New York buyout firm
New Mountain Finance announced that it sold 7.3 million shares at $13.75, to raise $100 million, below its planned offering of 8.3 million shares at $14 to $15 each, according to a regulatory filing and below each share’s net asset value of $13.94. The shares then fell 5.5 percent below the IPO price, to close at $13, on their first day of trading on the New York Stock Exchange, according to sister news service Reuters.
New Mountain Finance did not respond by deadline to a request for comment.
Part of the problem with the fund’s reception could be its complexity. New Mountain Finance is a holding company with no direct operations of its own; instead, its only business and sole asset is its ownership of common membership units of another, existing BDC, New Mountain Finance Holdings LLC, which New Mountain Capital formed in October 2008. New Mountain Finance Holdings, the operating company, is in turn externally managed by an investment adviser, a wholly owned subsidiary of New Mountain Capital.
As of March 31, New Mountain Finance Holdings had a portfolio with a fair value of about $460 million in 45 companies, with software and health care services making up nearly half of the investments.
New Mountain Finance Holdings said in its prospectus that it plans to focus on “defensive growth companies,” with sustainable secular growth drivers, high barriers to competitive entry, high free cash flow after capital expenditure and working capital needs, high returns on assets and opportunities for niche market dominance.
Founded in January 2000 by Steven B. Klinsky, New Mountain Capital has aggregate assets under management totaling more than $8.5 billion. Klinksy, who was named a Buyouts “Legend of Private Equity” last November, launched the firm after departing Forstmann Little and Co., which he had joined in 1984 and became the most senior partner of Forstmann Little outside of the Forstmann family for most of the 1990s. Earlier, Klinsky had been a co-founder of Goldman Sachs & Co.’s Leveraged Buyout Group in 1981.
New Mountain Capital pursues a multi-strategy approach. Although it is primarily a buyout shop, it also has a hedge fund arm, New Mountain Vantage, that takes non-control positions in public U.S. companies.
The BDC structure has shown popularity as the economy has recovered from the financial crisis of 2008 and 2009. Historically providers of mezzanine financing for LBOs, BDCs increasingly are investing in senior debt and making equity investments. First-lien financing made up almost 70 percent of New Mountain Finance Holdings as of March 31, its prospectus said.