Morgan Stanley Direct Lending Fund(MSDL) - 2024 Q1 - Quarterly Results

Morgan Stanley Direct Lending Fund Q1 2024 Financial Results and Dividend Announcement Financial and Quarterly Highlights MSDL reported strong Q1 2024 results with $0.63 net investment income per share, stable $20.67 NAV per share, and a reduced 0.81x debt-to-equity ratio, declaring a $0.50 dividend - President and CEO Jeffrey Levin emphasized strong Q1 operating results, stable credit performance, and a resilient middle-market portfolio of senior, sponsor-backed loans[2] - Net funded portfolio increased by $96.7 million, driven by $168.4 million in fundings and $71.7 million in sales and repayments[5] Selected Financial Highlights (Q1 2024 vs Q4 2023) | | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Per Share Data | | | | Net investment income per share | $0.63 | $0.67 | | Net realized/unrealized gains (losses) per share | $(0.05) | $0.03 | | Earnings per share | $0.59 | $0.70 | | Regular dividend per share | $0.50 | $0.50 | | Balance Sheet Data ($ in thousands) | | | | Investments, at fair value | $3,293,205 | $3,193,561 | | Total debt outstanding, at principal | $1,492,257 | $1,502,263 | | Net assets | $1,837,027 | $1,721,151 | | Net asset value per share | $20.67 | $20.67 | | Leverage | | | | Debt to equity | 0.81x | 0.87x | | Net debt to equity | 0.77x | 0.83x | Results of Operations Q1 2024 saw total investment income of $99.1 million and reduced operating expenses of $44.5 million, leading to a net investment income of $54.7 million or $0.63 per share - Total investment income for Q1 2024 was $99.1 million, a slight decrease from $100.8 million in Q4 2023 due to lower non-recurring repayment income[4] - Total operating expenses decreased to $44.5 million in Q1 2024 from $45.3 million, primarily due to lower interest expenses and incentive fees[6] - Q1 2024 saw a net change in unrealized appreciation on investments of $2.7 million, offset by $5.6 million in realized losses[7] Net Investment Income Comparison | Metric | Q1 2024 | Q4 2023 | | :--- | :--- | :--- | | Net Investment Income | $54.7 million | $55.5 million | | Net Investment Income per Share | $0.63 | $0.67 | Portfolio and Investment Activity As of March 31, 2024, the $3.3 billion investment portfolio, diversified across 178 companies, primarily comprised 94.6% first lien debt with a 12.0% weighted average yield and $232.1 million in new commitments - The portfolio is diversified across 178 companies in 31 industries, with an average investment size of $18.5 million, representing 0.6% of the total portfolio by fair value[8] - As of March 31, 2024, the weighted average yield of debt investments was 11.9% at cost and 12.0% at fair value, with three investments on non-accrual status, representing 0.4% of total investments at cost[8] Portfolio Composition by Investment Type (at Fair Value) | Investment Type | % of Total (Mar 31, 2024) | % of Total (Dec 31, 2023) | | :--- | :--- | :--- | | First Lien Debt | 94.6% | 94.1% | | Second Lien Debt | 3.6% | 4.1% | | Other Investments | 1.8% | 1.8% | Q1 2024 Investment Activity ($ in thousands) | Activity | Q1 2024 | Q4 2023 | | :--- | :--- | :--- | | New investment commitments, at par | $232,120 | $242,891 | | Investment fundings | $168,357 | $253,867 | | Number of new portfolio companies | 9 | 12 | | Number of exited/repaid companies | 3 | 5 | Capital and Liquidity As of March 31, 2024, MSDL reported total principal debt of $1.49 billion, $923.7 million in credit facility availability, $64.8 million in cash, and an improved 0.81x debt-to-equity ratio due to IPO proceeds - The debt-to-equity ratio declined from 0.87x to 0.81x quarter-over-quarter, primarily due to the IPO executed during the first quarter[9] Capital and Liquidity Summary (as of March 31, 2024) | Metric | Value | | :--- | :--- | | Total Principal Debt Outstanding | $1,492.3 million | | Weighted Average Interest Rate on Debt | 6.69% | | Availability under Credit Facilities | $923.7 million | | Cash | $64.8 million | | Debt to Equity | 0.81x | Recent Developments Post-quarter, the Board declared a $0.50 per share dividend, the Truist Bank credit facility was amended and upsized to $1.30 billion with a 2029 maturity, and Fitch Ratings affirmed MSDL's BBB- (stable) rating - On May 8, 2024, the Board declared a $0.50 per share dividend, payable on July 25, 2024, to shareholders of record as of June 28, 2024[13] - On April 19, 2024, the Senior Secured Revolving Credit Facility with Truist Bank was amended, extending maturity to April 2029 and increasing commitment from $1.12 billion to $1.30 billion[13] - In late March, Fitch Ratings affirmed MSDL's investment grade credit rating of BBB- with a stable outlook[13] Consolidated Financial Statements Consolidated Statements of Assets and Liabilities As of March 31, 2024, MSDL reported total assets of $3.40 billion, total liabilities of $1.56 billion, total net assets of $1.84 billion, and an unchanged NAV per share of $20.67 Consolidated Statements of Assets and Liabilities (In thousands, except per share amounts) | | March 31, 2024 (Unaudited) | December 31, 2023 (Audited) | | :--- | :--- | :--- | | Assets | | | | Total investments, at fair value | $3,293,205 | $3,193,561 | | Cash | $64,762 | $69,705 | | Total assets | $3,401,347 | $3,306,734 | | Liabilities | | | | Debt (net) | $1,486,661 | $1,496,032 | | Total liabilities | $1,564,320 | $1,585,583 | | Net Assets | | | | Total net assets | $1,837,027 | $1,721,151 | | Total liabilities and net assets | $3,401,347 | $3,306,734 | | Net asset value per share | $20.67 | $20.67 | Consolidated Statements of Operations (unaudited) For Q1 2024, MSDL generated $99.1 million in total investment income, with net investment income of $54.7 million or $0.63 per share, leading to a $51.7 million net increase in net assets from operations Consolidated Statements of Operations (In thousands, except share amounts) | | For the Three Months Ended Mar 31, 2024 | For the Three Months Ended Mar 31, 2023 | | :--- | :--- | :--- | | Total investment income | $99,101 | $83,639 | | Net expenses | $44,014 | $39,417 | | Net investment income (loss) after taxes | $54,651 | $44,222 | | Net realized and unrealized gain (loss) | $(2,967) | $(445) | | Net increase in net assets from operations | $51,684 | $43,777 | | Net investment income per share | $0.63 | $0.62 | | Earnings per share | $0.59 | $0.62 | | Weighted average shares outstanding | 87,358,527 | 70,863,184 |