & income approach   EBITDA multiple     0.4x     19.0x     12.6x  

            Revenue multiple     2.5x     3.3x     2.9x  

            Discount rate     7.0 %   25.1 %   12.9 %

    495   Black Scholes analysis   Expected life in years     7.5     7.5     7.5  

            Volatility     38.0 %   38.0 %   38.0 %

            Discount rate     2.9 %   2.9 %   2.9 %

  $ 1,766,285                            

(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

S-45


Table of Contents

under a limited liability company agreement (the "SLP I Agreement") and will continue in existence until August 31, 2021, 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 was through July 31, 2018. In September 2018, the re-investment period was extended until August 31, 2019. 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 party investors representing the remaining capital commitments. As of September 30, 2018, SLP I had total investments with an aggregate fair value of approximately $328.6 million, debt outstanding of $237.3 million and capital that had been called and funded of $93.0 million. As of December 31, 2017, SLP I had total investments with an aggregate fair value of approximately $348.7 million, debt outstanding of $223.7 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, 2018 and December 31, 2017.

          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, 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. For the three and nine months ended September 30, 2017, 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, 2018 and December 31, 2017, approximately $0.3 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, 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. For the three and nine months ended September 30, 2017, we earned approximately $0.8 million and $2.7 million, respectively, of dividend income related to SLP I, which is included in dividend income. As of September 30, 2018 and December 31, 2017, approximately $0.8 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 has a three year investment period and will continue in existence until April 12, 2021. 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, 2018, we and SkyKnight have committed and contributed $79.4 million and

S-46


Table of Contents

$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, 2018 and December 31, 2017.

          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, 2021 and bears interest at a rate of LIBOR plus 1.75% per annum. Effective April 1, 2018, SLP II's revolving credit facility bears interest at a rate of LIBOR plus 1.60% per annum. As of September 30, 2018 and December 31, 2017, SLP II had total investments with an aggregate fair value of approximately $353.3 million and $382.5 million, respectively, and debt outstanding under its credit facility of $262.4 million and $266.3 million, respectively. As of September 30, 2018 and December 31, 2017, none of SLP II's investments were on non-accrual. Additionally, as of September 30, 2018 and December 31, 2017, SLP II had unfunded commitments in the form of delayed draws of $8.8 million and $4.9 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, 2018 and December 31, 2017:

(in thousands)
  September 30,
2018
 
  December 31,
2017
 
 

First lien investments(1)

    360,933     386,100  

Weighted average interest rate on first lien investments(2)

    6.55 %   6.05 %

Number of portfolio companies in SLP II

    32     35  

Largest portfolio company investment(1)

    17,183     17,369  

Total of five largest portfolio company investments(1)

    80,958     81,728  

(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.

S-47


Table of Contents

          The following table is a listing of the individual investments in SLP II's portfolio as of September 30, 2018:

Portfolio Company and Type of
Investment
  Industry     Interest Rate(1)     Maturity
Date
 
  Principal
Amount or
Par Value
 
  Cost     Fair Value(2)    

                (in thousands)     (in thousands)     (in thousands)  

Funded Investments — First lien:

                               

Access CIG, LLC

  Business Services   5.99% (L + 3.75%)   2/27/2025   $ 8,848   $ 8,806   $ 8,906  

ADG, LLC

  Healthcare Services   6.99% (L + 4.75%)   9/28/2023     16,905     16,778     16,651  

Beaver-Visitec International Holdings, Inc. 

  Healthcare Products   6.39% (L + 4.00%)   8/21/2023     14,701     14,521     14,774  

Brave Parent Holdings, Inc. 

  Software   6.39% (L + 4.00%)   4/18/2025     15,461     15,406     15,519  

CentralSquare Technologies, LLC

  Software   5.99% (L + 3.75%)   8/29/2025     15,000     14,963     15,070  

CHA Holdings, Inc. 

  Business Services   6.89% (L + 4.50%)   4/10/2025     9,832     9,786     9,906  

CommerceHub, Inc. 

  Software   5.99% (L + 3.75%)   5/21/2025     2,493     2,482     2,503  

Drilling Info Holdings, Inc. 

  Business Services   6.54% (L + 4.25%)   7/30/2025     11,250     11,202     11,237  

FPC Holdings, Inc. 

  Distribution & Logistics   6.74% (L + 4.50%)   11/18/2022     14,925     14,517     15,069  

Greenway Health, LLC

  Software   6.14% (L + 3.75%)   2/16/2024     14,812     14,753     14,832  

Idera, Inc. 

  Software   6.75% (L + 4.50%)   6/28/2024     12,523     12,416     12,644  

J.D. Power (fka J.D. Power and Associates)

  Business Services   6.49% (L + 4.25%)   9/7/2023     13,256     13,213     13,344  

Keystone Acquisition Corp. 

  Healthcare Services   7.64% (L + 5.25%)   5/1/2024     5,346     5,301     5,383  

LSCS Holdings, Inc. 

  Healthcare Services   6.63% (L + 4.25%)   3/17/2025     5,321     5,312     5,321  

LSCS Holdings, Inc. 

  Healthcare Services   6.52% (L + 4.25%)   3/17/2025     1,374     1,371     1,374  

Market Track, LLC

  Business Services   6.64% (L + 4.25%)   6/5/2024     11,850     11,800     11,835  

Medical Solutions Holdings, Inc. 

  Healthcare Services   5.99% (L + 3.75%)   6/14/2024     4,443     4,424     4,459  

Ministry Brands, LLC

  Software   6.24% (L + 4.00%)   12/2/2022     2,121     2,113     2,121  

Ministry Brands, LLC

  Software   6.24% (L + 4.00%)   12/2/2022     303     301     303  

Ministry Brands, LLC

  Software   6.24% (L + 4.00%)   12/2/2022     12,316     12,267     12,316  

Navicure, Inc. 

  Healthcare Services   5.99% (L + 3.75%)   11/1/2024     2,928     2,915     2,942  

NorthStar Financial Services Group, LLC

  Software   5.56% (L + 3.50%)   5/25/2025     7,500     7,464     7,523  

Pathway Vet Alliance LLC (fka Pathway Partners Vet Management Company LLC)

  Consumer Services   6.49% (L + 4.25%)   10/10/2024     286     284     286  

Pathway Vet Alliance LLC (fka Pathway Partners Vet Management Company LLC)

  Consumer Services   6.49% (L + 4.25%)   10/10/2024     9,630     9,586     9,654  

Peraton Corp. (fka MHVC Acquisition Corp.)

  Federal Services   7.64% (L + 5.25%)   4/29/2024     10,369     10,325     10,317  

Poseidon Intermediate, LLC

  Software   6.50% (L + 4.25%)   8/15/2022     14,767     14,764     14,841  

Premise Health Holding Corp. 

  Healthcare Services   6.14% (L + 3.75%)   7/10/2025     1,390     1,383     1,397  

Project Accelerate Parent, LLC

  Business Services   6.37% (L + 4.25%)   1/2/2025     14,925     14,856     15,018  

PSC Industrial Holdings Corp. 

  Industrial Services   5.91% (L + 3.75%)   10/11/2024     10,421     10,329     10,467  

Quest Software US Holdings Inc. 

  Software   6.57% (L + 4.25%)   5/16/2025     15,000     14,928     15,060  

Salient CRGT Inc. 

  Federal Services   7.99% (L + 5.75%)   2/28/2022     13,603     13,505     13,807  

Sierra Acquisition, Inc. 

  Food & Beverage   5.99% (L + 3.75%)   11/11/2024     3,722     3,705     3,754  

SSH Group Holdings, Inc. 

  Education   6.59% (L + 4.25%)   7/30/2025     9,000     8,978     9,090  

WP CityMD Bidco LLC

  Healthcare Services   5.89% (L + 3.50%)   6/7/2024     14,850     14,819     14,831  

YI, LLC

  Healthcare Services   6.39% (L + 4.00%)   11/7/2024     1,457     1,462     1,457  

YI, LLC

  Healthcare Services   6.39% (L + 4.00%)   11/7/2024     12,069     12,059     12,069  

Zywave, Inc. 

  Software   7.34% (L + 5.00%)   11/17/2022     17,183     17,120     17,183  

Total Funded Investments

              $ 352,180   $ 350,214   $ 353,263  

Unfunded Investments — First lien:

                               

Access CIG, LLC

  Business Services     2/27/2019   $ 1,108   $   $ 7  

CHA Holdings, Inc. 

  Business Services     10/10/2019     2,143     (11 )   16  

Drilling Info Holdings, Inc. 

  Business Services     7/30/2020     2,249     (10 )   (6 )

Ministry Brands, LLC

  Software     10/18/2019     1,566     (8 )    

Premise Health Holding Corp. 

  Healthcare Services     7/10/2020     110         1  

YI, LLC

  Healthcare Services     11/7/2018     1,577     (8 )    

Total Unfunded Investments

              $ 8,753   $ (37 ) $ 18  

Total Investments

              $ 360,933   $ 350,177   $ 353,281  

(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), the Prime Rate (P) and the alternative base rate (Base). For each investment, the current interest rate provided reflects the rate in effect as of September 30, 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.

S-48


Table of Contents

          The following table is a listing of the individual investments in SLP II's portfolio as of December 31, 2017:

Portfolio Company and Type of
Investment
  Industry     Interest Rate(1)     Maturity
Date
 
  Principal
Amount or
Par Value
 
  Cost     Fair Value(2)    

                (in thousands)     (in thousands)     (in thousands)  

Funded Investments — First lien

                               

ADG, LLC

  Healthcare Services   6.32% (L + 4.75%)   9/28/2023   $ 17,034   $ 16,890   $ 16,779  

ASG Technologies Group, Inc. 

  Software   6.32% (L + 4.75%)   7/31/2024     7,481     7,446     7,547  

Beaver-Visitec International Holdings, Inc. 

  Healthcare Products   6.69% (L + 5.00%)   8/21/2023     14,812     14,688     14,813  

DigiCert, Inc. 

  Business Services   6.13% (L + 4.75%)   10/31/2024     10,000     9,951     10,141  

Emerald 2 Limited

  Business Services   5.69% (L + 4.00%)   5/14/2021     1,266     1,211     1,267  

Evo Payments International, LLC

  Business Services   5.57% (L + 4.00%)   12/22/2023     17,369     17,292     17,492  

Explorer Holdings, Inc. 

  Healthcare Services   5.13% (L + 3.75%)   5/2/2023     2,940     2,917     2,973  

Globallogic Holdings Inc. 

  Business Services   6.19% (L + 4.50%)   6/20/2022     9,677     9,611     9,755  

Greenway Health, LLC

  Software   5.94% (L + 4.25%)   2/16/2024     14,925     14,858     15,074  

Idera, Inc. 

  Software   6.57% (L + 5.00%)   6/28/2024     12,619     12,499     12,556  

J.D. Power (fka J.D. Power and Associates)

  Business Services   5.94% (L + 4.25%)   9/7/2023     13,357     13,308     13,407  

Keystone Acquisition Corp. 

  Healthcare Services   6.94% (L + 5.25%)   5/1/2024     5,386     5,336     5,424  

Market Track, LLC

  Business Services   5.94% (L + 4.25%)   6/5/2024     11,940     11,884     11,940  

McGraw-Hill Global Education Holdings, LLC

  Education   5.57% (L + 4.00%)   5/4/2022     9,850     9,813     9,844  

Medical Solutions Holdings, Inc. 

  Healthcare Services   5.82% (L + 4.25%)   6/14/2024     6,965     6,932     7,043  

Ministry Brands, LLC

  Software   6.38% (L + 5.00%)   12/2/2022     2,138     2,128     2,138  

Ministry Brands, LLC

  Software   6.38% (L + 5.00%)   12/2/2022     7,768     7,735     7,768  

Navex Global, Inc. 

  Software   5.82% (L + 4.25%)   11/19/2021     14,897     14,724     14,971  

Navicure, Inc. 

  Healthcare Services   5.11% (L + 3.75%)   11/1/2024     15,000     14,926     15,000  

OEConnection LLC

  Business Services   5.69% (L + 4.00%)   11/22/2024     15,000     14,925     14,981  

Pathway Partners Vet Management Company LLC

  Consumer Services   5.82% (L + 4.25%)   10/10/2024     6,963     6,929     6,980  

Pathway Partners Vet Management Company LLC

  Consumer Services   5.82% (L + 4.25%)   10/10/2024     291     290     292  

Peraton Corp. (fka MHVC Acquisition Corp.)

  Federal Services   6.95% (L + 5.25%)   4/29/2024     10,448     10,399     10,526  

Poseidon Intermediate, LLC

  Software   5.82% (L + 4.25%)   8/15/2022     14,881     14,877     14,955  

Project Accelerate Parent, LLC

  Business Services   5.94% (L + 4.25%)   1/2/2025     15,000     14,925     15,038  

PSC Industrial Holdings Corp. 

  Industrial Services   5.71% (L + 4.25%)   10/11/2024     10,500     10,398     10,500  

Quest Software US Holdings Inc. 

  Software   6.92% (L + 5.50%)   10/31/2022     9,899     9,775     10,071  

Salient CRGT Inc. 

  Federal Services   7.32% (L + 5.75%)   2/28/2022     14,433     14,310     14,559  

Severin Acquisition, LLC

  Software   6.32% (L + 4.75%)   7/30/2021     14,888     14,827     14,813  

Shine Acquisitoin Co. S.à.r.l / Boing US Holdco Inc. 

  Consumer Services   4.88% (L + 3.50%)   10/3/2024     15,000     14,964     15,108  

Sierra Acquisition, Inc. 

  Food & Beverage   5.68% (L + 4.25%)   11/11/2024     3,750     3,731     3,789  

TMK Hawk Parent, Corp. 

  Distribution & Logistics   4.88% (L + 3.50%)   8/28/2024     1,671     1,667     1,686  

University Support Services LLC (St. George's University Scholastic Services LLC)

  Education   5.82% (L + 4.25%)   7/6/2022     1,875     1,875     1,900  

Vencore, Inc. (fka SI Organization, Inc., The)

  Federal Services   6.44% (L + 4.75%)   11/23/2019     10,686     10,673     10,835  

WP CityMD Bidco LLC

  Healthcare Services   5.69% (L + 4.00%)   6/7/2024     14,963     14,928     15,009  

YI, LLC

  Healthcare Services   5.69% (L + 4.00%)   11/7/2024     8,240     8,204     8,230  

Zywave, Inc. 

  Software   6.61% (L + 5.00%)   11/17/2022     17,325     17,252     17,325  

Total Funded Investments

              $ 381,237   $ 379,098   $ 382,529  

Unfunded Investments — First lien

                               

Pathway Partners Vet Management Company LLC

  Consumer Services     10/10/2019   $ 2,728   $ (14 ) $ 7  

TMK Hawk Parent, Corp. 

  Distribution & Logistics     3/28/2018     75         1  

YI, LLC

  Healthcare Services     11/7/2018     2,060     (9 )   (3 )

Total Unfunded Investments

              $ 4,863   $ (23 ) $ 5  

Total Investments

              $ 386,100   $ 379,075   $ 382,534  

(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), the Prime Rate (P) and the alternative base rate (Base). For each investment, the current interest rate provided reflects the rate in effect as of December 31, 2017.

(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.

S-49


Table of Contents

          Below is certain summarized financial information for SLP II as of September 30, 2018 and December 31, 2017 and for the three and nine months ended September 30, 2018 and September 30, 2017:

  September 30,
2018
 
  December 31,
2017
 
 

    (in thousands)     (in thousands)  

Selected Balance Sheet Information:

             

Investments at fair value (cost of $350,177 and $379,075, respectively)

  $ 353,281   $ 382,534  

Cash and other assets

    17,417     8,065  

Total assets

  $ 370,698   $ 390,599  

Credit facility

  $ 262,370   $ 266,270  

Deferred financing costs

    (1,526 )   (1,966 )

Payable for unsettled securities purchased

        15,964  

Distribution payable

    3,500     3,500  

Other liabilities

    2,722     2,891  

Total liabilities

    267,066     286,659  

Members' capital

 
$

103,632
 
$

103,940
 

Total liabilities and members' capital

  $ 370,698   $ 390,599  

 

    Three Months Ended     Nine Months Ended
 

  September 30,
2018
 
  September 30,
2017
 
  September 30,
2018
 
  September 30,
2017
 
 

    (in thousands)     (in thousands)     (in thousands)     (in thousands)  

Selected Statement of Operations Information:

                         

Interest income

  $ 6,358   $ 5,858   $ 18,122   $ 16,661  

Other income

    39     27     97     343  

Total investment income

    6,397     5,885     18,219     17,004  

Interest and other financing expenses

    2,686     2,185     7,667     6,108  

Other expenses

    140     159     504     533  

Total expenses

    2,826     2,344     8,171     6,641  

Net investment income

    3,571     3,541     10,048     10,363  

Net realized gains on investments

    125     223     758     2,145  

Net change in unrealized appreciation (depreciation) of investments

    (75 )   88     (355 )   (553 )

Net increase in members' capital

  $ 3,621   $ 3,852   $ 10,451   $ 11,955  

          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. For the three and nine months ended September 30, 2017, we earned approximately $3.0 million and $9.6 million, respectively, of dividend income related to SLP II, which is included in dividend income. As of September 30, 2018 and December 31, 2017, approximately

S-50


Table of Contents

$2.7 million and $2.8 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.

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 the 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, 2018, we and SkyKnight II have committed $80.0 million and $20.0 million, respectively, of equity to SLP III. As of September 30, 2018, we and SkyKnight II have contributed $66.8 million and $16.7 million, respectively, of equity to SLP III. Our investment in SLP III is disclosed on the our Consolidated Schedule of Investments as of September 30, 2018.

          On May 2, 2018, SLP III closed its $300.0 million 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. As of September 30, 2018, SLP III had total investments with an aggregate fair value of approximately $322.2 million and debt outstanding under its credit facility of $218.8 million. As of September 30, 2018, none of SLP III's investments were on non-accrual. Additionally, as of September 30, 2018, SLP III had unfunded commitments in the form of delayed draws of $15.2 million. 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, 2018:

(in thousands)

  September 30,
2018
 
 

First lien investments(1)

    336,383  

Weighted average interest rate on first lien investments(2)

    6.16 %

Number of portfolio companies in SLP III

    34  

Largest portfolio company investment(1)

    19,000  

Total of five largest portfolio company investments(1)

    82,959  

(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.

S-51


Table of Contents

          The following table is a listing of the individual investments in SLP III's portfolio as of September 30, 2018:

Portfolio Company and Type of
Investment

  Industry   Interest Rate(1)     Maturity
Date
    Principal
Amount or
Par Value
    Cost     Fair
Value(2)
 

                  (in thousands)     (in thousands)     (in thousands)  

Funded Investments — First lien

                                 

Access CIG, LLC

  Business Services   5.99% (L + 3.75%)     2/27/2025   $ 1,219   $ 1,219   $ 1,227  

Affordable Care Holding Corp. 

  Healthcare Services   7.04% (L + 4.75%)     10/24/2022     1,028     1,033     1,032  

Bracket Intermediate Holding Corp. 

  Healthcare Services   6.57% (L + 4.25%)     9/5/2025     15,000     14,925     15,000  

Brave Parent Holdings, Inc. 

  Software   6.39% (L + 4.00%)     4/18/2025     14,964     14,911     15,019  

CentralSquare Technologies, LLC

  Software   5.99% (L + 3.75%)     8/29/2025     15,000     14,963     15,070  

Certara Holdco, Inc. 

  Healthcare I.T.   5.89% (L + 3.50%)     8/15/2024     1,279     1,284     1,283  

CommerceHub, Inc. 

  Software   5.99% (L + 3.75%)     5/21/2025     14,964     14,892     15,019  

CRCI Longhorn Holdings, Inc. 

  Business Services   5.62% (L + 3.50%)     8/8/2025     15,001     14,927     15,042  

Dentalcorp Perfect Smile ULC

  Healthcare Services   5.99% (L + 3.75%)     6/6/2025     11,971     11,941     12,082  

Dentalcorp Perfect Smile ULC

  Healthcare Services   5.99% (L + 3.75%)     6/6/2025     749     753     756  

Drilling Info Holdings, Inc. 

  Business Services   6.54% (L + 4.25%)     7/30/2025     16,499     16,417     16,478  

Financial & Risk US Holdings, Inc. 

  Business Services   6.01% (L + 3.75%)     10/1/2025     8,000     7,980     7,992  

Greenway Health, LLC

  Software   6.14% (L + 3.75%)     2/16/2024     14,858     14,869     14,877  

Heartland Dental, LLC

  Healthcare Services   5.99% (L + 3.75%)     4/30/2025     16,480     16,402     16,508  

Idera, Inc. 

  Software   6.76% (L + 4.50%)     6/28/2024     2,294     2,294     2,322  

Market Track, LLC

  Business Services   6.64% (L + 4.25%)     6/5/2024     4,839     4,833     4,833  

Ministry Brands, LLC

  Software   6.24% (L + 4.00%)     12/2/2022     4,607     4,586     4,607  

Ministry Brands, LLC

  Software   6.24% (L + 4.00%)     12/2/2022     303     301     303  

National Intergovernmental Purchasing Alliance Company

  Business Services   6.14% (L + 3.75%)     5/23/2025     14,963     14,949     15,019  

Navex Topco, Inc. 

  Software   5.37% (L + 3.25%)     9/5/2025     15,000     14,925     15,006  

Navicure, Inc. 

  Healthcare Services   5.99% (L + 3.75%)     11/1/2024     2,992     2,992     3,007  

Netsmart Technologies, Inc. 

  Healthcare I.T.   5.99% (L + 3.75%)     4/19/2023     10,464     10,464     10,543  

Newport Group Holdings II, Inc. 

  Business Services   5.90% (L + 3.75%)     9/12/2025     5,000     4,975     5,019  

NorthStar Financial Services Group, LLC

  Software   5.56% (L + 3.50%)     5/25/2025     15,000     14,928     15,047  

OEConnection LLC

  Business Services   6.25% (L + 4.00%)     11/22/2024     1,834     1,848     1,844  

Pathway Vet Alliance LLC

  Consumer Services   6.49% (L + 4.25%)     10/10/2024     1,333     1,326     1,336  

Pelican Products, Inc. 

  Business Products   5.60% (L + 3.50%)     5/1/2025     4,988     4,976     4,999  

Peraton Corp. (fka MHVC Acquisition Corp.)

  Federal Services   7.64% (L + 5.25%)     4/29/2024     12,628     12,565     12,565  

Premise Health Holding Corp. 

  Healthcare Services   6.14% (L + 3.75%)     7/10/2025     13,897     13,828     13,971  

Quest Software US Holdings Inc. 

  Software   6.57% (L + 4.25%)     5/16/2025     15,000     14,928     15,060  

Sierra Enterprises, LLC

  Food & Beverage   5.99% (L + 3.75%)     11/11/2024     2,488     2,485     2,509  

SSH Group Holdings, Inc. 

  Education   6.59% (L + 4.25%)     7/30/2025     15,000     14,963     15,150  

University Support Services LLC (St. George's University Scholastic Services LLC)

  Education   5.75% (L + 3.50%)     7/17/2025     3,814     3,795     3,849  

VT Topco, Inc. 

  Business Services   6.09% (L + 3.75%)     8/1/2025     8,000     7,980     8,075  

VT Topco, Inc. 

  Business Services   6.14% (L + 3.75%)     8/1/2025     373     376     377  

WP CityMD Bidco LLC

  Healthcare Services   5.89% (L + 3.50%)     6/7/2024     14,925     14,925     14,906  

YI, LLC

  Healthcare Services   6.39% (L + 4.00%)     11/7/2024     3,978     3,992     3,978  

YI, LLC

  Healthcare Services   6.39% (L + 4.00%)     11/7/2024     480     482     480