SEC Company Response from New Mountain Finance Corp (NMFC, NMFCZ) (CIK 0001496099) (NMFC) — Feb 7, 2011
New Mountain Finance Corp (NMFC, NMFCZ) (CIK 0001496099)
Date: Feb. 7, 2011 · CIK: 0001496099 · Accession: 0001047469-11-000542
AI Filing Summary & Sentiment
File numbers found in text: 333-168280
Letter
Securities and Exchange Commission United States Securities and Exchange Commission Division of Investment Management Re:New Mountain Guardian Corporation Registration Statement on Form N-2 Filed September 16, 2010 File No. 333-168280
Re:
Dear Mr. Ganley:
This letter sets forth the response of New Mountain Guardian Corporation (the "Company" or "New Mountain Guardian") to the comments, given in a telephonic conference on January 25, 2011, of the staff of the Division of Investment Management (the "Staff") with respect to the Registration Statement (File No. 333-168280) filed September 16, 2010 (the "Registration Statement"). In such telephonic conference, you invited the Company to submit a draft Amendment No. 2 ("Draft Amendment No. 2") via correspondence with the Staff so that the Staff could review Draft Amendment No. 2 before the December 31, 2010 audited financial statements were complete. For your convenience, we have endeavored to repeat each comment. Unless otherwise noted, all references herein to page numbers are to page numbers in Draft Amendment No. 2, which accompanies this response letter. For purposes of this letter, the defined terms used herein shall have the meaning ascribed to them in Draft Amendment No. 2.
Please note that, as discussed above, the Company's audited December 31, 2010 financial statements are not yet complete and therefore are not included in Draft Amendment No. 2. However, some financial information and metrics as of December 31, 2010 are included in brackets.
Prospectus Summary (Pages 1-17 of the Registration Statement)
1.The Staff noted that the Prospectus Summary should be shortened.
Response: In response to the Staff's comment, the Company has shortened the Prospectus Summary, including by (i) deleting the graphs from pages 7 and 8, (ii) duplicative descriptions of the numbers of professionals at New Mountain, (iii) duplicative information about the operating history of the fund and (iv) information about New Mountain from page 4.
Prospectus Summary—The Company (Page 1 of the Registration Statement)
2.The Staff noted that this section states that New Mountain Guardian, through the Operating Company, will invest primarily in the debt of companies that the Investment Adviser believes are "high quality." The Staff noted that the term "high quality" is commonly used to refer to the top two tiers of investment grade debt and requested that the Company delete that reference.
Response: In response to the Staff's comment, the Company has revised the disclosure on pages 2, 7, 84, 102 and 107. Draft Amendment No. 2 does not use the term "high quality" to refer to companies.
Prospectus Summary—The Company (Page 1 of the Registration Statement)
3.The Staff noted that the Registration Statement states that "we intend to target investments that we believe are capable of yielding a total asset level of unlevered return of 10% to 15% . . . ." The Staff noted that such disclosures about future performance may be misleading and cited Rule 156(b)(2) of the Securities Act of 1933, as amended (the "Securities Act").
Response: The Company notes the Staff's comments and has revised the language on pages 2 and 102 to clarify that the Company will target future individual investments with contractual yields between 10% and 15% and to add additional explanatory and cautionary language. The Company respectfully advises the Staff that given the Company's focus on yield-bearing investments, it is important (i.e., material) to investors for the Company to make clear that the potential yields for individual future investments that it is targeting are not in line with the prior performance of the Predecessor Entities as a whole. We believe our disclosure relating to target yields is wholly consistent with Rule 156(b)(2). Rule 156(b)(2) provides, among other things, that representations about past or future performance could be misleading because of portrayals of past performance that would imply that gains or income realized in the past would be repeated in the future. Since their inception, the Predecessor Entities have experienced total returns on their respective investments that are extraordinarily high due to the unique market circumstances that existed during the period shortly after the formation of the Predecessor Entities. The Company has intentionally downplayed its historically high returns in the Registration Statement so as not to be misleading, but the Company's financial statements still show these historically high returns. In light of the fact that market conditions have dramatically changed in the last year or so, it would be misleading for the Company not to state that it now intends to purchase investments with contractual yields between 10% and 15%.
In disclosing the contractual yields the Company is targeting, the Company is not making any guarantee about the future investment performance of the Company as a whole, or even any given investment. Rather, it is simply stating the fact that it only seeks to state the contractual yield on future investments that it intends to make. Moreover, any chance for confusion in that regard should be mitigated by the fact that the disclosure includes cautionary language that notes that "there can be no assurance that targeted returns will be achieved on our investments as they are subject to risks, uncertainties and other factors, some of which are beyond our control, which may lead to non-payment of interest and principal."
Prospectus Summary—The Company (Page 2 of the Registration Statement)
4.The Staff noted that the Registration Statement should define EBITDA.
Response: In response to the Staff's comment, the Company has defined EBITDA on page 2.
Prospectus Summary—The Company (Page 2 of the Registration Statement)
5.The Staff noted that December 31, 2010 numbers should be used on page 2 of the Registration Statement where the financial results of the Predecessor Entities are discussed.
Response: The Company will provide December 31, 2010 numbers on page 3 at such time as they become available. Furthermore, the Company will provide December 31, 2010 audited financial statements at such time as they become available and will file them with Amendment No. 2.
Prospectus Summary—The Company (Page 2 of the Registration Statement)
6.The Staff requested more disclosure of how fair value is calculated in connection with the two pie charts on page 2 of the Registration Statement. Furthermore, the Staff requested that the Valuation Policies of New Mountain Guardian and the Operating Company be provided to the SEC.
Response: In response to the Staff's comment, the Company has revised the disclosure on pages 3 and 103 of Draft Amendment No. 2. The Valuation Policies of the Company and the Operating Company have been filed as correspondence with this letter.
Prospectus Summary—The Company (Page 3 of the Registration Statement)
7.The Staff noted that the introduction of New Mountain Guardian Debt Funding, L.L.C. and New Mountain Guardian Debt Funding, L.L.C. at the bottom of page 3 of the Registration Statement was confusing.
Response: In response to the Staff's comment, the Company has revised the disclosure on page 3.
Prospectus Summary—Recent Developments (Page 5 of the Registration Statement)
8.The Staff noted that the Registration Statement should clearly state that the recent developments section is unaudited.
Response: In response to the Staff's comment, the Company has revised the disclosure on pages 5 and 87, but at this time has not included any data.
Prospectus Summary—Competitive Advantages (Page 9 of the Registration Statement)
9.The Staff noted that it was unclear whether or not the funds intended to invest in loans in the secondary market, start originating loans or buy new issues of loans.
Response: In response to the Staff's comment, the Company has revised the disclosure on pages 7, 110 and 111.
Prospectus Summary—Operating and Regulatory Structure (Page 15 of the Registration Statement)
10.The Staff noted that the first paragraph of "Prospectus Summary—Operating and Regulatory Structure" should begin by mentioning the 200% asset coverage ratio under the Investment Company Act of 1940, as amended (the "1940 Act").
Response: In response to the Staff's comment, the Company has revised the disclosure on page 12.
Prospectus Summary—Risk Factors (Page 16-17 of the Registration Statement)
11.The Staff noted that a risk factor for immediate dilution should be included in the "Prospectus Summary—Risk Factors" section.
Response: In response to the Staff's comment, the Company has revised the disclosure on page 14.
Risk Factors—Risks Relating to Our Business (Pages 29-50 of the Registration Statement)
12.The Staff noted that the state of all the no-action relief requests should be disclosed in the risk factors in the Registration Statement. The Staff noted that this disclosure could be removed from the Registration Statement for each no-action relief request once such request was granted. In particular the Staff noted that requests for relief from sections 55 and 61 of the 1940 Act should be disclosed and that the disclosure should note that relief was not guaranteed.
Response: In response to the Staff's comment, the Company respectfully advises the Staff that the Company will not distribute a Section 10 prospectus unless it receives relief from sections 55 and 61 of the 1940 Act. The Company is relying on revised or existing disclosure on pages 42, 43 and 48 of Draft Amendment No. 2 to disclose other no-action exemptive relief requests.
Business—Market Opportunity (Page 115 of the Registration Statement)
13.The Staff noted that the two graphs on page 115 of the Registration Statement were small and might violate the legibility requirements in Rule 421.
Response: In response to the Staff's comment, the graphs now appear larger on pages 110-111.
Portfolio Companies (Pages 124 and 125 of the Registration Statement)
14.The Staff noted that the font size in some sections of the Registration Statement might be too small. In particular the Staff noted that the font size in the schedule of investments on pages 124 and 125 of the Registration Statement was too small. The Staff noted that 10-point font was generally required in the Registration Statement, except for in the case of tables, where 8-point font was required.
Response: In response to the Staff's comment, the Company has adjusted font sizes throughout Draft Amendment No. 2.
* * *
Should you have any questions or comments with respect to this filing, please call me at (212) 859-8272.
Sincerely,
/s/ STUART H. GELFOND
Show Raw Text
CORRESP
1
filename1.htm
Direct Line: 212.859.8272
Fax: 212.859.4000
February 7, 2011
CORRESPONDENCE VIA ELECTRONIC TRANSMISSION
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re:
New Mountain Guardian Corporation
Ladies and Gentlemen:
On behalf of New Mountain Guardian Corporation, a Delaware corporation (the “Company”), and pursuant to the conversation that the Company had with Mr. Ganley, Senior Counsel in the Securities and Exchange Commission’s Division of Investment Management (the “Division”), we are submitting via correspondence the Company’s draft Pre-Effective Amendment No. 2 to the Company’s Registration Statement on Form N-2 filed on July 22, 2010 (the “Registration Statement”) relating to the registration of shares of the Company’s common stock, par value $0.01 per share. Also included are (i) the Company’s response letter to the Division’s telephonic comments received January 25, 2011, (ii) a copy of the Valuation Policies of the Company and New Mountain Guardian Holdings, L.L.C. and (iii) a PDF showing the changes to the Registration Statement since Pre-Effective Amendment No. 1 was filed on September 16, 2010.
Except as noted in the Registration Statement, all of the exhibits will be included in a subsequent amendment to the Registration Statement. The filing fee of $14,260 was paid by wire transfer to the Securities and Exchange Commission, Account Number 152307768324, US Bank, ABA No. 081000210 on July 9, 2010.
Please direct any questions or comments that the Staff may have with regard to the filing to Jessica Forbes at 212.859.8558 or to the undersigned at the above-referenced number.
Sincerely,
/s/ STUART H. GELFOND
Stuart H. Gelfond
cc:
Robert A. Hamwee (New Mountain Guardian Corporation)
Adam Weinstein (New Mountain Guardian Corporation)
Direct Line: 212.859.8272
Fax: 212.859.4000
Stuart.Gelfond@ffhsj.com
February 7,
2011
Mr. John
M. Ganley
Senior Counsel
United States Securities and Exchange Commission
Division of Investment Management
100 F Street, N.E.
Washington, D.C. 20549
Re:New
Mountain Guardian Corporation
Registration Statement on Form N-2
Filed September 16, 2010
File No. 333-168280
Dear
Mr. Ganley:
This
letter sets forth the response of New Mountain Guardian Corporation (the "Company" or "New Mountain Guardian") to the comments, given in a telephonic conference on
January 25, 2011, of the staff of the Division of Investment Management (the "Staff") with respect to the Registration Statement (File No. 333-168280) filed
September 16, 2010 (the "Registration Statement"). In such telephonic conference, you invited the Company to submit a draft Amendment No. 2 ("Draft Amendment No. 2") via
correspondence with the Staff so that the Staff could review Draft Amendment No. 2 before the December 31, 2010 audited financial statements were complete. For your convenience, we have
endeavored to repeat each comment. Unless otherwise noted, all references herein to page numbers are to page numbers in Draft Amendment No. 2, which accompanies this response letter. For
purposes of this letter, the defined terms used herein shall have the meaning ascribed to them in Draft Amendment No. 2.
Please
note that, as discussed above, the Company's audited December 31, 2010 financial statements are not yet complete and therefore are not included in Draft Amendment
No. 2. However, some financial information and metrics as of December 31, 2010 are included in brackets.
Prospectus Summary (Pages 1-17 of the Registration Statement)
1.The Staff noted that the Prospectus Summary should be shortened.
Response: In response to the Staff's comment, the Company has shortened the Prospectus Summary, including by (i) deleting the graphs
from pages 7 and 8, (ii) duplicative descriptions of the numbers of professionals at New Mountain, (iii) duplicative information about the operating history of the fund and
(iv) information about New Mountain from page 4.
Prospectus Summary—The Company (Page 1 of the Registration Statement)
2.The Staff noted that this section states that New Mountain Guardian, through the Operating Company, will invest primarily in the debt
of companies that the Investment Adviser believes are "high quality." The Staff noted that the term "high quality" is commonly used to refer to the top two tiers of investment grade debt and requested
that the Company delete that reference.
Response: In response to the Staff's comment, the Company has revised the disclosure on pages 2, 7, 84, 102 and 107. Draft Amendment
No. 2 does not use the term "high quality" to refer to companies.
Prospectus Summary—The Company (Page 1 of the Registration Statement)
3.The Staff noted that the Registration Statement states that "we intend to target investments that we believe are capable of yielding
a total asset level of unlevered return of 10% to 15% . . . ." The Staff noted that such disclosures about future performance may be misleading and cited Rule 156(b)(2) of the Securities Act of
1933, as amended (the "Securities Act").
Response: The Company notes the Staff's comments and has revised the language on pages 2 and 102 to clarify that the Company will
target future individual investments with contractual yields between 10% and 15% and to add additional explanatory and cautionary language. The Company respectfully advises the Staff that given the
Company's focus on yield-bearing investments, it is important (i.e., material) to investors for the Company to make clear that the potential yields for
individual future investments that it is targeting are not in line with the prior performance of the Predecessor Entities as a whole. We believe our disclosure relating to target yields is wholly
consistent with Rule 156(b)(2). Rule 156(b)(2) provides, among other things, that representations about past or future performance could be misleading because of portrayals of past
performance that would imply that gains or income realized in the past would be repeated in the future. Since their inception, the Predecessor Entities have experienced total returns on their
respective investments that are extraordinarily high due to the unique market circumstances that existed during the period shortly after the formation of the Predecessor Entities. The Company has
intentionally downplayed its historically high returns in the Registration Statement so as not to be misleading, but the Company's financial statements still show these historically high returns. In
light of the fact that market conditions have dramatically changed in the
last year or so, it would be misleading for the Company not to state that it now intends to purchase investments with contractual yields between 10% and
15%.
In
disclosing the contractual yields the Company is targeting, the Company is not making any guarantee about the future investment performance of the Company as a whole, or even any given investment.
Rather, it is simply stating the fact that it only seeks to state the contractual yield on future investments that it intends to make. Moreover, any chance for confusion in that regard should be
mitigated by the fact that the disclosure includes cautionary language that notes that "there can be no assurance that targeted returns will be achieved on our investments as they are subject to
risks, uncertainties and other factors, some of which are beyond our control, which may lead to non-payment of interest and principal."
Prospectus Summary—The Company (Page 2 of the Registration Statement)
4.The Staff noted that the Registration Statement should define EBITDA.
Response: In response to the Staff's comment, the Company has defined EBITDA on page 2.
Prospectus Summary—The Company (Page 2 of the Registration Statement)
5.The Staff noted that December 31, 2010 numbers should be used on page 2 of the Registration Statement where the
financial results of the Predecessor Entities are discussed.
Response: The Company will provide December 31, 2010 numbers on page 3 at such time as they become available. Furthermore,
the Company will provide December 31, 2010 audited financial statements at such time as they become available and will file them with Amendment No. 2.
Prospectus Summary—The Company (Page 2 of the Registration Statement)
6.The Staff requested more disclosure of how fair value is calculated in connection with the two pie charts on page 2 of the
Registration Statement. Furthermore, the Staff requested that the Valuation Policies of New Mountain Guardian and the Operating Company be provided to the SEC.
Response: In response to the Staff's comment, the Company has revised the disclosure on pages 3 and 103 of Draft Amendment
No. 2. The Valuation Policies of the Company and the Operating Company have been filed as correspondence with this letter.
Prospectus Summary—The Company (Page 3 of the Registration Statement)
7.The Staff noted that the introduction of New Mountain Guardian Debt Funding, L.L.C. and New Mountain Guardian Debt Funding, L.L.C. at
the bottom of page 3 of the Registration Statement was confusing.
Response: In response to the Staff's comment, the Company has revised the disclosure on page 3.
Prospectus Summary—Recent Developments (Page 5 of the Registration Statement)
8.The Staff noted that the Registration Statement should clearly state that the recent developments section is
unaudited.
Response: In response to the Staff's comment, the Company has revised the disclosure on pages 5 and 87, but at this time has not
included any data.
Prospectus Summary—Competitive Advantages (Page 9 of the Registration Statement)
9.The Staff noted that it was unclear whether or not the funds intended to invest in loans in the secondary market, start originating
loans or buy new issues of loans.
Response: In response to the Staff's comment, the Company has revised the disclosure on pages 7, 110 and 111.
Prospectus Summary—Operating and Regulatory Structure (Page 15 of the Registration Statement)
10.The Staff noted that the first paragraph of "Prospectus Summary—Operating and Regulatory Structure" should begin by
mentioning the 200% asset coverage ratio under the Investment Company Act of 1940, as amended (the "1940 Act").
Response: In response to the Staff's comment, the Company has revised the disclosure on page 12.
Prospectus Summary—Risk Factors (Page 16-17 of the Registration Statement)
11.The Staff noted that a risk factor for immediate dilution should be included in the "Prospectus Summary—Risk Factors"
section.
Response: In response to the Staff's comment, the Company has revised the disclosure on page 14.
Risk Factors—Risks Relating to Our Business (Pages 29-50 of the Registration Statement)
12.The Staff noted that the state of all the no-action relief requests should be disclosed in the risk factors in the
Registration Statement. The Staff noted that this disclosure could be removed from the Registration Statement for each no-action relief request once such request was granted. In particular
the Staff noted that requests for relief from sections 55 and 61 of the 1940 Act should be disclosed and that the disclosure should note that relief was not guaranteed.
Response: In response to the Staff's comment, the Company respectfully advises the Staff that the Company will not distribute a
Section 10 prospectus unless it receives relief from sections 55 and 61 of the 1940 Act. The Company is relying on revised or existing disclosure on pages 42, 43 and 48 of Draft
Amendment No. 2 to disclose other no-action exemptive relief requests.
Business—Market Opportunity (Page 115 of the Registration Statement)
13.The Staff noted that the two graphs on page 115 of the Registration Statement were small and might violate the legibility
requirements in Rule 421.
Response: In response to the Staff's comment, the graphs now appear larger on pages 110-111.
Portfolio Companies (Pages 124 and 125 of the Registration Statement)
14.The Staff noted that the font size in some sections of the Registration Statement might be too small. In particular the Staff noted
that the font size in the schedule of investments on pages 124 and 125 of the Registration Statement was too small. The Staff noted that 10-point font was generally required in the
Registration Statement, except for in the case of tables, where 8-point font was required.
Response: In response to the Staff's comment, the Company has adjusted font sizes throughout Draft Amendment No. 2.
* * *
Should
you have any questions or comments with respect to this filing, please call me at (212) 859-8272.
Sincerely,
/s/ STUART H. GELFOND
Stuart H. Gelfond
cc:Robert
A. Hamwee (New Mountain Guardian Corporation)
Adam Weinstein (New Mountain Guardian Corporation)
Jessica Forbes (Fried, Frank, Harris, Shriver & Jacobson LLP)
Steven B. Boehm (Sutherland Asbill & Brennan LLP)
John J. Mahon (Sutherland Asbill & Brennan LLP)
New Mountain Guardian Corporation
Valuation Policy
New Mountain Guardian Corporation (the "Company") conducts the valuation of our assets, pursuant to which our net asset value is
determined, at all times consistent with generally accepted accounting principles, or GAAP, and the Investment Company Act of 1940. In all cases, our Board of Directors is ultimately and solely
responsible for determining the fair value of the Company's portfolio investments on a quarterly basis in good faith, including those that are not publicly traded, those whose market prices are not
readily available, and any other situation where the Company's portfolio investments require a fair value determination. The Company's 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
Bloomberg;
(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. These pricing services include, but are not limited to:
Thomson Reuters LPC, Markit Loans Portal, and Interactive Data Corporation. The Board of Directors employs the following procedures:
•Bond quotes are obtained through Interactive Data Corporation. Analytics are performed by the investment professionals of
New Mountain Guardian Holdings, L.L.C.'s investment advisor (the "Investment Advisor") 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 Advisor is unable to sufficiently validate the quote(s) internally and if the investment's par value exceeds the materiality threshold (defined below), the investment is valued
similarly to those assets with no readily available quotes (see (3) below);
•For investments other than bonds, we look at the number of quotes readily available and perform the
following:
(a)Investments
for which more than two quotes are received from a pricing service are valued using the mean of the mean of the bid and ask of the quotes
obtained;
(b)Investments
for which one or two quotes are received from a pricing service are validated internally. The investment professionals of the Investment Advisor
analyze the market quotes obtained using an array of valuation methods (further described below) to validate the fair value. If the Investment Advisor is unable to sufficiently validate the quote(s)
internally and if the investment's par value exceeds the materiality threshold (defined below), 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 exchange