Investment Portfolio - As of June 30, 2023, the company had investments in 159 portfolio companies across 29 industries, with approximately 100% of its debt portfolio invested in floating interest rate debt[244] - Approximately 98.5% of the company's debt investments were in loans and other debt issued by middle-market companies backed by private equity sponsors, with about 79.0% supporting leveraged buyouts (LBOs) and acquisitions[245] - The weighted average total yield of investments in debt securities at amortized cost was 10.9% as of December 31, 2022[246] - The investment portfolio at fair value increased from $2.681 billion as of June 30, 2022 to $2.984 billion as of June 30, 2023[257] - Weighted average yield on debt investments at cost increased from 8.2% at June 30, 2022 to 11.8% at June 30, 2023[257] - Approximately 77.0% of debt investments had one or more financial covenants[248] - No realized losses due to loan defaults or credit deterioration since January 31, 2020, through June 30, 2023[248] - The average position size of investments was approximately $18.8 million, representing 0.6% of total fair value[248] Financial Performance - Total investment income increased from $49.994 million for the three months ended June 30, 2022 to $88.894 million for the three months ended June 30, 2023[256] - Net investment income for the three months ended June 30, 2023 was $47.795 million, compared to $29.409 million for the same period in 2022[255] - Total expenses for the three months ended June 30, 2023 were $46.683 million, compared to $25.487 million for the same period in 2022[259] - Interest expense for the three months ended June 30, 2023, was $27,907, an increase from $13,781 in the same period of 2022, primarily due to higher average borrowings and increased reference rates[260] - The income-based incentive fee for the three months ended June 30, 2023, was $10,138, compared to $5,879 in the same period of 2022, indicating a rise in pre-incentive fee net investment income[264] Capital Structure and Liquidity - As of June 30, 2023, the company had approximately $52.9 million in cash and $230.0 million and $626.5 million available under credit facilities, indicating strong liquidity[273] - Total investor capital commitments to purchase shares of Common Stock were approximately $1,629.4 million as of June 30, 2023, with no capital calls issued during the six months ended June 30, 2023[274] - The outstanding debt obligations as of June 30, 2023, totaled $1,562,259, with an unused portion of $856,491, indicating a robust capital structure[280] Management and Operations - The company is externally managed by an adviser that is a wholly owned subsidiary of Morgan Stanley, but it is not a subsidiary of Morgan Stanley[232] - The company monitors the evolving market environment to adjust its operations as necessary in response to external factors[237] - The company expects its general and administrative expenses to be stable or decline as a percentage of total assets during periods of asset growth[243] - The company has elected to be regulated as a Business Development Company (BDC) under the Investment Company Act of 1940[232] Market Conditions and Risks - The current inflationary environment and potential global recession could impact the company's portfolio companies and financial condition[237] - A hypothetical increase of 300 basis points in interest rates would result in an annualized net income increase of $65.191 million, while a decrease of 300 basis points would lead to a net income decrease of $65.191 million[288] - The company has not engaged in interest rate hedging activities during the periods covered by the report[288] Legal and Compliance - There have been no changes in internal control over financial reporting that materially affected the company for the three months ended June 30, 2023[290] - The company is not currently subject to any material legal proceedings, nor is any material proceeding threatened against it[291] Recent Investments - As of August 9, 2023, the company closed approximately $71.6 million in new/add-on investments, with $71.5 million in first lien senior secured loans[281] - The company remains focused on investing in companies with strong management, substantial free cash flow, and sustainable business models despite market volatility[281]
Morgan Stanley Direct Lending Fund(MSDL) - 2023 Q2 - Quarterly Report