NMF SLF I Inc.
03/04/2026 | Press release | Distributed by Public on 03/04/2026 13:13
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The information in management's discussion and analysis of financial condition and results of operations relates to NMF SLF I, Inc., including its wholly-owned direct subsidiary (collectively, "we", "us", "our", or the "Company").
Forward-Looking Statements
The information contained in this section should be read in conjunction with the financial data and consolidated financial statements and notes thereto appearing elsewhere in this Annual Report on Form 10-K. Some of the statements in this Annual Report on Form 10-K (including in the following discussion) constitute forward-looking statements, which relate to future events or our future performance or our financial condition. The forward-looking statements contained in this section involve a number of risks and uncertainties, including:
•statements concerning the impact of a protracted decline in the liquidity of credit markets;
•the general economy, including fluctuating interest and inflation rates on the industries in which we invest;
•the uncertainty associated with the imposition of tariffs and/or trade barriers and changes in trade policy and its impact on our portfolio companies and the global economy;
•the impact of interest rate volatility on our business and our portfolio companies;
•our future operating results, our business prospects and the adequacy of our cash resources and working capital;
•the ability of our portfolio companies to achieve their objectives;
•our ability to make investments consistent with our investment objectives, including with respect to the size, nature and terms of our investments;
•the ability of New Mountain Finance Advisers, L.L.C. (the "Investment Adviser"), formerly known as New Mountain Finance Advisers BDC, L.L.C., or its affiliates to attract and retain highly talented professionals;
•actual and potential conflicts of interest with the Investment Adviser and New Mountain Capital Group, L.P. (together with New Mountain Capital, L.L.C. and its affiliates, "New Mountain Capital"), whose ultimate owners include Steven B. Klinsky, other current and former New Mountain Capital professionals and related vehicles, and a minority investor; and
•the risk factors set forth in Part I-Item 1A.-Risk Factors,contained in this Annual Report on Form 10-K.
Forward-looking statements are identified by their use of such terms and phrases such as "anticipate", "believe", "continue", "could", "estimate", "expect", "intend", "may", "plan", "potential", "project", "seek", "should", "target", "will", "would" or similar expressions. Actual results could differ materially from those projected in the forward-looking statements for any reason, including the factors set forth in Part I-Item 1A.-Risk Factorscontained in this Annual Report on Form 10-K.
We have based the forward-looking statements included in this Annual Report on Form 10-K on information available to us on the date of this Annual Report on Form 10-K. We assume no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Although we undertake no obligation to revise or update any forward-looking statements, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the U.S. Securities and Exchange Commission (the "SEC"), including annual reports on Form 10-K, registration statements on Form 10, quarterly reports on Form 10-Q and current reports on Form 8-K.
Overview
We are a Maryland corporation formed on January 23, 2019. We are a closed-end, non-diversified management investment company that has elected to be regulated as a business development company ("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act"). We have elected to be treated for U.S. federal income tax purposes as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
The Investment Adviser is a wholly-owned subsidiary of New Mountain Capital. New Mountain Capital is a global investment firm with approximately $60 billion of assets under management and a track record of investing in the middle market. New Mountain Capital focuses on investing in defensive growth companies across its private equity, credit and net lease investment strategies. The Investment Adviser manages our day-to-day operations and provides us with investment advisory and management services. The Investment Adviser also manages other funds that may have investment mandates that are similar, in whole or in part, to ours. New Mountain Finance Administration, L.L.C. (the "Administrator"), a wholly-owned subsidiary of New Mountain Capital, provides the administrative services necessary to conduct our day-to-day operations. The Administrator has hired a third-party sub-administrator to assist with the provision of administrative services.
We conducted a private offering (the "Private Offering") of our common stock to investors in reliance on exemptions from the registration requirements of the Securities Act of 1933, as amended. At the closing of any Private Offering, each investor in the Private Offering will make a capital commitment (each, a "Capital Commitment") to purchase common stock pursuant to a subscription agreement entered into with us (each, a "Subscription Agreement"). We commenced our loan origination and investment activities on the date we issued shares to persons not affiliated with the Investment Adviser (the "Initial Closing Date"), which occurred on February 18, 2020.We may conduct subsequent closings at times during our investment period (the "Investment Period"), which commenced on the Initial Closing Date and initially continued until September 30, 2023, subject to automatic extensions thereafter, each for an additional one year period, unless the holders of a majority of our outstanding common stock elect to forego any such extension upon not less than ninety days prior written notice.Effective September 30, 2025, the Investment Period was automatically extended for an additional one year period to September 30, 2026. Each investor will be required to make capital contributions to purchase our common stock each time a drawdown notice is issued based on such investor's Capital Commitment. Pursuant to the Subscription Agreement entered into with each investor, we shall commence the wind up of operations two years following the expiration of the Investment Period, subject to additional extensions, each for an additional one year period, upon approval of the holders of a majority of our then outstanding common stock.
On December 9, 2020, we established NMF SLF I SPV, L.L.C. ("SLF I SPV") as a wholly-owned direct subsidiary, whose assets are used to secure SLF I SPV's credit facility. On December 23, 2020, SLF I SPV entered into a Loan and Security Agreement among SLF I SPV as the borrower, the Investment Adviser as collateral manager, us as equity holder and seller, Wells Fargo Bank, National Association as the administrative agent and the collateral custodian, and each of the lenders from time to time party thereto (as amended, from time to time, the "Loan and Security Agreement"), which is structured as a secured revolving credit facility (the "Wells Credit Facility"). On October 6, 2022, we established NMF SLF I Opportunistic SPV, L.L.C. ("SLF I Opportunistic SPV") as a wholly-owned direct subsidiary. As of December 31, 2025 and December 31, 2024, there were no assets held by SLF I Opportunistic SPV.
We primarily invest in senior secured debt of U.S. sponsor-backed, middle market companies. We define middle market companies as those businesses with annual earnings before interest, taxes, depreciation, and amortization ("EBITDA") between $10.0 million and $200.0 million. We focus on defensive growth businesses that generally exhibit the following characteristics: (i) acyclicality, (ii) sustainable secular growth drivers, (iii) niche market dominance and high barriers to competitive entry, (iv) recurring revenue and strong free cash flow, (v) flexible cost structures and (vi) seasoned management teams.
Senior secured loans may include traditional first lien loans or unitranche loans. We invest a significant portion of our portfolio in unitranche loans, which are loans that combine both senior and subordinated debt, generally in a first-lien position. Because unitranche loans combine characteristics of senior and subordinated debt, they have risks similar to the risks associated with secured debt and subordinated debt. Certain unitranche loan investments may include "last-out" positions, which generally heighten the risk of loss.
As of December 31, 2025, our top five industry concentrations were business services, software, financial services & technology, healthcare and consumer services.
As of December 31, 2025, our net assets were approximately $979.8 million and our portfolio had a fair value, as determined in good faith by our board of directors (the "Board"), of approximately $1,512.1 million in 129 portfolio companies.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States ("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 consolidated 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 estimates.
Valuation and Leveling of Portfolio Investments
At all times, consistent with GAAP and the 1940 Act, we conduct a valuation of our 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 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. Because (i) "benefit plan investors", as defined in Section 3(42) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and any regulations promulgated thereunder ("Benefit Plan Investors"), hold 25% or more of our outstanding shares, and (ii) our shares are not listed on a national securities exchange, an unaffiliated third-party (the "Sub-
Administrator") has been engaged to independently value our investments, in consultation with the Investment Adviser. Our quarterly valuation procedures, which are the procedures that will be followed by such Sub-Administrator are set forth in more detail below:
(1)Investments for which market quotations are readily available on an exchange are valued at such market quotations based on the closing price indicated from independent pricing services.
(2)Investments for which indicative prices are obtained from various pricing services and/or brokers or dealers are valued through a multi-step valuation process, as described below, to determine whether the quote(s) obtained is representative of fair value in accordance with GAAP.
a.Bond quotes are obtained through independent pricing services. Internal reviews are performed by the personnel of the Sub-Administrator, in consultation with the investment professionals of the Investment Adviser, to ensure that the quote obtained is representative of fair value in accordance with GAAP and, if so, the quote is used. If the Sub-Administrator is unable to sufficiently validate the quote(s) internally and if the investment's par value exceeds a certain materiality threshold, the investment is valued similarly to those assets with no readily available quotes (see (3) below); and
b.For investments other than bonds, the personnel of the Sub-Administrator, in consultation with the investment professionals of the Investment Adviser, look at the number of quotes readily available and perform the following procedures:
i.Investments for which two or more quotes are received from a pricing service are valued using the mean of the mean of the bid and ask of the quotes obtained. If an IHS Markit Ltd. quote differs from the Refinitiv (formerly known as Thomson Reuters) quote by +/- 5% or if the spread between the bid and ask for a quote is greater than 10%, the personnel of the Sub-Administrator, in consultation with the investment professionals of the Investment Adviser, will evaluate the reasonableness of the quote, and if the quote is determined to not be representative of fair value, the personnel of the Sub-Administrator, in consultation with the investment professionals of the Investment Adviser, will use one or more of the methodologies outlined below to determine fair value;
ii.Investments for which one quote is received from a pricing service are validated by the Sub-Administrator, in consultation with the investment professionals at the Investment Adviser. The personnel of the Sub-Administrator, in consultation with the investment professionals of the Investment Adviser, analyze the market quotes obtained using an array of valuation methods (further described below) to validate the fair value. For assets where a supporting analysis is prepared, the Sub-Administrator will document the selection and appropriateness of the indices selected for yield comparison and a conclusion documenting how the yield comparison analysis supports the proposed mark. The quarterly portfolio company monitoring reports which detail the qualitative and quantitative performance of the portfolio company will also be included. If the Sub-Administrator, in consultation with the investment professionals at the Investment Adviser, is unable to sufficiently validate the quote internally and if the investment's par value exceeds a certain materiality threshold, the investment is valued similarly to those assets with no readily available quotes (see (3) below).
(3)Investments for which quotations are not readily available through exchanges, pricing services, brokers, or dealers are valued through a multi-step valuation process:
a.Each portfolio company or investment is initially valued by the Sub-Administrator, in consultation with the investment professionals of the Investment Adviser responsible for the credit monitoring; and
b.Preliminary valuation conclusions will then be documented and discussed with our senior management.
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.
In the event Benefit Plan Investors do not hold 25% or more of our outstanding shares, or our shares are listed on a national securities exchange, then (i) personnel of the Investment Adviser will undertake the roles to be performed by the personnel of the Sub-Administrator, as described above and (ii) if an investment falls into category (3) above for four
consecutive quarters and the investment's par value or its fair value exceeds a certain materiality threshold, then at least once each fiscal year, the valuation for each portfolio investment for which we do not have a readily available market quotation will be reviewed by an independent valuation firm engaged by our Board.
GAAP fair value measurement guidance classifies the inputs used in measuring fair value into three levels as follows:
Level I-Quoted prices (unadjusted) are available in active markets for identical investments and we have the ability to access such quotes as of the reporting date. The type of investments which would generally be included in Level I include active exchange-traded equity securities and exchange-traded derivatives. As required by Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures("ASC 820"), we, to the extent that we hold such investments, do not adjust the quoted price for these investments, even in situations where we hold a large position and a sale could reasonably impact the quoted price.
Level II-Pricing inputs are observable for the investments, either directly or indirectly, as of the reporting date, but are not the same as those used in Level I. Level II inputs include the following:
•Quoted prices for similar assets or liabilities in active markets;
•Quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds, which trade infrequently);
•Pricing models whose inputs are observable for substantially the full term of the asset or liability (examples include most over-the-counter derivatives, including foreign exchange forward contracts); and
•Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability.
Level III-Pricing inputs are unobservable for the investment and include situations where there is little, if any, market activity for the investment.
The inputs used to measure fair value may fall into different levels. In all instances when the inputs fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level of input that is significant to the fair value measurement in its entirety. As such, a Level III fair value measurement may include inputs that are both observable and unobservable. Gains and losses for such assets categorized within the Level III table below may include changes in fair value that are attributable to both observable inputs and unobservable inputs.
The inputs into the determination of fair value require significant judgment or estimation by management and consideration of factors specific to each investment. A review of the fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in the transfer of certain investments within the fair value hierarchy from period to period.
See Item 8.-Financial Statements and Supplementary Data-Note 4. Fair Value in this Annual Report on Form 10-K for additional information on fair value hierarchy for the year ended December 31, 2025.
We generally use the following framework when determining the fair value of investments where there is 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 our revenue and EBITDA growth, margin trends, liquidity position, covenant compliance and changes to our capital structure. We also attempt to identify and subsequently track any developments at the portfolio company, within its customer or vendor base or within the industry or the macroeconomic environment, generally, that may alter any material element of our original investment thesis. This analysis is specific to each portfolio company. We leverage the knowledge gained from our original due diligence process, augmented by this subsequent monitoring, to continually refine our outlook for each of our portfolio companies and ultimately form the valuation of our investment in each portfolio company. When an external event such as a purchase transaction, public offering or subsequent sale occurs, we will consider the pricing indicated by the external event to corroborate the private valuation.
For debt investments, we may employ the Market Based Approach (as described below) to assess the total enterprise value of the portfolio company, in order to evaluate the enterprise value coverage of our debt investment. For equity investments or in cases where the Market Based Approach implies a lack of enterprise value coverage for the debt investment,
we may additionally employ a discounted cash flow analysis based on the free cash flows of the portfolio company to assess the total enterprise value.
After enterprise value coverage is demonstrated for our debt investments through the method(s) above, the Income Based Approach (as described below) may be employed to estimate the fair value of the investment.
Market Based Approach:We may estimate the total enterprise value of each portfolio company by utilizing EBITDA or revenue 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 or revenue multiples to the portfolio company's latest twelve month ("LTM") EBITDA or revenue or projected EBITDA or revenue to calculate the enterprise value of the portfolio company. Significant increases or decreases in the EBITDA or revenue multiples 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.
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 combination of a yield calibration approach and a comparable investment approach. The yield calibration approach 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. The comparable investment approach utilizes an average yield-to-maturity of a selected set of high-quality, liquid investments to determine a comparable investment discount rate. Significant increases or decreases in the discount rate would result in a decrease or increase in the fair value measurement.
See Item 8.-Financial Statements and Supplementary Data-Note 4. Fair Valuein this Annual Report on Form 10-K for additional information on unobservable inputs used in the fair value measurement of our Level III investments for the year ended December 31, 2025.
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 and certain preferred equity investments in our 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 balance on the capitalization date and are generally due at maturity or when redeemed by the issuer. For the years ended December 31, 2025 and December 31, 2024, we recognized PIK interest from investments of approximately $5.2 million and $8.7 million, respectively, and PIK dividends from investments of $1.0 million and $0.2 million, respectively.
Dividend income on preferred securities is recorded as dividend income on an accrual basis to the extent that such amount 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 generally 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 collectability. 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.
Fee income: Fee income represents delayed compensation, consent or amendment fees, revolver fees, structuring fees, upfront fees 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. Fee 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 by us 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. Income
received in exchange for the provision of services such as recurring administration services are also recognized as fee income in the period in which it was earned.
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. Our portfolio monitoring procedures are designed to provide a simple yet comprehensive analysis of our portfolio companies based on their operating performance and underlying business characteristics, which in turn forms the basis of its Risk Rating (as defined below).
We use an investment risk rating system to characterize and monitor the credit profile and expected level of returns on each investment in the portfolio. As such, we assign each investment a composite score ("Risk Rating") based on two metrics - 1) Operating Performance and 2) Business Characteristics:
•Operating Performance assesses the health of the investment in context of its financial performance and the market environment it faces. The metric is expressed in Tiers of "4" to "1", with "4" being the best and "1" being the worst:
•Tier 4 - Business performance is in-line with or above expectations
•Tier 3 - Moderate business underperformance and/or moderate market headwinds
•Tier 2 - Significant business underperformance and/or significant market headwind
•Tier 1 - Severe business underperformance and/or severe market headwinds
•Business Characteristics assesses the health of the investment in context of the underlying portfolio company's business and credit quality, the underlying portfolio company's current balance sheet, and the level of support from the equity sponsor. The metric is expressed as on a qualitative scale of "A" to "C", with "A" being the best and "C" being the worst.
The Risk Rating for each investment is a composite of these two metrics. The Risk Rating is expressed in categories of Green, Yellow, Orange and Red, with Green reflecting an investment that is in-line with or above expectations and Red reflecting an investment performing materially below expectations. The mapping of the composite scores to these categories are below:
•Green - 4C, 3B, 2A, 4B, 3A, and 4A (e.g., Tier 4 for Operating Performance and C for Business Characteristics)
•Yellow - 3C, 2B, and 1A
•Orange - 2C and 1B
•Red - 1C
The following table shows the Risk Ratings of our portfolio companies as of December 31, 2025:
| (in millions) | As of December 31, 2025 | |||||||||||||||||||||||||
| Risk Rating | Cost | Percent | Fair Value | Percent | ||||||||||||||||||||||
| Green | $ | 1,423.9 | 93.3 | % | $ | 1,422.5 | 94.0 | % | ||||||||||||||||||
| Yellow | 57.7 | 3.8 | % | 50.8 | 3.4 | % | ||||||||||||||||||||
| Orange | 43.5 | 2.9 | % | 38.8 | 2.6 | % | ||||||||||||||||||||
| Red | - | - | % | - | - | % | ||||||||||||||||||||
| $ | 1,525.1 | 100.0 | % | $ | 1,512.1 | 100.0 | % | |||||||||||||||||||
As of December 31, 2025, all investments in our portfolio had a Green Risk Rating with the exception of five portfolio companies that had a Yellow Risk Rating and four portfolio companies that had an Orange Risk Rating.
During the fourth quarter of 2025, we placed our first lien positions in DCA Investment Holding, LLC ("DCA") on non-accrual status. As of December 31, 2025, our first lien positions in DCA had an aggregate cost basis of $7.2 million, an aggregate fair value of $6.4 million and total unearned interest income of $0.2 million for the year then ended. As of December 31, 2025, our investment in DCA had a Green Risk Rating.
Portfolio and Investment Activity
The fair value of our investments, as determined in good faith by our Board, was approximately $1,512.1 million in 129 portfolio companies at December 31, 2025 and approximately $1,445.7 million in 121 portfolio companies at December 31, 2024.
The following table shows our portfolio and investment activity for the years ended December 31, 2025 and December 31, 2024:
| Year Ended December 31, | ||||||||||||||
| (in millions) | 2025 | 2024 | ||||||||||||
| Investments in 84 and 78, respectively, new and existing portfolio companies | $ | 421.9 | $ | 462.1 | ||||||||||
| Debt repayments in existing portfolio companies | (317.5) | (330.5) | ||||||||||||
| Sales of securities in 9 and 5 portfolio companies, respectively | (34.5) | (17.3) | ||||||||||||
| Change in unrealized appreciation on 47 and 65 portfolio companies, respectively | 9.8 | 6.7 | ||||||||||||
| Change in unrealized depreciation on 99 and 71 portfolio companies, respectively | (17.5) | (11.0) | ||||||||||||
Recent Accounting Standards Updates
See Part II-Financial Statements and Supplementary Data-Note 13. Recent Accounting Standardsin this Annual Report on Form 10-K for details on recent accounting standards updates.
Results of Operations for the Years Ended December 31, 2025 and December 31, 2024
Results of Operations for the fiscal year ended December 31, 2023 can be found in Item 7.-Management's Discussion and Analysis of Financial Condition and Results of Operationsin our Annual Report on Form 10-K filed on March 6, 2024 which is incorporated by reference herein.
Revenue
| Year Ended December 31, | ||||||||||||||
| (in millions) | 2025 | 2024 | ||||||||||||
| Interest income | $ | 146.1 | $ | 159.6 | ||||||||||
| Dividend income | 1.0 | 0.2 | ||||||||||||
| Fee income | 3.2 | 5.1 | ||||||||||||
| Total investment income | $ | 150.3 | $ | 164.9 | ||||||||||
Our total investment income decreased by approximately $14.6 million, or 9%, for the year ended December 31, 2025, as compared to the same period in the prior year. For the year ended December 31, 2025, total investment income of approximately $150.3 million consisted of approximately $134.2 million in cash interest from investments, approximately $5.2 million in PIK and non-cash interest from investments, net amortization of purchase premiums and discounts of approximately $6.7 million, $1.0 million in PIK dividends from investments, and approximately $3.2 million in fee income. The decrease in interest income of approximately $13.5 million during the year ended December 31, 2025 as compared to the same period in the prior year was due to lower all-in yields on our portfolio investments. Fee income during the year ended December 31, 2025, which represents fees that are generally non-recurring in nature, was primarily attributable to upfront and ticking fees received from 49 different portfolio companies.
Operating Expenses
| Year Ended December 31, | |||||||||||||||||||||||
| (in millions) | 2025 | 2024 | |||||||||||||||||||||
| Management fee | $ | 9.2 | $ | 9.0 | |||||||||||||||||||
| Interest and other financing expenses | 33.2 | 37.0 | |||||||||||||||||||||
| Administrative expenses | 1.3 | 1.3 | |||||||||||||||||||||
| Professional fees | 1.3 | 1.1 | |||||||||||||||||||||
| Other general and administrative expenses | 0.4 | 0.3 | |||||||||||||||||||||
| Net expenses | $ | 45.4 | $ | 48.7 | |||||||||||||||||||
Our total net operating expenses decreased by approximately $3.3 million for the year ended December 31, 2025 as compared to the same period in the prior year. Our management fee increased by approximately $0.2 million for the year ended December 31, 2025 as compared to the same period in the prior year, which was attributable to larger managed and invested capital balances as a result of shares issued through the DRIP and higher drawn balances on the Wells Credit Facility.
Interest and other financing expenses decreased by approximately $3.8 million during the year ended December 31, 2025 as compared to the same period in the prior year, primarily due to decreased spreads and SOFR rates on the Wells Credit Facility, offset by higher average drawn balances on the Wells Credit Facility.
Our total professional fees, administrative expenses and other general and administrative expenses increased by approximately $0.3 million for the year ended December 31, 2025 as compared to the same period in the prior year primarily due to higher invested capital balances during the year ended December 31, 2025 as compared to the year ended December 31, 2024.
Net Realized (Losses) Gains and Net Change in Unrealized (Depreciation) Appreciation
| Year Ended December 31, | ||||||||||||||
| (in millions) | 2025 | 2024 | ||||||||||||
| Net realized (losses) gains on investments | $ | (12.9) | $ | (0.1) | ||||||||||
| Net change in unrealized appreciation (depreciation) of investments | (7.7) | (4.3) | ||||||||||||
| Net realized and unrealized gains (losses) | $ | (20.6) | $ | (4.4) | ||||||||||
Our net realized losses and unrealized depreciation resulted in a net loss of approximately $20.6 million for the year ended December 31, 2025 as compared to the net realized losses and unrealized depreciation resulting in a net loss of $4.4 million for the same period in the prior year. As movement in unrealized appreciation or depreciation can be the result of realizations, we look at net realized and unrealized gains or losses together. The net loss for the year ended December 31, 2025 was primarily driven by realized losses in Notorious Topco, LLC and KWOR Acquisition, Inc ("Alacrity"), unrealized depreciation in CCBlue Bidco, Inc. ("BioAgilytix"), ACI Group Holdings, Inc., RLG Holding, LLC and Houghton Mifflin Harcourt Company and material accelerated amortization realized on our investment in Sierra Enterprises, LLC ("Lyons Magnus") due to early repayments received during the period. The net loss for the year ended December 31, 2024 was primarily driven by unrealized depreciation on Alacrity, BioAgilytix, Therapy Brands Holdings LLC, and Zone Climate Services, Inc., partially offset by unrealized appreciation on Lyons Magnus.
Liquidity, Capital Resources, Off-Balance Sheet Arrangements, Borrowings and Contractual Obligations
Liquidity and Capital Resources
The primary use of existing funds and any funds raised in the future is expected to be for repayment of indebtedness, investments in portfolio companies, cash distributions to our stockholders or for other general corporate purposes.
We expect to generate cash flows from investments and operations and borrowings from banks or other lenders. We will seek to enter into any bank debt, credit facility or other financing arrangements on at least customary market terms; however, we cannot assure you we will be able to do so. Any such incurrence or issuance would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors.
The Investment Adviser, as our initial stockholder, authorized us to adopt the application of the modified asset coverage ratio pursuant to the requirements set forth in Section 61(a) of the 1940 Act, which resulted in the reduction from 200.0% to 150.0% of the minimum asset coverage ratio applicable to us. In connection with their subscriptions of our shares, our stockholders were required to acknowledge our ability to operate with an asset coverage ratio that may be as low as 150.0%. In accordance with the 1940 Act, with certain limited exceptions, we are only allowed to borrow amounts such that our
asset coverage, calculated pursuant to the 1940 Act, is at least 150.0% after such borrowing (which means we can borrow $2 for every $1 of our equity). As of December 31, 2025, our asset coverage ratio was 270.8%.
At December 31, 2025 and December 31, 2024, we had aggregate capital commitments and undrawn capital commitments from investors as follows:
| (in millions) | December 31, 2025 | December 31, 2024 | ||||||||||||
| Capital Commitments | $ | 690.0 | $ | 690.0 | ||||||||||
| Unfunded Capital Commitments | - | - | ||||||||||||
| % of Capital Commitments funded | 100.0 | % | 100.0 | % | ||||||||||
At December 31, 2025 and December 31, 2024, our credit facilities consisted of the Wells Credit Facility. SeeItem 8-Financial Statements and Supplementary Data-Note 6. Borrowings in this Annual Report on Form 10-K for additional information.
At December 31, 2025 and December 31, 2024, we had cash and cash equivalents of approximately $25.3 million and $20.4 million, respectively. Our cash provided by (used) in operating activities for the years ended December 31, 2025 and December 31, 2024, was approximately $25.4 million and $(20.3) million, respectively. We expect that all current liquidity needs will be met with cash flows from operations and other activities.
Off-Balance Sheet Arrangements
We may become a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our portfolio companies. These instruments may include commitments to extend credit and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized in the balance sheet. We may from time to time enter into financing commitment letters or bridge financing commitments, which could require funding in the future. As of December 31, 2025 and December 31, 2024, we had outstanding commitments to third parties to fund investments totaling $216.3 million and $186.0 million, respectively, under various undrawn revolving credit facilities, delayed draw commitments or other future funding commitments.
We may from time to time enter into financing commitment letters or bridge financing commitments, which could require funding in the future. As of December 31, 2025 and December 31, 2024, we had no commitment letters to purchase investments which could require funding in the future. As of December 31, 2025 and December 31, 2024, we had not entered into any bridge financing commitments which could require funding in the future.
Contractual Obligations
A summary of our significant contractual payment obligations as of December 31, 2025 is as follows:
| Contractual Obligations Payments Due by Period | |||||||||||||||||||||||||||||
| (in millions) | Total |
Less than 1 Year |
1 - 3 Years | 3 - 5 Years |
More than 5 Years |
||||||||||||||||||||||||
| Wells Credit Facility (1) | $ | 573.8 | $ | - | $ | - | $ | 573.8 | $ | - | |||||||||||||||||||
(1) Under the terms of the Wells Credit Facility, all outstanding borrowings under that facility ($573.8 million as of December 31, 2025) must be repaid on or before October 10, 2030. As of December 31, 2025, there was approximately $126.2 million of possible capacity remaining under the Wells Credit Facility. See Item 8.-Financial Statements and Supplementary Data-Note 6. Borrowings in this Annual Report on Form 10-K, for material details on the Wells Credit Facility.
We have entered into an investment management agreement, as amended and restated from time to time (the "Investment Management Agreement"), with the Investment Adviser in accordance with the 1940 Act. Under the Investment Management Agreement, the Investment Adviser has agreed to provide us with investment advisory and management services. We have agreed to pay a management fee for these services.
We have also entered into an administration agreement (the "Administration Agreement") with the Administrator. Under the Administration Agreement, the Administrator has agreed to arrange office space for us and provide office equipment and clerical, bookkeeping and record keeping services and other administrative services necessary to conduct our respective day-to-day operations. The Administrator has also agreed to maintain, or oversee the maintenance of, our financial records, our reports to stockholders and reports filed with the SEC. The Administrator has hired a third-party sub-administrator to assist with the provision of administrative services.
If any of the contractual obligations discussed above are terminated, our costs under any new agreements that are entered into may increase. In addition, we would likely incur significant time and expense in locating alternative parties to provide the services we expect to receive under the Investment Management Agreement and the Administration Agreement.
Distributions and Dividends
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, 2025 and December 31, 2024, total distributions declared were $103.8 million and $117.2 million, respectively, of which the distributions were comprised of approximately 95.57% and 97.30%, respectively, of ordinary income, 1.57% and 2.55%, respectively, of long-term capital gains and 2.86% and 0.15%, respectively, of a return of capital. Future distributions, if any, will be determined by our board of directors.
We intend to pay semi-annual distributions to our stockholders in amounts sufficient to qualify as and maintain our status as a RIC. We intend to distribute approximately all of our net investment income on a semi-annual basis and substantially all of our taxable income on an annual basis, except that we may retain certain net capital gains for reinvestment.
We maintain an "opt out" dividend reinvestment plan, as amended from time to time (the "DRIP"), on behalf of our common 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 will only use newly-issued shares of common stock to implement the DRIP. On August 16, 2022, our board of directors amended and restated the DRIP, effective as of September 18, 2022 (the "Amendment"). The Amendment clarifies that by "opting out" a stockholder may elect to receive some or all of their dividends or distributions in cash. Additionally, the notice requirement for stockholders to withdraw or modify their elections under the DRIP was amended such that a stockholder must notify the Company's transfer agent and registrar of any changes to their election no later than the day before the start of the quarterly period for which the stockholder desires to receive some or all of the dividend or distribution in cash. For the years ended December 31, 2025, December 31, 2024 and December 31, 2023, we issued 1,503,421, 11,854,750 and 8,631,890 shares through the DRIP, respectively. SeePart II - Item 8- Financial Statements-Note 2. Summary of Significant Accounting Policiesfor additional details regarding our DRIP.
Related Parties
We have entered into a number of business relationships with affiliated or related parties, including the following:
•We have entered into the Investment Management Agreement with the Investment Adviser, a wholly-owned subsidiary of New Mountain Capital. Therefore, New Mountain Capital is entitled to any profits earned by the Investment Adviser, which includes any fees payable to the Investment Adviser under the terms of the Investment Management Agreement, as amended, less expenses incurred by the Investment Adviser in performing its services under the Investment Management Agreement.
•We have entered into the Administration Agreement with the Administrator, a wholly-owned subsidiary of New Mountain Capital. The Administrator arranges our office space and provides office equipment and administrative services necessary to conduct our respective day-to-day operations pursuant to the Administration Agreement.
•We, the Investment Adviser and the Administrator have entered into a Trademark License Agreement with New Mountain Capital, pursuant to which New Mountain Capital has granted us, the Investment Adviser and the Administrator a non-exclusive, royalty-free license to use the "NMF" name.
In addition, we have adopted a formal Code of Ethics that governs the conduct of our officers and directors. These officers and directors also remain subject to the duties imposed by the 1940 Act and the Maryland General Corporation Law.
The Investment Adviser and its affiliates may also manage other funds in the future that may have investment mandates that are similar, in whole or in part, to our investment mandates. The Investment Adviser and its affiliates may determine that an investment is appropriate for us and for one or more of those other funds. In such event, depending on the availability of such investment and other appropriate factors, the Investment Adviser or its affiliates may determine that we should invest side-by-side with one or more other funds. Any such investments will be made only to the extent permitted by applicable law and interpretive positions of the SEC and its staff, and consistent with the Investment Adviser's allocation procedures.
We may be prohibited under the 1940 Act from participating in certain transactions with our affiliates without prior approval of the directors who are not interested persons, and in some cases, the prior approval of the SEC. We, the Investment Adviser and certain of our affiliates were granted an order for exemptive relief that permitted co-investing with our affiliates subject to various approvals of the Board and other conditions. On May 13, 2025, we, the Investment Adviser and certain of our affiliates were granted a new order for exemptive relief (the "Exemptive Order") by the SEC. The Exemptive Order allows us to co-invest with other funds managed by the Investment Adviser or certain affiliates pursuant to the conditions of the Exemptive Order. Pursuant to such Exemptive Order, we generally are permitted to co-invest in certain negotiated transactions with certain
of our affiliates if such co-investments are done on the same terms and at the same time, as further detailed in the Exemptive Order. The Exemptive Order requires that a "required majority" (as defined in Section 57(o) of the 1940 Act) of the Board make certain findings (1) in most instances when we co-invest with our affiliates in an issuer where our affiliate has an existing investment in the issuer, and (2) if we dispose of an asset acquired in a transaction under the Exemptive Order unless the disposition is done on a pro rata basis, or is a sale of a tradeable security. Pursuant to the Exemptive Order, the Board oversees our participation in the co-investment program. As required by the Exemptive Order, we have adopted, and the Board has approved, policies and procedures reasonably designed to ensure compliance with the terms of the Exemptive Order, and the Investment Adviser and our Chief Compliance Officer will provide reporting to the Board.
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