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New Mountain BDC reports wave of second-lien repayments in Q4

New Mountain Capital’s BDC said the increase in second-lien loan repayments gave the lender an opportunity to place new, more senior debt for yields that were almost as high.

New Mountain Capital’s BDC said second-lien loan repayments increased in the quarter, giving the lender an opportunity to place new, more senior debt for yields that were “almost” as high.

“Four of our repayments [in Q4 2023] were second-lien positions. We have line of sight into a few additional second-lien repayments, as the portfolio continues to migrate more senior over time,” said Laura Holson, COO of New Mountain Finance Corp, in response to a question on an earnings call.

John Kline, CEO of New Mountain Finance, said there was a silver lining in the trend of second-lien refinancings.

“We think there’s a great opportunity in this environment to originate new first-lien and unitranche loans that have spreads almost as good as the second-lien loans, while reducing the overall risk in the portfolio,” said Kline.

As of Dec 31, non-accrual investments comprised 1.7% of the firm’s total investment portfolio at fair value. New Mountain Capital had six borrower companies on non-accrual status for the quarter ended Dec 31, 2023, including American Achievement Corp, Education Management Corp, Integro, and UniTek Global Services, SEC filings showed.

Plastic films manufacturer Transcendia was moved to non-accrual status during the quarter. The company is currently marked with a $7 million fair value in the firm’s portfolio, compared to a $10.7 million fair value for the quarter ended Sept 30, 2023, public filings showed.

Additionally, the firm’s investment in Ansira, a data-driven marketing services provider previously marked on non-accrual status, has been realized. Ansira was acquired by Truelink Capital from Advent International, and a new group of lenders refinanced the company’s debt.

The New Mountain Capital portfolio’s weighted average EBITDA increased from $138 million for the quarter ended Dec 31, 2022, to $154 million for the quarter ended Dec 31, 2023.

“This is primarily attributable to sequential EBITDA growth at the individual companies we lend to and to a lesser extent, portfolio churn,” said Holson. “We believe that larger borrowers tend to be marginally safer.”

New Mountain Capital BDC completed five new investments for the quarter ended Dec 31, 2023, including:

  • Veterinary hospital operator PetVet: $28.1 million first-lien term loan (S+600) due 2030.
  • IT infrastructure & security provider Bomgar: $20.1 million first-lien term loan (S+500) due 2029.
  • Energy infrastructure service provider PowerGrid: $18 million first-lien term loan (S+475) due 2030.
  • Food and beverage producer Lyons Magnus: $14.6 million first-lien term loan (S+675) due 2029.
  • Risk management software provider Ncontracts: $8.3 million first-lien term loan (S+650) due 2029.

The firm also deployed $53.4 million in DDTL draws for existing portfolio companies during the quarter, resulting in $142.5 million in total originations. Repayments and sales totaled $256.8 million during the same quarter.

This compared to $93.9 million in total originations and $101.1 million in sales and repayments in the quarter ended December 2022.

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