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Filed Pursuant to Rule 497
Securities Act File No. 333-230326

          PROSPECTUS SUPPLEMENT
(to Prospectus dated April 29, 2019)

6,000,000 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 6,000,000 shares of our common stock. We have granted the underwriters a 30-day option to purchase up to 900,000 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 July 5, 2019, the last reported sales price on the New York Stock Exchange for our common stock was $14.02 per share, and the net asset value per share of our common stock on March 31, 2019 (the last date prior to the date of this prospectus supplement on which we determined our net asset value per share) was $13.45.

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 22 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

  $ 13.68   $ 82,080,000  

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

  $ 0.03   $ 180,000  

Proceeds to us (before expenses)(1)

  $ 13.65   $ 81,900,000  

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

  $ 0.39   $ 2,340,000  

(1)
New Mountain Finance Advisers BDC, L.L.C. (the "Investment Adviser") has agreed to bear $2,340,000, or $0.39 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 6,000,000 shares of our common stock, the underwriters have the option to purchase up to an additional 900,000 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 $94,392,000, $207,000, $94,185,000 and $2,691,000, 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 July 11, 2019.


Joint-Lead Bookrunners

Wells Fargo Securities

 

Morgan Stanley

 

Goldman Sachs & Co. LLC

 

Keefe, Bruyette & Woods
A Stifel Company
Deutsche Bank Securities   UBS Investment Bank

Co-Managers

Janney Montgomery Scott

 

Oppenheimer & Co.



   

Prospectus Supplement dated July 8, 2019


Table of Contents

TABLE OF CONTENTS

 

PROSPECTUS SUPPLEMENT

 

ABOUT THIS PROSPECTUS SUPPLEMENT

   
iii
 

PROSPECTUS SUPPLEMENT SUMMARY

    S-1  

THE OFFERING

    S-12  

FEES AND EXPENSES

    S-17  

SELECTED FINANCIAL AND OTHER DATA

    S-21  

SELECTED QUARTERLY FINANCIAL DATA

    S-24  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

    S-25  

CAPITALIZATION

    S-27  

USE OF PROCEEDS

    S-28  

PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS

    S-29  

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

    S-32  

SENIOR SECURITIES

    S-71  

UNDERWRITING

    S-73  

LEGAL MATTERS

    S-76  

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

    S-76  

AVAILABLE INFORMATION

    S-76  

INDEX TO FINANCIAL STATEMENTS

    F-1  

TABLE OF CONTENTS

 

ABOUT THIS PROSPECTUS

   
ii
 

PROSPECTUS SUMMARY

    1  

THE OFFERING

    11  

FEES AND EXPENSES

    16  

SELECTED FINANCIAL AND OTHER DATA

    19  

SELECTED QUARTERLY FINANCIAL DATA

    21  

RISK FACTORS

    22  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

    59  

USE OF PROCEEDS

    61  

PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS

    62  

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

    65  

SENIOR SECURITIES

    102  

BUSINESS

    104  

PORTFOLIO COMPANIES

    117  

MANAGEMENT

    125  

PORTFOLIO MANAGEMENT

    135  

INVESTMENT MANAGEMENT AGREEMENT

    137  

ADMINISTRATION AGREEMENT

    145  

LICENSE AGREEMENT

    145  

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    146  

CONTROL PERSONS AND PRINCIPAL STOCKHOLDERS

    148  

DETERMINATION OF NET ASSET VALUE

    150  

DIVIDEND REINVESTMENT PLAN

    153  

DESCRIPTION OF SECURITIES

    155  

DESCRIPTION OF CAPITAL STOCK

    155  

DESCRIPTION OF PREFERRED STOCK

    159  

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DESCRIPTION OF SUBSCRIPTION RIGHTS

    161  

DESCRIPTION OF WARRANTS

    163  

DESCRIPTION OF DEBT SECURITIES

    165  

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

    182  

REGULATION

    193  

PLAN OF DISTRIBUTION

    200  

SAFEKEEPING AGENT, CUSTODIAN, TRANSFER AGENT, DISTRIBUTION PAYING AGENT AND REGISTRAR

    202  

BROKERAGE ALLOCATION AND OTHER PRACTICES

    202  

LEGAL MATTERS

    202  

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

    203  

AVAILABLE INFORMATION

    203  

PRIVACY NOTICE

    204  

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

    204  

INDEX TO FINANCIAL STATEMENTS

    F-1  

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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, these securities 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 these securities. 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 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 "Prospectus Supplement Summary" in this prospectus supplement and the "Available Information", "Prospectus Summary" and "Risk Factors" sections of 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 900,000 shares of our common stock.

          This prospectus supplement includes summaries of certain provisions contained in some of the documents described in this prospectus supplement, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed, will be filed, or will be incorporated by reference as exhibits to the registration statement of which this prospectus supplement is a part, and you may obtain copies of those documents as described in the section titled "Available Information."

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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" in the accompanying prospectus, and the other information included in this prospectus supplement and the accompanying prospectus.

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          For the periods prior to and as of December 31, 2013, all financial information provided in this prospectus supplement and accompanying prospectus reflect our organizational structure prior to the restructuring on May 8, 2014 described in "Note 1. Formation and Business Purpose — Restructuring" to our consolidated financial statements included in the accompanying prospectus, where NMF Holdings functioned as the operating company.

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Overview

          We are a Delaware corporation that was originally incorporated on June 29, 2010 and completed our initial public offering ("IPO") on May 19, 2011. We are a closed-end, non-diversified management investment company that has elected to be regulated as a business development company ("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act"). As such, we are obligated to comply with certain regulatory requirements. We have elected to be treated, and intend to comply with the requirements to continue to qualify annually, as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). NMFC is also registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the "Advisers Act").

          The Investment Adviser is a wholly-owned subsidiary of New Mountain Capital. New Mountain Capital is a firm with a track record of investing in the middle market. New Mountain Capital focuses on investing in defensive growth companies across its private equity, public equity and credit investment vehicles. The Investment Adviser manages our day-to-day operations and provides us with investment advisory and management services. The Investment Adviser also manages New Mountain Guardian Partners II, L.P., a Delaware limited partnership, and New Mountain Guardian II Offshore, L.P., a Cayman Islands exempted limited partnership, (together "Guardian II"), which commenced operations in April 2017. The Administrator, a wholly-owned subsidiary of New Mountain Capital, provides the administrative services necessary to conduct our day-to-day operations.

          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 March 31, 2019, our top five industry concentrations were business services, software, healthcare services, education and investment funds (which includes our investments in our joint ventures).

          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 March 31, 2019, our net asset value was $1,083.3 million and our portfolio had a fair value of approximately $2,522.3 million in 97 portfolio companies, with a weighted average yield to maturity at cost for income producing investments ("YTM at Cost") of approximately 10.0% and a weighted average

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yield to maturity at cost for all investments ("YTM at Cost for Investments") of approximately 10.0%. 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

          On April 1, 2019, after receiving the required stockholder approval, we amended our Amended and Restated Certificate of Incorporation to increase the number of authorized shares of our common stock from 100,000,000 shares to 200,000,000 shares.

          On April 30, 2019, we entered into a fourth supplement (the "Supplement") to our Amended and Restated Note Purchase Agreement, dated September 30, 2016 (the "NPA"). Pursuant to the Supplement, on April 30, 2019, we issued to certain institutional investors identified therein, in a private placement, $116.5 million in aggregate principal amount of 5.494% Series 2019A Notes due April 30, 2024 as an additional series of notes under the NPA. Except as set forth in the Supplement, the 2019A Unsecured Notes have the same terms as the $90.0 million in aggregate principal amount of the 5.313% Notes due May 15, 2021, the $55.0 million in aggregate principal amount of the 4.760% Series 2017A Notes due July 15, 2022, the $90.0 million in aggregate 4.870% Series 2018A Notes due January 30, 2023 and the $50.0 million in aggregate principal amount of the 5.360% Series 2018B Notes due June 28, 2023 (collectively, the "Prior Notes") that we previously issued pursuant to the NPA and the first, second and third supplement thereto, respectively. The 2019A Unsecured Notes will rank equal in priority with our other unsecured indebtedness, including the Prior Notes. Interest on the 2019A Unsecured Notes will be payable semi-annually in arrears on April 15 and October 15 of each year, commencing on October 15, 2019.

          On May 1, 2019, our board of directors declared a second quarter 2019 distribution of $0.34 per share which was paid on June 28, 2019 to holders of record as of June 14, 2019.

          On May 7, 2019, we entered into the Third Amendment to Loan and Security Agreement (the "Third Amendment"), which amended the Holdings Credit Facility, by and among us, as the collateral manager, NMF Holdings, as the borrower, Wells Fargo Bank, National Association ("Wells Fargo Bank"), as the administrative agent, the lenders party thereto (the "Lenders"), and Wells Fargo Bank, as collateral custodian. The Third Amendment increased the maximum amount of the Holdings Credit Facility from $695.0 million to $800.0 million. Fifth Third Bank was joined to the Holdings Credit Facility through a Joinder Supplement, dated May 7, 2019, and certain existing Lenders increased their commitments such that, as of the date of the Third Amendment, the aggregate commitments of the Lenders equals $720.0 million. The Holdings Credit Facility continues to have a revolving period ending on October 24, 2020, and will still mature on October 24, 2022.

          On June 7, 2019, we closed a public offering of an additional $86.25 million in aggregate principal amount of Additional 2018 Convertible Notes, which includes $11.25 million in aggregate principal amount of the Additional 2018 Convertible Notes that were issued pursuant to the full exercise of the option granted to the underwriters to purchase Additional 2018 Convertible Notes. The Additional 2018 Convertible Notes were priced at 100.5% of par value, plus accrued interest from February 15, 2019. The total net proceeds from the offering, exclusive of accrued interest from February 15, 2019 and offering expenses, was $86.25 million. The Additional 2018 Convertible Notes issued constitute a further issuance

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of, rank equally in right of payment with, and form a single series with the $115.0 million in aggregate principal amount of the Existing 2018 Convertible Notes issued in August 2018.

          On June 15, 2019 the outstanding 2014 Convertible Notes of $155.3 million matured and we repaid the principal and interest in cash.

          Due to the untimely death of Kurt J. Wolfgruber on June 17, 2019, as of the date of this prospectus supplement, our Board of Directors does not consist of a majority of non-interested persons, as such term is defined in Section 2(a)(19) of the 1940 Act. However, in accordance with Section 56(b) of the 1940 Act, the requirement to have a majority of non-interested persons on our Board of Directors is suspended for 90 days. We are actively searching for a new non-interested person to add to our Board of Directors and expect to have a Board of Directors that consists of a majority of non-interested persons within the time period prescribed by the 1940 Act. Moreover, Rome G. Arnold replaced Mr. Wolfgruber as the Chairman of our Audit Committee.

          On June 28, 2019, we entered into Amendment No. 2 to the Loan Financing and Servicing Agreement (the "Second Amendment"), which amended the DB Credit Facility, by and among us, as the equityholder and the servicer, NMFDB, as the borrower, Deutsche Bank AG, New York Branch ("DBNY"), as the facility agent, U.S. Bank National Association, as the collateral agent and collateral custodian, and DBNY as agent and lender, and each of the other lenders and agents parties from time to time party thereto. The Second Amendment, among other things, increased the maximum facility amount and the commitment of DBNY under the DB Credit Facility from $100.0 million to $150.0 million and lowered the applicable margin for calculating interest from 2.85% per annum to 2.60% per annum. The DB Credit Facility continues to have a revolving period ending on December 14, 2021, and will still mature on December 14, 2023.

          We had approximately $183.3 million of originations and commitments since the end of the first quarter through June 30, 2019. This was offset by approximately $68.3 million of repayments during the same period.

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 June 30, 2019 and a preliminary estimate of our net investment income per share range for the three months ended June 30, 2019. The following estimates are not a comprehensive statement of our financial condition or results for the period ended June 30, 2019. We advise you that our actual results for the three months ended June 30, 2019 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 June 30, 2019 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 June 30, 2019 was approximately $13.40 to $13.50.

          As of the date of this prospectus supplement, we currently expect that our net investment income per share was between $0.34 and $0.35 for the three months ended June 30, 2019.

          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.

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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 Guardian II, which commenced operations in April 2017. As of March 31, 2019, the Investment Adviser was supported by over 145 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 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:

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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.

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:

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Access to Non Mark to Market, Seasoned Leverage Facility

          The amount available under the Holdings Credit Facility and 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, with the exception of the NMNLC Credit Facility, which matures in September 2019, 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.

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

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in the 1940 Act, of at least 150.0% (which means we can borrow $2 for every $1 of our equity), 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 we meet 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.

          We have established the following wholly-owned direct and indirect subsidiaries:

Risks

          An investment in our common stock 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" in the accompanying prospectus 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 common stock. The value of our assets, as well as the market price of our common stock, 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:

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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 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 "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.

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OFFERING

Common Stock Offered

  We are offering 6,000,000 shares of our common stock. To the extent that the underwriters sell more than 6,000,000 shares of our common stock, the underwriters have the option to purchase up to an additional 900,000 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

 

80,610,302 shares.

Shares of Our Common Stock Outstanding After This Offering

 

86,610,302 shares, excluding 900,000 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 $81.6 million, after deducting $0.2 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 $2.3 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 $93.9 million, after deducting $0.2 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 $2.7 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.

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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.

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

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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.

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 months ended March 31, 2019, approximately $0.7 million of indirect administrative expenses were included in administrative expenses, of which no indirect administrative expenses were waived by the Administrator. As of March 31 2019, $0.7 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

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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.

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 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

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Law and Certain Certificate of Incorporation and Bylaw Provisions; Anti-Takeover Measures" in the accompanying prospectus.

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.

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FEES AND EXPENSES

          The following table is intended to assist you in understanding the costs and expenses that you will bear directly or indirectly on an as-converted basis. 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)

    0.22% (1)

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

    0.37% (2)

Dividend reinvestment plan fees (per sales transaction)

  $ 15.00 (3)

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

    0.59%  

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

       

Base management fees

    4.03% (4)

Incentive fees payable under the Investment Management Agreement

    2.36% (5)

Interest payments on borrowed funds

    6.50% (6)

Other expenses

    0.79% (7)

Acquired fund fees and expenses

    2.02% (8)

Total annual expenses

    15.70% (9)

Base management fee waiver

    (0.87)%(10)  

Total annual expenses after the base management fee waiver

    14.83% (9)(10)

(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 $0.39 per share, or approximately 2.9% 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. For additional information, see "Dividend Reinvestment Plan" in the accompanying prospectus.

(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. The base management fee reflected in the table

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(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 March 31, 2019 and calculated without deducting any incentive fees waived. For the three months ended March 31, 2019, 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 March 31, 2019, 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 March 31, 2019. For more detailed information about the incentive fee calculations, see "Investment Management Agreement" in 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 March 31, 2019, we had $567.1 million, $135.0 million, $50.0 million, $115.0 million, $336.8 million and $165.0 million of indebtedness outstanding under the Holdings Credit Facility, the NMFC Credit Facility, the DB Credit Facility, the Existing 2018 Convertible Notes, the Unsecured Notes and the SBA-guaranteed debentures, respectively. For purposes of this calculation, we have assumed the March 31, 2019 amounts outstanding under the Holdings Credit Facility, NMFC Credit Facility, DB Credit Facility, Existing 2018 Convertible Notes, Unsecured Notes and SBA-guaranteed debentures, and have computed interest expense using an assumed interest rate of 4.5% for the Holdings Credit Facility, 5.0% for the NMFC Credit Facility, 5.5% for the DB Credit Facility, 5.75% for the Existing 2018 Convertible Notes, 5.2% for the Unsecured Notes and 3.3% for the SBA-guaranteed debentures, which were the rates payable as of March 31, 2019. See "Senior Securities" in this prospectus supplement. In addition, for the purpose of this calculation, we have included $116.5 million of 2019A Unsecured Notes outstanding and $86.3 million of additional 2018 Convertible Notes outstanding and have computed interest expense assuming an interest rate of 5.494% for the 2019A Unsecured Notes and 5.75% for the additional 2018 Convertible Notes. We also computed interest expense taking into account the repayment of $155.3 million of our 2014 Convertible Notes which occurred on June 15, 2019.

(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. For the three months ended March 31, 2019, we reimbursed the Administrator approximately $0.7 million for indirect administrative expenses that our Administrator did not waive, which represents approximately 0.03% of our gross assets. See "Administration Agreement" in the accompanying prospectus.

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(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 and 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.

(10)
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 waiver reflected in the table above is based on the base management fees waived during the three months ended March 31, 2019. See "Investment Management Agreement" in the accompanying prospectus.


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 have assumed that our borrowings and annual operating expenses would remain at the levels set forth in the table above. See Note 6 above 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 without realization of any capital gains

  $ 133   $ 364   $ 556   $ 903  

          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

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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 completely in the form of net realized capital gains

  $ 142   $ 385   $ 582   $ 928  

          The example assumes a sales load borne by us of 0.3%. 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.

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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 and the accompanying prospectus. Financial information for the years ended December 31, 2018, December 31, 2017, December 31, 2016, December 31, 2015 and December 31, 2014 has been derived from the Predecessor Operating Company 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 three months ended March 31, 2019 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.

(in thousands except shares, per share data and number of portfolio companies)

 
  Three Months
Ended
March 31,
2019
  Year Ended December 31,  
New Mountain Finance Corporation
  2018   2017   2016   2015   2014  

Statement of Operations Data:

                                     

Investment income

  $ 64,191   $ 231,465   $ 197,806   $ 168,084   $ 153,855   $ 91,923  

Investment income allocated from NMF Holdings

                        43,678  

Net expenses

    36,741     125,433     95,602     79,976     71,360     34,727  

Net expenses allocated from NMF Holdings

                        20,808  

Net investment income

    27,450     106,032     102,204     88,108     82,495     80,066  

Net realized gains (losses) on investments

    46     (9,657 )   (39,734 )   (16,717 )   (12,789 )   357  

Net realized and unrealized gains allocated from NMF Holdings

                        9,508  

Net change in unrealized appreciation (depreciation) of investments

    16,314     (22,206 )   50,794     40,131     (35,272 )   (43,863 )

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

        (1,704 )   (4,006 )   (486 )   (296 )    

Benefit (provision) for taxes

    110     (112 )   140     642     (1,183 )   (493 )

Net increase in net assets resulting from operations

    43,920     72,353     109,398     111,678     32,955     45,575  

Per share data:

                                     

Net asset value

  $ 13.45   $ 13.22   $ 13.63   $ 13.46   $ 13.08   $ 13.83  

Net increase in net assets resulting from operations (basic)

    0.56     0.95     1.47     1.72     0.55     0.88  

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

    0.49     0.91     1.38     1.60     0.55     0.86  

Distributions declared(2)

    0.34     1.36     1.36     1.36     1.36     1.48  

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  Three Months
Ended
March 31,
2019
  Year Ended December 31,  
New Mountain Finance Corporation
  2018   2017   2016   2015   2014  

Balance sheet data:

                                     

Total assets(3)

  $ 2,650,116   $ 2,448,666   $ 1,928,018   $ 1,656,018   $ 1,588,146   $ 1,500,868  

Holdings Credit Facility

    567,063     512,563     312,363     333,513     419,313     468,108  

Unsecured Notes

    336,750     336,750     145,000     90,000          

Existing Convertible Notes

    270,273     270,301     155,412     155,523     115,000     115,000  

SBA-guaranteed debentures

    165,000     165,000     150,000     121,745     117,745     37,500  

NMFC Credit Facility

    135,000     60,000     122,500     10,000     90,000     50,000  

DB Credit Facility

    50,000     57,000                  

Total net assets

    1,083,279     1,006,269     1,034,975     938,562     836,908     802,170  

Other data:

                                     

Total return based on market value(4)

    10.57 %   2.70 %   5.54 %   19.68 %   (4.00 )%   9.66 %

Total return based on net asset value(5)

    4.34 %   7.16 %   11.77 %   13.98 %   4.32 %   6.56 %

Number of portfolio companies at period end

    97     92     84     78     75     71  

Total new investments for the period(6)

  $ 158,328   $ 1,321,559   $ 999,677   $ 558,068   $ 612,737   $ 720,871  

Investment sales and repayments for the period(6)

  $ 5,857   $ 802,964   $ 767,360   $ 547,078   $ 483,936   $ 384,568  

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

    10.0 %   10.4 %   10.9 %   11.1 %   10.7 %   10.7 %

Weighted average YTM at Cost for Investments at period end (unaudited)(7)

    10.0 %   10.4 %   10.9 %   10.5 %   10.7 %   10.6 %

Weighted average shares outstanding for the period (basic)

    78,457,641     76,022,375     74,171,268     64,918,191     59,715,290     51,846,164  

Weighted average shares outstanding for the period (diluted)

    95,857,530     88,627,741     83,995,395     72,863,387     66,968,089     56,157,835  

Portfolio turnover(6)

    0.23 %   36.75 %   41.98 %   36.07 %   33.93 %   29.51 %

(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 three months ended March 31, 2019 and the years ended December 31, 2018, December 31, 2017, December 31, 2016 and December 31, 2014, there was no anti-dilution.

(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.

(3)
On January 1, 2016, we adopted Accounting Standard 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.

(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.

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(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. The YTM at Cost for Investments calculation assumes that all investments, including secured collateralized agreements, are purchased at cost on the quarter end date and held until their respective maturities with no prepayments or losses and exited at par at maturity. YTM at Cost and YTM at Cost for Investments calculations exclude the impact of existing leverage. YTM at Cost and YTM at Cost for Investments use the London Interbank Offered Rate ("LIBOR") curves at each quarter's end date. The actual yield to maturity may be higher or lower due to the future selection of the LIBOR contracts by the individual companies in our portfolio or other factors. Adjusted cost reflects the cost for post-IPO investments in accordance with accounting principles generally accepted in the United States of America ("GAAP") and a stepped up cost basis of pre-IPO investments (assuming a step-up to fair market value occurred on the IPO date).

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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 quarter ended March 31, 2019 and each of the quarters for the fiscal years ended December 31, 2018 and December 31, 2017. 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  

March 31, 2019

  $ 64,191   $ 0.82   $ 27,450   $ 0.35   $ 16,470   $ 0.21   $ 43,920   $ 0.56  

December 31, 2018

  $ 63,509   $ 0.83   $ 27,458   $ 0.36   $ (28,842 ) $ (0.38 ) $ (1,384 ) $ (0.02 )

September 30, 2018

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

June 30, 2018

    54,598     0.72     25,721     0.34     (2,588 )   (0.03 )   23,133     0.31  

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  

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

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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:

          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:

          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 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

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regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in the accompanying prospectus, and elsewhere in this prospectus supplement and the accompanying prospectus. You should not place undue reliance on these forward-looking statements, which are based on information available to us as of the date of this prospectus supplement, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely on these statements.

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CAPITALIZATION

          The following table sets forth our capitalization as of March 31, 2019:

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

(in thousands)
  Actual
(unaudited)
  As
Adjusted
(unaudited)
  As Further
Adjusted
(unaudited)
 

Assets:

                   

Cash and cash equivalents

  $ 65,571   $ 65,571   $ 147,166  

Investments at fair value

    2,522,305     2,522,305     2,522,305  

Other assets

    62,240     62,240     62,240  

Total assets

  $ 2,650,116   $ 2,650,116   $ 2,731,711  

Liabilities:

                   

Net outstanding borrowings

  $ 1,507,900   $ 1,305,150   $ 1,305,150  

2019A Unsecured Notes

        116,500     116,500  

Additional 2018 Convertible Notes

        86,250     86,250  

Other liabilities

    58,937     58,937     58,937  

Total liabilities

  $ 1,566,837   $ 1,566,837   $ 1,566,837  

Net assets

  $ 1,083,279   $ 1,083,279   $ 1,164,874  

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, 100,000,000 shares and 200,000,000 shares authorized, respectively, and, 80,519,430 shares, 80,519,430 shares and 86,519,430 shares issued and outstanding, respectively

    805     805     865  

Paid in capital in excess of par

    1,096,017     1,096,017     1,177,552  

Accumulated overdistributed earnings

    (13,543 )   (13,543 )   (13,543 )

Total net assets

    1,083,279     1,083,279     1,164,874  

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USE OF PROCEEDS

          We estimate that we will receive net proceeds from the sale of the 6,000,000 shares of our common stock in this offering of approximately $81.6 million, after deducting underwriting discounts and commissions of approximately $0.2 million and estimated offering expenses of approximately $0.3 million payable by us. In addition, the Investment Adviser has agreed to bear $2.3 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 $93.9 million, after deducting underwriting discounts and commissions of approximately $0.2 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 $2.7 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.

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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.

 
   
  Closing
Sales
Price(3)
   
   
   
 
 
   
  Premium or
Discount of
High Closing
Sales to NAV(4)
  Premium or
Discount of
Low Closing
Sales to NAV(4)
  Declared
Dividends
Per
Share(5)(6)
 
 
  NAV
Per Share(2)
 
Fiscal Year Ended
  High   Low  

December 31, 2019

                                     

Third Quarter(1)

    *   $ 14.07   $ 13.91     *     *     *  

Second Quarter

    *   $ 14.35   $ 13.49     *     *   $ 0.34  

First Quarter

  $ 13.45   $ 14.16   $ 12.78     5.28 %   (4.98 )% $ 0.34  

December 31, 2018

                                     

Fourth Quarter

  $ 13.22   $ 13.83   $ 12.25     4.61 %   (7.34 )% $ 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 July 1, 2019 through July 5, 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.

*
Not determinable at the time of filing.

          On July 5, 2019, the last reported sales price of our common stock was $14.02 per share. As of July 5, 2019, we had approximately fourteen stockholders of record and approximately two beneficial owners 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 July 5, 2019, our shares of common stock traded at a premium of approximately 4.2% of the NAV

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attributable to those shares as of March 31, 2019. 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 net investment income on a quarterly basis and substantially all of our taxable income on an annual basis, except that we may retain certain net capital gains for reinvestment. 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 stockholder's 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 maintain an "opt out" dividend reinvestment plan on behalf of our stockholders, pursuant to which each of our stockholders' cash distributions will be automatically reinvested in additional shares of our common stock, unless the stockholder elects to receive cash.

          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.

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          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 two most recent fiscal years and the current fiscal year to date:

Date Declared
  Record Date   Payment Date   Per Share
Amount
 

May 1, 2019

  June 14, 2019   June 28, 2019   $ 0.34  

February 22, 2019

  March 15, 2019   March 29, 2019     0.34  

          $ 0.68  

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  

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

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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 and the accompanying prospectus. 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 "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 our 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 March 31, 2019, we raised approximately $673.9 million in net proceeds from additional offerings of our common stock.

          The Investment Adviser is a wholly-owned subsidiary of New Mountain Capital. New Mountain Capital is a firm with a track record of investing in the middle market. New Mountain Capital focuses on investing in defensive growth companies across its private equity, public equity and credit investment vehicles. The Investment Adviser manages our day-to-day operations and provides us with investment advisory and management services. The Investment Adviser also manages Guardian II, which commenced operations in April 2017. The Administrator, a wholly-owned subsidiary of New Mountain Capital, provides the administrative services necessary to conduct our day-to-day operations.

          We have established the following wholly-owned direct and indirect subsidiaries:

          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

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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 March 31, 2019, our top five industry concentrations were business services, software, healthcare services, education and investment funds (which includes our investments in our joint ventures).

          As of March 31, 2019, our net asset value was $1,083.3 million and our portfolio had a fair value of approximately $2,522.3 million in 97 portfolio companies, with a YTM at Cost of approximately 10.0% and a YTM at Cost for Investments of approximately 10.0%. The YTM at Cost calculation assumes that all investments, including secured collateralized agreements, not on non-accrual are purchased at cost on the quarter end date and held until their respective maturities with no prepayments or losses and exited at par at maturity. The YTM at Cost for Investments calculation assumes that all investments, including secured collateralized agreements, are purchased at cost on the quarter end date and held until their respective maturities with no prepayments or losses and exited at par at maturity. YTM at Cost and YTM at Cost for Investments calculations exclude the impact of existing leverage. YTM at Cost and YTM at Cost for Investments use the LIBOR curves at each quarter's end date. The actual yield to maturity may be higher or lower due to the future selection of the LIBOR contracts by the individual companies in our portfolio or other factors.

Recent Developments

          On April 1, 2019, after receiving the required stockholder approval, we amended our Amended and Restated Certificate of Incorporation to increase the number of authorized shares of our common stock from 100,000,000 shares to 200,000,000 shares.

          On April 30, 2019, we entered into a Supplement to our NPA. Pursuant to the Supplement, on April 30, 2019, we issued to certain institutional investors identified therein, in a private placement, $116.5 million in aggregate principal amount of 2019A Unsecured Notes as an additional series of notes under the NPA. Except as set forth in the Supplement, the 2019A Unsecured Notes have the same terms as the $90.0 million in aggregate principal amount of the 5.313% Notes due May 15, 2021, the $55.0 million in aggregate principal amount of the 4.760% Series 2017A Notes due July 15, 2022, the $90.0 million in aggregate 4.870% Series 2018A Notes due January 30, 2023 and the $50.0 million in aggregate principal amount of the 5.360% Series 2018B Notes due June 28, 2023 that we previously issued pursuant to the NPA and the first, second and third supplement thereto, respectively. The 2019A Unsecured Notes will rank equal in priority with our other unsecured indebtedness, including the Prior Notes. Interest on the 2019A Unsecured Notes will be payable semi-annually in arrears on April 15 and October 15 of each year, commencing on October 15, 2019.

          On May 1, 2019, our board of directors declared a second quarter 2019 distribution of $0.34 per share which was paid on June 28, 2019 to holders of record as of June 14, 2019.

          On May 7, 2019, we entered into the Third Amendment, which amended the Holdings Credit Facility, by and among us, as the collateral manager, NMF Holdings, as the borrower, Wells Fargo Bank, as the administrative agent, the Lenders, and Wells Fargo Bank, as collateral custodian. The Third Amendment increased the maximum amount of the Holdings Credit Facility from $695.0 million to $800.0 million. Fifth Third Bank was joined to the Holdings Credit Facility through a Joinder Supplement, dated May 7, 2019, and certain existing Lenders increased their commitments such that, as of the date of the Third Amendment, the aggregate commitments of the Lenders equals $720.0 million. The

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Holdings Credit Facility continues to have a revolving period ending on October 24, 2020, and will still mature on October 24, 2022.

          On June 7, 2019, we closed a public offering of an additional $86.25 million in aggregate principal amount of 2018 Convertible Notes, which includes $11.25 million in aggregate principal amount of the 2018 Convertible Notes that were issued pursuant to the full exercise of the option granted to the underwriters to purchase additional 2018 Convertible Notes. The 2018 Convertible Notes were priced at 100.5% of par value, plus accrued interest from February 15, 2019. The total net proceeds from the offering, exclusive of accrued interest from February 15, 2019 and offering expenses, was $86.25 million. The additional 2018 Convertible Notes issued constitute a further issuance of, rank equally in right of payment with, and form a single series with the $115.0 million in aggregate principal amount of the 2018 Convertible Notes issued in August 2018.

          On June 15, 2019 the outstanding 2014 Convertible Notes of $155.3 million matured and we repaid the principal and interest in cash.

          Due to the untimely death of Kurt J. Wolfgruber on June 17, 2019, as of the date of this prospectus supplement, our Board of Directors does not consist of a majority of non-interested persons, as such term is defined in Section 2(a)(19) of 1940 Act. However, in accordance with Section 56(b) of the 1940 Act, the requirement to have a majority of non-interested persons on our Board of Directors is suspended for 90 days. We are actively searching for a new non-interested person to add to our Board of Directors and expect to have a Board of Directors that consists of a majority of non-interested persons within the time period prescribed by the 1940 Act. Moreover, Rome G. Arnold replaced Mr. Wolfgruber as the Chairman of our Audit Committee.

          On June 28, 2019, we entered into the Second Amendment, which amended the DB Credit Facility, by and among us, as the equityholder and the servicer, NMFDB, as the borrower, DBNY, as the facility agent, U.S. Bank National Association, as the collateral agent and collateral custodian, and DBNY as agent and lender, and each of the other lenders and agents parties from time to time party thereto. The Second Amendment, among other things, increased the maximum facility amount and the commitment of DBNY under the DB Credit Facility from $100.0 million to $150.0 million and lowered the applicable margin for calculating interest from 2.85% per annum to 2.60% per annum. The DB Credit Facility continues to have a revolving period ending on December 14, 2021, and will still mature on December 14, 2023.

          We had approximately $183.3 million of originations and commitments since the end of the first quarter through June 30, 2019. This was offset by approximately $68.3 million of repayments during the same period.

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 June 30, 2019 and a preliminary estimate of our net investment income per share range for the three months ended June 30, 2019. The following estimates are not a comprehensive statement of our financial condition or results for the period ended June 30, 2019. We advise you that our actual results for the three months ended June 30, 2019 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 June 30, 2019 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 June 30, 2019 was approximately $13.40 to $13.50.

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          As of the date of this prospectus supplement, we currently expect that our net investment income per share was between $0.34 and $0.35 for the three months ended June 30, 2019.

          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.

Critical Accounting Policies

          The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following items as critical accounting policies.

Basis of Accounting

          We consolidate our wholly-owned direct and indirect subsidiaries: NMF Holdings, NMF Servicing, NMNLC, NMFDB, SBIC I, SBIC I GP, SBIC II, SBIC II GP, NMF Ancora, NMF QID and NMF YP. We are an investment company following accounting and reporting guidance as described in Accounting Standards Codification Topic 946, Financial Services — Investment Companies, ("ASC 946").

Valuation and Leveling of Portfolio Investments

          At all times consistent with GAAP and the 1940 Act, we conduct a valuation of assets, which impacts our net asset value.

          We value our assets on a quarterly basis, or more frequently if required under the 1940 Act. In all cases, our board of directors is ultimately and solely responsible for determining the fair value of our portfolio investments on a quarterly basis in good faith, including investments that are not publicly traded, those whose market prices are not readily available and any other situation where our portfolio investments require a fair value determination. Security transactions are accounted for on a trade date basis. Our quarterly valuation procedures are set forth in more detail below:

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          For investments in revolving credit facilities and delayed draw commitments, the cost basis of the funded investments purchased is offset by any costs/netbacks received for any unfunded portion on the total balance committed. The fair value is also adjusted for the price appreciation or depreciation on the unfunded portion. As a result, the purchase of a commitment not completely funded may result in a negative fair value until it is called and funded.

          The values assigned to investments are based upon available information and do not necessarily represent amounts which might ultimately be realized, since such amounts depend on future circumstances and cannot be reasonably determined until the individual positions are liquidated. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period and the fluctuations could be material.

          GAAP fair value measurement guidance classifies the inputs used in measuring fair value into three levels as follows:

          Level I — Quoted prices (unadjusted) are available in active markets for identical investments and we have the ability to access such quotes as of the reporting date. The type of investments which would generally be included in Level I include active exchange-traded equity securities and exchange-traded derivatives. As required by Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures ("ASC 820"), we, to the extent that we hold such investments, do not adjust the quoted price for these investments, even in situations where we hold a large position and a sale could reasonably impact the quoted price.

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          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:

          Level III — Pricing inputs are unobservable for the investment and include situations where there is little, if any, market activity for the investment.

          The inputs used to measure fair value may fall into different levels. In all instances when the inputs fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level of input that is significant to the fair value measurement in its entirety. As such, a Level III fair value measurement may include inputs that are both observable and unobservable. Gains and losses for such assets categorized within the Level III table below may include changes in fair value that are attributable to both observable inputs and unobservable inputs.

          The inputs into the determination of fair value require significant judgment or estimation by management and consideration of factors specific to each investment. A review of the fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in the transfer of certain investments within the fair value hierarchy from period to period.

          The following table summarizes the levels in the fair value hierarchy that our portfolio investments fall into as of March 31, 2019:

(in thousands)
  Total   Level I   Level II   Level III  

First lien

  $ 1,276,616   $   $ 168,900   $ 1,107,716  

Second lien

    725,162         408,652     316,510  

Subordinated

    66,858         25,967     40,891  

Equity and other

    453,669     1         453,668  

Total investments

  $ 2,522,305   $ 1   $ 603,519   $ 1,918,785  

          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.

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We leverage the knowledge gained from our original due diligence process, augmented by this subsequent monitoring, to continually refine our outlook for each of our portfolio companies and ultimately form the valuation of our investment in each portfolio company. When an external event such as a purchase transaction, public offering or subsequent sale occurs, we will consider the pricing indicated by the external event to corroborate the private valuation.

          For debt investments, we may employ the Market Based Approach (as described below) to assess the total enterprise value of the portfolio company, in order to evaluate the enterprise value coverage of our debt investment. For equity investments or in cases where the Market Based Approach implies a lack of enterprise value coverage for the debt investment, we may additionally employ a discounted cash flow analysis based on the free cash flows of the portfolio company to assess the total enterprise value. After enterprise value coverage is demonstrated for our debt investments through the method(s) above, the Income Based Approach (as described below) may be employed to estimate the fair value of the investment.

          Market Based Approach:    We may estimate the total enterprise value of each portfolio company by utilizing market value cash flow (EBITDA) multiples of publicly traded comparable companies and comparable transactions. We consider numerous factors when selecting the appropriate companies whose trading multiples are used to value our portfolio companies. These factors include, but are not limited to, the type of organization, similarity to the business being valued, and relevant risk factors, as well as size, profitability and growth expectations. We may apply an average of various relevant comparable company EBITDA multiples to the portfolio company's latest twelve month ("LTM") EBITDA or projected EBITDA to calculate the enterprise value of the portfolio company. Significant increases or decreases in the EBITDA multiple will result in an increase or decrease in enterprise value, which may result in an increase or decrease in the fair value estimate of the investment. In applying the market based approach as of March 31, 2019, 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 March 31, 2019, we used the discount ranges set forth in the table below to value investments in our portfolio companies.

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          The unobservable inputs used in the fair value measurement of our Level III investments as of March 31, 2019 were as follows:

 
   
   
   
  Range  
(in thousands)

Type
  Fair Value as of
March 31, 2019
  Approach   Unobservable
Input
  Low   High   Weighted
Average
 

First lien

  $ 902,428   Market & income approach   EBITDA multiple     2.0x     30.0x     12.0x  

            Revenue multiple     3.5x     11.0x     6.9x  

            Discount rate     7.4 %   15.3 %   9.5 %

    195,513   Market quote   Broker quote     N/A     N/A     N/A  

    9,775   Other   N/A(1)     N/A     N/A     N/A  

Second lien

    110,205   Market & income approach   EBITDA multiple     8.5x     15.0x     11.1x  

            Discount rate     10.0 %   20.0 %   12.8 %

    186,238   Market quote   Broker quote     N/A     N/A     N/A  

    20,067   Other   N/A(1)     N/A     N/A     N/A  

Subordinated

    40,891   Market & income approach   EBITDA multiple     4.8x     12.5x     10.1x  

            Discount rate     11.0 %   21.4 %   16.8 %

Equity and other

    452,856   Market & income approach   EBITDA multiple     0.4x     18.0x     10.7x  

            Discount rate     6.5 %   26.2 %   13.6 %

    812   Black Scholes analysis   Expected life in years     7.0     7.0     7.0  

            Volatility     37.5 %   37.5 %   37.5 %

            Discount rate     2.6 %   2.6 %   2.6 %

  $ 1,918,785                            

(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

          SLP I was formed as a Delaware limited liability company on May 27, 2014 and commenced operations on June 10, 2014. SLP I is a portfolio company held by us. SLP I is structured as a private investment fund, in which all of the investors are qualified purchasers, as such term is defined under the 1940 Act. Transfer of interests in SLP I is subject to restrictions and, as a result, such interests are not readily marketable. SLP I operates under a limited liability company agreement (the "SLP I Agreement") and will continue in existence until August 31, 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 is currently 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 March 31, 2019, SLP I had total investments with an aggregate fair value of approximately $337.4 million, debt outstanding of $246.7 million and capital that had been called and funded of $93.0 million. As of December 31, 2018, SLP I had total investments with an aggregate fair value of approximately $327.2 million, debt outstanding of $242.6 million and capital that had been called and funded of $93.0 million. Our investment in SLP I is disclosed on our Consolidated Schedule of Investments as of March 31, 2019 and December 31, 2018.

          We, as an investment adviser registered under the Advisers Act, act as the collateral manager to SLP I and are entitled to receive a management fee for our investment management services provided to SLP I. As a result, SLP I is classified as our affiliate. No management fee is charged on our investment in SLP I in connection with the administrative services provided to SLP I. For the three

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months ended March 31, 2019 and March 31, 2018, we earned approximately $0.3 million and $0.3 million, respectively, in management fees related to SLP I, which is included in other income. As of March 31, 2019 and December 31, 2018, approximately $0.6 million and $0.3 million, respectively, of management fees related to SLP I was included in receivable from affiliates. For the three months ended March 31, 2019 and March 31, 2018, we earned approximately $0.7 million and $0.8 million, respectively, of dividend income related to SLP I, which is included in dividend income. As of March 31, 2019 and December 31, 2018, 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

          SLP II was formed as a Delaware limited liability company on March 9, 2016 and commenced operations on April 12, 2016. SLP II is structured as a private joint venture investment fund between us and SkyKnight Income, LLC ("SkyKnight") and operates under a limited liability company agreement (the "SLP II Agreement"). The purpose of the joint venture is to invest primarily in senior secured loans issued by portfolio companies within our core industry verticals. These investments are typically broadly syndicated first lien loans. All investment decisions must be unanimously approved by the board of managers of SLP II, which has equal representation from us and SkyKnight. SLP II's investment period is currently until April 12, 2020 and SLP II will continue in existence until April 12, 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 March 31, 2019, we and SkyKnight have committed and contributed $79.4 million and $20.6 million, respectively, of equity to SLP II. Our investment in SLP II is disclosed on our Consolidated Schedule of Investments as of March 31, 2019 and December 31, 2018.

          On April 12, 2016, SLP II closed its $275.0 million revolving credit facility with Wells Fargo Bank, National Association, which matures on April 12, 2021 and bears interest at a rate of LIBOR plus 1.60% per annum. As of March 31, 2019 and December 31, 2018, SLP II had total investments with an aggregate fair value of approximately $366.8 million and $336.9 million, respectively, and debt outstanding under its credit facility of $267.9 million and $243.2 million, respectively. As of March 31, 2019 and December 31, 2018, none of SLP II's investments were on non-accrual. Additionally, as of March 31, 2019 and December 31, 2018, SLP II had unfunded commitments in the form of delayed draws of $4.4 million and $5.9 million, respectively. Below is a summary of SLP II's portfolio, along with a listing of the individual investments in SLP II's portfolio as of March 31, 2019 and December 31, 2018:

(in thousands)
  March 31, 2019   December 31, 2018  

First lien investments(1)

    375,703     348,577  

Weighted average interest rate on first lien investments(2)

    6.81 %   6.84 %

Number of portfolio companies in SLP II

    34     31  

Largest portfolio company investment(1)

    17,106     17,150  

Total of five largest portfolio company investments(1)

    80,566     80,766  

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

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

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          The following table is a listing of the individual investments in SLP II's portfolio as of March 31, 2019:

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   6.24% (L + 3.75%)   2/27/2025   $ 9,908   $ 9,864   $ 9,834  

ADG, LLC

  Healthcare Services   7.63% (L + 4.75%)   9/28/2023     16,819     16,703     16,566  

Brave Parent Holdings, Inc. 

  Software   6.50% (L + 4.00%)   4/18/2025     15,384     15,332     15,223  

CentralSquare Technologies, LLC

  Software   6.25% (L + 3.75%)   8/29/2025     14,963     14,928     14,766  

CHA Holdings, Inc. 

  Business Services   7.10% (L + 4.50%)   4/10/2025     10,778     10,735     10,765  

CommerceHub, Inc. 

  Software   6.25% (L + 3.75%)   5/21/2025     2,481     2,470     2,447  

Drilling Info Holdings, Inc. 

  Business Services   6.75% (L + 4.25%)   7/30/2025     14,812     14,751     14,756  

Edgewood Partners Holdings LLC

  Business Services   6.75% (L + 4.25%)   9/6/2024     6,397     6,334     6,381  

Fastlane Parent Company, Inc. 

  Distribution & Logistics   7.10% (L + 4.50%)   2/4/2026     3,500     3,431     3,474  

GOBP Holdings, Inc. 

  Retail   6.35% (L + 3.75%)   10/22/2025     2,494     2,488     2,480  

Greenway Health, LLC

  Software   6.35% (L + 3.75%)   2/16/2024     14,738     14,683     13,669  

Idera, Inc. 

  Software   7.00% (L + 4.50%)   6/28/2024     12,460     12,361     12,470  

Institutional Shareholder Services Inc. 

  Business Services   7.10% (L + 4.50%)   3/5/2026     14,000     13,861     13,930  

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

  Business Services   6.25% (L + 3.75%)   9/7/2023     14,924     14,884     14,700  

Keystone Acquisition Corp. 

  Healthcare Services   7.85% (L + 5.25%)   5/1/2024     5,319     5,277     5,213  

LSCS Holdings, Inc. 

  Healthcare Services   6.75% (L + 4.25%)   3/17/2025     7,316     7,308     7,298  

LSCS Holdings, Inc. 

  Healthcare Services   6.82% (L + 4.25%)   3/17/2025     1,889     1,886     1,884  

Market Track, LLC

  Business Services   6.83% (L + 4.25%)   6/5/2024     11,790     11,744     11,201  

Medical Solutions Holdings, Inc. 

  Healthcare Services   6.25% (L + 3.75%)   6/14/2024     4,420     4,403     4,420  

Ministry Brands, LLC

  Software   6.50% (L + 4.00%)   12/2/2022     12,254     12,210     12,254  

Ministry Brands, LLC

  Software   6.50% (L + 4.00%)   12/2/2022     2,111     2,104     2,111  

Ministry Brands, LLC

  Software   6.50% (L + 4.00%)   12/2/2022     886     882     886  

National Mentor Holdings, Inc. (aka Civitas Solutions, Inc.)

  Healthcare Services   6.75% (L + 4.25%)   3/9/2026     14,123     13,982     14,121  

National Mentor Holdings, Inc. (aka Civitas Solutions, Inc.)

  Healthcare Services   6.75% (L + 4.25%)   3/9/2026     877     868     877  

NorthStar Financial Services Group, LLC

  Software   6.08% (L + 3.50%)   5/25/2025     5,885     5,859     5,797  

Peraton Corp. (fka MHVC Acquisition Corp.)

  Federal Services   7.75% (L + 5.25%)   4/29/2024     10,315     10,276     9,955  

Poseidon Intermediate, LLC

  Software   6.75% (L + 4.25%)   8/15/2022     14,691     14,689     14,674  

Premise Health Holding Corp. 

  Healthcare Services   6.35% (L + 3.75%)   7/10/2025     1,383     1,376     1,372  

Project Accelerate Parent, LLC

  Business Services   6.74% (L + 4.25%)   1/2/2025     14,851     14,786     14,888  

PSC Industrial Holdings Corp. 

  Industrial Services   6.23% (L + 3.75%)   10/11/2024     10,368     10,284     10,247  

Quartz Holding Company

  Software   6.49% (L + 4.00%)   4/2/2026     4,000     3,980     4,005  

Quest Software US Holdings Inc. 

  Software   6.99% (L + 4.25%)   5/16/2025     14,963     14,895     14,799  

Salient CRGT Inc. 

  Federal Services   8.25% (L + 5.75%)   2/28/2022     13,415     13,331     13,247  

Spring Education Group (fka SSH Group Holdings, Inc.)

  Education   6.75% (L + 4.25%)   7/30/2025     8,955     8,934     8,893  

Wirepath LLC

  Distribution & Logistics   6.63% (L + 4.00%)   8/5/2024     14,925     14,925     14,701  

WP CityMD Bidco LLC

  Healthcare Services   6.10% (L + 3.50%)   6/7/2024     10,795     10,774     10,471  

YI, LLC

  Healthcare Services   6.60% (L + 4.00%)   11/7/2024     15,026     15,015     14,932  

Zywave, Inc. 

  Software   7.50% (L + 5.00%)   11/17/2022     17,106     17,051     17,106  

Total Funded Investments

              $ 371,321   $ 369,664   $ 366,813  

Unfunded Investments — First lien:

                               

CHA Holdings, Inc. 

  Business Services     10/10/2019   $ 2,143   $ (11 ) $ (3 )

Drilling Info Holdings, Inc. 

  Business Services     7/30/2020     62          

Edgewood Partners Holdings LLC

  Business Services     7/31/2019     1,087     (11 )   (3 )

Ministry Brands, LLC

  Software     10/18/2019     980     (5 )    

Premise Health Holding Corp. 

  Healthcare Services     7/10/2020     110         (1 )

Total Unfunded Investments

              $ 4,382   $ (27 ) $ (7 )

Total Investments

              $ 375,703   $ 369,637   $ 366,806  

(1)
All interest is payable in cash unless otherwise indicated. A majority of the variable rate debt investments bear interest at a rate that may be determined by reference to the LIBOR (L). For each investment, the current interest rate provided reflects the rate in effect as of March 31, 2019.

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

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

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

Funded Investments — First lien

                               

Access CIG, LLC

  Business Services   6.46% (L + 3.75%)   2/27/2025   $ 8,825   $ 8,785   $ 8,605  

ADG, LLC

  Healthcare Services   7.63% (L + 4.75%)   9/28/2023     16,862     16,740     16,609  

Beaver-Visitec International Holdings, Inc. 

  Healthcare Products   6.62% (L + 4.00%)   8/21/2023     14,664     14,492     14,517  

Brave Parent Holdings, Inc. 

  Software   6.52% (L + 4.00%)   4/18/2025     15,422     15,369     14,902  

CentralSquare Technologies, LLC

  Software   6.27% (L + 3.75%)   8/29/2025     15,000     14,964     14,648  

CHA Holdings, Inc. 

  Business Services   7.30% (L + 4.50%)   4/10/2025     10,805     10,760     10,774  

CommerceHub, Inc. 

  Software   6.27% (L + 3.75%)   5/21/2025     2,488     2,476     2,419  

Drilling Info Holdings, Inc. 

  Business Services   6.77% (L + 4.25%)   7/30/2025     12,242     12,190     12,196  

Greenway Health, LLC

  Software   6.56% (L + 3.75%)   2/16/2024     14,775     14,718     14,406  

GOBP Holdings, Inc. 

  Retail   6.55% (L + 3.75%)   10/22/2025     2,500     2,494     2,438  

Idera, Inc. 

  Software   7.03% (L + 4.50%)   6/28/2024     12,492     12,388     12,242  

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

  Business Services   6.27% (L + 3.75%)   9/7/2023     14,962     14,920     14,588  

Keystone Acquisition Corp. 

  Healthcare Services   8.05% (L + 5.25%)   5/1/2024     5,332     5,289     5,226  

LSCS Holdings, Inc. 

  Healthcare Services   6.86% (L + 4.25%)   3/17/2025     5,321     5,312     5,294  

LSCS Holdings, Inc. 

  Healthcare Services   6.89% (L + 4.25%)   3/17/2025     1,374     1,371     1,367  

Market Track, LLC

  Business Services   6.87% (L + 4.25%)   6/5/2024     11,820     11,772     11,347  

Medical Solutions Holdings, Inc. 

  Healthcare Services   6.27% (L + 3.75%)   6/14/2024     4,432     4,413     4,343  

Ministry Brands, LLC

  Software   6.52% (L + 4.00%)   12/2/2022     2,116     2,109     2,116  

Ministry Brands, LLC

  Software   6.52% (L + 4.00%)   12/2/2022     600     597     600  

Ministry Brands, LLC

  Software   6.52% (L + 4.00%)   12/2/2022     12,285     12,238     12,285  

NorthStar Financial Services Group, LLC

  Software   6.10% (L + 3.50%)   5/25/2025     7,463     7,428     7,313  

Peraton Corp. (fka MHVC Acquisition Corp.)

  Federal Services   8.06% (L + 5.25%)   4/29/2024     10,342     10,301     10,084  

Poseidon Intermediate, LLC

  Software   6.78% (L + 4.25%)   8/15/2022     14,729     14,727     14,644  

Premise Health Holding Corp. 

  Healthcare Services   6.55% (L + 3.75%)   7/10/2025     1,386     1,380     1,369  

Project Accelerate Parent, LLC

  Business Services   6.64% (L + 4.25%)   1/2/2025     14,887     14,821     14,663  

PSC Industrial Holdings Corp. 

  Industrial Services   6.21% (L + 3.75%)   10/11/2024     10,395     10,307     10,161  

Quest Software US Holdings Inc. 

  Software   6.78% (L + 4.25%)   5/16/2025     15,000     14,930     14,535  

Salient CRGT Inc. 

  Federal Services   8.27% (L + 5.75%)   2/28/2022     13,509     13,418     13,306  

Sierra Acquisition, Inc. 

  Food & Beverage   6.02% (L + 3.50%)   11/11/2024     3,713     3,696     3,685  

SSH Group Holdings, Inc. 

  Education   6.77% (L + 4.25%)   7/30/2025     8,978     8,956     8,753  

Wirepath LLC

  Distribution & Logistics   6.71% (L + 4.00%)   8/5/2024     14,963     14,963     14,738  

WP CityMD Bidco LLC

  Healthcare Services   6.30% (L + 3.50%)   6/7/2024     10,823     10,801     10,620  

YI, LLC

  Healthcare Services   6.80% (L + 4.00%)   11/7/2024     15,064     15,053     14,971  

Zywave, Inc. 

  Software   7.52% (L + 5.00%)   11/17/2022     17,150     17,091     17,150  

Total Funded Investments

              $ 342,719   $ 341,269   $ 336,914  

Unfunded Investments — First lien

                               

Access CIG, LLC

  Business Services     2/27/2019   $ 1,108   $   $ (28 )

CHA Holdings, Inc. 

  Business Services     10/10/2019     2,143     (11 )   (6 )

Drilling Info Holdings, Inc. 

  Business Services     7/30/2020     1,230     (5 )   (10 )

Ministry Brands, LLC

  Software     10/18/2019     1,267     (6 )    

Premise Health Holding Corp. 

  Healthcare Services     7/10/2020     110         (1 )

Total Unfunded Investments

                5,858     (22 )   (45 )

Total Investments

              $ 348,577   $ 341,247   $ 336,869  

(1)
All interest is payable in cash unless otherwise indicated. A majority of the variable rate debt investments bear interest at a rate that may be determined by reference to the LIBOR (L). For each investment, the current interest rate provided reflects the rate in effect as of December 31, 2018.

(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.

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

Selected Balance Sheet Information:
  March 31, 2019   December 31, 2018  
 
  (in thousands)
  (in thousands)
 

Investments at fair value (cost of $369,637 and $341,247, respectively)

  $ 366,806   $ 336,869  

Cash and other assets

    8,184     7,620  

Total assets

  $ 374,990   $ 344,489  

Credit facility

  $ 267,870   $ 243,170  

Deferred financing costs

    (1,226 )   (1,374 )

Payable for unsettled securities purchased

    3,980      

Distribution payable

    4,000     3,250  

Other liabilities

    2,896     2,869  

Total liabilities

    277,520     247,915  

Members' capital

 
$

97,470
 
$

96,574
 

Total liabilities and members' capital

  $ 374,990   $ 344,489  

 

 
  Three Months Ended  
Selected Statement of Operations Information:
  March 31, 2019   March 31, 2018  
 
  (in thousands)
  (in thousands)
 

Interest income

  $ 6,223   $ 5,630  

Other income

    26     22  

Total investment income

    6,249     5,652  

Interest and other financing expenses

    2,773     2,428  

Other expenses

    135     224  

Total expenses

    2,908     2,652  

Net investment income

    3,341     3,000  

Net realized gains on investments

   
8
   
453
 

Net change in unrealized appreciation (depreciation) of investments

    1,547     677  

Net increase in members' capital

  $ 4,896   $ 4,130  

          For the three months ended March 31, 2019 and March 31, 2018, we earned approximately $3.2 million and $2.6 million, respectively, of dividend income related to SLP II, which is included in dividend income. As of March 31, 2019 and December 31, 2018, approximately $3.2 million and $2.6 million, respectively, of dividend income related to SLP II was included in interest and dividend receivable.

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

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

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

          SLP III is capitalized with equity contributions which are called from its members, on a pro-rata basis based on their equity commitments, as transactions are completed. Any decision by SLP III to call down on capital commitments requires approval by the board of managers of SLP III. As of March 31, 2019, we and SkyKnight II have committed and contributed $80.0 million and $20.0 million, respectively, of equity to SLP III. Our investment in SLP III is disclosed on our Consolidated Schedule of Investments as of March 31, 2019 and December 31, 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 March 31, 2019 and December 31, 2018, SLP III had total investments with an aggregate fair value of approximately $384.6 million and $365.4 million, respectively, and debt outstanding under its credit facility of $293.1 million and $280.3 million, respectively. As of March 31, 2019 and December 31, 2018, none of SLP III's investments were on non-accrual. Additionally, as of March 31, 2019 and December 31, 2018, SLP III had unfunded commitments in the form of delayed draws of $5.3 million and $8.8 million, respectively. Below is a summary of SLP III's portfolio, along with a listing of the individual investments in SLP III's portfolio as of March 31, 2019 and December 31, 2018:

(in thousands)
  March 31, 2019   December 31, 2018  

First lien investments(1)

    396,227     383,289  

Weighted average interest rate on first lien investments(2)

    6.46 %   6.50 %

Number of portfolio companies in SLP III

    41     39  

Largest portfolio company investment(1)

    18,914     18,958  

Total of five largest portfolio company investments(1)

    85,729     85,938  

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

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

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          The following table is a listing of the individual investments in SLP III's portfolio as of March 31, 2019:

Portfolio Company and Type of Investment
  Industry   Interest Rate(1)   Maturity
Date
  Principal
Amount or
Par Value
  Cost   Fair
Value(2)
 
Funded Investments — First lien
   
   
   
  (in thousands)
  (in thousands)
  (in thousands)
 

Access CIG, LLC

  Business Services   6.24% (L + 3.75%)   2/27/2025   $ 1,213   $ 1,213   $ 1,204  

Affordable Care Holding Corp. 

  Healthcare Services   7.31% (L + 4.75%)   10/24/2022     6,010     5,914     5,889  

Bracket Intermediate Holding Corp. 

  Healthcare Services   6.73% (L + 4.25%)   9/5/2025     14,925     14,855     14,869  

Brave Parent Holdings, Inc. 

  Software   6.50% (L + 4.00%)   4/18/2025     14,887     14,838     14,732  

CentralSquare Technologies, LLC

  Software   6.25% (L + 3.75%)   8/29/2025     14,963     14,928     14,766  

Certara Holdco, Inc. 

  Healthcare I.T.   6.10% (L + 3.50%)   8/15/2024     1,272     1,276     1,262  

CHA Holdings, Inc. 

  Business Services   7.10% (L + 4.50%)   4/10/2025     995     995     994  

CommerceHub, Inc. 

  Software   6.25% (L + 3.75%)   5/21/2025     14,888     14,821     14,683  

CRCI Longhorn Holdings, Inc. 

  Business Services   6.00% (L + 3.50%)   8/8/2025     14,925     14,856     14,645  

Dentalcorp Health Services ULC (fka Dentalcorp Perfect Smile ULC)

  Healthcare Services   6.25% (L + 3.75%)   6/6/2025     11,910     11,883     11,642  

Dentalcorp Health Services ULC (fka Dentalcorp Perfect Smile ULC)

  Healthcare Services   6.25% (L + 3.75%)   6/6/2025     2,194     2,189     2,145  

Drilling Info Holdings, Inc. 

  Business Services   6.75% (L + 4.25%)   7/30/2025     18,851     18,763     18,780  

Edgewood Partners Holdings LLC

  Business Services   6.75% (L + 4.25%)   9/6/2024     6,397     6,334     6,381  

Fastlane Parent Company, Inc. 

  Distribution & Logistics   7.10% (L + 4.50%)   2/4/2026     3,500     3,431     3,474  

GOBP Holdings, Inc. 

  Retail   6.35% (L + 3.75%)   10/22/2025     14,963     14,927     14,878  

Greenway Health, LLC

  Software   6.35% (L + 3.75%)   2/16/2024     14,783     14,793     13,711  

Heartland Dental, LLC

  Healthcare Services   6.25% (L + 3.75%)   4/30/2025     18,457     18,373     17,972  

Idera, Inc. 

  Software   7.00% (L + 4.50%)   6/28/2024     2,288     2,283     2,290  

Institutional Shareholder Services Inc. 

  Business Services   7.10% (L + 4.50%)   3/5/2026     1,000     990     995  

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

  Business Services   6.25% (L + 3.75%)   9/7/2023     5,969     5,969     5,880  

Market Track, LLC

  Business Services   6.83% (L + 4.25%)   6/5/2024     4,814     4,809     4,574  

Ministry Brands, LLC

  Software   6.50% (L + 4.00%)   12/2/2022     4,584     4,565     4,584  

Ministry Brands, LLC

  Software   6.50% (L + 4.00%)   12/2/2022     886     882     886  

National Intergovernmental Purchasing Alliance Company

  Business Services   6.35% (L + 3.75%)   5/23/2025     14,888     14,875     14,813  

Navex Topco, Inc. 

  Software   5.75% (L + 3.25%)   9/5/2025     14,924     14,855     14,645  

Navicure, Inc. 

  Healthcare Services   6.25% (L + 3.75%)   11/1/2024     2,977     2,978     2,940  

Netsmart Technologies, Inc. 

  Healthcare I.T.   6.25% (L + 3.75%)   4/19/2023     10,411     10,412     10,306  

Newport Group Holdings II, Inc. 

  Business Services   6.36% (L + 3.75%)   9/12/2025     4,975     4,953     4,935  

NorthStar Financial Services Group, LLC

  Software   6.08% (L + 3.50%)   5/25/2025     11,770     11,717     11,595  

OEConnection LLC

  Business Services   6.50% (L + 4.00%)   11/22/2024     1,825     1,838     1,811  

Outcomes Group Holdings, Inc. 

  Healthcare Services   6.00% (L + 3.50%)   10/24/2025     6,484     6,468     6,362  

Pelican Products, Inc. 

  Business Products   5.98% (L + 3.50%)   5/1/2025     4,963     4,951     4,888  

Peraton Corp. (fka MHVC Acquisition Corp.)

  Federal Services   7.75% (L + 5.25%)   4/29/2024     15,549     15,480     15,005  

Premise Health Holding Corp. 

  Healthcare Services   6.35% (L + 3.75%)   7/10/2025     13,828     13,763     13,724  

Quartz Holding Company

  Software   6.49% (L + 4.00%)   4/2/2026     2,000     1,990     2,003  

Quest Software US Holdings Inc. 

  Software   6.99% (L + 4.25%)   5/16/2025     14,963     14,895     14,799  

Refinitiv US Holdings Inc. (fka Financial & Risk US Holdings, Inc.)

  Business Services   6.25% (L + 3.75%)   10/1/2025     7,980     7,961     7,755  

Sierra Enterprises, LLC

  Food & Beverage   6.00% (L + 3.50%)   11/11/2024     2,475     2,472     2,456  

Spring Education Group, Inc. (fka SSH Group Holdings, Inc.)

  Education   6.75% (L + 4.25%)   7/30/2025     14,925     14,890     14,822  

VT Topco, Inc. 

  Business Services   6.35% (L + 3.75%)   8/1/2025     7,960     7,941     7,920  

VT Topco, Inc. 

  Business Services   6.35% (L + 3.75%)   8/1/2025     1,145     1,144     1,140  

Wirepath LLC

  Distribution & Logistics   6.63% (L + 4.00%)   8/5/2024     17,433     17,433     17,172  

WP CityMD Bidco LLC

  Healthcare Services   6.10% (L + 3.50%)   6/7/2024     14,849     14,849     14,404  

YI, LLC

  Healthcare Services   6.60% (L + 4.00%)   11/7/2024     9,940     9,932     9,878  

Total Funded Investments

              $ 390,938   $ 389,684   $ 384,609  

Unfunded Investments — First lien

                               

Dentalcorp Health Services ULC (fka Dentalcorp Perfect Smile ULC)

  Healthcare Services     6/6/2020   $ 794   $   $ (18 )

Drilling Info Holdings, Inc. 

  Business Services     7/30/2020     63          

Edgewood Partners Holdings LLC

  Business Services     7/31/2019     1,087     (11 )   (3 )

Heartland Dental, LLC

  Healthcare Services     4/30/2020     413         (11 )

Ministry Brands, LLC

  Software     10/18/2019     980     (5 )    

Premise Health Holding Corp. 

  Healthcare Services     7/10/2020     1,103     (3 )   (6 )

VT Topco, Inc. 

  Business Services     8/1/2020     849         (4 )

Total Unfunded Investments

              $ 5,289   $ (19 ) $ (42 )

Total Investments

              $ 396,227   $ 389,665   $ 384,567  

(1)
All interest is payable in cash unless otherwise indicated. A majority of the variable rate debt investments bear interest at a rate that may be determined by reference to the LIBOR (L). For each investment, the current interest rate provided reflects the rate in effect as of March 31, 2019.

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

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

Portfolio Company and Type of Investment
  Industry   Interest Rate(1)   Maturity
Date
  Principal
Amount or
Par Value
  Cost   Fair
Value(2)
 
Funded Investments — First lien
   
   
   
  (in thousands)
  (in thousands)
  (in thousands)
 

Access CIG, LLC

  Business Services   6.46% (L + 3.75%)   2/27/2025   $ 1,216   $ 1,216   $ 1,185  

Affordable Care Holding Corp. 

  Healthcare Services   7.25% (L + 4.75%)   10/24/2022     1,025     1,030     1,005  

Bracket Intermediate Holding Corp. 

  Healthcare Services   7.00% (L + 4.25%)   9/5/2025     14,963     14,890     14,813  

Brave Parent Holdings, Inc. 

  Software   6.52% (L + 4.00%)   4/18/2025     14,925     14,874     14,421  

CentralSquare Technologies, LLC

  Software   6.27% (L + 3.75%)   8/29/2025     15,000     14,964     14,648  

Certara Holdco, Inc. 

  Healthcare I.T.   6.30% (L + 3.50%)   8/15/2024     1,275     1,280     1,255  

CHA Holdings, Inc. 

  Business Services   7.30% (L + 4.50%)   4/10/2025     997     997     995  

CommerceHub, Inc. 

  Software   6.27% (L + 3.75%)   5/21/2025     14,925     14,856     14,515  

CRCI Longhorn Holdings, Inc. 

  Business Services   5.89% (L + 3.50%)   8/8/2025     14,963     14,891     14,588  

Dentalcorp Perfect Smile ULC

  Healthcare Services   6.27% (L + 3.75%)   6/6/2025     11,940     11,912     11,701  

Dentalcorp Perfect Smile ULC

  Healthcare Services   6.27% (L + 3.75%)   6/6/2025     1,686     1,685     1,652  

Drilling Info Holdings, Inc. 

  Business Services   6.77% (L + 4.25%)   7/30/2025     17,591     17,507     17,525  

Financial & Risk US Holdings, Inc. 

  Business Services   6.27% (L + 3.75%)   10/1/2025     8,000     7,980     7,512  

GOBP Holdings, Inc. 

  Retail   6.55% (L + 3.75%)   10/22/2025     15,000     14,963     14,625  

Greenway Health, LLC

  Software   6.56% (L + 3.75%)   2/16/2024     14,821     14,831     14,450  

Heartland Dental, LLC

  Healthcare Services   6.27% (L + 3.75%)   4/30/2025     17,329     17,249     16,593  

HIG Finance 2 Limited

  Business Services   6.06% (L + 3.50%)   12/20/2024     1,995     1,985     1,939  

Idera, Inc. 

  Software   7.03% (L + 4.50%)   6/28/2024     2,294     2,289     2,248  

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

  Business Services   6.27% (L + 3.75%)   9/7/2023     5,985     5,985     5,835  

Market Track, LLC

  Business Services   6.87% (L + 4.25%)   6/5/2024     4,827     4,821     4,633  

Ministry Brands, LLC

  Software   6.52% (L + 4.00%)   12/2/2022     4,596     4,576     4,596  

Ministry Brands, LLC

  Software   6.52% (L + 4.00%)   12/2/2022     600     597     600  

National Intergovernmental Purchasing Alliance Company

  Business Services   6.55% (L + 3.75%)   5/23/2025     14,925     14,912     14,552  

Navex Topco, Inc. 

  Software   5.78% (L + 3.25%)   9/5/2025     14,963     14,890     14,102  

Navicure, Inc. 

  Healthcare Services   6.27% (L + 3.75%)   11/1/2024     2,985     2,985     2,925  

Netsmart Technologies, Inc. 

  Healthcare I.T.   6.27% (L + 3.75%)   4/19/2023     10,437     10,437     10,307  

Newport Group Holdings II, Inc. 

  Business Services   6.54% (L + 3.75%)   9/12/2025     4,988     4,963     4,875  

NorthStar Financial Services Group, LLC

  Software   6.10% (L + 3.50%)   5/25/2025     14,925     14,856     14,628  

OEConnection LLC

  Business Services   6.53% (L + 4.00%)   11/22/2024     1,830     1,843     1,789  

Outcomes Group Holdings, Inc. 

  Healthcare Services   6.28% (L + 3.50%)   10/24/2025     6,500     6,484     6,394  

Pelican Products, Inc. 

  Business Products   5.88% (L + 3.50%)   5/1/2025     4,975     4,963     4,726  

Peraton Corp. (fka MHVC Acquisition Corp.)

  Federal Services   8.06% (L + 5.25%)   4/29/2024     15,588     15,517     15,199  

Premise Health Holding Corp. 

  Healthcare Services   6.55% (L + 3.75%)   7/10/2025     13,862     13,796     13,689  

Quest Software US Holdings Inc. 

  Software   6.78% (L + 4.25%)   5/16/2025     15,000     14,930     14,535  

Sierra Enterprises, LLC

  Food & Beverage   6.02% (L + 3.50%)   11/11/2024     2,481     2,478     2,463  

SSH Group Holdings, Inc. 

  Education   6.77% (L + 4.25%)   7/30/2025     14,963     14,927     14,588  

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

  Education   6.03% (L + 3.50%)   7/17/2025     3,790     3,772     3,759  

VT Topco, Inc. 

  Business Services   6.55% (L + 3.75%)   8/1/2025     7,980     7,961     7,882  

VT Topco, Inc. 

  Business Services   6.55% (L + 3.75%)   8/1/2025     1,004     1,004     992  

Wirepath LLC

  Distribution & Logistics   6.71% (L + 4.00%)   8/5/2024     17,477     17,477     17,215  

WP CityMD Bidco LLC

  Healthcare Services   6.30% (L + 3.50%)   6/7/2024     14,887     14,887     14,608  

YI, LLC

  Healthcare Services   6.80% (L + 4.00%)   11/7/2024     4,965     4,983     4,935  

Total Funded Investments

              $ 374,478   $ 373,443   $ 365,497  

Unfunded Investments — First lien

                               

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Portfolio Company and Type of Investment
  Industry   Interest Rate(1)   Maturity
Date
  Principal
Amount or
Par Value
  Cost   Fair
Value(2)
 
Funded Investments — First lien
   
   
   
  (in thousands)
  (in thousands)
  (in thousands)
 

Dentalcorp Perfect Smile ULC

  Healthcare Services     6/6/2020   $ 1,308   $ (3 ) $ (26 )

Drilling Info Holdings, Inc. 

  Business Services     7/30/2020     1,367     (7 )   (11 )

Heartland Dental, LLC

  Healthcare Services     4/30/2020     1,586         (67 )

Ministry Brands, LLC

  Software     10/18/2019     1,267     (6 )    

Premise Health Holding Corp. 

  Healthcare Services     7/10/2020     1,103     (3 )   (14 )

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

  Education     7/17/2019     1,187         (10 )

VT Topco, Inc. 

  Business Services     8/1/2020     993     (2 )   (12 )

Total Unfunded Investments

              $ 8,811   $ (21 ) $ (140 )

Total Investments

              $ 383,289   $ 373,422   $ 365,357  

(1)
All interest is payable in cash unless otherwise indicated. A majority of the variable rate debt investments bear interest at a rate that may be determined by reference to the LIBOR (L). For each investment, the current interest rate provided reflects the rate in effect as of December 31, 2018.

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

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

Selected Balance Sheet Information:
  March 31, 2019   December 31, 2018  
 
  (in thousands)
  (in thousands)
 

Investments at fair value (cost of $389,665 and $373,422)

  $ 384,567   $ 365,357  

Cash and other assets

    10,487     9,138  

Receivable from unsettled securities sold

    4,897      

Total assets

  $ 399,951   $ 374,495  

Credit facility

  $ 293,100   $ 280,300  

Deferred financing costs

    (2,670 )   (2,831 )

Payable for unsettled securities purchased

    6,874      

Distribution payable

    3,400     2,600  

Other liabilities

    4,843     4,456  

Total liabilities

    305,547     284,525  

Members' capital

  $ 94,404   $ 89,970  

Total liabilities and members' capital

  $ 399,951   $ 374,495  

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  Three Months Ended  
Selected Statement of Operations Information:
  March 31, 2019   March 31, 2018(1)  
 
  (in thousands)
  (in thousands)
 

Interest income

  $ 6,293   $  

Other income

    70      

Total investment income

    6,363      

Interest and other financing expenses

    3,391      

Other expenses

    138      

Total expenses

    3,529      

Net investment income

    2,834      

Net realized gains on investments

    33      

Net change in unrealized appreciation of investments

    2,967      

Net increase in members' capital

  $ 5,834   $  

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

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

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

New Mountain Net Lease Corporation

          NMNLC was formed to acquire commercial real estate properties that are subject to "triple net" leases. NMNLC's investments are disclosed on our Consolidated Schedule of Investments as of March 31, 2019.

          Below is certain summarized property information for NMNLC as of March 31, 2019:

Portfolio Company
  Tenant   Lease
Expiration Date
  Location   Total
Square Feet
  Fair Value as of
March 31, 2019
 
 
   
   
   
  (in thousands)
  (in thousands)
 

NM NL Holdings LP / NM GP Holdco LLC

  Various   Various   Various   Various   $ 34,092  

NM GLCR LP

  Arctic Glacier U.S.A.   2/28/2038   CA   214     20,628  

NM CLFX LP

  Victor Equipment Company   8/31/2033   TX   423     12,731  

NM APP Canada Corp. 

  A.P. Plasman, Inc.   9/30/2031   Canada   436     9,620  

NM APP US LLC

  Plasman Corp, LLC / A-Brite LP   9/30/2033   AL / OH   261     6,006  

NM DRVT, LLC

  FMH Conveyors, LLC   10/31/2031   AR   195     5,661  

NM KRLN LLC

  Kirlin Group, LLC   6/30/2029   MD   95     4,294  

NM JRA LLC

  J.R. Automation Technologies, LLC   1/31/2031   MI   88     2,557  

                  $ 95,589  

Collateralized agreements or repurchase financings

          We follow the guidance in Accounting Standards Codification Topic 860, Transfers and Servicing — Secured Borrowing and Collateral, ("ASC 860") when accounting for transactions involving the purchases of securities under collateralized agreements to resell (resale agreements). These transactions

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are treated as collateralized financing transactions and are recorded at their contracted resale or repurchase amounts, as specified in the respective agreements. Interest on collateralized agreements is accrued and recognized over the life of the transaction and included in interest income. As of March 31, 2019 and December 31, 2018, we held one collateralized agreement to resell with a cost basis of $30.0 million and $30.0 million, respectively, and a fair value of $23.5 million and $23.5 million, respectively. The collateralized agreement to resell is guaranteed by a private hedge fund. The private hedge fund is currently in liquidation under the laws of the Cayman Islands. Pursuant to the terms of the collateralized agreement, the private hedge fund was obligated to repurchase the collateral from us at the par value of the collateralized agreement. The private hedge fund has breached its agreement to repurchase the collateral under the collateralized agreement. The default by the private hedge fund did not release the collateral to us, therefore, we do not have full rights and title to the collateral. A claim has been filed with the Cayman Islands joint official liquidators to resolve this matter. The joint official liquidators have recognized our contractual rights under the collateralized agreement. We continue to exercise our rights under the collateralized agreement and continue to monitor the liquidation process of the private hedge fund. The fair value of the collateralized agreement to resell is reflective of the increased risk of the position.

PPVA Black Elk (Equity) LLC

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

          In August 2017, a trustee (the "Black Elk Trustee") for Black Elk informed us that the Black Elk Trustee intended to assert a fraudulent conveyance claim (the "Claim") against us and one of its affiliates seeking the return of the $20.5 million repayment. Black Elk filed a Chapter 11 bankruptcy petition pursuant to the United States Bankruptcy Code in August 2015. The Black Elk Trustee alleges that individuals affiliated with the private hedge fund conspired with Black Elk and others to improperly use proceeds from the sale of certain Black Elk assets to repay, in August 2014, the private hedge fund's obligation to us under the SPP Agreement. We were unaware of these claims at the time the repayment was received. The private hedge fund is currently in liquidation under the laws of the Cayman Islands.

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

Revenue Recognition

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

          Interest and dividend income:    Interest income, including amortization of premium and discount using the effective interest method, is recorded on the accrual basis and periodically assessed for collectability. Interest income also includes interest earned from cash on hand. Upon the prepayment of a loan or debt security, any prepayment penalties are recorded as part of interest income. We have loans

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and certain preferred equity investments in the portfolio that contain a payment-in-kind ("PIK") interest or dividend provision. PIK interest and dividends are accrued and recorded as income at the contractual rates, if deemed collectible. The PIK interest and dividends are added to the principal or share balances on the capitalization dates and are generally due at maturity or when redeemed by the issuer. For the three months ended March 31, 2019 and March 31, 2018, we recognized PIK and non-cash interest from investments of approximately $3.0 million and $1.7 million, respectively, and PIK and non-cash dividends from investments of approximately $4.3 million and $6.8 million, respectively.

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

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

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

Monitoring of Portfolio Investments

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

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

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          The following table shows the distribution of our investments on the 1 to 4 investment rating scale at fair value as of March 31, 2019:

 
  As of March 31, 2019  
(in millions)
Investment Rating
  Cost   Percent   Fair Value   Percent  

Investment Rating 1

  $ 105.7     4.2 % $ 107.6     4.3 %

Investment Rating 2

    2,386.6     95.7 %   2,414.7     95.7 %

Investment Rating 3

         — %        — %

Investment Rating 4

    1.5     0.1 %   0.0     0.0 %

  $ 2,493.8     100.0 % $ 2,522.3     100.0 %

          As of March 31, 2019, all investments in our portfolio had an Investment Rating of 1 or 2 with the exception of one portfolio company that had an Investment Rating of 4.

          During the first quarter of 2018, we placed our first lien positions in Education Management II LLC on non-accrual status as the portfolio company announced its intention to wind down and liquidate the business. Our first lien positions and our preferred and common shares in Education Management Corporation ("EDMC") have an investment rating of 4. As of March 31, 2019, our investments in EDMC with an Investment Rating of 4 had an aggregate cost basis of $1.5 million, an aggregate fair value of less than $0.1 million and total unearned interest income of less than $0.1 million for the three months then ended.

Portfolio and Investment Activity

          The fair value of our investments was approximately $2,522.3 million in 97 portfolio companies at March 31, 2019 and approximately $2,342.0 million in 92 portfolio companies at December 31, 2018.

          The following table shows our portfolio and investment activity for the three months ended March 31, 2019 and March 31, 2018:

 
  Three Months Ended  
(in millions)
  March 31, 2019   March 31, 2018  

New investments in 17 and 21 portfolio companies, respectively

  $ 158.3   $ 237.8  

Debt repayments in existing portfolio companies

    5.9     84.0  

Sales of securities in 0 and 1 portfolio companies, respectively

        3.1  

Change in unrealized appreciation on 38 and 22 portfolio companies, respectively

    19.6     5.0  

Change in unrealized depreciation on 54 and 61 portfolio companies, respectively

    (3.3 )   (7.2 )

Recent Accounting Standards Updates

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

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Results of Operations for the Three Months Ended March 31, 2019 and March 31, 2018

Revenue

 
  Three Months Ended  
(in thousands)
  March 31, 2019   March 31, 2018  

Interest income

  $ 47,924   $ 36,739  

Total dividend income

    13,493     12,357  

Other income

    2,774     3,793  

Total investment income

  $ 64,191   $ 52,889  

          Our total investment income increased by approximately $11.3 million, or 21%, for the three months ended March 31, 2019 as compared to the three months ended March 31, 2018. For the three months ended March 31, 2019, total investment income of approximately $64.2 million consisted of approximately $44.0 million in cash interest from investments, approximately $3.0 million in PIK and non-cash interest from investments, approximately $0.1 million in prepayment fees, net amortization of purchase premiums and discounts of approximately $0.8 million, approximately $9.2 million in cash dividends from investments, approximately $4.3 million in PIK and non-cash dividends from investments and approximately $2.8 million in other income. The increase in interest income of approximately $11.2 million during the three months ended March 31, 2019 as compared to the three months ended March 31, 2018 was primarily due to increased interest income which is attributable to larger invested balances and rising LIBOR rates. Our larger invested balances were driven by the proceeds from our August 2018 convertible notes issuance, our July 2018 and September 2018 unsecured notes issuances, higher drawn balances of our Holdings Credit Facility (as defined below), borrowings from our newly formed DB Credit Facility (as defined below) and our February 2019 public offering of our common stock all of which were to originate new investments. Also contributing to the increase in total investment income is the increase in dividend income of approximately $1.1 million which is due to distributions from our investments in NMNLC, SLP II, SLP III and PIK and non-cash dividend income from five portfolio companies where we hold equity positions. Other income during the three months ended March 31, 2019, which represents fees that are generally non-recurring in nature, was primarily attributable to upfront, commitment and amendment fees received from seven different portfolio companies and management fees from a non-controlled affiliated portfolio company.

Operating Expenses

 
  Three Months Ended  
(in thousands)
  March 31, 2019   March 31, 2018  

Management fee

  $ 10,975   $ 8,692  

Less: management fee waiver

    (2,533 )   (1,322 )

Total management fee

    8,442     7,370  

Incentive fee

    6,863     6,434  

Interest and other financing expenses

    19,146     11,290  

Professional fees

    766     694  

Administrative expenses

    1,095     939  

Other general and administrative expenses

    412     410  

Net expenses before income taxes

    36,724