NMFC: Lower Dividend Holds as Nonaccruals Improve
New Mountain Finance reported second-quarter adjusted net investment income of ﹩0.26 per share and declared a third-quarter distribution of ﹩0.25 per share. Adjusted earnings were down from ﹩0.32 per share a year earlier.
NAV was nearly stable at ﹩10.89 per share, compared with ﹩10.92 at March 31. Investments on nonaccrual improved to 1.5% of the portfolio at fair value from 2.6%. Debt to equity increased to 1.16 times from 1.12 times.
Why it matters
The lower distribution was covered, but only by one cent per share. That offers limited room if portfolio yields or fee income weaken. At the same time, the reduction in nonaccrual exposure and stable NAV suggest that credit conditions improved during the quarter.
Realized losses remained significant, including ﹩32.1 million on non-controlled and non-affiliated investments and ﹩12.9 million on controlled investments. Unrealized gains partly offset those losses in the NAV calculation.
What to watch
Management has emphasized reducing payment-in-kind income, selling equity positions, and diversifying the portfolio. Progress on those goals, along with leverage and realized credit outcomes, will determine whether the current distribution remains sustainable.
Sources
This article is general information, not personalized investment advice. Fly High Investing may hold securities discussed in this article.