Morgan Stanley Q2 EPS Falls 38%

Core Viewpoint - Morgan Stanley Direct Lending Fund reported lower-than-expected earnings and investment income for Q2 2025, with earnings per share (GAAP) at $0.41, missing the consensus estimate of $0.51 and down from $0.66 in the previous year [1][2] Financial Performance - Earnings per share (GAAP) for Q2 2025 was $0.41, below the estimate of $0.51 and lower than the previous year's $0.66 [2] - Total investment income (GAAP) was $99.5 million, slightly below the analyst expectation of $99.99 million and down 4.5% from $104.2 million in Q2 2024 [2] - Net asset value per share decreased to $20.59, a 1.1% decline from $20.81 [2] - Expenses rose to $55.9 million from $55.2 million in the previous quarter, reflecting the end of a fee waiver [5] Investment Activity - New investment commitments totaled $149.1 million, down from $233.4 million in the previous quarter, indicating subdued investment activity [6] - The fund experienced net negative new deployment of $3.5 million due to higher sales and repayments than gross fundings [6] Portfolio Quality - Approximately 96.4% of investments are in first lien debt, with only 0.7% of the portfolio on non-accrual status [7] - The weighted average yield of debt securities decreased to 10.1% at cost and 10.2% at fair value, indicating modest yield compression [7] Liability Management - The company issued $350 million of 6.00% notes due in 2030, replacing higher-cost notes, and priced a $400 million collateralized loan obligation [8] - At the end of the quarter, the fund had $1,113.0 million in available credit and $75.8 million in cash, supporting liquidity [8] Dividend Policy - The regular dividend was maintained at $0.50 per share, consistent with the prior payout, matching net investment income per share [11] Strategic Focus - The fund specializes in senior secured credit investments, primarily targeting U.S. middle-market companies with strong market positions [3] - Governance as a Business Development Company (BDC) requires most income to be distributed as dividends, setting operational and risk boundaries [4]