Investment Overview - Total investments as of June 30, 2025, amounted to $3,831,207,000, with a fair value of $3,785,496,000, representing 100% of total investments [344]. - First lien debt constituted 96.4% of total investments at fair value, totaling $3,650,847,000 [344]. - Second lien debt represented 1.9% of total investments at fair value, amounting to $71,721,000 [344]. - Other debt investments accounted for 0.3% of total investments at fair value, totaling $9,773,000 [344]. - Equity investments made up 1.4% of total investments at fair value, amounting to $53,155,000 [344]. - As of June 30, 2025, the number of portfolio companies increased to 214 from 208 as of December 31, 2024 [346]. - The distribution of investments by risk rating showed that 96.0% were rated as Risk Rating 2 as of June 30, 2025 [352]. - The average position size of investments decreased to $17.7 million as of June 30, 2025, from $18.2 million as of December 31, 2024 [346]. Revenue and Income - The company primarily generates revenue through interest income from debt investments, with additional income from dividends, capital gains, and various fees [336]. - Total investment income for the three months ended June 30, 2025, was $99,508, a decrease from $104,188 for the same period in 2024 [353]. - Net investment income after taxes for the six months ended June 30, 2025, was $89,885, compared to $110,772 for the same period in 2024 [353]. - The weighted average yield on debt and income-producing investments at cost decreased to 10.1% as of June 30, 2025, down from 10.4% as of December 31, 2024 [346]. Expenses and Financial Performance - The company expects its general and administrative expenses to remain stable or decline as a percentage of total assets during periods of asset growth [342]. - Total expenses for the three months ended June 30, 2025, were $55,651, compared to $47,567 for the same period in 2024 [356]. - Interest and other financing expenses increased to $34,707 for Q2 2025 from $29,302 in Q2 2024, primarily due to higher average borrowings [357]. - Average borrowings outstanding for Q2 2025 were $2,046,092, up from $1,578,492 in Q2 2024, while the average interest rate decreased from 6.57% to 6.02% [357]. - Base management fees rose to $9,624 for Q2 2025 from $6,479 in Q2 2024, attributed to an increase in average gross assets [358]. Debt and Leverage - As of June 30, 2025, total outstanding debt obligations were $3,175,000, with $2,054,188 outstanding principal [375]. - The weighted average net leverage through tranche increased to 5.9x as of June 30, 2025, from 5.8x as of December 31, 2024 [346]. - Approximately 99.6% of the company's debt investments were at floating rates as of June 30, 2025 [392]. Shareholder Actions and Distributions - Total distributions declared for the first half of 2025 amounted to $1.00 per share, with 839,047 shares involved, compared to 1,066,157 shares in the same period of 2024 [371]. - The company repurchased a total of 1,548,459 shares under its 10b5-1 Plan during the first half of 2025 [373]. - The Board declared a distribution of $0.50 per share, payable on or around October 24, 2025, to shareholders of record as of September 30, 2025 [378]. Management and Governance - On July 24, 2025, Michael Occi was appointed as CEO, succeeding Jeffrey Levin, who resigned [378]. - The Investment Committee currently comprises nine individuals, including newly appointed members Jon Spivak and Rebecca Shaoul [380]. Market and Regulatory Environment - The company is regulated as a Business Development Company (BDC) under the Investment Company Act of 1940 [333]. - The company has the ability to enter into negotiated co-investment transactions alongside certain Regulated Funds, subject to compliance with SEC regulations [337]. - The CLO transaction is anticipated to close on or about September 17, 2025, and is subject to overall asset coverage requirements under the Investment Company Act of 1940 [384]. - The company considers the valuation of investments as its most significant critical estimate, which is influenced by market yields and discount rates [385]. - The company is subject to financial market risks, including valuation risk, market risk, and interest rate risk, which could materially affect its operations [387]. Future Projections - The Issuer expects to issue approximately $401.2 million in aggregate principal amount of notes, including $182 million in Class A-1 Senior Secured Floating Rate Notes due 2037 [383]. - A hypothetical increase of 300 basis points in interest rates would result in a net income of $64.38 million, while a decrease of 300 basis points would lead to a net loss of $64.38 million [392]. - The company did not engage in interest rate hedging activities during the periods covered by this report [393].
Morgan Stanley Direct Lending Fund(MSDL) - 2025 Q2 - Quarterly Report