New Mountain Finance Corp 10-Q

Item 2. 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 New Mountain Finance Corporation, including its wholly-owned direct and indirect subsidiaries (collectively, "we", "us", "our", "NMFC" 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 report. Some of the statements in this report (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 interest and inflation rates, and the COVID-19 pandemic on the industries in which we invest; • our future operating results, our business prospects, the adequacy of our cash resources and working capital, and the impact of the COVID-19 pandemic thereon; • the ability of our portfolio companies to achieve their objectives and the impact of the COVID-19 pandemic thereon; • 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 BDC, L.L.C. (the "Investment Adviser") 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 and related and other vehicles; and • the risk factors set forth in Item 1A.—Risk Factors contained in our annual report on Form 10-K for the year ended December 31, 2020 and in this quarterly report on Form 10-Q. 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 Item 1A.—Risk Factors contained in our annual report on Form 10-K for the year ended December 31, 2020 and in this quarterly report on Form 10-Q. We have based the forward-looking statements included in this report on information available to us on the date of this report. 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 United States ("U.S.") Securities and Exchange Commission (the "SEC"), including annual reports on Form 10-K, registration statements on Form N-2, quarterly reports on Form 10-Q and current reports on Form 8-K. 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"). 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"). Since our IPO, and through March 31, 2021, we raised approximately $893.2 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 92 Table o f Contents 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. We have established the following wholly-owned direct and indirect subsidiaries: • New Mountain Finance Holdings, L.L.C. ("NMF Holdings" or the "Predecessor Operating Company") and New Mountain Finance DB, L.L.C. ("NMFDB"), whose assets are used to secure NMF Holdings’ credit facility and NMFDB’s credit facility, respectively; • New Mountain Finance SBIC, L.P. ("SBIC I") and New Mountain Finance SBIC II, L.P. ("SBIC II"), who have received licenses from the United States ("U.S.") Small Business Administration ("SBA") to operate as small business investment companies ("SBICs") under Section 301(c) of the Small Business Investment Act of 1958, as amended (the "1958 Act") and their general partners, New Mountain Finance SBIC G.P., L.L.C. ("SBIC I GP") and New Mountain Finance SBIC II G.P., L.L.C. ("SBIC II GP"), respectively; • NMF Ancora Holdings Inc. ("NMF Ancora"), NMF QID Holdings, Inc. ("NMF QID") NMF YP Holdings Inc. ("NMF YP") and NMF Permian Holdings LLC ("NMF Permian"), which serve as tax blocker corporations by holding equity or equity-like investments in portfolio companies organized as limited liability companies (or other forms of pass-through entities); we consolidate our tax blocker corporations for accounting purposes but the tax blocker corporations are not consolidated for income tax purposes and may incur income tax expense as a result of their ownership of the portfolio companies; and • New Mountain Finance Servicing, L.L.C. ("NMF Servicing"), which serves as the administrative agent on certain investment transactions. New Mountain Net Lease Corporation ("NMNLC") is a majority-owned consolidated subsidiary of ours, which acquires commercial real estate properties that are subject to ‘‘triple net’’ leases has elected to be treated, and intends to comply with the requirements to continue to qualify annually, as a real estate investment trust, or REIT, within the meaning of Section 856(a) of the Code. 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, 2021, our top five industry concentrations were software, business services, healthcare services, education and investment funds (which includes our investments in our joint ventures). As of March 31, 2021, our net asset value was approximately $1,244.3 million and our portfolio had a fair value of approximately $3,018.6 million in 102 portfolio companies, with a weighted average yield to maturity at cost for income producing investments ("YTM at Cost") of approximately 8.8% and a weighted average yield to maturity at cost for all investments ("YTM at Cost for Investments") of approximately 8.2%. 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 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. 93 Table o f Contents Recent Developments Holdings Credit Facility Amendment On April 20, 2021, we entered into the Fifth Amendment to Loan and Security Agreement (the “Fifth Amendment”), which amended the Holdings Credit Facility. Pursuant to the Fifth Amendment, the revolving period was extended from September 30, 2021 to April 20, 2024. The Holdings Credit Facility continues to mature two years after the end of the revolving period. With the extension of the revolving period, the Holdings Credit Facility will now mature on April 20, 2026. As of the date of the Fifth Amendment, the aggregate commitments of the lenders to the Holding Credit Facility equaled $730.0 million. The Fifth Amendment made a number of other modifications, including, but not limited to, the following. The applicable spread used to determine the per annum interest rate payable under the Holdings Credit Facility was modified to be the higher of (a) 1.85% (reduced from 2.25%) and (b) the pro rata portion of the facility secured by assets that are First Lien Loans that are also Broadly Syndicated Loans (as each such term is defined under the Holdings Credit Facility) multiplied by 1.60% (reduced from 2.00%), plus the pro rata portion of the facility secured by assets that are not First Lien Loans that are Broadly Syndicated Loans multiplied by 2.10% (reduced from 2.50%). The Fifth Amendment also modified the applicable spread that would be effective during an Event of Default or a Curable BDC Asset Coverage Event (as each such term is defined under the Holdings Credit Facility) by reducing such applicable spread from 3.75% to 3.25%. NMFC Senior Loan Program IV LLC On May 5, 2021, NMFC and SkyKnight Income Alpha, LLC ("SkyKnight Alpha") entered into a limited liability company agreement to establish a joint venture, NMFC Senior Loan Program IV LLC ("SLP IV"). NMFC and SkyKnight Alpha have transferred and contributed 100% of their membership interest in SLP I and SLP II to SLP IV, pursuant to contribution agreements. The purpose of the joint venture is to invest primarily in senior secured loans issued by portfolio companies within our core industry verticals. All investment decisions must be unanimously approved by the investment committee of SLP IV, which has equal representations from NMFC and SkyKnight Alpha. On May 5, 2021, SLP IV entered into a $370.0 million revolving credit facility with Wells Fargo Bank, National Association which matures on May 5, 2026 and bears interest at a rate of LIBOR plus 1.60% per annum. Management Fee Waiver On May 4, 2021, we and the Investment Adviser entered into a Fee Waiver Agreement (the “Fee Wavier Agreement”). Pursuant to the Fee Waiver Agreement, the Investment Adviser agreed to voluntarily reduce the base management fees payable to the Investment Adviser by us under the Investment Management Agreement. Effective as of and for the quarter ended March 31, 2021 through the quarter ending December 31, 2022, the Investment Adviser agreed to waive a portion of the base management fee payable under the Investment Management Agreement such that the base management fee payable would not exceed 1.25% of our gross assets (the “Reduced Base Management Fee”). If, for any quarterly period during the term of the Fee Wavier Agreement, the Reduced Base Management Fee would be greater than the base management fee calculated under the terms of the Investment Management Agreement, the Investment Adviser shall only be entitled to the lesser of those two amounts. Distributions On April 30, 2021, our board of directors declared a second quarter 2021 distribution of $0.30 per share payable on June 30, 2021 to holders of record as of June 16, 2021. We will, subject to extraordinary circumstances, pay quarterly distributions to our common stockholders of at least thirty cents ($0.30) per quarter over the next seven quarters beginning with the second quarter distribution to be paid on June 30, 2021 and ending in the fourth quarter of 2022, subject to any possible extensions. The declaration of any such future distributions will be subject to the availability of legally distributable funds and the discretion and approval of our board of directors. The Investment Adviser has informed us that, to the extent necessary, it will waive incentive fees payable to the Investment Adviser in the event that there is an insufficient amount of legally distributable funds available to us to make the thirty cent ($0.30) distributions through the periods described above. COVID-19 Developments Our operating results and portfolio companies may be negatively impacted by the COVID-19 pandemic. While several countries, as well as certain states, counties and cities in the United States, have relaxed initial public health restrictions with the view to partially or fully reopening their economies, many cities have since experienced a surge in the reported number of cases, hospitalizations and deaths related to the COVID-19 pandemic. These surges have led to the re-introduction of such restrictions and business shutdowns in certain states in the United States and globally and could continue to lead to the re-introduction of such restrictions elsewhere. Health advisors warn that recurring COVID-19 outbreaks will continue if reopening 94 Table o f Contents is pursued too soon or in the wrong manner, which may lead to the re-introduction or continuation of certain public health restrictions (such as instituting quarantines, prohibitions on travel and the closure of offices, businesses, schools, retail stores and other public venues). Additionally, travelers from the United States are restricted from visiting many countries including countries in Europe, Asia, Africa and South America. These continued travel restrictions may prolong the global economic downturn. In addition, although the Federal Food and Drug Administration authorized vaccines beginning in December 2020 and a significant portion of the U.S. population have been vaccinated, and it remains unclear how quickly the vaccines will continue to be distributed nationwide and globally, or when “herd immunity” will be achieved and the restrictions that were imposed to slow the spread of the virus will be lifted entirely. Any delay in distributing the vaccines could lead people to continue to self-isolate and not participate in the economy at pre-pandemic levels for a prolonged period of time. Even after the COVID-19 pandemic subsides, the U.S. economy and most other major global economies may continue to experience a recession, and we anticipate our business and operations could be materially adversely affected by a prolonged recession in the United States and other major markets. This outbreak is having, and any future outbreaks could have, an adverse impact on the markets and the economy in general, which could have a material adverse impact on, among other things, the ability of lenders to originate loans, the volume and type of loans originated, and the volume and type of amendments and waivers granted to borrowers and remedial actions taken in the event of a borrower default, each of which could negatively impact the amount and quality of loans available for investment by us and returns to us, among other things. As of the date of this quarterly report on Form 10-Q, it is impossible to determine the scope of this outbreak, or any future outbreaks, how long any such outbreak, market disruption or uncertainties may last, the effect any governmental actions will have or the full potential impact on us and our portfolio companies. Any potential impact to our results of operations will depend to a large extent on future developments and new information that could emerge regarding the duration and severity of COVID-19 and the actions taken by authorities and other entities to contain COVID-19 or treat its impact, all of which are beyond our control. These potential impacts, while uncertain, could adversely affect our and our portfolio companies’ operating results. An increase in unrealized depreciation of our investment portfolio due to decreases in fair value of investments attributable to the COVID-19 pandemic has resulted in a significant reduction in our net asset value from the period of March 31, 2020 through December 31, 2020 as compared to its net asset value as of December 31, 2019. As of the three months ended March 31, 2021, our net asset value has experienced a recovery from that of the three months ended March 31, 2020. As of March 31, 2021, we were in compliance with our asset coverage requirements under the 1940 Act. In addition, we are not in default of any of the asset coverage requirements under any of our credit facilities as of March 31, 2021. For additional discussion on the impact of COVID-19 on our portfolio companies, see “Monitoring of Portfolio Investments”. Critical Accounting Policies The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America ("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, NMFDB, SBIC I, SBIC I GP, SBIC II, SBIC II GP, NMF Ancora, NMF QID, NMF YP and NMF Permian and our majority-owned consolidated subsidiary, NMNLC. 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: (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. 95 Table o f Contents (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 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 Investment Adviser is unable to sufficiently validate the quote(s) internally and if the investment's par value or its fair value exceeds the 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, we 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. We will evaluate the reasonableness of the quote, and if the quote is determined to not be representative of fair value, we 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 internally. 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. If the Investment Adviser is unable to sufficiently validate the quote internally and if the investment's par value or its fair value exceeds the 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 investment professionals of the Investment Adviser responsible for the credit monitoring; b. Preliminary valuation conclusions will then be documented and discussed with our senior management; c. If an investment falls into (3) above for four consecutive quarters and if the investment's par value or its fair value exceeds the 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 of directors; and d. When deemed appropriate by our management, an independent valuation firm may be engaged to review and value investment(s) of a portfolio company, without any preliminary valuation being performed by the Investment Adviser. The investment professionals of the Investment Adviser will review and validate the value provided. 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. 96 Table o f Contents 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. The following table summarizes the levels in the fair value hierarchy that our portfolio investments fall into as of March 31, 2021: (in thousands) Total Level I Level II Level III First lien $ 1,576,600 $ — $ 76,750 $ 1,499,850 Second lien 696,209 — 301,291 394,918 Subordinated 37,295 — — 37,295 Equity and other 708,508 — — 708,508 Total investments $ 3,018,612 $ — $ 378,041 $ 2,640,571 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. 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. 97 Table o f Contents 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, 2021, 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 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. In applying the income based approach as of March 31, 2021, we used the discount ranges set forth in the table below to value investments in our portfolio companies. The unobservable inputs used in the fair value measurement of our Level III investments as of March 31, 2021 were as follows: (in thousands) Range Type Fair Value as of March 31, 2021 Approach Unobservable Input Low High Weighted Average First lien $ 1,356,548 Market & income approach EBITDA multiple 5.0x 35.0x 14.8x Revenue multiple 5.0x 11.0x 7.1x Discount rate 4.8 % 18.4 % 7.8 % 99,862 Market quote Broker quote N/A N/A N/A 43,440 Other N/A(1) N/A N/A N/A Second lien 279,853 Market & income approach EBITDA multiple 7.5x 32.0x 15.0x Discount rate 6.2 % 24.7 % 10.3 % 94,803 Market quote Broker quote N/A N/A N/A 20,262 Other N/A(1) N/A N/A N/A Subordinated 37,295 Market & income approach EBITDA multiple 8.0x 13.5x 10.0x Discount rate 11.5 % 17.3 % 13.6 % Equity and other 708,350 Market & income approach EBITDA multiple 5.0x 19.5x 11.4x Discount rate 5.8 % 35.2 % 11.2 % 158 Other N/A(1) N/A N/A N/A $ 2,640,571 (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. 98 Table o f Contents NMFC Senior Loan Program I LLC 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 was structured as a private investment fund, in which all of the investors were "qualified purchasers", as such term is defined in section 2(a)(51) of the 1940 Act. Transfer of interests in SLP I are subject to restrictions and, as a result, 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, 2022, 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 invests in senior secured loans issued by companies within our core industry verticals. These investments are typically broadly syndicated first lien loans. SLP I's re-investment period ended on August 31, 2020. As of this date, the fund ceased new investment activity and any principal repayments from investments were used to repay SLP I's revolving credit facility. Due to the expiration of the investment period, a member expressed an interest to withdraw from the fund. Effective December 11, 2020, this member, with the consent of the other members pursuant to the Withdrawal and Distribution Agreement dated as of December 11, 2020, fully withdrew as a member of SLP I through an in-kind distribution. Immediately following the effectiveness of this withdrawal, the remaining members of SLP I entered into the First Amended and Restated Limited Liability Company Agreement (the “Restated SLP I Agreement”), which among other matters, removed us as the managing member of SLP I and made other changes to its governance and management. Under the Restated SLP I Agreement, SLP I is managed and all investment decisions are made by a board of members, which has equal representation from all investors. No revisions were made to the term of SLP I or the reinvestment period end date. As of March 31, 2021, SLP I had total investments with an aggregate fair value of approximately $125.9 million, debt outstanding of $88.6 million and capital that had been called and funded of $43.0 million. As of December 31, 2020, SLP I had total investments with an aggregate fair value of approximately $124.7 million, debt outstanding of $188.9 million and capital that had been called and funded of $43.0 million. Our investment in SLP I is disclosed on our Consolidated Schedule of Investments as of March 31, 2021 and December 31, 2020. Below is a summary of SLP I's portfolio, along with a listing of the individual investments in SLP I's portfolio as of March 31, 2021 and December 31, 2020: March 31, 2021 December 31, 2020 First lien investments (1) $ 127,366 $ 127,660 Weighted average interest rate on first lien investments (2) 4.74 % 4.85 % Number of portfolio companies in SLP I 34 34 Largest portfolio company investment (1) $ 7,778 $ 7,797 Total of five largest portfolio company investments (1) $ 34,847 $ 34,918 (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. 99 Table o f Contents The following table is a listing of the individual investments in SLP I's portfolio as of March 31, 2021: 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 3.87% (L + 3.75%) 2/27/2025 $ 3,669 $ 3,692 $ 3,648 Advisor Group Holdings, Inc. Consumer Services 4.61% (L + 4.50%) 7/31/2026 6,849 6,794 6,852 Affordable Care Holding Corp. Healthcare Services 5.75% (L + 4.75%) 10/24/2022 6,596 6,565 6,497 ASG Technologies Group, Inc. Software 4.50% (L + 3.50%) 7/31/2024 651 649 643 BarBri, Inc. Education 5.00% (L + 4.00%) 12/1/2023 5,980 5,965 5,920 Bearcat Buyer, Inc. Healthcare Services 5.25% (L + 4.25%) 7/9/2026 130 130 130 Bearcat Buyer, Inc. Healthcare Services 5.25% (L + 4.25%) 7/9/2026 629 627 629 Bracket Intermediate Holding Corp. Healthcare Services 4.49% (L + 4.25%) 9/5/2025 4,508 4,493 4,502 Certara Holdco, Inc. Healthcare Information Technology 3.70% (L + 3.50%) 8/15/2024 5,125 5,121 5,125 CHA Holdings, Inc. Business Services 5.50% (L + 4.50%) 4/10/2025 451 451 421 Cvent, Inc. Software 3.90% (L + 3.75%) 11/29/2024 6,727 6,716 6,574 Dealer Tire, LLC Distribution & Logistics 4.36% (L + 4.25%) 12/12/2025 3,424 3,417 3,434 Drilling Info Holdings, Inc. Business Services 4.36% (L + 4.25%) 7/30/2025 6,088 6,070 5,996 Emerald 2 Limited Business Services 3.61% (L + 3.50%) 7/10/2026 447 447 445 eResearchTechnology, Inc. Healthcare Services 5.50% (L + 4.50%) 2/4/2027 1,342 1,331 1,345 Fastlane Parent Company, Inc. Distribution & Logistics 4.61% (L + 4.50%) 2/4/2026 1,359 1,339 1,359 Greenway Health, LLC Software 4.75% (L + 3.75%) 2/16/2024 6,675 6,660 6,383 Heartland Dental, LLC Healthcare Services 3.61% (L + 3.50%) 4/30/2025 3,600 3,589 3,549 Help/Systems Holdings, Inc. Software 5.75% (L + 4.75%) 11/19/2026 137 137 138 LSCS Holdings, Inc. Healthcare Services 4.51% (L + 4.25%) 3/17/2025 1,368 1,364 1,355 LSCS Holdings, Inc. Healthcare Services 4.51% (L + 4.25%) 3/17/2025 5,301 5,285 5,248 Market Track, LLC Business Services 5.25% (L + 4.25%) 6/5/2024 779 781 779 Medical Solutions Holdings, Inc. Healthcare Services 5.50% (L + 4.50%) 6/14/2024 2,243 2,240 2,247 Ministry Brands, LLC Software 5.00% (L + 4.00%) 12/2/2022 4,863 4,856 4,850 National Intergovernmental Purchasing Alliance Company Business Services 3.95% (L + 3.75%) 5/23/2025 1,349 1,350 1,346 Pelican Products, Inc. Business Products 4.50% (L + 3.50%) 5/1/2025 2,248 2,244 2,227 Premise Health Holding Corp. Healthcare Services 3.70% (L + 3.50%) 7/10/2025 627 624 624 Project Accelerate Parent, LLC Business Services 5.25% (L + 4.25%) 1/2/2025 4,164 4,149 4,015 PSC Industrial Holdings Corp. Industrial Services 4.75% (L + 3.75%) 10/11/2024 3,896 3,875 3,815 Salient CRGT Inc. Federal Services 7.50% (L + 6.50%) 2/28/2022 6,731 6,717 6,731 Sierra Enterprises, LLC Food & Beverage 5.00% (L + 4.00%) 11/11/2024 4,249 4,233 4,195 Wirepath LLC Distribution & Logistics 4.20% (L + 4.00%) 8/5/2024 6,762 6,762 6,661 WP CityMD Bidco LLC Healthcare Services 4.50% (L + 3.75%) 8/13/2026 6,133 6,083 6,132 Wrench Group LLC Consumer Services 4.20% (L + 4.00%) 4/30/2026 2,734 2,712 2,734 YI, LLC Healthcare Services 5.00% (L + 4.00%) 11/7/2024 7,778 7,771 7,564 Zelis Cost Management Buyer, Inc. Healthcare Information Technology 3.62% (L + 3.50%) 9/30/2026 1,754 1,739 1,748 Total Funded Investments $ 127,366 $ 126,978 $ 125,861 (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), the Prime Rate (P) and the alternative base rate (Base). For each investment, the current interest rate provided reflects the rate in effect as of March 31, 2021. (2) Represents the fair value in accordance with Accounting Standards Codification Topic 820, Fair Value Measurement and Disclosures ("ASC 820"). Our board of directors does not determine the fair value of the investments held by SLP I. 100 Table o f Contents The following table is a listing of the individual investments in SLP I's portfolio as of December 31, 2020: 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 3.98% (L + 3.75%) 2/27/2025 $ 3,678 $ 3,701 $ 3,649 Advisor Group Holdings, Inc. Consumer Services 5.15% (L + 5.00%) 7/31/2026 6,866 6,809 6,836 Affordable Care Holding Corp. Healthcare Services 5.75% (L + 4.75%) 10/24/2022 6,614 6,578 6,531 ASG Technologies Group, Inc. Software 4.50% (L + 3.50%) 7/31/2024 653 651 636 BarBri, Inc. Education 5.00% (L + 4.00%) 12/1/2023 5,980 5,964 5,980 Bearcat Buyer, Inc. Healthcare Services 5.25% (L + 4.25%) 7/9/2026 131 130 131 Bearcat Buyer, Inc. Healthcare Services 5.25% (L + 4.25%) 7/9/2026 631 628 631 Bracket Intermediate Holding Corp. Healthcare Services 4.48% (L + 4.25%) 9/5/2025 4,520 4,504 4,474 Certara Holdco, Inc. Healthcare Information Technology 3.75% (L + 3.50%) 8/15/2024 5,138 5,134 5,145 CHA Holdings, Inc. Business Services 5.50% (L + 4.50%) 4/10/2025 452 452 423 Cvent, Inc. Software 3.90% (L + 3.75%) 11/29/2024 6,745 6,732 6,479 Dealer Tire, LLC Distribution & Logistics 4.40% (L + 4.25%) 12/12/2025 3,433 3,426 3,419 Drilling Info Holdings, Inc. Business Services 4.40% (L + 4.25%) 7/30/2025 6,103 6,084 5,925 Emerald 2 Limited Business Services 3.50% (L + 3.25%) 7/10/2026 449 448 445 eResearchTechnology, Inc. Healthcare Services 5.50% (L + 4.50%) 2/4/2027 1,345 1,333 1,336 Fastlane Parent Company, Inc. Distribution & Logistics 4.65% (L + 4.50%) 2/4/2026 1,363 1,342 1,355 Greenway Health, LLC Software 4.75% (L + 3.75%) 2/16/2024 6,693 6,677 6,141 Heartland Dental, LLC Healthcare Services 3.65% (L + 3.50%) 4/30/2025 3,609 3,597 3,524 HS Purchaser, LLC / Help/Systems Holdings, Inc. Software 5.75% (L + 4.75%) 11/19/2026 138 137 138 LSCS Holdings, Inc. Healthcare Services 4.51% (L + 4.25%) 3/17/2025 1,372 1,367 1,344 LSCS Holdings, Inc. Healthcare Services 4.51% (L + 4.25%) 3/17/2025 5,314 5,297 5,208 Market Track, LLC Business Services 5.25% (L + 4.25%) 6/5/2024 781 783 767 Medical Solutions Holdings, Inc. Healthcare Services 5.50% (L + 4.50%) 6/14/2024 2,249 2,245 2,237 Ministry Brands, LLC Software 5.00% (L + 4.00%) 12/2/2022 4,876 4,868 4,852 National Intergovernmental Purchasing Alliance Company Business Services 4.00% (L + 3.75%) 5/23/2025 1,352 1,354 1,346 Pelican Products, Inc. Business Products 4.50% (L + 3.50%) 5/1/2025 2,254 2,250 2,217 Premise Health Holding Corp. Healthcare Services 3.75% (L + 3.50%) 7/10/2025 628 626 614 Project Accelerate Parent, LLC Business Services 5.25% (L + 4.25%) 1/2/2025 4,175 4,159 3,799 PSC Industrial Holdings Corp. Industrial Services 4.75% (L + 3.75%) 10/11/2024 3,906 3,883 3,799 Salient CRGT Inc. Federal Services 7.50% (L + 6.50%) 2/28/2022 6,731 6,713 6,731 Sierra Enterprises, LLC Food & Beverage 5.00% (L + 4.00%) 11/11/2024 4,260 4,243 4,192 Wirepath LLC Distribution & Logistics 4.25% (L + 4.00%) 8/5/2024 6,779 6,779 6,542 WP CityMD Bidco LLC Healthcare Services 5.50% (L + 4.50%) 8/13/2026 6,148 6,096 6,162 Wrench Group LLC Consumer Services 4.25% (L + 4.00%) 4/30/2026 2,739 2,716 2,712 YI, LLC Healthcare Services 5.00% (L + 4.00%) 11/7/2024 7,797 7,792 7,174 Zelis Cost Management Buyer, Inc. Healthcare Information Technology 4.90% (L + 4.75%) 9/30/2026 1,758 1,743 1,765 Total Funded Investments $ 127,660 $ 127,241 $ 124,659 (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), the Prime Rate (P) and the alternative base rate (Base). For each investment, the current interest rate provided reflects the rate in effect as of December 31, 2020. (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 I. 101 Table o f Contents Below is certain summarized financial information for SLP I as of March 31, 2021 and December 31, 2020 and for the three months ended March 31, 2021 and March 31, 2020: Selected Balance Sheet Information: March 31, 2021 December 31, 2020 (in thousands) (in thousands) Investments at fair value (cost of $126,978 and $127,241, respectively) $ 125,861 $ 124,659 Receivable from in-kind distributions — 100,404 Receivable from unsettled securities sold — 1,662 Cash and other assets 6,308 6,461 Total assets $ 132,169 $ 233,186 Credit facility $ 88,567 $ 188,867 Deferred financing costs (233) (296) Distribution payable 1,075 2,538 Other liabilities 689 1,364 Total liabilities 90,098 192,473 Members' capital $ 42,071 $ 40,713 Total liabilities and members' capital $ 132,169 $ 233,186 Three Months Ended Selected Statement of Operations Information: March 31, 2021 March 31, 2020 (in thousands) (in thousands) Interest income $ 1,966 $ 5,122 Other income 11 39 Total investment income 1,977 5,161 Interest and other financing expenses 471 1,954 Other expenses 539 398 Total expenses 1,010 2,352 Less: expenses waived and reimbursed — (56) Net expenses 1,010 2,296 Net investment income 967 2,865 Net realized gains on investments 1 45 Net change in unrealized appreciation (depreciation) of investments 1,465 (39,060) Net increase (decrease) in members' capital $ 2,433 $ (36,150) 102 Table o f Contents Pursuant to the Restated SLP I Agreement, the Company is no longer entitled to, and SLP I no longer pays management fees for investment management services provided to SLP I. For the three months ended March 31, 2021 and March 31, 2020, we earned approximately $0.0 million and $0.3 million, respectively, in management fees related to SLP I, which is included in other income. As of March 31, 2021 and December 31, 2020, approximately $0.0 million and $0.1 million, respectively, of management fees related to SLP I was included in receivable from affiliates. For the three months ended March 31, 2021 and March 31, 2020, we earned approximately $0.6 million and $0.7 million, respectively, of dividend income related to SLP I, which is included in dividend income. As of March 31, 2021 and December 31, 2020, approximately $0.6 million and $0.7 million, respectively, of dividend income related to SLP I was included in interest and dividend receivable. We have determined that SLP I is an investment company under ASC 946; however, in accordance with such guidance we will generally not consolidate its investment in a company other than a wholly-owned investment company subsidiary. Furthermore, Accounting Standards Codification Topic 810, Consolidation ("ASC 810"), concludes that in an investment fund where all members have equal decision making authority, it is not appropriate for one member to consolidate since neither has control. Accordingly, we do not consolidate SLP I. NMFC Senior Loan Program II LLC 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 ended on April 12, 2020 and SLP II will continue in existence until April 12, 2022. 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, 2021, 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, 2021 and December 31, 2020. On April 12, 2016, SLP II entered into its revolving credit facility with Wells Fargo Bank, National Association, which matures on April 12, 2022 and bears interest at a rate of the LIBOR plus 1.60% per annum. As of March 31, 2021 and December 31, 2020, SLP II had total investments with an aggregate fair value of approximately $250.9 million and $271.1 million, respectively, and debt outstanding under its credit facility of $160.7 million and $184.0 million, respectively. As of March 31, 2021 and December 31, 2020, none of SLP II's investments were on non-accrual. 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, 2021 and December 31, 2020: (in thousands) March 31, 2021 December 31, 2020 First lien investments (1) $ 255,235 $ 279,678 Weighted average interest rate on first lien investments (2) 4.95 % 5.07 % Number of portfolio companies in SLP II 30 32 Largest portfolio company investment (1) $ 16,501 $ 16,481 Total of five largest portfolio company investments (1) $ 75,392 $ 75,522 (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. 103 Table o f Contents The following table is a listing of the individual investments in SLP II's portfolio as of March 31, 2021: 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 3.87% (L + 3.75%) 2/27/2025 $ 4,601 $ 4,587 $ 4,575 ADG, LLC Healthcare Services 6.25 % (L + 4.75% + 0.50% PIK) 9/28/2023 16,501 16,436 15,939 Advisor Group Holdings, Inc. Consumer Services 4.61% (L + 4.50%) 7/31/2026 4,938 4,898 4,940 Bearcat Buyer, Inc. Healthcare Services 5.25% (L + 4.25%) 7/9/2026 282 281 282 Bearcat Buyer, Inc. Healthcare Services 5.25% (L + 4.25%) 7/9/2026 1,361 1,356 1,361 Bleriot US Bidco Inc. Federal Services 4.20% (L + 4.00%) 10/30/2026 9,900 9,817 9,888 Brave Parent Holdings, Inc. Software 4.11% (L + 4.00%) 4/18/2025 3,643 3,634 3,646 CentralSquare Technologies, LLC Software 3.95% (L + 3.75%) 8/29/2025 14,663 14,638 14,069 CHA Holdings, Inc. Business Services 5.50% (L + 4.50%) 4/10/2025 2,021 2,014 1,890 CHA Holdings, Inc. Business Services 5.50% (L + 4.50%) 4/10/2025 10,561 10,531 9,874 Dealer Tire, LLC Distribution & Logistics 4.36% (L + 4.25%) 12/12/2025 7,406 7,391 7,428 Drilling Info Holdings, Inc. Business Services 4.36% (L + 4.25%) 7/30/2025 14,571 14,528 14,352 Edgewood Partners Holdings LLC (EPIC) Business Services 5.25% (L + 4.25%) 9/6/2024 7,337 7,289 7,264 eResearchTechnology, Inc. Healthcare Services 5.50% (L + 4.50%) 2/4/2027 3,121 3,094 3,128 Fastlane Parent Company, Inc. Distribution & Logistics 4.61% (L + 4.50%) 2/4/2026 3,430 3,380 3,428 Greenway Health, LLC Software 4.75% (L + 3.75%) 2/16/2024 14,438 14,404 13,806 Help/Systems Holdings, Inc. Software 5.75% (L + 4.75%) 11/19/2026 4,400 4,363 4,432 Keystone Acquisition Corp. Healthcare Services 6.25% (L + 5.25%) 5/1/2024 5,211 5,185 5,028 LSCS Holdings, Inc. Healthcare Services 4.51% (L + 4.25%) 3/17/2025 1,860 1,859 1,842 LSCS Holdings, Inc. Healthcare Services 4.51% (L + 4.25%) 3/17/2025 7,206 7,201 7,134 Market Track, LLC Business Services 5.25% (L + 4.25%) 6/5/2024 11,550 11,521 11,550 Medical Solutions Holdings, Inc. Healthcare Services 5.50% (L + 4.50%) 6/14/2024 2,760 2,753 2,765 Ministry Brands, LLC Software 5.00% (L + 4.00%) 12/2/2022 2,068 2,064 2,062 Ministry Brands, LLC Software 5.00% (L + 4.00%) 12/2/2022 869 867 866 Ministry Brands, LLC Software 5.00% (L + 4.00%) 12/2/2022 12,003 11,983 11,969 Premise Health Holding Corp. Healthcare Services 3.70% (L + 3.50%) 7/10/2025 1,355 1,350 1,346 Project Accelerate Parent, LLC Business Services 5.25% (L + 4.25%) 1/2/2025 12,386 12,349 11,942 PSC Industrial Holdings Corp. Industrial Services 4.75% (L + 3.75%) 10/11/2024 3,021 3,004 2,958 Quest Software US Holdings Inc. Software 4.46% (L + 4.25%) 5/16/2025 14,663 14,616 14,678 Salient CRGT Inc. Federal Services 7.50% (L + 6.50%) 2/28/2022 12,478 12,451 12,478 Wirepath LLC Distribution & Logistics 4.20% (L + 4.00%) 8/5/2024 14,625 14,625 14,406 WP CityMD Bidco LLC Healthcare Services 4.50% (L + 3.75%) 8/13/2026 5,404 5,361 5,404 Wrench Group LLC Consumer Services 4.20% (L + 4.00%) 4/30/2026 5,913 5,866 5,913 YI, LLC Healthcare Services 5.00% (L + 4.00%) 11/7/2024 14,611 14,604 14,209 Zelis Cost Management Buyer, Inc. Healthcare Information Technology 3.62% (L + 3.50%) 9/30/2026 4,078 4,044 4,065 Total Funded Investments $ 255,235 $ 254,344 $ 250,917 (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), the Prime Rate (P) and the alternative base rate (Base). For each investment, the current interest rate provided reflects the rate in effect as of March 31, 2021. (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. 104 Table o f Contents The following table is a listing of the individual investments in SLP II's portfolio as of December 31, 2020: 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 3.98% (L + 3.75%) 2/27/2025 $ 4,613 $ 4,598 $ 4,577 ADG, LLC Healthcare Services 6.25 % (L + 4.75% + 0.50% PIK) 9/28/2023 16,481 16,410 15,612 Advisor Group Holdings, Inc. Consumer Services 5.15% (L + 5.00%) 7/31/2026 4,950 4,909 4,928 Bearcat Buyer, Inc. Healthcare Services 5.25% (L + 4.25%) 7/9/2026 283 282 283 Bearcat Buyer, Inc. Healthcare Services 5.25% (L + 4.25%) 7/9/2026 1,365 1,359 1,365 Bleriot US Bidco Inc. Federal Services 5.00% (L + 4.75%) 10/31/2026 1,341 1,329 1,341 Bleriot US Bidco Inc. Federal Services 5.00% (L + 4.75%) 10/30/2026 8,584 8,509 8,584 Brave Parent Holdings, Inc. Software 4.15% (L + 4.00%) 4/18/2025 3,652 3,643 3,630 CentralSquare Technologies, LLC Software 4.00% (L + 3.75%) 8/29/2025 14,700 14,674 13,745 CHA Holdings, Inc. Business Services 5.50% (L + 4.50%) 4/10/2025 2,026 2,019 1,895 CHA Holdings, Inc. Business Services 5.50% (L + 4.50%) 4/10/2025 10,588 10,556 9,900 Dealer Tire, LLC Distribution & Logistics 4.40% (L + 4.25%) 12/12/2025 7,425 7,409 7,394 Drilling Info Holdings, Inc. Business Services 4.40% (L + 4.25%) 7/30/2025 14,608 14,563 14,182 Edgewood Partners Holdings LLC (EPIC) Business Services 5.25% (L + 4.25%) 9/6/2024 7,356 7,304 7,301 eResearchTechnology, Inc. Healthcare Services 5.50% (L + 4.50%) 2/4/2027 3,129 3,101 3,106 Fastlane Parent Company, Inc. Distribution & Logistics 4.65% (L + 4.50%) 2/4/2026 3,439 3,386 3,419 Greenway Health, LLC Software 4.75% (L + 3.75%) 2/16/2024 14,475 14,439 13,281 HS Purchaser, LLC / Help/Systems Holdings, Inc. Software 5.75% (L + 4.75%) 11/19/2026 4,411 4,373 4,411 Institutional Shareholder Services Inc. Business Services 4.75% (L + 4.50%) 3/5/2026 13,755 13,648 13,600 Keystone Acquisition Corp. Healthcare Services 6.25% (L + 5.25%) 5/1/2024 5,225 5,196 4,937 LSCS Holdings, Inc. Healthcare Services 4.51% (L + 4.25%) 3/17/2025 1,865 1,863 1,828 LSCS Holdings, Inc. Healthcare Services 4.51% (L + 4.25%) 3/17/2025 7,225 7,219 7,080 Market Track, LLC Business Services 5.25% (L + 4.25%) 6/5/2024 11,580 11,549 11,376 Medical Solutions Holdings, Inc. Healthcare Services 5.50% (L + 4.50%) 6/14/2024 2,767 2,760 2,753 Ministry Brands, LLC Software 5.00% (L + 4.00%) 12/2/2022 2,073 2,069 2,063 Ministry Brands, LLC Software 5.00% (L + 4.00%) 12/2/2022 871 869 867 Ministry Brands, LLC Software 5.00% (L + 4.00%) 12/2/2022 12,034 12,011 11,975 Peraton Corp. (fka MHVC Acquisition Corp.) Federal Services 6.25% (L + 5.25%) 4/29/2024 10,133 10,105 10,158 Premise Health Holding Corp. Healthcare Services 3.75% (L + 3.50%) 7/10/2025 1,358 1,354 1,328 Project Accelerate Parent, LLC Business Services 5.25% (L + 4.25%) 1/2/2025 12,418 12,379 11,300 PSC Industrial Holdings Corp. Industrial Services 4.75% (L + 3.75%) 10/11/2024 3,028 3,011 2,945 Quest Software US Holdings Inc. Software 4.46% (L + 4.25%) 5/16/2025 14,700 14,650 14,480 Salient CRGT Inc. Federal Services 7.50% (L + 6.50%) 2/28/2022 12,478 12,445 12,478 Wirepath LLC Distribution & Logistics 4.25% (L + 4.00%) 8/5/2024 14,663 14,663 14,149 WP CityMD Bidco LLC Healthcare Services 5.50% (L + 4.50%) 8/13/2026 5,418 5,372 5,431 Wrench Group LLC Consumer Services 4.25% (L + 4.00%) 4/30/2026 5,924 5,875 5,865 YI, LLC Healthcare Services 5.00% (L + 4.00%) 11/7/2024 14,649 14,641 13,477 Zelis Cost Management Buyer, Inc. Healthcare Information Technology 4.90% (L + 4.75%) 9/30/2026 4,088 4,053 4,105 Total Funded Investments $ 279,678 $ 278,595 $ 271,149 (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), the Prime Rate (P) and the alternative base rate (Base). For each investment, the current interest rate provided reflects the rate in effect as of December 31, 2020. (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. 105 Table o f Contents Below is certain summarized financial information for SLP II as of March 31, 2021 and December 31, 2020 and for the three months ended March 31, 2021 and March 31, 2020: Selected Balance Sheet Information: March 31, 2021 December 31, 2020 (in thousands) (in thousands) Investments at fair value (cost of $254,344 and $278,595, respectively) $ 250,917 $ 271,149 Cash and other assets 9,724 8,759 Total assets $ 260,641 $ 279,908 Credit facility $ 160,670 $ 183,970 Deferred financing costs (315) (534) Distribution payable 2,500 2,500 Other liabilities 904 1,058 Total liabilities 163,759 186,994 Members' capital $ 96,882 $ 92,914 Total liabilities and members' capital $ 260,641 $ 279,908 Three Months Ended Selected Statement of Operations Information: March 31, 2021 March 31, 2020 (in thousands) (in thousands) Interest income $ 3,534 $ 5,447 Other income — 53 Total investment income 3,534 5,500 Interest and other financing expenses 980 2,145 Other expenses 107 132 Total expenses 1,087 2,277 Net investment income 2,447 3,223 Net realized gains on investments 2 56 Net change in unrealized appreciation (depreciation) of investments 4,019 (34,801) Net increase (decrease) in members' capital $ 6,468 $ (31,522) For the three months ended March 31, 2021 and March 31, 2020, we earned approximately $2.0 million and $2.6 million, respectively, of dividend income related to SLP II, which is included in dividend income. As of March 31, 2021 and December 31, 2020, approximately $2.0 million and $2.0 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, 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 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 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. 106 Table o f Contents 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, 2021, we and SkyKnight II have committed $140.0 million and $35.0 million, respectively, of equity to SLP III. As of March 31, 2021, we and SkyKnight II have contributed $130.0 million and $32.5 million, respectively, of equity to SLP III. Our investment in SLP III is disclosed on our Consolidated Schedule of Investments as of March 31, 2021 and December 31, 2020. On May 2, 2018, SLP III entered into its 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. Effective February 13, 2020, SLP III's revolving credit facility has a maximum borrowing capacity of $525.0 million. As of March 31, 2021 and December 31, 2020, SLP III had total investments with an aggregate fair value of approximately $666.6 million and $610.0 million, respectively, and debt outstanding under its credit facility of $474.2 million and $424.2 million, respectively. As of March 31, 2021 and December 31, 2020, none of SLP III's investments were on non-accrual. Additionally, as of March 31, 2021 and December 31, 2020, SLP III had unfunded commitments in the form of delayed draws of $15.1 million and $7.8 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, 2021 and December 31, 2020: (in thousands) March 31, 2021 December 31, 2020 First lien investments (1) $ 686,095 $ 626,985 Weighted average interest rate on first lien investments (2) 4.57 % 4.72 % Number of portfolio companies in SLP III 71 69 Largest portfolio company investment (1) $ 23,668 $ 23,735 Total of five largest portfolio company investments (1) $ 98,902 $ 99,159 (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. 107 Table o f Contents The following table is a listing of the individual investments in SLP III's portfolio as of March 31, 2021: 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 3.87% (L + 3.75%) 2/27/2025 $ 865 $ 865 $ 860 Advisor Group Holdings, Inc. Consumer Services 4.61% (L + 4.50%) 7/31/2026 9,875 9,835 9,880 Affordable Care Holding Corp. Healthcare Services 5.75% (L + 4.75%) 10/24/2022 5,885 5,841 5,797 AG Parent Holdings, LLC Healthcare Services 5.11% (L + 5.00%) 7/31/2026 12,344 12,294 12,297 Ascensus Specialties LLC Specialty Chemicals & Materials 4.87% (L + 4.75%) 9/24/2026 9,875 9,835 9,986 Aston FinCo S.a.r.l. / Aston US Finco, LLC Software 4.36% (L + 4.25%) 10/9/2026 5,940 5,891 5,918 Astra Acquisition Corp. Software 5.50% (L + 4.75%) 3/1/2027 16,490 16,415 16,614 BCPE Empire Holdings, Inc. Distribution & Logistics 4.11% (L + 4.00%) 6/11/2026 10,842 10,756 10,801 Bearcat Buyer, Inc. Healthcare Services 5.25% (L + 4.25%) 7/9/2026 19,604 19,527 19,604 Bearcat Buyer, Inc. Healthcare Services 5.25% (L + 4.25%) 7/9/2026 4,064 4,046 4,064 Bleriot US Bidco Inc. Federal Services 4.20% (L + 4.00%) 10/31/2026 4,950 4,907 4,944 Bluefin Holding, LLC Software 4.11% (L + 4.00%) 9/4/2026 9,875 9,755 9,875 Bracket Intermediate Holding Corp. Healthcare Services 4.49% (L + 4.25%) 9/5/2025 14,625 14,575 14,607 Brave Parent Holdings, Inc. Software 4.11% (L + 4.00%) 4/18/2025 11,188 11,163 11,197 Cano Health, LLC Healthcare Services 5.50% (L + 4.75%) 11/23/2027 6,291 6,231 6,298 Cardinal Parent, Inc. Software 5.25% (L + 4.50%) 11/12/2027 7,037 6,935 7,077 CentralSquare Technologies, LLC Software 3.95% (L + 3.75%) 8/29/2025 14,662 14,638 14,069 Certara Holdco, Inc. Healthcare Information Technology 3.70% (L + 3.50%) 8/15/2024 1,242 1,245 1,242 CHA Holdings, Inc. Business Services 5.50% (L + 4.50%) 4/10/2025 975 975 912 CommerceHub, Inc. Software 4.75% (L + 4.00%) 12/29/2027 5,819 5,790 5,833 Confluent Health, LLC Healthcare Services 5.11% (L + 5.00%) 6/24/2026 4,387 4,345 4,387 Covenant Surgical Partners, Inc. Healthcare Services 4.11% (L + 4.00%) 7/1/2026 9,851 9,774 9,642 CRCI Longhorn Holdings, Inc. Business Services 3.61% (L + 3.50%) 8/8/2025 14,625 14,577 14,399 Dealer Tire, LLC Distribution & Logistics 4.36% (L + 4.25%) 12/12/2025 9,875 9,855 9,904 Dentalcorp Health Services ULC (fka Dentalcorp Perfect Smile ULC) Healthcare Services 4.75% (L + 3.75%) 6/6/2025 16,842 16,797 16,737 DG Investment Intermediate Holdings 2, Inc. Business Services 4.50% (L + 3.75%) 3/31/2028 6,201 6,170 6,174 DG Investment Intermediate Holdings 2, Inc. Business Services 4.50% (L + 3.75%) 3/31/2028 500 500 498 Dispatch Acquisition Holdings, LLC Industrial Services 5.00% (L + 4.25%) 3/25/2028 4,179 4,137 4,171 Drilling Info Holdings, Inc. Business Services 4.36% (L + 4.25%) 7/30/2025 18,529 18,467 18,251 Edgewood Partners Holdings LLC Business Services 5.25% (L + 4.25%) 9/6/2024 7,337 7,289 7,264 eResearchTechnology, Inc. Healthcare Services 5.50% (L + 4.50%) 2/4/2027 7,393 7,359 7,408 EyeCare Partners, LLC Healthcare Services 3.86% (L + 3.75%) 2/18/2027 14,872 14,855 14,737 Frontline Technologies Intermediate Holdings, LLC Software 6.75% (L + 5.75%) 9/18/2023 6,497 6,497 6,497 Greenway Health, LLC Software 4.75% (L + 3.75%) 2/16/2024 14,482 14,488 13,849 Heartland Dental, LLC Healthcare Services 3.61% (L + 3.50%) 4/30/2025 18,493 18,434 18,228 Help/Systems Holdings, Inc. Software 5.75% (L + 4.75%) 11/19/2026 18,394 18,231 18,526 Higginbotham Insurance Agency, Inc. Financial Services 6.50% (L + 5.75%) 11/25/2026 7,187 7,136 7,331 Idera, Inc. Software 4.50% (L + 3.75%) 3/2/2028 16,085 16,070 16,004 Kestra Advisor Services Holdings A, Inc. Business Services 4.36% (L + 4.25%) 6/3/2026 12,150 12,083 12,120 LI Group Holdings, Inc. Software 4.50% (L + 3.75%) 3/11/2028 4,655 4,643 4,672 LSCS Holdings, Inc. Healthcare Services 4.51% (L + 4.25%) 3/17/2025 2,621 2,606 2,594 LSCS Holdings, Inc. Healthcare Services 4.51% (L + 4.25%) 3/17/2025 676 673 670 Maravai Intermediate Holdings, LLC Specialty Chemicals & Materials 5.25% (L + 4.25%) 10/19/2027 4,114 4,075 4,132 Market Track, LLC Business Services 5.25% (L + 4.25%) 6/5/2024 6,129 6,062 6,129 MED ParentCo, LP Healthcare Services 4.36% (L + 4.25%) 8/31/2026 10,246 10,169 10,172 MED ParentCo, LP Healthcare Services 4.36% (L + 4.25%) 8/31/2026 2,570 2,548 2,551 Ministry Brands, LLC Software 5.00% (L + 4.00%) 12/2/2022 4,490 4,481 4,478 Ministry Brands, LLC Software 5.00% (L + 4.00%) 12/2/2022 869 867 866 National Intergovernmental Purchasing Alliance Company Business Services 3.95% (L + 3.75%) 5/23/2025 8,679 8,676 8,657 Navex Topco, Inc. Software 3.36% (L + 3.25%) 9/5/2025 18,162 18,038 18,048 108 Table o f Contents Portfolio Company and Type of Investment Industry Interest Rate (1) Maturity Date Principal Amount or Par Value Cost Fair Value (2) Newport Group Holdings II, Inc. Business Services 3.70% (L + 3.50%) 9/12/2025 $ 4,875 $ 4,859 $ 4,851 Orion Advisor Solutions, Inc. Business Services 4.50% (L + 3.75%) 9/24/2027 5,237 5,188 5,234 Outcomes Group Holdings, Inc. Healthcare Services 3.45% (L + 3.25%) 10/24/2025 3,392 3,386 3,358 Pelican Products, Inc. Business Products 4.50% (L + 3.50%) 5/1/2025 4,863 4,855 4,817 Peraton Corp. Federal Services 4.50% (L + 3.75%) 2/1/2028 4,529 4,507 4,531 PetVet Care Centers, LLC (fka Pearl Intermediate Parent LLC) Consumer Services 4.25% (L + 3.50%) 2/14/2025 4,506 4,506 4,502 Planview Parent, Inc. Software 4.75% (L + 4.00%) 12/17/2027 7,979 7,901 7,994 Premise Health Holding Corp. Healthcare Services 3.70% (L + 3.50%) 7/10/2025 13,550 13,505 13,465 Project Accelerate Parent, LLC Business Services 5.25% (L + 4.25%) 1/2/2025 9,798 9,763 9,447 Project Boost Purchaser, LLC Business Services 5.00% (L + 4.25%) 6/1/2026 1,990 1,971 1,991 Project Ruby Ultimate Parent Corp. (Mediware) Healthcare I.T. 4.00% (L + 3.25%) 3/10/2028 14,000 13,930 13,959 Quest Software US Holdings Inc. Software 4.46% (L + 4.25%) 5/16/2025 14,662 14,616 14,678 RealPage, Inc. Business Services 3.75% (L + 3.25%) 4/24/2028 14,000 13,965 13,950 Sierra Enterprises, LLC Food & Beverage 5.00% (L + 4.00%) 11/11/2024 2,425 2,423 2,395 Sovos Brands Intermediate, Inc. Food & Beverage 4.98% (L + 4.75%) 11/20/2025 3,582 3,573 3,600 Spring Education Group, Inc. (fka SSH Group Holdings, Inc.) Education 4.45% (L + 4.25%) 7/30/2025 12,152 12,131 11,632 Storable, Inc Software 3.75% (L + 3.25%) 2/26/2028 3,862 3,852 3,833 Symplr Software, Inc.(fka Caliper Software, Inc.) Healthcare I.T. 5.25% (L + 4.50%) 12/22/2027 16,000 15,854 16,072 Syndigo LLC Software 5.25% (L + 4.50%) 12/15/2027 15,000 14,891 14,888 TIBCO Software Inc. Software 3.86% (L + 3.75%) 6/30/2026 7,635 7,618 7,568 Unified Women’s Healthcare, LP Healthcare Services 5.00% (L + 4.25%) 12/20/2027 9,975 9,900 10,008 Waystar Technologies, Inc. Healthcare Services 4.11% (L + 4.00%) 10/22/2026 4,097 4,088 4,107 Wirepath LLC Distribution & Logistics 4.20% (L + 4.00%) 8/5/2024 17,083 17,083 16,827 WP CityMD Bidco LLC Healthcare Services 4.50% (L + 3.75%) 8/13/2026 19,818 19,658 19,817 VT Topco, Inc. Business Services 3.61% (L + 3.50%) 8/1/2025 2,788 2,788 2,754 YI, LLC Healthcare Services 5.00% (L + 4.00%) 11/7/2024 9,666 9,660 9,400 Total Funded Investments $ 671,002 $ 667,892 $ 666,649 Unfunded Investments - First lien Cano Health, LLC Healthcare Services — 11/23/2021 $ 2,300 $ (23) $ 2 Covenant Surgical Partners, Inc. Healthcare Services — 7/1/2021 2,000 (20) (43) DG Investment Intermediate Holdings 2, Inc. Business Services — 3/31/2023 799 — (3) Higginbotham Insurance Agency, Inc. Financial Services — 11/25/2022 2,023 (15) 40 Peraton Corp. Federal Services — 2/1/2028 7,971 (40) 3 Total Unfunded Investments $ 15,093 $ (98) $ (1) Total Investments $ 686,095 $ 667,794 $ 666,648 (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), the Prime Rate (P) and the alternative base rate (Base). For each investment, the current interest rate provided reflects the rate in effect as of March 31, 2021. (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. 109 Table o f Contents The following table is a listing of the individual investments in SLP III's portfolio as of December 31, 2020: 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 3.98% (L + 3.75%) 2/27/2025 $ 868 $ 868 $ 861 Advisor Group Holdings, Inc. Consumer Services 5.15% (L + 5.00%) 7/31/2026 4,950 4,909 4,928 Affordable Care Holding Corp. Healthcare Services 5.75% (L + 4.75%) 10/24/2022 5,901 5,850 5,827 AG Parent Holdings, LLC Healthcare Services 5.15% (L + 5.00%) 7/31/2026 12,375 12,323 12,251 Ascensus Specialties LLC Specialty Chemicals & Materials 4.90% (L + 4.75%) 9/24/2026 9,900 9,858 9,931 Aston FinCo S.a.r.l. / Aston US Finco, LLC Software 4.40% (L + 4.25%) 10/9/2026 5,955 5,904 5,900 Astra Acquisition Corp. Software 6.50% (L + 5.50%) 3/1/2027 11,490 11,412 11,605 BCPE Empire Holdings, Inc. Distribution & Logistics 4.15% (L + 4.00%) 6/11/2026 10,869 10,780 10,801 Bearcat Buyer, Inc. Healthcare Services 5.25% (L + 4.25%) 7/9/2026 19,654 19,573 19,654 Bearcat Buyer, Inc. Healthcare Services 5.25% (L + 4.25%) 7/9/2026 4,081 4,062 4,081 Bleriot US Bidco Inc. Federal Services 5.00% (L + 4.75%) 10/31/2026 4,292 4,254 4,292 Bleriot US Bidco Inc. Federal Services 5.00% (L + 4.75%) 10/31/2026 671 665 671 Bluefin Holding, LLC Software 4.15% (L + 4.00%) 9/4/2026 9,900 9,775 9,900 Bracket Intermediate Holding Corp. Healthcare Services 4.48% (L + 4.25%) 9/5/2025 14,663 14,610 14,516 Brave Parent Holdings, Inc. Software 4.15% (L + 4.00%) 4/18/2025 11,217 11,190 11,147 Cano Health, LLC Healthcare Services 5.50% (L + 4.75%) 11/23/2027 6,308 6,244 6,244 Cardinal Parent, Inc. Software 5.25% (L + 4.50%) 11/12/2027 7,038 6,932 6,967 CentralSquare Technologies, LLC Software 4.00% (L + 3.75%) 8/29/2025 14,700 14,674 13,745 Certara Holdco, Inc. Healthcare I.T. 3.75% (L + 3.50%) 8/15/2024 1,246 1,248 1,247 CHA Holdings, Inc. Business Services 5.50% (L + 4.50%) 4/10/2025 977 977 914 CommerceHub, Inc. Software 4.75% (L + 4.00%) 12/29/2027 5,833 5,804 5,833 Confluent Health, LLC Healthcare Services 5.15% (L + 5.00%) 6/24/2026 4,398 4,354 4,348 Covenant Surgical Partners, Inc. Healthcare Services 4.15% (L + 4.00%) 7/1/2026 9,876 9,795 9,678 CRCI Longhorn Holdings, Inc. Business Services 3.65% (L + 3.50%) 8/8/2025 14,663 14,611 14,498 Dealer Tire, LLC Distribution & Logistics 4.40% (L + 4.25%) 12/12/2025 9,900 9,879 9,859 Dentalcorp Health Services ULC (fka Dentalcorp Perfect Smile ULC) Healthcare Services 4.75% (L + 3.75%) 6/6/2025 14,636 14,611 14,421 Drilling Info Holdings, Inc. Business Services 4.40% (L + 4.25%) 7/30/2025 18,576 18,511 18,035 Edgewood Partners Holdings LLC Business Services 5.25% (L + 4.25%) 9/6/2024 7,356 7,304 7,301 eResearchTechnology, Inc. Healthcare Services 5.50% (L + 4.50%) 2/4/2027 3,911 3,876 3,883 EyeCare Partners, LLC Healthcare Services 3.90% (L + 3.75%) 2/18/2027 12,071 12,057 11,796 EyeCare Partners, LLC Healthcare Services 3.90% (L + 3.75%) 2/18/2027 2,838 2,834 2,773 Fastlane Parent Company, Inc. Distribution & Logistics 4.65% (L + 4.50%) 2/4/2026 3,439 3,386 3,419 Frontline Technologies Intermediate Holdings, LLC Software 6.75% (L + 5.75%) 9/18/2023 6,513 6,513 6,513 Greenway Health, LLC Software 4.75% (L + 3.75%) 2/16/2024 14,520 14,527 13,322 Heartland Dental, LLC Healthcare Services 3.65% (L + 3.50%) 4/30/2025 18,540 18,478 18,104 HS Purchaser, LLC / Help/Systems Holdings, Inc. Software 5.75% (L + 4.75%) 11/19/2026 18,440 18,270 18,440 Higginbotham Insurance Agency, Inc. Financial Services 6.50% (L + 5.75%) 11/25/2026 7,187 7,134 7,331 Idera, Inc. Software 5.00% (L + 4.00%) 6/28/2024 9,435 9,406 9,435 Institutional Shareholder Services Inc. Business Services 4.75% (L + 4.50%) 3/5/2026 983 975 971 Kestra Advisor Services Holdings A, Inc. Business Services 4.40% (L + 4.25%) 6/3/2026 9,381 9,318 9,241 LSCS Holdings, Inc. Healthcare Services 4.51% (L + 4.25%) 3/17/2025 2,627 2,612 2,575 LSCS Holdings, Inc. Healthcare Services 4.51% (L + 4.25%) 3/17/2025 678 674 665 Maravai Intermediate Holdings, LLC Specialty Chemicals & Materials 5.25% (L + 4.25%) 10/19/2027 4,125 4,085 4,148 Market Track, LLC Business Services 5.25% (L + 4.25%) 6/5/2024 4,729 4,725 4,645 Mavis Tire Express Services Corp. Retail 5.00% (L + 4.00%) 3/20/2025 4,828 4,733 4,846 MED ParentCo, LP Healthcare Services 4.40% (L + 4.25%) 8/31/2026 10,272 10,191 10,148 MED ParentCo, LP Healthcare Services 4.40% (L + 4.25%) 8/31/2026 2,576 2,554 2,545 Ministry Brands, LLC Software 5.00% (L + 4.00%) 12/2/2022 4,502 4,492 4,480 Ministry Brands, LLC Software 5.00% (L + 4.00%) 12/2/2022 871 869 867 National Intergovernmental Purchasing Alliance Company Business Services 4.00% (L + 3.75%) 5/23/2025 8,701 8,698 8,658 110 Table o f Contents Portfolio Company and Type of Investment Industry Interest Rate (1) Maturity Date Principal Amount or Par Value Cost Fair Value (2) National Mentor Holdings, Inc. (aka Civitas Solutions, Inc.) Healthcare Services 4.43% (L + 4.25%) 3/9/2026 $ 8,887 $ 8,887 $ 8,897 National Mentor Holdings, Inc. (aka Civitas Solutions, Inc.) Healthcare Services 4.51% (L + 4.25%) 3/9/2026 398 398 398 Navex Topco, Inc. Software 3.40% (L + 3.25%) 9/5/2025 18,208 18,079 17,929 Navicure, Inc. Healthcare Services 4.75% (L + 4.00%) 10/22/2026 4,107 4,097 4,110 Newport Group Holdings II, Inc. Business Services 3.75% (L + 3.50%) 9/12/2025 4,888 4,870 4,851 Orion Advisor Solutions, Inc. Business Services 5.00% (L + 4.00%) 9/24/2027 5,237 5,186 5,260 Outcomes Group Holdings, Inc. Healthcare Services 3.50% (L + 3.25%) 10/24/2025 3,400 3,394 3,349 Pelican Products, Inc. Business Products 4.50% (L + 3.50%) 5/1/2025 4,875 4,867 4,796 Peraton Corp. (fka MHVC Acquisition Corp.) Federal Services 6.25% (L + 5.25%) 4/29/2024 15,272 15,225 15,310 Planview Parent, Inc. Software 4.75% (L + 4.00%) 12/17/2027 6,484 6,419 6,496 Premise Health Holding Corp. Healthcare Services 3.75% (L + 3.50%) 7/10/2025 13,583 13,538 13,279 Project Accelerate Parent, LLC Business Services 5.25% (L + 4.25%) 1/2/2025 9,822 9,786 8,939 Project Boost Purchaser, LLC Business Services 5.00% (L + 4.25%) 6/1/2026 1,995 1,975 2,002 Quest Software US Holdings Inc. Software 4.46% (L + 4.25%) 5/16/2025 14,700 14,650 14,480 Ryan Specialty Group, LLC Business Services 4.00% (L + 3.25%) 9/1/2027 3,491 3,441 3,491 Sierra Enterprises, LLC Food & Beverage 5.00% (L + 4.00%) 11/11/2024 2,431 2,429 2,393 Sovos Brands Intermediate, Inc. Food & Beverage 4.96% (L + 4.75%) 11/20/2025 3,591 3,582 3,609 Spring Education Group, Inc. (fka SSH Group Holdings, Inc.) Education 4.50% (L + 4.25%) 7/30/2025 12,183 12,161 11,665 Symplr Software, Inc.(fka Caliper Software, Inc.) Healthcare I.T. 5.25% (L + 4.50%) 12/22/2027 10,000 9,850 9,913 Syndigo LLC Software 5.25% (L + 4.50%) 12/15/2027 15,000 14,888 14,888 TIBCO Software Inc. Software 3.90% (L + 3.75%) 6/30/2026 7,654 7,637 7,572 Unified Women’s Healthcare, LP Healthcare Services 5.00% (L + 4.25%) 12/20/2027 10,000 9,923 9,975 Wirepath LLC Distribution & Logistics 4.25% (L + 4.00%) 8/5/2024 17,127 17,127 16,527 WP CityMD Bidco LLC Healthcare Services 5.50% (L + 4.50%) 8/13/2026 19,868 19,701 19,914 VT Topco, Inc. Business Services 3.65% (L + 3.50%) 8/1/2025 2,795 2,795 2,763 YI, LLC Healthcare Services 5.00% (L + 4.00%) 11/7/2024 9,691 9,685 8,915 Total Funded Investments $ 619,147 $ 615,974 $ 609,981 Unfunded Investments - First lien Cano Health, LLC Healthcare Services — 11/23/2021 $ 2,300 $ (23) $ (23) Covenant Surgical Partners, Inc. Healthcare Services — 7/1/2021 2,000 (20) (40) Higginbotham Insurance Agency, Inc. Financial Services — 11/25/2022 2,023 (15) 40 Planview Parent, Inc. Software — 3/31/2021 1,515 — 3 Total Unfunded Investments $ 7,838 $ (58) $ (20) Total Investments $ 626,985 $ 615,916 $ 609,961 (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), the Prime Rate (P) and the alternative base rate (Base). For each investment, the current interest rate provided reflects the rate in effect as of December 31, 2020. (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. 111 Table o f Contents Below is certain summarized financial information for SLP III as of March 31, 2021 and December 31, 2020 and for the three months ended March 31, 2021 and March 31, 2020: Selected Balance Sheet Information: March 31, 2021 December 31, 2020 (in thousands) (in thousands) Investments at fair value (cost of $667,794 and $615,916) $ 666,648 $ 609,961 Cash and other assets 20,507 10,176 Receivable from unsettled securities sold 4,828 — Total assets $ 691,983 $ 620,137 Credit facility $ 474,200 $ 424,200 Deferred financing costs (2,210) (2,471) Payable for unsettled securities purchased 50,333 47,192 Distribution payable 5,658 3,800 Other liabilities 2,505 2,501 Total liabilities 530,486 475,222 Members' capital $ 161,497 $ 144,915 Total liabilities and members' capital $ 691,983 $ 620,137 Three Months Ended Selected Statement of Operations Information: March 31, 2021 March 31, 2020 (in thousands) (in thousands) Interest income $ 7,371 $ 7,407 Other income 103 181 Total investment income 7,474 7,588 Interest and other financing expenses 2,584 3,696 Other expenses 171 157 Total expenses 2,755 3,853 Net investment income 4,719 3,735 Net realized gains (losses) on investments 212 (2) Net change in unrealized appreciation (depreciation) of investments 4,809 (63,348) Net increase (decrease) in members' capital $ 9,740 $ (59,615) For the three months ended March 31, 2021 and March 31, 2020, we earned approximately $4.5 million and $2.9 million of dividend income related to SLP III, which is included in dividend income. As of March 31, 2021 and December 31, 2020, approximately $4.5 million and $3.0 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, 2021. On March 30, 2020, an affiliate of the Investment Adviser purchased directly from NMNLC 105,030 shares of NMNLC’s common stock at a price of $107.73 per share, which represented the net asset value per share of NMNLC at the 112 Table o f Contents date of purchase, for an aggregate purchase price of approximately $11.3 million. Immediately thereafter, NMNLC redeemed 105,030 shares of its common stock held by NMFC in exchange for a promissory note with a principal amount of $11.3 million and a 7.0% interest rate, which was repaid by NMNLC to NMFC on March 31, 2020. Below is certain summarized property information for NMNLC as of March 31, 2021: Lease Total Fair Value as of Portfolio Company Tenant Expiration Date Location Square Feet March 31, 2021 (in thousands) (in thousands) NM NL Holdings LP / NM GP Holdco LLC Various Various Various Various $ 102,635 NM GLCR LP Arctic Glacier U.S.A. 2/28/2038 CA 214 29,463 NM CLFX LP Victor Equipment Company 8/31/2033 TX 423 14,896 NM APP Canada, Corp. A.P. Plasman, Inc. 9/30/2031 Canada 436 12,488 NM APP US LLC Plasman Corp, LLC / A-Brite LP 9/30/2033 AL / OH 261 7,525 NM DRVT LLC FMH Conveyors, LLC 10/31/2031 AR 195 7,194 NM YI, LLC Young Innovations, Inc. 10/31/2039 IL / MO 212 6,866 NM JRA LLC J.R. Automation Technologies, LLC 1/31/2031 MI 88 3,861 NM KRLN LLC None N/A MD 95 717 $ 185,645 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 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, 2021 and December 31, 2020, 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 $21.4 million and $21.4 million, respectively. The collateralized agreement to resell is on non-accrual. The collateralized agreement to resell is guaranteed by a private hedge fund, PPVA Fund, L.P. 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, PPVA Black Elk (Equity) LLC, 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 “Trustee”) for Black Elk informed us that the 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 Trustee alleged 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. 113 Table o f Contents On December 22, 2017, we settled the 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. During the year ended December 31, 2018, we received a $1.5 million payment from our insurance carrier in respect to the settlement. As of March 31, 2021 and December 31, 2020, the SPP Agreement has a cost basis of $14.5 million and $14.5 million, respectively, and a fair value of $10.4 million and $10.4 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 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, 2021 and March 31, 2020, we recognized PIK and non-cash interest from investments of approximately $5.8 million and $3.5 million, respectively, and PIK and non-cash dividends from investments of approximately $5.2 million and $1.6 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: • Investment Rating 1—Investment is performing materially above expectations; • Investment Rating 2—Investment is performing materially in-line with expectations. All new loans are rated 2 at initial purchase; • Investment Rating 3—Investment is performing materially below expectations, where the risk of loss has materially increased since the original investment; and • Investment Rating 4—Investment is performing substantially below expectations and risks have increased substantially since the original investment. Payments may be delinquent. There is meaningful possibility that we will not recoup our original cost basis in the investment and may realize a substantial loss upon exit. 114 Table o f Contents The following table shows the distribution of our investments and securities purchased under collateralized agreements to resell on the 1 to 4 investment rating scale at fair value as of March 31, 2021: (in millions) As of March 31, 2021 Investment Rating Cost Percent Fair Value Percent Investment Rating 1 $ 466.1 15.2 % $ 494.4 16.3 % Investment Rating 2 2,342.9 76.6 % 2,397.1 78.8 % Investment Rating 3 151.4 5.0 % 112.0 3.7 % Investment Rating 4 98.9 3.2 % 36.5 1.2 % $ 3,059.3 100.0 % $ 3,040.0 100.0 % As of March 31, 2021, all investments in our portfolio had an Investment Rating of 1 or 2 with the exception of six portfolio companies that had an Investment Rating of 3 and four portfolio companies that had an Investment Rating of 4. During the first quarter of 2020, we placed our investment in our junior preferred shares of UniTek Global Services, Inc. ("UniTek") on non-accrual status and the investment had a rating of 4. As of March 31, 2021, our junior preferred shares of UniTek had an aggregate cost basis of $34.4 million, an aggregate fair value of $0.0 million and total unearned dividend income of $1.4 million for the three months then ended. During the fourth quarter of 2020, we placed an aggregate principal amount of $9.7 million of our investment in our senior preferred shares of UniTek on non-accrual status and the investment had a rating of 4. As of March 31, 2021, our senior preferred shares of UniTek on non-accrual had an aggregate cost basis of $9.7 million, an aggregate fair value of approximately $4.0 million and total unearned dividend income of approximately $0.5 million for the three months then ended. 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, 2021, our investment in EDMC, with an Investment Rating of 4 had an aggregate cost basis of $1.4 million, an aggregate fair value of $0.0 million and total unearned interest income of $0.0 million for the three months then ended. Since March 31, 2020, our investment in NM KRLN LLC had an investment rating of 4 and had an aggregate cost basis of $8.9 million and an aggregate fair value of $0.7 million. Since December 31, 2019, our subordinated position in PPVA Black Elk (Equity) LLC had an investment rating of 4. As of March 31, 2021, our investment in this security had an aggregate cost basis of $14.5 million and an aggregate fair value of approximately $10.4 million. During the year ended December 31, 2019, our security purchased under collateralized agreements to resell was placed on non-accrual and the investment had an Investment Rating of 4. As of March 31, 2021, our investment in this security had an aggregate cost basis of $30.0 million and an aggregate fair value of approximately $21.4 million. In response to the continuing impact of the outbreak of the COVID-19 pandemic and its impact on the overall market environment and the health of our portfolio companies, we performed a company-by-company evaluation of the anticipated impact of the COVID-19 pandemic. The evaluation process consisted of dialogue with sponsors and portfolio companies to understand the COVID-19 pandemic's impact on each portfolio company, the portfolio company’s response to any disruption, the level of sponsor support, and the current and projected financial and liquidity position of the portfolio company. Based on this evaluation, we assigned each portfolio company a “Risk Rating” of red, orange, yellow and green, with red reflecting a portfolio company with the potential for the most severe impact, due to the COVID-19 pandemic, and green reflecting the least. We will continue to monitor our portfolio companies and provide support to their management teams where possible. The following table shows the Risk Rating of our portfolio companies as of March 31, 2021: (in millions) As of March 31, 2021 Risk Rating Cost Percent Fair Value Percent Red $ 87.1 2.8 % $ 67.2 2.2 % Orange 163.0 5.3 % 154.1 5.1 % Yellow 249.9 8.2 % 190.9 6.3 % Green 2,559.3 83.7 % 2,627.8 86.4 % $ 3,059.3 100.0 % $ 3,040.0 100.0 % 115 Table o f Contents Portfolio and Investment Activity The fair value of our investments was approximately $3,018.6 million in 102 portfolio companies at March 31, 2021 and approximately $2,953.5 million in 104 portfolio companies at December 31, 2020. The following table shows our portfolio and investment activity for the three months ended March 31, 2021 and March 31, 2020: Three Months Ended (in millions) March 31, 2021 March 31, 2020 New investments in 13 and 17 portfolio companies, respectively $ 223.4 $ 181.7 Debt repayments in existing portfolio companies 190.7 151.5 Sales of securities in 2 and 3 portfolio companies, respectively 7.0 38.6 Change in unrealized appreciation on 47 and 6 portfolio companies, respectively 45.6 1.0 Change in unrealized depreciation on 55 and 112 portfolio companies, respectively (12.1) (205.7) Recent Accounting Standards Updates See Item 1.—Financial Statements—Note 13. Recent Accounting Standards for details on recent accounting standards updates. Results of Operations for the Three Months Ended March 31, 2021 and March 31, 2020 Revenue Three Months Ended (in thousands) March 31, 2021 March 31, 2020 Total interest income $ 47,009 $ 61,636 Total dividend income 15,662 10,493 Other income 5,037 1,955 Total investment income $ 67,708 $ 74,084 Our total investment income decreased by approximately $6.4 million, or (9)%, for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020. For the three months ended March 31, 2021, total investment income of approximately $67.7 million consisted of approximately $38.8 million in cash interest from investments, approximately $5.8 million in PIK and non-cash interest from investments, approximately $0.4 million in prepayment fees, net amortization of purchase premiums and discounts of approximately $2.0 million, approximately $10.5 million in cash dividends from investments, approximately $5.2 million in PIK and non-cash dividends from investments and approximately $5.0 million in other income. The decrease in interest income of approximately $14.6 million during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020 was primarily due to lower LIBOR rates on smaller invested balances. Our smaller invested balances were driven by the repayments of our revolving credit facilities due to asset sales and repayments greater than asset originations during 2020. The increase in dividend income for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020 was primarily due to the reversal of approximately $3.4 million of previously recorded PIK dividends related to our preferred shares in Permian Holdco 1, Inc., which was deemed to no longer be collectible for the three months ended March 31, 2020. Other income during the three months ended March 31, 2021, which represents fees that are generally non-recurring in nature, was primarily attributable to upfront, consent and amendment fees received from 19 different portfolio companies. 116 Table o f Contents Operating Expenses Three Months Ended (in thousands) March 31, 2021 March 31, 2020 Management fee $ 13,420 $ 13,858 Less: management fee waiver (3,637) (3,543) Total management fee 9,783 10,315 Incentive fee 7,248 7,826 Interest and other financing expenses 19,385 22,194 Administrative expenses 1,129 1,040 Professional fees 726 905 Other general and administrative expenses 442 499 Total expenses 38,713 42,779 Income tax expense 1 — Net expenses after income taxes $ 38,714 $ 42,779 Our total net operating expenses decreased by approximately $4.1 million for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020. Our management fee decreased by approximately $0.5 million, net of a management fee waiver, and our incentive fee decreased by approximately $0.6 million for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020. The decrease in management and incentive fees was attributable to smaller invested balances, driven by the repayments of our revolving credit facilities due to asset sales and repayments greater than asset originations during 2020. Interest and other financing expenses decreased by approximately $2.8 million during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020, primarily due to lower LIBOR rates on our floating rate borrowings and lower drawn balances on our revolving credit facilities. Our total professional fees, administrative expenses and total other general and administrative expenses for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020 remained relatively flat. Net Realized Gains (Losses) and Net Change in Unrealized Appreciation (Depreciation) Three Months Ended (in thousands) March 31, 2021 March 31, 2020 Net realized (losses) gains on investments $ (10,496) $ 114 Net change in unrealized appreciation (depreciation) of investments 33,472 (204,739) (Provision) benefit for taxes (115) 898 Net realized and unrealized gains (losses) $ 22,861 $ (203,727) Our net realized losses and unrealized gains resulted in a net gain of approximately $22.9 million for the three months ended March 31, 2021 compared to net realized gains and unrealized losses resulting in a net loss of approximately $203.7 million for the same period in 2020. 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 gain for the three months ended March 31, 2021 was primarily driven by the overall increase in market prices of our investments during the period. The provision for income taxes was attributable to equity investments that are held as of March 31, 2021 in four of our corporate subsidiaries. The net loss for the three months ended March 31, 2020 was primarily driven by the overall decrease in market prices of our investments during the period due to the impact of the COVID-19 pandemic. See Monitoring of Portfolio Investments above for more details regarding the continuing impact of the COVID-19 pandemic on the health of our portfolio companies. 117 Table o f Contents 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. Since our IPO, and through March 31, 2021, we raised approximately $893.2 million in net proceeds from additional offerings of common stock. Our liquidity is generated and generally available through advances from the revolving credit facilities, from cash flows from operations, and, we expect, through periodic follow-on equity offerings. In addition, we may from time to time enter into additional debt facilities, increase the size of existing facilities or issue additional debt securities, including unsecured debt and/or debt securities convertible into common stock. Any such incurrence or issuance would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors. On June 8, 2018 our shareholders approved the application of the modified asset coverage 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 as of June 9, 2018. 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 a result of our exemptive relief received on November 5, 2014, we are permitted to exclude our SBA-guaranteed debentures from the 150.0% asset coverage ratio that the we are required to maintain under the 1940 Act. The agreements governing the NMFC Credit Facility, the 2018 Convertible Notes and the Unsecured Notes (as defined below) contain certain covenants and terms, including a requirement that we not exceed a debt-to-equity ratio of 1.65 to 1.00 at the time of incurring additional indebtedness and a requirement that we not exceed a secured debt ratio of 0.70 to 1.00 at any time. As of March 31, 2021, our asset coverage ratio was 184.6%. At March 31, 2021 and December 31, 2020, we had cash and cash equivalents of approximately $47.3 million and $79.0 million, respectively. Our cash provided by (used in) operating activities during the three months ended March 31, 2021 and March 31, 2020 was approximately $44.3 million and $(13.5) million, respectively. We expect that all current liquidity needs will be met with cash flows from operations and other activities. Borrowings Holdings Credit Facility —On October 24, 2017, we entered into the Third Amended and Restated Loan and Security Agreement among us, as the Collateral Manager, NMF Holdings, as the Borrower, Wells Fargo Securities, LLC, as the Administrative Agent and Wells Fargo Bank, National Association, as the Lender and Collateral Custodian (as amended from time to time, the "Holdings Credit Facility"). As of the most recent amendment on September 30, 2020, the maturity date of the Holdings Credit Facility is September 30, 2023, and the maximum facility amount is the lesser of $800.0 million and the actual commitments of the lenders to make advances as of such date. As of March 31, 2021, the maximum amount of revolving borrowings available under the Holdings Credit Facility is $745.0 million. Under the Holdings Credit Facility, NMF Holdings is permitted to borrow up to 25.0%, 45.0%, 67.5% or 70.0% of the purchase price of pledged assets, subject to approval by Wells Fargo Bank, National Association. The Holdings Credit Facility is non-recourse to us and is collateralized by all of the investments of NMF Holdings on an investment by investment basis. All fees associated with the origination or upsizing of the Holdings Credit Facility are capitalized on our Consolidated Statement of Assets and Liabilities and charged against income as other financing expenses over the life of the Holdings Credit Facility. The Holdings Credit Facility contains certain customary affirmative and negative covenants and events of default. In addition, the Holdings Credit Facility requires us to maintain a minimum asset coverage ratio of 150.0%. The covenants are generally not tied to mark to market fluctuations in the prices of NMF Holdings investments, but rather to the performance of the underlying portfolio companies. As of the most recent amendment on September 30, 2020, the Holdings Credit Facility bears interest at a rate of LIBOR plus 2.00% per annum for Broadly Syndicated Loans (as defined in the Third Amended and Restated Loan and Security Agreement) and LIBOR plus 2.50% per annum for all other investments. Previously the Holdings Credit Facility bore interest at a rate of LIBOR plus 1.75% per annum for Broadly Syndicated Loans (as defined in the Second Amended and Restated Loan and Security Agreement) and LIBOR plus 2.25% per annum for all other investments. The Holdings Credit Facility also charges a non-usage fee, based on the unused facility amount multiplied by the Non-Usage Fee Rate (as defined in the Third Amended and Restated Loan and Security Agreement). 118 Table o f Contents The following table summarizes the interest expense, non-usage fees and amortization of financing costs incurred on the Holdings Credit Facility for the three months ended March 31, 2021 and March 31, 2020: Three Months Ended (in millions) March 31, 2021 March 31, 2020 Interest expense $ 2.7 $ 5.4 Non-usage fee $ 0.4 $ 0.2 Amortization of financing costs $ 0.5 $ 0.3 Weighted average interest rate 2.4 % 3.5 % Effective interest rate 3.2 % 3.8 % Average debt outstanding $ 450.2 $ 629.5 As of March 31, 2021 and December 31, 2020, the outstanding balance on the Holdings Credit Facility was $450.2 million and $450.2 million, respectively, and NMF Holdings was in compliance with the applicable covenants in the Holdings Credit Facility on such dates. NMFC Credit Facility —The Senior Secured Revolving Credit Agreement, (as amended from time to time, and together with the related guarantee and security agreement, the "NMFC Credit Facility"), dated June 4, 2014, among us, as the Borrower, Goldman Sachs Bank USA, as the Administrative Agent and Collateral Agent, and Goldman Sachs Bank USA, Morgan Stanley Bank, N.A., Stifel Bank & Trust and MUFG Union Bank, N.A., as Lenders, is structured as a senior secured revolving credit facility. The NMFC Credit Facility is guaranteed by certain of our domestic subsidiaries and proceeds from the NMFC Credit Facility may be used for general corporate purposes, including the funding of portfolio investments. The maturity date of the NMFC Credit Facility is June 4, 2022. As of March 31, 2021, the maximum amount of revolving borrowings available under the NMFC Credit Facility was $188.5 million. We are permitted to borrow at various advance rates depending on the type of portfolio investment as outlined in the related Senior Secured Revolving Credit Agreement. All fees associated with the origination of the NMFC Credit Facility are capitalized on our Consolidated Statement of Assets and Liabilities and charged against income as other financing expenses over the life of the NMFC Credit Facility. The NMFC Credit Facility contains certain customary affirmative and negative covenants and events of default, including certain financial covenants related to the asset coverage and liquidity and other maintenance covenants. The NMFC Credit Facility generally bears interest at a rate of LIBOR plus 2.50% per annum or the prime rate plus 1.50% per annum, and charges a commitment fee, based on the unused facility amount multiplied by 0.375% per annum (as defined in the Senior Secured Revolving Credit Agreement). The following table summarizes the interest expense, non-usage fees and amortization of financing costs incurred on the NMFC Credit Facility for the three months ended March 31, 2021 and March 31, 2020: Three Months Ended (in millions) March 31, 2021 March 31, 2020 Interest expense $ 0.7 $ 1.9 Non-usage fee $ 0.1 $ — Amortization of financing costs $ — (1) $ — (1) Weighted average interest rate 2.7 % 4.1 % Effective interest rate 3.1 % 4.2 % Average debt outstanding $ 104.5 $ 188.5 (1) For the three months ended March 31, 2021 and March 31, 2020, the total amortization of financing costs were less than $50.0 thousand. As of March 31, 2021 and December 31, 2020, the outstanding balance on the NMFC Credit Facility was $107.0 million and $165.5 million, respectively, and NMFC was in compliance with the applicable covenants in the NMFC Credit Facility on such dates. DB Credit Facility —The Loan Financing and Servicing Agreement (the "DB Credit Facility") dated December 14, 2018 and as amended from time to time, among NMFDB as the borrower, Deutsche Bank AG, New York Branch ("Deutsche Bank") as the facility agent, Lender and other agent from time to time party thereto and U.S. Bank National Association, as collateral agent and collateral custodian, is structured as a secured revolving credit facility and matures on March 25, 2026. 119 Table o f Contents As of March 31, 2021, the maximum amount of revolving borrowings available under the DB Credit Facility was $280.0 million. We are permitted to borrow at various advance rates depending on the type of portfolio investment, as outlined in the Loan Financing and Servicing Agreement. The DB Credit Facility is non-recourse to us and is collateralized by all of the investments of NMFDB on an investment by investment basis. All fees associated with the origination of the DB Credit Facility are capitalized on our Consolidated Statement of Assets and Liabilities and charged against income as other financing expenses over the life of the DB Credit Facility. The DB Credit Facility contains certain customary affirmative and negative covenants and events of default. The covenants are generally not tied to mark to market fluctuations in the prices of NMFDB investments, but rather to the performance of the underlying portfolio companies. The advances under the DB Credit Facility accrue interest at a per annum rate equal to the Applicable Margin plus the lender's Cost of Funds Rate. Prior to March 25, 2021, the Applicable Margin was equal to 2.60% during the Revolving Period and then increases by 0.02% during an Event of Default. Effective March 25, 2021, the Applicable Margin is equal to 2.35% during the Revolving Period and then increases by 0.20% during an Event of Default. The "Cost of Funds Rate" for a conduit lender is the lower of its commercial paper rate and the Base Rate plus 0.50%, and for any other lender is the Base Rate. The "Base Rate" is the three-months LIBOR Rate but may become an alternative base rate based on Deutsche Bank's base lending rate if certain LIBOR disruption events occur. We are also charged a non-usage fee, based on the unused facility amount multiplied by the Undrawn Fee Rate (as defined in the Loan Financing and Servicing Agreement) and a facility agent fee of 0.25% per annum on the total facility amount. The following table summarizes the interest expense, non-usage fees and amortization of financing costs incurred on the DB Credit Facility for the three months ended March 31, 2021 and March 31, 2020: Three Months Ended (in millions) March 31, 2021 March 31, 2020 Interest expense(1) $ 1.7 $ 2.6 Non-usage fee(1) $ 0.1 $ 0.1 Amortization of financing costs $ 0.2 $ 0.2 Weighted average interest rate 3.1 % 4.5 % Effective interest rate 3.5 % 4.9 % Average debt outstanding $ 218.6 $ 235.1 (1) Interest expense includes the portion of the facility agent fee applicable to the drawn portion of the DB Credit Facility and non-usage fee includes the portion of the facility agent fee applicable to the undrawn portion of the DB Credit Facility. As of March 31, 2021 and December 31, 2020, the outstanding balance on the DB Credit Facility was $201.0 million and $244.0 million, respectively, and NMFDB was in compliance with the applicable covenants in the DB Credit Facility on such date. Unsecured Management Company Revolver —The Uncommitted Revolving Loan Agreement, (the "Unsecured Management Company Revolver"), dated March 30, 2020, by and between us, as the Borrower, and NMF Investments III, L.L.C., as Lender, an affiliate of the Investment Adviser, is structured as a discretionary unsecured revolving credit facility. The proceeds from the Unsecured Management Company Revolver may be used for general corporate purposes, including the funding of portfolio investments. The maturity date of the Unsecured Management Company Revolver is December 31, 2022. The Unsecured Management Company Revolver generally bears interest at a rate of 7.00% per annum (as defined in the Uncommitted Revolving Loan Agreement). On May 4, 2020, we entered into an Amended and Restated Uncommitted Revolving Loan Agreement with NMF Investments III, L.L.C., which increased the maximum amounts of revolving borrowings available thereunder from $30.0 million to $50.0 million. As of March 31, 2021, the maximum amount of revolving borrowings available under the Unsecured Management Company Revolver was $50.0 million and no borrowings were outstanding. For the three months ended March 31, 2021 and March 31, 2020, amortization of financing costs were each less than $50.0 thousand, respectively. NMNLC Credit Facilities —The Revolving Credit Agreement (together with the related guarantee and security agreement, the “NMNLC Credit Facility”), dated September 21, 2018, by and between NMNLC, as the Borrower, and KeyBank National Association, as the Administrative Agent and Lender, was structured as a senior secured revolving credit facility and matured on September 23, 2020. The NMNLC Credit Facility was guaranteed by us and proceeds from the NMNLC Credit Facility were able to be used for funding of additional acquisition properties. 120 Table o f Contents The NMNLC Credit Facility bore interest at a rate of LIBOR plus 2.50% per annum or the prime rate plus 1.50% per annum, and charged a commitment fee, based on the unused facility amount multiplied by 0.15% per annum (as defined in the Revolving Credit Agreement). For the three months ended March 31, 2020, interest expense, non-usage fees and amortization of financing costs were each less than $50.0 thousand. The Credit Agreement (together with the related guarantee and security agreement, "the NMNLC Credit Facility II"), dated February 26, 2021, by and between NMNLC, as the Borrower, and City National Bank, as the Lender, is structured as a senior secured revolving credit facility and matures on February 25, 2022. The NMNLC Credit Facility II is guaranteed by us and proceeds from the NMNLC Credit Facility II are able to be used for funding of additional acquisition properties. As of March 31, 2021, the maximum amount of revolving borrowings available under the NMNLC Credit Facility II is $10.0 million. The NMNLC Credit Facility II bears interest at a rate of LIBOR plus 2.75% per annum, and charges a commitment fee, based on the unused facility amount multiplied by 0.05% per annum (as defined in the Credit Agreement). For the three months ended March 31, 2021, interest expense, non-usage fees and amortization of financing costs were each less than $50.0 thousand. As of March 31, 2021, the outstanding balance on the NMNLC Credit Facility II was $0 million and NMNLC was in compliance with the applicable covenants in the NMNLC Credit Facility II on such date. Convertible Notes —On August 20, 2018, we closed a registered public offering of $100.0 million aggregate principal amount of unsecured convertible notes (the “2018 Convertible Notes” and together with the 2014 Convertible Notes, the "Convertible Notes"), pursuant to an indenture, dated August 20, 2018, as supplemented by a first supplemental indenture thereto, dated August 20, 2018 (together the “2018A Indenture”). On August 30, 2018, in connection with the registered public offering, we issued an additional $15.0 million aggregate principal amount of the 2018 Convertible Notes pursuant to the exercise of an overallotment option by the underwriter of the 2018 Convertible Notes. On June 7, 2019, we closed a registered public offering of an additional $86.3 million aggregate principal amount of the 2018 Convertible Notes. These additional 2018 Convertible Notes constitute a further issuance of, rank equally in right of payment with, and form a single series with the $115.0 million aggregate principal amount of 2018 Convertible Notes that we issued in August 2018. The 2018 Convertible Notes bear interest at an annual rate of 5.75%, payable semi-annually in arrears on February 15 and August 15 of each year. The 2018 Convertible Notes will mature on August 15, 2023 unless earlier converted, repurchased or redeemed pursuant to the terms of the 2018A Indenture. We may not redeem the 2018 Convertible Notes prior to May 15, 2023. On or after May 15, 2023, we may redeem the 2018 Convertible Notes for cash, in whole or from time to time in part, at our option at a redemption price, subject to an exception for redemption dates occurring after a record date but on or prior to the interest payment date, equal to the sum of (i) 100% of the principal amount of the 2018 Convertible Notes to be redeemed, (ii) accrued and unpaid interest thereon to, but excluding, the redemption date and (iii) a make-whole premium. No sinking fund is provided for the 2018 Convertible Notes. Holders of 2018 Convertible Notes may, at their option, convert their 2018 Convertible Notes into shares of our common stock at any time on or prior to the close of business on the business day immediately preceding the maturity date of the 2018 Convertible Notes. In addition, if certain corporate events occur, holders of the 2018 Convertible Notes may require us to repurchase for cash all or part of their 2018 Convertible Notes at a repurchase price equal to 100.0% of the principal amount of the 2018 Convertible Notes to be repurchased, plus accrued and unpaid interest through, but excluding, the repurchase date. The 2018A Indenture contains certain covenants, including covenants requiring us to provide certain financial information to the holders of the 2018 Convertible Notes and the trustee if we cease to be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The 2018A Indenture also includes additional financial covenants related to our asset coverage ratio. These covenants are subject to limitations and exceptions that are described in the 2018A Indenture. 121 Table o f Contents The following table summarizes certain key terms related to the convertible features of our 2018 Convertible Notes as of March 31, 2021: 2018 Convertible Notes Initial conversion premium 10.0 % Initial conversion rate(1) 65.8762 Initial conversion price $ 15.18 Conversion premium at March 31, 2021 10.0 % Conversion rate at March 31, 2021(1)(2) 65.8762 Conversion price at March 31, 2021(2)(3) $ 15.18 Last conversion price calculation date August 20, 2020 (1) Conversion rates denominated in shares of common stock per $1.0 thousand principal amount of the 2018 Convertible Notes converted. (2) Represents conversion rate and conversion price, as applicable, taking into account certain de minimis adjustments that will be made on the conversion date. (3) The conversion price in effect at March 31, 2021 was calculated on the last anniversary of the issuance and will be calculated again on the next anniversary, unless the exercise price shall have changed by more than 1.0% before the anniversary. The conversion rate will be subject to adjustment upon certain events, such as stock splits and combinations, mergers, spin-offs, increases in dividends in excess of $0.34 per share per quarter and certain changes in control. Certain of these adjustments, including adjustments for increases in dividends, are subject to a conversion price floor of $13.80 per share. In no event will the total number of shares of common stock issuable upon conversion exceed 72.4637 per $1 principal amount. We have determined that the embedded conversion option in the 2018 Convertible Notes is not required to be separately accounted for as a derivative under GAAP. The 2018 Convertible Notes are unsecured obligations and rank senior in right of payment to our existing and future indebtedness, if any, that is expressly subordinated in right of payment to the 2018 Convertible Notes; equal in right of payment to our existing and future unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of our secured indebtedness (including existing unsecured indebtedness that we later secure) to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness (including trade payables) incurred by our subsidiaries and financing vehicles. As reflected in Item 1. - Financial Statements - Note 11 . Earnings Per Share , the issuance is considered part of the if-converted method for calculation of diluted earnings per share. The following table summarizes the interest expense, amortization of financing costs and amortization of premium incurred on the 2018 Convertible Notes for the three months ended March 31, 2021 and March 31, 2020: Three Months Ended (in millions) March 31, 2021 March 31, 2020 Interest expense $ 2.9 $ 2.9 Amortization of financing costs $ 0.1 $ 0.1 Amortization of premium $ — (1) $ — (1) Weighted average interest rate 5.8 % 5.8 % Effective interest rate 5.9 % 5.9 % Average debt outstanding $ 201.3 $ 201.3 (1) For the three months ended March 31, 2021 and March 31, 2020, the amortization of premium was less than $50.0 thousand. As of March 31, 2021 and December 31, 2020, the outstanding balance on the 2018 Convertible Notes was $201.2 million and $201.2 million, respectively, and NMFC was in compliance with the terms of the 2018A Indenture on such date. 122 Table o f Contents Unsecured Notes On May 6, 2016, we issued $50.0 million in aggregate principal amount of our 2016 Unsecured Notes (the “2016 Unsecured Notes”), pursuant to a note purchase agreement, dated May 4, 2016, to an institutional investor in a private placement. On September 30, 2016, we entered into an amended and restated note purchase agreement (the "NPA") and issued an additional $40.0 million in aggregate principal amount of 2016 Unsecured Notes to institutional investors in a private placement. On February 16, 2021, we repaid all $90.0 million in aggregate principal amount of the issued and outstanding 2016 Unsecured Notes. On June 30, 2017, we issued $55.0 million in aggregate principal amount of five-year unsecured notes that mature on July 15, 2022 (the "2017A Unsecured Notes"), pursuant to the NPA and a supplement to the NPA. On January 30, 2018, we issued $90.0 million in aggregate principal amount of five year unsecured notes that mature on January 30, 2023 (the "2018A Unsecured Notes") pursuant to the NPA and a second supplement to the NPA. On July 5, 2018, we issued $50.0 million in aggregate principal amount of five year unsecured notes that mature on June 28, 2023 (the "2018B Unsecured Notes") pursuant to the NPA and a third supplement to the NPA (the "Third Supplement"). On April 30, 2019, we issued $116.5 million in aggregate principal amount of five year unsecured notes that mature on April 30, 2024 (the "2019A Unsecured Notes") pursuant to the NPA and a fourth supplement to the NPA. On January 29, 2021, we issued $200.0 million in aggregate principal amount of five year unsecured notes that mature on January 29, 2026 (the "2021A Unsecured Notes") pursuant to the NPA and a fifth supplement to the NPA. The NPA provides for future issuances of unsecured notes in separate series or tranches. On February 5, 2021, we caused notices to be issued to holders of our 2016 Unsecured Notes regarding the exercise of our option to prepay all of our $90.0 million in aggregate principal amount of issued and outstanding 2016 Unsecured Notes, which was prepaid on February 16, 2021. The 2016 Unsecured Notes bore interest at an annual rate of 5.313%, payable semi-annually on May 15 and November 15 of each year. The 2017A Unsecured Notes bear interest at an annual rate of 4.760%, payable semi-annually on January 15 and July 15 of each year. The 2018A Unsecured Notes bear interest at an annual rate of 4.870%, payable semi-annually on February 15 and August 15 of each year. The 2018B Unsecured Notes bear interest at an annual rate of 5.360%, payable semi-annually on January 15 and July 15 of each year. The 2019A Unsecured Notes bear interest at an annual rate of 5.494%, payable semi-annually on April 15 and October 15 of each year. The 2021A Unsecured Notes bear interest at an annual rate of 3.875%, payable semi-annually in arrears on January 29 and July 29 of each year, commencing on July 29, 2021. These interest rates are subject to increase in the event that: (i) subject to certain exceptions, the underlying unsecured notes or we cease to have an investment grade rating or (ii) the aggregate amount of our unsecured debt falls below $150.0 million. In each such event, we have the option to offer to prepay the underlying unsecured notes at par, in which case holders of the underlying unsecured notes who accept the offer would not receive the increased interest rate. In addition, we are obligated to offer to prepay the underlying unsecured notes at par if the Investment Adviser, or an affiliate thereof, ceases to be our investment adviser or if certain change in control events occur with respect to the Investment Adviser. The NPA contains customary terms and conditions for unsecured notes issued, including, without limitation, an option to offer to prepay all or a portion of the unsecured notes under its governance at par (plus a make-whole amount if applicable), affirmative and negative covenants such as information reporting, maintenance of our status as a BDC under the 1940 Act and a RIC under the Code, minimum stockholders’ equity, minimum asset coverage ratio, and prohibitions on certain fundamental changes at NMFC or any subsidiary guarantor, as well as customary events of default with customary cure and notice, including, without limitation, nonpayment, misrepresentation in a material respect, breach of covenant, cross-default under other indebtedness of NMFC or certain significant subsidiaries, certain judgments and orders, and certain events of bankruptcy. The Third Supplement includes additional financial covenants related to asset coverage as well as other terms. On September 25, 2018, we closed a registered public offering of $50.0 million in aggregate principal amount of our 5.75% Unsecured Notes that mature on October 1, 2023 (the "5.75% Unsecured Notes", together with the 2016 Unsecured Notes, 2017A Unsecured Notes, 2018A Unsecured Notes, 2018B Unsecured Notes, 2019A Unsecured Notes and the 2021A Unsecured Notes, the "Unsecured Notes"), pursuant to an indenture, dated August 20, 2018, as supplemented by a second supplemental indenture thereto, dated September 25, 2018 (together, the "2018B Indenture"). On October 17, 2018, in connection with the registered public offering, we issued an additional $1.8 million aggregate principal amount of the 5.75% Unsecured Notes pursuant to the exercise of an overallotment option by the underwriters of the 5.75% Unsecured Notes. On March 8, 2021, we redeemed $51.8 million in aggregate principal amount of the 5.75% Unsecured Notes at a redemption price of 100% plus accrued and unpaid interest. The 5.75% Unsecured Notes bore interest at an annual rate of 5.75%, payable quarterly on January 1, April 1, July 1 and October 1 of each year. The 5.75% Unsecured Notes were listed on the New York Stock Exchange and traded under the trading symbol “NMFX” until September 13, 2020. On September 14, 2020, the 5.75% Unsecured Notes began trading on the NASDAQ Global Select Market (the "NASDAQ") under the ticker symbol "NMFCL", until redeemed on March 8, 2021. 123 Table o f Contents The Unsecured Notes are unsecured obligations and rank senior in right of payment to our existing and future indebtedness, if any, that is expressly subordinated in right of payment to the Unsecured Notes; equal in right of payment to our existing and future unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of our secured indebtedness (including existing unsecured indebtedness that we later secure) to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness (including trade payables) incurred by our subsidiaries and financing vehicles. The following table summarizes the interest expense and amortization of financing costs incurred on the Unsecured Notes for the three months ended March 31, 2021 and March 31, 2020: Three Months Ended (in millions) March 31, 2021 March 31, 2020 Interest expense $ 6.5 $ 6.0 Amortization of financing costs $ 1.3 $ 0.3 Weighted average interest rate 4.9 % 5.3 % Effective interest rate 5.9 % 5.6 % Average debt outstanding $ 532.2 $ 453.3 As of March 31, 2021 and December 31, 2020, the outstanding balance on the Unsecured Notes was $511.5 million and $453.3 million, respectively, and we were in compliance with the terms of the NPA and the 2018B Indenture as of such dates, as applicable. SBA-guaranteed debentures —On August 1, 2014 and August 25, 2017, respectively, SBIC I and SBIC II received SBIC licenses from the SBA to operate as SBICs. The SBIC license allows SBICs to obtain leverage by issuing SBA-guaranteed debentures, subject to the issuance of a capital commitment by the SBA and other customary procedures. SBA-guaranteed debentures are non-recourse to us, interest only debentures with interest payable semi-annually and have a ten year maturity. The principal amount of SBA-guaranteed debentures is not required to be paid prior to maturity but may be prepaid at any time without penalty. The interest rate of SBA-guaranteed debentures is fixed on a semi-annual basis at a market-driven spread over U.S. Treasury Notes with ten year maturities. The SBA, as a creditor, will have a superior claim to the assets of SBIC I and SBIC II over our stockholders in the event SBIC I and SBIC II are liquidated or the SBA exercises remedies upon an event of default. The maximum amount of borrowings available under current SBA regulations for a single licensee is $150.0 million as long as the licensee has at least $75.0 million in regulatory capital, receives a capital commitment from the SBA and has been through an examination by the SBA subsequent to licensing. In June 2018, legislation amended the 1958 Act by increasing the individual leverage limit from $150.0 million to $175.0 million, subject to SBA approvals. As of March 31, 2021 and December 31, 2020, SBIC I had regulatory capital of $75.0 million and $75.0 million, respectively, and SBA-guaranteed debentures outstanding of $150.0 million and $150.0 million, respectively. As of March 31, 2021 and December 31, 2020, SBIC II had regulatory capital of $75.0 million and $75.0 million, respectively, and $150.0 million and $150.0 million, respectively, of SBA-guaranteed debentures outstanding. The SBA-guaranteed debentures incur upfront fees of 3.435%, which consists of a 1.00% commitment fee and a 2.435% issuance discount, which are amortized over the life of the SBA-guaranteed debentures. 124 Table o f Contents The following table summarizes our SBA-guaranteed debentures as of March 31, 2021: (in millions) Issuance Date Maturity Date Debenture Amount Interest Rate SBA Annual Charge Fixed SBA-guaranteed debentures(1): March 25, 2015 March 1, 2025 $ 37.5 2.517 % 0.355 % September 23, 2015 September 1, 2025 37.5 2.829 % 0.355 % September 23, 2015 September 1, 2025 28.8 2.829 % 0.742 % March 23, 2016 March 1, 2026 13.9 2.507 % 0.742 % September 21, 2016 September 1, 2026 4.0 2.051 % 0.742 % September 20, 2017 September 1, 2027 13.0 2.518 % 0.742 % March 21, 2018 March 1, 2028 15.3 3.187 % 0.742 % Fixed SBA-guaranteed debentures(2): September 19, 2018 September 1, 2028 15.0 3.548 % 0.222 % September 25, 2019 September 1, 2029 19.0 2.283 % 0.222 % March 25, 2020 March 1, 2030 41.0 2.078 % 0.222 % March 25, 2020 March 1, 2030 24.0 2.078 % 0.275 % September 23, 2020 September 1, 2030 51.0 1.034 % 0.275 % Total SBA-guaranteed debentures $ 300.0 (1) SBA-guaranteed debentures are held in SBIC I. (2) SBA-guaranteed debentures are held in SBIC II. Prior to pooling, the SBA-guaranteed debentures bear interest at an interim floating rate of LIBOR plus 0.30%. Once pooled, which occurs in March and September each year, the SBA-guaranteed debentures bear interest at a fixed rate that is set to the current 10-year treasury rate plus a spread at each pooling date. The following table summarizes the interest expense and amortization of financing costs incurred on the SBA-guaranteed debentures for the three months ended March 31, 2021 and March 31, 2020: Three Months Ended (in millions) March 31, 2021 March 31, 2020 Interest expense $ 2.0 $ 1.8 Amortization of financing costs $ 0.2 $ 0.2 Weighted average interest rate 2.7 % 3.0 % Effective interest rate 3.0 % 3.4 % Average debt outstanding $ 300.0 $ 243.1 The SBIC program is designed to stimulate the flow of private investor capital into eligible smaller businesses, as defined by the SBA. Under SBA regulations, SBICs are subject to regulatory requirements, including making investments in SBA-eligible businesses, investing at least 25.0% of its investment capital in eligible smaller businesses, as defined under the 1958 Act, placing certain limitations on the financing terms of investments, regulating the types of financing, prohibiting investments in small businesses with certain characteristics or in certain industries and requiring capitalization thresholds that limit distributions to us. SBICs are subject to an annual periodic examination by an SBA examiner to determine the SBIC's compliance with the relevant SBA regulations and an annual financial audit of its financial statements that are prepared on a basis of accounting other than GAAP (such as ASC 820) by an independent auditor. As of March 31, 2021 and December 31, 2020, SBIC I and SBIC II were in compliance with SBA regulatory requirements. 125 Table o f Contents 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. As of March 31, 2021 and December 31, 2020, we had outstanding commitments to third parties to fund investments totaling $100.3 million and $73.1 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 March 31, 2021 and December 31, 2020, we had commitment letters to purchase investments in an aggregate par amount of $0 and $44.9 million, respectively. As of March 31, 2021 and December 31, 2020, we had not entered into any bridge financing commitments which could require funding in the future. As of March 31, 2021, we had unfunded commitments related to an equity investment in SLP III of $10.0 million, which may be funded at our discretion. Contractual Obligations A summary of our significant contractual payment obligations as of March 31, 2021 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 Holdings Credit Facility(1) $ 450.2 $ — $ 450.2 $ — $ — Unsecured Notes(2) 511.5 — 195.0 316.5 — SBA-guaranteed debentures(3) 300.0 — — 117.7 182.3 DB Credit Facility(4) 201.0 — — 201.0 — Convertible Notes(5) 201.2 — 201.2 — — NMFC Credit Facility(6) 107.0 — 107.0 — — Total Contractual Obligations $ 1,770.9 $ — $ 953.4 $ 635.2 $ 182.3 (1) Under the terms of the $745.0 million Holdings Credit Facility, all outstanding borrowings under that facility ($450.2 million as of March 31, 2021) must be repaid on or before September 30, 2023. As of March 31, 2021, there was approximately $294.8 million of possible capacity remaining under the Holdings Credit Facility. (2) $55.0 million of the 2017A Unsecured Notes will mature on July 15, 2022 unless earlier repurchased, $90.0 million of the 2018A Unsecured Notes will mature on January 30, 2023 unless earlier repurchased, $50.0 million of the 2018B Unsecured Notes will mature on June 28, 2023 unless earlier repurchased, $116.5 million of the 2019A Unsecured Notes will mature on April 30, 2024 unless earlier repurchased and $200.0 million of the 2021A Unsecured Notes will mature on January 29, 2026 unless earlier repurchased. (3) Our SBA-guaranteed debentures will begin to mature on March 1, 2025. (4) Under the terms of the $280.0 million DB Credit Facility, all outstanding borrowings under that facility ($201.0 million as of March 31, 2021) must be repaid on or before March 25, 2026. As of March 31, 2021, there was approximately $79.0 million of possible capacity remaining under the DB Credit Facility. (5) The 2018 Convertible Notes will mature on August 15, 2023 unless earlier converted or repurchased at the holder's option or redeemed by us. (6) Under the terms of the $188.5 million NMFC Credit Facility, all outstanding borrowings under that facility ($107.0 million as of March 31, 2021) must be repaid on or before June 4, 2022. As of March 31, 2021, there was approximately $81.5 million of available capacity remaining under the NMFC Credit Facility. We have entered into an investment management and advisory agreement (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 for these services (1) a management fee and (2) an incentive fee based on our performance. We have also entered into the administration agreement, as amended and restated (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 126 Table o f Contents 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. 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 Distributions declared and paid to stockholders for the three months ended March 31, 2021 totaled approximately $29.0 million. The following table reflects 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: Fiscal Year Ended Date Declared Record Date Payment Date Per Share Amount (1) December 31, 2021 First Quarter February 17, 2021 March 17, 2021 March 31, 2021 $ 0.30 $ 0.30 December 31, 2020 Fourth Quarter October 28, 2020 December 16, 2020 December 30, 2020 $ 0.30 Third Quarter July 29, 2020 September 16, 2020 September 30, 2020 0.30 Second Quarter April 29, 2020 June 16, 2020 June 30, 2020 0.30 First Quarter February 19, 2020 March 13, 2020 March 27, 2020 0.34 $ 1.24 December 31, 2019 Fourth Quarter November 4, 2019 December 13, 2019 December 27, 2019 $ 0.34 Third Quarter August 1, 2019 September 13, 2019 September 27, 2019 0.34 Second Quarter May 1, 2019 June 14, 2019 June 28, 2019 0.34 First Quarter February 22, 2019 March 15, 2019 March 29, 2019 0.34 $ 1.36 (1) 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, 2020 and December 31, 2019, total distributions were $120.1 million and $117.4 million, respectively, of which the distributions were comprised of approximately 84.58% and 72.01%, respectively, of ordinary income, 0.00% and 0.00%, respectively, of long-term capital gains and approximately 15.42% and 27.99%, respectively, of a return of capital. Future quarterly distributions, if any, will be determined by our board of directors. We intend to pay quarterly distributions to our stockholders in amounts sufficient to maintain our status as a RIC. We intend to distribute approximately all of our 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. We maintain an "opt out" dividend reinvestment plan on behalf of our common stockholders, pursuant to which each of our stockholders' cash distributions will be automatically reinvested in additional shares of common stock, unless the stockholder elects to receive cash. See Item 1— Financial Statements—Note 2. Summary of Significant Accounting Policies for additional details regarding our dividend reinvestment plan. 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, less expenses incurred by the Investment Adviser in performing its services under the Investment Management Agreement. 127 Table o f Contents • 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 reimburse the Administrator for the allocable portion of overhead and other expenses incurred by it in performing its obligations to us under the Administration Agreement, which includes the fees and expenses associated with performing administrative, finance, and compliance functions, and the compensation of our chief financial officer and chief compliance officer and their respective staffs. Pursuant to the Administration Agreement and further restricted by us, 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. For the three months ended March 31, 2021 approximately $0.8 million of indirect administrative expenses were included in administrative expenses, of which approximately $0.0 million were waived by the Administrator. As of March 31, 2021, approximately $1.5 million of indirect administrative expenses were included in payable to affiliates. For the three months ended March 31, 2021, the reimbursement to the Administrator represented approximately 0.02% of our gross assets. • We, the Investment Adviser and the Administrator have entered into a royalty-free Trademark License Agreement, as amended, with New Mountain Capital, pursuant to which New Mountain Capital has agreed to grant us, the Investment Adviser and the Administrator a non-exclusive, royalty-free license to use the name "New Mountain" and "New Mountain Finance". In addition, we have adopted a formal code of ethics that governs the conduct of our officers and directors, which is available on our website at http://www.newmountainfinance.com. These officers and directors also remain subject to the duties imposed by the 1940 Act and the Delaware 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. On October 8, 2019, the SEC issued an exemptive order (the “Exemptive Order”), which superseded a prior order issued on December 18, 2017, which permits us to co-invest in portfolio companies with certain funds or entities managed by the Investment Adviser or its affiliates in certain negotiated transactions where co-investing would otherwise be prohibited under the 1940 Act, subject to the conditions of the Exemptive Order. Pursuant to the Exemptive Order, we are permitted to co-invest with our affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors make certain conclusions in connection with a co-investment transaction, including, but not limited to, that (1) the terms of the potential co-investment transaction, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching in respect of us or our stockholders on the part of any person concerned, and (2) the potential co-investment transaction is consistent with the interests of our stockholders and is consistent with our then-current investment objective and strategies. On March 30, 2020, an affiliate of the Investment Adviser purchased directly from NMNLC 105,030 shares of NMNLC’s common stock at a price of $107.73 per share, which represented the net asset value per share of NMNLC at the date of purchase, for an aggregate purchase price of approximately $11.3 million. Immediately thereafter, NMNLC redeemed 105,030 shares of its common stock held by NMFC in exchange for a promissory note with a principal amount of $11.3 million and a 7.0% interest rate, which was repaid by NMNLC to NMFC on March 31, 2020. On March 30, 2020, we entered into the Unsecured Management Company Revolver with NMF Investments III, L.L.C., an affiliate of the Investment Adviser, with a $30.0 million maximum amount of revolver borrowings available and a maturity date of December 31, 2022. On May 4, 2020, we entered into an Amended and Restated Uncommitted Revolving Loan Agreement with NMF Investments III, L.L.C., which increased the maximum amounts of revolving borrowings available thereunder from $30.0 million to $50.0 million. Refer to Borrowings for discussion of the Unsecured Management Company Revolver. 128 Table o f Contents