New Mountain Finance Q3 NAV Falls 2% as Adjusted NII Covers Dividend

New Mountain Finance Corporation (NASDAQ: NMFC) reported third-quarter 2026 adjusted net investment income of $0.26 per share, sufficient to cover its $0.25 quarterly dividend, while credit-related and market valuation changes reduced net asset value by 2.0%. The business development company also declared a fourth-quarter dividend of $0.25 per share and said it plans to make its reduced incentive-fee rate permanent in 2027.

Adjusted net investment income was $24.1 million, or $0.26 per weighted-average share, for the quarter ended September 30, unchanged on a per-share basis from the second quarter but below $0.32 a year earlier. GAAP net investment income was $23.6 million, or $0.25 per share. The adjusted result included a voluntary $1.4 million incentive-fee waiver, which brought the effective incentive-fee rate to 15%.

The fourth-quarter dividend will be payable on December 31 to shareholders of record as of December 17. NMFC’s investment adviser has pledged to maintain the 15% incentive-fee rate through the end of 2026 to support the dividend. After the dividend-protection program expires, the company plans to permanently set the fee at 15% over the same 8% hurdle.

Total investment income declined to $60.3 million from $61.4 million in the prior quarter and $80.4 million a year earlier. Interest income was $43.9 million, dividend income was $14.6 million and other income was $1.8 million. Total net expenses were $36.2 million, compared with $36.7 million in the second quarter.

Recurring sources accounted for 98% of investment income. Cash income represented 75% of the total, while payment-in-kind interest and dividend income accounted for 20%, including 5% generated through amendments or restructurings. The company has identified reducing PIK income to below 12% as a strategic target.

NAV Declines on Portfolio Marks

NAV fell to $10.67 per share at September 30 from $10.89 at June 30. Of the $0.22 decline, $0.12 came from market movements and $0.10 from credit-specific changes. Resource Label Group accounted for a negative $0.07 per share, while insightsoftware and Deca Dental each reduced NAV by $0.02. A positive mark on symplr added $0.02 per share.

The quarter included $19.4 million of net unrealized depreciation on investments and $0.5 million of net realized losses. NMFC recorded a $4.0 million adjusted increase in net assets resulting from operations.

The portfolio’s fair value declined to $2.27 billion from $2.30 billion at the end of June. Originations totaled $10.3 million, compared with $35.8 million of repayments and $8.1 million of sales, producing net outflows of $33.7 million after repayments and sales. The portfolio’s yield to maturity at cost was 12.0%, up from 11.1% at June 30, while current yield at cost was 11.7%.

About 80% of the portfolio was senior-oriented, including first-lien loans, senior loan programs and net-lease assets. First-lien investments alone represented 63% of fair value. The top 10 portfolio companies accounted for 24.8% of consolidated investments when the senior loan programs and net-lease portfolio were excluded, above management’s target of less than 20%.

Credit Quality and Capital Position

Approximately 86.1% of portfolio fair value carried a Green risk rating at quarter-end, down from 87.6% in June. Yellow-rated assets increased to 11.7% from 10.2%, while Orange and Red assets represented 2.1% and 0.1%, respectively. About $36 million of negative risk-rating migrations were partly offset by roughly $1 million of positive migration.

Non-accrual investments represented 1.8% of portfolio fair value and 2.9% of cost. NMFC said cumulative investments of about $10.6 billion since its 2011 initial public offering had generated approximately $101 million of net realized losses, equivalent to a 6-basis-point annualized realized total net loss rate.

Portfolio companies had weighted-average net leverage of 6.2 times and weighted-average interest coverage of 2.1 times, based on the most recently available financial information. Weighted-average portfolio-company EBITDA was $214 million.

Pro forma statutory debt to equity rose to 1.15 times from 1.11 times in June, remaining within management’s target range of 1.00 to 1.25 times. NMFC reported an asset-coverage ratio of 184% and liquidity of $802 million as of October 2, compared with $145 million of unfunded commitments. Following the October funding of $150 million in senior unsecured notes, unsecured borrowings represented 82% of outstanding debt and floating-rate liabilities represented 76%.

Management’s priorities include maintaining or increasing senior assets, diversifying large positions, better aligning floating-rate liabilities with the asset mix, reducing PIK income and rotating approximately $130 million of non-yielding equity positions into income-producing assets. The portfolio remains positively exposed to interest rates: based on the quarter-end asset and liability mix, NMFC estimated that a 100-basis-point rate decline would reduce interest and dividend income net of interest expense by 5.8%, while an equivalent increase would raise it by 5.8%.

NMFC cautioned that its outlook is subject to geopolitical conflicts, changes in base interest rates, market volatility, tariffs, trade barriers and shifts in trade policy. It also noted that portfolio-company information may come from third-party sources that have not been independently verified.