Financial Data and Key Metrics Changes - Net asset value per share increased by $0.16 to $20.83 per share, with net investment income of $0.63 per share consistent with the first quarter [6][14] - Total investment income for the second quarter was $104.2 million, up from $99.1 million in the prior quarter, driven by recurring interest income [13] - Total expenses for the second quarter were $48.1 million compared to $44.5 million in the prior quarter [14] - Debt-to-equity ratio increased to 0.9 times from 0.81 times as of March 31, 2024 [15] Business Line Data and Key Metrics Changes - New investment commitments totaled approximately $673.9 million in 46 portfolio companies, with net funded deployment of $210 million compared to $97 million in the first quarter [6][13] - Portfolio at fair value was $3.5 billion, with 95% in first-lien debt and 3% in second-lien debt [11] - Weighted average loan-to-value was approximately 40%, with a weighted average EBITDA of portfolio companies at $150 million [12] Market Data and Key Metrics Changes - Gross asset yields remained elevated, and credit performance was solid, with deal flow expected to accelerate [8][9] - The capital market rebound is on track, with sponsor M&A likely to accelerate, although not in a straight line [9] Company Strategy and Development Direction - The company aims to achieve a target leverage of 1 to 1.25 in the second half of the year without stretching on credit [6] - The focus is on delivering shareholder value through a combination of low expenses and a thoughtful fee structure [7] - The company believes its differentiated origination platform enhances its ability to find attractive lending opportunities [20] Management's Comments on Operating Environment and Future Outlook - The first half of 2024 was marked by economic outperformance, with a strong risk appetite for Private Credit as an asset class [8] - Management noted that predicting repayments is challenging, but there has been an uptick in repricing and repayments [21][23] - The company remains cautious in capital deployment due to macroeconomic uncertainties [22] Other Important Information - The Board of Directors declared a regular distribution of $0.50 per share for the third quarter, with an estimated spillover net investment income of $63.5 million [17] - The company closed an offering of $350 million in unsecured notes due in 2029, with a fixed coupon of 6.15% [16] Q&A Session Summary Question: How long will it take to rotate into more unique, non-overlapping positions? - Management believes they have a unique origination platform and focuses on high-quality opportunities, regardless of overlap with other BDCs [18][20] Question: What are the expectations for repayments and refinancing in the second half? - Management finds it hard to predict repayments but notes an increase in gross originations and a cautious approach to capital deployment [21][22] Question: Thoughts on the upper middle market or middle market segments for potential originations? - Management sees opportunities across the size spectrum and emphasizes the importance of bespoke analysis for each deal [26][30]
Morgan Stanley Direct Lending Fund(MSDL) - 2024 Q3 - Earnings Call Transcript