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

Thank you and good morning everyone and welcome to New Mountain Finance Corporation’s fourth quarter earnings call for 2014. With me here today are Steve Klinsky, Chairman of NMFC and CEO of New Mountain Capital; and Dave Cordova, CFO of NMFC. Steve is going to make some introductory remarks. But before he does, I would like to ask Dave to make some important statements regarding today’s call.

Thank you, Rob. I would like to advise everyone that today’s call and webcast are being recorded. Please note that they are the property of New Mountain Finance Corporation and that any unauthorized broadcast in any form is strictly prohibited. Information about the audio replay of this call is available on our earnings press release. I would also like to call your attention to the customary Safe Harbor disclosure in our March 02, 2015 press release and on page two of the slide presentation regarding forward-looking statements. Today’s conference call and webcast may include forward-looking statements and projections, and we ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from those statements and projections. We do not undertake to update our forward-looking statements or projections unless required to by law. Any references to New Mountain Capital or New Mountain are referring to New Mountain Capital, LLC or its affiliates and may be referring to our investment advisor, New Mountain Finance Advisors BDC, L.L.C. where appropriate. To obtain copies of our latest SEC filings and to access the slide presentation that we will be referencing throughout this call, please visit our website at www.newmountainfinance.com or call us at 212-720-0300. At this time, I’d like to turn the call over to Steve Klinsky who will give some highlights beginning on page four of the slide presentation. Steve?

Rob and Dave will go through the details in a moment but let me start by presenting the highlights of another quarter of steady earnings and dividend performance for New Mountain Finance. New Mountain Finance’s adjusted net investment income for the quarter ended December 31, 2014 was $0.34 per share, right in the middle of our guidance of $0.33 to $0.35 per share. This once again covers our Q4 dividend of $0.34 per share. The company’s book value on December 31 was $13.83 per share, which is down $0.50 from last quarter reflecting overall weakness in the credit markets particularly in energy and below budgeted performance at one of our portfolio credits Edmentum. We are also able to announce our regular dividend for the current quarter ending March 31, 2015. The regular dividend will again be $0.34 per share, consistent with our previously communicated view that we have reached a fully ramped steady state dividend level. The overall credit quality of the company's loan portfolio continues to be strong. We had no new loans placed on nonaccrual this quarter, although we do expect to place a portion of the Edmentum loan on nonaccrual in Q1. We still have had only one issuer with the realized default loss since NMFC was founded, representing less than 0.2% of all cumulative investments made to date. The company invested $226 million in gross originations in Q4 and $156 million net of repayments. In addition to the positive earnings and dividend results of the core business, we continue to execute on strategic initiatives that we believe will create meaningful shareholder value in the coming quarters. We upsized and extended our existing credit facilities. We have begun to utilize our recently issued Small Business Investment Company license. And now that energy credit markets have weakened, NMFC has also formalized a strategic alliance with Five States Energy Capital who we have worked with in past years to help us better seek out defensive and proprietary special opportunities in the energy space. In summary, we are pleased with NMFC’s continued performance and progress. With that, let me turn the call back over to Rob Hamwee, NMFC’s CEO.

Thank you, Steve. Before diving into the details of the quarter, as always, I’d like to give everyone a brief review of NMFC and our strategy. On Page 5, we provided some key financial highlights. As outlined on pages 6 and 7 of our presentation, NMFC is externally managed by New Mountain Capital, a leading private equity firm with approximately $15 billion of assets under management and 100 staff members, including 60 investment professionals. Since the inception of our debt investment program in 2008, we have taken New Mountain’s approach to private equity and applied it to corporate credit with a consistent focus on defensive growth business models and extensive fundamental research within industries that are already well-known to New Mountain. Or, more simply put, we invest in recession resistant businesses that we really know and that we really like. We believe this approach results in a differentiated and sustainable model that allows us to generate attractive risk-adjusted rates of return across changing cycles and market conditions. To achieve our mandate, we utilize the existing New Mountain investment team as our primary underwriting resource. Additionally, I would note here that our public float is now $850 million, up from $150 million at our IPO. Turning to Page 8, you can see our total return performance from our IPO in May 2011 through February 25, 2015. In the nearly four years since our IPO, we have generated a compounded annual return to our investors of 13.2%, significantly above our regular dividend yield and dramatically higher than our peers. Page 9 goes into a little more detail around relative performance against our peer set benchmarking against the 10 largest externally managed BDCs that have been public at least as long as we have. We attribute the success to, one, our differentiated underwriting…

Thank you, Rob. For more details on the financial results in today's commentary please refer to the Form 10-K that was filed last evening with the SEC. Now, I would like to turn your attention to slide 29. The portfolio had just over $1.45 billion in investment at fair value at December 31, 2014 and total assets of just over $1.5 billion. We had total liabilities of $712.7 million of which, total statutory debt outstanding was $633.1 million, excluding $37.5 million of drawn SBA-guaranteed debentures. Net asset value of $802.2 million or $13.83 per share was down $0.50 from the prior quarter. As of December 31, our statutory debt-to-equity ratio was 0.79 to 1. On Slide 30, we show the historical NAV per share and leverage ratios, which are broadly consistent with our current target leverage of between 0.7 to 0.8 to 1. We also show the NAV adjusted for the cumulative impact of special dividends, which portrays a more accurate reflection of true economic value creation. On Slide 31, we show our quarterly income statement results. We believe that our adjusted NII, which excludes the capital gains incentive fee, is the most appropriate measure of our quarterly performance. This slide highlights that while realizations and unrealized appreciation/depreciation can be volatile below the line, we continue to generate stable net investment income above the line. Focusing on the quarter ended December 31, 2014, we earned total investment income of approximately $36.7 million. This represents an increase of 2 million or 6% from the prior quarter, largely attributable to an increase in interest income from a larger asset base. Total net expenses of $17.5 million increased $0.9 million or 5% due to an increase in incentive fees associated with the asset growth as well as an increase in interest expense associated…

Thanks, Dave. In closing, I would just like to say that we continue to be pleased with our performance to-date. Looking into 2015, we believe we are well positioned to both cover our dividend out of NII and maintain our track record of very limited credit losses. Once again, we like to thank you for your support and interest. And at this point, turn things back to the operator to being Q&A. Operator?

Thank you. We will now being the question-and-answer session. [Operator Instructions] Our first question comes today from Ryan Lynch with KBW.

Good morning. Thank you for taking my questions. First one, on Slide 14, you talked about 50% of Edmentum going on non-accrual potentially in Q1. Are you guys just waiting for this restructuring to occur before you actually place this loan on non-accrual? And is 50% of this loan going on non-accrual kind of a good run rate of what we should anticipate?

Yeah, I think that’s our best guess at this time. I mean it’s relatively early on. This kind of all came to our attention in the first quarter, so it’s definitely a subsequent event. And we’re giving you our best guess as to where it’s likely to come out at this point.

So should we expect you guys to accrue income on that loan through Q1?

No, I would expect that it goes on non-accrual as of the first day of Q1.

Okay.

A portion of it.

Sure. I mean you guys have about 8% of your portfolio in energy, do you expect this percentage to get materially larger with the new energy initiative and also obviously with the energy markets getting beaten up recently, how do you view the kind of current market for making energy investments.

I think it’s tricky right now, right? Because nobody wants to try to catch a falling knife on the one hand. On the other hand, particularly with the new alliance and initiative, we are likely to see some things where the risk reward is so skewed in our favor that you can – for almost any state of the world in terms of energy prices, you can structure an attractive security. And if that’s the case, those are type of things we’re going to do. So whether we’re able to execute on none of those or a handful of those, it’s hard to say right now. I think the 8% could get larger, I don’t know if it gets to 12% or 15%, but that would be order of magnitude I would think about, if and only if we’re able to find those types of opportunities that are so skewed in our favor.

Okay. All right. And then can you remind us how you view leverage in terms of total leverage including the SBIC and then also just regulatory leverage?

Yeah, I mean we’re really more focused on regulatory leverage given the way we’ve structured our leverage. I would be very comfortable inclusive of the SBA debt having that number go, the non-statutory number go above one time, but we’re obviously very sensitive to the statutory number and keeping – preserving a very meaningful cushion to the one-to-one. So we’ve historically targeted a range from 0.7 to 0.8.

Okay. And then it looks like you had about $37.5 million currently drawn on the SBIC debt with about $42 million of regulatory capital. Do you have additional debentures currently available to draw down?

Yes, we do.

Okay. And then one…

We would expect the SBA to be a meaningful driver this year of accretive growth all else being equal.

Okay. And then one more kind of technical modeling question, how should we think about administrative profession or other G&A expenses going forward. It looks like you guys had about $2.1 million in the fourth quarter but I think that might also have some taxes in that number. Just kind of how should we think about that number going forward?

Yeah. That also include about $0.3 million of indirect expenses as well and it’s something – as we’ve gotten larger and we’ve gotten some incremental operating leverage, we expect that the BDC one day it will be able to bear all of the expenses but I think the interim consistent with what we disclosed in the financial statement that the investment advisor will continue to evaluate the indirect expenses and to the extent they need to waive any in the future.

Okay, thanks. That’s all from me.

Thanks, Ryan.

The next question comes from Greg Nelson with Wells Fargo.

Hi, good morning guys.

Hi, Greg.

Good morning. Thanks for taking my questions. So I have a few, first, obviously you ramped up the first SLP it’s great that you did it quickly. Thinking about the opportunities do more and the ability to keep those off balance sheet as far as consolidation of leverage, just like to hear your thoughts there.

Yeah. We don’t think there is any issue about keeping the existing SLP leverage off balance sheet. That’s kind of a done deal, so that will be as it is. Our ability to do SLP II or SLP III will really be a function of the developing regulatory views around that. So it’s really pending SEC approval at this point in time and we do have an active dialogue there but obviously impossible to predict which direction that will go in. But just to be clear, no backward looking issues, SLP I is in very good shape.

Alright, perfect. And then just touching on the leverage a little bit, I just like to get obviously if some SBIC capacity, but just hear your appetite for growth and equity issuance in this environment. Obviously what you’ve done quarter-to-date has been a little bit focused heavier on the second lien. So I am just trying to get an idea of how you’re thinking about the current investment environment as it relates to growth and equity versus what you’re deploying in.

Yeah. So far this quarter, we’ve effectively funded our originations with repayments. We had our biggest investment Global Knowledge repay their latest quarter. And so we will continue to do that and we’re always thinking about when and if an equity offering makes sense, there are obviously a lot of factors that would go into that and we’ll continue to evaluate that but we are clearly in the upper end of our leverage target. And so for the time being, we will be funding – other than using the SBA facility, we will be funding investments with monetizations.

Sure. Any kind of off of that, do you see any – have you been seeing better - any opportunities to optimize the portfolio through sales…

Yeah, exactly. So we have been doing some opportunistic rotating if you will of old assets with [drafts] [ph], less attractive yields and putting that – deploying that those proceeds back into some of the new assets that have what we believe are pretty compelling yields.

Sure. And then on the market impact for the unrealized [depreciation] [ph], I think you had about $12.8 million, it’s more than $0.20 a share of NAV. With spreads coming back a little bit and stabilizing here during the quarter, do you expect some of that to come back?

I think we do. We will have to see exactly how the rest of the quarter plays out. But, yeah, I mentioned in my prepared remarks, I think we do believe that ultimately that market movement is transient, is not reflective of anything idiosyncratic in the portfolio other than obviously the Edmentum pieces which we broke out. And so depending on how the market goes, we would expect there would be some recovery there.

Great. And then just one last quick on Edmentum. This is a loan that a few BDCs hold, some have it marked higher, one asset marked 10% about lower than you do, which would be $0.05 to $0.06 NAV, just wanted to get your thoughts here on why you view 50% as the right rate?

It’s hard to go into all the details given the evolving nature of the situation and confidentiality obligations. So all I can say is that’s what we after pretty through analysis working with our auditors, working with our board, felt was the appropriate number. There is volatility around that number in both directions given the – like I said, the evolving situation, but we are comfortable that sitting here today it reflects best guess.

Alright. Thanks for taking my question.

Yeah, anytime.

[Operator Instructions] Our next question comes from Tony Sterne with Boston Provident.

Hi, all. Good morning. Thanks for taking my question.

Sure.

I hate to spend so much on this Edmentum, but I just wanted to get a better understanding of what’s going on there. I saw a few BDCs taking the mark and I called around the Street and Street is now quoting it at $0.02 to $0.07 and I see that you are holding it at $0.50, which maybe as of December. I just wanted to get an understanding for what the ultimate mark could be and how you are thinking about this investment going forward?

We’ve obviously heard about this “Street level”, which is completely meaningless since four people hold virtually the entire security. So there is no trade, there is no basis that we are aware of for that Street quote. So we continue to be very comfortable with the underlying support that not just at 12/31, but like I said, subsequent event, sitting here today, we feel that that’s an appropriate level for change. It could go up, it could go down. But right now, that’s what we feel is the best level.

Thank you.

Welcome.

This concludes our question-and-answer session. I would like to turn the conference back over to Rob Hamwee for any closing remarks.

Great. Thank you, operator. Thanks, everyone. Again, appreciate everyone’s continued interest and support and look forward to speaking again in a few months when we have our Q1 call. Thank you.

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