Investment Portfolio - As of September 30, 2022, the company had investments in 139 portfolio companies across 29 industries, with over 99.9% of its debt portfolio invested in floating interest rate debt[238]. - The company primarily generates revenue from interest income on debt investments, along with income from dividends, capital gains, and various fees[230]. - The company’s investment objective is to achieve attractive risk-adjusted returns primarily through current income and, to a lesser extent, capital appreciation[228]. - As of September 30, 2022, 77% of the company's investments were loans supporting LBOs and acquisitions by private equity sponsors[240]. - The weighted average EBITDA of portfolio companies was approximately $120 million, with a net leverage of 6.1x and a loan-to-value ratio of 45%[242]. - The average position size of investments was approximately $19.8 million, with the top ten portfolio companies representing 22.9% of total fair value[242]. - The company had 139 portfolio companies as of September 30, 2022, compared to 77 as of September 30, 2021[250]. Financial Performance - Total investment income increased from $31.7 million for the three months ended September 30, 2021, to $62.7 million for the same period in 2022, driven by capital deployment[250]. - For the nine months ended September 30, 2022, net investment income was $89.7 million, up from $44.9 million in the same period in 2021[249]. - Net realized gain on investments for the nine months ended September 30, 2022, was $556, compared to $120 for the same period in 2021, reflecting a 363% increase[256]. - The net change in unrealized depreciation on investments for the nine months ended September 30, 2022, was $61,869, compared to an unrealized appreciation of $11,824 in 2021[257]. Debt and Financing - As of September 30, 2022, total outstanding debt obligations amounted to $1,524.6 million, with an unused portion of $984.3 million[265]. - The CIBC Subscription Facility had an outstanding principal of $220.4 million, while the BNP Funding Facility had $322.0 million[265]. - The total aggregate principal of debt obligations increased from $1,975.0 million as of December 31, 2021, to $2,510.0 million as of September 30, 2022[265]. - The company had borrowings denominated in Euros (EUR) amounting to €238 as of September 30, 2022, which was a new development compared to December 31, 2021[265]. Risk Management - The company is exposed to risks from potential disruptions in operations due to economic conditions, including inflationary environments and supply chain interruptions[232]. - Approximately 82% of debt investments had one or more financial covenants, indicating a strong risk management approach[242]. - The company reported no realized losses from loan defaults since inception through September 30, 2022[242]. - A hypothetical increase of 300 basis points in interest rates would result in an annualized net income increase of $59.0 million[274]. - The company emphasizes extensive due diligence in its investment strategy to achieve compelling risk-adjusted returns[266]. Expenses and Distributions - For the three months ended September 30, 2022, net expenses were $28,905, compared to $12,909 for the same period in 2021, representing a 123% increase[252]. - Total expenses for the nine months ended September 30, 2022, were $81,927, up from $36,970 in 2021, indicating a 121% increase[252]. - Total distributions declared for the nine months ended September 30, 2022, amounted to $86,667, with a per share distribution of $1.42[263]. - The company has not accrued any U.S. federal excise tax for the nine months ended September 30, 2022, compared to $5 accrued in 2021[255]. - The company intends to distribute at least 90% of its investment company taxable income to maintain its tax treatment as a RIC[255]. Regulatory Compliance - The company has elected to be regulated as a Business Development Company (BDC) and intends to comply with requirements to qualify as a Regulated Investment Company (RIC)[227]. - As of December 31, 2021, approximately 99.3% of the debt portfolio had an interest rate floor denoted in LIBOR, with a weighted average interest rate floor of approximately 0.9%[239]. - The company is permitted to co-invest with affiliates under certain conditions, ensuring that transactions are fair and consistent with the interests of its stockholders[231]. - The company did not engage in interest rate hedging activities during the periods covered by the report[274]. Capital Commitments - Aggregate capital commitments received as of September 30, 2022, totaled approximately $1,624.0 million, with a one-year extension of the Investment Period until December 23, 2023[261]. - Total shares issued and proceeds received related to capital drawdowns for the nine months ended September 30, 2022, were 7,451,363 shares, amounting to $154.7 million[262]. - Approximately $45.3 million of new/add-on investments were closed or approved from September 30, 2022, to November 8, 2022, with $43.0 million in first lien senior secured loans[266]. Market Focus - The company remains focused on investing in companies with strong management teams and sustainable business models despite market volatility[266]. - The company’s debt investments typically have a stated term of five to eight years and bear interest at a floating rate based on benchmarks like LIBOR or SOFR[229]. - 100% of the income-producing senior secured debt investments were at floating rates as of September 30, 2022[273].
Morgan Stanley Direct Lending Fund(MSDL) - 2022 Q3 - Quarterly Report