Good morning and welcome to the New Mountain Finance Corporation’s Second Quarter 2018 Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Rob Hamwee, CEO. Please go ahead.

Thank you, and good morning, everyone. And welcome to New Mountain Finance Corporation’s second quarter earnings call for 2018. On the line with me here today are Steve Klinsky, Chairman of NMFC and CEO of New Mountain Capital; John Kline, President and COO of NMFC; and Shiraz Kajee, CFO of NMFC. Steve Klinsky is going to make some introductory remarks. But before he does, I’d like to ask Shiraz to make some important statements regarding today’s call.

Thanks Rob. Good morning everyone. Before we get into the presentation, 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 if any unauthorized broadcast in any form is strictly prohibited. Information about the audio replay of this call is available in our August 7th earnings press release. I would also like to call your attention to the customary Safe Harbor disclosure in our Press Release, and on Page 2 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. 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. At this time, I’d like to turn the call over to Steve Klinsky, NMFC's Chairman who will give some highlights beginning on Pages 4 and 5 of the slide presentation. Steve?

The team will go through the details in a moment. But let me start by presenting the highlights of another solid quarter for New Mountain Finance. New Mountain Finance's net investment income for the quarter ended June 30, 2018 was $0.34 per share, in the middle of our guidance of $0.33 to $0.35 per share, and once again covering our quarterly dividend of $0.34 per share. New Mountain Finance's book value was stable at $13.57 per share as compared to $13.60 per share last quarter. We're also able to announce our regular dividend, which for the 26th straight quarter will again be $0.34 per share, an annualized yield of nearly 10% based on last Friday's close. The company had another productive quarter of deal generation, investing $296 million in gross originations versus repayment of $153 million, allowing us to begin to deploy the incremental leverage approved by shareholders in the quarter. Credit quality generally remains strong. Although for the first time in over year one new asset has gone on non-accrual. I and other members of New Mountain continue to be very large owners of our stock with aggregate ownership of 9.6 million shares, approximately 13% of total shares outstanding. Finally, the broader New Mountain platform that supports NMFC continues to grow with over $20 billion of assets under management and 140 team members. In summary, we are very pleased with NMFC's continued performance and progress overall. 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. As outlined on Page 6 of our presentation, NMFC is externally managed by New Mountain Capital, a leading private equity firm. 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. Turning to Page 7, you can see our total return performance from our IPO in May 2011 through August 3, 2018. In the seven plus years since our IPO, we have generated a compounded annual return to our initial public investors of over 11%, meaningfully higher than our peers in the high yield index and approximately 1,000 basis point per annum above relevant risk free benchmarks. Page 8 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. Page 9 shows return attribution. Total cumulative return continues to be largely driven by our cash dividend, which in turn has been more than 100% covered by NII. As the bar on the far right illustrates, over the seven plus years we…

Thanks, Rob. As outlined on Page 13, the leverage credit market has been relatively stable throughout the year. However, recently, we observed some small pockets of volatility in the new issued market, where certain deals with aggressive debt structures and terms have need higher pricing to clear the market. As a result, there has been evolved in the wave of loan re-pricing activity that we observed earlier in the year and new issue spreads for quality deals have stabilized and some cases techs slightly wider. Still most deals that we evaluate continue to have strong competitive tension between lenders who are eager to deploy capital into the private credit market. Three months LIBOR, which has been a meaningful tailwinds for NMFC was relatively flat in this quarter at 2.34%. Deal flow and our core defensive growth sectors have been very steady throughout the late spring and summer and particularly strong in the early part of the third quarter. We attribute the strength was heavy market and good performance by our team of professionals focused on new deal flow. Looking forward, we expect this momentum to continue as we are currently evaluating a number of transactions that could become new investments for NMFC in the near future. Turning to Page 14, NMFC continues to be positively exposed the future of rate increases as 86% of our portfolio is invested in floating rate debt, and 51% of our liabilities are locked in over the medium term at attractive fixed rates. As the chart on the bottom of the page shows, given our investment portfolio and liability mix, NMFC’s earnings are positively leverage to any further increases in short term rates. Moving onto portfolio activity, as seen on pages 15 and 16, NMFC had an active quarter with total originations of $296 million…

Thanks, John. For more details in our financial results in today's commentary, please refer to the Form 10-Q that was filed last evening with the SEC. Now, I'd like to turn your attention to Slide 22. In the portfolio we had approximately $2.1 billion in investments at fair value at June 30, 2018, and total assets of $2.2 billion. We have total liabilities of $1.2 billion of which total statutory debt outstanding was $931 million, excluding $163 million of drawn SPA guarantee debentures. Net asset value of $1 billion, a $13.57 per share, was down $0.03 from the prior quarter. As of June 30, our statutory debt-to-equity ratio was 0.9 to 1. On Slide 23, we show our historical leverage ratios. We expect to increase leverage overtime given the shareholders approval we received in Q2. In the slide, we also show the historical NAV adjusted for the cumulative impact of special dividends, which would trade the more accurate reflection of true economic value creation. On Slide 24, we show our quarterly income statement results. We believe that our net investment income is the most appropriate measure of our quality performance. This slide highlights that our realized and unrealized gains and losses can be volatile below line, we continue to generate stable net investment income above the line. Focusing on the quarter ended June 30, 2018, we earned total investment income of $54.6 million, a $1.7 million increase from the prior quarter, primarily due to an increase in interest income from a higher asset base. Total net expenses were approximately $28.8 million, a $1.6 million increase from the prior quarter due to higher borrowing costs. As in prior quarters, the investment advisor continues to raise certain management fees such that the effective annualized management fees of 1.45%. It is important to…

Thanks Shiraz. It continues to remain our intention to consistently pay the $0.34 per share on a quarterly basis for future quarters, so long as the adjusted NII covers the dividend in line with our current expectations. In closing, I would just like to say that we continue to be pleased with our performance to date, most importantly from a credit perspective our portfolio overall continues to be healthy. Once again, we’d like to thank you for your support and interest and at this point turn things back to the operator to begin Q&A. Operator?

Thank you. We will now begin the question-and-answer session. [Operator Instructions] First question comes from [indiscernible] with Wells Fargo Securities. Please go ahead.

Just first question on the leverage. I think, I know, you said you want to forgive me for long last quarter expanded the holdings facility that you know has about $100 million in capacity left. But any color in terms of -- should we see maybe that grow in size and commitment or something else?

Yes, I think it will be a combination of that growing as well as utilizing the other elements of the financing structure including some unsecured. We always looking at trade-offs between are in stakes, given the flat yield curve interest rate versus floating on a secured basis. But I think the mix will continue to be utilized in such way to optimize all the various elements of the liability strategy.

And high technology, can you give some color on the appreciation there. Is that a market yield base component or is there some maybe convert or equity kicker in there that reflects that appreciation?

So we were actually market at the accreted value at a contractual value. At this moment that is not showing any impact of the convertibility. We’re really sort of right at the cost though. So we continue to monitor the enterprise value map that drives the share price there could be further upside if that seem to be in the money.

And then just one final, more high level question, touching on HME, but not specifically zeroing on it understanding it's a specific name. We're seeing some similar sharper declines kind of across the space this quarter even with the benign environment and strong economy et cetera, but as active folks in the market such as yourselves, if you look at these high level, can you give kind of a feel on how much is say your synchronic one-off versus the impact of declining structures that we often hear about in the ladder of which I would find more broadly concerning. But if you kind of want to touch on there, are we seeing perhaps market-wide, are we kind of paying the price now for the structural impacts across direct lending?

We are certainly not seeing that at all. Any issues we're seeing in HME would be a good example. It's completely idiosyncratic and irrespective of some of the structural weaknesses that have been introduced into credit agreements in the last few years. One or two years from now might those structural weaknesses impact things that certainly possible. But to date, that has -- there is no tearful evidence at least that we're seeing in terms of portfolio impacts.

Very well guys. Thanks so much for taking the questions.

Yes. Thank you.

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

Well, thanks everyone. We appreciate the interest, the support and look forward to speaking to everyone in the months ahead. And enjoy the rest of the summer. Thank you. Good bye.

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