Robert Hamwee – Chief Executive Officer Steve Klinsky - Chairman David Cordova – Chief Financial Officer & Treasurer.

Ryan Lynch – KBW Greg Nelson – Wells Fargo Securities Arthur Winston - Pilot Advisors.

Good morning, and welcome to the New Mountain Finance Corporation Third Quarter 2014 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Robert Hamwee, CEO. Please go ahead sir..

Thank you and good morning everyone and welcome to New Mountain Finance Corporation’s third quarter earnings call for 2014. With me here today are Steve Klinsky, Chairman of NMFC and CEO of New Mountain Capital and Dave Cordova, CFO of NMFC. Steve is going to make some introductory remarks.

But before he does, I would like to ask Dave to make some important statements regarding today's call..

Thank you, Rob. I would like to advise everyone that today's call and webcast are being recorded. Please note that they are the property of New Mountain Finance Corporation and that any unauthorized broadcast in any form is strictly prohibited. Information about the audio replay of this call is available in our earnings press release.

I would also like to call your attention to the customary Safe Harbor disclosure in our November 5, 2014 press release and on page two of the slide presentation regarding forward-looking statements.

Today's conference call and webcast may include forward-looking statements and projections, and we ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from those statements and projections.

We do not undertake to update our forward-looking statements or projections unless required to by law. Any references to New Mountain Capital or New Mountain are referring to New Mountain Capital, LLC or its affiliates and may be referring to our investment advisor, New Mountain Finance Advisors BDC, L.L.C. where appropriate.

To obtain copies of our latest SEC filings and to access the slide presentation that we will be referencing throughout this call, please visit our website at www.newmountainfinance.com or call us at 212-720-0300.

At this time, I would like to turn the call back over to Steve Klinsky who will give some highlights beginning on page four of the slide presentation.

Steve?.

Thank you. Rob and Dave will go through the details in a moment but let me start by presenting the highlights of another strong quarter overall for New Mountain Finance. New Mountain Finance’s pro forma adjusted net investment income for the quarter ended September 30, 2014 was $0.35 per share, the high-end of our guidance of $0.33 to $0.35 per share.

This once again more than covers our Q3 dividend of $0.34 per share. The company's book value on September 30 was $14.33 per share, which is down $0.20 from last quarter after adjusting for the recent $0.12special dividend. We're also able to announce our regular dividend for the current quarter ending December 31, 2014.

The regular dividend will again be $0.34 per share, consistent with our previously communicated view that we have reached a fully ramped steady state dividend level. The overall credit quality of the company's loan portfolio continues to be strong.

We had one new loan placed on nonaccrual this quarter, representing only our second nonaccrual since inception of our debt effort in October 2008. We have had only one issuer with the realized default loss since inception, representing less than 0.2% of cumulative investments made to date.

The company invested $199 million in gross originations in Q3 and $64 million net of repayments. In addition to the positive quarterly results of the core business, we continue to execute on strategic initiatives that we believe will create meaningful shareholder value in the coming quarters.

We've completed the ramp-up of our senior loan program that will generate management fees for the BDC. We’ve also begun to utilize our recently issued SBIC license. In summary, we are pleased with NMFC’s continued performance and progress. With that, let me turn the call back over to Rob Hamwee, NMFC’s CEO..

satellite, cable and wireless. Over the last two months, UniTek has suffered from two fundamental problems from our view. First, they have suffered significant losses in their wireless segment through a combination of market headwinds and poor execution.

Second, they have over-invested in an excessive corporate infrastructure that was designed to support growth in areas that never occurred. These two problems coupled with the failed company sales process led to poor consolidated operating results and a liquidity shortfall in recent months.

NMFC and other large lenders have now stepped in and we're utilizing a pre-packaged restructurings to provide liquidity and implement the balance sheet and corporate restructuring. This will also give us control of the company and allow us to bring our private equity competencies to bare optimizing value going forward.

Post re-organization, we expect to either right-size wireless or shut it down and meaningfully downsize corporate. It’s important to note that the core satellite and cable segments continue to perform well and are highly cash generative.

EBITDA, excluding wireless losses, and adjusted for right-sizing corporate is in the $35 million to $40 million range. At our current mark of $0.71, implied TEV for the business is $187 million, representing a range of EBITDA multiples from 4.7 to 5.3 times.

We believe this is a very reasonable mark and we see a relatively clear path towards a full recovery on this investment over the next few years. Turning to Page 16, we update progress on our senior loan program or SLP-1.

As a reminder, SLP-1 is a $368 million pool of capital established and managed by NMFC for the purpose of investing in syndicated loan that fit within our traditional investment parameters but they have absolute yields that are too low for the BDC.

SLP-1 is funded with $275 million of attractively priced and structured debt from Wells Fargo and $93 million of equity. Over three quarters of the equity is coming from third-party institutional investors with the balance supplied by NMFC.

While the standalone return on NMFC’s investment in SLP-1 are attractive in their own rights, what’s particularly compelling about this vehicle for the BDC is that the management fees anticipated to be approximately $1.7 million annually will flow up to NMFC.

We’ve now completed the ramp up of the SLP in line with our asset level return expectations and predominantly in credits that are well known to us through our private equity practice. The chart on Page 17 helps track the company’s overall economic performance since its IPO.

At the top of the page, we show how the regular quarterly dividend is being covered out of net investment income. As you can see, we continue to more than cover 100% of our cumulative regular dividend out of NII. In fact, for the first nine months of this year we’ve out-earned our dividend by nearly $0.06 per share.

On the bottom of the page, we focus on below the line items. First, we look at realized gains and realized credit and other losses. As you can see, looking at the row highlighted in green, we’ve had success generating real economic gains nearly every quarter through a combination of equity gain, portfolio company dividends and trading profits.

Conversely, we've had only one material realized loss representing the realized default loss of $4.3 million on ATI in 2013. Beyond that, the numbers highlighted in orange show that we're not avoiding nonaccruals by selling poor credits at a material loss prior to actual default.

The net cumulative impact of this success to-date is highlighted in blue which shows cumulative net realized gains of $28.7 million since our IPO. Next, we look at unrealized appreciation and depreciation. The decline in the net unrealized appreciation this quarter primarily reflects the UniTek write-down.

As you can see highlighted in grey, we still have cumulative net unrealized appreciation of $14.1 million. Finally, we combined net realized with unrealized appreciation to derive the final line on the table, which in the yellow box shows the current cumulative net realized and unrealized appreciation of $43 million.

The point here is to show that on both the realized and combined realized unrealized basis, we have consistently and methodically more than offset any credit losses or impairments with below the line gains elsewhere in the portfolio.

While market-driven volatility around unrealized appreciation and depreciation may cause the bottom-line number to vary over time through economic gains and losses we will accumulate in the realized bucket where we will strive to retain a positive balance.

Moving on to portfolio activity, as seen on Page 18, we had another active quarter for originations in Q3. We made significant investments in 11 portfolio companies and had total gross originations of $199 million. Repayments in Q3 were also significant totaling $135 million.

We funded some of the origination with asset sales of $9 million, resulting in net originations of $55 million. As shown on Page 19, we’ve had an active start to Q4 with investments of $60 million. Given the robust pace of net originations over the last six months, we ended Q3 outside the high-end of our target leverage ratio at 0.8 times.

That combined with our near-term pipeline of attractive opportunities led us to the equity issuance we completed two weeks ago, where we sold 5.75 million shares raising in excess of $80 million. Pro forma for that deal and new investments quarter to date, we are now at a leverage ratio of 0.7 times.

Pages 20 and 21 sow the impacts of Q3 investments and disposition activity on asset type and yields respectively. Both asset originations and repayments were weighted towards second lien investments. Yields on originations were slightly lower than those on disposals but modestly higher than the portfolio as a whole.

The net impact is that portfolio yield overall is unchanged at 10.7%. In terms of the portfolio review on Page 22, the key statistics as of 9/30 look very similar to 6/30. The asset mix remains roughly evenly split between first lien and non-first lien.

As always we maintain the portfolio comprise of companies in a defensive growth industries like software, education, business services and healthcare that we believe will outperform in uncertain economic environment.

Finally as illustrated on Page 23, we have a broadly diversified portfolio with our largest investment at 3.7% of fair value and the top 15 investments accounting for 42% of fair value, slightly down from prior quarters. With that, I will now turn it over to our CFO Dave Cordova to discuss the financial statements and key financial metrics.

Dave?.

Thank you, Rob. For more details on the financial results in today's commentary please refer to the Form 10-Q that was filed last evening with the SEC. Now I would like to turn your attention to Slide 24. The portfolio had just over $1.35 billion investment at fair value at September 30, 2014 and total assets of just under $1.4 billion.

We had total liabilities of $650.7 million of which total debt outstanding was approximately $600.8 million. Net asset value of $747.5 million or $14.33 per share was down $0.20 from the previous quarter pro forma for the $0.12 special dividend paid during the quarter, primarily due to net unrealized depreciation.

As of September 30, our debt-to-equity ratio was 0.8 to 1 which exceeded the high-end of our target range. The weighted-average debt-to-equity ratio during the quarter was approximately 0.74 to 1. On Slide 25, we show the historical NAV per share and leverage ratios, which are probably consistent with our target leverage between 0.65 to 0.75 to 1.

We also show the NAV adjusted for the cumulative impact of special dividends which portrays a more accurate reflection of true economic value creation and highlights the general upward trend in NAV per share since inception. On Slide 26, we show our quarterly income statement results.

We believe that adjusted NII which excludes the capital gains incentive fees is the most appropriate measure of our quarterly performance. This slide highlights that while realizations and unrealized appreciation, depreciation can be volatile below the line, we continue to generate stable net investment income above the line.

Focusing on the quarter ended September 30, 2014 we earned total investment income of approximately $34.7 million. This represents an increase of 1 million or 3% from the prior quarter, largely attributable to an increase in interest income from a larger asset base offset by a modest decrease in prepayment fees.

Total net expenses of $16.6 million increased $1.5 million or 10% due to an increase in management fees associated with the asset growth as well as an increase in interest expense associated a higher average debt balance. Net administrative, professional and other general and administrative expenses were roughly flat with the prior quarter.

This results in third quarter adjusted NII of $18.1 million or $0.35 per weighted average share, which is at the high-end of our guidance provided on August 7, 2014 of $0.33 to $0.35 per share and more than covers our Q3 regular dividend of $0.34 per share. Shifting to below the NII line, we had adjusted net realized gains of $0.6 million.

Adjusted unrealized losses of $14 million were largely driven by the write-down of our positioning UniTek of approximately 11.5 million and lower marks in the broader portfolio of approximately $7 million which was offset by an increase in unrealized appreciation on one of our equity positions of approximately $4.6 million.

As a result of the net unrealized appreciation in the quarter, we reduced our capital gains incentive fee accrual by approximately $2.7 million. In total, for the quarter ended September 30, 2014 we had a net increase in net assets resulting from operations of $7.4 million.

As Slide 27 demonstrates, our total investment income is predominantly paid in cash. Though the amount of prepayment fees vary from quarter-to-quarter based on repayments, our historical earnings have consistently shown some material prepayment fee income.

Therefore we show total interest income as a percentage of total investment income both with and without prepayment fees which is one measurement of the stability and predictability of our investment income. Turning to Slide 28, as briefly discussed earlier, our adjusted NII for the third quarter more than covered our Q3 dividend.

Given our belief that our Q4 NII will fall within the previously declared expected range of $0.33 to $0.35 per share, our Board of Directors has declared a Q4 2014 dividend of $0.34 per share in line with the past 10 quarters.

The Q4 2014 quarterly dividend of $0.34 per share will be paid on December 30, 2014 the holders of record on December 16, 2014. On Slide 29, we highlight our various financing sources, including the convertible notes issued in corporate revolving credit facility that closed earlier this year.

Taking into account SBIC debentures from our recently announced SBIC license, we now have 810 million of total pro forma borrowing capacity. As a reminder, our Wells Fargo credit facility covenants are generally tied to the operating performance of the underlying businesses that we lend to rather than the marks of our investments at any given time.

We are also currently documenting extensions of our Wells Fargo credit facilities. At this time I would like to turn the call back over to Rob. .

Thanks, Dave. Well once again we do not plan to give explicit forward guidance. It continues to remain our intention to consistently pay the $0.34 per share on a quarterly basis, for future quarters as long as the adjusted NII covers the dividend in line with our current expectation.

In closing, I would just like to say that we continue to be extremely pleased with our performance to date. Most importantly, from a credit perspective our overall portfolio continues to be very healthy. Once we like to thank you for your support and interest and at this time I will turn things back to the operator to begin the Q&A.

Operator?.

(Operator Instructions) And our first question today will come from Ryan Lynch of KBW..

First one is regarding the senior loan program.

Now that’s closed and fully funded, are you guys in discussions with other partners about possibly signing up a senior secured loan program too and any time from around that closing will be really helpful to us?.

Yeah I would say we are in some preliminary discussions. From a timeframe perspective, I wouldn't expect anything in the first half of next year, perhaps in the second half of next year..

And are you targeting with an SLP number 2, similar size, similar management fees and expected returns?.

Yes..

And then to touch on UniTek for a second. First, I just wanted to confirm that there was $27 million of UniTek that is still making interest payments to you guys.

Is that correct?.

Yes, some of it’s making payment in cash, some of it which continues to be growing. Yes..

So how should we think about those payments as UniTek officially files for bankruptcy this week? Are those going to continue or how should we think about those?.

So the payments I am referring to is on the new securities that are outlined in the reorganization plan. So again there will be some that are paid in cash, some that will accrue and since we control the whole capital structure, we and the other lenders, we will be taking out cash as appropriate once we get the business where we want it to be..

And then one more in regards to the SBIC, it looks like you guys have kind of funded maybe two loans in the SBIC which is a small sample size but just looking at those two loans, looks like they are subordinated debt and they have kind of double digits midteens yield on those.

Is that kind of what we should be expecting to go into the SBIC kind of more subordinated debt and maybe a little bit higher-yielding loans versus what you guys have kind of historically done to your portfolio?.

It will be a mix. I think over time it will broadly mirror the big portfolio at the BDC. So I think like you said it’s small size and I would expect as the program is fully ramped up you will see a mix of junior and senior with yields consistent with our broader yield profile..

And then just one more I was just looking through, looks like about 77% of your portfolio is kind of in energy investments.

I just kind of quickly looked through a couple on them, looked like they had pretty good fair value marks on them in the quarter, but I was just wondering how -- are any of those businesses kind of tied to the oil and gas industry and if they are, are they feeling any effects of the recent downturn in energy prices?.

Yes, the answer is some are, none of them are through a direct commodity exposure E&P type investment. Some are first or second derivative, we specifically target the investment that we do not expect to correlate, because we have no idea where oil and gas prices are going.

So businesses that are – have models that you would not expect to be meaningfully impacted by the price movements and price volatility in the underlying commodity..

And the next question comes from Greg Nelson of Wells Fargo Securities..

Just hitting back on UniTek per a second. Does the mark at end of the quarter – does that include everything that was going on with the bankruptcy, because I know 40% of your debt has been converted to equity and you’re holding the entire position on the books at about $0.72 on the dollar.

Is that mark reflective of the entire prepack?.

Yes, absolutely..

And I'm assuming that the amount you put on that accrual is what you assume will be converted into equity?.

Yes, well it’s consistent with the amount that is going to flow through from a mark-down perspective which is broadly consistent with the equity movement.

Well, at the end of the reorganization process which we hope and expect will be at the end of this quarter, we will break out the new securities that we are converting into the new debt pieces and the equity piece and show individual marks and that will sort of add back up to the $0.71..

And then on SBIC facility, I don’t believe you guys – you started funding and you didn’t draw-down on the SBIC or SBI debt, yet, what’s your outlook for timeframe that you expect to start pulling on the facility and drawing some debt?.

Yes, we are expecting to drawdown some debt to fund two new investments this quarter, so this month actually, in the coming days we expect to make our first borrowings under the facility and I would expect , if I had to guess by the end of the quarter we would be maybe half- drawn on the first 75 tranche and then moving up from there in the coming quarters..

And then last question just on -- obviously this quarter was pretty robust from an origination standpoint but also kind of robust from a repayment standpoint, but then looking at the quarter, activity repayments were little bit lower.

Just kind of get a sense of how you’re thinking of net portfolio growth here and then as it relates to equity issuance going forward?.

Sure, I would – if I had to guess it’s always so hard, right, because the repayments tend to be pretty lumpy. We feel very good about the origination, the pipeline is very strong today. So I would expect from an origination perspective, Q4s look very similar to Q3, always plus or minus because the deals can move meaningfully.

And then the repayments it’s tougher to see – I certainly wouldn’t expect it to be greater repayments than we saw in Q3, potentially somewhat less but we have a few meaningful ones that we know are coming – well, one that we know is upcoming this quarter and one that may happen end of this quarter and may leak into January.

So as always we will manage our balance sheet first and foremost to be fully levered, take advantage of the attractively priced financing that we have, including the SBA leverage that we don't think about, when we think about our target range, when we talk about our target range to that 0.75 number, we exclude the SBA leverage from that.

So as we use – as we drawdown on the SBA to fund some deals this quarter, that sort of incremental buying power that would push any future equity issuance further into the future but it’s always the timing around any further equity issuances will be driven by first our ability to be fully levered and capitalized, and then secondly, incremental attractive deal flow that we see in excess of repayments..

And then just touch on that point briefly for a second. So you are still targeting 0.75 times leverage regardless of SBA debt.

So no matter where economic leverage goes, you still target 0.75 from a regularly perspective?.

We are comfortable up to 0.75, we always see our range is 0.65 to 0.75, but we're clearly comfortable up to 0.75 on a steady state basis. And yes, we are focused on the regulatory perspective, not the financial perspective, it looks t be somewhat higher once we start drawing down on the SBA debt..

And our next question will come from Arthur Winston of Pilot Advisors..

As becoming a long term investor, we are appreciative of the credit – the great credit you guys are doing and the fact that there is inside ownership by the people who collect the fees.

But the thing I can’t figure out is that with the current leverage -- your projection from leverage how these incremental equity offerings can result in higher dividends or net investment income to the existing shareholders, it seems like – with the returns you get a new investments you’re more like on a treadmill in terms of – with the net investment income to be and we’re appreciative of the capital gains distributions which have been terrific..

I mean again we raise equity when we have the attractive new investment pipeline in terms of the other obviously covenant we have with the investor bases to always raise equity on a net basis, at least the book value.

And then the benefits -- so they are at least – like you say breakeven right, we do think they are accretive to the extent that we are continuing to use some of that equity for instance to fund our equity investments in the SBA where returns to the shareholders are considerably higher than our existing return on equity.

There is also benefits to scale relative to amortizing fixed costs across the broader platform and there is some benefits to scale in terms of securing deal flow, I think given our scale today we're doing some very interesting unit tranche financing that we couldn’t do in the past.

So I do think over time there – you could argue that it works to its neutral but I do actually think that as our scale grows, we do get benefits to that, that get passed along to the shareholders..

And this will conclude our question-and-answer session. I would like to turn the conference back over to Robert Hamwee for any closing remarks..

Great, thank you. Again we appreciate everyone’s time this morning and ongoing support of the company and look forward to talking to you in the new year. Thank you very much. .

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..