Company Overview - The company is a non-diversified, externally managed specialty finance company focused on lending to middle-market companies, regulated as a BDC under the Investment Company Act of 1940[359]. - The company is not a subsidiary of Morgan Stanley and has no obligation for financial support from Morgan Stanley[359]. - The company aims to maintain its qualification as a BDC and as a regulated investment company under the Internal Revenue Code[367]. Investment Strategy - The investment objective is to achieve attractive risk-adjusted returns primarily through current income from senior secured term loans issued by U.S. middle-market companies, typically generating annual EBITDA between $15 million and $200 million[360]. - Revenue is primarily generated from interest income on debt investments, with additional income from dividends, capital gains, and various fees, reflecting a focus on directly originated senior secured term loans[362][365]. - The company expects its debt investments to have a stated term of five to eight years, typically bearing interest at a floating rate based on benchmarks like SOFR[361]. - The level of investment activity can vary significantly based on factors such as available debt for middle-market companies and the general economic environment[364]. Financial Performance - Total investment income for Q3 2025 was $99,722, a decrease of 9.4% from $109,752 in Q3 2024[383]. - Net investment income after taxes for Q3 2025 was $43,730, down 25.5% from $58,729 in Q3 2024[383]. - The total portfolio value as of September 30, 2025, was $3,837,722, an increase from $3,662,618 at the end of Q3 2024[377]. - The weighted average yield on debt and income-producing investments at cost was 9.7% as of September 30, 2025, compared to 10.4% at the end of 2024[377]. - New investment commitments in portfolio companies totaled $183,049 for Q3 2025, significantly lower than $455,365 in Q3 2024[377]. - Total investment income decreased from $109,752 to $99,722 for the three months ended September 30, 2025, and from $313,041 to $300,690 for the nine months ended September 30, 2025, primarily due to declining base rates and repricing on the existing portfolio[385]. - Weighted average yield at cost decreased to 9.7% as of September 30, 2025, from 11.0% as of September 30, 2024[385]. Portfolio and Investment Metrics - The number of portfolio companies increased to 218 as of September 30, 2025, from 208 at the end of 2024[377]. - The average position size of investments decreased to $17.3 million as of September 30, 2025, from $18.2 million at the end of 2024[377]. - The percentage of debt investments with one or more financial covenants was 59.1% as of September 30, 2025, down from 64.6% at the end of 2024[377]. - The percentage of performing debt bearing a floating rate at fair value remained stable at 99.6% as of September 30, 2025[377]. - Approximately 99.6% of the Company's debt investments were at floating rates as of September 30, 2025[422]. Expenses and Liabilities - Operating expenses include investment advisory fees, administrative costs, and other operational expenses, with expectations for general and administrative expenses to remain stable or decline during asset growth periods[367][368]. - Interest and other financing expenses increased to $33,903 for the three months ended September 30, 2025, from $33,153 for the same period in 2024, and to $102,788 for the nine months ended September 30, 2025, from $89,715 in 2024[388]. - Average borrowings outstanding increased to $2,021,437 for the three months ended September 30, 2025, compared to $1,799,879 for the same period in 2024[388]. - As of September 30, 2025, the total outstanding debt obligations were $3,484,000, with $2,078,120 outstanding and $1,396,105 unused[408]. Shareholder Returns and Distributions - Total distributions declared for the nine months ended September 30, 2025, amounted to $1.50 per share, compared to $1.60 per share for the same period in 2024[402]. - The Company declared a distribution of $0.50 per share on November 4, 2025, payable on or around January 23, 2026[412]. - The company entered into a share repurchase plan to acquire up to $100 million of its Common Stock at prices below its net asset value per share[404]. - Total shares repurchased under the Original Company 10b5-1 Plan from January 1 to September 30, 2025, amounted to 1,699,876 shares[405]. - The average price paid per share for repurchases in March 2025 was $20.38, with a total of 459,142 shares purchased[405]. IPO and Management Fees - The company closed its IPO on January 26, 2024, issuing 5,000,000 shares at a public offering price of $20.67 per share, resulting in net cash proceeds of approximately $97.1 million[396]. - The management fee waiver expired on January 24, 2025, leading to an increase in base management fees to $9,628 for the three months ended September 30, 2025, from $6,825 in 2024[389]. Market Sensitivity - A hypothetical increase of 300 basis points in interest rates would result in a net income increase of $72,523,000[422]. - The net realized gain for Q3 2025 was $26, compared to a loss of $10,965 in Q3 2024[383]. - Net realized gains were $26 and $666 for the three and nine months ended September 30, 2025, respectively, compared to net realized losses of $10,965 and $16,482 for the same periods in 2024[392].
Morgan Stanley Direct Lending Fund(MSDL) - 2025 Q3 - Quarterly Report