Financial Data and Key Metrics Changes - For Q4 2024, the net asset value per share was stable at 20.83 in the previous quarter [9][31] - Net investment income for Q4 was 0.57 per share, down from 0.66 per share in the prior quarter [31] - Total investment income for Q4 was 110 million in the prior quarter [29] - The debt-to-equity ratio increased to 1.08 times from 0.99 times in the previous quarter [32] Business Line Data and Key Metrics Changes - New investment commitments in Q4 totaled approximately 144 million, an increase from 3.8 billion, representing a year-over-year increase of approximately 19% [24] - The weighted average loan-to-value was approximately 40%, with a median EBITDA of approximately 86 million [26] Market Data and Key Metrics Changes - The company noted a modest pickup in LBO activity during 2024, with private credit remaining the funding source of choice for LBOs [20] - Spreads for new loans compressed in 2024 but stabilized in the second half [18] - The company observed strong borrower fundamentals and healthy fund-level credit statistics, reflecting the strength of the middle market economy [17] Company Strategy and Development Direction - The company aims to continue sourcing and underwriting lending opportunities that offer strong risk-adjusted returns [22] - The strategy includes leveraging the broader Morgan Stanley platform to enhance deal flow and selectivity [13] - The company plans to remain defensive in its investment approach, focusing on resilient sectors amidst economic uncertainties [68] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the market generating attractive risk-adjusted investing opportunities due to a resilient economy and anticipated deregulation [17] - The company is closely monitoring potential impacts from government reforms, including tariffs, on its existing portfolio [21] - Management believes that the rebound in M&A activity will be gradual due to uncertainties in the legislative agenda [20] Other Important Information - The company declared a regular distribution of 0.50 per share for Q1 2025 [33] - An amended share repurchase program was authorized to repurchase up to $100 million of company shares at prices below its net asset value per share [34] Q&A Session Summary Question: Review of portfolio concentrations regarding tariffs and strategy changes for 2025 - Management clarified that there is no direct auto exposure, and the sectors with the longest investments are somewhat insulated from tariff impacts [36][38] Question: Outlook on M&A activity over the next three quarters - Management indicated that while private equity dry powder remains a tailwind, uncertainties around tariffs may slow M&A activity, expecting a more back-ended recovery in 2025 [41][44] Question: Trends in net investment income (NII) and rate cuts impact - Management noted that about two-thirds of the portfolio reset in Q4, with a lag remaining for the other third, impacting NII [51][53] Question: Repayment numbers and trends - Management stated that the repayment activity can be lumpy and does not indicate a specific trend for the future [59][60] Question: Leverage outlook for the year - Management confirmed the target leverage range of 1 to 1.25 times, emphasizing a focus on quality and capital preservation [72][76]
Morgan Stanley Direct Lending Fund(MSDL) - 2024 Q4 - Earnings Call Transcript