Morgan Stanley Direct Lending Fund(MSDL) - 2024 Q2 - Quarterly Report

Investment Overview - Total investments at fair value as of June 30, 2024, amounted to $3,514,286, with first lien debt representing 95.3$3,356,586 in first lien debt, $122,416 in second lien debt, and$53,735 in equity investments [182]. - As of June 30, 2024, the fair value of second lien debt investments decreased to $103,144, representing 2.9$3,542,035 as of June 30, 2024, from $3,041,700 as of June 30, 2023, showing a growth of approximately 16.5$673,902 as of June 30, 2024, significantly higher than $62,263 for the same period in 2023, indicating a substantial increase in investment activity [186]. - The company plans to continue investing primarily in illiquid debt and equity securities of portfolio companies [209]. Revenue and Income - The company generated revenue primarily from interest income on debt investments, with a typical interest rate based on benchmarks like SOFR [180]. - The total investment income increased to$104,188 for the three months ended June 30, 2024, up from $88,894 for the same period in 2023, representing a growth of approximately 17.5$56,121 for the three months ended June 30, 2024, compared to $47,795 for the same period in 2023, reflecting an increase of approximately 17.7$1.5 billion for the quarter, representing a 15% year-over-year growth [220]. Expenses and Financial Metrics - For the three months ended June 30, 2024, total expenses increased to $51,378 from$46,683 for the same period in 2023, representing an increase of 14.9% [193]. - Interest and other financing expenses rose to $29,302 for the three months ended June 30, 2024, compared to$27,907 in 2023, reflecting an increase of 4.7% due to higher reference rates [194]. - Base management fees, net of waiver, increased to $6,479 for the three months ended June 30, 2024, from$7,446 in 2023, a decrease of 13.0% [195]. - The weighted average yield on debt and income-producing investments at fair value was 11.7% as of June 30, 2024, down from 12.1% as of December 31, 2023 [183]. - The weighted average net leverage through tranche decreased to 5.7x as of June 30, 2024, from 6.0x as of December 31, 2023, indicating improved leverage metrics [183]. Debt and Financing - As of June 30, 2024, total outstanding debt obligations amounted to $2,950,000, with$1,675,474 outstanding and $1,270,364 unused [206]. - The company had borrowings denominated in Euros (EUR) of 238 and Canadian dollars (CAD) of$300 as of June 30, 2024 [206]. - Approximately 99.6% of the company's debt investments were at floating rates as of June 30, 2024 [211]. - A hypothetical increase of 300 basis points in interest rates would result in an income of $105,256 and an expense of$29,250, leading to a net income of $76,006 [212]. Company Operations and Management - The company is externally managed by an adviser that is a wholly owned subsidiary of Morgan Stanley [178]. - The company closed its Initial Public Offering on January 26, 2024, issuing 5,000,000 shares at a price of$20.67 per share, resulting in net cash proceeds of approximately $97.1 million [201]. - The company entered into a share repurchase plan on January 25, 2024, to acquire up to$100 million of its Common Stock, although no shares were repurchased under this plan for the six months ended June 30, 2024 [205]. - There were no changes in internal control over financial reporting that materially affected the company for the quarter ended June 30, 2024 [214]. - The company is not currently subject to any material legal proceedings, nor is any material proceeding threatened against it [215]. Strategic Initiatives - The company expects general and administrative expenses to remain stable or decline as a percentage of total assets during periods of asset growth [181]. - The company has applied for a new exemptive relief order from the SEC to facilitate negotiated co-investment transactions [178]. - The company’s investment objective focuses on achieving attractive risk-adjusted returns through current income and capital appreciation [178]. - The company’s investment strategy includes primarily investing in senior secured term loans issued by U.S. middle-market companies [178]. - The company is exploring potential acquisitions to bolster its market position, with a focus on companies in the tech sector [220]. - A new strategic partnership was announced, expected to enhance distribution channels and increase market reach [220]. - The management emphasized a commitment to sustainability initiatives, aiming for a 30% reduction in carbon footprint by 2025 [220]. User and Market Growth - User data showed a total of 5 million active users, up from 4 million in the previous quarter, indicating a 25% increase [220]. - The company provided guidance for the next quarter, projecting revenue growth of 10% to 12% [220]. - New product launches are expected to contribute an additional $200 million in revenue over the next fiscal year [220]. - Market expansion efforts include entering three new international markets by the end of the year [220]. - The company has successfully reduced operational costs by 8% through efficiency improvements [220].