Investment Portfolio - As of March 31, 2022, the company had investments in 109 portfolio companies across 27 industries, with over 99.9% of the debt portfolio invested in floating interest rate debt[214] - The company’s investment objective is to achieve attractive risk-adjusted returns primarily through current income and, to a lesser extent, capital appreciation[203] - As of March 31, 2022, 77% of the company's investments were loans supporting LBOs and acquisitions by private equity sponsors[216] - The investment portfolio at fair value grew from $948 million as of March 31, 2021 to $2.534 billion as of March 31, 2022[223] - The company is focused on investing in companies with strong management teams, substantial free cash flow, and sustainable business models despite the impact of the Coronavirus pandemic[250] - The company plans to continue investing primarily in illiquid debt and equity securities of portfolio companies[254] Financial Performance - The total investment income increased from $17,345 in Q1 2021 to $44,304 in Q1 2022, driven by capital deployment[222][223] - Net investment income after taxes for Q1 2022 was $26,514, up from $10,059 in Q1 2021[222] - The weighted average yield on debt investments was 7.2% as of March 31, 2022, compared to 7.4% in the same period of 2021[217][222] - The net change in unrealized appreciation for Q1 2022 was a decrease of $4,342, contrasting with an increase of $4,642 in Q1 2021[222] - The net change in unrealized loss on investments for the three months ended March 31, 2022, was $4.342 million, compared to a net change in unrealized gain of $4.642 million for the same period in 2021[231] - For the three months ended March 31, 2022, the net realized gain on investments was $0.1 million, compared to $0 million for the same period in 2021, primarily driven by the sale of debt and equity investments[230] Debt and Financing - The total outstanding debt as of March 31, 2022, was $1.362 billion, with an unused capacity of $952.65 million[238] - The company declared a distribution of $0.48 per share for the three months ended March 31, 2022, resulting in a total distribution amount of $27.455 million[235] - Under the Truist Credit Facility, the company borrowed $130.5 million and repaid $415.0 million during the three months ended March 31, 2022[247] - The company issued $425 million in aggregate principal amount of 4.500% notes due 2027 on February 11, 2022[248] - The CIBC Subscription Facility was permanently reduced to $315 million effective January 18, 2022, from $400 million[239] - The BNP Funding Facility had an outstanding amount of $435.5 million as of March 31, 2022, with available capacity of $164.5 million[244] - As of March 31, 2022, the company was in compliance with all covenants and other requirements of each of the credit facilities and the 2027 Notes[249] Market Conditions and Risks - The ongoing Coronavirus pandemic has created market stress that could affect the company’s portfolio companies, although it believes it is well positioned to manage the current environment[207] - The company is subject to financial market risks, including valuation risk, market risk, and interest rate risk[253] - The current market environment is viewed as offering opportunities for compelling risk-adjusted returns[250] - The company’s investment pace will depend on market conditions, deal flow, and the ongoing impact of the Coronavirus[250] Interest Rates and Expenses - The weighted average total yield of investments in debt securities at amortized cost was 7.2% as of March 31, 2022[214] - The company expects general and administrative expenses to be stable or decline as a percentage of total assets during periods of asset growth[213] - Total expenses increased from $8,745 in Q1 2021 to $22,388 in Q1 2022, primarily due to higher interest and financing expenses[225] - Interest and other financing expenses rose from $2,758 in Q1 2021 to $10,349 in Q1 2022, attributed to increased average borrowings[227] - The company expects that a 300 basis point increase in interest rates would result in an annualized net income increase of $44,046,000[259] - 100% of the income-producing senior secured debt investments were at floating rates as of March 31, 2022[257] - The company did not engage in interest rate hedging activities during the periods covered by the report[259] Regulatory and Compliance - The company has elected to be regulated as a Business Development Company (BDC) under the 1940 Act and intends to qualify as a Regulated Investment Company (RIC) for U.S. federal income tax purposes[202] - The company is permitted to co-invest with affiliates under certain conditions as per the SEC's exemptive relief granted on September 18, 2020[206] - Approximately 83% of debt investments had one or more financial covenants as of March 31, 2022[216] - The company had 109 portfolio companies as of March 31, 2022, compared to 53 in the previous year[217]
Morgan Stanley Direct Lending Fund(MSDL) - 2022 Q1 - Quarterly Report