Fitch Ratings affirmed New Mountain Finance Corporation's Long-Term Issuer Default Rating (IDR) and unsecured debt rating at 'BBB-', with a Stable Outlook. The senior secured debt rating was also affirmed at 'BBB'. This affirmation reflects NMFC's strong affiliation with New Mountain Capital, providing access to deal flow and investment resources.
The rating agency highlighted NMFC's solid historical credit performance, experienced management team, and increasing exposure to first-lien investments, which accounted for 64.3% of the portfolio at fair value as of March 31, 2025. This represents an increase from 56.9% a year prior. The company's funding flexibility and demonstrated access to capital markets were also noted as strengths.
Fitch identified certain constraints, including a higher proportion of non-cash income, with Payment-in-Kind (PIK) income amounting to 19.1% of interest and dividend income in Q1 2025. Other constraints included higher-than-peer exposure to second-lien and equity investments, and above-average total leverage of 1.35x at Q1 2025. Non-accrual investments declined to 1.7% of the debt portfolio at value.
For investors, the affirmation of the 'BBB-' rating provides an independent assessment of NMFC's creditworthiness and financial stability. While the Stable Outlook is positive, the identified constraints, particularly regarding PIK income and leverage, indicate areas that require ongoing monitoring. The increasing allocation to first-lien positions is viewed favorably by Fitch as a de-risking measure.
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