Morgan Stanley Direct Lending Fund(MSDL) - 2025 Q1 - Quarterly Report

FORM 10-Q Filing Information Details the filing of Morgan Stanley Direct Lending Fund's Quarterly Report on Form 10-Q for Q1 2025, including key registrant information - Morgan Stanley Direct Lending Fund filed its Quarterly Report on Form 10-Q for the period ended March 31, 2025[1][2] Table: Registrant Information | Indicator | Value | | :--- | :--- | | Registrant Name | Morgan Stanley Direct Lending Fund | | State of Incorporation | Delaware | | Commission File Number | 814-01332 | | Trading Symbol | MSDL | | Exchange | The New York Stock Exchange | | Filer Status | Accelerated filer | | Common Stock Outstanding (May 7, 2025) | 87,146,275 shares | TABLE OF CONTENTS Outlines the report's structure into financial and other information, covering statements, analysis, risks, and controls - The report is structured into two main parts: Part I (Financial Information) and Part II (Other Information), detailing the company's financial statements, management's discussion and analysis, market risks, controls, legal proceedings, risk factors, equity sales, defaults, and exhibits[6] Part I. Financial Information Presents the company's unaudited consolidated financial statements and management's discussion and analysis for the reporting period Item 1. Consolidated Financial Statements (unaudited) This section presents the unaudited consolidated financial statements for Morgan Stanley Direct Lending Fund, including statements of assets and liabilities, operations, changes in net assets, cash flows, schedules of investments, and comprehensive notes, providing a detailed financial overview for the quarter ended March 31, 2025, compared to prior periods Consolidated Statements of Assets and Liabilities Details the company's financial position, including total investments, assets, liabilities, and net assets, as of March 31, 2025, and December 31, 2024 Table: Consolidated Statements of Assets and Liabilities (in thousands) | Metric (in thousands) | March 31, 2025 (Unaudited) | December 31, 2024 (Audited) | | :--- | :--- | :--- | | Total investments, at fair value | $3,788,178 | $3,791,494 | | Cash and cash equivalents | $69,400 | $72,372 | | Total assets | $3,912,171 | $3,912,018 | | Debt (net) | $2,008,946 | $1,973,479 | | Total liabilities | $2,094,364 | $2,069,862 | | Total net assets | $1,817,807 | $1,842,156 | | Net asset value per share | $20.65 | $20.81 | - Total net assets decreased by $24.3 million from December 31, 2024, to March 31, 2025, primarily due to a decrease in distributable earnings and common stock repurchases[9][15] Consolidated Statements of Operations Presents the company's revenues, expenses, and net income from operations for the three months ended March 31, 2025, and 2024 Table: Consolidated Statements of Operations (in thousands) | Metric (in thousands) | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total investment income | $101,458 | $99,101 | | Total expenses | $55,619 | $48,322 | | Management fees waiver | $(641) | $(3,098) | | Incentive fees waiver | $(375) | $(1,210) | | Net expenses | $54,603 | $44,014 | | Net investment income (loss) after taxes | $46,228 | $54,651 | | Net realized gain (loss) | $549 | $(5,625) | | Net change in unrealized appreciation (depreciation) | $(17,107) | $2,658 | | Net increase (decrease) in net assets from operations | $29,670 | $51,684 | | Net investment income (loss) per share | $0.52 | $0.63 | | Earnings per share | $0.34 | $0.59 | - Net investment income after taxes decreased by $8.4 million year-over-year, primarily due to higher net expenses and lower incentive fee waivers, despite an increase in total investment income[13][332][334] - The company experienced a net change in unrealized depreciation of $17.1 million in Q1 2025, a significant shift from the $2.7 million appreciation in Q1 2024, contributing to a lower net increase in net assets from operations[13][341] Consolidated Statements of Changes in Net Assets Outlines the changes in the company's net assets, including operational results, distributions, and stock transactions, for the periods presented Table: Consolidated Statements of Changes in Net Assets (in thousands) | Metric (in thousands) | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net assets at beginning of period | $1,842,156 | $1,721,151 | | Net increase in net assets from operations | $29,670 | $51,684 | | Total distributions to stockholders | $(44,010) | $(44,447) | | Repurchase of common stock | $(10,009) | — | | Issuance of common stock, net | — | $95,847 | | Reinvestment of dividends | — | $12,792 | | Total increase (decrease) in net assets | $(24,349) | $115,876 | | Net assets at end of period | $1,817,807 | $1,837,027 | | Dividends per share | $0.50 | $0.50 | - Net assets decreased by $24.3 million in Q1 2025, primarily due to distributions to stockholders and common stock repurchases, contrasting with a significant increase in Q1 2024 driven by common stock issuance and dividend reinvestment[15] Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2025, and 2024 Table: Consolidated Statements of Cash Flows (in thousands) | Metric (in thousands) | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $34,104 | $(53,655) | | Net cash provided by (used in) financing activities | $(37,062) | $48,712 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(2,958) | $(4,943) | | Cash, cash equivalents and restricted cash, end of period | $69,400 | $64,762 | | Excise tax paid | $2,567 | $1,457 | | Interest expense paid | $36,946 | $35,558 | | Reinvestment of dividends | — | $12,792 | - Operating activities generated $34.1 million in cash in Q1 2025, a significant improvement from a net cash outflow of $53.7 million in Q1 2024, primarily driven by higher proceeds from investment sales and principal repayments[17] - Financing activities resulted in a net cash outflow of $37.1 million in Q1 2025, a reversal from a net inflow of $48.7 million in Q1 2024, mainly due to common stock repurchases and no new stock issuance[17] Consolidated Schedules of Investments Provides a detailed breakdown of the company's investment portfolio by type, industry, geography, and risk characteristics as of March 31, 2025 Table: Investments by Type (Fair Value in thousands) | Investment Type | March 31, 2025 (Fair Value) | December 31, 2024 (Fair Value) | | :--- | :--- | :--- | | First Lien Debt | $3,652,320 | $3,654,538 | | Second Lien Debt | $71,190 | $69,367 | | Other Debt Investments | $9,603 | $9,198 | | Equity | $55,065 | $58,391 | | Total Investments | $3,788,178 | $3,791,494 | Table: Investments by Industry (% of Total Investments at Fair Value) | Industry | March 31, 2025 (% of Total Investments at Fair Value) | December 31, 2024 (% of Total Investments at Fair Value) | | :--- | :--- | :--- | | Software | 19.5% | 18.9% | | Insurance Services | 12.0% | 12.0% | | IT Services | 8.0% | 8.9% | | Commercial Services & Supplies | 8.6% | 9.1% | | Diversified Consumer Services | 4.9% | 4.7% | | Real Estate Management & Development | 4.1% | 3.6% | | Automobile Components | 3.1% | 3.0% | | Automobiles | 3.6% | 3.6% | | Financial Services | 2.6% | 2.5% | | Interactive Media & Services | 2.6% | 2.6% | | Construction & Engineering | 2.1% | 2.0% | | Electronic Equipment, Instruments & Components | 2.1% | 2.1% | | Food Products | 1.9% | 2.0% | | Health Care Technology | 1.7% | 1.6% | | Health Care Providers & Services | 4.9% | 5.0% | | Industrial Conglomerates | 1.3% | 1.2% | | Containers & Packaging | 1.2% | 1.2% | | Machinery | 1.0% | 0.9% | | Ground Transportation | 0.7% | 0.6% | | Consumer Staples Distribution & Retail | 0.7% | 0.7% | | Biotechnology | 0.7% | 0.7% | | Multi-Utilities | 0.6% | 0.6% | | Chemicals | 0.5% | 0.5% | | Air Freight & Logistics | 0.4% | 0.3% | | Building Products | 0.4% | 0.4% | | Aerospace & Defense | 2.2% | 2.2% | | Life Sciences Tools & Services | 0.3% | 0.3% | | Pharmaceuticals | 0.3% | 0.3% | | Wireless Telecommunication Services | 0.2% | 0.1% | | Electrical Equipment | 0.1% | 0.1% | | Beverages | 0.1% | — | | Total | 100.0% | 100.0% | Table: Geographic Composition of Investments (% of Total Investments at Fair Value) | Geographic Composition | March 31, 2025 (% of Total Investments at Fair Value) | December 31, 2024 (% of Total Investments at Fair Value) | | :--- | :--- | :--- | | United States | 95.2% | 95.4% | | Canada | 4.3% | 4.1% | | United Kingdom | 0.3% | 0.3% | | Australia | 0.2% | 0.2% | | Total | 100.0% | 100.0% | Table: Investment Characteristics | Investment Characteristic | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Number of portfolio companies | 210 | 208 | | Number of new investment commitments | 9 | 60 | | Number of portfolio companies exited or fully repaid | 7 | 24 | | Percentage of performing debt bearing a floating rate, at fair value | 99.6% | 99.6% | | Weighted average yield on debt and income producing investments, at cost | 10.2% | 10.4% | | Weighted average net leverage through tranche | 5.8x | 5.8x | | Weighted average interest coverage | 1.7x | 1.6x | | Weighted average loan to value | 39.7% | 39.7% | | Percentage of debt investments with one or more financial covenants | 62.5% | 64.6% | | Percentage of our debt investments that are sponsor backed | 99.1% | 99.7% | | Percentage of loans and other debt in support of LBOs and acquisitions | 71.8% | 69.2% | | Average position size of our investments | $18.0 million | $18.2 million | Table: Investment Risk Ratings (Fair Value in thousands) | Risk Rating | March 31, 2025 (Fair Value) | December 31, 2024 (Fair Value) | | :--- | :--- | :--- | | Risk rating 1 | $40,513 (1.1%) | $62,631 (1.7%) | | Risk rating 2 | $3,678,978 (97.1%) | $3,662,337 (96.6%) | | Risk rating 3 | $65,253 (1.7%) | $61,597 (1.6%) | | Risk rating 4 | $3,434 (0.1%) | $4,929 (0.1%) | | Total | $3,788,178 (100.0%) | $3,791,494 (100.0%) | Table: Investment Status (Amortized Cost in thousands) | Investment Status | March 31, 2025 (Amortized Cost) | December 31, 2024 (Amortized Cost) | | :--- | :--- | :--- | | Performing | $3,818,816 (99.8%) | $3,805,010 (99.8%) | | Non-accrual | $7,915 (0.2%) | $8,117 (0.2%) | | Total | $3,826,731 (100.0%) | $3,813,127 (100.0%) | Notes to the Consolidated Financial Statements Provides detailed explanations and disclosures supporting the consolidated financial statements, covering accounting policies, agreements, and investment specifics (1) ORGANIZATION Describes Morgan Stanley Direct Lending Fund as an externally managed BDC focused on U.S. middle-market lending, including its IPO details - Morgan Stanley Direct Lending Fund is a non-diversified, externally managed Business Development Company (BDC) focused on lending to U.S. middle-market companies, aiming for attractive risk-adjusted returns primarily through senior secured term loans[165][167] - The company commenced investment operations in January 2020 and completed its initial public offering (IPO) on January 26, 2024, listing its common stock on the NYSE under the symbol 'MSDL'[166][169] (2) SIGNIFICANT ACCOUNTING POLICIES Outlines the key accounting principles and practices used in preparing the financial statements, including investment valuation and tax policies - The financial statements are prepared in accordance with U.S. GAAP for interim financial information and ASC Topic 946, Financial Services – Investment Companies[171] - Investments are generally placed on non-accrual status when there is reasonable doubt of full principal or interest collection, with accrued interest reversed and original issue discount/market discount accretion ceased[186] Table: Non-Accrual Investments (in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Investments on non-accrual status (number of portfolio companies) | 2 | 2 | | Amortized cost of non-accrual investments (in thousands) | $7,915 | $8,117 | - The company evaluates tax positions to determine if they are 'more likely than not' to be sustained by tax authorities and accrues a 4% nondeductible federal excise tax on undistributed income if distribution requirements are not met[193][194] (3) SIGNIFICANT AGREEMENTS AND RELATED PARTY TRANSACTIONS Details agreements with the Investment Adviser, including fee structures and waivers, and outlines other transactions with affiliated entities - The company pays its Investment Adviser (MS Capital Partners Adviser Inc.) a Base Management Fee and an Incentive Fee, with certain waivers in effect for the period from January 24, 2024, to January 24, 2025[201][203][214] Table: Investment Advisory Fees (in thousands) | Fee Type (in thousands) | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Base Management Fees (net of waiver) | $8,977 | $5,132 | | Income based incentive fees (net of waiver) | $9,468 | $10,126 | | Management fees payable (as of period end) | $8,977 | $7,042 | | Income based incentive fees payable (as of period end) | $9,468 | $8,956 | - MS Credit Partners Holdings, Inc., an affiliate of the Investment Adviser, holds approximately 11.1% of the Company's outstanding common stock as of March 31, 2025[225] - Morgan Stanley & Co. LLC, an affiliate, served as an underwriter for the IPO and co-agent for private placements of notes, receiving fees for these services[226][227][228] (4) INVESTMENTS Provides a detailed breakdown of the company's investment portfolio by type, cost, and fair value for the reporting periods Table: Investments by Type (Cost and Fair Value in thousands) - March 31, 2025 | Investment Type | March 31, 2025 (Cost) | March 31, 2025 (Fair Value) | % of Total Investments at Fair Value | | :--- | :--- | :--- | :--- | | First Lien Debt | $3,679,424 | $3,652,320 | 96.3% | | Second Lien Debt | $82,134 | $71,190 | 1.9% | | Other Debt Investments | $11,008 | $9,603 | 0.3% | | Equity | $54,165 | $55,065 | 1.5% | | Total | $3,826,731 | $3,788,178 | 100.0% | Table: Investments by Type (Cost and Fair Value in thousands) - December 31, 2024 | Investment Type | December 31, 2024 (Cost) | December 31, 2024 (Fair Value) | % of Total Investments at Fair Value | | :--- | :--- | :--- | :--- | | First Lien Debt | $3,669,886 | $3,654,538 | 96.5% | | Second Lien Debt | $78,803 | $69,367 | 1.8% | | Other Debt Investments | $9,755 | $9,198 | 0.2% | | Equity | $54,683 | $58,391 | 1.5% | | Total | $3,813,127 | $3,791,494 | 100.0% | - The portfolio remains heavily concentrated in First Lien Debt, accounting for over 96% of total investments at fair value for both periods[230] (5) FAIR VALUE MEASUREMENTS Explains the methodology for valuing investments, including the three-level hierarchy and the significant use of unobservable inputs - The company values investments using a three-level hierarchy based on input observability, with Level 3 inputs requiring significant management judgment for illiquid securities[235][236] Table: Fair Value Hierarchy of Investments (in thousands) | Investment Category (Fair Value in thousands) | Level 1 | Level 2 | Level 3 | Total | | :--- | :--- | :--- | :--- | :--- | | March 31, 2025 | | | | | | First Lien Debt | $— | $20,641 | $3,631,679 | $3,652,320 | | Second Lien Debt | $— | $21,978 | $49,212 | $71,190 | | Other Debt Investments | $— | $— | $9,603 | $9,603 | | Equity | $— | $— | $37,872 | $37,872 | | Subtotal | $— | $42,619 | $3,728,366 | $3,770,985 | | Investment measured at net asset value | | | | $17,193 | | Total Investments | | | | $3,788,178 | | December 31, 2024 | | | | | | First Lien Debt | $— | $51,329 | $3,603,209 | $3,654,538 | | Second Lien Debt | $— | $36,016 | $33,351 | $69,367 | | Other Debt Investments | $— | $— | $9,198 | $9,198 | | Equity | $— | $— | $41,198 | $41,198 | | Subtotal | $— | $87,345 | $3,686,956 | $3,774,301 | | Investment measured at net asset value | | | | $17,193 | | Total Investments | | | | $3,791,494 | - The vast majority of investments (over 98%) are classified as Level 3, indicating reliance on unobservable inputs and significant management judgment for fair value determination[243] Table: Level 3 Investments - Valuation Techniques and Unobservable Inputs (March 31, 2025) | Asset Category (Level 3, March 31, 2025) | Fair Value (in thousands) | Valuation Technique | Significant Unobservable Input | Weighted Average | | :--- | :--- | :--- | :--- | :--- | | Investments in first lien debt | $3,628,634 | Yield Analysis | Discount Rate | 10.20% | | Investments in second lien debt | $46,149 | Yield Analysis | Discount Rate | 18.14% | | Other debt | $8,475 | Yield Analysis | Discount Rate | 14.77% | | Preferred equity | $18,930 | Income Approach | Discount Rate | 12.84% | | Common equity | $11,705 | Market Approach | EBITDA Multiple | 12.17x | (6) DEBT Details the company's debt obligations, including credit facilities and unsecured notes, along with associated interest rates and compliance Table: Debt Obligations (Outstanding Principal in thousands) | Debt Obligation (in thousands) | March 31, 2025 (Outstanding Principal) | December 31, 2024 (Outstanding Principal) | | :--- | :--- | :--- | | BNP Funding Facility | $316,000 | $316,000 | | Truist Credit Facility | $647,588 | $617,401 | | 2027 Notes | $425,000 | $425,000 | | 2025 Notes | $275,000 | $275,000 | | 2029 Notes | $350,000 | $350,000 | | Total | $2,013,588 | $1,983,401 | Table: Debt Interest Rates and Outstanding Amounts | Debt Metric | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Combined weighted average interest rate | 6.11% | 6.69% | | Combined weighted average effective interest rate | 6.52% | 7.12% | | Combined weighted average debt outstanding (in thousands) | $2,030,967 | $1,462,796 | - The company was in compliance with all covenants and requirements of its credit facilities and unsecured notes as of March 31, 2025, and December 31, 2024[263] - The 2029 Notes include an interest rate swap agreement where the company receives a fixed rate of 6.413% and pays a floating rate of SOFR + 2.37% on $350 million, with a fair value of $4.6 million as of March 31, 2025[280] (7) COMMITMENTS AND CONTINGENCIES Outlines the company's unfunded commitments for debt investments and other potential liabilities Table: Unfunded Commitments (in thousands) | Commitment Type (in thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Unfunded commitments to fund delayed draw and revolving senior secured loans | $584,877 | $564,839 | - The company has unfunded commitments for debt investments, which are in the form of lines of credit or delayed draw commitments, requiring funding upon request by portfolio companies[284] (8) NET ASSETS Details the components of net assets, including distributable earnings, equity issuance, and share repurchase activities Table: Distributable Earnings (Loss) (in thousands) | Distributable Earnings (Loss) (in thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total distributable earnings (loss), beginning of period | $29,624 | $8,459 | | Net investment income (loss) after taxes | $46,228 | $220,235 | | Net realized gain (loss) | $549 | $(16,467) | | Net unrealized appreciation (depreciation) | $(17,107) | $11,796 | | Dividends declared | $(44,010) | $(195,729) | | Total distributable earnings (loss), end of period | $15,284 | $29,624 | - The company entered into Equity Distribution Agreements on March 28, 2025, to issue and sell up to $300 million of common stock through Sales Agents, with commissions up to 1.5% of gross sales[287][288] - The company adopted an 'opt out' Dividend Reinvestment Plan (DRIP) on January 26, 2024, allowing stockholders to reinvest cash dividends into additional common stock[290] Table: Share Repurchase Activity (January 1 - March 31, 2025) | Share Repurchase Activity (in thousands, except per share) | January 1 - March 31, 2025 | | :--- | :--- | | Total Number of Shares Purchased | 491,332 | | Average Price Paid per Share | $20.35 | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | 491,332 | | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions) | $90.2 | (9) EARNINGS (LOSS) PER SHARE Presents the basic and diluted earnings per share, reflecting the net increase or decrease in net assets from operations Table: Earnings (Loss) Per Share (in thousands, except per share) | Metric | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net increase/(decrease) in net assets resulting from operations (in thousands) | $29,670 | $51,684 | | Weighted average shares outstanding | 88,413,652 | 87,358,527 | | Basic and diluted earnings (loss) per share | $0.34 | $0.59 | - Earnings per share decreased from $0.59 in Q1 2024 to $0.34 in Q1 2025, reflecting a lower net increase in net assets from operations[295] (10) CONSOLIDATED FINANCIAL HIGHLIGHTS Summarizes key financial performance indicators, including net asset value, total return, and expense ratios, for the reporting periods Table: Consolidated Financial Highlights | Metric | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net asset value, beginning of period | $20.81 | $20.67 | | Net investment income (loss) per share | $0.52 | $0.63 | | Net unrealized and realized gain (loss) per share | $(0.18) | $(0.05) | | Net increase (decrease) in net assets from operations per share | $0.34 | $0.58 | | Dividends declared per share | $(0.50) | $(0.50) | | Net asset value, end of period | $20.65 | $20.67 | | Per share market value, end of period | $19.96 | $21.55 | | Total return based on net asset value | 1.78% | 2.42% | | Total return based on market value | (0.90)% | 6.78% | | Ratio of net expenses to average net assets | 10.52% | 8.10% | | Ratio of net investment income to average net assets | 11.67% | 13.69% | | Asset coverage ratio | 190.00% | 223.00% | | Portfolio turnover rate | 5.46% | 2.21% | - The asset coverage ratio decreased from 223.00% in Q1 2024 to 190.00% in Q1 2025, while the ratio of net expenses to average net assets increased from 8.10% to 10.52%[296] (11) SENIOR SECURITIES Provides details on the company's senior securities, including outstanding amounts and asset coverage per unit Table: Senior Securities Outstanding (in thousands) | Senior Security Class | March 31, 2025 (Total Amount Outstanding, in thousands) | December 31, 2024 (Total Amount Outstanding, in thousands) | | :--- | :--- | :--- | | 2025 Notes | $275,000 | $275,000 | | 2027 Notes | $425,000 | $425,000 | | 2029 Notes | $350,000 | $350,000 | | Truist Credit Facility | $647,588 | $617,401 | | BNP Funding Facility | $316,000 | $316,000 | | Asset Coverage per Unit (March 31, 2025) | $1,900 | $1,930 | | Asset Coverage per Unit (December 31, 2024) | $1,930 | $1,930 | - The asset coverage per unit for all senior securities was $1,900 as of March 31, 2025, indicating the company's ability to cover its indebtedness[302][303] (12) SUBSEQUENT EVENTS Reports significant events occurring after the reporting period, including the declaration of a dividend - On May 8, 2025, the Board declared a distribution of $0.50 per share, payable on or around July 25, 2025, to shareholders of record as of June 30, 2025[305] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, results of operations, and liquidity for the quarter ended March 31, 2025. It includes an overview of the business, key components of operating results, portfolio and investment activity, and a discussion of financial condition, liquidity, and capital resources, along with recent developments and critical accounting estimates Overview Introduces the company's business model as an externally managed BDC focused on U.S. middle-market senior secured term loans - Morgan Stanley Direct Lending Fund is a non-diversified, externally managed BDC focused on originating senior secured term loans for U.S. middle-market companies, primarily those with private equity sponsors[310][311] - The company's investment objective is to achieve attractive risk-adjusted returns through current income and capital appreciation, with debt investments typically bearing floating interest rates and having a term of five to eight years[311][312] - The company has exemptive relief from the SEC to co-invest with affiliates, subject to certain conditions and board approvals, and has applied for new exemptive relief[314][315] Key Components of Our Results of Operations Explains the primary drivers of the company's financial performance, including investment income and operating expenses - Investment activity levels fluctuate based on factors like debt availability, economic conditions, and competitive environment[316] - Revenue is primarily generated from interest income on debt investments, with additional income from dividends, capital gains, and various loan-related fees[317][318] - Primary operating expenses include investment advisory fees (base management and incentive fees), administrative service fees, and other general and administrative costs, which are expected to be relatively stable or decline as a percentage of total assets during growth periods[319][320] Portfolio and Investment Activity Reviews the composition and changes in the investment portfolio, including new investments, sales, and risk ratings Table: Investments by Type (Fair Value in thousands) | Investment Type | March 31, 2025 (Fair Value) | December 31, 2024 (Fair Value) | | :--- | :--- | :--- | | First Lien Debt | $3,652,320 | $3,654,538 | | Second Lien Debt | $71,190 | $69,367 | | Other Debt Investments | $9,603 | $9,198 | | Equity | $55,065 | $58,391 | | Total | $3,788,178 | $3,791,494 | Table: Investment Activity (Amortized Cost in thousands) | Investment Activity (at amortized cost, in thousands) | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | New investments committed (Gross principal balance) | $233,368 | $232,120 | | Investments, beginning of period | $3,813,127 | $3,226,776 | | New investments purchased | $205,647 | $168,357 | | Investments sold or repaid | $(201,838) | $(71,681) | | Investments, end of period | $3,826,731 | $3,323,767 | - The Investment Adviser uses an internal risk rating system (1-4) to assess the risk profile of debt investments, with Risk Rating 1 being the least risky and Risk Rating 4 indicating substantial loss potential[326][327][328][329] Consolidated Results of Operations Analyzes the company's financial performance, including investment income, expenses, and net changes in assets, for the reporting periods Table: Consolidated Results of Operations (in thousands) | Operating Result (in thousands) | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total investment income | $101,458 | $99,101 | | Net expenses | $54,603 | $44,014 | | Net investment income (loss) after taxes | $46,228 | $54,651 | | Net realized gain (loss) | $549 | $(5,625) | | Net change in unrealized appreciation (depreciation) | $(17,107) | $2,658 | | Net increase (decrease) in net assets from operations | $29,670 | $51,684 | - Total investment income increased to $101.5 million in Q1 2025 from $99.1 million in Q1 2024, driven by capital deployment and an increase in the investment portfolio size, despite a decrease in weighted average yield at cost[332][333] - Net expenses increased to $54.6 million in Q1 2025 from $44.0 million in Q1 2024, primarily due to higher interest and other financing expenses and increased management fees (net of waiver)[334][335][336] - The company recorded net realized gains of $549 thousand in Q1 2025, a positive shift from net realized losses of $5.6 million in Q1 2024, mainly due to equity position sales/repayments[340] - Net change in unrealized depreciation was $17.1 million in Q1 2025, primarily due to changes in secondary market spreads and financial performance of portfolio companies, contrasting with appreciation in Q1 2024[341] Financial Condition, Liquidity and Capital Resources Assesses the company's financial health, cash position, available credit, and ability to meet commitments and funding needs - As of March 31, 2025, the company had $65.6 million in unrestricted cash and cash equivalents, along with $284.0 million and $800.1 million available under the BNP Funding Facility and Truist Credit Facility, respectively, deemed sufficient for near-term investing and operations[343] - The company believes it has adequate financial resources to satisfy $584.9 million in unfunded portfolio company commitments as of March 31, 2025[343] Table: Debt Obligations (Outstanding Principal in thousands) | Debt Obligation (in thousands) | March 31, 2025 (Outstanding Principal) | December 31, 2024 (Outstanding Principal) | | :--- | :--- | :--- | | BNP Funding Facility | $316,000 | $316,000 | | Truist Credit Facility | $647,588 | $617,401 | | 2027 Notes | $425,000 | $425,000 | | 2025 Notes | $275,000 | $275,000 | | 2029 Notes | $350,000 | $350,000 | | Total | $2,013,588 | $1,983,401 | Recent Developments Highlights key events occurring after the reporting period, including bylaw amendments and dividend declarations - On April 23, 2025, the Board adopted the Second Amended and Restated Bylaws, removing sections related to Ratification and Interested Directors[356] - On May 8, 2025, the Board declared a distribution of $0.50 per share, payable on or around July 25, 2025, to shareholders of record as of June 30, 2025[356] Critical Accounting Estimates Identifies the most significant accounting judgments, particularly the valuation of investments and its sensitivity to discount rates - The most significant critical accounting estimate is the valuation of investments, particularly the discount rate used in yield analysis, where increases in the rate would lead to significantly lower fair value measurements[357] Related Party Transactions Describes the company's various business relationships and agreements with affiliated or related parties - The company has various business relationships with affiliated or related parties, including the Investment Advisory Agreement and the Administration Agreement[358][363] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details the company's exposure to financial market risks, including valuation risk, market risk, and interest rate risk, and discusses how these risks are managed or could impact financial performance - The company is subject to valuation risk due to its primary investments in illiquid debt and equity securities, which are valued at fair value by the Board with significant judgment[360] - Market risk affects the value of securities due to broad economic, political, and industry trends, with global interconnectedness increasing the potential for adverse impacts from various external events[361][364] Table: Annualized Impact of Interest Rate Changes on Net Income (in thousands) | Basis Point Change - Interest Rates | Annualized Impact on Interest Income (in thousands) | Annualized Impact on Interest Expense (in thousands) | Annualized Impact on Net Income (in thousands) | | :--- | :--- | :--- | :--- | | Up 300 basis points | $113,731 | $(39,408) | $74,323 | | Up 200 basis points | $75,821 | $(26,272) | $49,549 | | Up 100 basis points | $37,910 | $(13,136) | $24,774 | | Up 25 basis points | $9,478 | $(3,284) | $6,194 | | Down 25 basis points | $(9,478) | $3,284 | $(6,194) | | Down 100 basis points | $(37,910) | $13,136 | $(24,774) | | Down 200 basis points | $(75,821) | $26,272 | $(49,549) | | Down 300 basis points | $(113,731) | $39,408 | $(74,323) | - As of March 31, 2025, approximately 99.6% of the company's debt investments were at floating rates, making net investment income sensitive to interest rate changes[365][366] Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal controls over financial reporting for the quarter ended March 31, 2025 - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[368] - There were no material changes in internal control over financial reporting during the fiscal quarter ended March 31, 2025[369] Part II. Other Information Covers non-financial disclosures, including legal proceedings, risk factors, equity sales, defaults, and exhibits Item 1. Legal Proceedings This section states that the company, its Adviser, and Administrator are not currently subject to any material legal proceedings, nor are any threatened - The company, its Adviser, and Administrator are not currently involved in any material legal proceedings, nor are any material legal proceedings threatened against them[370] Item 1A. Risk Factors This section refers readers to the risk factors previously disclosed in the Annual Report on Form 10-K, noting that additional unknown or immaterial risks may also affect the business - Readers should carefully consider the risk factors disclosed in Item 1A of the Annual Report on Form 10-K, as these, along with other unknown or currently immaterial risks, could materially affect the company's business, financial condition, and operating results[371] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's share repurchase activities under its 10b5-1 plans for the three months ended March 31, 2025 Table: Share Repurchase Activity (January 1 - March 31, 2025) | Share Repurchase Activity (in thousands, except per share) | January 1 - March 31, 2025 | | :--- | :--- | | Total Number of Shares Purchased | 491,332 | | Average Price Paid per Share | $20.35 | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | 491,332 | | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions) | $90.2 | - The company repurchased 491,332 shares of common stock for an average price of $20.35 per share during the three months ended March 31, 2025, under its Original and Amended and Restated 10b5-1 Plans[374] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities - There were no defaults upon senior securities during the reporting period[375] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the company[375] Item 5. Other Information This section confirms that none of the company's directors or executive officers adopted or terminated any Rule 10b5-1 trading plans during the fiscal quarter ended March 31, 2025 - No directors or executive officers adopted or terminated any Rule 10b5-1 trading plans for the purchase or sale of company securities during the fiscal quarter ended March 31, 2025[376] Item 6. Exhibits This section lists all exhibits filed as part of the report, including corporate governance documents, equity distribution agreements, and certifications - Key exhibits filed include the Certificate of Amendment to Certificate of Incorporation, Second Amended and Restated Bylaws, Form of Equity Distribution Agreement, and various certifications from the Chief Executive Officer and Chief Financial Officer[376] SIGNATURES Confirms the official signing of the report by the company's Chief Executive Officer and Chief Financial Officer - The report was signed on May 8, 2025, by Jeffrey S. Levin, Director and Chief Executive Officer, and David Pessah, Chief Financial Officer[378]