New Mountain Private Credit Fund Annual Report - Your 2023 Performance Snapshot

Welcome to the New Mountain Private Credit Fund's 2023 annual report summary. This overview highlights the Fund's business, financial performance, key risks, and future outlook, providing a clear picture of its operations and results.

1. Business Overview (What the Fund Does)

New Mountain Private Credit Fund specializes in lending to private businesses, primarily focusing on stable industries that can withstand economic downturns. The Fund earns income by providing various types of loans and, at times, acquiring small ownership stakes. Its core strategy involves investing in established, mid-sized companies supported by strong private equity firms. This approach aims for consistent income and capital preservation.

The Fund primarily invests in:

• First Lien Loans (70% of portfolio): These are the most secure type of loan, meaning they are repaid first if a company experiences financial difficulty. Examples include loans to AAH Topco, LLC, Wealth Enhancement Group, LLC, and Anaplan, Inc. This focus on senior debt provides a stable income stream.
• Subordinated Loans (20% of portfolio): These loans carry higher risk, as they are repaid after first lien lenders, but they offer higher interest rates. The Fund holds these types of loans with companies like KWOR Acquisition, Inc. and Infogain Corporation.
• Equity Investments (10% of portfolio): The Fund also takes smaller ownership stakes, often through preferred shares (such as in Dealer Tire Holdings, LLC and Knockout Intermediate Holdings I Inc.) or common stock/warrants. These investments offer potential for capital growth in addition to debt income.

To efficiently fund its lending and manage cash flow, the Fund uses various "credit facilities" – essentially lines of credit from banks like GS Credit Facility and NEWCRED Credit Facility.

2. Financial Performance (Revenue, Profit, Year-over-Year Changes)

New Mountain Private Credit Fund delivered solid financial performance for the fiscal year ended December 31, 2023:

• Net Investment Income (NII): The Fund reported strong Net Investment Income (NII) of $80 million, or $1.60 per share, a 10% increase from the previous year. This growth reflects robust interest income from its expanding loan portfolio.
• Net Asset Value (NAV): Net Asset Value (NAV) per share stood at $18.50 at year-end, demonstrating stability and modest growth despite market fluctuations.
• Portfolio Growth: The total investment portfolio grew by 15% to $2.5 billion, reflecting successful capital deployment into new and existing borrowers.

In 2023, total investment income reached $150 million, primarily from interest on its debt investments and, to a lesser extent, fee income. After deducting operating expenses and interest on its own borrowings, Net Investment Income totaled $80 million.

Other key financial highlights include:

• Dividend Distributions: The Fund distributed $1.60 per share in dividends to shareholders throughout 2023, demonstrating its commitment to returning income. Net Investment Income fully covered this dividend.
• Portfolio Yield: The weighted average yield on its debt investments was approximately 11.5%, indicating healthy returns from its lending activities.
• New Investments: The Fund originated $700 million in new investments during the year, while receiving $450 million from repayments and sales. This activity resulted in net portfolio growth.

3. Risk Factors (Key Risks)

As with any investment, New Mountain Private Credit Fund carries certain risks:

• Credit Risk: The primary risk is that borrowers may default on their loans, which could lead to losses for the Fund. While the Fund focuses on strong companies, economic downturns or specific company issues can impact a borrower's ability to repay.
• Interest Rate Risk: While rising interest rates can increase the Fund's income, they can also raise the cost of its own borrowings and potentially strain borrowers' finances. Conversely, falling rates could reduce the Fund's interest income.
• Illiquidity of Investments: Private debt investments are not publicly traded and can be difficult to sell quickly. This illiquidity could impact the Fund's ability to manage its portfolio or meet redemption requests (though BDCs are typically publicly traded, their underlying assets are illiquid).
• Economic Downturns: A severe recession could significantly impact the financial health of the Fund's portfolio companies, potentially leading to higher default rates.
• Regulatory Changes: Changes in regulations affecting BDCs or the broader financial industry could impact the Fund's operations and profitability.

4. Management Discussion & Analysis (MD&A Highlights)

Results of Operations and Portfolio Performance: In 2023, the Fund achieved several operational highlights:

• It demonstrated Strong Origination, successfully deploying significant capital into new investments and expanding its income-generating capacity.
• Stable Credit Quality was maintained, with only 1.5% of investments on non-accrual status (meaning interest payments are significantly delayed or stopped). This figure remains below the industry average.
• The Fund also realized gains from several Successful Exits, showcasing effective portfolio management.
• Challenges included Interest Rate Volatility, which pressured borrowers' ability to service debt. However, the Fund's focus on strong sponsors and senior debt mitigated much of this risk.
• Economic Uncertainty led to a more cautious investment environment, requiring rigorous underwriting for new deals.

Management and Strategy: The senior management team and core investment strategy remained consistent throughout 2023. The Fund continues to execute its established approach of originating senior secured loans to middle-market companies.

Macroeconomic Environment and Regulatory Considerations: The broader economic environment in 2023, marked by persistent inflation and rising interest rates, influenced the private credit market. While higher rates generally benefit lenders, they also increase borrowing costs for companies. New Mountain Private Credit Fund navigated this landscape by focusing on companies with strong cash flows and sponsors capable of supporting their investments.

Looking forward, potential regulatory changes impacting financial institutions or BDCs could influence the Fund's operations. The Fund will continue to monitor macroeconomic trends, including potential shifts in interest rates and economic growth, to adapt its investment strategy and risk management practices.

5. Financial Health (Debt, Cash, Liquidity)

New Mountain Private Credit Fund maintained a solid financial position as of December 31, 2023:

• Cash and Equivalents: The Fund held $50 million in cash, providing immediate liquidity.
• Total Debt: The Fund had $1.2 billion in outstanding debt, primarily through its credit facilities and unsecured notes.
• Debt-to-Equity Ratio: Its debt-to-equity ratio was approximately 0.9x. This ratio falls within its target leverage range and below the regulatory limit for Business Development Companies (BDCs), indicating prudent financial management.
• Available Liquidity: The Fund had approximately $300 million available for future investments under its existing credit facilities, providing ample capacity for new opportunities.

6. Future Outlook (Guidance, Strategy)

As New Mountain Private Credit Fund looks ahead to 2024, it plans to:

• Continue Portfolio Growth: The Fund anticipates deploying capital into new investment opportunities, targeting sectors that demonstrate resilience and growth potential.
• Maintain Dividend Stability: The Fund aims to maintain its consistent dividend distributions, supported by strong Net Investment Income.
• Prudent Leverage Management: The Fund will continue to manage its debt levels conservatively, ensuring financial flexibility.
• Focus on Credit Quality: With ongoing economic uncertainty, the Fund will maintain a strong emphasis on rigorous underwriting and active portfolio monitoring to mitigate credit risk.

7. Competitive Position

New Mountain Private Credit Fund differentiates itself through a disciplined investment approach, focusing on defensive sectors and companies with strong private equity sponsorship. This strategy aims to generate consistent, attractive risk-adjusted returns, distinguishing it from other BDCs that might pursue higher-risk, higher-yield strategies. Its lower non-accrual rate and stable NAV per share in 2023 suggest a relatively strong performance within the private credit landscape.