Form 10-12G/A New Mountain Guardian Iii Bdc, L.l.c.

[Amend] Registration of securities [Section 12(g)]

Published: 2019-09-13 16:24:25
Submitted: 2019-09-13
a2239543z10-12ga.htm 10-12G/A


ENT> 10-12G/A 1 a2239543z10-12ga.htm 10-12G/A

As filed with the Securities and Exchange Commission on September 13, 2019

File No. 000-56072

 

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Amendment No. 1
to
FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934

NEW MOUNTAIN GUARDIAN III BDC, L.L.C.
(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of
incorporation or organization)
 
84-1918127

(I.R.S. Employer
Identification No.)

787 Seventh Avenue, 48th Floor
New York, New York

(Address of principal executive offices)

 


10019

(Zip Code)

(212) 720-0300

(Registrant's telephone number, including area code)

with copies to:

Rajib Chanda
Simpson Thacher & Bartlett LLP
900 G Street, N.W.
Washington, D.C. 20001

Securities to be registered pursuant to Section 12(b) of the Act:
None

Securities to be registered pursuant to Section 12(g) of the Act:
Units of Limited Liability Company Interests
(Title of class)

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer 
o
 
Accelerated filer 
o
 
Non-accelerated filer 
ý
 
Smaller reporting company 
o

Emerging growth company 
ý

        If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
o

   


TABLE OF CONTENTS

 

 
 

 
Page
 

Explanatory Note
 
 
1
 

Cautionary Statement Regarding Forward-Looking Statements
 
 

1
 

Item 1.
 

Business
 
 

3
 

Item 1A
 

Risk Factors
 
 

35
 

Item 2.
 

Financial Information
 
 

82
 

Item 3.
 

Properties
 
 

84
 

Item 4.
 

Security Ownership of Certain Beneficial Owners and Management
 
 

84
 

Item 5.
 

Directors and Executive Officers
 
 

86
 

Item 6.
 

Executive Compensation
 
 

94
 

Item 7.
 

Certain Relationships and Related Transactions, and Director Independence
 
 

95
 

Item 8.
 

Legal Proceedings
 
 

105
 

Item 9.
 

Market Price of and Dividends on the Registrant's Common Equity and Related Unitholder Matters
 
 

105
 

Item 10.
 

Recent Sales of Unregistered Securities
 
 

106
 

Item 11.
 

Description of Registrant's Securities to be Registered
 
 

106
 

Item 12.
 

Indemnification of Directors and Officers
 
 

108
 

Item 13.
 

Financial Statements and Supplementary Data
 
 

109
 

Item 14.
 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
 
 

109
 

Item 15.
 

Financial Statements and Exhibits
 
 

109
 

EXPLANATORY NOTE

        New Mountain Guardian III BDC, L.L.C. is filing this registration statement on Form 10 (this "Registration Statement") under the Securities Exchange Act of 1934, as amended (the "1934 Act"), on a voluntary basis to permit it to file an election to be regulated as a business development company (a "BDC"), under the Investment Company Act of 1940, as amended (the "1940 Act"). In this Registration Statement, each of the "Fund," "we," "us," and "our" refers to New Mountain Guardian III BDC, L.L.C. and the "Adviser" refers to New Mountain Finance Advisers BDC, L.L.C., unless otherwise specified.

        The Fund is an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 and the Fund will take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the "Securities Act").

        Once this Registration Statement has been deemed effective, we will be subject to the requirements of Section 13(a) of the 1934 Act, including the rules and regulations promulgated thereunder, which will require us, among other things, to file annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and we will be required to comply with all other obligations of the 1934 Act applicable to issuers filing registration statements pursuant to Section 12(g) of the 1934 Act.

        In connection with the foregoing, we have elected to be regulated as a BDC under the 1940 Act and are subject to the 1940 Act requirements applicable to BDCs.

Prospective investors should note that:

    the Fund's Units (as defined below) may not be sold without the written consent of the Adviser;


    the Units are not currently listed on an exchange, and it is uncertain whether a secondary market will develop;


    repurchases of Units by the Fund, if any, are expected to be very limited; and


    an investment in the Fund may not be suitable for investors who may need the money they invest in a specified time frame.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

        This Registration Statement contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as "anticipate", "believe", "can", "continue", "could", "estimate", "expect", "intend", "may", "plan", "potential", "project", "seek", "should", "target", "will", "would" or the negatives thereof or other variations of these words and similar expressions are intended to identify forward-looking statements. The forward-looking statements contained in this Registration Statement involve risks and uncertainties, including statements as to:

    our future operating results;


    our business prospects and the prospects of our Portfolio Companies (as defined below);


    the impact of investments that we expect to make;


    our contractual arrangements and relationships with third parties;


    the dependence of our future success on the general economy and its impact on the industries in which we invest;


    the ability of our Portfolio Companies to achieve their objectives;

1


    our expected financings and investments;


    the adequacy of our cash resources and working capital; and


    the timing of cash flows, if any, from the operations of our Portfolio Companies.

        These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:

    an economic downturn could impair our Portfolio Companies' ability to continue to operate, which could lead to the loss of some or all of our investments in such Portfolio Companies;


    a contraction of available credit and/or an inability to access the equity markets could impair our lending and investment activities;


    interest rate volatility could adversely affect our results, particularly if we elect to use leverage as part of our investment strategy;


    currency fluctuations could adversely affect the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S. dollars; and


    the risks, uncertainties and other factors we identify in "Risk Factors" and elsewhere in this Registration Statement and in our filings with the SEC.

        Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include our ability to originate new loans and investments, certain margins and levels of profitability and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this Registration Statement should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in "Risk Factors" and elsewhere in this Registration Statement. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Registration Statement. We do not undertake any obligation to update or revise any forward-looking statements or any other information contained herein, except as required by applicable law. The safe harbor provisions of Section 21E of the 1934 Act, which preclude civil liability for certain forward-looking statements, do not apply to the forward-looking statements in this Registration Statement because we are an investment company.

2


ITEM 1.    BUSINESS.

        We were formed on May 22, 2019 as a limited liability company under the laws of the State of Delaware. We expect to conduct a private offering (the "Private Offering") of units of our limited liability company interests (the "Units") to investors in reliance on exemptions from the registration requirements of the Securities Act. Units will be offered for subscription continuously throughout the Closing Period (as defined below). Each investor in the Private Offering will make a capital commitment (each, a "Capital Commitment") to purchase Units pursuant to a subscription agreement entered into with us (a "Subscription Agreement"). We expect closings of the Private Offering will occur, from time to time, in the Adviser's sole discretion, during the 18-month period (the "Closing Period") following the initial closing of Capital Commitments, which occurred on July 15, 2019. We may accept and draw down Capital Commitments from investors throughout the Closing Period. We commenced our loan origination and investment activities contemporaneously with the initial drawdown from investors in the Private Offering, which occurred on August 6, 2019 (the "Initial Drawdown," and the date on which the Initial Drawdown occurs, the "Initial Drawdown Date"). The "Investment Period" began on July 15, 2019 and will continue until the four-year anniversary of such date. The term of the Fund is six years from July 15, 2019, subject to (i) a one year extension as determined by the Adviser in its sole discretion and (ii) an additional one year extension as determined by our board of directors (the "Board") (the six year period and any successive extensions, the "Term").

        Prior to the initial closing in the Private Offering, we elected to be regulated as a BDC under the 1940 Act. We also intend to elect to be treated for U.S. federal income tax purposes as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a BDC and a RIC, we are required to comply with certain regulatory requirements. See "
—Operating and Regulatory Environment
" and "
—Taxation as a Regulated Investment Company
."

        The investments that we intend to invest in are almost entirely rated below investment grade or may be unrated, which are often referred to as "leveraged loans", "high yield" or "junk" debt investments, and may be considered "high risk" or speculative compared to debt investments that are rated investment grade. Such issuers are considered more likely than investment grade issuers to default on their payments of interest and principal, and such risk of default could reduce our net asset value and income distributions.

        Because we intend to qualify as a RIC under the Code, our portfolio will be subject to diversification and other requirements. See "
—Taxation as a Regulated Investment Company
." In addition to those diversification requirements, we will generally seek not to invest more than 6% of our total assets in any single Portfolio Company.

        In accordance with the 1940 Act as presently in effect, BDCs generally are prohibited from incurring additional leverage to the extent it would cause them to have less than a 200% asset coverage ratio, reflecting approximately a 1:1 debt-to-equity ratio, taking into account the then current fair value of the investments. However, under Section 61(a)(2) of the 1940 Act, implemented in accordance with the Small Business Credit Availability Act, we have elected to be subject to the lower asset current coverage ratio of 150% available thereunder in order to maintain maximum flexibility, which will permit us to have up to a 2:1 debt-to-equity ratio.

        Notwithstanding the foregoing, our target leverage is expected to be in the range of 0.7x to 0.9x debt-to-equity (excluding borrowings under any subscription line secured by unfunded Capital Commitments), depending on asset mix. This 0.7x to 0.9x debt-to-equity range equates to leverage of approximately 41% to 47% of total assets. We shall not incur leverage if, as a result of such incurrence, our leverage would exceed 1.0x debt-to-equity (excluding borrowings under any subscription line secured by unfunded Capital Commitments). See "
Item 1A. Risk Factors—Certain Risks Relating to Portfolio Investments Generally—Fund-Level Borrowings.
" We may in the future determine to utilize a greater amount of leverage, including for investment purposes. However, our leverage, including

3


borrowings under any subscription line secured by unfunded Capital Commitments, cannot exceed 2.0x debt-to-equity (or leverage of 66 2/3% of total assets). The use of borrowed funds or the proceeds of preferred Units issued by the Fund (the "Preferred Units") to make investments would have its own specific set of benefits and risks, and all of the costs of borrowing funds or issuing Preferred Units would be borne by the holders of the Units (each, a "Unitholder"). The Fund may, but has no current intention to, issue Preferred Units. See "
Item 1A. Risk Factors—Certain Risks Relating to Portfolio Investments Generally—Fund-Level Borrowings
" and "
Item 1A. Risk Factors—Certain Risks Relating to the Units and Operation of the Fund—Preferred Units.
"

Background

About New Mountain

        New Mountain Capital, L.L.C. ("New Mountain," "NMC" or "the Firm") is a leading alternative investment firm. New Mountain was founded in 1999 and began operations in January 2000, following approximately twenty years of private equity investing by its founding principal, Steven B. Klinsky. New Mountain Capital focuses on acyclical industries and emphasizes deep fundamental research and investor "value add," rather than reliance on excessive risk, as the best path to high and consistent long-term returns.

        New Mountain's mission is to be best in class among alternative asset managers as measured by returns, control of risk, service to our investors and the quality of the businesses we help build. This mission has since been applied to its public equity and yield strategies. As of March 31, 2019, New Mountain managed over $20 billion of assets across private equity, corporate credit, public equity and real estate. Since inception through March 31, 2019, New Mountain has invested approximately $9.9 billion across its entire Credit Platform.

The Adviser

        The Adviser is a wholly-owned subsidiary of New Mountain Capital Group, L.P. (together with NMC, "New Mountain Capital") whose ultimate owners include Steven B. Klinsky and related and other vehicles. The Adviser is a Delaware limited liability company registered as an investment adviser with the Securities and Exchange Commission (the "SEC") under the Investment Advisers Act of 1940, as amended (the "Advisers Act"). New Mountain Capital focuses on investing in defensive growth companies across its private equity, public equity and credit investment vehicles. The Adviser manages our day-to-day operations and provides us with investment advisory and management services pursuant to the investment advisory and management agreement (the "Investment Management Agreement") by and between the Adviser and us. In particular, the Adviser shall:

    determine the composition of the portfolio of the Fund, the nature and timing of the changes therein and the manner of implementing such changes;


    identify, evaluate and negotiate the structure of the investments made by the Fund;


    execute, monitor and service the Fund's investments;


    determine the securities and other assets that the Fund will purchase, retain, or sell;


    perform due diligence on prospective portfolio companies;


    vote, exercise consents and exercise all other rights appertaining to such securities and other assets on behalf of the Fund; and


    provide the Fund with such other investment advisory, research and related services as the Fund may, from time to time, reasonably require for the investment of its funds.

4


        The Adviser is managed by a five member investment committee, which is responsible for approving purchases and sales of our investments above $7.5 million in the aggregate by a single issuer. For additional information on the investment committee, see "—
Investment Committee."

The Administrator

        New Mountain Finance Administration, L.L.C. (the "Administrator"), a wholly-owned subsidiary of New Mountain, entered into an Administration Agreement (the "Administration Agreement") with us, under which it provides administrative services for us, including arranging office facilities for us and providing office equipment and clerical, bookkeeping and recordkeeping services at such facilities. Subject to the Board's oversight, the Administrator shall also, on behalf of the Fund, conduct relations with custodians, depositories, transfer agents, dividend disbursing agents, other stockholder servicing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and other such persons in any such other capacity deemed necessary or desirable. Under the Administration Agreement, the Administrator shall also perform, or oversee the performance of, our required administrative services, which includes being responsible for the financial records which we are required to maintain and preparing reports to our stockholders and reports filed with the SEC, which includes, but is not limited to, providing the services of our chief financial officer, chief compliance officer, and their respective staffs. In addition, the Administrator assists us in determining and publishing our net asset value ("NAV"), overseeing the preparation and filing of tax returns and the printing and dissemination of reports to our stockholders, and generally overseeing the payment of our expenses and the performance of administrative and professional services rendered to us by others. The Administrator may also provide on our behalf managerial assistance to our Portfolio Companies. We reimburse the Administrator for the allocable portion of overhead and other expenses incurred by it in performing its obligations to us under the Administration Agreement, including the compensation of our chief financial officer and chief compliance officer, and their respective staffs.

        The Administrator may hire a third party sub-administrator to assist with the provision of administrative services. A sub-administrator would receive compensation for its sub-administrative services under a sub-administration agreement.

Investment Objective and Portfolio

        We seek to generate current income and capital appreciation primarily by investing in or originating debt investments in companies that the Adviser believes are "defensive growth" companies in non-cyclical industry niches where the Adviser has developed strong proprietary research and operational advantages. We expect to make investments through both primary originations and open-market secondary purchases. The relative amount of our investments in primary originations and secondary market purchases is expected to vary over time, but we expect the majority of our investments in the near future will be in primary originations. We predominantly target investments in U.S. middle market businesses, a market segment we believe continues to be underserved by other lenders. We define middle market businesses as those businesses with annual earnings before interest, taxes, depreciation, and amortization ("EBITDA") between $10.0 million and $200.0 million. Our primary focus is in the debt of defensive growth companies, which we define as generally exhibiting the following characteristics: (i) sustainable secular growth drivers, (ii) high barriers to competitive entry, (iii) high free cash flow after capital expenditure and working capital needs, (iv) high returns on assets and (v) niche market dominance. The form of our investments may include first lien, second lien or subordinated debt, or, to a lesser extent, preferred equity or common equity. The Fund will not invest in real property or hold equity in a U.S. real property holding company.

        Investments by the Fund are referred to herein as "Portfolio Investments," and the companies in which such Portfolio Investments are made or the issuers of such Portfolio Investments are referred to herein as "Portfolio Companies." After the Fund's initial ramp period, the Fund's target Portfolio Investment size in one Portfolio Company is expected to be 2.0% to 4.0% of total assets and the maximum Portfolio Investment size in one Portfolio Company is expected to be 6.0% of total assets.

5


Investment Criteria

        The Adviser has identified the following investment criteria and guidelines for use in evaluating prospective Portfolio Companies. However, not all of these criteria and guidelines were, or will be, met in connection with each of the Fund's investments.

    Defensive growth industries.
      The Fund seeks to invest in industries that can succeed in both robust and weak economic environments, but which are also sufficiently large and growing to achieve high valuations providing enterprise value cushion for our targeted debt securities.


    High barriers to competitive entry.
      The Fund targets industries and companies that have well defined industries and well established, understandable barriers to competitive entry.


    Recurring revenue.
      Where possible, the Fund focuses on companies that have a high degree of predictability in future revenue.


    Flexible cost structure.
      The Fund seeks to invest in businesses that have limited fixed costs and therefore modest operating leverage.


    Strong free cash flow and high return on assets.
      The Fund focuses on businesses with a demonstrated ability to produce meaningful free cash flow from operations. The Fund typically targets companies that are not asset intensive and that have minimal capital expenditure and minimal working capital growth needs.


    Sustainable business and niche market dominance.
      The Fund seeks to invest in businesses that exert niche market dominance in their industry and that have a demonstrated history of sustaining market leadership over time.


    Established companies.
      We seek to invest in established companies with sound historical financial performance. We do not intend to invest in start-up companies or companies with speculative business plans.

Competition

        We compete for investments with a number of BDCs and investment funds (including private equity and hedge funds), as well as traditional financial services companies such as commercial banks and other sources of financing. Many of these entities have greater financial and managerial resources than we do. We believe we are able to be competitive with these entities primarily on the basis of the experience and contacts of our management team, our responsive and efficient investment analysis and decision-making processes, the investment terms we offer, the model that we employ to perform our due diligence with the broader New Mountain Capital team and our model of investing in companies and industries we know well.

        We believe that some of our competitors may make investments with interest rates and returns that are comparable to or lower than the rates and returns that we target. Therefore, we do not seek to compete solely on the interest rates and returns that we offer to potential Portfolio Companies. For additional information concerning the competitive risks we face, see "
Item 1A. Risk Factors."

Investment Selection and Process

        The Adviser believes it has developed a proven, consistent and replicable investment process to execute our investment strategy. The Adviser seeks to identify the most attractive investment sectors from the top down and then works to become the most advantaged investor in these sectors. The steps in the Adviser's process include:

    Identifying attractive investment sectors top down;

6


    Creating competitive advantages in the selected industry sectors; and


    Targeting companies with leading market share and attractive business models in its chosen sectors.

Investment Committee

        The Adviser is managed by a five-member investment committee (the "Investment Committee"), which is responsible for approving purchases and sales of our investments above $7.5 million in the aggregate by a single issuer. The Investment Committee currently consists of Steven B. Klinsky, Robert A. Hamwee, Adam B. Weinstein and John R. Kline. The fifth and final member of the Investment Committee will consist of a New Mountain Managing Director who will hold the position on the Investment Committee on an annual rotating basis. Lars O. Johansson has served on the Investment Committee since August 2019. In addition, our executive officers and certain investment professionals of the Adviser are invited to all Investment Committee meetings. Purchases and dispositions below $7.5 million may be approved by our chief executive officer. These approval thresholds are subject to change over time. We expect to benefit from the extensive and varied relevant experience of the investment professionals serving on the Investment Committee, which includes expertise in private equity, primary and secondary leveraged credit, private mezzanine finance and distressed debt.

        The purpose of the Investment Committee is to evaluate and approve, as deemed appropriate, all investments by the Adviser, subject to certain thresholds. The Investment Committee's process is intended to bring the diverse experience and perspectives of the Investment Committee's members to the analysis and consideration of every investment. The Investment Committee also serves to provide investment consistency and adherence to the Adviser's investment philosophies and policies. The Investment Committee also determines appropriate investment sizing and suggests ongoing monitoring requirements.

        In addition to reviewing investments, the Investment Committee meetings serve as a forum to discuss credit views and outlooks. Potential transactions and investment opportunities are also reviewed on a regular basis. The members of our investment team are encouraged to share information and views on credits with the Investment Committee early in their analysis. This process improves the quality of the analysis and assists the deal team members to work more efficiently.

Investment Structure

        We target debt investments that will yield current income that can support distributions to our Unitholders. Our debt investments are typically structured with the maximum seniority and collateral that we can reasonably obtain while seeking to achieve our target return profile.

        The terms of our debt investments are tailored to the facts and circumstances of the transaction and prospective Portfolio Company and structured to protect our rights and manage our risk while creating incentives for the Portfolio Company to achieve its business plan. A substantial source of return is the cash interest that we collect on our debt investments.

        First lien loans, second lien loans, subordinated loans and bonds generally have terms of four to seven years, provide for a variable or fixed interest rate, may contain prepayment penalties. First lien loans are secured by a first priority security interest in all existing and future assets of the borrower. Second lien loans are secured by a second priority interest and subordinated loans are generally unsecured. Our loan and bond investments may include payment-in-kind ("PIK") interest, which represents contractual interest accrued and added to the principal that generally becomes due at maturity. Our first lien loans may include traditional first lien senior secured loans or unitranche loans.

7


Unitranche loans combine characteristics of traditional first lien senior secured loans as well as second lien and subordinated loans.

        In addition, from time to time we may also enter into revolving credit facilities, bridge financing commitments, delayed draw commitments or other commitments which can result in providing future financing to a Portfolio Company. When we make a debt investment, we may be granted equity in the Portfolio Company in the same class of security as the sponsor receives upon funding.

        We may make investments through wholly owned subsidiaries. Such subsidiaries are expected to be organized as corporations or limited liability companies and will not be registered under the 1940 Act. These subsidiaries may be formed to obtain favorable tax benefits or to obtain financing on favorable terms due to their bankruptcy-remote characteristics. Our Board has oversight responsibility for our investment activities, including our investment in any subsidiary, and our role as sole shareholder of any subsidiary. To the extent applicable to the investment activities of a subsidiary, the subsidiary will follow the same compliance policies and procedures as the Fund. We would "look through" any such subsidiary to determine compliance with our investment policies.

Portfolio Company Monitoring

        We monitor the performance and financial trends of our Portfolio Companies on at least a quarterly basis. We attempt to identify any developments within the Portfolio Company, the industry or the macroeconomic environment that may alter any material element of our original investment strategy. We use several methods of evaluating and monitoring the performance of our investments, including but not limited to the following:

    review of monthly and/or quarterly financial statements and financial projections for Portfolio Companies provided by its management;


    ongoing dialogue with and review of original diligence sources;


    periodic contact with Portfolio Company management (and, if appropriate, the private equity sponsor) to discuss financial position, requirements and accomplishments; and


    assessment of business development success, including product development, profitability and the Portfolio Company's overall adherence to its business plan.

        We use an investment rating system to characterize and monitor the credit profile and expected level of returns on each investment in the portfolio. We use a four-level numeric rating scale as follows:

    Investment Rating 1—Investment is performing materially above expectations;


    Investment Rating 2—Investment is performing materially in-line with expectations. All new loans are rated 2 at initial purchase;


    Investment Rating 3—Investment is performing materially below expectations, where the risk of loss has materially increased since the original investment; and


    Investment Rating 4—Investment is performing substantially below expectations and risks have increased substantially since the original investment. Payments may be delinquent. There is meaningful possibility that we will not recoup our original cost basis in the investment and may realize a substantial loss upon exit.

Exit Strategies/Refinancing

        We expect to exit our investments typically through one of four scenarios: (i) the sale of the Portfolio Company itself, resulting in repayment of all outstanding debt, (ii) the recapitalization of the Portfolio Company in which our loan is replaced with debt or equity from a third party or parties (in

8


some cases, we may choose to participate in the newly issued loan(s)), (iii) the repayment of the initial or remaining principal amount of our loan then outstanding at maturity or (iv) the sale of the debt investment by us. In some investments, there may be scheduled amortization of some portion of our loan which would result in a partial exit of our investment prior to the maturity of the loan.

        Within the Investment Period, repayments and refinancings will be redeployed into new investments. After the Investment Period, the Adviser may pursue several options to return capital to investors. These may include running off the portfolio over subsequent years as investments are repaid, secondary sales in the market and other potential liquidity options. For the avoidance of doubt, we have no intention of pursuing an initial public offering and the Fund's documents will prohibit this type of event; however, Unitholders may be given the opportunity (but would not be required) to elect to exchange their interests in us for interests in another investment vehicle managed by the Adviser or its affiliates.

Valuation of Portfolio Securities

        At all times consistent with accounting principles generally accepted in the United States of America ("GAAP") and the 1940 Act, we will conduct a valuation of our assets, pursuant to which our net asset value is determined.

        We value our assets on a quarterly basis, or more frequently if required under the 1940 Act. For purposes of the 1940 Act, our Board is ultimately and solely responsible for determining the fair value of our portfolio investments on a quarterly basis in good faith, including investments that are not publicly traded, those whose market prices are not readily available and any other situation where our portfolio investments require a fair value determination. Security transactions are accounted for on a trade date basis. Our 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 independent pricing services.

    (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.

    a.
    Bond quotes are obtained through independent pricing services. Internal reviews are performed by the investment professionals of the Adviser to ensure that the quote obtained is representative of fair value in accordance with GAAP and if so, the quote is used. If the Adviser is unable to sufficiently validate the quote(s) internally and if the investment's par value or its fair value exceeds the materiality threshold, the investment is valued similarly to those assets with no readily available quotes (see (3) below); and

    b.
    For investments other than bonds, we look at the number of quotes readily available and perform the following procedures:

    i.
    Investments for which two or more quotes are received from a pricing service are valued using the mean of the mean of the bid and ask of the quotes obtained;

    ii.
    Investments for which one quote is received from a pricing service are validated internally. The investment professionals of the Adviser analyze the market quotes obtained using an array of valuation methods (further described below) to validate the fair value. If the Adviser is unable to sufficiently validate the quote internally and if the investment's par value or its fair value exceeds the materiality threshold, the investment is valued similarly to those assets with no readily available quotes (see (3) below).

9


    (3)
    Investments for which quotations are not readily available through exchanges, pricing services, brokers, or dealers are valued through a multi-step valuation process:

    a.
    Each Portfolio Company or investment is initially valued by the investment professionals of the Adviser responsible for the credit monitoring;

    b.
    Preliminary valuation conclusions will then be documented and discussed with our senior management;

    c.
    If an investment falls into (3) above for four consecutive quarters and if the investment's par value or its fair value exceeds the materiality threshold, then at least once each fiscal year, the valuation for each portfolio investment for which we do not have a readily available market quotation will be reviewed by an independent valuation firm engaged by our Board; and

    d.
    When deemed appropriate by our management, an independent valuation firm may be engaged to review and value investment(s) of a Portfolio Company, without any preliminary valuation being performed by the Adviser. The investment professionals of the Adviser will review and validate the value provided.

        For investments in revolving credit facilities and delayed draw commitments, the cost basis of the funded investments purchased is offset by any costs/netbacks received for any unfunded portion on the total balance committed. The fair value is also adjusted for the price appreciation or depreciation on the unfunded portion. As a result, the purchase of commitments not completely funded may result in a negative fair value until it is called and funded.

        The values assigned to investments are based upon available information and do not necessarily represent amounts which might ultimately be realized, since such amounts depend on future circumstances and cannot be reasonably determined until the individual positions are liquidated. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period and the fluctuations could be material.

        For all valuations, the Valuation Committee of our Board, which consists solely of directors who are not "interested persons" of the Fund, as such term is used under the 1940 Act (the "Independent Directors"), will review these preliminary valuations and our Board, a majority of whom are Independent Directors, will discuss the valuations and determine the fair value of each investment in the portfolio in good faith.

Operating and Regulatory Environment

        As with other companies regulated by the 1940 Act, a BDC must adhere to certain regulatory requirements. The 1940 Act contains prohibitions and restrictions relating to investments by a BDC in another investment company as well as transactions between BDCs and their affiliates, principal underwriters and affiliates of those affiliates or underwriters. A BDC must be organized and have its principal place of business in the U.S., it must be operated for the purpose of investing in or lending to primarily private companies and for qualifying investments it must make significant managerial assistance available to them.

        We have a Board. A majority of our Board must be persons who are not interested persons, as that term is defined in the 1940 Act. As a BDC, we are prohibited from indemnifying any director or officer against any liability to us or our Unitholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person's office. Additionally, we are required to provide and maintain a bond issued by a reputable fidelity insurance company.

10


        As a BDC, we are required to meet a coverage ratio of the value of total assets to total senior securities, which include all of our borrowings, and any Preferred Units we may issue in the future. Under recent changes implemented in accordance with the Small Business Credit Availability Act passed in 2018, a BDC may increase the maximum amount of leverage it may incur from an asset coverage ratio of 200% to an asset coverage ratio of 150%, if certain requirements are met. We have elected to be subject to the lower coverage ratio of 150% available thereunder in order to maintain maximum flexibility, reflecting approximately a 2:1 debt to equity ratio.

        We may, to the extent permitted under the 1940 Act, issue additional equity or debt capital. After the Stable Offering Price Period (as defined below), we will generally not be able to issue and sell our Units at a price below net asset value per Unit without Unitholder approval. See "
Item 1. Business—The Private Offering.
" We may, however, sell our Units, or warrants, options or rights to acquire our Units, at a price below the then-current net asset value of our Units if our Board determines that such sale is in our best interests and the best interests of our Unitholders, and our Unitholders approve such sale. In addition, we may generally issue new Units at a price below net asset value in rights offerings to existing Unitholders, in payment of dividends and in certain other limited circumstances.

        As a BDC, we will not generally be permitted to make any co-investments with the Adviser or its affiliates without an exemptive order from the SEC. On December 18, 2017, the SEC issued an exemptive order (the "Exemptive Order"), which superseded a prior order issued on June 5, 2017, which permits us to co-invest in Portfolio Companies with certain funds or entities managed by the Adviser or its affiliates in certain negotiated transactions where co-investing would otherwise be prohibited under the 1940 Act, subject to the conditions of the Exemptive Order. Pursuant to the Exemptive Order, we are permitted to co-invest with our affiliates if a "required majority" (as defined in Section 57(o) of the 1940 Act) of our Independent Directors make certain conclusions in connection with a co-investment transaction, including, but not limited to, that (1) the terms of the potential co-investment transaction, including the consideration to be paid, are reasonable and fair to us and our Unitholders and do not involve overreaching in respect of us or our Unitholders on the part of any person concerned, and (2) the potential co-investment transaction is consistent with the interests of our Unitholders and is consistent with our then-current investment objective and strategies.

        We may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC unless authorized by vote of a majority of the outstanding voting securities, as required by the 1940 Act. A majority of the outstanding voting securities of a company is defined under the 1940 Act as the lesser of: (a) 67.0% or more of such company's voting securities present at a meeting if more than 50.0% of the outstanding voting securities of such company are present or represented by proxy, or (b) more than 50.0% of the outstanding voting securities of such company. We do not anticipate any substantial change in the nature of our business.

        In addition, as a BDC, we are not permitted to issue stock in consideration for services.

Investment Management Agreement

        We are a closed-end, non-diversified management investment company that has elected to be regulated as a BDC under the 1940 Act. We are externally managed by our Adviser and pay our Adviser a fee for its services. The following summarizes our arrangements with the Adviser pursuant to an investment advisory and management agreement (the "Investment Management Agreement").

        Pursuant to the Investment Management Agreement, the Adviser shall:

    determine the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes;


    determine the securities and other assets that we will purchase, retain or sell;

11


    identify, evaluate and negotiate the structure of our investments that we make;


    execute, monitor and service the investments that we make;


    perform due diligence on prospective Portfolio Companies;


    vote, exercise consents and exercise all other rights appertaining to such securities and other assets on our behalf; and


    provide us with such other investment advisory, research and related services as we may, from time to time, reasonably require for the investment of our funds.

        The Adviser's services under the Investment Management Agreement are not exclusive, and the Adviser (so long as its services to us are not impaired) and/or other entities affiliated with New Mountain are permitted to furnish similar services to other entities. Under the Investment Management Agreement, the Adviser is entitled to receive a fee for investment advisory and management services consisting of a base management fee and an incentive fee. The cost of the base management fee and incentive fee payable to the Adviser is borne by us and, as a result, is indirectly borne by our Unitholders.

        The Investment Management Agreement has been approved by our Board at the Board's initial board meeting. Unless earlier terminated as described below, the Investment Management Agreement will remain in effect for a period of two years from its effective date and will remain in effect from year to year thereafter if approved annually by (i) the vote of our Board, or by the vote of a majority of our outstanding voting securities, and (ii) the vote of a majority of our Independent Directors. The Investment Management Agreement will automatically terminate in the event of an assignment by the Adviser. The Investment Management Agreement may be terminated by either party, or by a vote of the majority of our outstanding voting Units or, if less, such lower percentage as required by the 1940 Act, without penalty upon not less than 60 days' prior written notice to the applicable party. If the Investment Management Agreement is terminated according to this paragraph, we will pay the Adviser a pro-rated portion of the management fee. See "
Item 1A. Risk Factors—Certain General Risks of an Investment in the Fund—Role of New Mountain and its Professionals; No Dedicated Investment Team.
"

Exculpation and Indemnification

        The Fund's limited liability company agreement (the "Limited Liability Company Agreement") generally provides for the indemnification of directors and officers.

        In addition, the Adviser and the Administrator shall not be liable for any error of judgment or mistake of law or for any act or omission or any loss suffered by the Fund in connection with the matters to which the Investment Management Agreement and Administration Agreement, respectively, relate, provided that the Adviser and Administrator shall not be protected against any liability to the Fund or its Unitholders to which the Adviser or Administrator would otherwise be subject by reason of (i) breach of the Limited Liability Company Agreement or, as applicable, the Investment Management Agreement or Administration Agreement, (ii) willful misfeasance, bad faith, fraud or gross negligence on its part in the performance of its duties or by reason of the reckless disregard of its duties and obligations, or (iii) violation of any law, including, but not limited to, violation of any federal or state securities law, that has a material adverse effect on the Fund (collectively, "Disabling Conduct"). Each of the Investment Management Agreement and the Administration Agreement will provide that, absent Disabling Conduct, each of our Adviser and our Administrator, as applicable, and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with it will be entitled to indemnification from us for any damages, liabilities, costs and expenses (including reasonable attorneys' fees and amounts reasonably paid in settlement) arising from the rendering of our Adviser's services under the Investment Management Agreement and our Administrator's services under the Administration Agreement or otherwise as adviser or administrator

12


for us. The Adviser and the Administrator shall not be liable under their respective agreements with us or otherwise for any loss due to the mistake, action, inaction, negligence, dishonesty, fraud or bad faith of any broker or other agent; provided, that such broker or other agent shall have been selected, engaged or retained and monitored by the Adviser or the Administrator in good faith, unless such action or inaction was made by reason of Disabling Conduct, or in the case of a criminal action or proceeding, where the Adviser or Administrator had reasonable cause to believe its conduct was unlawful.

        The Fund has obtained liability insurance for its officers and directors.

Management and Incentive Fees

        The Fund will pay the Adviser a fee for its services under the Investment Management Agreement consisting of two components—an annual base management fee and an incentive fee.

Management Fee

        The cost of the management fee payable to the Adviser is borne by us and, as a result, is indirectly borne by our Unitholders.

        The management fee is payable quarterly in arrears at an annual rate of 1.15% of the Managed Capital (as defined below) as of the last day of the applicable quarter. For the period from the effective date of the Investment Management Agreement through June 30, 2020, the base management fee shall be reduced by 50% (for the avoidance of doubt, this results in a management fee rate of 0.575% through June 30, 2020). The management fee will be reduced, but not below zero, by any amounts paid by the Fund or its subsidiaries to a Placement Agent (as defined below) and any amounts in excess of the Organizational and Offering Expense Cap and the Specified Expenses Cap (each as defined below). "Managed Capital" means the value of aggregate Contributed Capital from all Unitholders (including any outstanding borrowings under any subscription line drawn in lieu of capital calls)
less
any return of capital distributions and
less
any cumulative realized losses since inception (calculated net of any subsequently reversed realized losses and net of any realized gains).

Incentive Fee

        The incentive fee consists of two components that are independent of each other, with the result that one component may be payable even if the other is not. A portion of the incentive fee is based on a percentage of our income and a portion is based on a percentage of our capital gains, each as described below.

Incentive Fee on Pre-Incentive Fee Net Investment Income

        The portion based on our income (the "Income Incentive Fee") is based on pre-incentive fee net investment income.

        Pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets at the end of the immediate preceding quarter, is compared to a "hurdle rate" of return of 1.75% per quarter (7.0% annualized).

        We will pay the Adviser an incentive fee quarterly in arrears with respect to our pre-incentive fee net investment income in each calendar quarter as follows:

    no incentive fee based on pre-incentive fee net investment income in any calendar quarter in which our pre-incentive fee net investment income does not exceed the hurdle rate of 1.75%;


    100% of the dollar amount of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but

13


      is less than or equal to a rate of return of 2.059% (8.235% annualized). We refer to this portion of our pre-incentive fee net investment income (which exceeds the hurdle rate but is less than 2.059%) as the "catch-up." The "catch-up" is meant to provide the Adviser with approximately 15% of our pre-incentive fee net investment income as if a hurdle rate did not apply if this net investment income exceeds 2.059% in any calendar quarter; and

    15% of the dollar amount of our pre-incentive fee net investment income, if any, that exceeds a rate of return of 2.059% (8.235% annualized). This reflects that once the hurdle rate is reached and the catch-up is achieved, 15% of all pre-incentive fee net investment income thereafter is payable to the Adviser.

        The following is a graphical representation of the calculation of the income related portion of the incentive fee:

Quarterly Income Incentive Fee

Pre-Incentive Fee Net Investment Income
(expressed as a percentage of the value of net assets)

GRAPHIC

Percentage of Pre-Incentive Fee Net Investment Income
Allocated to Quarterly Incentive Fee

        "Pre-Incentive Fee Net Investment Income" means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from Portfolio Companies) accrued during the calendar quarter, minus our operating expenses for the quarter (including the management fee, expenses payable under the Administration Agreement, and any interest expense and distributions paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with PIK interest and zero coupon securities), accrued income that we have not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.

        The fees that are payable under the Investment Management Agreement for any partial period will be appropriately prorated.

Incentive Fee on Capital Gains

        The second component of the incentive fee is the capital gains incentive fee. We will pay the Adviser an incentive fee with respect to our cumulative realized capital gains computed net of all realized capital losses and unrealized capital depreciation since inception ("Cumulative Net Realized Gains") based on the waterfall below:

    (a)
    First, no incentive fee is payable to the Adviser on Cumulative Net Realized Gains until aggregate return of capital distributions, distributions of net investment income and distributions of net realized capital gains to Unitholders is equal to total capital contributions;

14


    (b)
    Second, no incentive fee is payable to the Adviser on Cumulative Net Realized Gains until the Fund has paid cumulative distributions equal to an annualized, cumulative internal rate of return of 7% on the total contributed capital to the Fund calculated from the date that each such amount was due to be contributed to the Fund until the date each such distribution is paid;

    (c)
    Third, upon a distribution that results in cumulative distributions exceeding the amounts in clause (a) and (b) above, an incentive fee on capital gains payable to the Adviser equal to 100% of the amount of Cumulative Net Realized Gains until the Adviser has received (together with amounts the Adviser has received under Income Incentive Fees) an amount equal to 15% of the sum of (i) the cumulative distributions to Unitholders made pursuant to clause (b) above, (ii) Income Incentive Fee paid to the Adviser and (iii) amounts paid to the Adviser pursuant to this clause (c); and

    (d)
    Thereafter, an incentive fee on capital gains equal to 15% of additional undistributed—Cumulative Net Realized Gains;

provided that, in no event will the incentive fee on capital gains paid to the Adviser exceed the amount permitted by Section 205(b)(3) of the Advisers Act.

        The following is a graphical representation of the calculation of the realized gain portion of the incentive fee:

Realized Gain Incentive Fee

Aggregate Distributions to Investors
(expressed as a percentage of cumulative internal rate of return on total contributed capital
after total capital contributions have been returned)

GRAPHIC

Percentage of Cumulative Net Realized Gains Since Inception (provided that the Realized Gain Incentive Fee may not exceed 15% of Cumulative Net Realized Gains)

        Upon termination of the Fund, the Adviser will be required to return incentive fees to the Fund to the extent that: (i) the Adviser has received cumulative incentive fees in excess of 15% of the sum of (A) the Fund's cumulative distributions other than return of capital contributions and (B) the incentive fees paid to the Adviser; or (ii) the Unitholders have not received a 7% cumulative internal rate of return, in both instances, determined on an aggregate basis covering all transactions of the Fund; provided that in no event will such restoration be more than the incentive fees received by the Adviser less taxes paid or payable with respect to such incentive fees determined using the Assumed Tax Rate.

        The "Assumed Tax Rate" will mean the highest combined effective marginal U.S. federal (including Medicare tax), state and local tax rates applicable to individuals that are resident in New York, New York and taking into account deductibility of state and local taxes for U.S. federal income tax purposes and the character of such income and the rate applicable to the imposition of any entity-level taxes.

        The "internal rate of return" is a measure of discounted cash flows (inflows and outflows). Specifically, internal rate of return is the discount rate at which the net present value of all cash flows is equal to zero. In other words, internal rate of return is the discount rate at which the present value

15


of total capital invested in the investments is equal to the present value of all realized returns from the investments. The "cumulative internal rate of return" is determined by aggregating the internal rate of return for all transactions of the Fund.

The Administration Agreement

        Pursuant to the Administration Agreement, the Administrator shall perform (or oversee, or arrange for, the performance of) the administrative services necessary for the operation of the Fund. Without limiting the generality of the foregoing, the Administrator will provide the Fund with office facilities, equipment, clerical, bookkeeping and record keeping services at such facilities. The Administrator shall also, on behalf of the Fund and subject to oversight by the Board, conduct relations with custodians, depositories, transfer agents, dividend disbursing agents, other stockholder servicing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and other such persons in any such other capacity deemed necessary or desirable. The Administrator shall make reports to the Board of its performance of its obligations to the Fund hereunder, and furnish advice and recommendations with respect to such other aspects of the business and affairs of the Fund, as it determines to be desirable; provided that the Administrator shall not provide any advice or recommendation relating to the securities and other assets that the Fund should purchase, retain or sell or any other investment advisory services to the Fund. The Administrator is responsible for the financial and other records that the Fund is required to maintain and will prepare, print and disseminate reports to Unitholders and reports and other materials filed with the SEC or any other regulatory authority, which includes, but is not limited to, providing the services of the Fund's chief financial officer, chief compliance officer, and their respective staffs. The Administrator shall provide on the Fund's behalf significant managerial assistance to those Portfolio Companies to which the Fund is required to provide such assistance. In addition, the Administrator assists the Fund in determining and publishing its net asset value, overseeing the preparation and filing of its tax returns, and generally overseeing the payment of the Fund's expenses and the performance of administrative and professional services rendered to the Fund by others. We reimburse the Administrator for the allocable portion of overhead and other expenses incurred by it in performing its obligations to us under the Administration Agreement, including the compensation of our chief financial officer and chief compliance officer, and their respective staffs.

        The Administrator may hire a third party sub-administrator to assist with the provision of administrative services. The sub-administrator will receive compensation for its sub-administrative services under a sub-administration agreement.

        The Administration Agreement has been approved by our Board at the Board's initial board meeting. Unless earlier terminated as described below, the Administration Agreement will remain in effect for a period of two years from its effective date and will remain in effect from year to year thereafter if approved annually by (i) the vote of our Board, or by the vote of a majority of our outstanding voting securities, and (ii) the vote of a majority of our Independent Directors. The Administration Agreement will automatically terminate in the event of an assignment by the Administrator. The Administration Agreement may be terminated by either party, or by a vote of the majority of our outstanding voting Units without penalty upon not less than 60 days' prior written notice to the applicable party.

Payment of Our Expenses under the Investment Management and Administration Agreements

        The Adviser pays the costs and expenses of its normal operating overhead, including salaries of the Adviser's employees and senior advisors (excluding salary, benefits, directors' fees, stock options and other compensation received by senior advisors for serving on board of directors, serving in executive management roles or performing the functional equivalent of such roles) and other expenses incurred in maintaining the Adviser's place of business ("Adviser Expenses"). The Fund pays all costs, expenses

16


and liabilities that in the good faith judgment of the Adviser are incurred by or arise out of the operation and activities of the Fund, including, without limitation those listed in
"—Expenses—Fund Expenses."

Expenses

Organization and Offering Expenses

        We bear our own legal and other expenses incurred in connection with our formation and organization and the offering of our Units, including (other than any placement fees, which are borne by the Adviser directly or pursuant to waivers of the management fee) all out-of-pocket legal, tax, accounting, printing, data room, consultation, administrative, travel, meal, accommodation and U.S. and non-U.S. filing fees and expenses of the Fund or the Adviser (including with respect to any registration or licensing of the Fund or the Adviser for marketing under any national private placement or similar regime outside of the United States including those in member states of the European Union), up to a maximum aggregate amount of, at the end of the Closing Period, the lesser of: (i) $2 million or (ii) 0.50% of aggregate Capital Commitments (the "Organizational and Offering Expense Cap"). Any costs in excess of this cap will be applied as a reduction to the Adviser's management fee. The Adviser may not later recapture Organizational and Offering Expenses that are in excess of the Organizational and Offering Expense Cap.

Fund Expenses

        The Fund pays all costs, expenses and liabilities that in the good faith judgment of the Adviser are incurred by or arise out of the operation and activities of the Fund ("Fund Expenses"), including, without limitation:

    (a)
    the management fee and incentive fees payable under the Investment Management Agreement and the Fund's allocable portion of compensation, overhead (including office equipment and utilities) and other expenses incurred by the Administrator in performing its administrative obligations under the Administration Agreement;

    (b)
    out-of-pocket fees and expenses relating to consummated Portfolio Investments, proposed but unconsummated Portfolio Investments ("Broken Deal Expenses"), including (i) the sourcing, bidding, evaluating, purchasing, trading, settling, maintaining custody, holding, monitoring, acquisition, and sale of thereof, (ii) origination fees, syndication fees, research costs, due diligence costs, bank service fees, (iii) fees and expenses related to the organization or maintenance of any intermediate entity used to acquire, hold or dispose of any Portfolio Investment or otherwise facilitating the Fund's investment activities, (iv) travel, meal and lodging expenses incurred in connection with the preliminary evaluation of potential investment opportunities and (v) travel, meal, lodging and other ordinary course of business expenses of monitoring of Portfolio Investments.

    (c)
    an amount equal to 100% of all premiums for insurance protecting the Fund, its officers or directors, the Adviser, the Administrator or any of their employees, officers, directors or affiliates from liabilities to third persons in connection with Fund affairs to the extent such premiums cover liabilities with respect to matters that would otherwise be subject to indemnification by the Fund pursuant to the terms of the Fund's Limited Liability Company Agreement, the Investment Management Agreement or the Administration Agreement and for any fidelity bonds;

    (d)
    out-of-pocket legal, custodial, Portfolio Company and Fund investment-related public relations, and accounting expenses of third-party service providers, including fees, costs and expenses associated with the preparation, printing and distribution of the Fund's financial

17


      statements, tax information and any Fund-Related Compliance Obligation Expenses (it being understood that, where such Fund Related Compliance Obligation Expenses relate to the Fund and other clients of New Mountain, such costs and expenses shall mean the Fund's allocable share thereof as determined in good faith by the Adviser), and out-of-pocket expenses related to data rooms, investor portals, board reporting portals or other websites and accounting systems;

    (e)
    interest on and fees and expenses arising out of all Fund indebtedness, including, but not limited to, the arranging thereof and the costs and expenses of any lenders, investment banks and other financing sources;

    (f)
    out-of-pocket auditing, accounting, banking, consulting and valuation expenses of third-party service providers (including accounting and technology, environmental, social and governance consultants);

    (g)
    out-of-pocket appraisal expenses of third-party service providers;

    (h)
    out-of-pocket fees, costs and expenses of any third-party administrators and deal finders, experts, advisers, consultants, engineers and other professionals and service providers;

    (i)
    expenses of the Fund's advisory committee (the "Advisory Committee") (including the reasonable costs of legal counsel, accountants, financial advisors and/or such other advisors and consultants engaged by the Advisory Committee, if the Board agrees to permit such engagement);

    (j)
    costs and expenses that are classified as extraordinary expenses under generally accepted accounting principles;

    (k)
    taxes and other governmental charges, fees and duties payable by the Fund, and costs and expenses associated with third party tax advisors, tax return preparation or tax audits;

    (l)
    costs of any litigation and damages (including the costs of any indemnity or contribution right granted to any placement agent or third-party finder engaged by the Fund or its affiliates);

    (m)
    the costs and expenses associated with preparing, filing and delivering to Unitholders periodic and other reports and filings required under federal securities laws as a result of our status as a BDC costs of any Unitholder meeting (including proxy statements and solicitation in connection therewith);

    (n)
    costs associated with any third-party examinations or audits (including other similar services) of the Fund or the Adviser that are attributable to the operation of the Fund or requested by Unitholders;

    (o)
    costs of winding up and liquidating the Fund;

    (p)
    expenses incurred in connection with complying with provisions in side letter agreements entered into with Unitholders; but not including Excess Organizational and Offering Expenses (as defined in the Limited Liability Company Agreement (the "LLC Agreement")) or Adviser Expenses;

    (q)
    the cost of third-party software developers and software and related expenses, including as related to risk, research and market data, operations (i.e. IVP, Bloomberg and WSO), accounting and the tracking and monitoring of investments (i.e., portfolio management software, such as iLevel and general ledger software, such as VPM, or other operational or accounting software);

    (r)
    expenses related to the engagement of and ongoing obligations of the Fund's transfer agent, including any annual fees and fees related to maintaining Unitholder records, among others;

18


    (s)
    expenses related to the engagement of any rating agency (i.e. Moodys, Fitch, S&P, Kroll, etc.) and any fees and expenses associated with the ongoing responsibilities related to maintaining any rating from such agency;

    (t)
    expenses of the Board (including Independent Director fees, the reasonable costs of legal counsel, accountants, financial advisors and/or such other advisors and consultants engaged by the Board, as well as travel and out-of-pocket expenses related to the attendance by directors at Board meetings);

    (u)
    expenses related to the valuation or appraisal of our Portfolio Investments and the calculation of our NAV;

    (v)
    travel, out-of-pocket and meal expenses related to the attendance of any employee of the Adviser who acts as a board member or board observer (or similar function); and

    (w)
    the organizational and offering expenses described above in "Organizational and Offering Expenses" up to the Organizational and Offering Expense Cap.

        Notwithstanding the foregoing, the Adviser has agreed to reduce and/or waive its management fee (the "Specified Expenses Cap") each year such that the Fund will not be required to pay Specified Expenses (as defined below) in excess of a maximum aggregate amount in any calendar year (prorated for partial years and portions of years for which each applicable prong of the cap applies) equal to: (1) during the Closing Period, 0.40% of the greater of (A) $750 million and (B) actual aggregate Capital Commitments as of the end of such calendar year, (2) at the end of the Closing Period until the end of the Investment Period, 0.40% of aggregate committed capital and (3) after the end of the Investment Period, 0.40% of NAV. Further, if the actual Capital Commitments of the Fund at the end of the Closing Period are less than $750 million, the prong of the Specified Expenses Cap in clause (1) above will be retroactively adjusted to equal 0.40% of aggregate Capital Commitments at the end of the Closing Period, and the Adviser has agreed to further reduce and/or waive its management fee for the year in which the Closing Period ends in an amount equal to the difference between (A) the amount that would have been required to be waived/reimbursed pursuant to clause (1) above as adjusted and (B) the amount previously waived/reimbursed pursuant to clause (1) above. "Specified Expenses" of the Fund means all Fund Expenses (as defined in the LLC Agreement) incurred in the operation of the Fund with the exception of: (i) the management fee, (ii) any incentive fees, (iii) Organizational and Offering Expenses (as defined in the LLC Agreement) (which are subject to the Organizational and Offering Expense Cap), (iv) Placement Fees (as defined in the LLC Agreement), (v) interest on and fees and expenses arising out of all Fund indebtedness and other financing, (vi) costs of any litigation and damages (including the costs of any indemnity or contribution right granted to any placement agent or third-party finder engaged by the Fund or its affiliates) and (vii) for the avoidance of doubt, if applicable, any investor level withholding or other taxes.

        If, while the Adviser is the investment adviser to the Fund, the annualized Specified Expenses for a given calendar year are less than the Specified Expenses Cap, the Adviser shall be entitled to reimbursement by the Fund of the compensation waived and other expenses borne by the Adviser on behalf of the Fund pursuant to the expense limitation and reimbursement agreement between the Fund and the Adviser (the "Expense Limitation and Reimbursement Agreement") (the "Reimbursement Amount") during any of the previous thirty-six (36) months, and provided that such amount paid to the Adviser will in no event exceed the total Reimbursement Amount and will not include any amounts previously reimbursed. The Reimbursement Amount plus the annualized Specified Expenses for a given calendar year shall not exceed the Specified Expenses Cap. The Adviser may recapture a Specified Expense in any year within the thirty-six month period after the Adviser bears the expense.

19


        The Expense Limitation and Reimbursement Agreement may be amended by mutual agreement of the parties, provided that any amendment that could result in increase in expenses borne by the Fund also must be approved by vote of a majority of the outstanding Units.

        "Fund-Related Compliance Obligation Expenses" shall mean the costs and expenses of all legal and regulatory compliance obligations under U.S. federal (including the 1940 Act), state, local, non-U.S. or other laws and regulations directly related to managing the Fund or the making, holding or disposing of Portfolio Investments by the Fund (whether such compliance obligations are imposed on the Adviser, their affiliates or the Fund), including, without limitation, the preparation and filing of (a) Form PF and Form ADV under the Advisers Act, (b) Form 13F, Form 13H, Section 16 filings, Schedule 13D filings, Schedule 13G filings and other beneficial ownership filings, in each case under the Exchange Act, (c) TIC Form SLT filings, (d) materials required under FATCA and FinCEN reporting requirements applicable to the Fund, (e) CFTC Form 4.13(a)(3), CPO-PQR, CTA PR and NFA Form PQR filings, (f) any fees and expenses associated with hiring and maintaining a local distribution agent or administrative agent in any non-U.S. jurisdictions and (g) any other forms, schedules or other filings with governmental and self-regulatory agencies directly related to the making, holding or disposing of Portfolio Investments by the Fund (including blue sky filings and registration statement filings, as applicable), and the costs and expenses of any administrator, custodian and/or depositary appointed by the Adviser and its affiliates in relation to the safeguarding, administering and/or holding (or similar) of Portfolio Investments and/or the performance of any functions of an administrator, custodian and/or depositary contemplated by the AIFM Directive (as defined in the Limited Liability Company Agreement) or any national private placement regime in any jurisdiction and incurred in connection with the Adviser's or any of its affiliates' initial registration and compliance with ongoing registration (including annual, quarterly or similar fees), disclosure, reporting and other similar obligations pursuant to the Limited Liability Company Agreement or under the AIFM Directive or any national private placement regime in any jurisdiction (including, for the avoidance of doubt any reporting required in connection with Annex IV of the AIFM Directive).

        Travel and related expenses described herein include, without limitation, airfare not to exceed first class and/or business class rates, lodging, ground transportation, travel and meals. Travel and related expenses in connection with a trip taken by employees of the Adviser for purposes of multiple matters will be allocated by the Adviser in a manner that the Adviser determines is fair and equitable.

        New Mountain may cause the Fund's Portfolio Companies to enter into agreements regarding group procurement, benefits management, insurance policies (which will from time to time be pooled across Portfolio Companies and discounted due to scale) and other operational, administrative or management related matters from a third party or a New Mountain affiliate, and shall notify the Board of any such agreements no later than the next regularly scheduled meeting thereof. Fund Expenses, including certain consultant expenses, may be charged directly to the Fund or may be borne by both the Adviser and one or more Portfolio Companies.

        The Administrator will provide administrative services for the Fund (that would otherwise be performed by third parties), and will be entitled to the reimbursement of the fully allocated costs of the Administrator and its affiliates of providing such services, including the costs of employee compensation and related taxes, health insurance and other benefits, and such employees' allocable portion of overhead; provided that the amount paid under the Administration Agreement shall be reported in our annual reports. Such reimbursement of expenses will not be subject to offset as provided in "—
Transaction, Advisory Fees
" below.

Transaction, Advisory Fees

        Any transaction, advisory or similar fees received in connection with the Fund's activities or the Adviser's activities as they relate to the Fund will be the property of the Fund; provided that, if the

20


Fund engages in co-investment or joint transactions with certain of its affiliates, the Fund may share any such fees with such affiliate.

Qualifying Assets

        Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70.0% of the BDC's total assets. The principal categories of qualifying assets relevant to our business are any of the following:

    1)
    Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC. An eligible portfolio company is defined in the 1940 Act as any issuer which:

    a)
    is organized under the laws of, and has its principal place of business in, the United States;

    b)
    is not an investment company (other than a small business investment company wholly owned by the BDC) or a company that would be an investment company but for certain exclusions under the 1940 Act; and

    c)
    satisfies any of the following:

    i)
    does not have any class of securities that is traded on a national securities exchange;

    ii)
    has a class of securities listed on a national securities exchange, but has an aggregate market value of outstanding voting and non-voting common equity of less than $250.0 million;

    iii)
    is controlled by a BDC or a group of companies including a BDC and the BDC has an affiliated person who is a director of the eligible portfolio company; or

    iv)
    is a small and solvent company having total assets of not more than $4.0 million and capital and surplus of not less than $2.0 million.

    2)
    Securities of any eligible portfolio company that the BDC controls.

    3)
    Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities, was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements.

    4)
    Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and the BDC already owns 60.0% of the outstanding equity of the eligible portfolio company.

    5)
    Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of warrants or rights relating to such securities.

    6)
    Cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment.

        In addition, a BDC must have been organized and have its principal place of business in the U.S. and must be operated for the purpose of making investments in the types of securities described in (1), (2) or (3) above.

21


Managerial Assistance to Portfolio Companies

        BDCs generally must offer to make available to the issuer of qualifying assets significant managerial assistance, except in circumstances where either (i) the BDC controls such issuer of securities or (ii) the BDC purchases such securities in conjunction with one or more other persons acting together and one of the other persons in the group makes available such managerial assistance. Making available managerial assistance means, among other things, any arrangement whereby the BDC offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a Portfolio Company. The Administrator or its affiliate will provide such managerial assistance on our behalf to Portfolio Companies that request this assistance.

Temporary Investments

        Pending investment in other types of qualifying assets, as described above, our investments may consist of cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment, which we refer to, collectively, as "temporary investments," so that 70% of our assets are qualifying assets. We may also invest in U.S. Treasury bills or in repurchase agreements, provided that such agreements are fully collateralized by cash or securities issued by the U.S. government or its agencies. A repurchase agreement involves the purchase by an investor, such as us, of a specified security and the simultaneous agreement by the seller to repurchase it at an agreed-upon future date and at a price which is greater than the purchase price by an amount that reflects an agreed-upon interest rate. There is no percentage restriction on the proportion of our assets that may be invested in such repurchase agreements. However, if more than 25% of our gross assets constitute repurchase agreements from a single counterparty, we would not meet the diversification tests in order to qualify as a RIC. Thus, we do not intend to enter into repurchase agreements with a single counterparty in excess of this limit. Our Adviser will monitor the creditworthiness of the counterparties with which we enter into repurchase agreement transactions.

Indebtedness and Senior Securities

        As a BDC, the Fund is permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to its Units if its asset coverage meets the requirement set forth in the 1940 Act immediately after each such issuance. The 1940 Act currently requires an asset coverage of at least 150% (i.e., no more than a 2:1 debt-to-equity ratio). Our sole initial member approved the adoption of this 150% threshold pursuant to Section 61(a)(2) of the 1940 Act. In addition, while any senior securities remain outstanding, we must make provisions to prohibit any distribution to our Unitholders or the repurchase of our Units unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. We may also borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes without regard to asset coverage. For a discussion of the risks associated with leverage, see "
Item 1.A Risk Factors—Certain Risks Relating to Portfolio Investments Generally—Fund-Level Borrowings
" and "
Item 1A. Risk Factors—Certain Market, Regulatory and Tax Risks—Regulations Governing the Operations of BDCs.
"

Code of Ethics

        We and the Adviser have adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act and Rule 204A-1 under the Advisers Act, respectively, that establishes procedures for personal investments and restricts certain personal securities transactions. Personnel subject to the code may invest in securities for their personal investment accounts, including securities that may be purchased or held by us so long as such investments are made in accordance with the code's requirements. You may read and copy the code of ethics at the SEC's Public Reference Room located at 100 F Street, N.E., Washington, District of Columbia 20549. You may obtain information on the operation of the Public

22


Reference Room by calling the SEC at 1-800-SEC-0330, and a copy of the code of ethics may be obtained, after paying a duplication fee, by electronic request at the following e-mail address: publicinfo@sec.gov. In addition, the code of ethics is available on the SEC's Internet site at http://sec.report.

Compliance Policies and Procedures

        We and the Adviser have adopted and implemented written policies and procedures reasonably designed to prevent violation of the federal securities laws and we are required to review these compliance policies and procedures annually for their adequacy and the effectiveness of their implementation. The chief compliance officer is responsible for administering these policies and procedures.

Proxy Voting Policies and Procedures

        We intend to delegate our proxy voting responsibility to the Adviser. The Proxy Voting Policies and Procedures of the Adviser are set forth below. The guidelines will be reviewed periodically by the Adviser and our Independent Directors, and, accordingly, are subject to change.

Introduction

        As an investment adviser registered under the Advisers Act, the Adviser has a fiduciary duty to act solely in the best interests of its clients. As part of this duty, it recognizes that it must vote our securities in a timely manner free of conflicts of interest and in our best interests.

        The policies and procedures for voting proxies for the investment advisory clients of the Adviser are intended to comply with Section 206 of, and Rule 206(4)-6 under, the Advisers Act.

Proxy Policies

        The Adviser will vote proxies relating to our securities in our best interest. It will review on a case-by-case basis each proposal submitted for a Unitholder vote to determine its impact on the portfolio securities held by us. Although the Adviser will generally vote against proposals that may have a negative impact on its clients' portfolio securities, it may vote for such a proposal if there exists compelling long-term reasons to do so.

        The proxy voting decisions of Adviser are made by the senior officers who are responsible for monitoring each of its clients' investments. To ensure that its vote is not the product of a conflict of interest, it will require that: (a) anyone involved in the decision making process disclose to its chief compliance officer any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote; and (b) employees involved in the decision making process or vote administration are prohibited from revealing how the Adviser intends to vote on a proposal in order to reduce any attempted influence from interested parties.

Proxy Voting Records

        You may obtain, without charge, information regarding how we voted proxies with respect to our portfolio securities by making a written request for proxy voting information to: Chief Compliance Officer, 787 Seventh Avenue, 48th Floor, New York, New York 10019.

The Board of Directors

        Overall responsibility for the Fund's oversight rests with the Board. The Board is responsible for overseeing the Adviser, the Administrator and other service providers in our operations in accordance with the provisions of the 1940 Act, the Limited Liability Company Agreement and applicable

23


provisions of state and other laws. The Adviser is responsible for keeping the Board well informed as to the Adviser's activities on our behalf and our investment operations and provide the Board information with additional information as the Board may, from time to time, request. The Board is currently composed of 5 members, 3 of whom are trustees who are not "interested persons" of the Fund or the Adviser as defined in the 1940 Act.

Staffing

        We do not have any employees. Our day-to-day investment operations are managed by the Adviser and the Administrator. See "
—Investment Management Agreement
" and
"—Administration Agreement
." We reimburse the Administrator for the allocable portion of overhead and other expenses incurred by it in performing its obligations to us under the Administration Agreement, including the compensation of our chief financial officer and chief compliance officer, and their respective staffs. Each of our executive officers described under "
Item 5. Directors and Executive Officers
" is an employee of the Adviser.

Derivatives

        We do not expect derivatives to be a significant component of our investment strategy.

Emerging Growth Company

        We are an emerging growth company as defined in the Jumpstart Our Business Startups Act and we are eligible to take advantage of certain specified reduced disclosure and other requirements that are otherwise generally applicable to public companies that are not "emerging growth companies" including, but not limited to, reduced executive compensation disclosure requirements and not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002. Although we have not made a determination whether to take advantage of any or all of these exemptions, we expect to remain an emerging growth company for up to five years following the completion of any initial public offering by us or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion, (ii) December 31 of the fiscal year that we become a "large accelerated filer" as defined in Rule 12b-2 under the 1934 Act which would occur if the market value of our Units that are held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter and we have been publicly reporting for at least 12 calendar months or (iii) the date on which we have issued more than $1 billion in non-convertible debt securities during the preceding three-year period. In addition, we may take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.

The Private Offering

        We have entered into separate subscription agreements with one or more investors providing for the private placement of Units pursuant to the private offering and expect to enter into additional subscription agreements from time to time. Each investor will make a Capital Commitment to purchase Units pursuant to a subscription agreement. The Fund is seeking total Capital Commitments of approximately $750 million, but may accept Capital Commitments in excess of this amount. The minimum Capital Commitment for a Unitholder is $5 million. The Adviser reserves the right to accept Capital Commitments of a lesser amount.

        Investors are required to make capital contributions to purchase Units at a specified time (subject to applicable cure periods) each time we deliver a drawdown notice, which will be issued based on our anticipated investment activities and capital needs, in an aggregate amount not to exceed each investor's respective Capital Commitment to purchase Units pursuant to a Subscription Agreement

24


entered into with us. We will deliver drawdown requests at least ten calendar days prior to the required funding date. Holders of Capital Commitments with the lowest Contributed Capital Percentage (as defined below) will first be required to purchase our Units until all holders of Capital Commitments have the same Contributed Capital Percentage, and then purchases will be made pro rata in accordance with remaining Capital Commitments. As a result, for Capital Commitments, purchases of our Units will generally be made first by holders with the largest percentage of their Capital Commitments undrawn (i.e., a catch-up purchase) and then, once all holders have the same percentage of undrawn Capital Commitments outstanding, pro rata in accordance with remaining Capital Commitments of all investors.

        The offering price per Unit at the Initial Drawdown Date was $10.00. The offering price for future drawdown dates within 18 months (the "Stable Offering Price Period") from the Initial Drawdown Date will also be $10.00 per Unit. The NAV per Unit at the time of such issuances may be greater than or less than the offering price. By executing a Subscription Agreement, investors agree that they are providing their consent, in accordance with Section 23(b) of the 1940 Act, for the Fund to issue Units at such $10.00 offering price during the Stable Offering Price Period even if such offering price is below the then-current NAV per Unit.

        Following the Stable Offering Price Period, Units will be offered pursuant to capital calls at a price based on our NAV per Unit. Each offering will be subject to the limitations of Section 23(b) under the 1940 Act (which generally prohibits us from issuing Units at a price below the then-current NAV of the Units as determined within 48 hours, excluding Sundays and holidays, of such issuance, (taking into account any investment valuation adjustments from the latest quarterly valuation date in accordance with the Fund's valuation policy) subject to certain exceptions).

        "Contributed Capital Percentage" means, with respect to an investor holding Capital Commitments, the percentage determined by dividing such investor's Contributed Capital (as defined below) by such investor's total Capital Commitments (whether or not funded).

        "Contributed Capital" means, with respect to an investor holding Capital Commitments, the aggregate amount of capital contributions from such investor's Capital Commitments that have been funded by such investor to purchase Units. For the avoidance of doubt, Contributed Capital will not take into account distributions of the Fund's investment income (i.e., proceeds received in respect of interest payments, dividends or fees, net of expenses) to the investors or return of capital distributions.

        Unitholders may not sell, assign, transfer or otherwise dispose of (a "Transfer") any Units unless (i) the Adviser consents, provided that such consent will not unreasonably be withheld if such Transfer is to a party other than a defaulting Unitholder and the Transfer does not negatively impact the Fund's borrowing base or other terms of any credit facilities or subscription facilities, and, if required by our lending arrangements, our lenders give consent and (ii) the Transfer is made in accordance with applicable securities laws. No Transfer will be effectuated except by registration of the Transfer on our books. Each transferee will be required to execute an instrument agreeing to be bound by these restrictions and the other restrictions imposed on the Units and to execute such other instruments or certifications as are reasonably required by us. For the avoidance of doubt, the Adviser's reasonable doubt as to whether a transferee can accurately make the representations and warranties and fulfill the obligations set forth in the Subscription Agreement will be reasonable grounds to withhold consent to a Transfer.

        The Fund and the Adviser may enter into side letters or other similar agreements with one or more particular Unitholders in connection with a Unitholder's admission to the Fund without the approval of any other Unitholder, which would have the effect of establishing rights under, or altering or supplementing, the terms of the Subscription Agreement with respect to such Unitholder. Any rights established, or any terms of the Subscription Agreement altered or supplemented in a side letter with a Unitholder, will govern solely with respect to such Unitholder (but not any of such Unitholder's

25


assignees or transferees unless so specified in such side letter) notwithstanding any other provision of the Subscription Agreement.

        Units will be offered for subscription continuously throughout the Closing Period (as defined below). We expect closings of the Private Offering will occur, from time to time, in the Adviser's sole discretion, during the 18-month period (the "Closing Period") following the initial closing of Capital Commitments, which occurred on July 15, 2019. We may accept and draw down Capital Commitments from investors throughout the Closing Period.

Fund Term and Potential Exchange Option

        The Fund will be liquidated and dissolved in an orderly manner (i) upon the expiration of its Term (as such Term may be extended pursuant to the above) or (ii) at any time upon a decision of the Board, subject to any necessary Unitholder approvals and applicable requirements of the 1940 Act.

        Prior to the end of the Term, the Unitholders may be given the opportunity (but would not be required) to elect to exchange their Units for interests in another investment vehicle managed by the Adviser or its affiliates. Any such exchange would be structured in a manner so as not cause dilution to Unitholders who do not elect to exchange their units. There is no assurance such opportunity to exchange Units will be provided.

Reporting Obligations

        In order to be regulated as a BDC under the 1940 Act, we are required to register a class of equity securities under the 1934 Act. As a result, we have filed this Registration Statement for our Units with the SEC under the 1934 Act. Subsequent to the effectiveness of this Registration Statement, we will be required to file annual reports, quarterly reports and current reports with the SEC. This information will be available at the SEC's public reference room at 100 F Street, N.E., Washington, D.C. 20549 and on the SEC's website at sec.report. The public may obtain information on the operation of the SEC's public reference room by calling the SEC at 1-800-SEC-0330.

        In addition to the above regulatory filings, the Fund shall provide each Unitholder with such additional information as it may reasonably request from time to time in connection with such Unitholder's ongoing financial and operational due diligence.

Certain U.S. Federal Income Tax Considerations

        The following discussion is a general summary of the material U.S. federal income tax considerations applicable to us and the purchase, ownership and disposition of our Units. This discussion does not purport to be complete or to deal with all aspects of U.S. federal income taxation that may be relevant to Unitholders in light of their particular circumstances. Unless otherwise noted, this discussion applies only to U.S. Unitholders that hold our Units as capital assets. A U.S. Unitholder is an individual who is a citizen or resident of the United States, a U.S. corporation, a trust if it (a) is subject to the primary supervision of a court in the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust or (b) has made a valid election to be treated as a U.S. person, or any estate the income of which is subject to U.S. federal income tax regardless of its source. This discussion is based upon present provisions of the Code, the regulations promulgated thereunder, and judicial and administrative ruling authorities, all of which are subject to change, or differing interpretations (possibly with retroactive effect). This discussion does not represent a detailed description of the U.S. federal income tax consequences relevant to special classes of taxpayers including, without limitation, financial institutions, insurance companies, investors in pass-through entities, U.S. Unitholders whose "functional currency" is not the U.S. dollar, tax-exempt organizations, dealers in securities or currencies, traders in securities or commodities that elect mark to market treatment, or persons that will hold our Units as a position in a "straddle," "hedge" or as part

26


of a "constructive sale" for U.S. federal income tax purposes. In addition, this discussion does not address the application of the Medicare tax or the U.S. federal alternative minimum tax, or any tax consequences attributable to persons being required to accelerate the recognition of any item of gross income with respect to our Units as a result of such income being recognized on an applicable financial statement. Prospective investors should consult their tax advisors with regard to the U.S. federal tax consequences of the purchase, ownership, or disposition of our Units, as well as the tax consequences arising under the laws of any state, foreign country or other taxing jurisdiction.

Taxation as a Regulated Investment Company

        The Fund intends to elect to be treated and intends to comply with the requirements to qualify as a RIC under Subchapter M of the Code for each taxable year. However, as discussed below, it is possible that the Fund may not qualify as a RIC for the short taxable year that includes the initial closing of the Private Offering.

        To qualify for the favorable tax treatment accorded to RICs under Subchapter M of the Code, the Fund must, among other things: (1) have an election in effect to be treated as a BDC under the 1940 Act at all times during each taxable year; (2) have filed with its return for the taxable year an election to be a RIC or have made such election for a previous taxable year; (3) derive in each taxable year at least 90% of its gross income from (a) dividends, interest, payments with respect to certain securities loans, and gains from the sale or other disposition of stock or securities or foreign currencies, or other income (including but not limited to gains from options, futures or forward contracts) derived with respect to its business of investing in such stock, securities, or currencies; and (b) net income derived from an interest in certain publicly traded partnerships that are treated as partnerships for U.S. federal income tax purposes and that derive less than 90% of their gross income from the items described in (a) above (each, a "Qualified Publicly Traded Partnership"); and (4) diversify its holdings so that, at the end of each quarter of each taxable year of the Fund (a) at least 50% of the value of the Fund's total assets is represented by cash and cash items (including receivables), U.S. government securities and securities of other RICs, and other securities for purposes of this calculation limited, in respect of any one issuer to an amount not greater in value than 5% of the value of the Fund's total assets, and to not more than 10% of the outstanding voting securities of such issuer, and (b) not more than 25% of the value of the Fund's total assets is invested in the securities (other than U.S. government securities or securities of other RICs) of (I) any one issuer, (II) any two or more issuers which the Fund controls and which are determined to be engaged in the same or similar trades or businesses or related trades or businesses or (III) any one or more Qualified Publicly Traded Partnerships.

        As a RIC, the Fund generally will not be subject to U.S. federal income tax on its investment company taxable income (as that term is defined in the Code, but determined without regard to the deduction for dividends paid) and net capital gain (the excess of net long-term capital gain over net short-term capital loss), if any, that it distributes in each taxable year to its Unitholders, provided that it distributes dividends equal to at least 90% of its investment company taxable income plus 90% of its net interest income excludable under Section 103(a) of the Code. The Fund intends to distribute to its Unitholders, each taxable year, substantially all of its investment company taxable income and net capital gain.

        Amounts not distributed on a timely basis in accordance with a calendar year distribution requirement are subject to a nondeductible 4% U.S. federal excise tax. To prevent imposition of the excise tax, the Fund must distribute during each calendar year an amount at least equal to the sum of (i) 98% of its ordinary income (not taking into account any capital gains or losses) for the calendar year, (ii) 98.2% of its capital gains in excess of its capital losses (adjusted for certain ordinary losses) for the one-year period ending October 31 of the calendar year, and (iii) any ordinary income and capital gains for previous years that were not distributed during those years. For these purposes, the Fund will be deemed to have distributed any income or gains on which it paid U.S. federal income tax.

27


        A distribution will be treated as paid on December 31 of any calendar year if it is declared by the Fund in October, November or December with a record date in such a month and paid by the Fund during January of the following calendar year. Such distributions will be taxable to Unitholders in the calendar year in which the distributions are declared, rather than the calendar year in which the distributions are received.

        If the Fund fails to qualify as a RIC or fails to satisfy the 90% distribution requirement in any taxable year, the Fund would be subject to U.S. federal income tax at regular corporate rates on its taxable income (including distributions of net capital gain), even if such income were distributed to its Unitholders, and all distributions out of earnings and profits would be taxed to Unitholders as ordinary dividend income. Such distributions generally would be eligible (i) to be treated as "qualified dividend income" in the case of individuals and other noncorporate Unitholders and (ii) for the dividends received deduction in the case of corporate Unitholders. In addition, the Fund could be required to recognize unrealized gains, pay taxes and make distributions (which could be subject to interest charges) before requalifying for taxation as a RIC.

        While we generally intend to qualify as a RIC for each taxable year, it is possible that the Fund may not satisfy the diversification requirements described above, and thus may not qualify as a RIC, for the short taxable year that includes the initial closing of the Private Offering. In such case, however, we anticipate that the associated tax liability would not be material, and that such non-compliance would not have a material adverse effect on our business, financial condition and results of operations, although there can be no assurance in this regard.

Distributions

        Distributions to Unitholders by the Fund of ordinary income (including "market discount" realized by the Fund on the sale of debt securities), and of net short-term capital gains, if any, realized by the Fund will generally be taxable to Unitholders as ordinary income to the extent such distributions are paid out of the Fund's current or accumulated earnings and profits. Distributions, if any, of net capital gains properly reported as "capital gain dividends" will be taxable as long-term capital gains, regardless of the length of time the Unitholder has owned our Units. A distribution of an amount in excess of the Fund's current and accumulated earnings and profits (as determined for U.S. federal income tax purposes) will be treated by a Unitholder as a return of capital which will be applied against and reduce the Unitholder's basis in his or her Units. To the extent that the amount of any such distribution exceeds the Unitholder's basis in his or her Units, the excess will be treated by the Unitholder as gain from a sale or exchange of the Units. Distributions paid by the Fund generally will not be eligible for the dividends received deduction allowed to corporations or for the reduced rates applicable to certain qualified dividend income received by non-corporate Unitholders.

        The Fund may elect to retain its net capital gain or a portion thereof for investment and be taxed at corporate rates on the amount retained. In such case, it may designate the retained amount as undistributed capital gains in a notice to its Unitholders, who will be treated as if each received a distribution of his pro rata share of such gain, with the result that each Unitholder will (i) be required to report its pro rata share of such gain on its tax return as long-term capital gain, (ii) receive a refundable tax credit for its pro rata share of tax paid by the Fund on the gain and (iii) increase the tax basis for its Units by an amount equal to the deemed distribution less the tax credit.

        The IRS currently requires that a RIC that has two or more classes of stock allocate to each such class proportionate amounts of each type of its income (such as ordinary income and capital gains) based upon the percentage of total dividends paid to each class for the tax year. Accordingly, if the Fund issues preferred stock, the Fund intends to allocate capital gain dividends, if any, between its Units and preferred stock in proportion to the total dividends paid to each class with respect to such tax year. Unitholders will be notified annually as to the U.S. federal tax status of distributions, and

28


Unitholders receiving distributions in the form of additional Units will receive a report as to the NAV of those Units.

        A "publicly offered regulated investment company" or "publicly offered RIC" is a RIC whose shares are either (i) continuously offered pursuant to a public offering within the meaning of Section 4 of the Securities Act, (ii) regularly traded on an established securities market or (iii) held by at least 500 persons at all times during the taxable year. It is anticipated that the Fund will not qualify as a publicly offered RIC upon completion of the Private Offering. If the Fund is not a publicly offered RIC for any period, a non-corporate Unitholder's allocable portion of our affected expenses, including our management fees, will be treated as an additional distribution to the Unitholder and will be treated as miscellaneous itemized deductions that are deductible only to the extent permitted by applicable law. However, pursuant to recently enacted tax legislation, such expenses will not be deductible by any such Unitholder for tax years that begin prior to January 1, 2026.

Sale or Exchange of Units

        Upon the sale or other disposition of our Units (except pursuant to a repurchase by the Fund, as described below), a Unitholder will generally realize a capital gain or loss in an amount equal to the difference between the amount realized and the Unitholder's adjusted tax basis in the Units sold. Such gain or loss will be long-term or short-term, depending upon the Unitholder's holding period for the Units. Generally, a Unitholder's gain or loss will be a long-term gain or loss if the Units have been held for more than one year. For non-corporate taxpayers, long-term capital gains are currently eligible for reduced rates of taxation.

        No loss will be allowed on the sale or other disposition of Units if the owner acquires or enters into a contract or option to acquire securities that are substantially identical to such Units within 30 days before or after the disposition. In such a case, the basis of the securities acquired will be adjusted to reflect the disallowed loss. Losses realized by a Unitholder on the sale or exchange of Units held for six months or less are treated as long-term capital losses to the extent of any distribution of long-term capital gain received (or amounts designated as undistributed capital gains) with respect to such Units.

        From time to time, the Fund may offer to repurchase its outstanding Units. Unitholders who tender all Units of the Fund held, or considered to be held, by them will be treated as having sold their Units and generally will realize a capital gain or loss. If a Unitholder tenders fewer than all of its Units or fewer than all Units tendered are repurchased, such Unitholder may be treated as having received a taxable dividend upon the tender of its Units. In such a case, there is a risk that non-tendering Unitholders, and Unitholders who tender some but not all of their Units or fewer than all of whose Units are repurchased, in each case whose percentage interests in the Fund increases as a result of such tender, will be treated as having received a taxable distribution from the Fund. The extent of such risk will vary depending upon the particular circumstances of the tender offer, and in particular whether such offer is a single and isolated event or is part of a plan for periodically redeeming Units of the Fund.

        Under U.S. Treasury regulations, if a Unitholder recognizes a loss with respect to Units of $2 million or more for an individual Unitholder or $10 million or more for a corporate Unitholder, the Unitholder must file with the IRS a disclosure statement on IRS Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a RIC are not excepted. Future guidance may extend the current exception from this reporting requirement to shareholders of most or all RICs. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer's treatment of the loss is proper. Unitholders should consult their tax advisors to determine the applicability of these regulations in light of their individual circumstances.

29


Nature of the Fund's Investments

        Certain of the Fund's hedging and derivatives transactions are subject to special and complex U.S. federal income tax provisions that may, among other things, (i) disallow, suspend or otherwise limit the allowance of certain losses or deductions, (ii) convert lower-taxed long-term capital gain into higher-taxed short-term capital gain or ordinary income, (iii) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited), (iv) cause the Fund to recognize income or gain without a corresponding receipt of cash, (v) adversely affect the time as to when a purchase or sale of stock or securities is deemed to occur, (vi) adversely alter the intended characterization of certain complex financial transactions and (vii) produce income that will not be treated as qualifying income for purposes of the 90% gross income test described above.

        These rules could therefore affect the character, amount and timing of distributions to Unitholders and the Fund's status as a RIC. The Fund will monitor its transactions and may make certain tax elections in order to mitigate the effect of these provisions.

Below Investment Grade Instruments

        The Fund expects to invest in debt securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Investments in these types of instruments may present special tax issues for the Fund. U.S. federal income tax rules are not entirely clear about issues such as when the Fund may cease to accrue interest, original issue discount or market discount, when and to what extent deductions may be taken for bad debts or worthless instruments, how payments received on obligations in default should be allocated between principal and income and whether exchanges of debt obligations in a bankruptcy or workout context are taxable. These and other issues will be addressed by the Fund, to the extent necessary, to preserve its status as a RIC and to distribute sufficient income to not become subject to U.S. federal income tax.

Original Issue Discount and Other Accrued Amounts

        For U.S. federal income tax purposes, we may be required to recognize taxable income in circumstances in which we do not receive a corresponding payment in cash. For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount (such as zero coupon securities, debt instruments with PIK interest or, in certain cases, increasing interest rates or debt instruments that were issued with warrants), we must include in income each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. Moreover, under recently enacted tax legislation, we generally will be required to take certain amounts in income no later than the time such amounts are reflected on certain financial statements. The application of this rule may require the accrual of income with respect to our debt instruments, such as original issue discount, earlier than would be the case under the general tax rules, although the precise application of this rule is unclear at this time. Because any original issue discount or other amounts accrued will be included in our investment company taxable income for the year of the accrual, we may be required to make a distribution to our Unitholders in order to satisfy the annual distribution requirement, even though we will not have received any corresponding cash amount. As a result, we may have difficulty meeting the annual distribution requirement necessary to qualify for and maintain RIC status under Subchapter M of the Code. We may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may not qualify for or maintain RIC tax treatment and thus become subject to corporate-level income tax.

30


Market Discount

        In general, the Fund will be treated as having acquired a security with market discount if its stated redemption price at maturity (or, in the case of a security issued with original issue discount, its revised issue price) exceeds the Fund's initial tax basis in the security by more than a statutory
de minimis
amount. The Fund will be required to treat any principal payments on, or any gain derived from the disposition of, any securities acquired with market discount as ordinary income to the extent of the accrued market discount, unless the Fund makes an election to accrue market discount on a current basis. If this election is not made, all or a portion of any deduction for interest expense incurred to purchase or carry a market discount security may be deferred until the Fund sells or otherwise disposes of such security.

Currency Fluctuations

        Under Section 988 of the Code, gains or losses attributable to fluctuations in exchange rates between the time the Fund accrues income or receivables or expenses or other liabilities denominated in a foreign currency and the time the Fund actually collects such income or receivables or pays such liabilities are generally treated as ordinary income or loss. Similarly, gains or losses on foreign currency, foreign currency forward contracts, certain foreign currency options or futures contracts and the disposition of debt securities denominated in foreign currency, to the extent attributable to fluctuations in exchange rates between the acquisition and disposition dates, are also treated as ordinary income or loss.

Foreign Taxes

        The Fund's investment in non-U.S. securities may be subject to non-U.S. withholding taxes. In that case, the Fund's yield on those securities would be decreased. Unitholders will generally not be entitled to claim a credit or deduction with respect to foreign taxes paid by the Fund.

Preferred Stock or Borrowings

        If the Fund utilizes leverage through the issuance of preferred stock or borrowings, it may be restricted by certain covenants with respect to the declaration of, and payment of, dividends on Units in certain circumstances. Limits on the Fund's payments of dividends on Units may prevent the Fund from meeting the distribution requirements described above, and may, therefore, jeopardize the Fund's qualification for taxation as a RIC and possibly subject the Fund to the 4% excise tax. The Fund will endeavor to avoid restrictions on its ability to make dividend payments.

Backup Withholding

        The Fund may be required to withhold from all distributions and redemption proceeds payable to U.S. Unitholders who fail to provide the Fund with their correct taxpayer identification numbers or to make required certifications, or who have been notified by the IRS that they are subject to backup withholding. Certain Unitholders specified in the Code generally are exempt from such backup withholding. This backup withholding is not an additional tax. Any amounts withheld may be refunded or credited against the Unitholder's U.S. federal income tax liability, provided the required information is timely furnished to the IRS.

Foreign Unitholders

        U.S. taxation of a Unitholder who is a nonresident alien individual, a foreign trust or estate or a foreign corporation, as defined for U.S. federal income tax purposes (a "foreign Unitholder"), depends on whether the income from the Fund is "effectively connected" with a U.S. trade or business carried on by the Unitholder.

31


        If the income from the Fund is not "effectively connected" with a U.S. trade or business carried on by the foreign Unitholder, distributions of investment company taxable income will be subject to a U.S. tax of 30% (or lower treaty rate), which tax is generally withheld from such distributions. However, dividends paid by the Fund that are "interest-related dividends" or "short-term capital gain dividends" will generally be exempt from such withholding, in each case to the extent the Fund properly reports such dividends to Unitholders. For these purposes, interest-related dividends and short-term capital gain dividends generally represent distributions of interest or short-term capital gains that would not have been subject to U.S. federal withholding tax at the source if received directly by a foreign Unitholder, and that satisfy certain other requirements. A foreign Unitholder whose income from the Fund is not "effectively connected" with a U.S. trade or business would generally be exempt from U.S. federal income tax on capital gain dividends, any amounts retained by the Fund that are designated as undistributed capital gains and any gains realized upon the sale or exchange of Units. However, a foreign Unitholder who is a nonresident alien individual and is physically present in the United States for more than 182 days during the taxable year and meets certain other requirements will nevertheless be subject to a U.S. tax of 30% on such capital gain dividends, undistributed capital gains and sale or exchange gains.

        If the income from the Fund is "effectively connected" with a U.S. trade or business carried on by a foreign Unitholder, then distributions of investment company taxable income, any capital gain dividends, any amounts retained by the Fund that are designated as undistributed capital gains and any gains realized upon the sale or exchange of Units will be subject to U.S. federal income tax at the graduated rates applicable to U.S. citizens, residents or domestic corporations. Foreign corporate Unitholders may also be subject to the branch profits tax imposed by the Code.

        The Fund may be required to withhold from distributions that are otherwise exempt from U.S. federal withholding tax (or taxable at a reduced treaty rate) unless the foreign Unitholder certifies his or her foreign status under penalties of perjury or otherwise establishes an exemption.

        The tax consequences to a foreign Unitholder entitled to claim the benefits of an applicable tax treaty may differ from those described herein. Foreign Unitholders are advised to consult their own tax advisers with respect to the particular tax consequences to them of an investment in the Fund.

Additional Withholding Requirements

        Under Sections 1471 through 1474 of the Code (such Sections commonly referred to as "FATCA"), a 30% United States federal withholding tax may apply to any dividends that the Fund pays to (i) a "foreign financial institution" (as specifically defined in the Code), whether such foreign financial institution is the beneficial owner or an intermediary, unless such foreign financial institution agrees to verify, report and disclose its United States "account" holders (as specifically defined in the Code) and meets certain other specified requirements or (ii) a non-financial foreign entity, whether such nonfinancial foreign entity is the beneficial owner or an intermediary, unless such entity provides a certification that the beneficial owner of the payment does not have any substantial United States owners or provides the name, address and taxpayer identification number of each such substantial United States owner and certain other specified requirements are met. In certain cases, the relevant foreign financial institution or non-financial foreign entity may qualify for an exemption from, or be deemed to be in compliance with, these rules. In addition, foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules. You should consult your own tax advisor regarding FATCA and whether it may be relevant to your ownership and disposition of our Units.

32


Other Taxation

        Unitholders may be subject to state, local and foreign taxes on their distributions from the Fund. Unitholders are advised to consult their own tax advisers with respect to the particular tax consequences to them of an investment in the Fund.

Privacy Notice

Introduction

        Your privacy is very important to us. This notice (this "Privacy Notice") sets forth our policies for the collection, use, storage, sharing, disclosure (collectively, "processing") and protection of personal data relating to current, prospective and former investors in the Fund, as applicable. This Privacy Notice is being provided in accordance with the requirements of data privacy laws, the US Gramm-Leach-Bliley Act of 1999, as amended, or any other law relating to privacy or the processing of personal data and any statutory instrument, order, rule or regulation implemented thereunder, each as applicable to us (collectively, "Data Protection Laws"). References to "you" or an "investor" in this Privacy Notice mean any investor who is an individual, or any individual connected with an investor who is a legal person (each such individual, a "data subject"), as applicable.

The Types of Personal Data We May Collect and Use

        The categories of personal data we may collect include names, residential addresses or other contact details, signature, nationality, tax identification number, date of birth, place of birth, photographs, copies of identification documents, bank account details, information about assets or net worth, credit history, source of funds details or other sensitive information, such as certain special categories of data contained in the relevant materials or documents.

How We Collect Personal Data

        We may collect personal data about you through: (i) information provided directly to us by you, or another person on your behalf; (ii) information that we obtain in relation to any transactions between you and us; and (iii) recording and monitoring of telephone conversations and electronic communications with you as described below.

        We also may receive your personal information from third parties or other sources, such as our affiliates, the Adviser, the Administrator, publicly accessible databases or registers, tax authorities, governmental agencies and supervisory authorities, credit agencies, fraud prevention and detection agencies, or other publicly accessible sources, such as the Internet.

Using Your Personal Data: The Legal Basis and Purposes

        We may process your personal data for the purposes of administering the relationship between you and us (including communications and reporting), direct marketing of our products and services, monitoring and analyzing our activities, and complying with applicable legal or regulatory requirements (including anti-money laundering, fraud prevention, tax reporting, sanctions compliance, or responding to requests for information from supervisory authorities with competent jurisdiction over our business). Your personal data will be processed in accordance with Data Protection Laws and may be processed with your consent, upon your instruction, or for any of the purposes set out herein, including where we or a third-party consider there to be any other lawful purpose to do so.

        Where personal data is required to satisfy a statutory obligation (including compliance with applicable anti-money laundering or sanctions requirements) or a contractual requirement, failure to provide such information may result in your investment in the Fund being rejected or compulsorily

33


redeemed. Where there is suspicion of unlawful activity, failure to provide personal data may result in the submission of a report to the relevant law enforcement agency or supervisory authority.

How We May Share Your Personal Data

        We may disclose information about you to our affiliates or third parties, including the Adviser, the Administrator, lenders and other counterparties of the Fund for our everyday business purposes, such as to facilitate transactions, maintain your account(s) or respond to court orders and legal investigations. It may also be necessary, under anti-money laundering and similar laws, to disclose information about the Fund's investors in order to accept subscriptions from them or to facilitate the establishment of trading relationships for the Fund with executing brokers or other counterparties. We will also release information about you if you direct us to do so.

        We may share your information with our affiliates for direct marketing purposes, such as offers of products and services to you by us or our affiliates. You may prevent this type of sharing by contacting us at (212) 655-0083. If you are a
new
investor, we can begin sharing your information with our affiliates for direct marketing purposes 30 days from the date of your initial investment in or commitment to the Fund. When you are
no longer
our investor, we may continue to share your information with our affiliates for such purposes. We may also disclose information about your transactions and experiences with us to our affiliates for their everyday business purposes.

        We do not share your information with non-affiliates for them to market their own services to you. We may disclose information you provide to us to companies that perform marketing services on our behalf, such as any placement agent retained by the Fund.

Monitoring of Communications

        We may record and monitor telephone conversations and electronic communications with you for the purposes of: (i) ascertaining the details of instructions given, the terms on which any transaction was executed or any other relevant circumstances; (ii) ensuring compliance with our regulatory obligations; and/or (iii) detecting and preventing the commission of financial crime.

Retention Periods and Security Measures

        We will not retain personal data for longer than is necessary in relation to the purpose for which it is collected, subject to Data Protection Laws. Personal data will be retained for the duration of your investment in the Fund, as applicable, and for a minimum period of five to seven years after a redemption of an investment from the Fund or liquidation of the Fund. We may retain personal data for a longer period for the purpose of marketing our products and services or compliance with applicable law. From time to time, we will review the purpose for which personal data has been collected and decide whether to retain it or to delete if it no longer serves any purpose to us.

        To protect your personal information from unauthorized access and use, we apply technical and organizational security measures in accordance with Data Protection Laws. These measures include computer safeguards and secured files and buildings. We will notify you of any material personal data breaches affecting you in accordance with the requirements of Data Protection Laws.

International Transfers

        Because of the international nature of a fund management business, personal data may be transferred to countries outside the European Economic Area ("Third Countries"), such as to jurisdictions where we conduct business or have a service provider, including the United States and other countries that may not have the same level of data protection as that afforded by the Data Protection Laws in the European Economic Area. In such cases, we will process personal data (or

34


procure that it be processed) in the Third Countries in accordance with the requirements of the Data Protection Laws, which may include having appropriate contractual undertakings in legal agreements with service providers who process personal data on our behalf in such Third Countries.

ITEM 1A    RISK FACTORS.

        
An investment in our securities involves certain risks relating to our structure and investment objective. The risks set forth below are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may materially affect our business, our structure, our financial condition, our investments and/or operating results. If any of the following events occur, our business, financial condition and results of operations could be materially and adversely affected. In such case, our net asset value and the trading price of our Units could decline. There can be no assurance that we will achieve our investment objective and you may lose all or part of your investment.

Certain General Risks of an Investment in the Fund

No Assurance of Investment Return

        None of the Fund, the Adviser or their respective affiliates can provide any assurance whatsoever that the Fund will be successful in choosing, making and realizing investments in any particular Portfolio Company or Portfolio Companies. There is no assurance that the Fund will be able to generate returns for its investors or that the returns will be commensurate with the risks of investing in the type of companies and transactions described herein. While the Fund expects to make regular distributions of income, there can be no assurance that any Unitholder will receive any distribution from the Fund. Partial or complete sales, transfers or other dispositions of Portfolio Investments which may result in a return of capital or the realization of gains, if any, are generally not expected to occur for a number of years after an investment is made. Accordingly, an investment in the Fund should only be considered by persons for whom a speculative, illiquid and long-term investment is an appropriate component of a larger investment program and who can afford a loss of their entire investment.

        Past performance of investment entities associated with New Mountain and its affiliates is not necessarily indicative of future results. There can be no assurance that the Fund will achieve comparable results or that performance objectives of the Fund will be achieved. In particular, the Fund does not expect to replicate the historical performance of New Mountain's investments, or those of its affiliates, including New Mountain Finance Corporation ("NMFC"). In addition, the Fund's investment strategies may differ from those of New Mountain or its affiliates. The Fund, as a BDC and as a RIC, is subject to certain regulatory restrictions that do not apply to New Mountain or its affiliates.

        The Fund is generally not permitted to invest in any Portfolio Company in which New Mountain or any of its affiliates currently have an investment or to make any co-investments with New Mountain or its affiliates, except to the extent permitted by the 1940 Act, or pursuant to previously obtained exemptive orders. This may adversely affect the pace at which the Fund makes investments.

Role of New Mountain and its Professionals; No Dedicated Investment Team

        Investors in the Fund are placing their entire Capital Commitment in the exclusive discretion of, and are dependent upon the skill and experience of, New Mountain and the Adviser. In this regard, as of the date of this Registration Statement none of the Fund's investments have been identified, so that Unitholders will be relying on the ability of the Adviser to identify, structure and implement the investments to be made using the capital available to the Fund. Unitholders have no rights or powers to take part in the management of the Fund or make investment decisions and will not receive the amount of any Portfolio Company's financial information that is generally available to the Adviser. The Adviser, subject to the oversight of the Board, will generally have sole and absolute discretion in identifying, structuring, negotiating and purchasing, financing and eventually divesting investments on

35


behalf of the Fund (subject to specified exceptions). The Adviser may be unable to find a sufficient number of attractive opportunities to meet the Fund's investment objectives. The success of the Fund will depend on the ability of the Adviser to identify suitable Portfolio Investments, to negotiate and arrange the closing of appropriate transactions, and to arrange the timely disposition of Portfolio Investments. The success of the Fund will also depend in part upon the skill, expertise and ability of New Mountain's investment professionals and, as more fully discussed below, the management of Portfolio Companies. The interests of these professionals in New Mountain and the incentive fee should tend to discourage them from withdrawing from participation in the Fund's investment activities. However, there can be no assurance that such professionals will continue to be associated with New Mountain or the Adviser throughout the life of the Fund and a loss of the services of key personnel could impair New Mountain's ability to provide services to the Fund. There is ever-increasing competition among alternative asset managers, financial institutions, private investment firms, financial sponsors, investment managers and other industry participants for hiring and retaining qualified investment professionals. There can be no assurance that New Mountain personnel or its Senior Advisors will not be solicited by and join competitors or other firms and/or that New Mountain will be able to hire and retain any new personnel or Senior Advisors that it seeks to maintain or add to its roster of investment professionals.

        In addition, the Fund does not have a dedicated investment team and will share personnel and other resources with New Mountain's other funds and operations. New Mountain personnel will devote such time to the Fund as shall be reasonably necessary to conduct the business affairs of the Fund in an appropriate manner. However, such personnel will work on and devote substantial time to other projects, including New Mountain's existing funds, vehicles and accounts and their investments, and, therefore, conflicts exist in the allocation of management time, services and functions. The Fund will have no interest in such other investments, funds, vehicles and accounts where team members spend time. While there are a substantial number of investment team members who will devote such time to the Fund as shall be reasonably necessary as described above, certain of the New Mountain personnel devote, and are required to continue to devote, a majority and primary amount of his or her business time to New Mountain's other funds, their respective portfolio companies and matters relating thereto, which will necessarily limit the amount of time such personnel are able to dedicate to the Fund. As a result, the Adviser and its affiliates' ability to access professionals and resources within New Mountain for the benefit of the Fund as described in this Registration Statement will be limited. Such access may also be limited by the internal compliance policies of New Mountain or other legal or business considerations, including those constraints generally discussed herein.

        The Adviser is managed by an Investment Committee, which provides oversight over the Fund's investment activities. The Investment Committee currently consists of five members. The loss of any member of the Investment Committee or of other senior professionals of the Adviser and its affiliates without suitable replacement could limit the Fund's ability to achieve its investment objective and operate as the Fund anticipates. This could have a material adverse effect on the Fund's financial condition, results of operation and cash flows. To achieve the Fund's investment objective, the Adviser may hire, train, supervise and manage new investment professionals to participate in its investment selection and monitoring process. If the Adviser is unable to find investment professionals or do so in a timely manner, the Fund's business, financial condition and results of operations could be adversely affected.

36


        The Investment Management Agreement has been approved pursuant to Section 15 of the 1940 Act. In addition, the Investment Management Agreement has termination provisions that allow the parties to terminate the agreement. The Investment Management Agreement may be terminated at any time, without penalty, by the majority of the Board or by the Unitholders holding a majority of outstanding voting Units, upon 60 days' notice. If the Investment Management Agreement is terminated, it may adversely affect the quality of the Fund's investment opportunities. In addition, in the event the Investment Management Agreement is terminated, it may be difficult for the Fund to replace the Adviser. Moreover, it may be an event of default under the terms of the subscription facility and/or other credit facilities for the Fund, if the Adviser or an affiliate of the Adviser ceases to manage the Fund, which could result in the immediate acceleration of the amounts due under the Fund's credit facilities.

Compensation Arrangements

        The Adviser and its affiliates receive substantial fees from the Fund in return for their services, and these fees could influence the advice provided to the Fund. The Fund pays to the Adviser an incentive fee that is based on the performance of the Fund's portfolio and an annual base management fee that is payable quarterly in arrears at an annual rate based on Managed Capital as of the last day of the applicable quarter. Because the incentive fee is based on the performance of the Fund's portfolio, the Adviser may be incentivized to make investments on the Fund's behalf that are riskier or more speculative than would be the case in the absence of such compensation arrangement. The way in which the incentive fee is determined may also encourage the Adviser to use leverage to increase the return on the Fund's investments. In addition, because the base management fee is based on the Managed Capital as of the last day of the applicable quarter, which includes any outstanding borrowings under any subscription line drawn in lieu of capital calls, the Adviser may be incentivized to recommend the use of leverage or the issuance of additional equity to make additional investments and increase the Managed Capital as of the last day of the applicable quarter. Moreover, the Adviser's clawback obligation may create an incentive for the Adviser to delay the liquidation of the Fund where a clawback obligation would be owed. Under certain circumstances, the use of leverage may increase the likelihood of default, which could disfavor the Fund's Unitholders. The Fund's compensation arrangements could therefore result in the Fund making riskier or more speculative investments, or relying more on leverage to make investments, than would otherwise be the case. This could result in higher investment losses, particularly during cyclical economic downturns. See "—
Potential Conflicts of Interest
."

        The Fund's Investment Management Agreement entitles the Adviser to receive an incentive fee based on Pre-Incentive Fee Net Investment Income regardless of any capital losses. In such case, the Fund may be required to pay the Adviser incentive compensation for a fiscal quarter even if there is a decline in the value of the Fund's portfolio or if the Fund incurs a net loss for that quarter. However, the Adviser will be required to return incentive fees to the Fund as part of the Adviser's clawback obligation under the Investment Management Agreement.

        In addition, any Pre-Incentive Fee Net Investment Income may be computed and paid on income that may include interest that has been accrued but not yet received. If a Portfolio Company defaults on a loan that is structured to provide accrued interest, it is possible that accrued interest previously included in the calculation of the incentive fee will become uncollectible. The Adviser is not under any obligation to reimburse the Fund for any part of the incentive fee it received that was based on accrued income that the Fund never received as a result of a default by an entity on the obligation that resulted in the accrual of such income, and such circumstances would result in the Fund paying an incentive fee on income the Fund never received.

37


Lack of Operating History

        The Fund and certain other affiliated entities are newly formed entities which have very limited operations and therefore have no meaningful operating history upon which an investor may evaluate their performance. Moreover, New Mountain has not previously sponsored or managed a private BDC pursuing the same investment objective and strategy as the Fund. The prior investment performance described herein (in which the Fund will not participate), as with all performance data, can provide no assurance of future results for the Fund. The investment performance of the previous credit funds managed by New Mountain contained herein were achieved under different market conditions and with involvement from investment professionals that may not be involved with the investment activities of the Fund. Moreover, the Fund is subject to all of the business risks and uncertainties associated with any new fund, including the risk that it will not achieve its investment objective and that the value of a Unit in the Fund could decline substantially. The past performance of New Mountain or the Adviser's investment professionals is not a reliable indicator of the future performance of the Fund. Accordingly, investors should draw no conclusions from the performance of any previous Credit Platform vehicles and should not expect to achieve similar results.

        Other than the Fund, the Adviser manages two other companies that are regulated as BDCs and RICs. The 1940 Act and the Code impose numerous constraints on the operations of BDCs and RICs that do not apply to the other investment vehicles previously managed by the investment professionals of the Adviser. For example, under the 1940 Act, BDCs are required to invest at least 70% of their total assets primarily in securities of qualifying U.S. private or thinly traded companies, cash, cash equivalents, U.S. government securities and other high quality debt investments that mature in one year or less. Moreover, qualification for taxation as a RIC under Subchapter M of the Code requires satisfaction of source-of-income, asset diversification and annual distribution requirements. The failure to comply with these provisions in a timely manner could prevent the Fund from qualifying as a BDC or as a RIC and could force the Fund to pay unexpected taxes and penalties, which would have a material adverse effect on the Fund's performance. If the Fund fails to maintain its status as a BDC or as a RIC, its operating flexibility could be significantly reduced.

        The Adviser depends on its broader organization's relationships with private equity sponsors, investment banks and commercial banks, and the Fund relies to a significant extent upon these relationships to provide the Fund with potential investment opportunities. If the investment professionals of the Adviser fail to maintain existing relationships or develop new relationships with other sponsors or sources of investment opportunities, the Fund may not be able to grow its investment portfolio. In addition, individuals with whom the investment professionals of the Adviser have relationships are not obligated to provide the Fund with investment opportunities, and, therefore, there is no assurance that any relationships they currently or may in the future have will generate investment opportunities for the Fund.

        The Fund anticipates that its investment strategy may include both primary originations and secondary market purchases. While loans that the Fund originates and loans it purchases in the secondary market face many of the same risks associated with the financing of leveraged companies, the Fund may be exposed to different risks depending on specific business considerations for secondary market purchases or origination of loans. Primary originations require substantially more time and resources for sourcing, diligencing and monitoring investments, which may consume a significant portion of the Fund's resources. Further, the valuation process for primary originations may be more cumbersome and uncertain due to the lack of comparable market quotes for the investment and would likely require more frequent review by a third-party valuation firm. This may result in greater costs for the Fund and fluctuations in the quarterly valuations of investments that are primary originations. As a result, this strategy may result in different returns from these investments than the types of returns experienced from secondary market purchases of debt securities and may result in the partial or complete loss of your investment.

38


Certain Risks Relating to Portfolio Investments Generally

Operating and Financial Risks of Portfolio Companies

        Companies in which the Fund invests could deteriorate as a result of, among other factors, an adverse development in their business, a change in the competitive environment or an economic downturn. As a result, companies which the Fund expects to be stable may operate, or expect to operate, at a loss or have significant variations in operating results, may require substantial additional capital to support their operations or to maintain their competitive position, or may otherwise have a weak financial condition or be experiencing financial distress. In some cases, the success of the Fund's investment strategy will depend, in part, on the ability to restructure and effect improvements in the operations of a Portfolio Company. The activity of identifying and implementing restructuring programs and operating improvements at Portfolio Companies entails a high degree of uncertainty. There can be no assurance that any person (including the Fund) will be able to successfully identify and implement such restructuring programs and improvements.

        Although New Mountain's investment strategy includes a focus on tight control of risk, there can be no assurance that the various risks of an investment will be successfully controlled or that losses can be avoided.

        Investments in small and middle market businesses are highly speculative and involve a high degree of risk of credit loss. These risks are likely to increase during volatile economic periods, such as the U.S. and many other economies have recently experienced. Among other things, these companies:

    may have limited financial resources and may be unable to meet their obligations under their debt instruments that the Fund holds, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of the Fund realizing any guarantees from subsidiaries or affiliates of the Fund's Portfolio Companies that the Fund may have obtained in connection with the Fund's investment, as well as a corresponding decrease in the value of any equity components of the Fund's investments;


    may have shorter operating histories, narrower product lines, smaller market shares and/or more significant customer concentrations than larger businesses, which tend to render them more vulnerable to competitors' actions and market conditions, as well as general economic downturns;


    are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on the Fund's Portfolio Company and, in turn, on the Fund;


    generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence;


    may be targets of cybersecurity or other technological risks;


    may require substantial additional capital to support their operations, finance expansion or maintain their competitive position; and


    generally have less publicly available information about their businesses, operations and financial condition.

        In addition, in the course of providing significant managerial assistance to certain of the Fund's eligible Portfolio Companies, certain of the Fund's officers and directors may serve as directors on the boards of such companies. To the extent that litigation arises out of the Fund's investments in these companies, the Fund's officers and directors may be named as defendants in such litigation, which

39


could result in an expenditure of funds (through the Fund's indemnification of such officers and directors) and the diversion of management time and resources.

Investments in Highly Leveraged Companies

        The Fund's investments may include companies whose capital structures may have significant leverage. Such investments also involve a higher degree of risk and increase the investment's exposure to adverse economic factors such as rising interest rates, downturns in the economy or deteriorations in the markets generally. Moreover, any rise in interest rates may significantly increase the interest expense related to a Portfolio Investment, causing losses and/or the inability to meet debt obligations and covenants. The Fund's investments may involve varying degrees of leverage, which could magnify the impact of circumstances such as unfavorable market or economic conditions, operating problems and other general business and economic risks and/or changes that affect the relevant Portfolio Company or its industry, resulting in a more pronounced effect of such circumstances on the profitability or prospects of such companies. In using leverage, these companies may be subject to terms and conditions that include restrictive financial and operating covenants, which may impair their ability to finance or otherwise pursue their future operations or otherwise satisfy additional capital needs and may limit such company's flexibility to respond to changing business and economic conditions. Moreover, any rising interest rates may significantly increase Portfolio Companies' interest expense, causing losses and/or the inability to service debt levels. If a Portfolio Company cannot generate adequate cash flow to meet its debt obligations (including obligations to the Fund), the Fund may suffer a partial or total loss of capital invested in the Portfolio Company.

Defaults

        A Portfolio Company's failure to satisfy financial or operating covenants imposed by the Fund or other lenders could lead to defaults and, potentially, termination of its loans and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize a Portfolio Company's ability to meet its obligations under the debt and/or equity securities that the Fund holds.

        The Fund may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of certain financial covenants, with a defaulting Portfolio Company. In addition, lenders in certain cases can be subject to lender liability claims for actions taken by them when they become too involved in the borrower's business or exercise control over a borrower. It is possible that the Fund could become subject to a lender's liability claim, including as a result of actions taken if the Fund renders significant managerial assistance to the borrower. Furthermore, if one of the Fund's Portfolio Companies were to file for bankruptcy protection, even though the Fund may have structured its investment as senior secured debt, depending on the facts and circumstances, including the extent to which the Fund provided managerial assistance to that Portfolio Company, a bankruptcy court might re-characterize the Fund's debt holding and subordinate all or a portion the Fund's claim to claims of other creditors.

Unfunded Debt Commitments and Follow-On Investments

        The Fund may not have the funds or ability to make additional investments in its Portfolio Companies or to fund the Fund's unfunded debt commitments. The Fund expects that certain of its investments will take the form of unfunded commitments that the Fund will be contractually obligated to fund on the demand of a borrower or other counterparty. The Fund will not be able to control when, or if, these unfunded debt commitments are funded. Following an initial investment in a Portfolio Company, the Fund may make additional investments in that Portfolio Company as "follow-on" investments, in order to, among other things, (i) increase or maintain in whole or in part the Fund's ownership percentage, (ii) exercise warrants, options or convertible securities that were acquired in the original or subsequent financing or (iii) attempt to preserve or enhance the value of the

40


Fund's investment. The Fund may elect not to make follow-on investments or may otherwise lack sufficient funds to make these investments. The Fund has the discretion to make follow-on investments, subject to the availability of capital resources. If the Fund fails to make follow-on investments, the continued viability of a Portfolio Company and the Fund's investment may, in some circumstances, be jeopardized, the Fund could miss an opportunity for it to increase its participation in a successful operation and the Fund's expected return on the investment may be reduced. Even if the Fund has sufficient capital to make a desired follow-on investment, the Fund may elect not to make a follow-on investment because of regulatory, tax, diversification or asset profiles or the Fund may not want to increase its concentration of risk, either because the Fund prefers other opportunities or because the Fund is subject to BDC requirements that would prevent such follow-on investments or such follow-on investments would adversely impact the Fund's ability to maintain its RIC status.

Portfolio Companies' Other Debts

        The Fund's Portfolio Companies may incur debt that ranks equally with, or senior to, the Fund's investments in such companies.

        The Fund can invest in Portfolio Companies at all levels of the capital structure. The Fund's Portfolio Companies may have, or may be permitted to incur, other debt that ranks equally with, or senior to, the debt in which the Fund invests. By their terms, these debt instruments may entitle the holders to receive payment of interest or principal on or before the dates on which the Fund is entitled to receive payments with respect to the debt instruments in which the Fund invests. In addition, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a Portfolio Company, holders of debt instruments ranking senior to the Fund's investment in that Portfolio Company would typically be entitled to receive payment in full before the Fund receives any distribution. After repaying the senior creditors, the Portfolio Company may not have any remaining assets to use for repaying its obligation to the Fund. In the case of debt ranking equally with debt instruments in which the Fund invests, the Fund would have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant Portfolio Company.

Prepayments

        The Fund is subject to the risk that the investments the Fund makes in its Portfolio Companies may be repaid prior to maturity. When this occurs, subject to maintenance of the Fund's RIC status, the Fund will generally use these proceeds to pay down its credit facilities and later draw additional amounts under its credit facilities to fund new Portfolio Investments. Any future investment in a new Portfolio Company may also be at lower yields than the debt that was repaid. As a result, the Fund's results of operations could be materially adversely affected if one or more of the Fund's Portfolio Companies elect to prepay amounts owed to the Fund. Additionally, prepayments could negatively impact the Fund's return on equity.

Fund-Level Borrowings

        Subject to the limitations set forth in the Limited Liability Company Agreement and in accordance with the 1940 Act, the Fund may, at any time before or after the end of the Investment Period, borrow funds to (i) cover organizational and offering expenses and Fund Expenses, (ii) provide financing to consummate the purchase of Portfolio Investments; (iii) make repurchases of Units; or (iv) provide financing for debt investments, and may, to the extent consistent with RIC requirements, withhold from distributions amounts necessary to repay such borrowings. The interest expense and other costs incurred in connection with such borrowings may not be recovered by income from investments purchased by the Fund. If investment results fail to cover the cost of borrowings, the value of the portfolio held by the Fund will decrease faster than if there had been no such borrowings. Additionally,

41


if the investments fail to perform to expectation, the interests of Unitholders in the Fund will be subordinated to such leverage, which will compound any such adverse consequences. In connection with one or more credit facilities entered into by the Fund, distributions to the Unitholders may be subordinated to payments required in connection with any indebtedness contemplated thereby. Certain borrowings may be secured by assignment of the obligations of the Unitholders to make capital contributions to the Fund and a security interest in investments. Any default by the Fund under such a credit facility could enable a lender to take action against any Unitholder to the extent of its then-remaining undrawn commitments. Additionally, in the event of a failure to pay or other event of default under any such credit facility, the lenders could require investors to fund their entire remaining unfunded commitments. Leverage may limit the Unitholders' ability to use their interests in the Fund as collateral for other indebtedness. If the Fund defaults on secured indebtedness, the lender may foreclose and the Fund could lose its entire investment in the security for such loan. A credit facility at the fund level may also place restrictions on payments to equity holders, including prohibitions on payments in the event of any default (or continuance thereof) under such credit facility.

        The Adviser may, and intends to, fund the making of Portfolio Investments and other Fund capital needs with proceeds from drawdowns under one or more revolving credit facilities (the collateral for which can be, for example, one or more assets of the Fund, i.e., asset-backed facilities, or the undrawn capital commitments of investors, i.e., subscription lines) after calling for capital contributions. Capital calls, including those used to pay interest on subscription lines, asset-back facilities and other indebtedness, may from time to time be "batched" together into larger, less frequent capital calls or closings, with the Fund's interim capital needs being satisfied by the Fund borrowing money from such credit facilities. The interest expense and other costs of any such borrowings will be Fund Expenses and, accordingly, decrease net returns of the Fund.

        Leverage arrangements ("Leverage Arrangements") into which the Fund may enter may include covenants that, subject to exceptions, restrict the Fund's ability to pay distributions, create liens on assets, make investments, make acquisitions and engage in mergers or consolidations. Such Leverage Arrangements may also include a change of control provision that accelerates the indebtedness under the facility in the event of certain change of control events. Complying with these restrictions may prevent the Fund from taking actions that the Fund believes would help the Fund grow its business or are otherwise consistent with its investment objective. These restrictions could also limit the Fund's ability to plan for or react to market conditions or meet extraordinary capital needs or otherwise restrict corporate activities. In addition, the restrictions contained in a credit facility could limit the Fund's ability to make distributions to its Unitholders in certain circumstances, which could result in the Fund failing to qualify as a RIC and thus becoming subject to corporate-level U.S. federal income tax (and any applicable state and local taxes).

        To the extent the Fund borrows money to make investments, the Fund's net investment income depends, in part, upon the difference between the rate at which the Fund borrows funds and the rate at which the Fund invests those funds. As a result, a significant change in market interest rates may have a material adverse effect on the Fund's net investment income in the event the Fund uses debt to finance the Fund's investments. In periods of rising interest rates, the Fund's cost of funds would increase, which could reduce the Fund's net investment income. The Fund may use interest rate risk management techniques in an effort to limit its exposure to interest rate fluctuations. These techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act.

        In accordance with the 1940 Act as presently in effect, BDCs generally are prohibited from incurring additional leverage to the extent it would cause them to have less than a 200% asset coverage ratio, reflecting approximately a 1:1 debt to equity ratio, taking into account the then current fair value of the Fund's investments. However, under changes implemented in accordance with the Small Business Credit Availability Act, the Fund has elected to be subject to the lower leverage ratio of 150% available thereunder in order to maintain maximum flexibility, reflecting approximately a 2:1 debt to equity ratio.

42


Broad Investment Mandate; Unspecified Investments

        The Fund only recently began operations upon an initial drawdown of capital and may not have identified any particular future Portfolio Investments. A purchaser of the Units must rely upon the ability of the Adviser to identify, structure and implement Portfolio Investments consistent with the Fund's investment objectives and policies. The Adviser may be unable to find a sufficient number of attractive opportunities to meet the Fund's investment objectives. The success of the Fund will depend on the ability of the Adviser to identify suitable Portfolio Investments, to negotiate and arrange the closing of appropriate transactions, and to arrange the timely disposition of Portfolio Investments.

        The Board has the authority, except as otherwise provided in the 1940 Act, to modify or waive certain of the Fund's operating policies and strategies without prior notice and without Unitholder approval. As a result, the Board may be able to change the Fund's investment policies and objectives without any input from the Unitholders. However, absent Unitholder approval, the Fund may not change the nature of its business so as to cease to be, or withdraw its election as, a BDC. The Fund cannot predict the effect any changes to its current operating policies and strategies would have on its business and operating results. Nevertheless, any such changes could adversely affect the Fund's business and impair its ability to make distributions to the Unitholders.

Risk of Limited Number of Investments; Dependence on Performance of Certain Investments

        The Fund may participate in a limited number of Portfolio Investments and, as a consequence, the aggregate return of the Fund may be substantially adversely affected by the unfavorable performance of even a single Portfolio Investment. Moreover, there are no assurances that all of the Fund's Portfolio Investments will perform well or even return capital. Therefore, if certain Portfolio Investments perform unfavorably, for the Fund to achieve above-average returns, one or a few of its Portfolio Investments must perform well. There can be no assurance that this will be the case. In addition, other than the Fund seeking to meet the diversification requirements by virtue of the Fund's intention to be a RIC for U.S. tax purposes, investors have no assurance as to the degree of diversification of the Fund's Portfolio Investments, either by geographic region, industry or transaction type. To the extent the Fund concentrates Portfolio Investments in a particular issuer, industry, sub-sector, security, investment type, or geographic region, the Fund will become more susceptible to fluctuations in value resulting from adverse economic and business conditions with respect thereto. In addition, certain geographic regions, industries and/or sub-sectors may be more adversely affected from economic pressures when compared to other geographic regions, industries or sub-sectors. Prior to the end of the Closing Period, the investment limitations will be applied at the time of a given Portfolio Investment based on expected Capital Commitments to the Fund. Therefore, when the Fund makes a Portfolio Investment, it may calculate any investment limitations based on the assumption that it will have at least $750 million of Capital Commitments by the end of the Closing Period. In the event that the aggregate Capital Commitments are less than $750 million by the end of the Closing Period, the Fund may hold Portfolio Investments in excess of the percentage of the then-current Capital Commitments specified in such investment limitations. As a consequence, the aggregate return of the Fund may be adversely affected by the unfavorable performance of one or a small number of Portfolio Investments.

        A high concentration of the Fund's Portfolio Companies in a particular geographic area magnifies the effects of downturns in that geographic area and could have a disproportionate adverse effect on the value of the Fund's investments. If the Fund has a concentration of Portfolio Companies in any particular geographic area, any adverse situation that disproportionately affects that geographic area would have a magnified adverse effect on the Fund's portfolio. Factors that may negatively affect economic conditions in these states or countries include: business layoffs, downsizing or relocations; and industry slowdowns; changing demographics.

43


Influence over Management

        Although the Fund will primarily make debt and non-control equity investments, the Fund may make investments that allow the Fund to exercise certain influence over management and the strategic direction of a Portfolio Company, subject to the restrictions under the 1940 Act. The exercise of influence over a company imposes additional risks of liability for environmental damage, product defects, failure to supervise management and other types of liability in which the limited liability characteristic of business operations may be ignored. The exercise of influence over an investment could expose the assets of the Fund to claims by such Portfolio Companies, their shareholders and their creditors. While the Adviser intends to manage the Fund in a manner that will minimize the exposure of these risks, the possibility of successful claims cannot be precluded.

Illiquid and Long-Term Investments

        Investment in the Fund requires a long-term commitment with no certainty of return. Many of the Fund's Portfolio Investments will be highly illiquid, and the Fund may not be able to realize on such Portfolio Investments in a timely manner. It is anticipated that there will be a significant period of time (up to four years) before the Fund will have completed making investments in Portfolio Companies. Such Portfolio Investments are currently expected by New Mountain to mature in approximately four to seven years (or longer) from the date of initial investment, although the Fund expects many Portfolio Investments will be refinanced prior to their maturity. Although Portfolio Investments by the Fund are expected to generate current income, the return of capital and the realization of gains, if any, from a Portfolio Investment generally will occur only upon the partial or complete disposition or refinancing of such Portfolio Investment. While a Portfolio Investment may be sold or repaid at any time, it is not generally expected that this will occur for a number of years after the Portfolio Investment is made. Transaction structures typically will not provide for liquidity of the Fund's Portfolio Investments prior to that time. Often, there will be no readily available market for Portfolio Investments made by the Fund, if at all. Disposition of such Portfolio Investments may require a lengthy time period.

        In most cases, there will be no public market for the securities held by the Fund at the time of their acquisition. The Fund will generally not be able to sell the securities of Portfolio Companies through the public markets unless their sale is registered under applicable securities laws, or unless an exemption from such registration requirements is available. Additionally, there can be no assurances that investments can be sold on a private basis. The Fund's ability to quickly sell or exchange any of the Fund's Portfolio Companies in response to changes in economic and other conditions will be limited. In addition, in some cases the Fund may be prohibited by contract or legal or regulatory reasons from selling certain securities or other instruments for a period of time (
e.g.
, due to limitations on sale arising from contractual lockups, obligations to receive consent to transfer or assign interests, or rights of first offer), and as a result may not be permitted to sell a Portfolio Investment at a time it might otherwise desire to do so. To the extent that there is no trading market for a Portfolio Investment, the Fund may be unable to liquidate that Portfolio Investment or may be unable to do so at a profit. Moreover, there can be no assurances that private purchasers of the Fund's Portfolio Investments will be found.

        The Fund may experience difficulty in the sale of a Portfolio Company interest and could be forced to sell at a price that reduces the return to the Fund's investors. Markets are affected by many factors that are out of the Fund's control, including the availability of financing, interest rates and other factors, as well as supply and demand. As a result, the Fund cannot predict whether the Fund will be able to sell its interest in a Portfolio Company or whether such sale could be made at a favorable price or on terms acceptable to the Fund. Negative market conditions may cause the Fund to sell interests for less than their carrying value, which could result in impairments. The Fund also cannot predict the length of time which will be needed to obtain a purchaser or to complete the sale of any interest. No assurances can be given that the Fund will recognize full value, at a price and at terms that are

44


acceptable to the Fund, for any interest that the Fund is required to sell for liquidity reasons. The Fund's inability to respond rapidly to changes in the performance of the Fund's investments could adversely affect the Fund's financial condition and results of operations.

Investments Longer Than Term

        The Fund may make Portfolio Investments which may not be advantageously disposed of prior to the date the Fund will be dissolved, either by expiration of the Fund's term or otherwise. Although the Adviser expects that most Portfolio Investments will be disposed of prior to dissolution, the Adviser has a limited ability to extend the term of the Fund, and therefore the Fund may have to sell, distribute or otherwise dispose of Portfolio Investments at a disadvantageous time as a result of dissolution. In addition, although upon the dissolution of the Fund, the Adviser (or the relevant liquidating trustee or other representative) will be required to use its commercially reasonable efforts to liquidate all of the assets of the Fund in an orderly manner, there can be no assurances with respect to the time frame in which the winding up and the final distribution of proceeds to the Unitholders will occur. In addition, the Adviser may establish necessary reserves prior to distributing any gains, further elongating the period before the Unitholders will likely receive distributions of disposition proceeds or current income.

Highly Competitive Market for Investment Opportunities

        The activity of identifying, completing and realizing attractive credit investments is highly competitive, and involves a high degree of uncertainty. The availability of investment opportunities generally will be subject to market conditions. In particular, in light of changes in such conditions, including changes in long-term interest rates, certain types of investments may not be available to the Fund on terms that are as attractive as the terms on which opportunities were available to previous investment programs sponsored by New Mountain. The Fund will be competing for investments with many other investors, as well as financial institutions, open-ended funds, closed-ended funds, hedge funds and investment funds affiliated with other financial sponsors and other investors. Further, over the past several years, an ever-increasing number of credit funds have been formed and many such existing funds have grown substantially in size. Competition for appropriate investment opportunities may increase, thus reducing the number of investment opportunities available to the Fund and adversely affecting the terms upon which Portfolio Investments can be made. Moreover, the Fund may incur due diligence costs, bidding costs, or other expenses on potential investments that may not be successful. As a result, the Fund may not recover all of its costs, which would adversely affect returns. There can be no assurance that the Fund will be able to locate, complete and exit Portfolio Investments which satisfy the Fund's rate of return objectives, or realize upon their values, or that it will be able to invest fully its committed capital. To the extent that the Fund encounters competition for investments, returns to investors may decrease.

        The Fund cannot assure investors that it will be able to locate a sufficient number of suitable investment opportunities to allow the Fund to deploy all Capital Commitments successfully. In addition, privately negotiated investments in loans and illiquid securities of private middle market companies require substantial due diligence and structuring, and the Fund cannot assure investors that it will achieve its anticipated investment pace. As a result, investors will be unable to evaluate any future portfolio company investments prior to purchasing Units. Additionally, the Adviser will select the Fund's investments subsequent to this offering, and the Unitholders will have no input with respect to such investment decisions. These factors increase the uncertainty, and thus the risk, of investing in Units. To the extent the Fund is unable to deploy all Capital Commitments, the Fund's investment income and, in turn, the Fund's results of operations, will likely be materially adversely affected. There is no assurance that the Fund will be able to consummate investment transactions or that such transactions will be successful.

45


Indemnification

        The Fund will be required to indemnify any person who has served as a director, officer or employee of the Fund, the Adviser and each of their respective affiliates and related parties, and each person serving, or who has served, as a member of the Executive Advisory Council or the Advisory Committee (collectively, the "Covered Persons") for liabilities incurred in connection with the affairs of the Fund. Such liabilities may be material and have an adverse effect on the returns to Unitholders. For example, in their capacity as directors of Portfolio Companies the members, managers or affiliates of New Mountain may be subject to derivative or other similar claims brought by shareholders of such companies. The indemnification obligation (including the advancement of expenses in connection therewith) would be payable from the assets of the Fund, including the unfunded Capital Commitments of Unitholders. Furthermore, as a result of the provisions contained in the Fund's Limited Liability Company Agreement, Unitholders may have a more limited right of action in certain cases than it would in the absence of such limitations. For example, Covered Persons will not owe a duty of care equivalent to a "negligence" standard, but rather the Limited Liability Company Agreement provides that the Covered Persons will not be liable unless they act with "gross negligence." Further, members of the Advisory Committee will not be held to a "gross negligence" standard, but would only be liable for fraud, bad faith, or willful misconduct. In addition, under the Limited Liability Company Agreement the Fund is required to advance the costs and expenses of an indemnitee pending the outcome of the particular matter (including determination as to whether or not the person was entitled to indemnification or engaged in conduct that negated such person's entitlement to indemnification), there may be periods where the Fund is advancing expenses to an individual or entity with whom the Fund is not aligned or is otherwise an adverse party in a dispute.

Limited Recourse

        Subject to the requirements of the 1940 Act, the Investment Management Agreement and Administration Agreement will include exculpation, indemnification and other provisions that will limit the circumstances under which the Adviser and the Administrator, respectively, can be held liable to the Fund. In addition, investors should note that the Limited Liability Company Agreement contains provisions that, subject to applicable law, reduce or eliminate the liability of Covered Persons and limit remedies of the Unitholders. Additionally, certain service providers to the Fund, the Adviser, the Administrator, their respective affiliates and other persons, including, without limitation, the members of the Advisory Committee, may be entitled to exculpation and indemnification. As a result, the Unitholders may have a more limited right of action in certain cases than they would in the absence of such limitations.

Portfolio Company Management

        Each Portfolio Company's day-to-day operations will be the responsibility of such Portfolio Company's management team. Although New Mountain will be responsible for monitoring the performance of each Portfolio Investment, there can be no assurance that the existing management team, or any successor thereto, will be able to successfully operate the Portfolio Company in accordance with the Fund's plans and objectives. The success of each Portfolio Company depends in substantial part upon the skill and expertise of each Portfolio Company's management team. Additionally, Portfolio Companies will need to attract, retain and develop executives and members of their management teams. The market for executive talent is, notwithstanding general unemployment levels or developments within a particular industry, extremely competitive. There can be no assurance that Portfolio Companies will be able to attract, develop, integrate and retain suitable members of its management team and, as a result, such investment and the Fund may be adversely affected thereby.

46


Lack of Control of Portfolio Companies

        Although the Fund may take controlling positions in the Portfolio Companies from time to time, the Fund generally does not control most of the Portfolio Companies, even though the Fund may have board representation or board observation rights, and the Fund's debt agreements may contain certain restrictive covenants that limit the business and operations of the Portfolio Companies. As a result, the Fund is subject to the risk that a Portfolio Company may make business decisions with which the Fund disagrees and the management of such company may take risks or otherwise act in ways that do not serve the Fund's interests as debt investors. Due to the lack of liquidity of the investments that the Fund typically holds in the Portfolio Companies, the Fund may not be able to dispose of its investments in the event that the Fund disagrees with the actions of a Portfolio Company as readily as the Fund would otherwise like to or at favorable prices which could decrease the value of the Fund's investments.

Investment in Restructurings

        The Fund may, either alone or in conjunction with one or more partners or co-venturers, make Portfolio Investments in restructurings, or partner with another company to make Portfolio Investments in restructurings, which involve Portfolio Companies that are experiencing or are expected to experience severe financial difficulties. These financial difficulties may never be overcome and may cause such companies to become subject to bankruptcy proceedings. Such Portfolio Investments could, in certain circumstances, subject the Fund to certain additional potential liabilities, which may exceed the value of the Fund's original investment therein. For example, under certain circumstances, a lender who has inappropriately exercised control over the management and policies of a debtor may have its claims subordinated, or disallowed or may be found liable for damages suffered by parties as a result of such actions. In addition, under certain circumstances, payments to the Fund and distributions by the Fund to the Unitholders may be reclaimed if any such payment or distribution is later determined to have been a fraudulent conveyance, preferential payment or similar transaction under applicable bankruptcy and insolvency laws. Furthermore, Portfolio Investments in restructurings may be adversely affected by statutes relating to, among other things, fraudulent conveyances, voidable preferences, lender liability and a bankruptcy court's discretionary power to disallow, subordinate or disenfranchise particular claims or recharacterize Portfolio Investments made in the form of debt as equity contributions. These potential liabilities can adversely affect both the Portfolio Companies and their counterparties.

        The success of the Fund's investment strategy may depend on the ability of the Fund to restructure and effect improvements in the operations of a Portfolio Investment or expand the operations of a Portfolio Investment. The activity of identifying and implementing restructuring programs and operating improvements at Portfolio Investments entails a high degree of uncertainty. There can be no assurance that any person will be able to successfully identify and implement such restructuring programs and improvements or that the Fund will have control or influence over such decisions.

Investments in Private and Less Established Companies; Risk of Fraud in Portfolio Companies

        The Fund invests primarily in privately held companies. There is generally little public information about these companies, and, as a result, the Fund must rely on the ability of the Adviser to obtain adequate information to evaluate the potential returns from, and risks related to, investing in these companies. If the Fund is unable to uncover all material information about these companies, the Fund may not make a fully informed investment decision, and the Fund may lose money on the Fund's investments. Also, privately held companies frequently have less diverse product lines and smaller market presence than larger competitors. They are, thus, generally more vulnerable to economic downturns and may experience substantial variations in operating results. These factors could adversely affect the Fund's investment returns.

47


        Although the Fund generally seeks to invest in established companies with sound historical financial performance, the Fund may also invest a portion of its assets in the securities of less established companies, or early stage companies. Portfolio Investments in such early stage companies may involve greater risks than generally are associated with investments in more established companies. To the extent there is any public market for the securities held by the Fund, such securities may be subject to more abrupt and erratic market price movements than those of larger, more established companies. Less established companies tend to have lower capitalizations and fewer resources and, therefore, often are more vulnerable to financial failure. Such companies also may have shorter operating histories on which to judge future performance and in many cases, if operating, will have negative cash flow. Start-up enterprises may not have significant or any operating revenues. In addition, less mature companies could be deemed to be more susceptible to irregular accounting or other fraudulent practices. In the event of fraud by any company in which the Fund invests, the Fund may suffer a partial or total loss of capital invested in that company. The foregoing factors may increase the difficulty of valuing such investments. There can be no assurance that any such losses will be offset by gains (if any) realized on the Fund's other Portfolio Investments, and any such Portfolio Investment should be considered highly speculative and may result in the loss of the Fund's entire investment therein.

        The Fund may invest in Portfolio Companies that may (i) have a checkered financial history, (ii) be operating at a loss or have significant fluctuations in operating results, (iii) be engaged in rapidly changing business environments or (iv) need substantial additional capital to set up internal infrastructure, hire management and personnel, support expansion or achieve or maintain a competitive position. Such Portfolio Companies may have a greater variability of returns, and a higher risk of failure, than more established companies. Such companies also may face intense competition, including competition from companies with greater financial resources; more extensive development, manufacturing, marketing and service capabilities; and a larger number of qualified managerial and technical personnel.

Risks of Technology-Related Investments

        The Fund may invest in companies in rapidly changing fields, which may rely on the use of proprietary technology and be materially impacted by technological changes. Technological advancement is characterized by rapid change, evidenced by rapidly changing market conditions and participants, new competing products and improvements in existing products. Accordingly, companies relying on such technology may face special risks of product obsolescence. There can be no assurance that products sold by Portfolio Companies will not be rendered obsolete or adversely affected by competing products or that Portfolio Companies will not be adversely affected by other challenges inherent in businesses that may be significantly impacted by technological change, including a failure to successfully protect and enforce intellectual property and other rights, or failure to successfully implement and market new technology or proprietary systems.

OFAC and FCPA Considerations

        Economic sanction laws in the United States and other jurisdictions may prohibit New Mountain, New Mountain's professionals and the Fund from transacting with or in certain countries and with certain individuals and companies. In the United States, the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC") administers and enforces laws, Executive Orders and regulations establishing U.S. economic and trade sanctions. Such sanctions prohibit, among other things, transactions with, and the provision of services to, certain foreign countries, territories, entities and individuals. These entities and individuals include specially designated nationals, specially designated narcotics traffickers and other parties subject to OFAC sanctions and embargo programs. The lists of OFAC prohibited countries, territories, persons and entities, including the List of Specially Designated

48


Nationals and Blocked Persons, as such list may be amended from time to time, can be found on the OFAC website at <http://www.treas.gov/ofac.> In addition, certain programs administered by OFAC prohibit dealing with individuals or entities in certain countries regardless of whether such individuals or entities appear on the lists maintained by OFAC. These types of sanctions may significantly restrict the Fund's investment activities in certain emerging market countries.

        In some countries, there is a greater acceptance than in the United States of government involvement in commercial activities, and of corruption. New Mountain, the New Mountain professionals and the Fund are committed to complying with the FCPA and other anti-corruption laws, anti-bribery laws and regulations, as well as anti-boycott regulations, to which they are subject. As a result, the Fund may be adversely affected because of its unwillingness to participate in transactions that violate such laws or regulations. Such laws and regulations may make it difficult in certain circumstances for the Fund to act successfully on investment opportunities and for Portfolio Investments to obtain or retain business.

        In recent years, the U.S. Department of Justice and the SEC have devoted greater resources to enforcement of the FCPA. In addition, the United Kingdom has recently significantly expanded the reach of the UK Bribery Act of 2010 (the "UK Bribery Act"), which in some ways is broader in scope than the FCPA and applies to private and public sector corruption and holds companies liable for failure to prevent bribery unless they have adequate procedures in place to prevent bribery. While New Mountain has developed and implemented a stringent compliance program designed to ensure strict compliance by New Mountain, its personnel and senior advisors with the FCPA and the UK Bribery Act, even reasonable compliance programs may not prevent all instances of violations. In addition, in spite of New Mountain's policies and procedures, affiliates of Portfolio Companies, particularly in cases where the Fund or another New Mountain product or vehicle does not control such Portfolio Company, and third-party consultants, managers and advisors may engage in activities that could result in FCPA or UK Bribery Act violations. Any determination that New Mountain has violated the FCPA, the UK Bribery Act, or other applicable anti-corruption laws or anti-bribery laws could subject the Firm to, among other things, civil and criminal penalties, material fines, profit disgorgement, injunctions on future conduct, securities litigation and a general loss of investor confidence, any one of which could adversely affect New Mountain's business prospects and/or financial position, as well as the Fund's ability to achieve its investment objective and/or conduct its operations. The Fund may incur costs and expenses associated with engaging external counsel or other third-party consultants or professionals in connection with inquiries or investigations relating to FCPA or other applicable anti-corruption laws or anti-bribery laws.

Risks Associated with the European Union

        The long-term stability of certain European financial markets remains uncertain and difficult to predict. The possibility of a sovereign default, although more remote now than in years immediately following the crisis, remains a risk in countries where gross government debt, as a percentage of gross domestic product, remains relatively high by comparison to other EU countries, such as Greece, Italy, Cyprus and Portugal. A particularly high level of government debt may be unsustainable for a country that has, and continues to endure, weak economic growth, high unemployment, and has yet to benefit from longer-term economic reforms. The possibility of default, however unlikely, could nevertheless have a material impact on economic conditions and market activity in the Eurozone and elsewhere in the European Union (the "EU"). For example, default by a participating member state could in theory contribute to the collapse of the Eurozone as it is constituted today, resulting in the defaulting member state ceasing to use the Euro as its national currency, or even provide a stimulus for one or more member states may seek to withdraw from EU membership—any of which would likely have an adverse impact on the Fund. Moreover, collapse of the Euro would likely have negative implications for the European financial industry and the global economy as a whole because of counterparty risks,

49


exposures and other "systemic" risks. A potential effect would be an immediate reduction of liquidity for particular investments in economically connected countries, thereby impairing the value of such investments. Uncertain economic conditions generally affect markets adversely. Volatility in the global credit markets (and in particular, the recent uncertainty of the credit markets in Europe) may make it more difficult for issuers and borrowers to obtain favorable financing or refinancing arrangements that may be needed to execute the Fund's investment strategy. Continuing uncertainty in the Eurozone could have an adverse effect on the Fund by affecting the performance of its investments (whether made in a country that is at greater risk of default or in a country that is economically connected) and its ability to fulfill its investment objectives.

United Kingdom Withdrawal from the European Union

        The United Kingdom ("UK") formally notified the European Council of its intention to leave the EU on March 29, 2017. Under the process for leaving the EU, the UK will remain a member state until a withdrawal agreement is entered into, or failing that, on October 31, 2019. Under guidelines published by the European Council, the negotiations are being conducted broadly in two phases. The first phase is intended to ensure an orderly withdrawal from the EU. The second phase of negotiations will be directed toward agreeing on a framework for the future relationship between the UK and the EU. Political agreement on a draft withdrawal agreement between the UK and the EU was reached in November 2018, but the withdrawal agreement remains subject to approval by the UK parliament and ratification by the EU Parliament. There is no guarantee that such approval and/or ratification will be received. The UK will remain a member state subject to EU law with privileges to provide services under the single market directives until at least October 31, 2019. If the withdrawal agreement is approved, a transition period will run until December 31, 2020 and can be extended once by mutual agreement. Given the size and importance of the UK's economy, uncertainty or unpredictability about its legal, political and economic relationship with the EU, and whether it will cease to be a member of the EU in October 2019 or will continue to have rights and privileges during a transition period, will be a source of instability, may create significant currency fluctuations, and/or otherwise adversely affect international markets, trading or other arrangements (whether economic, tax, fiscal, legal, regulatory or otherwise) for the foreseeable future and possibly beyond the date of the UK's ultimate withdrawal from the EU. Any business that depends on the free movement of goods or the provision of cross-border services between the UK and the European Economic Area ("EEA") (as currently constituted) could be adversely affected by the terms ultimately agreed by the UK and the EU or by the absence of any such agreement. The inability to provide cross-border services, changes in fiscal cooperation (withholding tax), restrictions on movements of employees, tariffs on goods, increased transit times, etc., all have the potential to materially impair the profitability of a business and require it to adapt or even relocate. Regardless of whether the UK ultimately secures a transition period or a favorable set of trading arrangements with the EU, as October 31, 2019 approaches without assurance that the withdrawal agreement will be approved, many businesses will be unable to postpone executing contingency plans. Contingency planning for some businesses involves re-establishing the business in another member state, moving personnel and, if applicable, seeking authorization from local regulator(s)—all of which are costly and disruptive. Uncertainty about the way in which these many and complex issues will be resolved (and whether by agreement or through the absence of any agreement) could adversely affect the Fund, the performance of its investments (e.g., if its investments include businesses that depend on access to the single market or whose value is affected adversely by the UK's future relationship with the EU) and its ability to fulfill its investment objectives. Any decision of another member state to withdraw from the EU could exacerbate such uncertainty and instability and may present similar and/or additional potential risks.

50


Non-U.S. Investments

        The Fund may invest a portion of its aggregate Capital Commitments outside of the United States. Non-U.S. investments involve certain factors not typically associated with investing in the United States, including risks relating to (i) currency exchange matters, including fluctuations in the rate of exchange between the U.S. dollar and the various foreign currencies in which the Fund's foreign Portfolio Investments are denominated, and costs associated with conversion of investment principal and income from one currency into another; (ii) differences between the U.S. and foreign securities markets, including potential price volatility in and relative liquidity of some foreign securities markets, the absence of uniform accounting, auditing and financial reporting standards, practices and disclosure requirements and less government supervision and regulation; (iii) certain economic, social and political risks, including potential exchange control regulations and restrictions on foreign investment and repatriation of capital, the risks of political, economic or social instability and the possibility of expropriation or confiscatory taxation, nationalization of business enterprises, and adverse economic and political development; (iv) the possible imposition of foreign taxes on income recognized with respect to such securities; (v) less developed laws regarding corporate governance, creditors' rights, fiduciary duties and the protection of investors; (vi) differences in the legal and regulatory environment or enhanced legal and regulatory compliance; (vii) political hostility to investments by foreign or private credit investors; and (viii) less publicly available information. Such instability could result from, among other things, popular unrest associated with demands for improved political, economic and social conditions and popular unrest in opposition to government policies that facilitate direct foreign investment. Governments of certain of these countries have exercised and continue to exercise substantial influence over many aspects of the private sector. The Fund generally does not intend to obtain political risk insurance. Accordingly, government actions in the future could have a significant effect on economic conditions in such countries, which could affect private sector companies and the return from investments. Exchange control regulations, expropriation, confiscatory taxation, nationalization, restrictions on repatriation of capital, renunciation of foreign debt, political, economic or social instability or other economic or political developments could adversely affect Portfolio Companies of the Fund holding assets or engaged in business in a particular country.

        In addition, Portfolio Companies located in non-U.S. jurisdictions may be involved in restructurings, bankruptcy proceedings and/or reorganizations that are not subject to laws and regulations that are similar to the U.S. Bankruptcy Code and the rights of creditors afforded in U.S. jurisdictions. To the extent such non-U.S. laws and regulations do not provide the Fund with equivalent rights and privileges necessary to promote and protect its interest in any such proceeding, the Fund's investments in any such Portfolio Company may be adversely affected. While the Adviser intends, where appropriate, to manage the Fund in a manner that will minimize exposure to the foregoing risks, to the extent practicable, there can be no assurance that adverse developments with respect to such risks will not adversely affect the assets of the Fund that are held in certain countries. Prospective investors should also note the considerations discussed in "
Item 1. Business—Certain U.S. Federal Income Tax Considerations"
above.

Hedging Policies/Risks

        In connection with certain Portfolio Investments, the Fund may employ hedging techniques designed to reduce the risk of adverse movements in interest rates, securities prices and currency exchange rates to the extent permitted by the 1940 Act. While such transactions may reduce certain risks, such transactions themselves may entail certain other risks. Thus, while the Fund may benefit from the use of these hedging mechanisms, unanticipated changes in commodity prices, interest rates, securities prices, currency exchange rates and/or other events relating to such hedging transactions may result in a poorer overall performance for the Fund than if it had not entered into such hedging transactions. The Adviser may not hedge against a particular risk because it does not regard the

51


probability of the risk occurring to be sufficiently high as to justify the cost of the hedge, or because it does not foresee the occurrence of the risk. The successful utilization of hedging and risk management transactions requires skills that are separate from the skills used in selecting and monitoring investments. Costs related to hedging arrangements may be borne by the Fund.

Hedging; Derivative Instruments

        The Fund may, directly or indirectly, use various derivative instruments for hedging purposes. The Fund also may use derivative instruments to approximate or achieve the economic equivalent of an otherwise permitted Portfolio Investment (as if the Fund directly invested in the securities, loans, or claims of the subject Portfolio Company) or if such instruments are related to an otherwise permitted Portfolio Investment. Use of derivative instruments presents various risks. For example, when used for hedging or synthetic investment purposes, an imperfect or variable degree of correlation between price movements of the derivative instrument and the underlying investment sought to be hedged or tracked may prevent the Fund from achieving the intended hedging effect or expose the Fund to the risk of loss. Derivative instruments, especially when traded in large amounts, may not be liquid in all circumstances, so that in volatile markets the Fund may not be able to close out a position without incurring a loss. In addition, daily limits on price fluctuations and speculative position limits on exchanges on which the Fund may conduct its transactions in derivative instruments may prevent prompt liquidation of positions, subjecting the Fund to the potential of greater losses. Derivative instruments that may be purchased or sold by the Fund may include instruments not traded on an exchange. Derivative instruments not traded on exchanges are also not subject to the same type of government regulation as exchange-traded instruments, and many of the protections afforded to participants in a regulated environment may not be available in connection with such transactions. In addition, significant disparities may exist between "bid" and "asked" prices for derivative instruments that are not traded on an exchange. The risk of nonperformance by the counterparty on such an instrument may be greater and the ease with which the Fund can dispose of or enter into closing transactions with respect to such an instrument may be less than in the case of an exchange-traded instrument. The stability and liquidity of derivative investments depend in large part on the creditworthiness of the parties to the transactions. If there is a default by the counterparty to such a transaction, the Fund will under most normal circumstances have contractual remedies pursuant to the agreements related to the transaction. However, exercising such contractual rights may involve delays or costs, which could result in a loss to the Fund. Furthermore, there is a risk that any of such counterparties could become insolvent. Also, it should be noted that in purchasing derivative instruments, the Fund typically will not have the right to vote on matters requiring a vote of holders of the underlying investment. Moreover, derivative instruments, and the terms relating to the purchase, sale or financing thereof, are also typically governed by complex legal agreements. As a result, there is a higher risk of dispute over interpretation or enforceability of the agreements. It should also be noted that the regulation of derivatives is evolving in the U.S. and in other jurisdictions and is expected to increase, which could impact the Fund's ability to transact in such instruments and the liquidity of such instruments. The Adviser may cause the Fund to take advantage of investment opportunities with respect to derivative instruments that are neither presently contemplated nor currently available, but which may be developed in the future, to the extent such opportunities are both consistent with the Fund's investment objectives and legally permissible. Any such investments may expose the Fund to unique and presently indeterminate risks, the impact of which may not be capable of determination until such instruments are developed and/or the Adviser determines to make such an investment.

        The SEC has proposed a new rule under the 1940 Act that would govern the use of derivatives (defined to include any swap, security-based swap, futures contract, forward contract, option or any similar instrument) as well as financial commitment transactions (defined to include reverse repurchase agreements, short sale borrowings and any firm or standby commitment agreement or similar agreement) by BDCs. Under the proposed rule, a BDC would be required to comply with one of two

52


alternative portfolio limitations and manage the risks associated with derivatives transactions and financial commitment transactions by segregating certain assets. Furthermore, a BDC that engages in more than a limited amount of derivatives transactions or that uses complex derivatives would be required to establish a formalized derivatives risk management program. If the SEC adopts this rule in the form proposed, the Fund may incur greater and indirect costs to engage in derivatives transactions or financial commitment transactions, and the Fund's ability to enter into transactions involving such instruments may be hindered, which could have an adverse effect on the Fund's business, financial condition and results of operations.

Debt and Mezzanine Investments

        The Fund's investments are almost entirely rated below investment grade or may be unrated, which are often referred to as "leveraged loans", "high yield" or "junk" securities, and may be considered "high risk" compared to debt instruments that are rated investment grade. High yield securities are regarded as having predominantly speculative characteristics with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligations and involve major risk exposure to adverse conditions. In addition, high yield securities generally offer a higher current yield than that available from higher grade issues, but typically involve greater risk. These securities are especially sensitive to adverse changes in general economic conditions, to changes in the financial condition of their issuers and to price fluctuation in response to changes in interest rates. During periods of economic downturn or rising interest rates, issuers of below investment grade instruments may experience financial stress that could adversely affect their ability to make payments of principal and interest and increase the possibility of default.

        Certain debt investments that the Fund makes to Portfolio Companies may be secured on a second priority basis by the same collateral securing first priority debt of such companies. The first priority liens on the collateral will secure the Portfolio Company's obligations under any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by the company under the agreements governing the loans. The holders of obligations secured by the first priority liens on the collateral will generally control the liquidation of and be entitled to receive proceeds from any realization of the collateral to repay their obligations in full before the Fund. In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from the sale or sales of all of the collateral would be sufficient to satisfy the debt obligations secured by the second priority liens after payment in full of all obligations secured by the first priority liens on the collateral. If such proceeds are not sufficient to repay amounts outstanding under the debt obligations secured by the second priority liens, then the Fund, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against the company's remaining assets, if any.

        The Fund may also make unsecured debt investments in Portfolio Companies, meaning that such investments will not benefit from any interest in collateral of such companies. Liens on such Portfolio Companies' collateral, if any, will secure the Portfolio Company's obligations under its outstanding secured debt and may secure certain future debt that is permitted to be incurred by the Portfolio Company under its secured debt agreements. The holders of obligations secured by such liens will generally control the liquidation of, and be entitled to receive proceeds from, any realization of such collateral to repay their obligations in full before the Fund is so entitled. In addition, the value of such collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from sales of such collateral would be sufficient to satisfy its unsecured debt obligations after payment in full of all secured debt obligations. If such proceeds were not sufficient to repay the outstanding secured debt obligations, then its unsecured claims would rank equally with the unpaid portion of such secured creditors' claims against the Portfolio Company's remaining assets, if any.

53


        The rights the Fund may have with respect to the collateral securing the debt investments the Fund makes to the Portfolio Companies with senior debt outstanding may also be limited pursuant to the terms of one or more intercreditor agreements that the Fund enters into with the holders of senior debt. Under such an intercreditor agreement, at any time that obligations that have the benefit of the first priority liens are outstanding, any of the following actions that may be taken in respect of the collateral will be at the direction of the holders of the obligations secured by the first priority liens: the ability to cause the commencement of enforcement proceedings against the collateral; the ability to control the conduct of such proceedings; the approval of amendments to collateral documents; releases of liens on the collateral; and waivers of past defaults under collateral documents. The Fund may not have the ability to control or direct such actions, even if its rights are adversely affected.

        The Fund's investment in any mezzanine securities may not be protected by financial covenants or limitations upon additional indebtedness, may have limited liquidity and are not expected to be rated by a credit rating agency. Mezzanine investments generally are subject to various risks including, without limitation: (i) a subsequent characterization of an investment as a "fraudulent conveyance" under relevant creditors' rights laws possibly resulting in the avoidance of collateral securing the investment or the cancellation of the obligation representing the investment; (ii) the recovery as a "preference" of liens perfected or payments made on account of a debt in certain periods before a bankruptcy filing; (iii) equitable subordination claims by other creditors; (iv) so-called "lender liability" claims by the issuer of the obligations; and (v) environmental liabilities that may arise with respect to collateral securing the obligations. Additionally, adverse credit events with respect to any portfolio entity, such as missed or delayed payment of interest and/or principal, bankruptcy, receivership or distressed exchange, can significantly diminish the value of the Fund's investment in any such company.

Equity Investments

        When the Fund invests in Portfolio Companies, the Fund may acquire warrants or other equity securities of Portfolio Companies as well. The Fund may also invest in equity securities directly. To the extent the Fund holds equity investments, the Fund will attempt to dispose of them and realize gains upon its disposition of them. However, the equity interests the Fund receives may not appreciate in value and, in fact, may decline in value. As a result, the Fund may not be able to realize gains from its equity interests, and any gains that the Fund does realize on the disposition of any equity interests may not be sufficient to offset any other losses the Fund experiences. The Fund also may be unable to realize any value if a Portfolio Company does not have a liquidity event, such as a sale of the business, recapitalization or public offering, which would allow the Fund to sell the underlying equity interests.

Repurchase Agreements

        Subject to the Fund's investment objective and policies, the Fund may invest in repurchase agreements as a buyer for investment purposes. Repurchase agreements typically involve the acquisition by the Fund of debt securities from a selling financial institution such as a bank, savings and loan association or broker-dealer. The agreement provides that the Fund will sell the securities back to the institution at a fixed time in the future for the purchase price plus premium (which often reflects the interests). The Fund does not bear the risk of a decline in the value of the underlying security unless the seller defaults under its repurchase obligation. In the event of the bankruptcy or other default of a seller of a repurchase agreement, the Fund could experience both delays in liquidating the underlying securities and losses, including (1) possible decline in the value of the underlying security during the period in which the Fund seeks to enforce its rights thereto; (2) possible lack of access to income on the underlying security during this period; and (3) expenses of enforcing its rights. In addition, as described above, the value of the collateral underlying the repurchase agreement will be at least equal to the repurchase price, including any accrued interest earned on the repurchase agreement. In the event of a default or bankruptcy by a selling financial institution, the Fund generally will seek to

54


liquidate such collateral. However, the exercise of the Fund's right to liquidate such collateral could involve certain costs or delays and, to the extent that proceeds from any sale upon a default of the obligation to repurchase were less than the repurchase price, the Fund could suffer a loss.

Original Issue Discount and Payment-In-Kind Instruments

        To the extent that the Fund invests in original issue discount or PIK instruments and the accretion of original issue discount or PIK interest income constitutes a portion of the Fund's income, the Fund will be exposed to risks associated with the requirement to include such non-cash income in taxable and accounting income prior to receipt of cash, including the following:

    the higher interest rates on PIK instruments reflect the payment deferral and increased credit risk associated with these instruments, and PIK instruments generally represent a significantly higher credit risk than coupon loans;


    original issue discount and PIK instruments may have unreliable valuations because the accruals require judgments about collectability of the deferred payments and the value of any associated collateral;


    an election to defer PIK interest payments by adding them to the principal on such instruments increases the Fund's future investment income which increases the Fund's gross assets and, as such, increases the Adviser's future base management fees which, thus, increases the Adviser's future income incentive fees at a compounding rate;


    market prices of PIK instruments and other zero coupon instruments are affected to a greater extent by interest rate changes, and may be more volatile than instruments that pay interest periodically in cash. While PIK instruments are usually less volatile than zero coupon debt instruments, PIK instruments are generally more volatile than cash pay securities;


    the deferral of PIK interest on an instrument increases the loan-to-value ratio, which is a measure of the riskiness of a loan, with respect to such instrument;


    even if the conditions for income accrual under GAAP are satisfied, a borrower could still default when actual payment is due upon the maturity of such loan;


    for accounting purposes, cash distributions to investors representing original issue discount income do not come from paid-in capital, although they may be paid from the offering proceeds. Thus, although a distribution of original issue discount income may come from the cash invested by investors, the 1940 Act does not require that investors be given notice of this fact;


    the required recognition of original issue discount or PIK interest for U.S. federal income tax purposes may have a negative impact on liquidity, as it represents a non-cash component of the Fund's investment company taxable income that may require cash distributions to Unitholders in order to maintain the Fund's tax treatment as a RIC; and


    original issue discount may create a risk of non-refundable cash payments to the Adviser based on non-cash accruals that may never be realized.

Risks Relating to Due Diligence of and Conduct at Portfolio Companies

        Before making Portfolio Investments, the Adviser will typically conduct due diligence that they deem reasonable and appropriate based on the facts and circumstances applicable to each Portfolio Investment. Due diligence may entail evaluation of important and complex business, financial, tax, accounting, environmental, social, governance and legal issues. When conducting due diligence and making an assessment regarding an investment, the Adviser will rely on the resources available to it, including information provided by the target of the investment and, in some circumstances, third-party

55


investigations. The due diligence investigation that the Adviser carries out with respect to any investment opportunity may not reveal or highlight all relevant facts that may be necessary or helpful in evaluating such investment opportunity. Moreover, such an investigation will not necessarily result in the Portfolio Investment being successful. There can be no assurance that attempts to provide downside protection with respect to Portfolio Investments will achieve their desired effect and potential investors should regard an investment in the Fund as being speculative and having a high degree of risk.

        There can be no assurance that the Fund will be able to detect or prevent irregular accounting, employee misconduct or other fraudulent practices during the due diligence phase or during its efforts to monitor the Portfolio Investment on an ongoing basis or that any risk management procedures implemented by the Fund will be adequate. In the event of fraud by any Portfolio Company or any of its affiliates, the Fund may suffer a partial or total loss of capital invested in that Portfolio Company. An additional concern is the possibility of material misrepresentation or omission on the part of the Portfolio Company or the seller. Such inaccuracy or incompleteness may adversely affect the value of the Fund's securities and/or instruments in such Portfolio Company. The Fund will rely upon the accuracy and completeness of representations made by Portfolio Companies and/or their former owners in the due diligence process to the extent reasonable when it makes its investments, but cannot guarantee such accuracy or completeness. Under certain circumstances, payments to the Fund may be reclaimed if any such payment or distribution is later determined to have been a fraudulent conveyance or a preferential payment.

        Consultants, legal advisors, appraisers, accountants, investment banks and other third parties may be involved in the due diligence process and/or the ongoing operation of the Fund's Portfolio Companies to varying degrees depending on the type of investment. For example, certain asset management, finance, administrative and other similar functions may be outsourced to a third-party service provider whose fees and expenses will be borne by such Portfolio Company or the Fund and will not offset the management fee. Such involvement of third-party advisors or consultants may present a number of risks primarily relating to the Adviser's reduced control of the functions that are outsourced. In addition, if the Adviser is unable to timely engage third-party providers, their ability to evaluate and acquire more complex targets could be adversely affected.

Currency and Exchange Rate Risks

        A portion of the Fund's Portfolio Investments, and the income received by the Fund with respect to such Portfolio Investments, may be denominated in currencies other than U.S. dollars. However, the books of the Fund will be maintained, and capital contributions to and distributions from the Fund generally will be made, in U.S. dollars. Accordingly, changes in currency exchange rates may adversely affect the dollar value of Portfolio Investments, interest amounts and other payments received by the Fund, gains and losses realized on the sale of investments and the amount of distributions, if any, to be made by the Fund. Recent events have exacerbated the volatility of certain currency exchange rates, which may adversely affect the Fund. In addition, the Fund will incur costs in converting investment proceeds from one currency to another. The Adviser may enter into hedging transactions designed to reduce such currency risks. See also "
Hedging Policies/Risks
" above. Furthermore, Units are denominated in U.S. dollars. Investors subscribing for Units in any country in which U.S. dollars are not the local currency, should note that changes in the value of exchange between U.S. dollars and such currency may have an adverse effect on the value, price or income of the investment to such investor. There may be foreign exchange regulations applicable to investments in foreign currencies in certain jurisdictions. Each prospective investor should consult with its own counsel and advisors as to all legal, tax, financial and related matters concerning an investment in the Units.

56


Misconduct of Employees and of Third-Party Service Providers

        Misconduct by employees of the Adviser or by third-party service providers could cause significant losses to the Fund. The Board has determined that the compliance policies and procedures of the Adviser and other service providers are reasonably designed to prevent violations of securities laws, but there is no assurance that these policies will prevent violations or other activities that could harm the Fund. Employee misconduct may include binding the Fund to transactions that exceed authorized limits or present unacceptable risks and other unauthorized activities or concealing unsuccessful trading investments (which, in either case, may result in unknown and unmanaged risks or losses). Losses could also result from actions by third-party service providers, including, without limitation, failing to recognize trades, misappropriating assets or a failure of a custodian that holds securities of the Fund. In addition, employees and third-party service providers may improperly use or disclose confidential information, which could result in litigation or serious financial harm, including limiting the Fund's business prospects or future marketing activities. It is not always possible to deter misconduct by employees or service providers, and the precautions the Adviser takes to detect and prevent this activity may not be effective in all cases. No assurances can be given that the due diligence performed by the Adviser will identify or prevent any such misconduct.

Public Company Holdings

        To maintain the Fund's status as a BDC, the Fund is not permitted to acquire any assets other than in "eligible portfolio companies" specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of the Fund's total assets are eligible portfolio companies (with certain limited exceptions). Subject to certain exceptions for follow-on investments and distressed companies, an investment in an U.S. domiciled issuer that has outstanding securities listed on a national securities exchange may be treated as qualifying assets only if such issuer has a common equity market capitalization that is less than $250 million at the time of such investment.

Bridge Financings

        The Fund may provide interim financing to, or make investments that are intended to be of a temporary nature in equity or debt securities of, any Portfolio Company or any affiliate thereof in connection with or subsequent to an investment by the Fund in such Portfolio Company. Such bridge loans would typically be convertible into a more permanent, long-term security; however, for reasons not always in the Fund's control, such long-term securities issuance or other refinancing or syndication may not occur and such bridge loans and interim investments may remain outstanding. In such event, the interest rate or other terms of such financings may not adequately reflect the risk associated with the position taken by the Fund. Such financings may be entered into at prospective returns below the Fund's target investment returns. Therefore, such financing that is not exited as originally anticipated, even if successfully recovered by the Fund, could significantly reduce the Fund's overall investment returns.

Uncertainty of Financial Projections

        The Adviser will generally establish the pricing of transactions and the capital commitment amount to Portfolio Companies on the basis of financial projections for such Portfolio Companies. Estimates or projections of economic and market conditions, supply and demand dynamics and other key investment-related considerations are key factors in evaluating potential investment opportunities and valuing the Fund's investment program. It is possible for such estimates and projections to be significantly revised from time to time, creating significant changes in the value of the company subject to such factors. Projected operating results are normally be based primarily on management judgments. In all cases, projections are only estimates of future results that are based upon assumptions made at the time that the projections are developed. There can be no assurance that any projections, forecasts

57


or estimates referred to will prove to be accurate or that projected, forecasted or estimated results will be obtained. Actual results may vary significantly from the projections, forecasts or estimates provided. General economic, political and market conditions, which are not predictable, can have a material adverse impact on the reliability of such projections, forecasts or estimates.

Terrorism Risk

        The continued threat of global terrorism and the impact of military and other action will likely continue to cause volatility in the economies of certain countries and various aspects thereof, including in prices of commodities, and could affect the Fund's financial results. The Fund's Portfolio Investments may involve significant strategic assets having a national or regional profile. The nature of these assets could expose them to a greater risk of being the subject of a terrorist attack than other assets or businesses. Any terrorist attacks that occur at or near such assets would likely cause significant harm to employees, property and, potentially, the surrounding community, and may result in losses far in excess of available insurance coverage. As a result of global events and continued terrorism concerns, insurers significantly reduced the amount of insurance coverage available for liability to persons other than employees for claims resulting from acts of terrorism, war or similar events. As a result of a terrorist attack or terrorist activities in general, the Fund may not be able to obtain insurance coverage and other endorsements at commercially reasonable prices or at all.

Availability of Insurance Against Certain Catastrophic Losses

        With respect to Portfolio Investments, the Adviser may seek to require the underlying Portfolio Company and/or project to obtain liability, fire, flood, extended coverage and rental loss insurance with insured limits and policy specifications that they believe are customary for similar investments. However, certain losses of a catastrophic nature, such as wars, natural disasters, terrorist attacks, or other similar events, may be either uninsurable or insurable at such high rates that to maintain such coverage would cause an adverse impact on the related investments. In general, losses related to terrorism are becoming harder and more expensive to insure against. Most insurers are excluding terrorism coverage from their all-risk policies. In some cases, the insurers are offering significantly limited coverage against terrorist acts for additional premiums which can greatly increase the total costs of casualty insurance for a Portfolio Company. As a result, not all Portfolio Investments may be insured against terrorism. If a major uninsured loss occurs, the Fund could lose both invested capital in and anticipated profits from the affected Portfolio Investments.

Force Majeure Risk

        Portfolio Companies may be affected by force majeure events (i.e., events beyond the control of the party claiming that the event has occurred, including, without limitation, civil unrest, acts of God, fire, flood, earthquakes, hurricanes and other natural disasters, including extreme weather events from possible future climate change, outbreaks of an infectious disease, pandemic or any other serious public health concern, war, terrorism and labor strikes). Some force majeure events may adversely affect the ability of a party (including a Portfolio Company or a counterparty to the Fund or a Portfolio Company) to perform its obligations until it is able to remedy the force majeure event. In addition, the cost to a Portfolio Company or the Fund of repairing or replacing damaged assets resulting from such force majeure event could be considerable. Certain force majeure events (such as war or an outbreak of an infectious disease) could have a broader negative impact on the world economy and international business activity generally, or in any of the countries in which the Fund may invest specifically.

58


Certain Risks Relating to the Units and Operation of the Fund

No Market for Units; Transferability Restrictions

        The Units in the Fund have not been registered under the Securities Act, or applicable securities laws of any U.S. state or the securities laws of any other jurisdiction and, therefore, cannot be resold unless they are subsequently registered under the Securities Act and any other applicable securities laws or an exemption from such registration is available. It is not contemplated that registration of the Units under the Securities Act or other securities laws will ever be effected. There is no public market for the Units and one is not expected to develop. Accordingly, it may be difficult to obtain reliable information about the value of Units. Each Unitholder must be an "accredited investor" (as defined in Regulation D promulgated under the Securities Act) and will be required to represent, among other customary private placement representations, that it is acquiring its Unit for its own account and for investment purposes only and not with a view to resale or distribution and that it will only sell and transfer its limited liability company unit to an accredited investor under applicable securities laws or in a manner permitted by the Limited Liability Company Agreement and consistent with such laws. Subject to a few limited exceptions, a Unitholder will not be permitted to directly or indirectly assign, sell, exchange, mortgage, pledge or transfer any of its Units or any of its rights or obligations with respect to its Units in the Fund, except by operation of law, without the prior written consent of the Adviser, which consent may be given or withheld in accordance with the Limited Liability Company Agreement. Except in limited circumstances, voluntary withdrawals from the Fund will not be permitted. The Unitholders must be prepared to bear the risks of owning Units for an extended period of time.

Status as a BDC

        The Fund qualifies as a BDC under the 1940 Act. The 1940 Act imposes numerous constraints on the operations of BDCs. For example, BDCs are required to invest at least 70.0% of their total assets in specified types of securities, primarily in private companies or thinly-traded U.S. public companies, cash, cash equivalents, U.S. government securities and other high quality debt investments that mature in one year or less. Failure to comply with the requirements imposed on BDCs by the 1940 Act could cause the SEC to bring an enforcement action against the Fund and/or expose the Fund to claims of private litigants. In addition, upon approval of a majority of the Unitholders, the Fund may elect to withdraw their respective election as a BDC. If the Fund decides to withdraw its election, or if the Fund otherwise fails to qualify, or maintain its qualification, as a BDC, the Fund may be subject to the substantially greater regulation under the 1940 Act as a closed-end investment company. Compliance with these regulations would significantly decrease the Fund's operating flexibility and could significantly increase the Fund's cost of doing business.

        As a BDC, the Fund is prohibited from acquiring any assets other than "qualifying assets" unless, at the time of and after giving effect to such acquisition, at least 70% of its total assets are qualifying assets. The Fund may acquire in the future other investments that are not "qualifying assets" to the extent permitted by the 1940 Act. If the Fund does not invest a sufficient portion of its assets in qualifying assets, the Fund would be prohibited from investing in additional assets, which could have a material adverse effect on its business, financial condition and results of operations. Similarly, these rules could prevent the Fund from making follow-on investments in existing Portfolio Companies (which could result in the dilution of its position) or could require the Fund to dispose of investments at inopportune times in order to come into compliance with the 1940 Act. If the Fund needs to dispose of these investments quickly, it may be difficult to dispose of such investments on favorable terms. For example, the Fund may have difficulty in finding a buyer and, even if a buyer is found, it may have to sell the investments at a substantial loss.

59


Valuation of Portfolio Investments

        As noted above, there is no established market for many private investments and a Portfolio Company may not have any comparable companies for which public market valuations exist. Because there is significant uncertainty as to the valuation of illiquid investments, the values of such investments may not necessarily reflect the values that could actually be realized by the Fund. Under certain conditions the Fund may be forced to sell Portfolio Investments at lower prices than it had expected to realize or defer—potentially for a considerable period of time—sales that it had planned to make. In addition, under limited circumstances, the Adviser may not have access to all material information relevant to a valuation analysis with respect to a Portfolio Investment. As a result, the valuation of the Fund's Portfolio Investments, and therefore, as a further result, the valuation of the Units themselves (which is derived from the value of the Fund's Portfolio Investments), may be based on imperfect information and is subject to inherent uncertainties.

        Some of the Fund's investments are and may be in the form of securities or loans that are not publicly traded or actively traded on a secondary market. The fair value of these investments may not be readily determinable. Under the 1940 Act, the Fund is required to carry the Fund's portfolio investments at market value or, if there is no readily available market value, at fair value as determined in good faith by the Board, including to reflect significant events affecting the value of the Fund's securities. The Fund values its investments for which the Fund does not have readily available market quotations quarterly, or more frequently as circumstances require, at fair value as determined in good faith by the Board in accordance with the Fund's valuation policy, which is at all times consistent with GAAP. See "
Item 1. Business—Valuation of Portfolio Securities
" for additional information on valuations.

        The Board utilizes the services of one or more independent third-party valuation firms to aid it in determining the fair value with respect to the Fund's material unquoted assets in accordance with the Fund's valuation policy. The inputs into the determination of fair value of these investments may require significant management judgment or estimation. Even if observable market data is available, such information may be the result of consensus pricing information or broker quotes, which include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimers materially reduces the reliability of such information.

        The types of factors that the Board takes into account in determining the fair value of the Fund's investments generally include, as appropriate: available market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the Portfolio Company's ability to make payments, its earnings and discounted cash flows and the markets in which it does business, comparisons of financial ratios of peer companies that are public, comparable merger and acquisition transactions and the principal market and enterprise values. Since these valuations, and particularly valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, the Fund's determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed.

        Due to this uncertainty, the Fund's fair value determinations may cause the Fund's net asset value, on any given date, to materially differ from the value that the Fund may ultimately realize upon the sale of one or more of the Fund's investments. In addition, investors purchasing the Fund's Unit based on an overstated net asset value would pay a higher price than the realizable value that the Fund's investments might warrant.

        The Fund may adjust quarterly the valuation of the Fund's portfolio to reflect the Board's determination of the fair value of each investment in the Fund's portfolio. Any changes in fair value

60


are recorded in the Fund's statement of operations as net change in unrealized appreciation or depreciation.

Management of the Fund

        The Adviser, subject to the oversight of the Board, will have responsibility for the Fund's activities, and, other than as expressly set forth in the Limited Liability Company Agreement, the Unitholders will generally not be able to make investment or any other decisions regarding the management of the Fund. Other than as set forth herein and in the Limited Liability Company Agreement, the Unitholders have no rights or powers to take part in the management of the Fund or make investment decisions and will not receive the level of Portfolio Company financial information that is available to New Mountain. Accordingly, no person should purchase a Unit unless such person is willing to entrust all aspects of the management of the Fund to New Mountain and the Board.

        The Investment Management Agreement and the Administration Agreement were negotiated between related parties. In addition, the Fund may choose not to enforce, or to enforce less vigorously, the Fund's respective rights and remedies under these agreements because of the Fund's desire to maintain its ongoing relationship with the Adviser, the Administrator and their respective affiliates. Any such decision, however, could cause the Fund to breach its fiduciary obligations to the Unitholders.

Transactions with Affiliates

        As a BDC, the Fund is prohibited under the 1940 Act from participating in certain transactions with certain of the Fund's affiliates without the prior approval of a majority of the independent members of the Board and, in some cases, the SEC. Any person that owns, directly or indirectly, 5% or more of the Fund's outstanding voting securities will be the Fund's affiliate for purposes of the 1940 Act and generally the Fund will be prohibited from buying or selling any securities from or to such affiliate, absent the prior approval of the Board. The 1940 Act also prohibits certain "joint" transactions with certain of the Fund's affiliates, which could include investments in the same Portfolio Company (whether at the same or closely related times), without prior approval of the Board and, in some cases, the SEC. If a person acquires more than 25% of the Fund's voting securities, the Fund will be prohibited from buying or selling any security from or to such person or certain of that person's affiliates, or entering into prohibited joint transactions (including certain co-investments) with such persons, absent the prior approval of the SEC. Similar restrictions limit the Fund's ability to transact business with its officers, trustees, investment advisers, sub-advisers or their affiliates. As a result of these restrictions, the Fund may be prohibited from buying or selling any security from or to any fund or any Portfolio Company of a fund managed by the Adviser, or entering into joint arrangements such as certain co-investments with these companies or funds without the prior approval of the SEC, which may limit the scope of investment opportunities that would otherwise be available to the Fund.

        The Fund has obtained exemptive relief from the SEC that allows the Fund to engage in co-investment transactions with other affiliated funds of the Adviser, subject to certain terms and conditions. However, while the terms of the exemptive relief require that the Adviser will be given the opportunity to cause the Fund to participate in certain transactions originated by affiliates of the Adviser, the Adviser may determine that the Fund not participate in those transactions and for certain other transactions (as set forth in guidelines approved by the Board) the Adviser may not have the opportunity to cause the Fund to participate.

Material, Non-Public Information

        By reason of their responsibilities in connection with their other activities, certain New Mountain personnel or Senior Advisors may acquire confidential or material non-public information or be restricted from initiating transactions in certain securities. The Fund will not be free to act upon any

61


such information. Due to these restrictions, the Fund may not be able to initiate a transaction that it otherwise might have initiated and may not be able to sell a Portfolio Investment that it otherwise might have sold. Conversely, the Fund may not have access to material non-public information in the possession of New Mountain which might be relevant to an investment decision to be made by the Fund, and the Fund may initiate a transaction or sell a Portfolio Investment which, if such information had been known to it, may not have been undertaken.

FOIA and Similar Laws

        To the extent that the Adviser determines in good faith that, as a result of the Freedom of Information Act ("FOIA"), any U.S. or non-U.S. governmental public records access law, any state or other jurisdiction's laws similar in intent or effect to FOIA, or any other similar statutory or regulatory requirement, a Unitholder or any of its affiliates may be required to disclose information relating to the Fund, its affiliates and/or any entity in which an investment is made (other than certain fund-level, aggregate performance information as described in the Limited Liability Company Agreement), and such disclosure could affect the Fund's competitive advantage in finding attractive investment opportunities. The amount of information that is required to be disclosed has increased in recent years, and that trend may continue. To the extent that disclosure of confidential information relating to the Fund or its Portfolio Investments results from Units being held by public investors, the Fund may be adversely affected. Adviser may, to prevent any such potential disclosure, withhold all or any part of the information otherwise to be provided to such Unitholder. Without limiting the foregoing, in the event that any party seeks the disclosure of information relating to the Fund, its affiliates, and/or any entity in which an investment is made under FOIA or any such similar law, the Adviser may, in its discretion, initiate legal action and/or otherwise contest such disclosure, which may or may not be successful, and any expenses incurred therewith will be borne by the Fund. Conversely, potential future regulatory changes applicable to investment advisers and/or the accounts they advise could result in New Mountain becoming subject to additional disclosure requirements the specific nature of which is as yet uncertain.

Limited Access to Information

        Unitholders' rights to information regarding the Fund will be specified, and strictly limited, in the Limited Liability Company Agreement. In particular, it is anticipated that the Adviser will obtain certain types of material information from Portfolio Investments that will not be disclosed to Unitholders because such disclosure is prohibited for contractual, legal, or similar obligations outside of the Adviser's control. Decisions by the Adviser to withhold information may have adverse consequences for Unitholders in a variety of circumstances. For example, a Unitholder that seeks to transfer its Units may have difficulty in determining an appropriate price for such Units. Decisions to withhold information also may make it difficult for Unitholders to monitor the Adviser and its performance. Additionally, it is expected that Unitholders who designate representatives to participate on the Advisory Committee may, by virtue of such participation and subject to applicable law, have more information about the Fund and Portfolio Investments in certain circumstances than other Unitholders generally and may be disseminated information in advance of communication to other Unitholders generally.

Possibility of Different Information Rights

        Certain Unitholders may request information from the Adviser relating to the Fund and its Portfolio Investments and the Adviser may, subject to applicable law, including Regulation FD promulgated by the SEC, provide such Unitholders with the information requested (subject to availability, confidentiality obligations and other similar considerations). Unitholders may also be entitled to receive additional or customized reporting relating to their investment in the Fund pursuant

62


to their side letters, which are particular to such Unitholders and may not be available to other Unitholders. Any such Unitholders that request and receive such information will consequently possess information regarding the business and affairs of the Fund that is not generally known to other Unitholders. As a result, certain Unitholders may be able to take actions on the basis of such information which, in the absence of such information, other Unitholders do not take.

Amendments

        The Limited Liability Company Agreement may be amended from time to time, including by the Board without the consent of Unitholders in circumstances set forth in the Limited Liability Company Agreement.

Capital Calls

        Capital calls will be issued by the Adviser from time to time at the discretion of the Adviser, based upon the Adviser's assessment of the needs and opportunities of the Fund. To satisfy such capital calls, the Unitholders may be required to maintain a substantial portion of their Capital Commitment in assets that can be readily converted to cash. Except as specifically set forth in the Limited Liability Company Agreement, the Unitholders' obligation to satisfy capital calls will be unconditional. The Unitholders' obligation to satisfy capital calls will not in any manner be contingent upon the performance or prospects of the Fund or upon any assessment thereof provided by the Adviser. Capital calls may not provide all of the information a Unitholder desires in a particular circumstance, and such information may not be made available and will not be a condition precedent for a Unitholder to meet its funding obligation. Notwithstanding the foregoing, the Adviser will not be obligated to call 100% of the Unitholders' Capital Commitment during the Fund's term. If one or more Unitholders are unable to make, their capital calls on any one investment, the capital call of the other Unitholders will increase accordingly, possibly materially. The fees, costs and expenses incurred by the Unitholders in fulfilling a capital call (whether it is bank fees, wire fees, foreign exchange fees, value-added tax or other applicable charge imposed on a Unitholder) will be borne solely by such Unitholder and will be in addition to the amounts required by capital calls (and will not be part of or otherwise reduce their Capital Commitments and/or remaining Capital Commitments, as applicable).

Distributions

        The Fund intends to pay quarterly distributions to the Unitholders out of assets legally available for distribution. Such quarterly distributions will generally consist of cash or cash equivalents, except that the Fund may make distributions of assets in kind with the prior consent of each receiving Unitholder. The Fund cannot assure you that the Fund will continue to achieve investment results or maintain a tax status that will allow the Fund to make a specified level of cash distributions or year-to-year increases in cash distributions. If the Fund is unable to satisfy the asset coverage test applicable to the Fund as a BDC, the Fund's ability to pay distributions to the Unitholders could be limited. All distributions are paid at the discretion of the Board and depend on the Fund's earnings, financial condition, maintenance of its RIC status, compliance with applicable BDC regulations and such other factors as the Board may deem relevant from time to time. The Fund cannot assure Unitholders that the Fund will continue to pay distributions to the Unitholders in the future.

        Unitholders should understand that any distributions made from sources other than cash flow from operations or that are relying on fee or expense reimbursement waivers from the Adviser or the Administrator are not based on the Fund's investment performance, and can only be sustained if the Fund achieves positive investment performance in future periods and/or the Adviser or the Administrator continues to make such expense reimbursements. Unitholders should also understand that the Fund's future repayments to the Adviser will reduce the distributions that they would otherwise receive. There can be no assurance that the Fund will achieve such performance in order to sustain

63


these distributions, or be able to pay distributions at all. The Adviser and the Administrator have no obligation to waive fees or receipt of expense reimbursements.

        The Fund cannot assure you that the Fund will achieve investment results or maintain a tax status that will allow or require any specified level of cash distributions or year-to-year increases in cash distributions. In particular, the Fund's future distributions are dependent upon the investment income the Fund receives on the Fund's portfolio investments. To the extent such investment income declines, the Fund's ability to pay future distributions may be harmed.

Failure to Raise Substantial Funds

        Amounts that the Fund raises may not be sufficient for the Fund to purchase a broad portfolio of investments. To the extent that less than the maximum number of Units is subscribed for, the opportunity for the Fund to purchase a broad portfolio of investments may be decreased and the returns achieved on those investments may be reduced as a result of allocating all of the Fund's expenses among a smaller capital base. If the Fund is unable to raise substantial funds, the Fund may not achieve certain economies of scale and the Fund's expenses may represent a larger proportion of its total assets.

Failure to Make Capital Contributions

        If a Unitholder fails to pay when due installments of its Capital Commitment to the Fund, and the contributions made by non-defaulting Unitholder and borrowings by the Fund are inadequate to cover the defaulted capital contribution, the Fund may be unable to pay its obligations when due. As a result, the Fund may lose opportunities and/or be subjected to significant penalties that could materially adversely affect the returns to the Unitholders (including non-defaulting Unitholders). A default by a Unitholder may also limit the Fund's ability to incur borrowings and avail itself of what would otherwise have been available credit. In addition, if a Unitholder defaults, non-defaulting Unitholders may be obligated to make capital contributions to the Fund to make up for the amounts not paid by a defaulting Unitholder. If a Unitholder defaults, it may be subject to various remedies as provided in the Limited Liability Company Agreement, including, without limitation, reductions in its capital account balance, or a forfeiture of its Units in the Fund.

Preferred Units

        The Fund cannot assure you that the issuance of preferred Units would result in a higher yield or return to the holders of the Units. The issuance of preferred Units would likely cause the net asset value and market value of the Units to become more volatile. If the distribution rate on the preferred Units were to approach the net rate of return on the Fund's investment portfolio, the benefit of leverage to the holders of the Units would be reduced. If the distribution rate on the preferred Units were to exceed the net rate of return on the Fund's portfolio, the leverage would result in a lower rate of return to the holders of Units than if the Fund had not issued preferred Units. Any decline in the net asset value of the Fund's investments would be borne entirely by the holders of Units. Therefore, if the market value of the Fund's portfolio were to decline, the leverage would result in a greater decrease in net asset value to the holders of Units than if the Fund were not leveraged through the issuance of preferred Units.

        The Fund might be in danger of failing to maintain the required asset coverage of the preferred Units or of losing the Fund's ratings, if any, on the preferred Units or, in an extreme case, the Fund's current investment income might not be sufficient to meet the dividend requirements on the preferred Units. In order to counteract such an event, the Fund might need to liquidate investments in order to fund a redemption of some or all of the preferred Units. In addition, the Fund would pay (and the holders of Units would bear) all costs and expenses relating to the issuance and ongoing maintenance of the preferred Units, including higher advisory fees if the Fund's total return exceeds the distribution rate on the preferred Units. Holders of preferred Units may have different interests than holders of Units and may at times have disproportionate influence over the Fund's affairs.

64


        Holders of any preferred Units the Fund might issue, voting separately as a single class, would have the right to elect two members of the Board at all times and in the event dividends become two full years in arrears would have the right to elect a majority of the directors until such arrearage is completely eliminated. In addition, preferred Unitholders have class voting rights on certain matters, including changes in fundamental investment restrictions and conversion to open-end status, and accordingly can veto any such changes. Restrictions imposed on the declarations and payment of dividends or other distributions to the holders of the Units and preferred Units, both by the 1940 Act and by requirements imposed by rating agencies, if any, or the terms of the Fund's Leverage Arrangements, if any, might impair the Fund's ability to maintain its tax treatment as a RIC for U.S. federal income tax purposes. While the Fund would intend to redeem the Fund's preferred Units to the extent necessary to enable the Fund to distribute its income as required to maintain the Fund's tax treatment as a RIC, there can be no assurance that such actions could be effected in time to meet the tax requirements.

Removal of the Adviser or Administrator; Cancellation of Investment Period; Early Termination of the Fund

        Under the Investment Management Agreement, the Adviser has the right to resign at any time upon 60 days' written notice, whether a replacement has been found or not. If the Adviser resigns, the Fund may not be able to find a new Adviser or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 60 days, or at all. If a replacement is not able to be found on a timely basis, the Fund's business, results of operations and financial condition and the Fund's ability to pay distributions are likely to be materially adversely affected. In addition, if the Fund is unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by the Adviser and its affiliates, the coordination of its internal management and investment activities is likely to suffer. Even if the Fund is able to retain comparable management, whether internal or external, their integration into the Fund's business and lack of familiarity with the Fund's investment objective may result in additional costs and time delays that may materially adversely affect the Fund's business, results of operations and financial condition. The Administrator has the right to resign under the Administration Agreement upon 60 days' written notice, whether a replacement has been found or not. If the Administrator resigns, it may be difficult to find a new administrator or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms, or at all. If a replacement is not found quickly, the Fund's business, results of operations and financial condition, as well as the Fund's ability to pay distributions, are likely to be adversely affected. In addition, the coordination of the Fund's internal management and administrative activities is likely to suffer if the Fund is unable to identify and reach an agreement with a service provider or individuals with the expertise possessed by the Administrator. Even if a comparable service provider or individuals to perform such services are retained, whether internal or external, their integration into the Fund's business and lack of familiarity with its investment objective may result in additional costs and time delays that may materially adversely affect the Fund's business, results of operations and financial condition. Therefore, there can be no certainty regarding the Fund's ability to consummate investment opportunities thereafter. Similar risks exist if the Investment Period is cancelled earlier than anticipated pursuant to the terms of the Limited Liability Company Agreement. Moreover, it is possible that the Fund may be dissolved and terminated prematurely, and as a result, may not be able to accomplish its objectives and may be required to dispose of its investments at a disadvantageous time or make an in-kind distribution (resulting in Unitholders not having their capital invested and/or deployed in the manner originally contemplated).

65


Later Closings

        The purchase price per Unit in any drawdown of Capital Commitments after the Initial Drawdown is expected to be at a fixed price for the 18 months following the Initial Drawdown. By executing a subscription agreement, Unitholders agree that they are providing their consent, in accordance with Section 23(b) of the 1940 Act, for the Fund to issue Units at such set offering price during the Stable Offering Price Period even if such offering price is below the then-current NAV per Unit. As a result, Unitholders may be required to purchase Units pursuant to their Capital Commitments at a price that is above the then-current NAV per Unit (if the NAV per Unit is below the fixed offering price at the time of a drawdown). Conversely, Unitholders would also be entitled to purchase Units pursuant to Capital Commitments at a price that is below the then-current NAV per Units (if the NAV per Unit is above the fixed offering price at the time of the drawdown), which could create dilution of the NAV per Unit and affect then-current Unitholders to the extent that they are not participating in such drawdown purchase.

        Following the Stable Offering Price Period, Units will be offered pursuant to capital calls at a price based on the Fund's NAV per Unit. As a result, in the event of an increase in the Fund's NAV per Unit, the purchase price for Units purchased in any drawdown may be higher than the prior quarterly NAV per Unit, and therefore an investor may receive a smaller number of Units than if it had purchased Units in a prior issuance.

        Unitholders subscribing for Units at later closings will have exposure to existing Portfolio Investments of the Fund, diluting the interest of existing Unitholders therein. This dilution will be accelerated because purchases of the Units will generally be made first by holders with the largest percentage of their Capital Commitments undrawn and then, once all holders have the same percentage of undrawn Capital Commitments outstanding, pro rata in accordance with remaining Capital Commitments of all investors.

Compliance with Anti-Money Laundering Requirements

        In response to increased regulatory concerns with respect to the sources of funds used in investments and other activities, the Fund will request prospective and existing Unitholders to provide additional documentation verifying, among other things, such Unitholder's identity and the source of funds used to purchase interests in the Fund. The Adviser may decline to accept a prospective investor's subscription if this information is not provided or on the basis of such information that is provided. Requests for documentation may be made at any time during which a Unitholder holds any interest in the Fund. The Adviser may be required to provide this information, or report the failure to comply with such requests, to governmental authorities, in certain circumstances without notifying the Unitholder that the information has been provided. The Adviser will take such steps as it determines may be necessary to comply with applicable law, regulations, orders, directives or special measures that may be required by government regulators. Governmental authorities are continuing to consider appropriate measures to implement anti-money laundering laws and at this point it is unclear what steps the Adviser may be required to take; however, these steps may include prohibiting such Unitholder from making further contributions of capital to the Fund, depositing distributions to which such Unitholder would otherwise be entitled to an escrow account and causing the withdrawal of such Unitholder from the Fund.

Fund Expenses

        The Fund will pay and bear all Fund Expenses related to its operations (subject to the Specified Expenses Cap). The amount of these Fund Expenses will be substantial and will reduce the actual returns realized by the Unitholders on their investment in the Fund (and will reduce the amount of capital available to be deployed by the Fund in Portfolio Investments). As described further in the

66


Limited Liability Company Agreement, Fund Expenses encompass a broad range of expenses, including, but not limited to, reimbursement of expenses to the Administrator pursuant to the Administration Agreement, origination fees, syndication fees, research costs, due diligence costs, bank service fees, Broken Deal Expenses, fees and expenses related to transfer agents, rating agencies, valuation and appraisal agents, third-party administrators and deal finders, experts, advisers, consultants, engineers and other professionals and service providers, travel, meal and lodging expenses incurred for investment related purposes, outside legal counsel, accountants, indemnification and contribution expenses, expenses related to Fund-related compliance obligations (including Form PF and Form ADV, blue sky filings, registration statement filings), AIFMD-related expenses (including Annex IV reporting), and the cost of operational and accounting software and related expenses, the cost of software used by the Adviser and its affiliates to track and monitor investments (i.e., portfolio management software), and risk, research and market data-related expenses (including software and hardware). For a full list of Fund Expenses, see "
Item 1. Business—Expenses—Fund Expenses
."

Executive Advisory Council

        The Adviser may consult New Mountain's Executive Advisory Council from time to time concerning general industry trends, related matters and specific investment diligence. Members of the Executive Advisory Council may be paid by the Fund for project-related consulting fees and reimbursed by the Fund for their reasonable and documented out-of-pocket expenses in connection with specific diligence for a potential Portfolio Company.

Systems and Operational Risks

        The Fund depends on the Adviser to develop and implement appropriate systems for the Fund's activities. The Fund relies daily on financial, accounting and other data processing systems to execute, clear and settle transactions across numerous and diverse markets and to evaluate certain financial instruments, to monitor its portfolios and capital, and to generate risk management and other reports that are critical to oversight of the Fund's activities. Certain of the Fund's and the Adviser's activities will be dependent upon systems operated by third parties, and the Adviser may not be in a position to verify the risks or reliability of such third-party systems. Failures in the systems and processes employed by the Adviser and other parties could result in mistakes made, including, among other things, in the confirmation or settlement of transactions, or in transactions not being properly booked, evaluated or accounted for. Operational risks result from inadequate procedures and controls, employee fraud, recordkeeping errors, human errors and other mistakes or failures by the Adviser or a service provider. Disruption to third party critical service providers, such as the Fund's auditors, external counsel and custodian, may result in other disruptions in the Fund's operations. Disruptions in the Fund's operations may cause the Fund to suffer, among other things, financial loss, the disruption of their businesses, liability to third parties, regulatory intervention or reputational damage. Any of the foregoing failures or disruptions could have a material adverse effect on the Fund and the investors' investments therein.

Cybersecurity Breaches, Identity Theft and Other Disasters

        The Fund depends heavily upon computer systems to perform necessary business functions. Cybersecurity incidents and cyber-attacks have been occurring globally at a more frequent and severe level and are expected to continue to increase in frequency in the future. The information and technology systems of New Mountain, its Portfolio Companies and their service providers may be vulnerable to damage or interruption from computer viruses and other malicious code, network failures, computer and telecommunication failures, infiltration by unauthorized persons and security breaches, usage errors or malfeasance by their respective professionals or service providers, power, communications or other service outages and catastrophic events such as fires, tornadoes, floods,

67


hurricanes, earthquakes or terrorist incidents. This adverse effect can become particularly acute if those events affect the Fund's electronic data processing, transmission, storage, and retrieval systems, or impact the availability, integrity, or confidentiality of the Fund's data. If unauthorized parties gain access to such information and technology systems, or if personnel abuse or misuse their access privileges, they may be able to steal, publish, delete or modify private and sensitive information, including nonpublic personal information related to Unitholders (and their beneficial owners) and material nonpublic information. Although New Mountain has implemented, and Portfolio Companies and service providers may implement, various measures to manage risks relating to these types of events, such measures may be inadequate and, if compromised, information and technology systems could become inoperable for extended periods of time, cease to function properly, or fail to adequately secure private information. Even with sophisticated prevention and detection systems, breaches such as those involving covertly introduced malware, impersonation of authorized users and industrial or other espionage may not be identified even with sophisticated prevention and detection systems, potentially resulting in further harm and preventing them from being addressed appropriately. New Mountain, the Fund, other New Mountain products and/or their Portfolio Companies may have to make significant investments to fix or replace information and technology systems. The failure of these systems and/or of disaster recovery plans for any reason could cause significant interruptions in the operations of New Mountain, the Fund, a Portfolio Company, and/or their service providers and result in a failure to maintain the security, confidentiality or privacy of sensitive data, including personal information relating to Unitholders (and their beneficial owners) and the intellectual property and trade secrets of New Mountain and/or portfolio companies. Such a failure could harm the reputation of New Mountain, the Fund and/or a Portfolio Company, require them to make a significant investment to remedy the effects of any such failures, subject any such entity and their respective affiliates to legal claims, regulatory penalties, client dissatisfaction or loss and adverse publicity and otherwise affect their business and financial performance. When such issues are present with regard to the issuer of securities in which the Fund invests, the Fund's Portfolio Investment in those securities may lose value.

        A disaster or a disruption in the infrastructure that supports the Fund's business, including a disruption involving electronic communications or other services used by the Fund or third parties with whom the Fund conducts business, or directly affecting the Fund's headquarters, could have a material adverse impact on the Fund's ability to continue to operate its business without interruption. The Fund's disaster recovery programs may not be sufficient to mitigate the harm that may result from such a disaster or disruption. In addition, insurance and other safeguards might only partially reimburse the Fund for its losses, if at all.

        Third parties with which the Fund does business may also be sources of cybersecurity or other technological risk. The Fund outsources certain functions and these relationships allow for the storage and processing of the Fund's information, as well as client, counterparty, employee, and borrower information. While the Fund engages in actions to reduce its exposure resulting from outsourcing, ongoing threats may result in unauthorized access, loss, exposure, destruction, or other cybersecurity incident that affects the Fund's data, resulting in increased costs and other consequences as described above.

Litigation

        New Mountain engages in a broad variety of activities on a global basis in respect of its managed funds, accounts and Portfolio Companies. These activities have and may in the future subject New Mountain to risks of becoming involved in litigation by third parties or may subject New Mountain to investigations or proceedings initiated by governmental authorities. It is difficult to determine what impact, if any, such litigation may have on New Mountain and the Fund. As a result, there can be no assurance that the foregoing will not have an adverse impact on New Mountain or otherwise impede the Fund's ability to effectively achieve its objectives.

68


Certain Market, Regulatory and Tax Risks

General Economy and Market Conditions

        The success of the Fund's investment activities will be affected by general economic and market conditions in the U.S. and global economies, such as interest rates, currency exchange rates, availability of credit, credit defaults, inflation rates, economic uncertainty, as well as by changes in applicable laws and regulations, trade barriers, currency exchange controls and national and international political and socioeconomic circumstances in respect of the countries in which the Fund may invest. These factors may affect the level and volatility of securities prices and the liquidity of the Fund's Portfolio Investments, which could impair the Fund's profitability or result in losses. In addition, general fluctuations in the market prices of securities and interest rates may affect the Fund's investment opportunities and the value of the Fund's Portfolio Investments. New Mountain's financial condition may be adversely affected by a significant economic downturn and it may be subject to legal, regulatory, reputational and other unforeseen risks that could have a material adverse effect on New Mountain's businesses and operations (including those of the Fund). Uncertainty and volatility in the financial markets and political systems of the United States, the United Kingdom and other countries may have adverse spill-over effects into the global financial markets generally. Moreover, a recession, slowdown and/or a sustained downturn in the U.S. or global economy (or any particular segment thereof) will have a pronounced impact on the Fund and could adversely affect the Fund's profitability, impede the ability of the Fund's Portfolio Companies to perform under or refinance their existing obligations, and impair the Fund's ability to effectively deploy its capital or realize upon Portfolio Investments on favorable terms and may have an adverse impact on the business and operations of the Fund. The Fund and its Portfolio Companies may also be affected by difficult conditions in the capital markets and any overall weakening of the financial services industry of the U.S. and/or global economies. It is possible that a weakening of credit markets could adversely affect the Fund and its Portfolio Companies and the Fund could suffer adverse consequences, any of which could adversely affect the business of the Fund, restrict the Fund's investment activities, and impede the Fund's ability to effectively achieve its investment objective. Any of the foregoing events could result in substantial or total losses to the Fund in respect of certain Portfolio Investments, which losses will likely be exacerbated by the presence of leverage in a Portfolio Company's capital structure. The most recent global recession was prolonged and serious. To the extent that current conditions continue (or even worsen), this may have a further adverse impact on the availability of credit to businesses generally and further contribute to an overall weakening of the U.S. and global economies. The continuation of the economic downturn could adversely affect the financial resources of the Fund's Portfolio Companies and their ability to make principal and interest payments on, or refinance, outstanding debt when due. In the event of such defaults, the Fund could lose both invested capital in, and anticipated profits from, the affected Portfolio Companies. These developments may impair the Fund's ability to consummate transactions and may cause the Fund to enter into transactions on less attractive terms than those enjoyed by prior New Mountain funds.

        As a BDC, the Fund must maintain its ability to raise additional capital for investment purposes. If the Fund is unable to access the capital markets or credit markets, the Fund may be forced to curtail its business operations and may be unable to pursue new investment opportunities. The capital markets and the credit markets have experienced extreme volatility in recent periods, and, as a result, there have been and will likely continue to be uncertainty in the financial markets in general. Disruptions in the capital markets in recent years increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets. In addition, a prolonged period of market illiquidity may cause the Fund to reduce the volume of loans that the Fund originates and/or fund and adversely affect the value of the Fund's portfolio investments. Unfavorable economic conditions could also increase the Fund's funding costs, limit the Fund's access to the capital markets or result in a decision by lenders not to extend credit to the Fund. These events could limit the Fund's

69


investment originations, limit the Fund's ability to grow and negatively impact its operating results. Ongoing disruptive conditions in the financial industry and the impact of new legislation in response to those conditions could restrict the Fund's business operations and, consequently, could adversely impact the Fund's business, results of operations and financial condition.

        If the fair value of the Fund's assets declines substantially, the Fund may fail to maintain the asset coverage ratios imposed upon the Fund by the 1940 Act. Any such failure would result in a default under such indebtedness and otherwise affect the Fund's ability to issue senior securities, borrow under a credit facility and pay distributions, which could materially impair the Fund's business operations. The Fund's liquidity could be impaired further by the Fund's inability to access the capital or credit markets. For example, the Fund cannot be certain that it will be able to renew its Leverage Arrangements as they mature or to consummate new arrangements to provide capital for normal operations. In recent years, reflecting concern about the stability of the financial markets, many lenders and institutional investors have reduced or ceased providing funding to borrowers. This market turmoil and tightening of credit have led to increased market volatility and widespread reduction of business activity generally in recent years. In addition, adverse economic conditions due to these disruptive conditions could materially impact the Fund's ability to comply with the financial and other covenants in any existing or future Leverage Arrangements. If the Fund is unable to comply with these covenants, this could materially adversely affect the Fund's business, results of operations and financial condition.

Regulations Governing the Operations of BDCs

        The Fund's business requires a substantial amount of capital. The Fund may acquire additional capital from the issuance of senior securities, including borrowing under a credit facility or other indebtedness. In addition, the Fund may also issue additional equity capital, which would in turn increase the equity capital available to the Fund. However, the Fund may not be able to raise additional capital in the future on favorable terms or at all.

        The Fund may issue debt securities, preferred Units, and the Fund may borrow money from banks or other financial institutions, which the Fund refers to collectively as "senior securities", up to the maximum amount permitted by the 1940 Act. The 1940 Act permits BDCs to issue senior securities in amounts such that the BDC's asset coverage, as defined in the 1940 Act, equals at least 200% after each issuance of senior securities. The Fund has utilized recent legislation that has modified the 1940 Act by allowing a BDC to increase the maximum amount of leverage it may incur from an asset coverage ratio of 200% to an asset coverage ratio of 150%, if certain requirements are met. If the Fund's asset coverage ratio is not at least 150%, the Fund would be unable to issue senior securities, and if the Fund had senior securities outstanding (other than any indebtedness issued in consideration of a privately arranged loan, such as any indebtedness outstanding under a credit facility), the Fund would be unable to make distributions to the Unitholders. If the value of the Fund's assets declines, the Fund may be unable to satisfy this test. If that happens, the Fund may be required to liquidate a portion of the Fund's investments and repay a portion of its indebtedness at a time when such sales may be disadvantageous.

        In addition, the Fund may in the future seek to securitize other portfolio securities to generate cash for funding new investments. To securitize loans, the Fund would likely create a wholly-owned subsidiary and contribute a pool of loans to the subsidiary. The Fund would then sell interests in the subsidiary on a non-recourse basis to purchasers and the Fund would retain all or a portion of the equity in the subsidiary. If the Fund is unable to successfully securitize its loan portfolio the Fund's ability to grow its business or fully execute its business strategy could be impaired and its earnings, if any, could decrease. The securitization market is subject to changing market conditions, and the Fund may not be able to access this market when it would be otherwise deemed appropriate. Moreover, the successful securitization of the Fund's portfolio might expose the Fund to losses as the residual

70


investments in which the Fund does not sell interests will tend to be those that are riskier and more apt to generate losses. The 1940 Act also may impose restrictions on the structure of any securitization.

        The Fund may also obtain capital through the issuance of additional equity capital. As a BDC, the Fund generally is not able to issue or sell its Units at a price below net asset value per Unit. If the Units trades at a discount to the Fund's net asset value per Unit, this restriction could adversely affect the Fund's ability to raise equity capital. The Fund may, however, sell the Units, or warrants, options or rights to acquire the Units, at a price below the Fund's net asset value per Unit if the Board and Independent Directors determine that such sale is in the Fund's best interests and the best interests of the Unitholders, and the Unitholders approve such sale. In any such case, the price at which the Fund's securities are to be issued and sold may not be less than a price that, in the determination of the Board, closely approximates the market value of such securities (less any underwriting commission or discount). If the Fund raises additional funds by issuing more Units, or if the Fund issues senior securities convertible into, or exchangeable for, the Units, the percentage ownership of the Unitholders may decline and you may experience dilution.

        Changes in the laws or regulations or the interpretations of the laws and regulations that govern BDCs, RICs or non-depository commercial lenders could significantly affect the Fund's operations and its cost of doing business. The Portfolio Companies are subject to U.S. federal, state and local laws and regulations. New legislation may be enacted or new interpretations, rulings or regulations could be adopted, any of which could materially adversely affect the Fund's business, including with respect to the types of investments the Fund is permitted to make, and your interests as Unitholders potentially with retroactive effect. In addition, any changes to the laws and regulations governing the Fund's operations relating to permitted investments may cause the Fund to alter its investment strategy in order to avail itself of new or different opportunities. These changes could result in material changes to the Fund's strategies which may result in its investment focus shifting from the areas of expertise of the Adviser to other types of investments in which the Adviser may have less expertise or little or no experience. Any such changes, if they occur, could have a material adverse effect on the Fund's business, results of operations and financial condition and, consequently, the value of your investment in the Fund.

        Over the last several years, there has been an increase in regulatory attention to the extension of credit outside of the traditional banking sector, raising the possibility that some portion of the non-bank financial sector will be subject to new regulation. While it cannot be known at this time whether these regulations will be implemented or what form they will take, increased regulation of non-bank credit extension could negatively impact the Fund's operations, cash flows or financial condition, impose additional costs on the Fund, intensify the regulatory supervision of the Fund or otherwise adversely affect the Fund's business.

1934 Act

        Because the Units will be registered under the 1934 Act, ownership information for any person who beneficially owns 5% or more of the Units will have to be disclosed in a Schedule 13G or other filings with the SEC. Beneficial ownership for these purposes is determined in accordance with the rules of the SEC, and includes having voting or investment power over the securities. In some circumstances, the Unitholders who choose to reinvest their distributions may see their percentage stake in the Fund increased to more than 5%, thus triggering this filing requirement. Each Unitholder is responsible for determining their filing obligations and preparing the filings. In addition, the Unitholders who hold more than 10% of a class of the Units may be subject to Section 16(b) of the 1934 Act, which recaptures for the benefit of the Fund profits from the purchase and sale of registered stock within a six-month period.

71


Sarbanes-Oxley Act

        The Fund is not currently required to comply with the requirements of the Sarbanes-Oxley Act, including the internal control evaluation and certification requirements of Section 404 of that statute ("Section 404"), and will not be required to comply with all of those requirements until the Fund has been subject to the reporting requirements of the 1934 Act for a specified period of time or the date the Fund is no longer an emerging growth company under the JOBS Act. While other vehicles managed by the Adviser and its affiliates are and may in the future be subject to the internal controls requirements of Section 404 and, accordingly, the Adviser and its affiliates have established such internal controls policies, such internal controls policies are not required to be established with respect to the Fund at this time. Accordingly, the Fund's internal controls over financial reporting do not currently meet all of the standards contemplated by Section 404 that the Fund will eventually be required to meet. The Fund is in the process of addressing the Fund's internal controls over financial reporting and are establishing formal procedures, policies, processes and practices related to financial reporting and to the identification of key financial reporting risks, assessment of their potential impact and linkage of those risks to specific areas and activities within the Fund.

        Additionally, the Fund has begun the process of documenting its internal control procedures to satisfy the requirements of Section 404, which requires annual management assessments of the effectiveness of its internal controls over financial reporting. The Fund's independent registered public accounting firm will not be required to formally attest to the effectiveness of the Fund's internal control over financial reporting until the later of the year following the Fund's first annual report required to be filed with the SEC, or the date the Fund is no longer an emerging growth company under the JOBS Act. Because the Fund is not currently required to have comprehensive documentation of its internal controls and test its internal controls in accordance with Section 404, the Fund cannot conclude in accordance with Section 404 that the Fund does not have a material weakness in its internal controls or a combination of significant deficiencies that could result in the conclusion that the Fund has a material weakness in its internal controls. As a public entity, the Fund will be required to complete its initial assessment in a timely manner. If the Fund is not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, its operations, financial reporting or financial results could be adversely affected. Matters impacting the Fund's internal controls may cause the Fund to be unable to report its financial information on a timely basis and thereby subject the Fund to adverse regulatory consequences, including sanctions by the SEC, and result in a breach of the covenants under the agreements governing any of the Fund's financing arrangements. There could also be a negative reaction in the financial markets due to a loss of investor confidence in the Fund and the reliability of its financial statements. Confidence in the reliability of the Fund's financial statements could also suffer if the Fund or its independent registered public accounting firm were to report a material weakness in the Fund's internal controls over financial reporting.

"Emerging Growth Company" Under the JOBS Act

        The Fund is and the Fund will remain an "emerging growth company" as defined in the JOBS Act until the earlier of (a) the last day of the fiscal year (i) following the fifth anniversary of any exchange listing, (ii) in which the Fund has total annual gross revenue of at least $1.07 billion, or (iii) in which the Fund is deemed to be a large accelerated filer, which means the market value of the Fund's Units that are held by non-affiliates exceeds $700 million as of the date of the Fund's most recently completed second fiscal quarter, and (b) the date on which the Fund has issued more than $1.0 billion in non-convertible debt during the prior three-year period. For so long as the Fund remains an "emerging growth company," the Fund may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies" including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. The Fund cannot predict if investors will find

72


its Units less attractive because the Fund may rely on some or all of these exemptions. If some investors find the Fund's Units less attractive as a result, there may be a less active trading market for the Units and the Unit price may be more volatile.

        In addition, Section 107 of the JOBS Act also provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the 1933 Act for complying with new or revised accounting standards. In other words, an "emerging growth company" can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Fund currently are and may to continue taking advantage of such extended transition periods.

Inflation

        Inflation may affect the Fund's investments adversely in a number of ways. During periods of rising inflation, interest and distribution rates of any instruments the Fund or entities related to Portfolio Investments may have issued could increase. Inflationary expectations or periods of rising inflation could also be accompanied by the rising prices of commodities which are critical to the operation of Portfolio Companies. Portfolio Companies may have fixed income streams and, therefore, be unable to pay the interest amounts and other payments on the Fund's Portfolio Investments. The market value of such investments may decline in value in times of higher inflation rates. Some of the Fund's Portfolio Investments may have income linked to inflation through contractual rights or other means. However, as inflation may affect both income and expenses, any increase in income may not be sufficient to cover increases in expenses.

Inability to Deploy Capital Commitments

        The Fund may experience delays in investing its Capital Commitments, which may cause the Fund's performance to be worse than the performance of other investment vehicles with investment programs that are similar to the investment objectives of the Fund. The Adviser may not be able to identify a sufficient number of potential investments that meet the Fund's investment objectives or ensure that any investment that the Fund makes will produce a positive return. The Adviser may be unable to invest all of the Capital Commitments of the Fund on acceptable terms within the Investment Period, which would reduce the returns to the Fund.

Enhanced Scrutiny and Potential Regulation of the Private Investment Fund Industry

        The Fund's ability to achieve its investment objectives, as well as the ability of the Fund to conduct its operations, is based on laws and regulations, as well as their interpretation, which are subject to change through legislative, judicial or administrative action. Future legislative, judicial or administrative action could adversely affect the Fund's ability to achieve its investment objectives, as well as the ability of the Fund to conduct its operations. Furthermore, if regulatory capital requirements from the Dodd-Frank Act, Basel III, or other regulatory action are imposed on private lenders that provide the Fund with financing (as defined below), the lenders may be required to limit, or increase the cost of, financing they provide to the Fund. Among other things, this could potentially increase the Fund's financing costs and reduce the Fund's liquidity or require the Fund to sell assets at an inopportune time or price.

        There continues to be significant discussion regarding enhancing governmental scrutiny and/or increasing the regulation of the financial industry. On July 21, 2010, then-President Obama signed into law the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"). A key feature of the Dodd-Frank Act is the potential extension of prudential regulation by the Board of Governors of the Federal Reserve System (the "Federal Reserve") to nonbank financial companies that are not currently subject to such regulation but that are determined to pose risk to the U.S.

73


financial system. The Dodd-Frank Act defines a "nonbank financial company" as a company that is predominantly engaged in activities that are financial in nature. The Financial Stability Oversight Council (the "FSOC"), an interagency body created to monitor and address systemic risk, has the authority to subject such a company to supervision and regulation by the Federal Reserve (including capital, leverage and liquidity requirements) if it determines that such company is systemically important, in that it poses a risk to the U.S. financial system. The Dodd-Frank Act does not contain any minimum size requirements for such a determination by the FSOC, and it is possible that it could be applied to private funds, particularly large, highly-leveraged funds, although no such funds have been designated as systemically important by the FSOC to date.

        The Dodd-Frank Act also imposes a number of restrictions on the relationship and activities of banking organizations with private investment funds and other provisions that have affected the private investment fund industry, either directly or indirectly. Included in the Dodd-Frank Act is the so-called "Volcker Rule," which contain restrictions on certain investors that are (or that have affiliates or certain interest in any entity that is) a bank or a bank-related entity and/or have a connection to the U.S. in that regard from making and holding certain interests in private investment funds.

        The Dodd-Frank Act, as well as future related legislation, may have an adverse effect on the private investment fund industry generally and/or on New Mountain or the Fund, specifically. Therefore, there can be no assurance that any continued regulatory scrutiny or initiatives will not have an adverse impact on New Mountain or otherwise impede the Fund's activities. These reforms and/or other similar legislation could increase compliance costs of the Fund and have an adverse effect on the private fund industry generally and/or on New Mountain and the Fund.

        The current regulatory environment in the United States may be impacted by future legislative developments, such as amendments to key provisions of the Dodd-Frank Act. On June 12, 2017, the U.S. Department of the Treasury issued recommendations for streamlining banking regulation and changing key features of the Dodd-Frank Act and other measures taken by regulators following the most recent financial crisis. On May 24, 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act (the "Reform Act") was signed into law. Among other regulatory changes, the Reform Act amends various sections of the Dodd-Frank Act, including by modifying the Volcker Rule to exempt depository institutions that do not have, and are not controlled by a company that has, more than $10 billion in total consolidated assets and significant trading assets and liabilities. The ultimate consequences of the Reform Act on the Fund and its activities remain uncertain. Prospective investors should note that any significant changes in, among other things, banking and financial services regulation, including the regulation of the asset management industry, could have a material adverse impact on the Fund and its activities.

        As a registered investment adviser under the Advisers Act, the Adviser is required to comply with a variety of periodic reporting and compliance-related obligations under applicable federal and state securities laws (including, without limitation, the obligation of the Adviser and its affiliates to make regulatory filings with respect to the Fund and its activities under the Advisers Act (including, without limitation, Form PF and Form ADV)). In addition, the Adviser is required to comply with a variety of regulatory reporting and compliance-related obligations under applicable federal, state and foreign securities laws (including, without limitation, reports or notices in connection with the Directive (as defined below) and/or CFTC as well as other international jurisdiction-specific obligations). In light of the heightened regulatory environment in which the Fund and the Adviser operate and the ever-increasing regulations applicable to private investment funds and their investment advisors, it has become increasingly expensive and time-consuming for the Fund, the Adviser and their affiliates to comply with such regulatory reporting and compliance-related obligations. Additionally, the Fund may in the future engage additional third-party service providers to perform some or a significant portion of the reporting and compliance-related matters and functions under the Fund's supervision (including draft preparation and the filing of Form PF), which could result in increased compliance costs and

74


expenses. Any further increases in the regulations applicable to private investment funds generally or the Fund and/or the Adviser in particular may result in increased expenses associated with the Fund's activities and additional resources of the Adviser being devoted to such regulatory reporting and compliance-related obligations, which may reduce overall returns for the Unitholders and/or have an adverse effect on the ability of the Fund to effectively achieve its investment objective.

        Finally, increased reporting, registration and compliance requirements may divert the attention of personnel and the management teams of New Mountain and/or Portfolio Companies, and may furthermore place the Fund at a competitive disadvantage to the extent that New Mountain or Portfolio Companies are required to disclose sensitive business information.

Alternative Investment Fund Managers Directive

        The European Union Alternative Investment Fund Managers Directive (the "Directive") as transposed into national law within the member states of the EEA, imposes requirements on non-EEA alternative investment fund managers ("AIFMs") who intend to market alternative investment funds ("AIFs") to investors within the EEA.

        The Directive allows member states to permit the marketing of non-EEA AIFs by non-EEA AIFMs in accordance with local laws, provided that local laws meet the requirements of Article 42 (the so-called national private placement regimes). There is no requirement for member states to operate or maintain a national private placement regime and, if they do, the member state is free to impose stricter rules than the minimum requirements. In summary, under Article 42, the AIFM must: (i) provide prescribed pre-investment disclosures to investors; (ii) report prescribed information to regulators on a periodic basis; (iii) prepare an annual report containing prescribed information and make it available to investors and regulators; and (iv) if applicable: (a) comply with notification and disclosure requirements in relation to the acquisition and control of non-listed companies and issuers; and (b) restrict early distributions or reductions in capital in respect of Portfolio Companies (the asset-stripping rules).

        In addition, there must be appropriate cooperation arrangements in place between the competent authorities of the relevant countries, and neither the country where the AIFM is established nor the country where the AIF is established can be listed as a non-cooperative country and territory by the Financial Action Task Force (the "FATF").

        At present, some EEA states do not operate a national private placement regime at all; some member states apply the minimum requirements described above; others require the minimum plus, e.g., the appointment of a depositary; and some require compliance with substantially all of the Directive.

        Where the Adviser has marketed the Fund in a member state resulting in investors from that member state investing in the Fund, the Adviser's ongoing compliance with the laws of that member state will continue until all of such investors dispose of their interests in the Fund.

        The Directive has the potential to adversely affect the operations of the Fund by (i) limiting the territories in the EEA in which the Fund may seek investors, (ii) affecting the range of investment and realization strategies that the Fund is able to pursue, (iii) disadvantaging the Fund vis-à-vis non-AIF competitors and (iv) materially adding to the costs associated with compliance, monitoring and reporting over the life of the Fund.

75


        In the future, the Adviser may be compelled to seek, or it may determine that it should seek, authorization as an AIFM in an EEA member state (should that option become available) or under a similar regime elsewhere. This would entail compliance with all requirements of the AIFMD (or with similar requirements of a similar regime). Alternatively, it might be determined in the future that the Fund should be managed by an associate of the Adviser that is an authorized AIFM and has its registered office in an EEA member state. In either circumstance, the AIFM of the Fund would become subject to additional requirements, such as rules relating to remuneration, minimum regulatory capital requirements, restrictions on the use of leverage, requirements in relation to liquidity, risk management, valuation of assets, etc. Such requirements could adversely affect the Fund, among other things by increasing the regulatory burden and costs of operating and managing the Fund and its investments. Any required changes to compensation structures and practices could make it harder for the AIFM and its associates to recruit and retain key personnel.

        The interpretation and application of the Directive is subject to change as a result of, e.g., the issuance of further national guidance by a member state, the issuance of binding guidelines by the European Securities and Markets Authority ("ESMA"), further legislation supplementing the Directive, or a change in the national private placement regime of any member state. Compliance with the Directive could expose the Adviser and/or the Fund to conflicting regulatory requirements in the United States.

        The Fund will bear the costs and expenses of compliance with the Directive and any related regulations, including costs and expenses of collecting and calculating data and the preparation of regular reports to be filed with EEA member states.

        The offer of interests in the Fund, insofar as such interests can be offered to investors domiciled or established in a member state of the EEA (as described above) is restricted to professional investors. A professional investor is an investor that is considered to be a "professional client", or who may, on request, be treated as a "professional client" within the meaning of Annex II to the Markets in Financial Instruments Directive (2014/65/EU) ("MiFID"). Notwithstanding that all marketing activity of the Adviser toward investors domiciled or established in the EEA shall be directed at investors who qualify as professional clients, such investors are not a "client" of the Adviser. The Adviser is not advising or making a recommendation to investors or prospective investors with respect to an investment in the Fund and the Adviser will not be responsible for providing protections that would otherwise be provided in an advisory-client relationship.

Registration under the U.S. Commodity Exchange Act

        Registration with the U.S. Commodity Futures Trading Commission (the "CFTC") as a "commodity pool operator" or any change in the Fund's operations necessary to maintain the Adviser's ability to rely upon an exemption from registration could adversely affect the Fund's ability to implement its investment program, conduct its operations and/or achieve its objectives and subject the Fund to certain additional costs, expenses and administrative burdens. Furthermore, any determination by the Adviser to cease or to limit investing in interests which may be treated as "commodity interests" in order to comply with the regulations of the CFTC may have a material adverse effect on the Fund's ability to implement its investment objectives and to hedge risks associated with its operations.

LIBOR

        Concerns have been publicized that some of the member banks surveyed by the British Bankers' Association ("BBA") in connection with the calculation of LIBOR across a range of maturities and currencies may have been under-reporting or otherwise manipulating the inter-bank lending rate applicable to them in order to profit on their derivatives positions or to avoid an appearance of capital insufficiency or adverse reputational or other consequences that may have resulted from reporting

76


inter-bank lending rates higher than those they actually submitted. A number of BBA member banks have entered into settlements with their regulators and law enforcement agencies with respect to alleged manipulation of LIBOR, and investigations by regulators and governmental authorities in various jurisdictions are ongoing.

        On July 27, 2017, the United Kingdom's Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. It is unclear if at that time whether or not LIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist after 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with a new index calculated by short-term repurchase agreements, backed by Treasury securities, called the Secured Overnight Financing Rate ("SOFR"). The first publication of SOFR was released in April 2018. Whether or not SOFR attains market traction as a LIBOR replacement remains a question and the future of LIBOR at this time is uncertain. If LIBOR ceases to exist, interest rates on financial instruments tied to LIBOR, as well as the revenue and expenses associated with those financial instruments, may be adversely affected. Additionally, if LIBOR ceases to exist, the Fund may need to renegotiate the credit agreements extending beyond 2021 with the Portfolio Companies that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with the new standard that is established.

Legal, Tax and Regulatory Risks

        Legal, tax and regulatory changes could occur during the term of the Fund that may adversely affect the Fund, its Portfolio Companies or Unitholders. For example, from time to time the market for private investment transactions has been adversely affected by a decrease in the availability of senior and subordinated financing for transactions, in part in response to regulatory pressures on providers of financing to reduce or eliminate their exposure to such transactions.

        Antitrust or other regulatory requirements may impose filing fees and other additional expenses on the Fund and may adversely affect the Fund's ability to acquire or dispose of investment positions. The Fund and/or the Adviser may also be subject to regulation in jurisdictions in which the Fund and/or the Adviser engage in business. The regulatory environment for private investment funds is evolving, and changes in the regulation of private investment funds may adversely affect the value of investments held by the Fund and the ability of the Fund to effectively employ its investment strategies. Increased scrutiny and legislative changes applicable to private investment funds and their sponsors may also impose significant administrative burdens on the Adviser and may divert time and attention from portfolio management activities. The effect of any future regulatory change on the Fund could be substantial and adverse. In addition, the securities and futures markets are subject to comprehensive statutes, regulations and margin requirements. The SEC, other regulators and self-regulatory organizations and exchanges are authorized to take extraordinary actions in the event of market emergencies. The regulation of derivatives transactions and funds that engage in such transactions is an evolving area of law and is subject to modification by government and judicial action.

        Investors in the Fund should understand that the Fund's business is dynamic and may change over time. Therefore, the Fund may be subject to new or additional regulatory constraints in the future. This Registration Statement cannot address or anticipate every possible current or future regulation that may affect the Adviser, the Fund or their investments. Such regulations may have a significant impact on the Unitholders or the operations of the Fund, including, without limitation, restricting the types of investments the Fund may make, preventing the Fund from exercising its voting rights with regard to certain financial instruments, requiring the Fund to disclose the identity of its investors or otherwise. The Adviser may, in its sole discretion, cause the Fund to be subject to such regulations if it believes that an investment or business activity is in the Fund's interest, even if such regulations may have a

77


detrimental effect on one or more Unitholders. Prospective investors are encouraged to consult their own advisors regarding an investment in the Fund.

Tax Consequences

        There is a risk that the Internal Revenue Service (the "IRS") will not concur as to the tax consequences of an investment in the Fund described above in "
Item 1. Business—Certain U.S. Federal Income Tax Considerations
." Please refer to the discussion set forth in that section.

        The IRS may audit the Fund and challenge any of the positions taken in regard to its formation, its investments or operations, and such audit may result in an audit of a Unitholder's own tax returns and possibly adjustments to the tax liability reflected thereon.

        Although the Fund intends to continue to qualify annually as a RIC under Subchapter M of the Code, no assurance can be given that the Fund will be able to maintain the Fund's RIC tax treatment. To maintain RIC status and be relieved of U.S. federal income taxes on income and gains distributed to the Unitholders, the Fund must meet the annual distribution, source-of-income and asset diversification requirements described below.

    The annual distribution requirement will be satisfied if the Fund distributes dividends to the Unitholders during the taxable year equal to at least 90.0% of the Fund's investment company taxable income (as that term is defined in the Code, but determined without regard to the deduction for dividends paid) plus 90% of the Fund's net interest income excludable under Section 103(a) of the Code. Because the Fund uses debt financing, the Fund is subject to an asset coverage ratio requirement under the 1940 Act, and the Fund may be subject to certain financial covenants contained in debt financing agreements (as applicable). This asset coverage ratio requirement and these financial covenants could, under certain circumstances, restrict the Fund from making distributions to the Unitholders, which distributions are necessary for the Fund to satisfy the annual distribution requirement. If the Fund is unable to obtain cash from other sources and thus are unable to make sufficient distributions to the Unitholders, the Fund could fail to qualify as a RIC and thus become subject to U.S. corporate-level federal income tax (and any applicable state and local taxes).


    The source-of-income requirement will be satisfied if at least 90.0% of the Fund's gross income for each taxable year is derived from (a) dividends, interest, payments with respect to certain securities loans, and gains from the sale or other disposition of stock or securities or foreign currencies, or other income (including but not limited to gains from options, futures or forward contracts) derived with respect to the Fund's business of investing in such stock, securities, or currencies, and (b) net income derived from a Qualified Publicly Traded Partnership.


    The asset diversification requirement will be satisfied if, at the end of each quarter of each taxable year, the Fund diversifies the Fund's holdings so that (a) at least 50.0% of the value of the Fund's total assets is represented by cash and cash items (including receivables), U.S. government securities and securities of other RICs, and other securities for purposes of this calculation limited, in respect of any one issuer to an amount not greater in value than 5% of the Fund's total assets, and to not more than 10.0% of the outstanding voting securities of such issuer, and (b) not more than 25.0% of the value of the Fund's total assets is invested in the securities (other than U.S. government securities or securities of other RICs) of (I) any one issuer, (II) any two or more issuers that the Fund controls and which are determined to be engaged in the same or similar trades or businesses or related trades or businesses or (III) any one or more Qualified Publicly Traded Partnerships. Failure to meet these requirements may result in the Fund having to dispose of certain investments quickly to prevent losing the Fund's RIC status. Because most of the Fund's investments are intended to be in private companies,

78


      and therefore may be relatively illiquid, any such dispositions could be made at disadvantageous prices and could result in substantial losses.

        If the Fund fails to maintain the Fund's RIC status for any reason, and the Fund does not qualify for certain relief provisions under the Code, the Fund would be subject to corporate-level U.S. federal income tax (and any applicable state and local taxes). In this event, the resulting taxes could substantially reduce the Fund's net assets, the amount of cash available for distribution, and the amount of the Fund's distributions, which would have a material adverse effect on the Fund's financial performance.

Taxable Income in Excess of Cash

        For U.S. federal income tax purposes, the Fund includes in the Fund's taxable income its allocable share of certain amounts that the Fund has not yet received in cash, such as original issue discount, which may occur if the Fund receives warrants in connection with the origination of a loan or possibly in other circumstances if the Fund earns PIK interest, which generally represents contractual interest added to the loan balance and due at the end of the loan term. The Fund's allocable share of such original issue discount and PIK interest is included in the Fund's taxable income before the Fund receives any corresponding cash payments. The Fund may also be required to include in the Fund's taxable income its allocable share of certain other amounts that the Fund will not receive in cash.

        Because in certain cases the Fund may recognize taxable income before or without receiving cash representing such income, the Fund may have difficulty making distributions to the Unitholders that will be sufficient to enable the Fund to meet the annual distribution requirement necessary for the Fund to qualify as a RIC. Accordingly, the Fund may need to sell some of the Fund's assets at times and/or at prices that the Fund would not consider advantageous. The Fund may need to raise additional equity or debt capital, or the Fund may need to forego new investment opportunities or otherwise take actions that are disadvantageous to the Fund's business (or be unable to take actions that are advantageous to the Fund's business) to enable the Fund to make distributions to the Unitholders that will be sufficient to enable the Fund to meet the annual distribution requirement. If the Fund is unable to obtain cash from other sources to enable the Fund to meet the annual distribution requirement, the Fund may fail to qualify for the U.S. federal income tax benefits allowable to RICs and, thus, become subject to a corporate-level U.S. federal income tax (and any applicable state and local taxes).

Corporate-level Income Tax

        The Fund may invest in certain debt and equity investments through taxable subsidiaries and the taxable income of these taxable subsidiaries will be subject to federal and state corporate income taxes. The Fund may invest in certain foreign debt and equity investments which could be subject to foreign taxes (such as income tax, withholding and value added taxes).

Special Tax Issues

        The Fund expects to invest in debt securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Investments in these types of instruments may present special tax issues for the Fund. U.S. federal income tax rules are not entirely clear about issues such as when the Fund may cease to accrue interest, original issue discount or market discount, when and to what extent deductions may be taken for bad debts or worthless instruments, how payments received on obligations in default should be allocated between principal and income and whether exchanges of debt obligations in a bankruptcy or workout context are taxable. These and other issues will be addressed by the Fund, to the extent necessary, to preserve its status as a RIC and to distribute sufficient income to not become subject to U.S. federal income tax.

79


Publicly Offered Regulated Investment Company

        A "publicly offered regulated investment company" or "publicly offered RIC" is a RIC whose shares are either (i) continuously offered pursuant to a public offering within the meaning of Section 4 of the 1933 Act, (ii) regularly traded on an established securities market or (iii) held by at least 500 persons at all times during the taxable year. While the Fund generally expects to qualify as a RIC, the Fund anticipates that the Fund will not qualify as a publicly offered RIC upon completion of the Private Offering. If the Fund is a RIC that is not a publicly offered RIC for any period, a non-corporate Unitholder's allocable portion of the Fund's affected expenses, including the Fund's management fees, will be treated as an additional distribution to the Unitholder and will be treated as miscellaneous itemized deductions that are deductible only to the extent permitted by applicable law. However, pursuant to recently enacted legislation, such expenses will not be deductible by any such Unitholder for tax years that begin prior to January 1, 2026.

Possible Legislative or Other Developments

        All statements contained in this Registration Statement concerning the United States federal income tax consequences of any investment in the Fund are based upon current law and the interpretations thereof. Therefore, no assurance can be given that the currently anticipated United States federal income tax treatment of an investment in the Fund will not be modified by legislative, judicial or administrative changes, possibly with retroactive effect, to the detriment of the Unitholders. Additionally, tax authorities in jurisdictions where the Fund maintains investments may increase or materially change their tax laws so as to materially increase the tax burden associated with an investment in the Fund or to force or attempt to force increased disclosure from or about the Fund and/or its Unitholders as to the identity of all persons having a direct or indirect interest in the Fund. Such additional disclosure may take the form of additional filing requirements on Unitholders.

United States Federal Income Tax Reform

        Recently enacted tax reform legislation (the "Tax Reform Act") has resulted in fundamental changes to the Code. Among the numerous changes included in the Tax Reform Act are (i) a reduction to the corporate income tax rate, (ii) a partial limitation on the deductibility of business interest expense, (iii) an income deduction for individuals receiving certain business income from "pass-through" entities, (iv) a partial shift of the U.S. taxation of multinational corporations from a tax on worldwide income to a territorial system (along with a transitional rule which taxes certain historic accumulated earnings and rules which prevent tax planning strategies which shift profits to low-tax jurisdictions) and (v) a suspension of certain miscellaneous itemized deductions, including deductions for investment fees and expenses, until 2026. The impact of the Tax Reform Act on the Fund, the Portfolio Companies and investors is uncertain and could be adverse. Prospective investors should consult their own tax advisors regarding changes in tax laws.

Taxation in Other Jurisdictions

        If the Fund makes Portfolio Investments in a jurisdiction outside the United States, the Fund may be subject to income or other tax in that jurisdiction. Any tax incurred in non-United States jurisdictions by the Fund or vehicles through which it invests generally will not be creditable to or deductible by the Unitholders.

ERISA Considerations

        The Adviser will use reasonable efforts to avoid having the assets of the Fund constitute "plan assets" of any plan subject to Title I of the U.S. Employee Retirement Income Security Act of 1974, as amended ("ERISA") or Section 4975 of the U.S. Internal Revenue Code of 1986, as amended (the

80


"Code"). In this regard the Adviser intends to limit investment in the Units by "benefit plan investors" to less than 25% of the total value of each class of equity interests in the Fund (within the meaning of the Plan Asset Regulations), in which case the Fund may decline to accept subscriptions from, or approve transfers of Units to, certain investors in order to limit equity participation by benefit plan investors in the Fund to less than 25% of the total value of each class of equity interests in the Fund, as described in "
Item 1. Business—ERISA Considerations
"

Risk Arising from Potential Control Group Liability

        Under ERISA, upon the termination of a tax-qualified single employer-defined benefit pension plan, the sponsoring employer and all members of its "controlled group" will be jointly and severally liable for 100% of the plan's unfunded benefit liabilities whether or not the controlled group members have ever maintained or participated in the plan. In addition, the U.S. Pension Benefit Guaranty Corporation (the "PBGC") may assert a lien with respect to such liability against any member of the controlled group on up to 30% of the collective net worth of all members of the controlled group. Similarly, in the event a participating employer partially or completely withdraws from a multiemployer (union) defined benefit pension plan, any withdrawal liability incurred under ERISA will represent a joint and several liability of the withdrawing employer and each member of its controlled group.

        A "controlled group" includes all "trades or businesses" under 80% or greater common ownership. This common ownership test is broadly applied to include both "parent-subsidiary groups" and "brother-sister groups" applying complex exclusion and constructive ownership rules. However, regardless of the percentage ownership that the Fund holds in one or more of its Portfolio Companies, the Fund itself cannot be considered part of an ERISA controlled group unless the Fund is considered to be a "trade or business."

        While there are a number of cases that have held that managing investments is not a "trade or business" for tax purposes, in 2007 the PBGC Appeals Board ruled that a private equity fund was a "trade or business" for ERISA controlled group liability purposes and at least one U.S. Federal Circuit Court has similarly concluded that a private equity fund could be a trade or business for these purposes based upon a number of factors including the fund's level of involvement in the management of its Portfolio Companies and the nature of any management fee arrangements.

        If the Fund were determined to be a trade or business for purposes of ERISA, it is possible, depending upon the structure of the investment by the Fund and/or its affiliates and other co-investors in a Portfolio Company and their respective ownership interests in the Portfolio Company, that any tax-qualified single employer defined benefit pension plan liabilities and/or multiemployer plan withdrawal liabilities incurred by the Portfolio Company could result in liability being incurred by the Fund, with a resulting need for additional capital contributions, the appropriation of Fund assets to satisfy such pension liabilities and/or the imposition of a lien by the PBGC on certain Fund assets. Moreover, regardless of whether or not the Fund were determined to be a trade or business for purposes of ERISA, a court might hold that one of the Fund's Portfolio Companies could become jointly and severally liable for another Portfolio Company's unfunded pension liabilities pursuant to the ERISA "controlled group" rules, depending upon the relevant investment structures and ownership interests as noted above.

Pay-To-Play Laws, Regulations and Policies

        In light of controversies and highly publicized incidents involving money managers, a number of states and municipal pension plans have adopted so-called "pay-to-play" laws, regulations or policies which prohibit, restrict or require disclosure of payments to (and/or certain contacts with) state officials by individuals and entities seeking to do business with state entities, including investments by public retirement funds. The SEC also has adopted rules that, among other things, prohibit an investment

81


advisor from providing advisory services for compensation with respect to a government plan investor for two years after the advisor or certain of its executives or employees make a contribution to certain elected officials or candidates. If the Adviser or its employees or affiliates fail to comply with such pay-to-play laws, regulations or policies, such non-compliance could have an adverse effect on the Fund by, for example, providing the basis for the withdrawal of the affected government plan investor.

ITEM 2.    FINANCIAL INFORMATION.

DISCUSSION OF THE FUND'S EXPECTED OPERATING PLANS

Overview

        We were formed on May 22, 2019 under the laws of the State of Delaware. We have elected to be regulated as a BDC under the 1940 Act. We also intend to elect to be treated for U.S. federal income tax purposes as a RIC. As such, we will be required to comply with various regulatory requirements, such as the requirement to invest at least 70% of our assets in "qualifying assets," source of income limitations, asset diversification requirements, and the requirement to distribute annually at least 90% of our taxable income and tax-exempt interest. See "
Item 1. Business—Operating and Regulatory Environment
" and "
Item 1. Business
Taxation as a Regulated Investment Company
."

        We commenced our investment operations on August 6, 2019, the Initial Drawdown Date.

Revenues

        We plan to generate revenues in the form of interest income from the debt securities we hold and dividends and capital appreciation on either direct equity investments or equity interests obtained in connection with originating loans, such as options, warrants or conversion rights. The debt we invest in will typically not be rated by any rating agency, but if it were, it is likely that such debt would be below investment grade. In addition, we may also generate revenue in the form of commitment, loan origination, structuring or diligence fees, fees for providing managerial assistance to our Portfolio Companies, and possibly consulting fees. Certain of these fees may be capitalized and amortized as additional interest income over the life of the related loan.

Expenses

        We do not currently have any employees and do not expect to have any employees. Services necessary for our business will be provided through the Administration Agreement and the Investment Management Agreement.

        The Fund will bear its own legal and other expenses incurred in connection with our formation and organization and the offering of our Units, including (other than any placement fees, which will be borne by the Adviser directly or pursuant to waivers of the management fee) all out-of-pocket legal, tax, accounting, printing, data room, consultation, administrative, travel, meal, accommodation and U.S. and non-U.S. filing fees and expenses of the Fund or the Adviser (including with respect to any registration or licensing of the Fund or the Adviser for marketing under any national private placement or similar regime outside of the United States including those in member states of the European Union), as well as any fees and expenses associated with hiring and maintaining a local distribution agent in any such jurisdictions), up to a maximum aggregate amount of, at the end of the Closing Period, the lesser of: (i) $2 million or (ii) 0.50% of the aggregate Capital Commitments. Any costs in excess of this cap will be applied as a reduction to the Adviser's management fee. The Adviser may not later recapture Organizational and Offering Expenses that are in excess of the Organizational and Offering Expense Cap.

82


        Except as noted above, the Fund will bear (directly or indirectly) all expenses related to its operations, including, without limitation, the fees listed in "
Item 1. Business—Expenses—Fund Expenses
" (subject to the Specified Expenses Cap).

        Investment-related expenses with respect to investments in which the Fund invests together with one or more parallel funds (or co-investment vehicles) will generally be allocated among all such entities on the basis of capital invested by each such entity into the relevant investment; provided that if the Adviser reasonably believes that such allocation method would produce an inequitable result to any such entity, the Adviser shall allocate such expenses among such entities in any other manner that the Adviser believes in good faith to be fair and equitable.

        We are permitted to enter into credit facilities. In connection with borrowings, our lenders may require us to pledge assets, Capital Commitments and/or the right to draw down on Capital Commitments. In this regard, the Subscription Agreement contractually obligates each of our investors to fund their respective Capital Commitments in order to pay amounts that may become due under any borrowings or other financings or similar obligations.

Financial Condition, Liquidity and Capital Resources

        Prior to July 15, 2019, our only equity transaction was the issuance and sale of 100 Units to the Adviser for an aggregate purchase price of $1,000. On July 15, 2019, we entered into subscription agreements with several investors providing for the private placement of our Units. On July 19, 2019, we delivered a drawdown notice to investors relating to the issuance of 4,933,964 Units on August 6, 2019 for an aggregate purchase price of $49,339,640. On August 21, 2019, we delivered a drawdown notice to investors relating to the issuance of 4,933,964 Units on September 5, 2019 for an aggregate purchase price of $49,339,640.

        We expect to generate cash from (1) drawing down capital in respect of Units, (2) cash flows from investments and operations and (3) borrowings from banks or other lenders. We will seek to enter into any bank debt, credit facility or other financing arrangements on at least customary market terms; however, we cannot assure you we will be able to do so.

        Our primary use of cash will be for (1) investments in Portfolio Companies and other investments to comply with certain portfolio diversification requirements, (2) the cost of operations (including expenses, the management fee, the incentive fee and any indemnification obligations), (3) debt service of any borrowings and (4) cash distributions to the Unitholders.

Contractual Obligations

        We have entered into the Investment Management Agreement with the Adviser to provide us with investment advisory services and the Administration Agreement with the Administrator to provide us with administrative services. Payments for investment advisory services under the Investment Advisory Agreements and reimbursements under the Administration Agreement are described in "
Item 1. Description of Business—Investment Management Agreement
," "
Item 1. Description of Business—Administration Agreement
," and "
Item 1. Description of Business—Payment of Our Expenses under the Investment Management and Administration Agreements
."

        The Fund may borrow for cash management and administrative purposes, including to pay Fund expenses and liabilities (including management fees), and obtain leverage for purposes of making investments. To facilitate such borrowings, the Fund may, among other things, enter into one or more credit facilities, including subscription facilities, with service providers to the Fund or third-party credit institutions or other lenders. In connection with potential borrowings, the Fund's lenders may require the Fund to pledge assets, commitments and/or the drawdowns (and the ability to enforce the payment thereof). Any borrowings under a subscription facility shall be repaid by the Fund on or prior to the

83


six-month anniversary of the borrowing. We cannot assure Unitholders that we will be able to enter into a credit facility on favorable terms or at all.

Off-Balance Sheet Arrangements

        Other than contractual commitments and other legal contingencies incurred in the normal course of our business, we do not expect to have any off-balance sheet financings or liabilities.

Quantitative and Qualitative Disclosures about Market Risk

        We are subject to financial market risks, including changes in interest rates. We plan to invest primarily in illiquid debt securities of private companies. Most of our investments will not have a readily available market price, and we will value these investments at fair value as determined in good faith by the Board in accordance with our valuation policy. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. See "
Item 1. Business—Valuation of Portfolio Securities
."

ITEM 3.    PROPERTIES.

        We maintain our principal executive office at 787 Seventh Avenue, 48th Floor, New York, New York 10019. We do not own any real estate. We believe that our present facilities are adequate to meet our current needs. If new or additional space is required, we believe that adequate facilities are available at competitive prices in the same area.

ITEM 4.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

        The following table sets forth, as of September 5, 2019, the beneficial ownership of each current director, the Fund's executive officers, each person known to us to beneficially own 5% or more of the outstanding Units, and the executive officers and trustees as a group. Percentage of beneficial ownership is based on 9,868,028 Units outstanding as of September 5, 2019. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the Units. Ownership information for those persons who beneficially own 5% or more of our Units is based upon filings by such persons with the SEC and other information obtained from such persons, if available. Unless otherwise indicated, the Fund believes that each beneficial owner set forth in the table has sole voting and investment power over such Units. Unless otherwise indicated, the

84


address of all executive officers and directors is c/o New Mountain Guardian III BDC, L.L.C., 787 Seventh Avenue, 48th Floor, New York, New York 10019.

 

 
Type of Ownership
 
Number of Units Owned
 
Percentage
 

Interested Directors
 
 
 
 
 
 
 
 
 

John R. Kline
 
 
 
 
 
 

Adam B. Weinstein
 
 
 
 
 
 

Independent Directors
 
 
 
 
 
 
 
 
 

Alfred F. Hurley, Jr.
 
 
 
 
 
 

David Ogens
 
 
 
 
 
 

Rome G. Arnold III
 
 
 
 
 
 

Executive Officers Who Are Not Directors
 
 
 
 
 
 
 
 
 

Robert A. Hamwee
 
 
 
 
 
 

Karrie J. Jerry
 
 
 
 
 
 

Shiraz Y. Kajee
 
 
 
 
 
 

All Directors and Executive Officers as a Group (8 persons)
 
 
 
 
 
 

Five-Percent Unitholders
 
 
 
 
 
 
 
 
 

Deseret Mutual Employee Pension Plan Trust(1)
 
Record
 
 
1,000,000
 
 
10.13
%

GHL Investments Ltd.(2)
 
Record
 
 
2,800,000
 
 
28.37
%

Lifeyrissjodur Starfsmanna Rikisins Division A(3)
 
Record
 
 
1,000,000
 
 
10.13
%

Teachers' Retirement Allowances Fund(4)
 
Record
 
 
1,600,000
 
 
16.21
%

The Metropolitan Museum of Art(5)
 
Record
 
 
1,000,000
 
 
10.13
%

New Mountain Guardian Investments III, L.L.C.(6)
 
Record
 
 
1,587,928
 
 
16.09
%

(1)
Deseret Mutual Employee Pension Plan Trust ("MEPPT") is a Utah trust whose address is 179 E. Social Hall Avenue, Suite 100, Salt Lake City, Utah 84111. Deseret Mutual Benefit Administrators ("DMBA") is a Utah corporation whose address is 150 Social Hall Avenue, Suite 170, P.O. Box 45530, Salt Lake City, Utah 84145. DMBA serves as trustee of MEPPT.

(2)
GHL Investments Ltd. is a Cyprus limited liability company whose address is c/o Seatankers Management Co., Ltd., John Kennedy Street, IRIS House, 7th Floor, Office 740B, Limassol, Cyprus 3106.

(3)
Lifeyrissjodur Starfsmanna Rikisins Division A is an Icelandic pension fund whose address is Engjateigur II, 105 Reykjavik, Iceland.

(4)
Teachers' Retirement Allowances Fund L is a Canadian pension plan whose address is 330 - 25 Forks Market Road, Winnipeg, MB R3C 4S8.

(5)
The Metropolitan Museum of Art is a New York not-for-profit corporation whose address is 1000 Fifth Avenue, New York, New York 10028.

(6)
New Mountain Guardian Investments III, L.L.C. is a Delaware limited liability company whose address is 787 Seventh Avenue, 49th Floor, New York, New York 10019.

ITEM 5.    DIRECTORS AND EXECUTIVE OFFICERS.

Board of Directors and Executive Officers

        Our business and affairs are managed under the direction of our Board. Our Board appoints our officers, who serve at the discretion of our Board. Our Board has an audit committee, a nominating and corporate governance committee and a valuation committee and may establish additional committees from time to time as necessary.

85


        Our Board consists of five members, three of whom are classified under Section 2(a)(19) of the 1940 Act as non-interested persons. Each director will hold office for a one-year term. At each annual meeting of our Unitholders, the successors to the directors whose terms expire at each such meeting will be elected to hold office for a one-year term expiring at the next annual meeting of Unitholders following their election. Each director will hold office for the term to which he or she is elected and until his or her successor is duly elected and qualifies. Our governing documents also give our Board sole authority to appoint directors to fill vacancies that are created either through an increase in the number of directors or due to the resignation, removal or death of any director.

Directors

        Information regarding our Board is set forth below. The directors have been divided into two groups—Independent Directors and interested directors. Interested directors are "interested persons" of the Fund as defined in Section 2(a)(19) of the 1940 Act. The address for each director is c/o New Mountain Guardian III BDC, L.L.C., 787 Seventh Avenue, 48th Floor, New York, New York 10019.

Name
 
Age
 
Position(s)
 
Director Since
 
Independent Directors
 
 
 
 
 
 
 
 
 
Alfred F. Hurley, Jr. 
 
 
64
 
Director
 
 
2019
 
David Ogens
 
 
64
 
Director
 
 
2019
 
Rome G. Arnold III
 
 
64
 
Director
 
 
2019
 
Interested Directors
 
 
 
 
 
 
 
 
 
John R. Kline
 
 
43
 
Director, President and Chief Operating Officer
 
 
2019
 
Adam B. Weinstein
 
 
40
 
Director, Executive Vice President
 
 
2019
 

Executive Officers Who Are Not Directors

        Information regarding each person who is an executive officer of the Fund but who is not a director is as follows:

Name
 
Age
 
Position(s)
Robert A. Hamwee
 
 
48
 
Chief Executive Officer
Karrie J. Jerry
 
 
45
 
Chief Compliance Officer and Corporate Secretary
Shiraz Y. Kajee
 
 
39
 
Chief Financial Officer and Treasurer

        The address for each executive officer is c/o New Mountain, 787 Seventh Avenue, 48th Floor, New York, New York 10019.

Biographical Information

Directors

        Each of our directors has demonstrated high character and integrity, superior credentials and recognition in his respective field and the relevant expertise and experience upon which to be able to offer advice and guidance to our management. Each of our directors also has sufficient time available to devote to our affairs, is able to work with the other members of the Board and contribute to our success and can represent the long-term interests of our Unitholders as a whole. We have selected our current directors to provide a range of backgrounds and experience to our Board. Set forth below is biographical information for each director, including a discussion of the director's particular experience, qualifications, attributes or skills that led us to conclude, as of the date of this Registration Statement, that the individual should serve as a director, in light of our business and structure.

86


Independent Directors

        
Alfred F. Hurley, Jr.
has been a director of the Fund since 2019. He was a Vice Chairman of Emigrant Bank and Emigrant Bancorp (collectively, the "Bank") from 2007 and 2009, respectively, to December 2012 and was a consultant to the Bank during 2013. His responsibilities at the Bank included advising the Bank's CEO on acquisitions and divestitures, asset/liability management, and new products. In addition, he was the Chairman of the Bank's Credit and Risk Management Committee from 2008 to 2012 and the Bank's acting Chief Risk Officer until January 2012. Before joining the Bank, Mr. Hurley was the Chief Executive Officer of M. Safra & Co., a private money management firm, from 2004 to 2007. Prior to joining M. Safra & Co., Mr. Hurley worked at Merrill Lynch ("ML") from 1976 to 2004. His most recent management positions included serving as Senior Vice President of ML & Co. and Head of Global Private Equity Investing, Managing Director and Head of Japan Investment Banking and Capital Markets, Managing Director and Co-Head of the Global Manufacturing and Services Group, and Managing Director and Head of the Global Automotive Aerospace and Transportation Group. As part of the management duties described above, he was a member of the Corporate and Institutional Client Group ("CICG") Executive Committee which had global responsibility for the firm's equity, debt, investment banking and private equity businesses, a member of the Japan CICG Executive Committee, and a member of the Global Investment Banking Management and Operating Group Committees. Mr. Hurley has served as a director of NMFC since November 2010. He is also a member of the board of directors of Merrill Corporation, which is a privately held company that provides outsourced solutions for complex, regulated and confidential business information, where he serves as Chairman of the Compensation and Governance and Human Resources Committee and as a member of the Audit Committee. Since June 2016, Mr. Hurley has served as a member of the board of directors of The Stars Group Inc., a publicly listed technology gaming company, where he serves as Chairman of the Corporate Governance, Nominating & Compensation Committee. Since December 2017, Mr. Hurley has been the Fortress Voting Proxy and Voting Proxy Appointed Manager for LSQ to the Ligado Networks, Inc. Board of Managers. Since February 2014, Mr. Hurley is the sole member of a consulting business, Alfred F. Hurley, Jr. & Company, LLC. Mr. Hurley graduated from Princeton University with an A.B. in History, cum laude.

        Mr. Hurley brings his experience in risk management as well as his experience in the banking and money management industries to our Board. This background positions Mr. Hurley well to serve as our director.

        
David Ogens
has been a director of the Fund since 2019. He has served as the President and a Director of Med Inc. since 2011, a company that provides complex rehabilitation services to patients with serious muscular/neuro diseases. Previously, Mr. Ogens served as Senior Managing Director and Head of Investment Banking at Leerink Swann LLC, a specialized healthcare investment bank focused on emerging growth healthcare companies, from 2005 to 2009. Prior to serving at Leerink Swann LLC, Mr. Ogens was Chairman and Co-Founder of SCS Financial Services, LLC, a private wealth management firm. Before co-founding SCS Financial Services, LLC in 2002, Mr. Ogens was a Managing Director in the Investment Banking Division of Goldman, Sachs & Co, where he served as a senior investment banker and a head of the High Technology Investment Banking Group. He has served as a director of NMFC since November 2010. Mr. Ogens received his Bachelor of Arts ("B.A." or "A.B.") and Master of Business Administration ("M.B.A.") from the University of Virginia.

        Mr. Ogens brings his experience in wealth management and investment banking, including experience with debt issuances, as well as industry-specific expertise in the healthcare industry to our Board. This background positions Mr. Ogens well to serve as our director.

        
Rome G. Arnold III
has been a director of the Fund since 2019. Since January 2017, Mr. Arnold has served as a Senior Advisor at Rose and Co., a financial-technology startup company with a focus on digital media. From January 2012 through August 2016, Mr. Arnold was a Managing Director at UBS

87


Securities in their Energy Group, serving as the Head of Oil Field Services. In addition, Mr. Arnold currently serves as a director of Forbes Energy Services Ltd., an independent oilfield services contractor. Mr. Arnold received his B.A., cum laude, in Psychology and History of Art from Yale College. He received his M.B.A. from Harvard Business School, with High Distinction (Baker Scholar).

        Mr. Arnold brings his vast experience in investment banking and energy focus to our Board. This background positions Mr. Arnold well to serve as our director.

Interested Directors

        
John R. Kline
has been a director of the Fund since 2019 and has served as the Fund's president and chief operating officer since 2019. Mr. Kline also serves as a Managing Director of New Mountain Capital. Prior to joining New Mountain Capital in 2008, he worked at GSC Group Inc. from 2001 to 2008 as an investment analyst and trader for GSC Group Inc.'s control distressed and corporate credit funds. From 1999 to 2001, Mr. Kline was with Goldman, Sachs & Co. where he worked in the Credit Risk Management and Advisory Group. He currently serves as a director of UniTek Global Services, Inc. Mr. Kline received an A.B. degree in History from Dartmouth College.

        Mr. Kline's depth of experience in managerial operational positions in investment management and financial services and as a member of other corporate boards of directors, as well as his intimate knowledge of our business and operations, provides our Board valuable industry- and company-specific knowledge and expertise.

        
Adam B. Weinstein
has been a director of the Fund since 2019 and has served as the Fund's executive vice president since 2019. Mr. Weinstein also serves as a Managing Director and Chief Financial Officer of New Mountain Capital and has been in various roles since joining in 2005. Prior to joining New Mountain Capital in 2005, Mr. Weinstein was a Manager at Deloitte & Touche LLP and worked in that firm's merger and acquisition and private equity investor services areas. He also currently serves as a director of Bellerophon Therapeutics Inc., Great Oaks Foundation and Victory Education Partners. Mr. Weinstein sits on a number of boards of directors for professional and non-profit organizations. Mr. Weinstein received his B.S. from Binghamton University, is a member of the AICPA and is a New York State Certified Public Accountant.

        Mr. Weinstein brings his industry-specific expertise and background in accounting to the Fund's board of directors. This background positions Mr. Weinstein well to serve as a director of the Fund.

Executive Officers Who Are Not Directors

        
Robert A. Hamwee
will be the Fund's chief executive officer since 2019. Mr. Hamwee has also served as a Managing Director of New Mountain Capital since 2008. Prior to joining New Mountain Capital, Mr. Hamwee served as a Senior Executive of GSC Group Inc. ("GSC"), a leading institutional investment manager of alternative assets, where he had day-to-day responsibility for managing GSC's control distressed debt funds from 1999 to 2008. Prior to 1999, Mr. Hamwee held various positions at Greenwich Street Capital Partners, the predecessor to GSC, and with The Blackstone Group. Mr. Hamwee has chaired numerous Creditor Committees and Bank Steering Groups, and was formerly a director of a number of public and private companies, including Envirosource, Purina Mills, and Viasystems. Mr. Hamwee currently serves on the board of Edmentum, Inc. He has also served as a director of NMFC since November 2010 and as its chief executive officer since July 2010. Additionally, Mr. Hamwee is the founder, majority stockholder and serves on the board of directors of Boulevard Arts, Inc., a development stage company which is developing art education applications for virtual reality platforms. Mr. Hamwee received his Bachelor of Business Administration ("B.B.A.") in Finance and Accounting from the University of Michigan.

88


        
Karrie J. Jerry
will be our chief compliance officer ("CCO") and corporate secretary. Ms. Jerry joined the Adviser in 2011 and has served as chief compliance officer, compliance vice president and assistant corporate secretary of NMFC. From 2005 until 2011, Ms. Jerry served as a Compliance Associate and Assistant Corporate Secretary at Apollo Investment Corporation ("Apollo"), a publicly traded business development company. While at Apollo, Ms. Jerry also served in compliance and corporate governance oversight roles of Apollo's other publicly listed funds, which included a real estate investment trust and one other closed-end fund. Ms. Jerry received a B.S. degree in Paralegal Studies from Boston University.

        
Shiraz Y. Kajee
will be our chief financial officer and treasurer. Since joining the Adviser in 2015, Mr. Kajee has served as chief financial officer and treasurer of NMFC. Prior to joining the Adviser, Mr. Kajee was the Head of U.S. Finance at Man Investments from 2012 to 2015, where he was responsible for the accounting, tax and treasury functions for the U.S. operations of Man Group plc, a United Kingdom based alternative asset manager. From 2010 to 2012, Mr. Kajee was a Vice President of Private Wealth Finance at Goldman, Sachs & Co. and from 2006 to 2010 was a Senior Vice President of Corporate Loans Finance at Citigroup Inc. Mr. Kajee began his career at Ernst & Young LLP within their Financial Services Office Assurance practice. Mr. Kajee received both his Master of Science ("M.S.") in Accounting and a Bachelor of Business Administration ("B.B.A.") in Finance from Baruch College—City University of New York. He is a New York State Certified Public Accountant and a Chartered Global Management Accountant.

        Our Board has adopted a code of ethics that applies to our executive officers, which forms part of our broader compliance policies and procedures. See "
Item 1. Business—Compliance Policies and Procedures
."

Board Leadership Structure

        Our Board monitors and performs an oversight role with respect to our business and affairs, compliance with regulatory requirements and the services, expenses and performance of our service providers. Among other things, our Board approves the appointment of the Administrator and officers, reviews and monitors the services and activities performed by the Administrator and officers and approves the engagement, and reviews the performance of, our independent public accounting firm.

        Under our Limited Liability Company Agreement, our Board may designate a chairman to preside over the meetings of the Board and meetings of the Unitholders and to perform such other duties as may be assigned to the chairman by the Board. We do not have a fixed policy as to whether the chairman of the Board should be an Independent Director and believe that we should maintain the flexibility to select the chairman and reorganize the leadership structure, from time to time, based on the criteria that is in our best interests and our Unitholders at such times.

        John Kline currently serves as the chairman of our Board. Mr. Kline is an "interested person" of the Fund as defined in Section 2(a)(19) of the 1940 Act because he is a Managing Director of New Mountain Capital and serves on the investment committee of the Adviser. We believe that Mr. Kline's history with New Mountain Capital, familiarity with our investment objectives and investment strategy, and extensive knowledge of the financial services industry and the investment valuation process in particular qualify him to serve as the chairman of our Board. We believe that, at present, we are best served through this leadership structure, as Mr. Kline's relationship with the Adviser and New Mountain Capital, provides an effective bridge and encourages an open dialogue between our management and our Board, ensuring that all groups act with a common purpose.

89


        Our Board does not currently have a designated lead Independent Director. We are aware of the potential conflicts that may arise when a non-Independent Director is chairman of the Board, but believe these potential conflicts are offset by our strong corporate governance policies. Our corporate governance policies include regular meetings of the Independent Directors in executive session without the presence of interested directors and management over which the chairman of the audit committee presides, the establishment of audit, valuation and nominating and corporate governance committees comprised solely of Independent Directors and the appointment of a chief compliance officer, with whom the Independent Directors meet regularly without the presence of interested directors and other members of management, for administering our compliance policies and procedures.

        We recognize that different board leadership structures are appropriate for companies in different situations. We intend to continue to re-examine our corporate governance policies on an ongoing basis to ensure that they continue to meet our needs.

Board's Role In Risk Oversight

        Our Board performs its risk oversight function primarily through (1) its four standing committees which report to the Board, each of which is comprised solely of Independent Directors and (2) active monitoring by our chief compliance officer and our compliance policies and procedures.

        Our audit committee, valuation committee and nominating and corporate governance committee assist our Board in fulfilling its risk oversight responsibilities. The audit committee's risk oversight responsibilities include overseeing our accounting and financial reporting processes, our systems of internal controls regarding finance and accounting, and audits of our financial statements, including the independence of our independent auditors. The valuation committee is responsible for making recommendations in accordance with the valuation policies and procedures adopted by our Board, reviewing valuations and any reports of independent valuation firms, confirming that valuations are made in accordance with the valuation policies of our Board and reporting any deficiencies or violations of such valuation policies to our Board on at least a quarterly basis, and reviewing other matters that our Board or the valuation committee deems appropriate. The nominating and corporate governance committee's risk oversight responsibilities include selecting, researching and nominating directors for election by our Unitholders, developing and recommending to the Board a set of corporate governance principles and overseeing the evaluation of the Board and our management.

        Our Board performs its risk oversight responsibilities with the assistance of our chief compliance officer. The Board quarterly reviews a written report from the chief compliance officer discussing the adequacy and effectiveness of our compliance policies and procedures and our service providers. The chief compliance officer's quarterly report addresses at a minimum:

    the operation of our compliance policies and procedures and our service providers since the last report;


    any material changes to these policies and procedures since the last report;


    any recommendations for material changes to these policies and procedures as a result of the chief compliance officer's review; and


    any compliance matter that has occurred since the date of the last report about which the Board would reasonably need to know to oversee our compliance activities and risks.

        In addition, the chief compliance officer meets separately in executive session with the Independent Directors at least once each year.

        We believe that our Board's role in risk oversight is effective, and appropriate given the extensive regulation to which we are subject as a BDC. We are required to comply with certain regulatory requirements that control the levels of risk in our business and operations. For example, our ability to

90


incur indebtedness is limited because our asset coverage must equal at least 150.0% immediately after we incur indebtedness. We generally have to invest at least 70.0% of our total assets in "qualifying assets" and are not generally permitted to invest in any Portfolio Company in which one of our affiliates currently has an investment.

        We recognize that different board of director roles in risk oversight are appropriate for companies in different situations. We intend to continue to re-examine the manner in which our Board administers its oversight function on an ongoing basis to ensure that it continues to meet our needs.

Committees of the Board

        Our Board has established an audit committee, a nominating and corporate governance committee, and a valuation committee. The members of each committee have been appointed by our Board and serve until their respective successor is elected and qualifies, unless they are removed or resign. We require each director to make a diligent effort to attend all board and committee meetings as well as each annual meeting of our Unitholders.

Audit Committee

        The audit committee operates pursuant to a charter approved by our Board. The charter sets forth the responsibilities of the audit committee. The audit committee is responsible for recommending the selection of, engagement of and discharge of our independent auditors, reviewing the plans, scope and results of the audit engagement with the independent auditors, approving professional services provided by the independent auditors (including compensation therefore), reviewing the independence of the independent auditors and reviewing the adequacy of our internal controls over financial reporting. The members of the audit committee are Messrs. Hurley, Ogens and Arnold, each of whom is not an interested person of the Fund for purposes of the 1940 Act. Mr. Arnold serves as the chairman of the audit committee, and our Board has determined that Alfred F. Hurley, Jr., David Ogens and Rome G. Arnold III are "audit committee financial experts" as that term is defined under Item 407 of Regulation S-K, as promulgated under the 1934 Act, and that each of them meets the current independence and experience requirements of Rule 10A-3 of the 1934 Act.

Nominating and Corporate Governance Committee

        The nominating and corporate governance committee operates pursuant to a charter approved by our Board. The charter sets forth the responsibilities of the nominating and corporate governance committee. The nominating and corporate governance committee is responsible for determining criteria for service on the Board, identifying, researching and nominating directors for election by our Unitholders, selecting nominees to fill vacancies on our Board or committees of the Board, developing and recommending to the Board a set of corporate governance principles and overseeing the self-evaluation of the Board and its committees and evaluation of our management. The nominating and corporate governance committee considers nominees properly recommended by our Unitholders. The members of the nominating and corporate governance committee are Messrs. Hurley, Ogens and Arnold, each of whom is not an interested person of the Fund for purposes of the 1940 Act. Mr. Hurley serves as the chairman of the nominating and corporate governance committee.

        The nominating and corporate governance committee seeks candidates who possess the background, skills and expertise to make a significant contribution to the Board, us and our Unitholders. In considering possible candidates for election as a director, the nominating and corporate governance committee takes into account, in addition to such other factors as they deem relevant, the desirability of selecting directors who:

    are of high character and integrity;

91


    are accomplished in their respective fields, with superior credentials and recognition;


    have relevant expertise and experience upon which to be able to offer advice and guidance to management;


    have sufficient time available to devote to our affairs;


    are able to work with the other members of the Board and contribute to our success;


    can represent the long-term interests of our Unitholders as a whole; and


    are selected such that the Board represent a range of backgrounds and experience.

        The nominating and corporate governance committee has not adopted formal policies with regard to the consideration of diversity in identifying director nominees. In determining whether to recommend a director nominee, the nominating and corporate governance committee considers and discusses diversity, among other factors, with a view toward the needs of the Board as a whole. The nominating and corporate governance committee generally conceptualizes diversity expansively to include, without limitation, concepts such as race, gender, national origin, differences of viewpoint, professional experience, education, skill and other qualities that contribute to the Board, when identifying and recommending director nominees. The nominating and corporate governance committee believes that the inclusion of diversity as one of many factors considered in selecting director nominees is consistent with the nominating and corporate governance committee's goal of creating a Board that best serves our needs and the interest of our Unitholders.

Valuation Committee

        The valuation committee operates pursuant to a charter approved by our Board. The charter set forth the responsibilities of the valuation committee. The valuation committee is responsible for making recommendations in accordance with the valuation policies and procedures adopted by our Board, reviewing valuations and any reports of independent valuation firms, confirming that valuations are made in accordance with the valuation policies of our Board and reporting any deficiencies or violations of such valuation policies to our Board on at least a quarterly basis, and reviewing other matters that our Board or the valuation committee deems appropriate. The valuation committee is composed of Messrs. Hurley, Ogens and Arnold, each of whom is not an interested person of the Fund for purposes of the 1940 Act. Mr. Ogens serves as chairman of the valuation committee.

Investment Committee

        
The Adviser's Investment Committee currently consists of Steven B. Klinsky, Robert A. Hamwee, Adam B. Weinstein, John R. Kline and Lars O. Johansson. For biographical information of Mr. Hamwee, see
"—
Biographical Information
Executive Officers Who Are Not Directors." For biographical information about Messrs. Weinstein and Kline, see "
Biographical Information—Directors
Interested Directors.
"

        
Steven B. Klinsky
,
Managing Director, Chairman of NMFC
, established New Mountain in 1999. Mr. Klinsky also serves as the Chairman of the Board of NMFC. Prior to founding New Mountain Capital, L.L.C., Mr. Klinsky was co-founder of the Leverage Buyout Group of Goldman Sachs & Co. ("Goldman") (1981-1984), where he helped execute over $3 billion of pioneering transactions for Goldman and its clients. He then joined Forstmann Little and Co. ("Forstmann Little") as an associate partner (1984-1986) and a general partner (1986-1999), helping to oversee seven private equity and debt partnerships totaling over $10 billion in capital. Mr. Klinsky was the most senior partner of Forstmann Little outside of the Forstmann Little family for a majority of the 1990s. Mr. Klinsky received his B.A. in Economics and Political Philosophy, with high honors, from the University of Michigan in 1976. He received his M.B.A. from Harvard Business School (class of 1979) and his J.D.,

92


with honors, from Harvard Law School (class of 1981). He is or has been chairman or a director of numerous corporations and philanthropies.

        

Lars O. Johansson
,
Managing Director,
joined New Mountain in 2007. Prior to joining New Mountain Capital, Mr. Johansson was in the Consumer / Retail group at Goldman Sachs in New York. He received his Sc.B, summa cum laude, in Computer Science and Economics from Brown University. Mr. Johansson currently serves on the Board of Directors for ABB Optical Group, Beeline, Diversified Foodservice Supply, Pivvot, Strategic Partners and TRC Companies. He previously served on the Board of Directors for Alexander Mann Solutions.

Portfolio Management

        Set forth below is information regarding the team of professionals at the Adviser, led by Robert Hamwee and John Kline as portfolio managers, primarily responsible for overseeing the day-to-day operations of the Fund. The portfolio management team currently consists of Steven Klinsky, Robert Hamwee, John Kline, Laura Holson, Lars O. Johansson, James Stone III, Tom Libretto, Joshua Porter and Joy Xu. The Adviser utilizes a team approach, with decisions derived from interaction among various investment management sector specialists. Under this team approach, management of the Fund's portfolio will reflect a consensus of interdisciplinary views.

        
Steven Klinsky
, see "
—Committees of the Board—Investment Committee.
"

        
Robert Hamwee
, see "
—Biographical Information—Executive Officers Who Are Not Directors.
"

        
John Kline
, see "
—Biographical Information—Directors—Interested Directors."

        
Laura Holson
,
Managing Director, Head of Capital Markets
, joined New Mountain in 2009 as a private equity deal professional and in 2011, she later joined New Mountain's credit team full time. In 2017, Ms. Holson was named Head of Capital Markets; in this capacity, she manages the Firm's financing activities and relationships across its various product lines. Before joining New Mountain, Ms. Holson worked in Healthcare Investment Banking at Morgan Stanley in New York. Ms. Holson received a B.S. in Economics with concentrations in Finance and Marketing from The Wharton School, University of Pennsylvania, where she graduated magna cum laude.

        

Lars O. Johansson
, see "
—Committees of the Board—Investment Committee.
"

        

James Stone III
,
Managing Director
, joined New Mountain in 2011. Prior to joining New Mountain, he worked for The Blackstone Group ("Blackstone") as a Managing Director of GSO Capital Partners, Blackstone's credit business. At Blackstone, Mr. Stone was responsible for originating, evaluating, executing and monitoring various senior secured and mezzanine debt investments across a variety of industries. Before joining Blackstone in 2002, Mr. Stone worked as a Vice President in Lehman's Communications and Media Group and as a Vice President in UBS Warburg's Leveraged Finance Department. Prior to that, Mr. Stone worked at Nomura Securities International, Inc. with the team who later founded Blackstone's corporate debt investment unit. Mr. Stone graduated Phi Beta Kappa and received a B.S. in Mathematics and Physics from The University of the South. He later received an M.B.A. with concentrations in finance and accounting from The University of Chicago's Graduate School of Business.

        
Tom Libretto
,
Director
, joined New Mountain in 2018. Prior to joining New Mountain, he was a Senior Vice President in the Private Debt division at Partners Group, where he spent five years focused on sourcing, evaluating, and executing credit investments across a variety of industries. Collectively, Mr. Libretto has greater than 12 years of fixed income experience with prior roles at Barclays, FirstLight Financial Corporation, and Bear, Stearns & Co. Inc. Mr. Libretto received his B.B.A. in finance from James Madison University in 2004. He received his M.B.A. from the NYU Stern School of Business in 2012 and is a CFA Charterholder.

93


        
Joshua Porter
,
Director
, joined New Mountain in 2017. Prior to joining New Mountain, he was a Principal of Bayside Capital, the credit and special situations platform of H.I.G. Capital. Prior to joining Bayside in 2012, Mr. Porter worked for Mount Kellett Capital Management, where he focused on distressed credit investing, and for GSC Group, where he focused on middle-market control distressed. He began his career at Citigroup as an Analyst in the Leveraged Finance Group. Mr. Porter received B.A. degrees, magna cum laude, in Economics and Finance from the University of Illinois.

        
Joy Xu
,
Director
, joined New Mountain in 2012. Mrs. Xu previously worked in the Mergers & Acquisitions group at Bank of America Merrill Lynch in New York. Mrs. Xu graduated magna cum laude in 2010 from the Jerome Fisher Program in Management and Technology at the University of Pennsylvania; she received her B.S. in Economics with concentrations in Finance and Management from The Wharton School and her B.A.S. in Computer Science from the School of Engineering & Applied Sciences.

Executive Advisory Council

        The Adviser may consult New Mountain's executive advisory council (the "Executive Advisory Council") from time to time concerning general industry trends, related matters and specific investment diligence. Members of the Executive Advisory Council (i) will not be acting in a fiduciary capacity with respect to the Adviser, the Fund or any Unitholder, (ii) have substantial responsibilities outside of their Executive Advisory Council activities, (iii) are not obligated to devote any fixed portion of their time to the activities of the Fund and (iv) will not be prohibited from engaging in activities which compete or conflict with those of the Fund. The members of the Executive Advisory Council will be entitled to the benefit of certain indemnification and exculpation provisions.

ITEM 6.    EXECUTIVE COMPENSATION.

(a)
Compensation of Executive Officers

        We do not currently have any employees and do not expect to have any employees. Services necessary for our business, including such services provided by our executive officers, will be provided by individuals who are employees of the Adviser, pursuant to the terms of our Investment Management Agreement, or through the Administration Agreement. Therefore, our day-to-day investment operations will be managed by the Adviser, and most of the services necessary for the origination and administration of our investment portfolio will be provided by investment professionals employed by the Adviser.

        None of our executive officers will receive direct compensation from us. We reimburse the Administrator for expenses incurred by it on our behalf in performing its obligations under the Administration Agreement, including the compensation of our chief financial officer and chief compliance officer, and their respective staff. Certain of our executive officers, through their ownership interest in or management positions with the Adviser, may be entitled to a portion of any profits earned by the Adviser, which includes any fees payable to the Adviser under the terms of our Investment Management Agreement, less expenses incurred by the Adviser in performing its services under our Investment Management Agreement. The Adviser may pay additional salaries, bonuses, and individual performance awards and/or individual performance bonuses to our executive officers in addition to their ownership interest.

(b)
Compensation of Independent Directors

        Each of our Independent Directors will receive an annual retainer fee of $25,000, payable once per year, if the director attends at least 75% of the meetings held during the previous year. In addition, Independent Directors will receive $625 for each regularly scheduled board meeting and $250 for each

94


special board meeting that they participate in. Independent directors will also be reimbursed for all reasonable out-of-pocket expenses incurred in connection with participating in each board meeting.

        With respect to each audit committee meeting not held concurrently with a board meeting, Independent Directors will be reimbursed for all reasonable out-of-pocket expenses incurred in connection with participating in such audit committee meeting. In addition, the chairman of the audit committee will receive an annual retainer of $1,875, the chairman of the nominating and corporate governance committee will receive an annual retainer of $250 and the chairman of the valuation committee will receive an annual retainer of $1,250.

        No compensation will be paid to directors who are "interested persons," as that term is defined in the 1940 Act.

ITEM 7.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

(a)
Transactions with Related Persons; Review, Approval or Ratification of Transaction with Related Persons

Investment Management Agreement; Administration Agreement

        We have entered into the Investment Management Agreement with our Adviser pursuant to which we will pay management fees and incentive fees to the Adviser, and we have entered into the Administration Agreement with the Administrator pursuant to which we will make payments equal to an amount that reimburses the Administrator for the costs and expenses incurred by the Administrator in performing its obligations and providing personnel and facilities under the Administration Agreement.

        The Investment Management Agreement and the Administration Agreement were approved by our Board at the initial board meeting. Unless earlier terminated as described below, each of the Investment Management Agreement and the Administration Agreement will remain in effect for a period from their effective date to the second anniversary of such effective date and will remain in effect from year to year thereafter if approved annually by (i) the vote of our Board, or by the vote of a majority of our outstanding voting securities, and (ii) the vote of a majority of our Independent Directors. The Investment Management Agreement and Administration Agreement will automatically terminate within the meaning of the 1940 Act and related SEC guidance and interpretations in the event of its assignment, see "
Item 1A. Risk Factors—Certain General Risks of an Investment in the Fund—Role of New Mountain and its Professionals; No Dedicated Investment Team
." Notwithstanding the foregoing, each of the Investment Management Agreement and the Administration Agreement may be terminated at any time, without the payment of any penalty, upon 60 days' written notice, provided, that, such termination will be directed or approved by the vote of a majority of our outstanding voting securities, by the vote of our directors, or by the Adviser or Administrator (as applicable). If the Investment Management Agreement is terminated according to this paragraph, we will pay the Adviser a pro-rated portion of the management fee.

Potential Conflicts of Interest

Valuation Matters

        Most of the Fund's portfolio investments are made in the form of securities that are not publicly traded. As a result, the Board determines the fair value of these securities in good faith. In connection with this determination, investment professionals from the Adviser may provide the Board with Portfolio Company valuations based upon the most recent Portfolio Company financial statements available and projected financial results of each Portfolio Company. The participation of the Adviser's

95


investment professionals in the Fund's valuation process, and the indirect pecuniary interest in the Adviser by a member of the Board, could result in a conflict of interest as the Adviser's management fee and incentive fees are based, in part, on the value of the Fund's assets.

Incentive Fees

        The existence of incentive fees may create an incentive for the Adviser to make riskier or more speculative investments on behalf of the Fund than would be the case in the absence of such performance-based compensation, although the commitment of capital by New Mountain professionals to the Fund should somewhat reduce this incentive.

        In addition, the manner in which the Adviser's entitlement to incentive fees is determined may result in a conflict between its interests and the interests of Unitholders with respect to the sequence and timing of disposals of investments. For example, the ultimate beneficial owners of the Adviser are generally subject to United States federal and local income tax (unlike certain of the Unitholders). The Adviser may be incentivized to operate the Fund, including to hold and/or sell investments, in a manner that takes into account the tax treatment of its incentive fees. Investors should note in this regard that recently enacted tax reform legislation relating to the taxation of carried interest provide for a lower capital gains tax rate in respect of investments held for at least three years. While the Adviser generally intends to seek to maximize pretax returns for the Fund as a whole, the Adviser may nonetheless be incentivized, for example, to hold investments longer to ensure long-term capital gains treatment and/or realize investments prior to any change in law that results in a higher effective income tax rate on its incentive fees.

Other Fees

        The Adviser or its affiliates may from time to time receive compensation from a company in which the Fund holds a Portfolio Investment, including monitoring fees, financial arranging services, loan administration or servicing, break-up fees, directors' fees and/or other similar advisory fees (collectively, "Transaction Fees"). To the extent the Adviser or its affiliates receive any Transaction Fees, the base management fee (and, if necessary, the incentive fee) shall be reduced by the allocable portion of such fees attributable to the Fund, as determined pro rata based on the amount of capital committed to the relevant Portfolio Investment. by the Fund, any other funds or accounts managed by the Adviser and its affiliates and/or any account owned or controlled by the Adviser or an affiliate. Transaction Fees shall not include any salary, benefits, directors' fees, stock options and other compensation granted or paid by Portfolio Companies to (i) Senior Advisors for serving in Portfolio Company roles (and New Mountain may reduce the compensation paid by the Manager to Senior Advisors who serve in Portfolio Company roles) or (ii) other New Mountain personnel in respect of services performed in an executive management role at a Portfolio Company during a period in which such other personnel was not an employee of New Mountain.

        Moreover, New Mountain and its personnel can be expected to receive certain intangible and/or other benefits and/or perquisites arising or resulting from their activities on behalf of the Fund which will not be subject to the management fee offset or otherwise shared with the Fund, its Unitholders and/or the Portfolio Companies. For example, airline travel or hotel stays incurred as Fund Expenses typically result in "miles" or "points" or credit in loyalty / status programs, and such benefits and/or amounts will, whether or not de minimis or difficult to value, inure exclusively to New Mountain and/or such personnel (and not the Fund, its Unitholders and/or the Portfolio Companies) even though the cost of the underlying service is borne by the Fund and/or the Portfolio Companies.

96


Relationship with New Mountain and Other New Mountain Products

        An advisory affiliate of New Mountain manages New Mountain Vantage, L.P., a private fund with several parallel funds that generally invest in public equity and equity-related securities, and separate advisory affiliates manage New Mountain Net Lease Partners, L.P. ("NMNL"), a private fund that invests primarily in North American net lease real estate assets, NMFC, a publicly traded BDC that invests primarily in debt, and New Mountain Guardian Partners II, L.P., New Mountain Guardian Partners II Offshore, L.P., New Mountain Guardian II Master Fund-A, L.P. and New Mountain Guardian II Master Fund-B, L.P. (collectively, "Guardian II"), each a private fund that invests primarily in debt. In addition, NMFC is itself an advisory affiliate of New Mountain that manages a private credit fund that invests primarily in senior debt. The Manager also manages New Mountain Partners II, L.P., New Mountain Partners III, L.P., New Mountain Partners IV, L.P. and New Mountain Partners V, L.P. (collectively, "NMP"), each a private fund that invests primarily in growth equity transactions, management buyouts, leveraged acquisitions, build-ups, recapitalizations, control restructurings and pre-public offering opportunities, and New Mountain Strategic Equity Fund I, L.P. ("NMSEF") a private fund that invests primarily in privately-negotiated equity and equity-related strategic minority and other non-control investments. New Mountain may raise other public and private funds, investment vehicles and managed accounts in the future (collectively with New Mountain Vantage, NMNL, NMFC, Guardian II, NMP and NMSEF, the "Other New Mountain Products") and such Other New Mountain Products may from time-to-time make investments that would be suitable for the Fund. In addition, there may be circumstances when New Mountain considers a potential private investment in a Portfolio Company on behalf of the Fund, determines not to make such private investment and an investment is eventually made in such Portfolio Company by Other New Mountain Products. In these circumstances, another New Mountain client may benefit from research by the Fund's investment team and or from costs received by the Fund in pursuing the potential Portfolio Investment, but will not be required to reimburse the Fund for expenses incurred in connection with such investment.

Minority Investors in New Mountain

        Affiliates of Blackstone acquired a passive minority interest in New Mountain Capital Group, L.P. (which is the sole member of the Adviser) and affiliated general partner vehicles in the beginning of the fourth quarter of 2018. Blackstone has no involvement in the day-to-day operations or investment decisions of the Adviser.

        In addition, the Adviser has entered in an agreement with Blackstone Advisory Partners L.P., an affiliate of Blackstone ("BAP"), whereby BAP may, in consultation with the Adviser, refer prospective investors to the Fund and certain other New Mountain funds and accounts. BAP is not entitled to receive any fees from the Adviser, its affiliates or any other person or entity in connection with such referrals.

        Additionally, Portfolio Companies may enter into agreements regarding group procurement, benefits management, purchase of title and/or other insurance policies (which may include brokerage and/or placement thereof), with Blackstone, and Portfolio Companies may also participate in other operational, administrative or management related initiatives with Blackstone that Adviser believes will benefit participating Portfolio Companies. Some of these arrangements may result in commissions, discounts, rebates or similar payments to Blackstone, its affiliates, or Blackstone funds or accounts or their portfolio companies. Because such amounts are not received by the Adviser, any of its affiliates or any employee of the foregoing, such amounts will not offset the management fee. Accordingly, neither the Fund nor the Unitholders will receive the benefit of any such amounts.

97


Allocations of Investment Opportunities

        It is the policy of the Adviser to allocate investment opportunities to the Fund and to any other accounts on a fair and equitable basis, to the extent practicable and in accordance with the Fund's or other accounts' applicable investment strategies, over a period of time, in each case, in accordance with the Adviser's allocation policy.

        In respect of certain investments where terms other than price are subject to negotiation, the Fund will only be able to co-invest with other accounts in accordance with the terms of an exemptive order issued by the SEC, which requires among other things the consent of the Board and the board of any other BDC participating in the transaction.

        In particular, the Fund will only be able to participate in co-investment opportunities where in accordance with the terms of the exemptive relief granted by the SEC or where the only term being negotiated is price. Similarly, the Fund will be restricted in its ability to dispose of certain investments in Portfolio Companies. As a result, the Fund may be forced to forgo certain investment or disposition opportunities that would otherwise be attractive for it to the extent co-investment is not permitted under the 1940 Act.

        Where the terms of the exemptive relief granted by the SEC are met, including consent of the Board and the board of any other BDC participating in the transaction, or in respect of investment opportunities where the only term negotiated is price, the Fund may typically invest alongside other accounts in accordance with the terms of the Adviser's allocation policy.

        The Adviser will have no obligation to purchase or sell a security for, enter into a transaction on behalf of, or provide an investment opportunity to, the Fund or other accounts solely because the Adviser or its affiliates purchase or sell the same security for, enters into a transaction on behalf of, or provide an opportunity to, an other account or the Fund if, in its reasonable opinion, such security, transaction or investment opportunity does not appear to be suitable, practicable or desirable for the Fund or the other account.

Co-Investments

        The Adviser and its affiliates may, from time to time, subject to applicable law and conditions of the Adviser's exemptive order for co-investment under the 1940 Act, offer one or more Unitholders or investors in other accounts and/or other third-party investors the opportunity to co-invest with the Fund in particular investments, including through one or more co-mingled funds designed for co-investment with the Fund. Except as otherwise agreed with any individual Unitholders, the Adviser and its affiliates are not obligated to arrange co-investment opportunities, and no Unitholders will be obligated to participate in such an opportunity. The Adviser and its affiliates have sole discretion as to the amount (if any) of a co-investment opportunity that will be allocated to particular Unitholders or vehicles in which Unitholders participate and may allocate co-investment opportunities instead to investors in other accounts or to third parties. The Adviser or its affiliates may receive fees and/or allocations from co-investors, which may differ as among co-investors (and certain co-investors or co-investment vehicles may not be charged any fees), and also may differ from the fees borne by the Fund.

Allocation of Personnel

        The Adviser shall cause its personnel to devote such time as shall be reasonably necessary to conduct the business affairs of the Fund in an appropriate manner. New Mountain personnel, including those responsible for the affairs of the Fund, have commitments to, and may work on other projects unrelated to, the Fund, including the Other New Mountain Products contemplated herein. Such personnel may also (i) serve as members of the boards of directors of various public and private companies other than Portfolio Companies and retain fees for such services for such person's own

98


account, (ii) engage in such civic, trade association (or similar organization), industry and charitable activities as such person shall choose, (iii) conduct and manage such person's personal and family investment and related activities and (iv) engage in any other activities not prohibited by the Limited Liability Company Agreement. Conflicts may arise as a result of such other activities and in allocating management time services and functions. The possibility exists that such companies could engage in transactions which would be suitable for the Fund, but in which the Fund might be unable to invest. See also "
Item 1A. Risk Factors—Certain General Risks of an Investment in the Fund—Role of New Mountain and its Professionals; No Dedicated Investment Team
" above.

Conflicts Related to Portfolio Investments

        Officers, employees and Senior Advisors of New Mountain may serve, and certain Unitholders may serve, as directors of certain Portfolio Investments and, in that capacity, will be required to make decisions that consider the best interests of such Portfolio Investment and its shareholders. In certain circumstances, for example in situations involving bankruptcy or near-insolvency of a Portfolio Company, actions that may be in the best interest of the Portfolio Investment may not be in the best interests of the Fund, and vice versa. Accordingly, in these situations, there will be conflicts of interest between such individual's duties as an officer or employee of New Mountain, or as a Unitholder, and such individual's duties as a director of the Portfolio Company. A Portfolio Company may enter into transactions with another Portfolio Company or a portfolio company of another New Mountain product. If an issuer in which the Fund and a New Mountain-managed or sponsored fund or other investment vehicle hold different classes of securities encounters financial problems, decisions over the terms of any workout will raise conflicts of interest (including conflicts over proposed waivers and amendments to debt covenants and other terms).

Diverse Unitholder Group

        The Unitholders are expected to be based in a wide variety of jurisdictions and take a wide variety of forms. The Unitholders may have conflicting regulatory, investment, tax and other interests with respect to their investments in the Fund. The conflicting interests of individual Unitholders with respect to other Unitholders and relative to investors in other investment vehicles may relate to or arise from, among other things, the nature of Portfolio Investments made by the Fund and other such partnerships, the selection, structuring, acquisition and management of Portfolio Investments, the timing of disposition of Portfolio Investments, internal investment policies of the Adviser and Unitholders and target risk/return profiles of Unitholders. As a consequence, conflicts of interest may arise in connection with the decisions made by the Adviser, including with respect to the nature or structuring of Portfolio Investments that may be more beneficial for one investor than for another investor, especially with respect to investors' individual tax situations. In addition, the Fund may make Portfolio Investments which have a negative impact on related investments made by the Unitholders in separate transactions. In selecting and structuring Portfolio Investments appropriate for the Fund, the Adviser will generally consider the investment and tax objectives of the Fund and the Unitholders as a whole, and not the investment, tax or other objectives of any Unitholder individually. In addition, certain Unitholders may also be limited partners in other New Mountain funds, including co-investment vehicles that may invest alongside the Fund in one or more investments. It is also possible that the Fund or the Fund's Portfolio Companies may be counterparties (such counterparties dealt with on an arm's-length basis) or participants in agreements, transactions, or other arrangements with a Unitholder or an affiliate of a Unitholder. Such Unitholders described in the previous two sentences may therefore have different information about New Mountain and the Fund than Unitholders not similarly positioned.

        Certain Unitholders will have representatives on the Advisory Committee. The Advisory Committee will have a role in certain matters regarding the Fund, including with respect to certain

99


conflicts of interest, in each case as provided in the Limited Liability Company Agreement. Members of the Advisory Committee may have various business and other relationships with New Mountain and its affiliates (and may be investors in, and/or serve on similar committees of other New Mountain funds or arrangements, including those engaged in transactions with the Fund). The presence of these other relationships may influence their decisions as members of the Advisory Committee.

Joint Venture Partners

        In certain instances, the Adviser may seek to make Portfolio Investments involving one or more joint venture partners, and joint venture partners and other third parties may co-invest with the Fund with respect to certain investments. There can be no assurance that New Mountain's relationship with any existing joint venture partners will continue or that suitable joint venture partners will be found with respect to the Fund's investments. To the extent a dispute arises between New Mountain and such joint venture partners, the Fund's Portfolio Investments relating thereto may be affected.

Investments by New Mountain Principals and Employees in the Fund and Other Accounts

        The New Mountain principals and employees may choose to personally invest, directly and/or indirectly, in the Fund. Investments by the New Mountain principals and employees in the Fund could incentivize the principals and employees to increase or decrease the risk profile of the Fund.

Investments in Securities by Adviser Personnel

        The New Mountain Code of Ethics places restrictions on personal trades by employees, including that they disclose their personal securities holdings and transactions to New Mountain on a periodic basis, and requires that employees pre-clear certain types of personal securities transactions. The Adviser, its affiliates and their respective employees may give advice or take action for their own accounts that may differ from, conflict with or be adverse to advice given or action taken for the Fund.

Investments in Debt Obligations of Issuers

        Issuers of debt obligations in which the Fund invests may agree to pay for some expenses that would otherwise be expenses of the Adviser, including, without limitation, administrative and overhead expenses. While the Adviser will act in a manner consistent with its fiduciary duties to the Fund, payments of such expenses by such issuers may present a conflict of interest.

Allocation of Expenses Among Accounts and Co-Investors

        The Adviser seeks to fairly allocate expenses among the accounts, including the Fund, and any co-investors. Generally, Accounts and co-investors that own an investment will share in expenses related to such investment, including expenses originally charged solely to any Account. However, it is not always possible or reasonable to allocate or re-allocate expenses to a co-investor, depending upon the circumstances surrounding the applicable investment (including the timing of the investment) and the financial and other terms governing the relationship of the co-investor to the Accounts with respect to the investment, and, as a result, there may be occasions where co-investors do not bear a proportionate share of such expenses. In addition, where a potential investment is contemplated but ultimately not consummated, potential co-investors generally will not share in any expenses related to such potential investment, including expenses borne by any Account with respect to such potential investment. Similarly, there may be circumstances when New Mountain has considered a potential equity investment in a portfolio company on behalf of an Account, has determined not to make such equity investment and a debt investment is eventually made in such portfolio company by the credit funds, NMFC, the Fund or other investment vehicles sponsored by New Mountain. In these circumstances, the credit funds, NMFC, the Fund or such other vehicles may benefit from research by

100


New Mountain's investment team and/or from costs borne by the applicable Account in pursuing the potential portfolio investment, but will not be required to reimburse such Account for expenses incurred in connection with such investment.

Cross Transactions

        To the extent permitted by the 1940 Act, including Rule 17a-7 thereunder, the Adviser may determine that it would be in the best interests of the Fund and one or more other accounts to transfer a security from one Account to another (each such transfer, a "Cross Transaction") for a variety of reasons, including, without limitation, tax purposes, liquidity purposes, to rebalance the portfolios of the Accounts, or to reduce transaction costs. If the Adviser decides to engage in a Cross Transaction, the Adviser will determine that the trade is in the best interests of both of the Accounts involved and take steps to ensure that the transaction is consistent with the duty to obtain best execution for each of those Accounts.

        Among other things, one or more subsidiaries of the Fund may offer to other accounts participations in and/or assignments or sales of loans (or interests therein) that the subsidiaries have originated or purchased. In the event of such an offer, the price of the participation, assignment or sale will be based on the current market price of such loans and ascertained in a manner required by the 1940 Act. Further, the decision by such other accounts to accept or reject the relevant subsidiary's offer will be made by a party independent of the Adviser, such as a loan acquisition committee.

Principal Transactions

        To the extent that Cross Transactions may be viewed as principal transactions (as such term is used under the Advisers Act) due to the ownership interest in an Account by the Adviser or its personnel, the Adviser will comply with the requirements of Section 206(3) of the Advisers Act. In connection with principal transactions, Cross Transactions, related-party transactions and other transactions and relationships involving potential conflicts of interest, the Adviser will consult with the Board on such Cross Transactions; provided that the Adviser will not consult with the Board or the Unitholders for the sale of a loan to, or the purchase of a loan from, other accounts that are not principal accounts. Cross Transactions may be made when the Adviser determines that it is in the best interests of the Fund and other accounts to effectuate such trades. The Board may be consulted prior to or contemporaneous with, or subsequent to, the consummation of a Cross Transaction. In no event will any such transaction be entered into unless it complies with applicable law. The Board may be exculpated and indemnified by the Fund.

Proxy Voting Policy

        In compliance with Rule 206(4)-6 under the Advisers Act, the Adviser has adopted proxy voting policies and procedures. The general policy is to vote proxy proposals, amendments, consents or resolutions (collectively, "Proxies"), in the best interests of its clients.

        Because the Fund's investment program primarily involves investing through privately negotiated transactions, the Adviser typically is not presented with traditional Proxy votes.

        On the rare occasion the Fund is asked to decide on matters involving voting its ownership interest in a portfolio investment, the Adviser will seek to vote the Fund's Proxies in the best interest of the Fund. It will review on a case-by-case basis each proposal submitted for a Unitholder vote to determine its impact on the portfolio securities held by the Fund. Although the Adviser will generally vote against proposals that may have a negative impact on the Fund's portfolio securities, it may vote for such a proposal if there exists compelling long-term reasons to do so.

101


        The Proxy voting decisions of the Adviser are made by the senior officers who are responsible for monitoring the Fund's investments. To ensure that its vote is not the product of a conflict of interest, it will require that: (a) anyone involved in the decision-making process disclose to its chief compliance officer any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a Proxy vote; and (b) employees involved in the decision-making process or vote administration are prohibited from revealing how the Adviser intends to vote on a proposal in order to reduce any attempted influence from interested parties.

        The Adviser has identified one potential conflict of interest between the Fund's interests and its own arising from its Proxy voting process. From time to time, the Adviser may be in a position where it must vote to approve certain directors' participation on the boards of public companies in which the Fund invests. Since the Adviser's employees are permitted to participate on public company boards (upon notification to, or approval by, the chief compliance officer, as applicable) there may be situations where the Adviser has a decision as to whether to vote in favor of, or against, a public company director that is also compensated as an employee. If the Adviser determines that it may have, or is perceived to have, a conflict of interest when voting Proxies, the Adviser will either (i) convene a Proxy voting committee to address conflicts or (ii) refrain from voting when doing so is in the Fund's best interest.

The Adviser Does Have Different Compensation Arrangements with Other Accounts

        The Adviser could be subject to a conflict of interest because varying compensation arrangements among the Fund and other accounts could incentivize the Adviser to manage the Fund and such other accounts differently. These and other differences could make the Fund less profitable to the Adviser than certain other accounts.

Service Providers

        The service providers or their affiliates (including any administrators, lenders, brokers, attorneys, consultants, accountants, appraisers, valuation experts, tax advisors, servicers, asset managers and investment banking firms) of the Fund, New Mountain or any of their affiliates may also provide goods or services to or have business, personal, political, financial or other relationships with New Mountain, the Adviser or their affiliates. Such service providers may be investors in the Fund, affiliates of the Adviser and/or sources of investment opportunities and co-investors or counterparties therewith. These relationships may influence the Adviser in deciding whether to select or recommend such a service provider to perform services for the Fund or a Portfolio Company or to have other relationships with New Mountain. Notwithstanding the foregoing, investment transactions for the Fund that require the use of a service provider will generally be allocated to service providers on the basis of best execution, the evaluation of which includes, among other considerations, such service provider's provision of certain investment-related services and research that the Adviser believes to be of benefit to the Fund. Additionally, misconduct by service providers (such as the improper use or disclosure of confidential information which could result in litigation or serious financial harm by limiting the Fund's business prospects or future activities), which the Adviser may not be able to detect and prevent, could cause significant losses to the Fund.

Self-Administration of the Fund

        The Administrator, solely or through the use of any third party sub-administrator, may provide all or any part of fund administration services (including the valuation of the Fund's assets) to the Fund. Any costs for providing these services will not be included in the management fee and would be paid separately by the Fund. The Adviser's ability to determine the fund administration fee the Administrator receives from the Fund creates a conflict of interest. The Adviser addresses this conflict by reviewing its fund administration fee as the Adviser believes is appropriate to ensure that it is fair and comparable to equivalent services that could be performed by a non-affiliated third party, at a rate negotiated on an arm's length basis.

102


Brokerage Arrangements

        Depending upon market conditions and the types of financial instruments purchased and sold by the Fund, the Fund may or may not utilize broker-dealers. To the extent that the Fund effects any transaction through a broker-dealer, the Fund may elect to use one or more prime brokers or other broker-dealers for the Fund's transactions. The Fund generally does not expect to enter into transactions in which commissions are charged, but in the event of any commission-based transaction, the Fund will attempt to negotiate the lowest available commission rates commensurate with the particular services provided in connection with the transaction. Consequently, the Fund may select broker-dealers that charge a higher commission or fee than another broker-dealer would have charged for effecting the same transaction. The selection of a broker-dealer will be made on the basis of best execution as determined by the Adviser in its sole discretion, taking into consideration a number of factors, which may include, among others, commission rates, reliability, financial responsibility, strength of the broker-dealer and the ability of the broker-dealer to efficiently execute transactions, the broker-dealer's facilities, and the broker-dealer's provision or payment of the costs of research and other services or property that will be of benefit to the Fund, the Adviser, or other accounts to which the Adviser or any of its affiliates provides investment services.

        In addition, the Adviser may be influenced in its selection of broker-dealers by their provision of other services, including but not limited to capital introduction, marketing assistance, information technology services, operations and operating equipment and other services or items. Such execution services, research, investment opportunities or other services may be deemed to be "soft dollars." In the event that either of the Adviser enters into "soft dollar" arrangements, it will do so within the "safe harbor" of Section 28(e) of the Commodity Exchange Act, as amended.

Research and Other Soft Dollar Benefits

        New Mountain has no written, third party "soft dollar" arrangement with any broker-dealer at present, but it may utilize both third party and proprietary research and cause the Fund or other New Mountain products to pay commissions (or markups or markdowns) higher than those charged by other broker dealers in return for proprietary soft dollar benefits. In so doing, New Mountain has an incentive to select or recommend the broker-dealer based on its interest in receiving research or other products or services because New Mountain would not have to pay for such research or services directly.

        The Fund or other New Mountain products may and will bear more or less of the costs of "soft dollar" or other research than other New Mountain products who benefit from such products or services. These research products or services may and will also benefit and be used to assist other New Mountain products. In addition, research generated for New Mountain's credit strategy will be used to benefit other New Mountain investment strategies and vice versa.

        In the event that New Mountain does enter into a "soft dollar" arrangement, the follow policy will apply to New Mountain's "soft dollar" practices:

        In selecting a broker for any transaction or series of transactions, New Mountain may consider a number of factors. Where best execution may be obtained from more than one broker, New Mountain may purchase and sell securities through brokers that provide research, statistical and other information, although not all Funds may in every instance be the direct beneficiaries of the research services provided. Research furnished by brokers may include, but is not limited to, information on the economy, industries, groups of securities, individual companies, statistical information, accounting and tax law interpretations, political developments, legal developments affecting portfolio securities, technical market action, pricing and appraisal services, credit analysis, risk measurement analysis, performance analysis and analysis of corporate responsibility issues. Such research services are received

103


primarily in the form of written reports, telephone contacts and personal meetings with security analysts.

Outside Statements

        The Adviser and its affiliates and employees have made, and may in the future make, oral and written statements or expressions of intent or expectation to investors in the Fund or their affiliates or acknowledge statements by such persons ("Outside Statements") regarding the Fund or New Mountain's activities pertaining thereto. These may include, for example, the anticipated or expected allocation and terms of co-investment opportunities, the anticipated or expected allocation of investment opportunities to the Fund generally and other topics often addressed in legally binding side letters. Although such Outside Statements are not legally binding, such Outside Statements may influence allocation and other decisions of the Adviser and its affiliates and employees with respect to the operations and investment activities of the Fund and may influence a prospective investor's decision as to whether to invest in the Fund.

        The foregoing list of conflicts does not purport to be a complete enumeration or explanation of the actual and potential conflicts involved in an investment in the Fund. Prospective investors should read the Fund's offering documents and consult with their own advisors before deciding whether to invest in the Fund. In addition, as the Fund's investment program develops and changes over time, an investment in the Fund may be subject to additional and different actual and potential conflicts. Although the various conflicts discussed herein are generally described separately, prospective investors should consider the potential effects of the interplay of multiple conflicts.

Certain Business Relationships

        Certain of our current directors and officers are directors or officers of the Adviser.

        In the ordinary course of business, the Fund may enter into transactions with Portfolio Companies that may be considered related party transactions. In order to ensure that the Fund does not engage in any prohibited transactions with any persons affiliated with the Fund, the Fund has implemented certain policies and procedures whereby the Fund's executive officers screen each of the Fund's transactions for any possible affiliations between the proposed portfolio investment, the Fund, companies controlled by us and our employees and directors. The Fund will not enter into any agreements unless and until the Fund is satisfied that doing so will not raise concerns under the 1940 Act or, if such concerns exist, the Fund has taken appropriate actions to seek board review and approval or exemptive relief for such transaction. Our Board reviews these procedures on a quarterly basis.

        We have adopted a code of ethics which applies to, among others, our senior officers, including our chief executive officer and chief financial officer, as well as all of our officers, directors and employees. Our code of ethics requires that all employees and directors avoid any conflict, or the appearance of a conflict, between an individual's personal interests and our interests. Pursuant to such code of ethics, each employee and director must disclose any conflicts of interest, or actions or relationships that might give rise to a conflict, to our chief compliance officer.

Indebtedness of Management

        None.

(b)
Promoters and Certain Control Persons

        The Adviser may be deemed a promoter of the Fund. We have entered into the Investment Management Agreement with the Adviser and the Administration Agreement with the Administrator.

104


The Adviser, for its services to us, will be entitled to receive management fees and incentive fees. The Administrator, for its services to us, will be entitled to receive reimbursement of certain expenses. In addition, under the Investment Management Agreement and the Administration Agreement, we expect, to the extent permitted by applicable law and in the discretion of our Board, to indemnify the Adviser and certain of its affiliates. See "
Item 1. Business—Investment Management Agreement
" and "
Item 1. Business—Administration Agreement.
"

ITEM 8.    LEGAL PROCEEDINGS.

        Neither we nor the Adviser are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us or the Adviser. From time to time, we or the Adviser may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under loans to or other contracts with our Portfolio Companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

ITEM 9.    MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND RELATED UNITHOLDER MATTERS.

Market Information

        Our outstanding Units will be offered and sold in transactions exempt from registration under the Securities Act under Section 4(a)(2) and Regulation D. See "
Item 10. Recent Sales of Unregistered Securities
" for more information. There is currently no public market for the Units, and we do not expect one to develop.

        Because the Units are being acquired by investors in one or more transactions "not involving a public offering," they are "restricted securities" and may be required to be held indefinitely. Our Units may not be sold, transferred, assigned, pledged or otherwise disposed of unless (i) our consent is granted, and (ii) the Units are registered under applicable securities laws or specifically exempted from registration (in which case the Unitholder may, at our option, be required to provide us with a legal opinion, in form and substance satisfactory to us, that registration is not required). Accordingly, an investor must be willing to bear the economic risk of investment in the Units until we are liquidated. No sale, transfer, assignment, pledge or other disposition, whether voluntary or involuntary, of Units may be made except by registration of the transfer on our books. Each transferee will be required to execute an instrument agreeing to be bound by these restrictions and the other restrictions imposed on the Units and to execute such other instruments or certifications as are reasonably required by us.

Unitholders

        Please see "
Item 4. Security Ownership of Certain Beneficial Owners and Management
" for disclosure regarding the Unitholders.

Valuation of Portfolio Securities

        Please see "
Item 1. Business—Valuation of Portfolio Securities
" for disclosure regarding valuation of portfolio securities.

Distributions

        We generally intend to distribute substantially all of our available earnings annually by paying distributions of our net investment income and cumulative net realized capital gains (if any) on a quarterly basis, as determined by the Board in its discretion.

105


Reinvestment and Recycling of Capital

        Subject to the requirements of Section 852(a) of Subchapter M of the Code and the terms of any borrowings or other financings or similar obligations, proceeds realized by us from the sale or repayment of any investment (as opposed to investment income) during the Investment Period, may be retained and be used by us for purposes of making investments or paying management fees, incentive fees, or our expenses. Any amounts so reinvested will not reduce an investor's unused capital commitment.

Reports to Unitholders

        We plan to furnish or make available to our Unitholders an annual report for each fiscal year ending December 31 containing financial statements audited by our independent registered public accounting firm. Additionally, we intend to comply with the periodic reporting requirements of the 1934 Act.

ITEM 10.    RECENT SALES OF UNREGISTERED SECURITIES.

        In conjunction with our formation, we issued and sold 100 Units at an aggregate purchase price of $1,000 to the Adviser. These Units were issued and sold in reliance upon the available exemptions from registration requirements of Section 4(a)(2) of the Securities Act.

        On July 15, 2019, we entered into subscription agreements with several investors providing for the private placement of our Units. On July 19, 2019, we delivered a drawdown notice to investors relating to the issuance of 4,933,964 Units on August 6, 2019 for an aggregate purchase price of $49,339,640. On August 21, 2019, we delivered a drawdown notice to investors relating to the issuance of 4,933,964 Units on September 5, 2019 for an aggregate purchase price of $49,339,640. These Units were issued and sold on August 6, 2019 and September 5, 2019 in reliance upon the available exemption from registration requirements of the Securities Act under Section 4(a)(2) and Regulation D.

ITEM 11.    DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.

        The following description is based on relevant portions of the Delaware Limited Liability Company Act and on our Limited Liability Company Agreement. This summary is not necessarily complete, and we refer you to the Limited Liability Company Agreement for a more detailed description of the provisions summarized below.

Description of Our Units

        Interests in the Fund will be held in the form of Units. The Fund will issue Common Units (as defined in the Limited Liability Company Agreement) to investors from time to time at the applicable price per Unit. Such Common Units will be issued through drawdowns on specific Drawdown Dates or Catch-Up Dates (as defined in the Limited Liability Company Agreement), with Common Unitholders required to contribute all or a portion of their remaining Capital Commitments in exchange for Common Units as set forth in the Limited Liability Company Agreement. In addition, Unitholders are entitled to one vote for each Unit held on all matters submitted to a vote of Unitholders and do not have cumulative voting rights. Unitholders are entitled to receive proportionately any distributions declared by the Board, subject to any preferential distribution rights of outstanding preferred Units. Upon the Fund's dissolution and winding up, the Unitholders will be entitled to receive ratably its net assets available after the payment or the making of reasonable provision for payment of all debts and other liabilities and the establishment of reasonable reserves by the Board in amounts determined by it to be necessary for the payment of the Fund's expenses, liabilities and other obligations, and will be subject to the prior rights of any outstanding preferred Units. Unitholders have no redemption or

106


preemptive rights. The rights, preferences and privileges of Unitholders are subject to the rights of the holders of preferred Units that the Fund may designate and issue in the future.

        Without the consent of any Common Unitholder, the Board may cause the Fund to issue one class of preferred Units, which class of Units may have rights senior to those of the Common Units, and such other characteristics as the Board may determine, subject to the requirements of the 1940 Act. The Board may amend and supplement the Limited Liability Company Agreement to provide for the terms of such preferred Units.

Delaware Law and Certain Limited Liability Company Agreement Provisions

Agreement to be Bound by the Limited Liability Agreement; Power of Attorney

        By executing the Subscription Agreement or a counterpart thereof, each investor accepted by the Fund is agreeing to be admitted as a member of the Fund and bound by the terms of the Limited Liability Company Agreement. Pursuant to the Limited Liability Company Agreement, each Unitholder and each person who acquires Units from a Unitholder grants to certain of the Fund's officers (and, if appointed, a liquidator) a power of attorney to, among other things, execute and file documents required for the Fund's qualification, continuance or termination. The power of attorney also grants the Board the authority to make certain amendments to, and in accordance with, the Limited Liability Company Agreement.

Drawdowns

        From time to time in its discretion, the Fund may issue drawdowns on all or any portion of the Unitholders' remaining Capital Commitments in accordance with the terms of the Limited Liability Company Agreement.

        During the Investment Period, drawdowns may be issued at any time for any permitted purpose. Following the end of the Investment Period, the Fund will have the right to make drawdowns only for the limited purposes set forth in the Limited Liability Company Agreement.

Resignation and Removal of Directors; Procedures for Vacancies

        Any or all of the directors may be removed only for cause and only by the affirmative vote of at least 662/3% in voting power of all the then-outstanding Units of the Fund entitled to vote thereon, voting together as a single class.

        Except as otherwise provided by applicable law, including the 1940 Act, any newly created directorship on the Board that results from an increase in the number of directors, and any vacancy occurring in the Board that results from the death, resignation, disqualification or removal of a director or other cause, shall be filled exclusively by the affirmative vote of a majority of the remaining directors in office, although less than a quorum (with a quorum being a majority of the total number of directors), or by a sole remaining director. Any director elected to fill a vacancy or newly created directorship shall hold office until his or her death, resignation, retirement, disqualification or removal.

Action by Unitholders

        Under the Limited Liability Company Agreement, Unitholder action can be taken only at a meeting of Unitholders or by written consent in lieu of a meeting by Unitholders representing at least the number of Units required to approve the matter in question.

        Only the Board, the Chair of the Board, the Fund's Chief Executive Officer or the holders of a majority of the Units may call a meeting of Unitholders. Only business specified in the Fund's notice of meeting (or supplement thereto) may be conducted at a meeting of Unitholders.

107


Conflict with the 1940 Act

        Our Limited Liability Company Agreement provides that, if and to the extent that any provision of Delaware law or any provision of our limited liability company agreement conflicts with any provision of the 1940 Act, the applicable provision of the 1940 Act will control.

ITEM 12.    INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Limitation on Liability of Directors and Officers; Indemnification and Advance of Expenses

        The Limited Liability Company Agreement provides that, to the fullest extent permitted by applicable law, no Covered Person (as defined in the Limited Liability Company Agreement) will be liable to the Fund or to any Unitholder for any act or omission performed or omitted by any such Covered Person (including any acts or omissions of or by another Covered Person), in the absence of Disabling Conduct. Notwithstanding the foregoing, the definition of "Disabling Conduct", as it relates to the members of the Advisory Committee (and the Unitholders represented by such members, solely with respect to the activities of such members acting in their capacity as Advisory Committee members), will mean fraud, bad faith or willful misconduct.

        The Fund will, to the fullest extent permitted by law, indemnify each Covered Person for any loss or damage incurred by it in connection with any matter arising out of, or in connection with, the Fund, including the operations of the Fund and the offering of Units, except for losses incurred by a Covered Person arising solely from the Covered Person's own Disabling Conduct.

        Under the indemnification provision of the Limited Liability Company Agreement, expenses (including reasonable attorneys' fees) incurred by each Covered Person in defending any action, suit or proceeding for which they may be entitled to indemnification shall be paid in advance of the final disposition of the action, suit or proceeding. However, any such indemnification or payment or reimbursement of expenses will be subject to the applicable requirements of the 1940 Act.

        So long as the Fund is regulated under the 1940 Act, the above indemnification and limitation of liability is limited by the 1940 Act or by any valid rule, regulation or order of the SEC thereunder. The 1940 Act provides, among other things, that a company may not indemnify any director or officer against liability to it or its security holders to which he or she might otherwise be subject by reason of his or her willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office unless a determination is made by final decision of a court, by vote of a majority of a quorum of directors who are disinterested, non-party directors or by independent legal counsel that the liability for which indemnification is sought did not arise out of the foregoing conduct. In addition, the Fund has obtained liability insurance for its officers and directors.

        Under the Investment Management Agreement and Administration Agreement, we may, to the extent permitted by applicable law, in the discretion of our Board, indemnify the Adviser, the Administrator and certain of their affiliates, as described under "
Item 1. Business—Investment Management Agreement
Exculpation and Indemnification.
"

108


ITEM 13.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

        We set forth below a list of our audited financial statements included in this Registration Statement.

ITEM 14.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

        There are not and have not been any disagreements between us and our accountant on any matter of accounting principles, practices, or financial statement disclosure.

ITEM 15.    FINANCIAL STATEMENTS AND EXHIBITS.

(a)
List separately all financial statements filed

        The financial statements included in this Registration Statement are listed in Item 13 and commence on page F-1.

(b)
Exhibits

109


Exhibit Index

 
3.1
 

 

4.1

 


 

10.1

 


 

10.2

 


 

10.3

 


 

10.4

 


 

10.5

 


 

10.6

 


 

10.7

 


 

10.8

 


 

10.9

 


 

21.1

 


*
Previously filed.

SIGNATURES

        Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 
 

 
 

 
 

 
NEW MOUNTAIN GUARDIAN III BDC, L.L.C.

 

By:
 

/s/ ROBERT A. HAMWEE

 
 
 
Name:
 
Robert A. Hamwee

 
 
 
Title:
 
Chief Executive Officer

Date: September 13, 2019
 
 
 
 
 
 

INDEX TO FINANCIAL STATEMENTS

F-1


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the unitholder and the Board of Directors of New Mountain Guardian III BDC, L.L.C.

Opinion on the Financial Statements and Financial Highlights

        We have audited the accompanying statement of assets, liabilities and member's capital of New Mountain Guardian III BDC, L.L.C. (the "Company") as of July 5, 2019, and the related statements of operations, changes in members' capital and, cash flows for the period from May 22, 2019 (inception) through July 5, 2019, the financial highlights for the period from May 22, 2019 (inception) through July 5, 2019, and the related notes (collectively referred to as the "financial statements and financial highlights"). In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Company as of July 5, 2019, and the results of its operations, changes in member's capital, and its cash flows for the period from May 22, 2019 through July 5, 2019, and the financial highlights for the period from May 22, 2019 (inception) through July 5, 2019 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

        These financial statements and financial highlights are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

        We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

        Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.

Emphasis of a Matter

        As discussed in Note 3 to the financial statements, the accompanying financial statements have been restated to correct the presentation of Organizational and Offering expenses.

/s/ DELOITTE & TOUCHE LLP

New York, New York

July 15, 2019 (September 13, 2019 as to the effects of the restatement discussed in Note 3)

We have served as the Company's auditor since 2019.

F-2



New Mountain Guardian III BDC, L.L.C.

Statement of Assets, Liabilities and Member's Capital

 

 
July 5, 2019
 

Assets
 
 
 
 

Cash and cash equivalents
 
$
1,000
 

Deferred offering costs
 
 
49,521
 

Total assets
 
$
50,521
 

Liabilities
 
 
 
 

Accrued organizational and offering expenses
 
 
710,459
 

Payable to affiliates
 
 
8,500
 

Total liabilities
 
 
718,959
 

Commitments and contingencies (see Note 5)
 
 
 
 

Member's Capital
 
 
(668,438
)

Total liabilities and member's capital
 
$
50,521
 

Outstanding common membership units
 
 
100
 

Member's capital per unit
 
$
(6,684.38
)

   

The accompanying notes are an integral part of these financial statements.

F-3



New Mountain Guardian III BDC, L.L.C.

Statement of Operations

 

 
Period from
May 22, 2019
(inception) through
July 5, 2019
 

Expenses
 
 
 
 

Organizational expenses
 
$
669,438
 

Total expenses
 
 
669,438
 

Net investment loss
 
 
(669,438
)

Net decrease in member's capital resulting from operations
 
$
(669,438
)

   

The accompanying notes are an integral part of these financial statements.

F-4



New Mountain Guardian III BDC, L.L.C.

Statement of Changes in Member's Capital

 

 
Period from
May 22, 2019
(inception) through
July 5, 2019
 

Decrease in member's capital resulting from operations:
 
 
 
 

Net investment loss
 
$
(669,438
)

Net decrease in member's capital resulting from operations
 
 
(669,438
)

Capital transactions
 
 
 
 

Contributions
 
 
1,000
 

Net increase in member's capital resulting from capital transactions
 
 
1,000
 

Net decrease in member's capital
 
 
(668,438
)

Member's capital at the beginning of the period
 
 
 

Member's capital at the end of the period
 
$
(668,438
)

Unit activity
 
 
 
 

Units issued
 
 
100
 

Net increase in units outstanding
 
 
100
 

   

The accompanying notes are an integral part of these financial statements.

F-5



New Mountain Guardian III BDC, L.L.C.

Statement of Cash Flows

 

 
Period from
May 22, 2019
(inception) through
July 5, 2019
 

Cash flows from operating activities
 
 
 
 

Net decrease in member's capital resulting from operations
 
$
(669,438
)

Adjustments to reconcile net (increase) decrease in member's capital resulting from operations to net cash provided by (used in) operating activities:
 
 
 
 

Deferred offering costs
 
 
(49,521
)

Accrued organizational and offering expenses
 
 
710,459
 

Payable to affiliates
 
 
8,500
 

Net cash flows used in operating activities
 
 
 

Cash flows from financing activities
 
 
 
 

Contributions
 
 
1,000
 

Net cash flows provided by financing activities
 
 
1,000
 

Net increase in cash and cash equivalents
 
 
1,000
 

Cash and cash equivalents at the beginning of the period
 
 
 

Cash and cash equivalents at the end of the period
 
$
1,000
 

   

The accompanying notes are an integral part of these financial statements.

F-6



Notes to the Financial Statements of New Mountain Guardian III BDC, L.L.C.

Note 1. Formation and Business Purpose

        New Mountain Guardian III BDC, L.L.C. (the "Fund" or the "Company") is a Delaware limited liability company formed on May 22, 2019. The Company is non-diversified management investment company that intends to elect to be regulated as a business development company ("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act"). The Company intends to elect to be treated for United States ("U.S.") federal income tax purposes as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As of July 5, 2019, the Company was in the development stage and has not commenced investment operations.

        New Mountain Finance Advisers BDC, L.L.C. (the "Investment Adviser") is a wholly-owned subsidiary of New Mountain Capital Group, L.P. (together with New Mountain Capital, L.L.C. and its affiliates, "New Mountain Capital") whose ultimate owners include Steven B. Klinsky and related other vehicles. The Investment Adviser intends to manage the Company's day-to-day operations and provide it with investment advisory and management services. New Mountain Finance Administration, L.L.C. (the "Administrator"), a wholly-owned subsidiary of New Mountain Capital, intends to provide the administrative services necessary to conduct the Company's day-to-day operations.

        The Company's investment objective is to generate current income and capital appreciation primarily by investing in or originating first lien and unitranche leveraged loans in companies that the Investment Adviser believes are high quality, "defensive growth" companies in non-cyclical industry niches where the Investment Adviser has developed strong proprietary research and operational advantages. The Company expects to make investments through both primary originations and open-market secondary purchases. The Company will predominantly target loans to, and invest in, U.S. middle market businesses, a market segment the Company believes continues to be underserved by other lenders. The Company defines middle market businesses as those businesses with annual earnings before interest, taxes, depreciation, and amortization ("EBITDA") between $10.0 million and $200.0 million. The primary focus is in the debt of defensive growth companies, which are defined as generally exhibiting the following characteristics: (i) sustainable secular growth drivers, (ii) high barriers to competitive entry, (iii) high free cash flow after capital expenditure and working capital needs, (iv) high returns on assets and (v) niche market dominance.

        The Company expects to conduct a private offering (the "Private Offering") of the Company's limited liability company units (the "Units") to investors in reliance on exemptions from the registration requirements of the U.S. Securities Act of 1933, as amended. At the closing of any Private Offering, each investor will make a capital commitment (a "Capital Commitment") to purchase Units pursuant to a subscription agreement entered into with the Company. The Company expects closings of the Private Offering will occur during the 18-month period following the initial closing of Capital Commitments. The Company may accept and draw down Capital Commitments from investors on an as-needed basis. The Company anticipates commencing the Company's loan origination and investment activities contemporaneously with the initial drawdown from investors in the initial Private Offering. The Company's investment period will begin when Capital Commitments are first made and continue until the four-year anniversary of such date. The term of the Fund is six years from when Capital Commitments are first made, subject to (i) a one-year extension as determined by the Investment Adviser in its sole discretion and (ii) an additional one-year extension as determined by the Company's board of directors.

F-7



Notes to the Financial Statements of New Mountain Guardian III BDC, L.L.C. (Continued)

Note 2. Summary of Significant Accounting Policies

        Basis of accounting
—The Company's financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). The Company is an investment company following accounting and reporting guidance in Accounting Standards Codification Topic 946,
Financial Services—Investment Companies
, ("ASC 946"). The Company's consolidated financial statements reflect all adjustments and reclassifications which, in the opinion of management, are necessary for the fair presentation of the results of operations and financial condition for the period presented. The current period's results of operations will not necessarily be indicative of results that ultimately may be achieved for the fiscal year ending December 31, 2019.

        Cash and cash equivalents
—Cash and cash equivalents include cash and short-term, highly liquid investments. The Company defines cash equivalents as securities that are readily convertible into known amounts of cash and so near maturity that there is insignificant risk of changes in value. These securities have original maturities of three months or less. The Company did not hold any cash equivalents as of July 5, 2019.

        Organizational expenses
—Organizational expenses include costs and expenses incurred in connection with the formation and organization of the Company and are expensed as incurred in the Statement of Operations. Any organizational and offering expenses paid by the Company in excess of the lesser of $2.0 million or 0.50% of the aggregate Capital Commitments will be applied as a reduction to the base management fee paid to the Investment Adviser and cannot be recouped by the Investment Adviser.

        Deferred offering costs
—The Company's deferred offering costs consists of fees and expenses incurred in connection with the offering of the Company's Units. Upon the issuance of Units, offering costs are charged as a direct reduction of members' capital. Deferred offering costs are included on the Company's Statement of Assets, Liabilities and Member's Capital. Any organizational and offering expenses paid by the Company in excess of the lesser of $2.0 million or 0.50% of the aggregate Capital Commitments will be applied as a reduction to the base management fee paid to the Investment Adviser and cannot be recouped by the Investment Adviser.

        Income taxes
—The Company intends to elect to be treated as a RIC under Subchapter M of the Code. As a RIC, the Company is not subject to U.S. federal income tax on the portion of taxable income and gains timely distributed to its unitholders.

        To qualify and be subject to tax as a RIC, the Company is required to meet certain income and asset diversification tests in addition to distributing at least 90.0% of its investment company taxable income, as defined by the Code. Since U.S. federal income tax regulations differ from GAAP, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes.

        Differences between taxable income and the results of operations for financial reporting purposes may be permanent or temporary in nature. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.

        For U.S. federal income tax purposes, distributions paid to unitholders of the Company are reported as ordinary income, return of capital, long term capital gains or a combination thereof.

        The Company will be subject to a 4.0% nondeductible federal excise tax on certain undistributed income unless the Company distributes, in a timely manner as required by the Code, an amount at least equal to the sum of (1) 98.0% of its respective net ordinary income earned for the calendar year

F-8



Notes to the Financial Statements of New Mountain Guardian III BDC, L.L.C. (Continued)

Note 2. Summary of Significant Accounting Policies (Continued)

and (2) 98.2% of its respective capital gain net income for the one-year period ending October 31 in the calendar year.

        Use of estimates
—The preparation of the Company's financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Company's financial statements and the reported amounts of revenues and expenses during the reporting periods. Changes in the economic environment, financial markets, and other metrics used in determining these estimates could cause actual results to differ from the estimates used, and the differences could be material.

Note 3. Correction to Offering Costs

        Subsequent to the issuance of the financial statements as of July 5, 2019 and for the period from May 22, 2019 (inception) through July 5, 2019, the Company's management identified a misstatement in the recognition of offering expenses that the Company incorrectly expensed. The impact of the correction is a reduction of Organizational Expenses by $49,521 in the Statement of Operations and an increase in Deferred Offering Costs by $49,521 in the Statement of Assets, Liabilities and Member's Capital. As such, the financial statements and accompanying footnotes have been revised from the amounts previously reported to reflect the correct balances.

Note 4. Agreements and Related Parties

        The Company intends to enter into an investment advisory and management agreement (the "Investment Management Agreement") with the Investment Adviser. Under the Investment Management Agreement, the Investment Adviser will manage the day-to-day operations of, and provides investment advisory services to, the Company. For providing these services, the Investment Adviser will receive an annual base management fee and incentive fee from the Company.

        The base management fee will be payable quarterly in arrears at an annual rate of 1.15% of the aggregate contributed capital from all unitholders (including any outstanding borrowings under any subscription line drawn in lieu of capital calls) less any return of capital distributions and less any cumulative realized losses since inception (calculated net of any subsequently reversed realized losses and net of any realized gains) as of the last day of the applicable quarter. For the period from the effective date of the Investment Management Agreement through June 30, 2020, the base management fee shall be reduced by 50% (0.575% through June 30, 2020). The management fee will be reduced, but not below zero, by any amounts paid by the Company or its subsidiaries to a placement agent, any organizational and offering expenses in excess of the lesser of $2.0 million or 0.50% of the aggregate Capital Commitments and any fund expenses in excess of the Specified Expenses Cap, as defined in the Expense Limitation and Reimbursement Agreement between the Company and the Investment Adviser.

        The Investment Adviser has entered into agreements with placement agents that provide for ongoing payments from the Investment Adviser based upon the amount of a unitholder's Capital Commitment or capital contributions. Neither the Company nor any unitholders will bear any of the fees paid to placement agents of the Company as any such fees paid by the Company will offset the management fees.

        The incentive fee will consist of two components that are independent of each other, with the result that one component may be payable even if the other is not. A portion of the incentive fee is

F-9



Notes to the Financial Statements of New Mountain Guardian III BDC, L.L.C. (Continued)

Note 4. Agreements and Related Parties (Continued)

based on a percentage of the Company's income and a portion is based on a percentage of the Company's capital gains, each as described below.

    Incentive Fee on Pre-Incentive Fee Net Investment Income

        The portion based on the Company's income (the "Income Incentive Fee") is based on pre-incentive fee net investment income.

        Pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets at the end of the immediate preceding quarter, is compared to a "hurdle rate" of return of 1.75% per quarter (7.0% annualized).

        The Company will pay the Adviser an incentive fee quarterly in arrears with respect to the Company's pre-incentive fee net investment income in each calendar quarter as follows:

    no incentive fee based on pre-incentive fee net investment income in any calendar quarter in which the Company's pre-incentive fee net investment income does not exceed the hurdle rate of 1.75%;


    100% of the dollar amount of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than or equal to a rate of return of 2.059% (8.235% annualized). The Company refers to this portion of the Company's pre-incentive fee net investment income (which exceeds the hurdle rate but is less than 2.059%) as the "catch-up." The "catch-up" is meant to provide the Adviser with approximately 15% of our pre-incentive fee net investment income as if a hurdle rate did not apply if this net investment income exceeds 2.059% in any calendar quarter; and


    15% of the dollar amount of the Company's pre-incentive fee net investment income, if any, that exceeds a rate of return of 2.059% (8.235% annualized). This reflects that once the hurdle rate is reached and the catch-up is achieved, 15% of all pre-incentive fee net investment income thereafter is allocated to the Adviser.

        "Pre-Incentive Fee Net Investment Income" means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from Portfolio Companies) accrued during the calendar quarter, minus our operating expenses for the quarter (including the management fee, expenses payable under the Administration Agreement, and any interest expense and distributions paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with PIK interest and zero coupon securities), accrued income that we have not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.

        The fees that are payable under the Investment Management Agreement for any partial period will be appropriately prorated.

    Incentive Fee on Capital Gains

        The second component of the incentive fee is the capital gains incentive fee. The Company will pay the Adviser an incentive fee with respect to our cumulative realized capital gains computed net of

F-10



Notes to the Financial Statements of New Mountain Guardian III BDC, L.L.C. (Continued)

Note 4. Agreements and Related Parties (Continued)

all realized capital losses and unrealized capital depreciation since inception ("Cumulative Net Realized Gains") based on the waterfall below:

            (a)   First, no incentive fee is payable to the Adviser on Cumulative Net Realized Gains until total return of capital distributions, distributions of net investment income and distributions of net realized capital gains to Unitholders is equal to total capital contributions;

            (b)   Second, no incentive is payable to the Adviser on Cumulative Net Realized Gains until the Fund has paid cumulative distributions equal to an annualized, cumulative internal rate of return of 7% on the total contributed capital to the Fund calculated from the date that each such amount was due to be contributed to the Fund until the date each such distribution is paid;

            (c)   Third, upon a distribution that results in cumulative distributions exceeding the amounts in clause (a) and (b) above, an incentive fee on capital gains payable to the Adviser equal to 100% of the amount of Cumulative Net Realized Gains until the Adviser has received (together with amounts the Adviser has received under Income Incentive Fees) an amount equal to 15% of the sum of (i) the cumulative distributions to unitholders made pursuant to clause (b) above, (ii) Income Incentive Fee paid to the Adviser and (iii) amounts paid to the Adviser pursuant to this clause (c); and

            (d)   Thereafter, an incentive fee on capital gains equal to 15% of additional undistributed Cumulative Net Realized Gains.

        Upon termination of the Company, the Investment Adviser will be required to return incentive fees to the Company to the extent that: (i) the Investment Adviser has received cumulative incentive fees in excess of 15% of the sum of (A) the Company's cumulative distributions other than return of capital contributions and (B) the incentive fees paid to the Investment Adviser; or (ii) the Unitholders have not received a 7.0% cumulative internal rate of return; provided that in no event will such restoration be more than the incentive fees received by the Investment Adviser.

        The Company intends to enter into the administration agreement ("Administration Agreement") with the Administrator under which the Administrator will provide administrative services. The Administrator will maintain, or oversee the maintenance of, the Company's financial records, prepare reports filed with the United States Securities and Exchange Commission (the "SEC"), generally monitor the payment of the Company's expenses and oversee the performance of administrative and professional services rendered by others. The Company will reimburse the Administrator for the allocable portion of overhead and other expenses incurred by it in performing its obligations under the Administration Agreement, including the compensation of the Company's chief financial officer and chief compliance officer, and their respective staffs.

        The Company intends to enter into a Trademark License Agreement with New Mountain Capital, pursuant to which New Mountain Capital will agree to grant the Company a non-exclusive, royalty-free license to use the "New Mountain Capital" names under the Trademark License Agreement, subject to certain conditions, the Company, the Investment Adviser and the Administrator will have a right to use the "New Mountain Capital" names, for so long as the Investment Adviser or one of its affiliates remains the investment adviser of the Company. Other than with respect to this limited license, the Company will have no legal right to the "New Mountain Capital" name.

        The Investment Adviser and its affiliates may also manage other funds in the future that may have investment mandates that are similar, in whole or in part, to the Company's investment mandates. The

F-11



Notes to the Financial Statements of New Mountain Guardian III BDC, L.L.C. (Continued)

Note 4. Agreements and Related Parties (Continued)

Investment Adviser and its affiliates may determine that an investment is appropriate for the Company or for one or more of those other funds. In such event, depending on the availability of such investment and other appropriate factors, the Investment Adviser or its affiliates may determine that the Company should invest side-by-side with one or more other funds. Any such investments will be made only to the extent permitted by applicable law and interpretive positions of the SEC and its staff and consistent with the Investment Adviser's allocation procedures. On December 18, 2017, the SEC issued an exemptive order (the "Exemptive Order"), which superseded a prior order issued on June 5, 2017, which permits the Company to co-invest in portfolio companies with certain funds or entities managed by the Investment Adviser or its affiliates in certain negotiated transactions where co-investing would otherwise be prohibited under the 1940 Act, subject to the conditions of the Exemptive Order. Pursuant to the Exemptive Order, the Company is permitted to co-invest with its affiliates if a "required majority" (as defined in Section 57(o) of the 1940 Act) of the Company's independent directors make certain conclusions in connection with a co-investment transaction, including, but not limited to, that (1) the terms of the potential co-investment transaction, including the consideration to be paid, are reasonable and fair to the Company and its unitholders and do not involve overreaching in respect of the Company or its unitholders on the part of any person concerned, and (2) the potential co-investment transaction is consistent with the interests of the Company's unitholders and is consistent with its then-current investment objective and strategies.

Note 5. Commitments and Contingencies

        In the normal course of business, the Company may enter into contracts that contain a variety of representations and warranties and which provide general indemnifications. As of July 5, 2019, the Company is not aware of any commitments or contingencies.

Note 6. Member's Capital

        On July 5, 2019, the Company issued 100 Units for $1,000 to the Investment Adviser. The Company has not engaged in any other equity transactions as of July 5, 2019.

F-12



Notes to the Financial Statements of New Mountain Guardian III BDC, L.L.C. (Continued)

Note 7. Financial Highlights

        The following information sets forth the Company's financial highlights for the period from May 22, 2019 (inception) through July 5, 2019.

 

 
Period from
May 22, 2019
(inception) through
July 5, 2019
 

Per unit data
:
 
 
 
 

Net asset value, May 22, 2019
 
$
 

Net investment loss
 
 
(6,694.38
)

Issuance of Units
 
 
10.00
 

Total decrease in net assets
 
 
(6,684.38
)

Net asset value, July 5, 2019
 
 
(6,684.38
)

Total return
 
 
N/M
 

Units outstanding at end of period
 
 
100
 

Average weighted Units outstanding for the period
 
 
N/M
 

Average net assets for the period
 
 
N/M
 

Ratio to average net assets:
 
 
 
 

Net investment loss
 
 
N/M
 

Total expenses
 
 
N/M
 

N/M—not meaningful

Note 8. Subsequent Events

        On July 15, 2019, the Company entered into subscription agreements with several investors providing for the private placement of the Company's Units. In addition, on July 15, 2019, the Company entered into the Investment Management Agreement with the Investment Adviser and Administration Agreement with the Administrator.

        On July 19, 2019, the Company delivered a drawdown notice to its investors relating to the issuance of 4,933,964 Units for an aggregate purchase price of $49,339,640. The Units were issued to investors on August 6, 2019.

        On July 30, 2019, the Company entered into a Loan Authorization Agreement (the "BMO Facility") with BMO Harris Bank N.A. ("BMO"), which allows the Company to borrow on a revolving credit basis an aggregate principal amount which cannot exceed $100,000,000. All outstanding borrowings under the BMO Facility are due on BMO's demand within 15 business days or within 6 months after each advance. The BMO Facility is collateralized by the unfunded capital commitments of each of the Company's investors. The BMO Facility bears interest at the greater of the prime commercial rate minus 0.25% per annum or LIBOR Quoted Rate (as defined in the Loan Authorization Agreement) for each day plus 2.50% per annum.

        On August 6, 2019, the Company commenced its investment operations.

        On August 21, 2019, the Company delivered a drawdown notice to its investors relating to the issuance of 4,933,964 Units for an aggregate purchase price of $49,339,640. The Units were issued to investors on September 5, 2019.

F-13



Notes to the Financial Statements of New Mountain Guardian III BDC, L.L.C. (Continued)

Note 8. Subsequent Events (Continued)

        On August 30, 2019, the Company's newly formed wholly-owned subsidiary, New Mountain Guardian III SPV, L.L.C., entered into a Loan and Security Agreement (the "Wells Facility") as the Borrower, the Company as Collateral Manager and Equityholder, the lenders from time to time party thereto, and Wells Fargo Bank, National Association as the Administrative Agent and the Collateral Custodian, which is structured as a secured revolving credit facility. The Wells Facility will mature on August 30, 2024 and has an initial maximum facility amount of $150,000,000 which may increase in size, under certain circumstances, up to a total of $300,000,000. Under the Wells Facility, New Mountain Guardian III SPV, L.L.C. is permitted to borrow up to 25.0%, 45.0%, 70.0% or 75.0% of the purchase price of pledged assets, subject to approval by Wells Fargo Bank, National Association. The Wells Facility is non-recourse to the Company and is collateralized by all of the investments of New Mountain Guardian III SPV, L.L.C. on an investment by investment basis. The Wells Facility bears interest at a rate of London Interbank Offered Rate ("LIBOR") plus 1.75% per annum for Broadly Syndicated Loans (as defined in the Loan and Security Agreement) and LIBOR plus 2.25% per annum for all other investments. The Wells Facility also charges a non-usage fee, based on the unused facility amount multiplied by the Non-Usage Fee Rate (as defined in the Loan and Security Agreement).

F-14



a2239543zex-3_1.htm EX-3.1


ENT> EX-3.1 2 a2239543zex-3_1.htm EX-3.1

Exhibit 3.1

 

 

NEW MOUNTAIN GUARDIAN III BDC, L.L.C.

 


 

AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT

 


 

Dated as of July 15, 2019

 

 

THE UNITS OF LIMITED LIABILITY COMPANY INTERESTS (“UNITS”) OF NEW MOUNTAIN GUARDIAN III BDC, L.L.C. HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), THE SECURITIES LAWS OF ANY STATE OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS.  UNITS MUST BE ACQUIRED FOR INVESTMENT ONLY AND MAY NOT BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT, ANY APPLICABLE U.S. STATE SECURITIES LAWS AND ANY OTHER APPLICABLE SECURITIES LAWS AND THE TERMS AND CONDITIONS OF THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT.  THE UNITS MAY NOT BE TRANSFERRED OF RECORD EXCEPT IN COMPLIANCE WITH SUCH LAWS AND THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT.  THEREFORE, PURCHASERS OF UNITS WILL BE REQUIRED TO BEAR THE RISK OF THEIR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

 


 

Table of Contents

 

 

 

Page

 

 

 

Article I

 

 

 

GENERAL PROVISIONS

 

 

 

1.1

Definitions

1

1.2

Name and Office

9

1.3

Purposes; Powers

9

1.4

Term

9

1.5

Fiscal Year

10

1.6

Admission of New Members; Commitments

10

1.7

Expenses

10

1.8

Size of the Fund

11

1.9

Status of the Fund

11

 

 

 

Article II

 

 

 

BOARD OF DIRECTORS

 

 

 

2.1

Management

11

2.2

Number of Directors and Manner of Acting

11

2.3

Newly Created Directorships and Vacancies

11

2.4

Removal of Directors

12

2.5

Meetings of the Board

12

2.6

Committees

12

2.7

Officers

12

2.8

Executive Advisory Council

12

 

 

 

Article III

 

 

 

THE MEMBERS

 

 

 

3.1

No Participation in Management, etc.

13

3.2

Limitation of Liability

13

3.3

No Priority

13

3.4

Meetings of Members

13

3.5

Quorum

13

3.6

Member Voting and Consents

14

3.7

Bankruptcy, Dissolution or Withdrawal of a Member

14

3.8

Advisory Committee

14

 

 

 

Article IV

 

 

 

INVESTMENTS; INDEBTEDNESS

 

 

 

4.1

Investments in Portfolio Companies

15

4.2

Fund Indebtedness; Borrowings

16

 

i


 

Article V

 

 

 

CLOSINGS, CAPITAL COMMITMENTS AND DRAWDOWNS

 

 

 

5.1

Closings

17

5.2

Capital Commitments

17

5.3

Drawdowns

18

5.4

Excluded Investors

19

5.5

Defaulting Investors

19

5.6

Key Person Suspension or Early Termination of Investment Period

20

5.6

Successor Funds

20

 

 

 

Article VI

 

 

 

UNITS; DISTRIBUTIONS

 

 

 

6.1

Units

21

6.2

Distributions

22

6.3

Withholding Taxes

22

 

 

 

Article VII

 

 

 

THE ADVISER

 

 

 

7.1

Appointment of the Adviser

22

 

 

 

Article VIII

 

 

 

ADMINISTRATION; BOOKS AND RECORDS; REPORTS; ETC.

 

8.1

Administrator

22

8.2

Maintenance of Books and Records

22

8.3

Reports

23

8.4

Closing Documents

23

8.5

Tax Documents

23

8.6

Valuation

23

 

 

 

Article IX

 

 

 

INDEMNIFICATION

 

 

 

9.1

Limitation of Liability

23

9.2

Indemnification

23

9.3

Expenses

24

9.4

Indemnification Not Exclusive

24

9.5

Insurance

24

 

ii


 

Article X

 

 

 

TRANSFERS; REDEMPTIONS

 

 

 

10.1

Transfers by Common Unitholders

24

10.2

Redemptions

25

10.3

Redemptions by the Fund; Withdrawals

25

 

 

 

Article XI

 

 

 

DISSOLUTION AND TERMINATION OF THE FUND

 

11.1

Dissolution Events

26

11.2

Winding Up

26

11.3

Time for Liquidation, etc.

27

11.4

Cancellation

27

11.5

Liability

27

 

 

 

Article XII

 

 

 

AMENDMENTS; VOTING; POWER OF ATTORNEY

 

 

 

12.1

Amendments By Consent

27

12.2

Amendments Without Consent

27

12.3

Consent to Amend Special Provisions

28

12.4

Power of Attorney

28

 

 

 

Article XIII

 

 

 

MISCELLANEOUS

 

 

 

13.1

Notices

29

13.2

Counterparts

30

13.3

Table of Contents and Headings

30

13.4

Successors and Assigns

30

13.5

Severability

30

13.6

Further Actions

30

13.7

Interpretation

30

13.8

Non-Waiver

31

13.9

Applicable Law

31

13.10

Confidentiality

31

13.11

Survival of Certain Provisions

33

13.12

Waiver of Partition

34

13.13

Entire Agreement

34

13.14

Fund Counsel

34

13.15

Compliance with Anti-Money Laundering Requirements

34

13.16

ERISA Members

35

13.17

Tax Cooperation

35

13.18

Initial Member

35

 

iii


 

NEW MOUNTAIN GUARDIAN III BDC, L.L.C.

 

THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT of NEW MOUNTAIN GUARDIAN III BDC, L.L.C., a Delaware limited liability company (the “Fund”), is made and entered into as of July 15, 2019, by and among the Persons listed in the books and records of the Fund as Members of the Fund.  This Agreement amends and restates in its entirety the previous Limited Liability Company Agreement of the Fund, dated as of May 21, 2019 (the “Original Agreement”). Capitalized terms used herein without definition have the meanings specified in Section 1.1.

 

R
E C I T A L S:

 

WHEREAS, the Fund was formed under the Delaware Limited Liability Company Act (6 Del. C. §18-101, et seq.) (as amended from time to time, the “Delaware Act”) pursuant to a Certificate of Formation filed with the Secretary of State of the State of Delaware on May 22, 2019 and from its formation was governed by the Original Agreement; and

 

WHEREAS, the Members of the Fund wish to amend and restate the Original Agreement in its entirety and enter into this Agreement.

 

NOW, THEREFORE, the parties hereto hereby agree to continue the Fund and hereby amend and restate the Original Agreement, which is replaced and superseded in its entirety by this Agreement, as follows:

 

ARTICLE I

 

GENERAL PROVISIONS

 

1.1
                              
Definitions.  As used herein the following terms have the meanings set forth below:

 

Additional Closing” shall have the meaning set forth in Section 5.1.

 

Additional Investor” shall have the meaning set forth in Section 5.1.

 

Adverse Consequence” shall mean (a) a violation of a statute, rule, regulation or governmental administrative policy applicable to a Member of a U.S. federal or state or non-U.S. governmental authority that is reasonably likely to have a material adverse effect on a Portfolio Company or any Affiliate thereof or on the Fund, the Adviser or any of their respective Affiliates or on any Member or any Affiliate of any such Member or (b) an occurrence that is reasonably likely to subject a Portfolio Company, the Fund, the Adviser any Member or any of their respective Affiliates to any material regulatory requirement or burdensome filing requirement to which it would not otherwise be subject, or that is reasonably likely to materially increase any such regulatory requirement beyond what it would otherwise have been.

 

Administrator” shall mean
New Mountain Finance Administration, L.L.C., a Delaware limited liability company, and any successor thereto.

 

Administration Agreement” shall have the meaning set forth in Section 8.1.

 

Adviser” shall mean New Mountain Finance Advisers BDC, L.L.C., a Delaware limited liability company, and any successor thereto.

 


 

Adviser Expenses” shall mean the costs and expenses of the Adviser’s normal operating overhead, including salaries of the Adviser’s employees and Senior Advisors (excluding salary, benefits, directors’ fees, stock options and other compensation received by Senior Advisors for serving in Portfolio Company Roles) and other expenses incurred in maintaining the Adviser’s place of business, but not including other Organizational and Offering Expenses or Fund Expenses; provided that, for the avoidance of doubt, Adviser Expenses shall not include any fees paid to New Mountain or its Affiliates for administrative services pursuant to the final sentence of the first paragraph of Section 1.7; provided further that, the Adviser will undertake to reduce and/or waive its management fee, or otherwise reimburse expenses to the Fund, in the amount of Excess Organizational and Offering Expenses and Excess Specified Expenses pursuant to the last paragraph of Section 1.7.

 

Advisers Act” shall mean the U.S. Investment Advisers Act of 1940, as amended from time to time.

 

Advisory Committee” shall have the meaning set forth in Section 3.8(a).

 

Affiliate” shall mean, with respect to any specified Person, (a) a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the Person specified, (b) a Person with respect to which such Person acts as a discretionary investment adviser and (c) any relative or spouse of such Person who has the same home as such Person; provided that Portfolio Companies shall be deemed not to be “Affiliates” of the Adviser or the Fund; and provided, further, that each of the Key Persons shall be deemed to be an “Affiliate” of the Adviser for so long as such Key Person is an employee of the Adviser or any of its Affiliates.

 

Aggregate Committed Capital” shall mean
the aggregate Capital Commitments (whether funded or unfunded) of all Common Unitholders.

 

Agreement” shall mean this Amended and Restated Limited Liability Company Agreement, as amended, supplemented or restated from time to time.

 

AIFM Directive” shall mean Directive 2011/61/EU of the European Parliament and of the European Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010.

 

Alternative Key Person Event” shall have the meaning set forth in Section 5.6.

 

Board” or “Board of Directors” shall mean the Fund’s board of directors. Each director is hereby designated as a “manager” of the Fund within the meaning of Section 18-101(10) of the Delaware Act.

 

Broken Deal Expenses” shall have the meaning set forth in the definition of “Fund Expenses.”

 

Business Day” shall mean any day other than (a) Saturday and Sunday and (b) any other day on which banks located in New York City are required or authorized by law to remain closed.

 

Capital Commitment” shall mean, with respect to any Common Unitholder, the amount of capital committed to purchase Common Units as set forth as such in such Common Unitholder’s

 

2


 

accepted Subscription Agreement and reflected in the books and records of the Fund, as amended from time to time pursuant to this Agreement.

 

Closing” shall mean the Initial Closing Date and any date as of which the Adviser shall admit one or more further Common Unitholders to the Fund pursuant to this Agreement and one or more Subscription Agreements.

 

Closing Period” shall mean period starting with the Initial Closing Date and ending eighteen months thereafter.

 

Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

 

Common Unitholder” shall mean any Person who holds Common Units and/or a Capital Commitment to purchase Common Units, each in its capacity as a member of the Fund.

 

Common Units” shall mean common units of limited liability company interests in the Fund.

 

Confidential Information” shall have the meaning set forth in Section 13.10(a).

 

Covered Person” shall mean any person who has served as a director, officer or employee of the Fund, the Adviser, each Key Person and each of their respective Affiliates; each of the current and former shareholders, officers, directors, employees, partners, members, managers and Senior Advisors of any of the Adviser and each of its Affiliates and any other person who serves at the request of the Board or on behalf of the Fund as a shareholder, officer, director, employee, partner, member, manager or senior advisor of any other entity; each Person serving, or who has served, as a member of the Executive Advisory Council or the Advisory Committee (and, with respect to Claims or Damages arising out of or relating to service on the Advisory Committee only, the Member that such Person represents and each of such Member’s shareholders, officers, directors, employees, partners, members and managers).

 

Defaulting Investor” shall have the meaning set forth in Section 5.5(b).

 

Disabling Conduct” shall have the meaning set forth in Section 9.1.

 

Drawdown Date” shall have the meaning set forth in Section 5.3(a).

 

Drawdown Notice” shall have the meaning set forth in Section 5.3(a).

 

Drawdown Purchase Price” shall have the meaning set forth in Section 5.2.

 

Drawdown Purchases” shall mean the capital contributions made to the Fund to purchase Common Units pursuant to Section 5.2 from time to time by the Common Unitholders pursuant to a Drawdown Notice.

 

Drawdown Unit Amount” shall have the meaning set forth in Section 5.2.

 

ERISA” shall mean the U.S. Employee Retirement Income Security Act of 1974, as amended from time to time.

 

Event of Dissolution” shall have the meaning set forth in Section 11.1.

 

3


 

Excess Organizational and Offering Expenses” shall mean the amount of Organizational and Offering Expenses (other than Placement Fees) in excess of, at the end of the Closing Period, the lesser of: (i) $2 million or (ii) 0.50% of the Aggregate Committed Capital.

 

Excess Specified Expenses” shall mean the amount of Specified Expenses payable by the Fund for any calendar year in excess of the Specified Expenses Cap (giving effect to the adjustment in the last sentence of the definition of Specified Expenses Cap in the calendar year in which the Closing Period ends).

 

Exchange Act” shall mean the U.S. Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations of the Securities and Exchange Commission promulgated thereunder.

 

Executive Advisory Council” shall mean New Mountain’s executive advisory council with whom the Board and the Adviser may consult from time to time concerning general industry trends, related matters and specific investment diligence.

 

Excluded Investor” shall have the meaning set forth in Section 5.4.

 

FATCA” shall mean Sections 1471 through 1474 of the Code, any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code, any intergovernmental agreements, treaties or conventions entered into in connection with the implementation of such Sections, and any laws, rules, guidance notes and practices adopted by a non-U.S. jurisdiction to effect any such intergovernmental agreement or any similar provisions of non-U.S. law (including, for the avoidance of doubt, any law that implements any such agreement or that implements the Organization for Economic Co-operation and Development’s Common Reporting Standard).

 

Fiscal Year” shall mean the fiscal year of the Fund, as determined pursuant to Section 1.5.

 

Follow-On Investment” shall mean an investment (other than a Follow-Up Investment) by the Fund in a Portfolio Company or a Person whose business is related or complementary to that of (and will be under common management with) a Portfolio Company in which the Adviser determines that it is appropriate or necessary for the Fund to invest for the purpose of preserving, protecting or enhancing the Fund’s prior investment in such Portfolio Company.

 

Follow-Up Investment” shall mean any Portfolio Investment in which on or prior to the end of the Investment Period the Fund (or the Adviser or one of its Affiliates, on behalf of the Fund) or any acquisition vehicle thereof has entered into a letter of intent (which may or may not be binding), written agreement in principle, definitive agreement to invest or has otherwise committed in writing thereto and any Portfolio Investment that the Fund (or the Adviser or one of its Affiliates, on behalf of the Fund) has committed to make pursuant to the terms of Portfolio Investments held by the Fund prior to the end of the Investment Period.

 

Fund” shall have the meaning set forth in the preamble hereto.

 

Fund Counsel” shall have the meaning set forth in Section 13.14.

 

Fund Expenses” shall mean all costs, expenses and liabilities that in the good faith judgment of the Adviser are incurred by or arise out of the operation and activities of the Fund, including, without limitation: (a) the management fee and incentive fees payable under the

 

4


 

Investment Management Agreement and the Fund’s allocable portion of compensation, overhead (including office equipment and utilities) and other expenses incurred by the Administrator in performing its administrative obligations under the Administration Agreement; (b) out-of-pocket fees and expenses relating to consummated Portfolio Investments, proposed but unconsummated Portfolio Investments (“Broken Deal Expenses”), including (i) the sourcing, bidding, evaluating, purchasing, trading, settling, maintaining custody, holding, monitoring, acquisition and sale of thereof, (ii) origination fees, syndication fees, research costs, due diligence costs, bank service fees, (iii) fees and expenses related to the organization or maintenance of any intermediate entity used to acquire, hold or dispose of any Portfolio Investment or otherwise facilitating the Fund’s investment activities, (iv) travel, meal and lodging expenses incurred in connection with the preliminary evaluation of potential investment opportunities and (v) travel, meal, lodging and other ordinary course of business expenses of monitoring of Portfolio Investments; (c) an amount equal to 100% of all premiums for insurance protecting the Fund and any Covered Persons from liabilities to third persons in connection with Fund affairs to the extent such premiums cover liabilities with respect to matters that would otherwise be subject to indemnification by the Fund pursuant to the terms of this Agreement, the Investment Management Agreement or the Administration Agreement and for any fidelity bonds; (d) out-of-pocket legal, custodial, Portfolio Company and Fund investment-related public relations, and accounting expenses of third-party service providers, including fees, costs and expenses associated with the preparation, printing and distribution of the Fund’s financial statements, tax information and any Fund-Related Compliance Obligation Expenses (it being understood that, where such Fund-Related Compliance Obligation Expenses relate to the Fund and other clients of New Mountain, such costs and expenses shall mean the Fund’s allocable share thereof as determined in good faith by the Adviser), and out-of-pocket expenses related to data rooms, investor portals, board reporting portals or other websites and accounting systems; (e) interest on and fees and expenses arising out of all Fund Indebtedness, including, but not limited to, the arranging thereof and the costs and expenses of any lenders, investment banks and other financing sources; (f) out-of-pocket auditing, accounting, banking, consulting and valuation expenses of third-party service providers (including accounting and technology, environmental, social and governance consultants); (g) out-of-pocket appraisal expenses of third-party service providers; (h) out-of-pocket fees, costs and expenses of any third-party administrators and deal finders, experts, advisers, consultants, engineers and other professionals and service providers; (i) expenses of the Advisory Committee (including the reasonable costs of legal counsel, accountants, financial advisors and/or such other advisors and consultants engaged by the Advisory Committee, if the Board agrees to permit such engagement); (j) costs and expenses that are classified as extraordinary expenses under generally accepted accounting principles; (k) subject to Section 6.3, taxes and other governmental charges, fees and duties payable by the Fund, and costs and expenses associated with third party tax advisors, tax return preparation or tax audits; (l) costs of any litigation and damages (including the costs of any indemnity or contribution right granted to any placement agent or third-party finder engaged by the Fund or its affiliates); (m) the costs and expenses associated with preparing, filing and delivering to Unitholders periodic and other reports and filings required under federal securities laws as a result of the Fund’s status as a business development company costs of any meeting of Members (including proxy statements and solicitation in connection therewith); (n) costs associated with any third-party examinations or audits (including other similar services) of the Fund or the Adviser that are attributable to the operation of the Fund or requested by Members; (o) costs of winding up and liquidating the Fund; (p) expenses incurred in connection with complying with provisions in side letter agreements entered into with Members; but not including Adviser Expenses; (q) the cost of third-party software developers and software and related expenses, including as related to risk, research and market data, operations (i.e. IVP, Bloomberg and WSO), accounting and the tracking and monitoring of investments (i.e., portfolio management software, such as iLevel and general ledger software, such as VPM, or other operational or accounting software); (r) expenses related to

 

5


 

the engagement of and ongoing obligations of the Fund’s transfer agent, including any annual fees and fees related to maintaining Member records, among others; (s) expenses related to the engagement of any rating agency (i.e. Moodys, Fitch, S&P, Kroll, etc.) and any fees and expenses associated with the ongoing responsibilities related to maintaining any rating from such agency; (t) expenses of the Board (including independent director fees, the reasonable costs of legal counsel, accountants, financial advisors and/or such other advisors and consultants engaged by the Board, as well as travel and out-of-pocket expenses related to the attendance by directors at Board meetings); (u) expenses related to the valuation or appraisal of the Fund’s Portfolio Investments and the calculation of the Fund’s net asset value; (v) travel, out-of-pocket and meal expenses related to the attendance of any employee of the Adviser who acts as a board member or board observer (or similar function) and (w) the Organizational and Offering Expenses (subject to the Adviser’s obligation in Section 1.7 to waive and/or reduce its management fee, or otherwise reimburse expenses to the Fund, in the amount of Excess Organizational and Offering Expenses).

 

Fund Indebtedness” shall mean any borrowings, guarantees, repurchase arrangements or other credit or leverage obligations by the Fund.

 

Fund Information” shall have the meaning set forth in Section 13.10(b).

 

Fund-Related Compliance Obligation Expenses
shall mean the costs and expenses of all legal and regulatory compliance obligations under U.S. federal (including the Investment Company Act), state, local, non-U.S. or other laws and regulations directly related to managing the Fund or the making, holding or disposing of Portfolio Investments by the Fund (whether such compliance obligations are imposed on the Adviser, its Affiliates or the Fund), including, without limitation, the preparation and filing of (a) Form PF and Form ADV under the Advisers Act, (b) Form 13F, Form 13H, Section 16 filings, Schedule 13D filings, Schedule 13G filings and other beneficial ownership filings, in each case under the Exchange Act, (c) TIC Form SLT filings, (d) materials required under FATCA and FinCEN reporting requirements applicable to the Fund, (e) CFTC Form 4.13(a)(3), CPO-PQR, CTA PR and NFA Form PQR filings, (f) any fees and expenses associated with hiring and maintaining a local distribution agent or administrative agent in any non-U.S. jurisdictions and (g) any other forms, schedules or other filings with governmental and self-regulatory agencies directly related to the making, holding or disposing of Portfolio Investments by the Fund (including blue sky filings and registration statement filings, as applicable), and the costs and expenses of any administrator, custodian and/or depositary appointed by the Adviser and its affiliates in relation to the safeguarding, administering and/or holding (or similar) of Portfolio Investments and/or the performance of any functions of an administrator, custodian and/or depositary contemplated by the AIFM Directive or any national private placement regime in any jurisdiction and incurred in connection with the Adviser’s or any of its affiliates’ initial registration and compliance with ongoing registration (including annual, quarterly or similar fees), disclosure, reporting and other similar obligations or under the AIFM Directive or any national private placement regime in any jurisdiction (including, for the avoidance of doubt any reporting required in connection with Annex IV of the AIFM Directive).

 

Independent Directors” shall have the meaning set forth in Section 2.2.

 

Initial Closing Date” shall mean the date on which Capital Commitments are first accepted by the Fund.

 

Initial Drawdown Date” shall mean the date of initial Drawdown Purchase from Common Unitholders.

 

6


 

Investment Company Act” shall mean the U.S. Investment Company Act of 1940, as amended from time to time, and the rules and regulations of the Securities and Exchange Commission promulgated thereunder.

 

Investment Management Agreement” shall have the meaning set forth in Section 7.1.

 

Investment Objectives” shall have the meaning set forth in Section 4.1(a).

 

Investment Period” shall mean the period commencing on the Initial Closing Date and ending on the earliest to occur of (a) the fourth anniversary of the Initial Closing Date and (b) the date of any early termination of the Investment Period pursuant to Section 5.6.

 

Key Person” shall have the meaning set forth in Section 5.6.

 

Key Person Event” shall have the meaning set forth in Section 5.6.

 

Key Person Suspension Period” shall have the meaning set forth in Section 5.6.

 

Legal Requirements” shall have the meaning set forth in Section 13.10(a).

 

Limited Exclusion Right” shall have the meaning set forth in Section 5.4.

 

Management Company Related Investor” shall mean the Adviser, its Affiliates and their respective families and friends (including any investment vehicles wholly-owned by, or established for the benefit of, members of the Adviser’s investment team and their respective families and friends), collectively.

 

Members” shall mean, collectively, the Common Unitholders, holders of any other class of Units or any other member of the Fund.

 

Member Recipients” shall have the meaning set forth in Section 13.10(a).

 

New Mountain” shall mean the Adviser and its Affiliates.

 

Organizational and Offering Expenses” shall mean all legal and other expenses incurred in connection with the Fund’s formation and organization and the offering of the Common Units, including (other than any Placement Fees, which will be borne by the Adviser directly or pursuant to waivers of the management fee) all out-of-pocket legal, tax, accounting, printing, data room, consultation, administrative, travel, meal, accommodation and U.S. and non-U.S. filing fees and expenses of the Fund or the Adviser (including with respect to any registration or licensing of the Fund or the Adviser for marketing under any national private placement or similar regime outside of the United States including those in member states of the European Union).

 

Original Agreement” shall have the meaning set forth in the preamble hereto.

 

Per Unit NAV” shall have the meaning set forth in Section 5.2.

 

Per Unit Price” shall have the meaning set forth in Section 5.2.

 

Person” shall mean any individual or entity, including a corporation, partnership, association, limited liability company, limited liability partnership, joint-stock company, trust, unincorporated association, government or governmental agency or authority.

 

7


 

Placement Fees” shall mean the fees and expenses and any interest on deferred fees charged by any placement agent designated by the Adviser or the Fund for the marketing and sale of interests in the Fund.

 

Portfolio Company” shall mean an entity in which a Portfolio Investment is made by the Fund.

 

Portfolio Company Roles” shall mean serving on boards of directors, serving in executive management roles or performing the functional equivalent of such roles.

 

Portfolio Investments” shall mean debt or equity investments made by the Fund.

 

Qualified Replacement” shall have the meaning set forth in Section 5.6.

 

Remaining Capital Commitment” shall have the meaning set forth in Section 5.2.

 

Required Involvement” shall have the meaning set forth in Section 5.6.

 

Securities Act” shall mean the U.S. Securities Act of 1933, as amended from time to time, and the rules and regulations of the Securities and Exchange Commission promulgated thereunder.

 

Senior Advisor” shall mean any employee or non-employee senior advisor of the Adviser or its Affiliates, in each case only for so long as such Person is employed or engaged by the Adviser or its Affiliates.

 

Similar Law” shall mean any U.S. or non-U.S. federal, state, local, or other law or regulation that are similar to the fiduciary responsibility or prohibited transaction provisions contained in Title I of ERISA or Section 4975 of the Code.

 

Specified Expenses” means all Fund Expenses incurred in the operation of the Fund with the exception of: (i) the management fee, (ii) any incentive fees, (iii) Organizational and Offering Expenses, (iv) placement fees, (v) interest on and fees and expenses arising out of all Fund indebtedness and other financing, (vi) costs of any litigation and damages (including the costs of any indemnity or contribution right granted to any placement agent or third-party finder engaged by the Fund or its affiliates) and (vii) for the avoidance of doubt, if applicable, any investor level withholding or other taxes.

 

Specified Expenses Cap” shall mean an amount of Specified Expenses for any calendar year equal to (prorated for partial years and portions of years for which each applicable prong of the cap applies): (1) during the Closing Period, 0.40% of the greater of (A) $750 million and (B) actual Aggregate Committed Capital as of the end of such calendar year, (2) at the end of the Closing Period until the end of the Investment Period, 0.40% of aggregate Capital Commitments and (3) after the end of the Investment Period, 0.40% of NAV. Further, if the actual Aggregate Committed Capital of the Fund at the end of the Closing Period is less than $750 million, the prong of the Specified Expenses Cap in clause (1) above will be retroactively adjusted to equal 0.40% of Aggregate Committed Capital at the end of the Closing Period.

 

Sponsor Commitment” shall have the meaning set forth in Section 5.2.

 

Subscription Agreements” shall mean the Subscription Agreements entered into by the Common Unitholders in connection with their purchases of Common Units of the Fund.

 

8


 

Successor Fund” shall mean a closed-ended commingled investment vehicle organized by the Adviser or its Affiliates with investment criteria (including a return profile, security focus and leverage terms), objectives and focus substantially similar to those of the Fund. Successor Funds shall not include: (i) existing funds, accounts or portfolios of investments owned, sponsored or managed by the Adviser or its Affiliates, (ii) existing business development companies and Affiliates thereof, (iii) new or existing managed accounts or funds of one (including managed accounts or funds of one that are also BDCs), or (iv) new funds or accounts through which the Adviser or its Affiliates may make investments that are prohibited under Section 4.1(a).

 

Term” shall have the meaning set forth in Section 1.4.

 

Transfer” shall have the meaning set forth in Section 10.1.

 

Units” shall mean Common Units and any other class of units of limited liability company interests.

 

1.2
                              
Name and Office.

 

(a)
                                
Name.  The name of the Fund is New Mountain Guardian III BDC, L.L.C.

 

(b)
                                
Office.  The Fund shall have its principal place of business at c/o New Mountain Finance Advisers BDC, L.L.C., 787 Seventh Avenue, 49
th
 Floor, New York, New York 10019, or such other place as the Fund may determine from time to time.  The registered office of the Fund in the State of Delaware is located at c/o The Corporation Trust Company, 1209 Orange Street, New Castle County, Wilmington, Delaware 19801, and the registered agent for service of process on the Fund at such address is The Corporation Trust Company.  At any time, the Fund may designate another registered agent and/or registered office.

 

1.3
                              
Purposes; Powers.  The Fund may engage in any lawful act or activity for which limited liability companies may be formed under the laws of the State of Delaware and shall have all the powers available to it as a limited liability company formed under the laws of the State of Delaware.

 

1.4
                              
Term.  The term of the Fund is six years from when Capital Commitments are first made, subject to, unless the Fund is sooner dissolved, (i) a one-year extension as determined by the Adviser in its sole discretion and (ii) an additional one-year extension as determined by the Board (the six year period and any successive extensions, the “Term”). The Fund will be dissolved and its affairs wound up in an orderly manner (i) upon the expiration of its Term (as such Term may be extended pursuant to the above) or (ii) at any time upon a decision of the Board, subject to any necessary Unitholder approvals and applicable requirements of the Investment Company Act. Notwithstanding the dissolution of the Fund, the Fund shall continue in existence as a separate legal entity until cancellation of the Certificate of Formation of the Fund in accordance with Section 11.4. Prior to the end of the Term, the Fund may give a Common Unitholder the opportunity to elect (with no obligation) to exchange their Common Units for interests in another investment vehicle managed by the Adviser or its Affiliates.  Any such exchange would be required to be structured in a manner so as not cause dilution to Common Unitholders who do not elect to exchange their Common Units. The Fund will give Common Unitholders sufficient information and a reasonable amount of time to make an informed decision about any potential exchange option. There is no requirement for the Fund to provide such opportunity to exchange Common Units. Any Common Units so exchanged shall, upon consummation of such exchange, be cancelled.  The Fund will not list its securities on a public exchange.

 

9


 

1.5
                              
Fiscal Year.  The Fiscal Year of the Fund shall end on the 31
st
 day of December in each year.  The taxable year of the Fund shall be the calendar year or such other taxable year as is required under the Code.

 

1.6
                              
Admission of New Members; Commitments.  A Person acquiring Common Units will each enter into a Subscription Agreement pursuant to which such Person will agree to purchase Common Units for an aggregate purchase price equal to its aggregate Capital Commitment, subject to the Limited Exclusion Right. Each such Person shall be admitted as a member of the Fund at the time that such Subscription Agreement or a counterpart thereof is executed by or on behalf of such Person and accepted by the Fund.

 

1.7
                              
Expenses.  All Fund Expenses shall be paid by the Fund.  To the extent that the Adviser or any of its Affiliates pays any Fund Expenses on behalf of the Fund, the Fund shall reimburse the Adviser or such Affiliate, as the case may be, upon request.  All Adviser Expenses shall be paid by the Adviser or its Affiliates.  The Adviser shall allocate any expenses that benefit the Fund and other New Mountain funds or co-investors among the Fund and the applicable Persons in a manner that the Adviser determines is fair and equitable.  The Adviser shall endeavor to cause each potential co-investor that is considering an investment alongside the Fund prior to the signing of the Fund’s Portfolio Investment to bear its proportionate share of Broken Deal Expenses related to such potential Portfolio Investment, but to the extent not reimbursed by co-investors or other parties that may have invested in an unconsummated Portfolio Investment had it been consummated, Broken Deal Expenses may be borne entirely by the Fund and no share of such expense shall be required to be allocated to any such co-investors or other party; provided that no share of any break-up fees shall be allocated to any co-investor that is not bearing Broken Deal Expenses.  In addition, Broken Deal Expenses may include all or a portion of fees and expenses related to proposed but unconsummated Portfolio Investments that have also been considered for investment (either alone or in conjunction with the Fund) by other New Mountain vehicles or accounts and not ultimately consummated by such vehicles or accounts.  There may be circumstances when the Adviser has considered a potential investment in a portfolio company on behalf of the Fund, has determined not to make such investment and an investment is eventually made in such portfolio company by other investment vehicles or accounts sponsored by New Mountain.  In these circumstances, such vehicles or accounts may benefit from research by the Adviser’s investment team and/or from costs borne by the Fund related to this research or otherwise occurred in pursuing the potential portfolio investment, but may not be required to reimburse the Fund for expenses incurred in connection with such investment.  Travel and related expenses described herein include, without limitation, airfare not to exceed first class and/or business class rates, lodging, ground transportation, travel and meals.  Travel and related expenses in connection with a trip taken by employees of the Adviser for purposes of multiple matters will be allocated by the Adviser in a manner that the Adviser determines is fair and equitable.  The Adviser may cause the Fund’s Portfolio Companies to enter into agreements regarding group procurement, benefits management, insurance policies (which will from time to time be pooled across Portfolio Companies and discounted due to scale) and other operational, administrative or management related matters from a third party or a New Mountain Affiliate, and shall notify the Board of any such agreements no later than the next regularly scheduled meeting thereof.  Fund Expenses, including certain consultant expenses, may be charged directly to the Fund or may be borne by both the Adviser and one or more Portfolio Companies.  The Administrator will provide administrative services for the Fund (that would otherwise be performed by third parties), and will be entitled to the reimbursement of the fully allocated costs of the Administrator and its Affiliates of providing such services, including the costs of employee compensation and related taxes, health insurance and other benefits, and such employees’ allocable portion of overhead; provided that the amount paid under the Administration Agreement shall be reported in the Fund’s annual reports.

 

The Adviser shall enter into an expense limitation and reimbursement agreement whereby the Adviser agrees to reduce and/or waive the management fee it would otherwise be entitled to, or otherwise

 

10


 

reimburse expenses to the Fund, in the amount of Excess Organizational and Offering Expenses and Excess Specified Expenses.

 

1.8
                              
Size of the Fund.  The Fund intends that total Capital Commitments (excluding the Capital Commitments of the Adviser or its Affiliates and any Common Unitholder who is a member of the Executive Advisory Council) shall be approximately $750 million.

 

1.9
                              
Status of the Fund.  The Fund intends to make an election to be classified as a corporation for U.S. federal income tax purposes (a “Corporation”) and to be regulated as a business development company and intends to elect to be treated and is authorized to take any such action as it determines necessary to qualify annually (including investing in a Portfolio Company through a Corporation), as a regulated investment company within the meaning of Section 851 of the Code.

 

ARTICLE II

 

BOARD OF DIRECTORS

 

2.1
                              
Management.  The business and affairs of the Fund shall be managed by or under the direction of the Board of Directors.  The Board of Directors may exercise all such authority and powers of the Fund and do all such lawful acts and things as are not by statute or this Agreement directed or required to be exercised or done solely by the Members. Subject to the Investment Company Act and applicable law, the Board may delegate its rights and powers to third parties, including the Adviser, as it may determine.

 

Notwithstanding any other provision of this Agreement, subject to obtaining any required approvals by the Board of Directors, the Fund, and any duly authorized officer on behalf of the Fund, may execute, deliver and perform the Administration Agreement, the Investment Management Agreement, the Subscription Agreements and any side letters or similar agreements referred to in Section 13.13, other documents necessary for the formation of the Fund, any amendments to such agreements and all agreements contemplated thereby and related thereto, all without any further act, approval or vote of any Member or other Person.

 

2.2
                              
Number of Directors and Manner of Acting.  The number of directors on the Board shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the Whole Board; 
provided
, however
, that the number of directors on the Board shall not be less than three (3) nor more than fifteen (15).  The term “Whole Board” at any time shall mean the total number of authorized directors fixed at the time whether or not there exist any vacancies in previously-authorized directorships.  A majority of the Whole Board shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, and, except as otherwise expressly required by law or by this Agreement, the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. A majority of the Directors will at all times consist of Directors who are not “interested persons” (as defined in Section 2(a)(19) of the Investment Company Act) (the “Independent Directors”).

 

2.3
                              
Newly Created Directorships and Vacancies.  Subject to the applicable requirements of the Investment Company Act, including Section 16(b) thereunder, newly created directorships resulting from any increase in the authorized number of directors or any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal from office or any other cause shall, unless otherwise required by law or provided by resolution of the Board of Directors, be filled only by majority vote of the directors then in office, even if less than a quorum is then in office, or by the sole remaining director, and shall not be filled by Members.  Directors so chosen to fill a newly created directorship or other vacancies

 

11


 

shall serve until such director’s successor has been duly elected and qualified or until his or her earlier death, resignation or removal as provided in this Agreement.

 

2.4
                              
Removal of Directors.  Any director or the entire Board of Directors may be removed from office at any time, at a meeting called for that purpose, but only for cause and only by the affirmative vote of the holders of at least 66 2/3% of the voting power of the issued and outstanding Units of the Fund entitled to vote thereon, voting together as a single class.

 

2.5
                              
Meetings of the Board.

 

(a)
                                
Place of Meetings. Meetings of the Board of Directors shall be held at such place or places, within or without the State of Delaware, as the Board of Directors may from time to time determine or as shall be specified in the notice of any such meeting, including by telephone, videoconference or similar form of communication.

 

(b)
                                
Regular Meetings. Regular meetings of the Board of Directors shall be held at such time and place as the Board of Directors may fix.  If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting which would otherwise be held on that day shall be held at the same hour on the next succeeding business day.

 

(c)
                                 
Special Meetings. Special meetings of the Board of Directors may be called by the Chair of the Board of Directors, if one shall have been elected, or by a majority of the Whole Board or by the Chief Executive Officer.

 

2.6
                              
Committees.  The Board of Directors may designate one or more committees, including an executive committee, each committee to consist of one or more of the directors of the Fund.  The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.  Except to the extent restricted by statute or this Agreement, each such committee, to the extent provided in the resolution creating it, shall have and may exercise all the powers and authority of the Board of Directors (including, without limitation, the right to delegate authority to one or more subcommittees thereof). Each such committee shall serve at the pleasure of the Board of Directors and have such name as may be determined from time to time by resolution adopted by the Board of Directors.

 

2.7
                              
Officers.  The officers of the Fund shall be elected by the Board of Directors and shall include the Chief Executive Officer, the Chief Financial Officer, the Chief Compliance Officer and the Corporate Secretary.  The Fund may also have, at the discretion of the Board of Directors, such other officers as are desired, including one or more Vice Presidents, Treasurer, one or more Assistant Treasurers, Controller, one or more Assistant Corporate Secretaries, and such other officers as may be necessary or desirable for the business of the Fund.  In the event there are two or more Vice Presidents, then one or more may be designated as Executive Vice President, Senior Vice President, or other similar or dissimilar title.  At the time of the election of officers, the directors may by resolution determine the order of their rank.  Any number of offices may be held by the same person, and no officer need be a director.  In its discretion, the Board of Directors may choose not to fill any office for any period as it may deem advisable.

 

2.8
                              
Executive Advisory Council.

 

(a)
                                
To the extent the Board or the Adviser deem necessary or advisable in their discretion, the Board or the Adviser may consult from time to time with members of New Mountain’s executive advisory council (the “Executive Advisory Council”) on various matters concerning general industry trends and related matters, such as investments and broad strategy as well as specific investment diligence.  Neither

 

12


 

the Executive Advisory Council, nor any member thereof, will control or have any authority to bind the Fund, and as an advisory body the Executive Advisory Council shall not be construed as a board of directors or similar body with management, decision-making, investment or fiduciary authority or responsibility.

 

(b)
                                
In addition to project-related consulting fees paid by the Fund to the Executive Advisory Council, members of the Executive Advisory Council may be reimbursed by the Fund for their reasonable and documented out-of-pocket expenses in connection with the performance of project-related responsibilities as members of the Executive Advisory Council.  For the avoidance of doubt, the Members acknowledge that members of the Executive Advisory Council may receive compensation from the Adviser and its Affiliates.

 

(c)
                                 
The Members acknowledge that, to the fullest extent permitted by law, notwithstanding any duty otherwise existing at law or in equity, (i) members of the Executive Advisory Council will not be acting in a fiduciary capacity with respect to the Board, the Adviser, the Fund or any Member, (ii) members of the Executive Advisory Council have substantial responsibilities outside of their Executive Advisory Council activities and are not obligated to devote any fixed portion of their time to the activities of the Fund, (iii) none of the members of the Executive Advisory Council or their Affiliates shall be prohibited from engaging in activities which compete or conflict with those of the Fund and (iv) and the doctrine of corporate opportunity, or any analogous doctrine, shall not apply to any such member.

 

ARTICLE III

 

THE MEMBERS

 

3.1
                              
No Participation in Management, etc.  Except as expressly provided in this Agreement, no Member shall have the right or power to participate in the management or control of the Fund’s investment or other activities, transact any business in the Fund’s name or have the power to sign documents for or otherwise bind the Fund.

 

3.2
                              
Limitation of Liability.  Except as may otherwise be provided by the Delaware Act or as expressly provided for herein, the liability of each Member is limited to its Capital Commitment, and no Member shall be obligated to make a Capital Contribution at any time exceeding its then Remaining Capital Commitment. Except as otherwise expressly provided by the Delaware Act, the debts, obligations and liabilities of the Fund, whether arising in contract, tort or otherwise, shall be the debts, obligations and liabilities solely of the Fund, and a Member shall not be obligated personally for any such debt, obligation or liability of the Fund solely by reason of being a Member.

 

3.3
                              
No Priority.  No Common Unitholder shall have priority over any other Member as to the return of the amount of the value of its Common Units.

 

3.4
                              
Meetings of Members.  All meetings of the Members for any purpose shall be at any such place as shall be designated from time to time by the Board and stated in the notice of meeting or in a duly executed waiver of notice thereof. Meetings of Members may be called by the Board, the Chair of the Board, the Chief Executive Officer or holders of a majority of the Units. The Board of Directors may postpone, adjourn, reschedule or cancel any meeting of Members previously scheduled by the Board of Directors, the Chair of the Board or the Chief Executive Officer. For each meeting, only business specified in the Fund’s notice of meeting (or any supplement thereto) may be conducted at such meeting.

 

3.5
                              
Quorum.  Unless otherwise required by law, Members holding a majority of the Units entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings; provided that where a separate vote of Common Units and any other

 

13


 

class of Units is required, the holders of a majority of all issued and outstanding Common Units and such other class of Units, as applicable, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to such matter. Abstentions will be treated as Units that are present and entitled to vote for purposes of determining the number present and entitled to vote with respect to any particular proposal, but will not be counted as a vote in favor of such proposal.

 

If such quorum shall not be present or represented by proxy at any meeting, then either the Chair or Members entitled to vote thereat (present in person or represented by proxy) shall have the power to adjourn a vote from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented by proxy. At such adjourned meeting at which a quorum shall be present or represented by proxy, any business may be transacted which might have been transacted at the meeting as originally called. If the adjournment is for more than thirty (30) days, or, if after adjournment a new record date is set, then a notice of the adjourned meeting shall be given to each Member entitled to vote at the meeting.

 

3.6
                              
Member Voting and Consents.  Whenever action is required by applicable law or this Agreement to be taken by a specified percentage in interest of the Members (or any class or group of Members), such action shall be deemed to be valid if taken upon the written vote or written consent of those Members (or those Members included in such class or group) whose Units represent the specified percentage of the aggregate outstanding Units of all Members (or all Members included in such class or group) at the time. Each Member shall be entitled to one vote for each Unit held on all matters submitted to a vote of the Members. For these purposes, a “majority-in-interest” shall mean a percentage in interest in excess of 50%.

 

3.7
                              
Bankruptcy, Dissolution or Withdrawal of a Member.  The bankruptcy, dissolution or resignation of a Member shall not in and of itself dissolve or terminate the Fund. Upon the death, incompetence, bankruptcy, insolvency, liquidation or dissolution of a Member, the rights and obligations of such Member under this Agreement, to the maximum extent permitted by law, shall inure to the benefit of, and shall be binding upon, such Member’s successor(s), estate or legal representative. No Member shall resign from the Fund prior to the dissolution of the Fund except pursuant to Section 10.3.

 

3.8
                              
Advisory Committee.

 

(a)
                                
Appointment of Members, etc. The Adviser will establish an investor advisory committee (the “Advisory Committee”), which, by no later than sixty (60) calendar days after the end of the Closing Period, except as a result of vacancy due to death, resignation or removal, will consist of at least three (3) members and no more than five (5) members selected by the Adviser from among the Common Unitholders; provided that prior to the end of the Closing Period the Advisory Committee may consist of fewer than three voting members.  Each Person appointed to the Advisory Committee shall serve until such Person’s death, resignation or removal pursuant to this Section 3.8(a) or at the request of the Member that such Person represents.  Any member of the Advisory Committee may resign by giving the Adviser thirty (30) calendar days’ prior written notice.  Any member of the Advisory Committee shall be deemed removed, in the sole discretion of the Adviser (except pursuant to clause (iv) of this sentence), if the Common Unitholder(s) from which the Adviser that appointed such member (i) becomes a Defaulting Member, (ii) assigns more than 50% of its Common Units in the Fund to a Person that is not an Affiliate of such Member, (iii) is determined pursuant to Section 10.3 to be a Member whose continued participation in the Fund would have an Adverse Consequence or otherwise be reasonably likely to result in a significant delay, extraordinary expense or material adverse effect on the Adviser, the Fund, any Portfolio Company or any of their respective Affiliates or (iv) is notified that such member has been removed upon the recommendation of the Adviser with the consent of a majority of the other members of the Advisory Committee.  Upon the removal of a member of the Advisory Committee pursuant to clauses (i), (ii) or (iii) of the preceding sentence, the Adviser may appoint a replacement member, and upon the death or

 

14


 

resignation of a member of the Advisory Committee or the removal of such member pursuant to clause (iv) of the preceding sentence or the request of the Common Unitholder(s) from which the Adviser that appointed such member, the Adviser may appoint a replacement for such member from such Common Unitholder.

 

(b)
                                
Scope of Authority.  The Advisory Committee shall be authorized to, as required and subject to Regulation FD promulgated by the U.S. Securities and Exchange Commission, provide such advice and counsel as is requested by the Adviser or the Board in connection with actual and potential conflicts of interest, valuation matters and other matters relating to the Fund.  The Advisory Committee shall not constitute a committee of the Fund and shall take no part in the control or management of the Fund, nor shall it have any power or authority to act for or on behalf of the Fund, and all investment decisions, as well as all responsibility for the management of the Fund, shall rest with the Board.  Any actions taken by the Advisory Committee shall be advisory only, and none of the Board, the Adviser or any of its Affiliates shall be required or otherwise bound to act in accordance with any decision, action or comment of the Advisory Committee or any of its members.

 

(c)
                                 
Other Activities of the Members.  The Members acknowledge that, to the extent permitted by applicable law, notwithstanding any duty otherwise existing at law or in equity, the members of the Advisory Committee and the Common Unitholders from which the Adviser appointed such members (i) will not be obligated to act in a fiduciary capacity with respect to, and shall not owe any duty (fiduciary or otherwise) to, the Fund or any Member in respect of the activities of the Advisory Committee, (ii) have substantial responsibilities in addition to their Advisory Committee activities and are not obligated to devote any fixed portion of their time to the activities of the Advisory Committee and (iii) will not be prohibited from engaging in activities that compete or conflict with those of the Fund, nor shall any such restrictions apply to any of their respective Affiliates and the doctrine of corporate opportunity, or any analogous doctrine, shall not apply to such Persons.

 

(d)
                                
Meetings.    Meetings of the Advisory Committee may be called by the Adviser in its sole discretion.  In addition, a special meeting of the Advisory Committee may be called by a majority of the voting members of the Advisory Committee at any time. Except as expressly provided in this Section 3.8, the Advisory Committee shall conduct its business in such manner and by such procedures as a majority of its members deems appropriate.

 

(e)
                                 
Fees and Expenses, etc.  The members of the Advisory Committee shall serve without compensation, but shall be reimbursed by the Fund for all reasonable and documented out-of-pocket expenses incurred in attending meetings of the Advisory Committee.  The members of the Advisory Committee (and, with respect to Claims or Damages arising out of or relating to service on the Advisory Committee only, the Common Unitholder(s) from which the Adviser appointed such member and each of such Common Unitholder(s)’ shareholders, officers, directors, employees, partners, members and managers) shall be indemnified by the Fund as provided in Article IX and entitled to the benefit of the exculpation provisions set forth herein.

 

ARTICLE IV

 

INVESTMENTS; INDEBTEDNESS

 

4.1
                              
Investments in Portfolio Companies.

 

(a)
                                
Investment Objectives. The Fund’s investment objective is to generate current income and capital appreciation primarily by making or originating debt investments in Portfolio Companies (the “Investment Objectives”).  The form of the Fund’s investments may include first lien, second lien or

 

15


 

subordinated debt, or, to a lesser extent, preferred equity or common equity.  The Fund will not invest in real property or hold equity in a U.S. real property holding company. After the Fund’s initial ramp period, the Fund’s target Portfolio Investment size in one Portfolio Company is expected to be 2.0% to 4.0% of total assets at the time of investment and the maximum Portfolio Investment size in one Portfolio Company is expected to be 6.0% of total assets at the time of investment.

 

(b)
                                
Investment Period.  During the Investment Period, subject to Section 5.6, the Fund may make Portfolio Investments as determined by the Adviser, subject to the oversight of the Board. Following the termination of the Investment Period (and during any Key Person Suspension Period), no Portfolio Investments will be made by the Fund (and no Drawdown Purchases shall be required therefor) other than, within three months following the end of the Investment Period, (i) Follow-Up Investments and (ii) Follow-On Investments that are not Follow-Up Investments in an aggregate amount (net of amounts returned) of up to 15% of the aggregate Capital Commitments. For the avoidance of doubt, Drawdown Purchases may be required, in the Adviser’s discretion, following the termination of the Investment Period to repay Fund Indebtedness; provided that no such Drawdown Purchase shall be required to repay Fund Indebtedness incurred following the termination of the Investment Period to make a Portfolio Investment other than a Follow-Up Investment or Follow-On Investment for which the Drawdown Purchases could have been required in accordance with this Section 4.1(b); provided, further, that no Common Unitholder shall be required to fund a Drawdown Purchase in excess of its Remaining Capital Commitment.

 

(c)
                                 
Reinvestment.  Subject to the requirements in the Code and the terms of any borrowings or other financings or similar obligations, proceeds realized by the Fund from the sale or repayment of any Portfolio Investment (as opposed to investment income) during the Investment Period, may be retained and be used by the Fund for purposes of making Portfolio Investments or paying Fund Expenses. Any amounts so reinvested will not reduce a Common Unitholder’s Remaining Capital Commitment.

 

4.2
                              
Fund Indebtedness; Borrowings. The Fund may, either directly or through one or more subsidiaries, incur Fund Indebtedness for cash management and administrative purposes, including to pay Fund Expenses and obtain leverage for purposes of making Portfolio Investments.  To facilitate such Fund Indebtedness, the Fund may, among other things, enter into one or more credit facilities, including subscription facilities, with service providers to the Fund or third-party credit institutions or other lenders.  In connection with potential Fund Indebtedness, the Fund’s lenders may require the Fund to pledge assets or Capital Commitments (and the ability to enforce the payment thereof).  The Fund will repay any borrowings under a subscription facility on or prior to the six-month anniversary of the borrowing.  The Fund shall not incur leverage if, as a result of such incurrence, its aggregate Fund Indebtedness with direct recourse to the Fund or the Fund’s asset (excluding, for the avoidance of doubt, borrowings under any subscription line secured by unfunded Capital Commitments) would exceed 50% of its assets (valued at cost). For the avoidance of doubt, for purposes of determining the leverage limit under this Section 4.2, (A) Fund Indebtedness shall exclude (i) indebtedness incurred by specific Portfolio Companies or secured by the assets thereof or guarantees made by specific Portfolio Companies and (ii) indebtedness between the Fund and any subsidiary of the Fund and (B) Fund assets shall include aggregate Remaining Capital Commitments.  Furthermore, the Fund will not incur leverage in excess of the amounts permitted by the Investment Company Act.

 

In furtherance of the foregoing, but notwithstanding any other provision of this Agreement, in connection with any Fund Indebtedness, to the fullest extent permitted by law, the Fund, and the Board or the Adviser on behalf of the Fund, are hereby authorized to pledge, hypothecate, mortgage, assign, transfer or grant security interests in or other liens on (i) any assets of the Fund, (ii) the Members’ Subscription Agreements and the Members’ obligations to make capital contributions thereunder and hereunder subject to the terms hereof, and (iii) any other assets, rights or remedies of the Fund hereunder or under the Subscription Agreements, including without limitation, the right to issue Drawdowns and to exercise

 

16


 

remedies upon a default by a Member in the payment of its capital contributions and the right to receive capital contributions and other payments.  In furtherance of the foregoing, but notwithstanding any other provision in this Agreement, (i) the Fund may borrow funds, incur indebtedness and enter into guarantees together with one or more Persons on a joint and several basis or on any other basis that the Adviser, in its sole discretion, determines is fair and reasonable to the Fund, and (ii) in connection with any borrowing, indebtedness or guarantee by the Fund, all capital contributions shall be payable to the account designated by the Adviser or any lender or other credit party of the Fund.  All rights granted to a lender pursuant to this Section 4.2 shall apply to its agents and its successors and assigns.

 

ARTICLE V

 

CLOSINGS, CAPITAL COMMITMENTS AND DRAWDOWNS

 

5.1
                              
Closings.  The admission of Members will take place on such date as determined by the Adviser (each such date, a “Closing Date,” and the date upon which the first admission of Members occurs being referred to herein as the “Initial Closing Date”). Such admissions will occur, from time to time in the Adviser’s sole discretion, during a period starting with the Initial Closing Date and continuing through the Closing Period. As a result, the Fund may enter into Subscription Agreements with Common Unitholders during the Closing Period (such closings after the Initial Closing Date, “Additional Closings”) but after the Initial Drawdown Date and any Common Unitholder whose subscription has been accepted at an Additional Closing is referred to as an “Additional Investor.” Any such Person shall be admitted on a Closing Date as a Member at the time that a Subscription Agreement or a counterpart thereof is executed by or on behalf of such Person and accepted by the Fund.

 

5.2
                              
Capital Commitments.  The minimum Capital Commitment for each Common Unitholder is $5 million. The Adviser reserves the right to accept Capital Commitments of a lesser amount. Except as otherwise provided herein, each Member shall make Drawdown Purchases in an aggregate amount not to exceed its Capital Commitment, as set forth in such Common Unitholder’s Subscription Agreement.  Each Common Unitholder agrees to purchase Common Units for an aggregate purchase price equal to its Capital Commitment, payable at such times and in such amounts as required by the Fund, under the terms and subject to the conditions set forth herein. On each Drawdown Date (as defined below), each Common Unitholder agrees to purchase from the Fund, and the Fund agrees to issue to the Common Unitholder, a number of Common Units equal to the Drawdown Unit Amount (as defined below) at an aggregate price equal to the Drawdown Purchase Price (as defined below); providedhowever, that in no circumstance will a Common Unitholder be required to purchase Units for an amount in excess of its Remaining Capital Commitment (as defined below). Such Capital Commitment shall constitute a binding commitment to purchase Common Units no earlier than the Fund’s election to be treated as a business development company pursuant to Section 54(a) of the Investment Company Act. An affiliate of the Adviser (together with members of New Mountain’s senior management team) will make Capital Commitments of at least 5% of total Capital Commitments (the “Sponsor Commitment”).

 

Drawdown Purchase Price” shall mean, for each Drawdown Date, an amount in U.S. dollars determined by multiplying (i) the aggregate amount of Capital Commitments being drawn down by the Fund from all Common Unitholders on that Drawdown Date, by (ii) a fraction, the numerator of which is the Remaining Capital Commitment of the Common Unitholder and the denominator of which is the aggregate Remaining Capital Commitments of all Common Unitholders that are not Defaulting Investors or Excluded Investors (as defined below).

 

Drawdown Unit Amount” shall mean, for each Drawdown Date, a number of Common Units determined by dividing (i) the Drawdown Purchase Price for that Drawdown Date by (ii) the applicable Per Unit Price (as defined below), subject to adjustment in accordance with the procedures set forth in Section

 

17


 

5.3(c), with the resulting quotient adjusted to the nearest whole number to avoid the issuance of fractional shares.

 

Per Unit NAV” shall mean, for any Drawdown Date or Catch-Up Date (as defined below) or for Section 10.3, net asset value per Share as of the end of the most recent calendar quarter, determined in accordance with the procedures set forth in Section 5.3(c) in a manner consistent with the limitations of the Investment Company Act as of the last day of the Fund’s calendar quarter immediately preceding such date.

 

Per Unit Price” shall mean, (1) for the Initial Drawdown Date and any future Drawdown Dates or Catch-Up Dates within 18 months from the Initial Drawdown Date (the “Stable Offering Price Period”), $10,00, and (2) for any Drawdown Dates or Catch-Up Dates (as defined below) after the Stable Offering Price Period, the Per Unit NAV; provided that the Per Unit Price shall be subject to the limitations of Section 23 under the Investment Company Act (which generally prohibits the Fund from issuing Shares at a price below the then-current net asset value of the Shares as determined within 48 hours, excluding Sundays and holidays, of such issuance, (taking into account any investment valuation adjustments from the latest quarterly valuation date in accordance with the Fund’s valuation policy) subject to certain exceptions).  By executing a Subscription Agreement and agreeing to become a Member, each Common Unitholder agrees that it is providing its consent, in accordance with Section 23(b) of the Investment Company Act, for the Fund to issue Units at a $10.00 offering price during the Stable Offering Price Period even if such offering price is below the then-current Per Unit NAV.

 

Remaining Capital Commitment” shall mean, with respect to a Common Unitholder, the amount of such Common Unitholder’s Capital Commitment as of any date reduced by the aggregate amount of contributions made by that Common Unitholder at all previous Drawdown Dates and any Catch-Up Dates.

 

5.3
                              
Drawdowns.  During the Investment Period, the Adviser may issue capital calls, and Common Unitholders will be required to make Drawdown Purchases, for any permitted Fund purpose in the manner set forth below:

 

(a)
                                
Timing of Drawdown Notices; Use of Drawdowns.  The Adviser shall provide each Common Unitholder with a notice of each drawdown of Capital Commitments (a “Drawdown Notice”) at least ten (10) Business Days prior to the date on which such Drawdown Purchase is due and payable (the “Drawdown Date”).  The delivery of a Drawdown Notice to the Common Unitholder shall be the sole and exclusive condition to the Common Unitholder’s obligation to pay the Drawdown Purchase Price identified in each Drawdown Notice.

 

(b)
                                
Contents of Drawdown Notices.  Each Drawdown Notice should set forth (i) the Drawdown Date, (ii) the aggregate number of Common Units to be sold to all Common Unitholders on the Drawdown Date and the aggregate purchase price for such Common Units, (iii) the applicable Drawdown Unit Amount, Drawdown Purchase Price and Per Unit Price and (iv) the account to which the Drawdown Purchase Price should be wired.

 

(c)
                                 
Calculation of Each Member’s Share of a Drawdown.  Notwithstanding Section 5.2, on one or more dates to be determined by the Fund that occur on or following an Additional Closing but no later than the next succeeding Drawdown Date (each, a “Catch-Up Date”), each Additional Investor shall be required to purchase, on no less than ten (10) Business Days prior notice, from the Fund a number of Common Units with an aggregate purchase price necessary to ensure that, upon payment of the aggregate purchase price for such Common Units by the Additional Investor in the aggregate for all Catch-Up Dates, such Additional Investor’s Contributed Capital Percentage (as defined below) shall be equal to the Contributed Capital Percentage of all prior Common Unitholders (other than any Defaulting Investors, Excluded

 

18


 

Investors or any Common Unitholders who have subscribed on prior Additional Closing and have not yet funded the Catch-Up Purchase Price) (the “Catch-Up Purchase Price”).

 

Upon payment of the Catch-Up Purchase Price by a Common Unitholder on a Catch-Up Date and payment by other Common Unitholders of the requisite amount, the Fund shall issue to each such Additional Investor a number of Common Units determined by dividing (A) the Catch-Up Purchase Price for such Additional Investor by (B) the Per Unit Price for such Additional Investor as of a Catch-Up Date. For the avoidance of doubt, in the event that the Catch-Up Date and a Drawdown Date occur on the same calendar day, such Catch-Up Date (and the application of the provisions of this Section 5.3(c)) shall be deemed to have occurred immediately prior to the relevant Drawdown Date.

 

Contributed Capital Percentage” means, with respect to a Common Unitholder holding Capital Commitments, the percentage determined by dividing such Common Unitholder’s Contributed Capital (as defined below) by such Common Unitholder’s total Capital Commitments (whether or not funded).

 

Contributed Capital” means, with respect to a Common Unitholder holding Capital Commitments, the aggregate amount of capital contributions from such Common Unitholder’s Capital Commitments that have been funded by such Common Unitholder to purchase Units. For the avoidance of doubt, Contributed Capital will not take into account distributions of the Fund’s investment income (i.e., proceeds received in respect of interest payments, dividends or fees, net of expenses) to the investors.

 

Following the Investment Period, the Adviser may issue Drawdown Notices, and Common Unitholders will be required to make Drawdown Purchases, for the purposes described in Section 4.1(b).

 

5.4
                              
Excluded Investors.  Notwithstanding anything to the contrary contained in this Agreement, the Fund shall have the right (a “Limited Exclusion Right”) to exclude any Common Unitholder (such Common Unitholder, an “Excluded Investor”) from purchasing Common Units from the Fund on any Drawdown Date if, in the reasonable discretion of the Fund, there is a reasonable likelihood that such Common Unitholder’s purchase of Units at such time would result in (i) a violation of, or noncompliance with, any law or regulation to which such Common Unitholder, the Fund, the Adviser, any other Member or a Portfolio Company would be subject or (ii) all or any portion of the assets of the Fund to be considered plan assets for purposes of Title I of ERISA, Section 4975 of the Code, or any applicable Similar Law. In the event that any Limited Exclusion Rights is exercised, the Fund shall be authorized to issue an additional Drawdown Notice to the non-Excluded Investors to make up any applicable shortfall caused by such Limited Exclusion Right.

 

In addition, notwithstanding anything to the contrary contained in this Agreement, the Fund will have the power to take certain actions to avoid having (i) all or any portion of the assets of the Fund characterized as plan assets, for purposes of the fiduciary responsibility or prohibited transaction provisions of ERISA, Section 4975 of the Code or any Similar Law, including, without limitation, the right to cause a Common Unitholder that is a “benefit plan investor” (within the meaning of Section 3(42) of ERISA) to resign from the Fund in whole or in part and (ii) the Fund and the Adviser being considered a fiduciary of any Member for purposes of Title I of ERISA, Section 4975 of the Code or any applicable Similar Law.

 

5.5
                              
Defaulting Investors.  In the event that a Common Unitholder fails to pay all or any portion of the purchase price due from such Common Unitholder on any Catch-Up Date or Drawdown Date and such default remains uncured for a period of ten (10) Business Days after the written notice of such failure is given by the Fund to the Common Unitholder, the Fund shall be permitted to declare such Common

 

19


 

Unitholder to be in default of its obligations under this Agreement (any such Common Unitholder, a “Defaulting Investor”) and shall be permitted to pursue one or any combination of the following remedies:

 

(a)
                                
the Fund may prohibit the Defaulting Investor from purchasing additional Units on any future Drawdown Date or otherwise participating in any future investments in the Fund;

 

(b)
                                
Fifty percent (50%) of the Units then held by the Defaulting Investor shall be automatically transferred on the books of the Fund, without any further action being required on the part of the Fund or the Defaulting Investor, to the other Common Unitholders (other than any other Defaulting Investor), pro rata in accordance with their respective Capital Commitments; providedhowever, that notwithstanding anything to the contrary contained in this Agreement, no Units shall be transferred to any other Common Unitholder pursuant to this Section 5.5(b) in the event that such transfer would (A) violate the Securities Act, the Investment Company Act or any state (or other jurisdiction) securities or “Blue Sky” laws applicable to the Fund or such transfer would, (B) based on a written opinion of such Defaulting Investor’s counsel (which opinion and counsel shall be reasonably acceptable to the Fund) constitute a non-exempt “prohibited transaction” under Section 406 of ERISA or Section 4975 of the Code or (C) cause all or any portion of the assets of the Fund to constitute “plan assets” for purposes of ERISA or Section 4975 of the Code (it being understood that this proviso shall operate only to the extent necessary to avoid the occurrence of the consequences contemplated herein and shall not prevent the Common Unitholder from receiving a partial allocation of its pro rata portion of Units); providedfurther, that any Units that have not been transferred to one or more other Common Unitholders pursuant to the previous proviso shall be allocated among the participating other Common Unitholders pro rata in accordance with their respective Capital Commitments. The provisions of in this Section 5.5(b) constitute specified penalties or consequences for default in accordance with Section 18-502(c) of the Delaware Act. The damage to the Fund and other Common Unitholders resulting from a default by the Defaulting Investor is both significant and not easily quantified. By entry into a Subscription Agreement, the Common Unitholder agrees to this transfer and acknowledges that it constitutes a reasonable remedy and a specified penalty or consequence as contemplated by Section 18-306 of the Delaware Act for any default in the Common Unitholder’s obligation of the type described; and

 

(c)
                                 
The Fund may pursue any other remedies against the Defaulting Investor available to the Fund, subject to applicable law. By signing a Subscription Agreement, each Common Unitholder agrees that this Section 5.5 is for the benefit of the Fund and shall be interpreted by the Fund against a Defaulting Investor in the discretion of the Fund. Each Common Unitholder further agrees that such Common Unitholder cannot and will not seek to enforce this Section 5.5 against the Fund or any other Member in the Fund.

 

5.6
                              
Key Person Suspension or Early Termination of Investment Period.  Upon the occurrence of a Key Person Event, the Adviser will promptly give notice to the Members of this fact, at which time the Investment Period will immediately be suspended for 90 days (such 90-day period or shorter period pursuant to this paragraph, the “Key Person Suspension Period”).  Prior to the expiration of the Key Person Suspension Period, the Adviser will solicit votes from either (as determined by the Adviser in its sole discretion) the independent members of the Board or the Members to either: (i) lift the Key Person Suspension Period on or prior to its 90-day expiration and resume the Investment Period or (ii) replace the Key Persons with Qualified Replacements nominated by the Adviser and resume the Investment Period.  If the Key Person Suspension Period elapses without the written election or vote of a majority of the independent members of the Board or holders of a majority of the outstanding Units, as applicable, being entitled to make such determination to either lift the Key Person Suspension Period or replace the Key Persons with Qualified Replacement selected by the Adviser, then the Investment Period will be

 

20


 

permanently terminated.  Notwithstanding the foregoing, the Key Person Suspension Period and/or the termination of the Investment Period will not be effective in respect of any transactions for which there is an executed letter of intent (whether or not binding) or other written commitment prior to the occurrence of such Key Person Event.

 

A “Key Person” means each of Steven B. Klinsky, Robert A. Hamwee, John R. Kline and any qualified additional or a “Qualified Replacement” for any of them appointed pursuant to this paragraph or the final paragraph of this section.

 

A “Key Person Event” will be deemed to occur if at any time during the Investment Period all Key Persons simultaneously have ceased for any reason to devote the Required Involvement (as defined below)  for more than 30 days.

 

A “Qualified Replacement” is someone who, in the reasonable judgment of the Adviser, is a professional with credit investment experience.

 

Required Involvement” means (i) with respect to Mr. Klinsky or any Qualified Replacement therefor, the dedication of substantially all of the Key Person’s business time to New Mountain, its funds and their respective portfolio companies and (ii) with respect to Messrs. Hamwee and Kline and any Qualified Replacement therefor, the dedication of a substantial majority of the Key Person’s business time to New Mountain’s credit investing activities, New Mountain’s credit funds and their portfolio companies.

 

Upon the occurrence of an Alternative Key Person Event, the Adviser will, as soon as reasonably practicable, solicit votes from the Members to determine whether they wish to terminate the Investment Period at such time.  If Members holding 70% of the outstanding Units affirmatively vote in favor of the termination of the Investment Period within 90 days of the Alternative Key Person Event, the Investment Period will be terminated upon the expiration of such 90-day period.  An “Alternative Key Person Event” will be deemed to occur if at any time during the Investment Period where any two Key Persons simultaneously cease for any reason to devote the Required Involvement for more than 30 days.

 

At any time during the Investment Period, the Adviser may, by written notice to the Members, appoint a Qualified Replacement for any Key Person; provided that if, within 20 Business Days of receipt of notice from the Adviser of the selection of a person as a Qualified Replacement, holders of 60% of the outstanding Units object in writing to the selection of such person as a Qualified Replacement, such person shall not constitute a Qualified Replacement and the Adviser, in its sole discretion, shall appoint another person as a Qualified Replacement (with any such other person also being subject to objection pursuant to this proviso).

 

5.7
                              
Successor Funds. None of the Adviser or any Affiliates of the Adviser may commence the operation of a Successor Fund until the earlier of (1) the end of the Investment Period or (2) the time that at least 75% of the Common Unitholders’ aggregate Capital Commitments have been called pursuant to Section 5.3.

 

ARTICLE VI

 

UNITS; DISTRIBUTIONS

 

6.1
                              
Units.  Interests in the Fund will be held in the form of Units.  The Fund will issue Common Units to investors from time to time at the applicable Price Per Unit. Such Common Units will be issued through drawdowns on specific Drawdown Dates or Catch-Up Dates, with Common Unitholders required

 

21


 

to contribute all or a portion of their Remaining Capital Commitments in exchange for Common Units as set forth in this Agreement.

 

Without the consent of any Common Unitholder, the Board may cause the Fund to issue one class of preferred Units, which class of Units may have rights senior to those of the Common Units, and such other characteristics as the Board may determine, subject to the requirements of the Investment Company Act.  The Board may amend and supplement this Agreement to provide for the terms of such preferred Units. In connection with the issuance of any such preferred Units to a Person, such Person shall execute this Agreement and become a Member.

 

6.2
                              
Distributions.  The Fund generally intends to distribute, out of assets legally available for distribution, substantially all of its available earnings, on a quarterly basis, as determined by the Fund’s Board in its discretion. Any distributions received by a Common Unitholder shall have no effect on the amount of the Common Unitholder’s Remaining Capital Commitments. Notwithstanding anything to the contrary contained in this Agreement, the Fund, and the Board on behalf of the Fund, will not make a distribution to any Member if such distribution would violate any provision of the Delaware Act or any other applicable law, rule, regulation or administrative requirement.

 

6.3
                              
Withholding Taxes.  To the extent the Fund determines that it is required by law to withhold taxes with respect to distributions made by the Fund to a Member (“Withholding Taxes”), the Fund may withhold such taxes as so required.  The Fund will treat all Withholding Taxes as amounts distributed to the Member with respect to which such withholding was made.  To the fullest extent permitted by law, each Member hereby agrees to indemnify and hold harmless the Fund and the other Members from and against any liability (including, without limitation, any liability for taxes, penalties, additions to tax or interest) with respect to distributions or other payments made to such Member; provided that no reimbursement shall be required for such penalties, additions to tax, or interest that resulted from the gross negligence of the Fund.  The foregoing indemnity obligation of each Member shall survive dissolution and termination of the Fund and shall survive the withdrawal of any Member from the Fund or any Transfer of Units.

 

ARTICLE VII

 

THE ADVISER

 

7.1
                              
Appointment of the Adviser.  Subject to the requirements of the Investment Company Act, the Fund shall be party to an investment management agreement (the “Investment Management Agreement”) with the Adviser for purposes of engaging the Adviser to manage the Fund’s investments.

 

ARTICLE VIII

 

ADMINISTRATION; BOOKS AND RECORDS; REPORTS; ETC.

 

8.1
                              
Administrator. The Fund shall be party to an administration agreement (the “Administration Agreement”) with the Administrator for purposes of engaging the Administrator to provide administrative services to the Fund.  The Administrator may hire a third party sub-administrator to assist with the provision of administrative services.

 

8.2
                              
Maintenance of Books and Records.  The Fund shall keep or cause to be kept at the address of the Administrator (or at such other place as the Fund or the Administrator shall determine and, if during the Term, shall advise the Members in writing) full and accurate accounts of the transactions of the Fund in proper books and records of account, during the Term and for a period of at least six (6) years thereafter, which books and records shall set forth full and accurate information regarding the Fund in all material

 

22


 

respects.  Such books and records shall be maintained in accordance with U.S. generally accepted accounting principles, which shall be the basis for the preparation of the Fund’s financial reports prepared pursuant to this Article VIII.  Such books and records shall be available, upon five (5) Business Days’ notice to the Fund, for inspection and copying at reasonable times during business hours by a Member (other than any Defaulting Investor) or its duly authorized agents or representatives for any purpose reasonably related to such Member’s interest as a member in the Fund.  For the avoidance of any doubt, the Fund acknowledges and agrees that, notwithstanding anything contained in Section 13.10(a) to the contrary, any Member acting in compliance with this Agreement and the requirements of applicable law shall be entitled to receive a list of names, addresses and Capital Commitments of the Members within five (5) Business Days after making a request therefor.

 

8.3
                              
Reports.  The Fund will maintain a registration under the Exchange Act and shall prepare and make available to each Member the reports it is required to file under the Exchange Act, including any required audited and unaudited financial statements.

 

8.4
                              
Closing Documents.  The Fund shall provide to each Member an electronic copy of a set of executed documents relating to such Member’s subscription for Common Units within thirty (30) calendar days of such Member’s admission to the Fund.

 

8.5
                              
Tax Documents.  The Fund will cause to be delivered after the end of each calendar year to each Member who was a Member at any time during such calendar year and is subject to U.S. federal, state, and local tax reporting obligations, such information as may be necessary for the preparation of such Member’s U.S. federal, state, and local tax returns (including, but not limited to, Form 1042 and Form 1099, as applicable).

 

8.6
                              
Valuation.  The fair value of the Fund’s assets will be determined pursuant to a valuation policy approved by the Board.

 

ARTICLE IX

 

INDEMNIFICATION

 

9.1
                              
Limitation of Liability.  To the fullest extent permitted by applicable law, no Covered Person will be liable to the Fund or to any Member for any act or omission performed or omitted by any such Covered Person (including any acts or omissions of or by another Covered Person), in the absence of (i) breach of this Agreement by such Covered Person, (ii) willful misfeasance, bad faith, fraud or gross negligence on the part of such Covered Person in the performance of its duties or by reason of the reckless disregard of its duties and obligations, or (iii) violation of any law by such Covered Person, including, but not limited to, violation of any federal or state securities law, that has a material adverse effect on the Fund (collectively, “Disabling Conduct”). Notwithstanding the foregoing, the definition of “Disabling Conduct”, as it relates to the members of the Advisory Committee (and the Members represented by such members, solely with respect to the activities of such members acting in their capacity as Advisory Committee members), shall mean fraud, bad faith or willful misconduct.

 

9.2
                              
Indemnification.  The Fund shall, to the fullest extent permitted by law, indemnify each Covered Person for any loss or damage incurred by it in connection with any matter arising out of, or in connection with, the Fund, including the operations of the Fund and the offering of Units, except for losses

 

23


 

incurred by a Covered Person arising solely from (i) the Covered Person’s own Disabling Conduct or (ii) a claim between or among Covered Persons.

 

9.3
                              
Expenses.  In addition to the right to indemnification conferred in Section 9.2, an Covered Person shall also have the right to be paid by the Fund the expenses (including reasonable attorney’s fees) incurred in appearing at, participating in or defending any such proceeding in advance of its final disposition or in connection with a proceeding brought to establish or enforce a right to indemnification or advancement of expenses under this Article IX; provided, however, that, if applicable laws require or in the case of an advance made in a proceeding brought to establish or enforce a right to indemnification or advancement, an advancement of expenses incurred by an Covered Person in his or her capacity as a director, officer, employee or Advisory Committee member shall be made solely upon delivery to the Fund of an undertaking (hereinafter an “undertaking”), by or on behalf of such Covered Person, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a “final adjudication”) that such Covered Person is not entitled to be indemnified or entitled to advancement of expenses under Section 9.2 and this Section 9.3 or otherwise.

 

9.4
                              
Indemnification Not Exclusive.  The rights accruing to any Covered Person under these provisions shall not exclude any other right which any person may have or hereafter acquire under this Agreement, any statute, agreement, or any other right to which he or she may be lawfully entitled.

 

9.5
                              
Insurance.  The Fund may maintain insurance, at its expense, to protect itself and any director, officer or employee of the Fund, member of the Advisory Committee or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Fund would have the power to indemnify such person against such expense, liability or loss under applicable law.

 

ARTICLE X

 

TRANSFERS; REDEMPTIONS

 

10.1
                       
Transfers by Common Unitholders.  Common Unitholders may not sell, offer for sale, assign, transfer, pledge, hypothecate or otherwise dispose of (a “Transfer”) any Common Units unless (i) the Adviser consents; provided that such consent will not unreasonably be withheld if such Transfer is to a party other than a defaulting Common Unitholder and the Transfer does not negatively impact the Fund’s borrowing base or other terms of any credit facilities or subscription facilities, and, if required by the Fund’s lending arrangements, the Fund’s lenders give consent to such Transfer and (ii) the Transfer is made in accordance with all applicable securities laws.

 

No Transfer will be effectuated except by registration of the Transfer on the Fund’s books.
  Each transferee will be required to execute an instrument agreeing to be bound by this Agreement and the other restrictions imposed on the Common Units and to execute such other instruments or certifications as are reasonably required by the Adviser.  For the avoidance of doubt, the Adviser’s reasonable doubt as to whether a transferee can accurately make the representations and warranties and fulfill the obligations set forth in this Agreement or the Subscription Agreement of a transferor will be reasonable grounds to withhold consent to a Transfer.

 

The transferee shall be admitted to the Fund as a Member of the Fund upon (i) the approval of the Fund, and (ii) its execution of an instrument signifying its agreement to be bound by the terms and conditions of this Agreement, which instrument may be a counterpart signature page to this Agreement.  If a Member transfers all of its Common Units pursuant to this Section 10.1, such admission shall be deemed

 

24


 

effective immediately prior to the transfer and, immediately following such admission, the transferor Member shall cease to be a member of the Fund.

 

No Transfer will be permitted that would require the Fund to register the Common Units under the Securities Act, under any U.S. state securities laws or under the laws of any other jurisdiction. No Units shall be transferred in the event that such Transfer would (A) violate the Securities Act, the Investment Company Act or any state (or other jurisdiction) securities or “Blue Sky” laws applicable to the Fund, (B) constitute a non-exempt “prohibited transaction” under Section 406 of ERISA or Section 4975 of the Code, (C) be reasonably likely to cause all or any portion of the assets of the Fund to constitute plan assets for purposes of ERISA, Section 4975 of the Code, or applicable Similar Law, or (D) cause the Fund or the Adviser to be considered a fiduciary of any Member for purposes of Title I of ERISA, Section 4975 of the Code or any applicable Similar Law.

 

The Fund has no intention to register the Units under the Securities Act or under any state securities laws and, unless the Fund otherwise agrees in writing, is under no obligation to assist any Member in obtaining or complying with any exemption from registration. The Fund may require that a proposed transferee meet appropriate financial and other suitability standards and that the Member furnish a legal opinion satisfactory to the Fund and its counsel that the proposed Transfer complies with any applicable federal, state and any other securities laws.

 

Any Member who requests or otherwise seeks to effect a Transfer of all or a portion of its Units hereby agrees to reimburse the Fund, at its request, for any expenses reasonably incurred by the Fund in connection with such Transfer, including the costs of seeking and obtaining the legal opinion and any other legal, accounting and miscellaneous expenses, whether or not such Transfer is consummated.

 

The Sponsor Commitment may not be transferred except to a Management Company Related Investor.

 

10.2
                       
Redemptions.  Holders of Common Units shall not be entitled to require the Fund to repurchase or redeem Common Units.

 

10.3
                       
Redemptions by the Fund; Withdrawals.  Notwithstanding any provision to the contrary in this Agreement, if at any time the Board determines in its sole discretion that (a) a Member has breached this Agreement or any of its representations or warranties contained in such Member’s Subscription Agreement with the Fund or (b) there is a reasonable likelihood that the continuing participation in the Fund by such Member would have an Adverse Consequence, or otherwise be reasonably likely to result in a significant delay, extraordinary expense or material adverse effect on the Adviser, the Fund, any Portfolio Company or any of their respective Affiliates, then the Fund may (i) redeem such Member’s Common Units (out of the assets of the Fund) at the redemption price equal to the then current Per Unit NAV, and each Member’s Capital Commitment is subject to cancellation at any time and (ii) the Fund may cause such Member to cease to be a member of the Fund, and upon such redemption the holders of the Units so redeemed shall have no further right with respect thereto other than to receive payment of such redemption price; provided that the Fund will use commercially reasonable efforts to cooperate with the relevant Member to agree on a cure period or otherwise implement alternative solutions to avoiding an Adverse Consequence other than taking the actions in (i) or (ii) above, but the Fund will engage in such cooperation only to the extent that the Fund believes the relevant Member acted in good faith and the Fund reasonably determines that a delay in taking the actions in (i) or (ii) above would not result in an Adverse Consequence.

 

25


 

ARTICLE XI

 

DISSOLUTION AND TERMINATION OF THE FUND

 

11.1
                       
Dissolution Events.  There will be a dissolution of the Fund and its affairs shall be wound up upon the first to occur of any of the following events (each an “Event of Dissolution”):

 

(a)
                                
the dissolution of the Fund as provided in Section 1.4;

 

(b)
                                
the last Business Day of the first Fiscal Year following the end of the Investment Period in which all Portfolio Investments acquired or agreed to be acquired by the Fund have been sold or otherwise disposed of;

 

(c)
                                 
the determination by the Board, subject to any Member approvals required by the Investment Company Act;

 

(d)
                                
upon the vote of Common Unitholders holding 75% of outstanding Common Units at any time for any reason;

 

(e)
                                 
the termination of the legal existence of the last remaining member of the Fund or the occurrence of any other event which terminates the continued membership of the last remaining member of the Fund in the Fund unless the Fund is continued without dissolution in a manner permitted by the Delaware Act; or

 

(f)
                                  
the entry of a decree of judicial dissolution of the Fund under Section 18-802 of the Delaware Act.

 

11.2
                       
Winding Up.

 

(a)
                                
Liquidation of Assets.  Following an Event of Dissolution, the Fund’s affairs shall be wound up in an orderly manner. The Board shall act as, or shall appoin