MSDL Morgan Stanley Direct Lending Fund

Morgan Stanley Direct Lending Fund (NYSE: MSDL) (“MSDL” or the “Company”), a business development company externally managed by MS Capital Partners Adviser Inc. (the “Adviser”), today announced its financial results for the third quarter ended September 30, 2024.

QUARTERLY HIGHLIGHTS

• Net investment income of $58.7 million, or $0.66 per share, as compared to $56.1 million, or $0.63 per share, for the quarter ended June 30, 2024;
• Net asset value of $20.83 per share, flat as compared to June 30, 2024;
• Debt-to-equity was 0.99x as of September 30, 2024, as compared to 0.90x as of June 30, 2024;
• New investment commitments of $455.4 million, fundings of $377.0 million and sales and repayments of $252.9 million, resulting in net funded deployment of $124.1 million; and
• The Company’s Board of Directors (the “Board”) declared a regular dividend of $0.50 per share to shareholders of record as of September 30, 2024 as well as a special dividend, which was previously declared by the Board on January 11, 2024, of $0.10 per share to stockholders of record as of August 5, 2024.

SELECTED FINANCIAL HIGHLIGHTS

For the Quarter Ended

 

September 30, 2024

June 30, 2024

Net investment income per share

$0.66

$0.63

Net realized and unrealized gains (losses) per share1

($0.06)

$0.03

Earnings per share

$0.60

$0.66

Regular dividend per share

$0.50

$0.50

Special dividend per share

$0.10

-

1 Amount shown may not correspond for the period as it includes the effect of the timing of the distribution and the issuance of common stock.

 

As of

($ in thousands, except per share information)

September 30, 2024

June 30, 2024

Investments, at fair value

$3,640,324

$3,514,286

Total debt outstanding, at principal

$1,841,987

$1,675,474

Net assets

$1,853,722

$1,861,961

Net asset value per share

$20.83

$20.83

Debt to equity

0.99x

0.90x

Net debt to equity

0.94x

0.85x

RESULTS OF OPERATIONS

Total investment income for the third quarter ended September 30, 2024 was $109.8 million, compared to $104.2 million for the second quarter ended June 30, 2024. The increase was driven by deployment of capital and repayment related income.

Total expenses for the quarter ended September 30, 2024 were $51.0 million, compared to $48.1 million for the quarter ended June 30, 2024. The increase in expenses quarter over quarter was attributable to higher interest and other financing expenses driven by an increase in weighted average debt outstanding.

Net investment income for the quarter ended September 30, 2024 was $58.7 million, or $0.66 per share, compared to $56.1 million, or $0.63 per share, for the quarter ended June 30, 2024.

For the quarter ended September 30, 2024, net change in unrealized appreciation on investments was $5.4 million, offset by realized losses of $11.0 million.

PORTFOLIO AND INVESTMENT ACTIVITY

As of September 30, 2024, the Company’s investment portfolio had a fair value of approximately $3.6 billion, comprised of 200 portfolio companies across 33 industries, with an average investment size of $18.2 million, or 0.5% of our total portfolio on a fair value basis. The composition of the Company’s investments was the following:

 

 

September 30, 2024

June 30, 2024

($ in thousands)

 

Cost

 

Fair Value

 

% of Total Investments at Fair Value

 

Cost

 

Fair Value

 

% of Total Investments at Fair Value

First Lien Debt

 

$3,506,164

 

$3,492,302

 

96.0%

 

$3,356,586

 

$3,345,743

 

95.3%

Second Lien Debt

 

93,422

 

84,074

 

2.3

 

122,416

 

103,144

 

2.9

Other Debt Investments

 

9,525

 

8,809

 

0.2

 

9,289

 

8,467

 

0.2

Equity

 

53,507

 

55,139

 

1.5

 

53,735

 

56,932

 

1.6

Total

 

$3,662,618

 

$3,640,324

 

100.0%

 

$3,542,035

 

$3,514,286

 

100.0%

Investment activity for the three months ended September 30, 2024 and June 30, 2024, was as follows:

Investment Activity:

September 30, 2024

June 30, 2024

New investment commitments, at par

$455,365

$673,902

Investment fundings

$377,019

$499,684

Number of new Investment commitments in portfolio companies

19

22

Number of portfolio companies exited or fully repaid

11

8

Total weighted average yield of investments in debt securities at amortized cost and fair value was 11.0% and 11.0%, respectively, as of September 30, 2024, compared to 11.6% and 11.7%, respectively, as of June 30, 2024. Floating rate debt investments as a percentage of total portfolio on a fair value basis was 99.6% as of September 30, 2024, unchanged compared to June 30, 2024. As of September 30, 2024, certain investments in two portfolio companies were on non-accrual status, representing approximately 0.2% of total investments at amortized cost.

CAPITAL AND LIQUIDITY

As of September 30, 2024, the Company had total principal debt outstanding of $1,842.0 million, including $246.0 million outstanding in the Company’s BNP funding facility, $546.0 million outstanding in the Company’s Truist credit facility, $275.0 million outstanding in the Company’s senior unsecured notes due September 2025, $425.0 million outstanding in the Company’s senior unsecured notes due February 2027 and $350.0 million outstanding in the Company’s senior unsecured notes due May 2029. Additionally, on August 21, 2024, the Company executed an amendment to the BNP Funding Facility, which extended the maturity from September 2028 to August 2029 and reduced the applicable margin on borrowings from 2.85% to 2.25%. The combined weighted average interest rate on debt outstanding was 6.45% for the quarter ended September 30, 2024. As of September 30, 2024, the Company had $1,102.7 million of availability under its credit facilities and $88.4 million in unrestricted cash. Debt to equity was 0.99x and 0.90x as of September 30, 2024 and June 30, 2024, respectively.

SHARE REPURCHASES

On January 25, 2024, the Company entered into a share repurchase plan to acquire up to $100 million in the aggregate of the Company’s Common Stock at prices below NAV. For the three months ended September 30, 2024, the Company purchased 429,653 shares at an average price of $20.06 per share.

OTHER DEVELOPMENTS

• On November 4, 2024, the Board declared a regular distribution of $0.50 per share, which is payable on January 24, 2025 to shareholders of record as of December 31, 2024.
• The Board previously declared a $0.10 per share special dividend to shareholders of record as of November 4, 2024, which is payable on January 24, 2025.

CONFERENCE CALL INFORMATION

Morgan Stanley Direct Lending Fund will host a conference call on Friday, November 8, 2024 at 10:00 am ET to review its financial results and conduct a question-and-answer session. All interested parties are invited to participate in the live earnings conference call by using the following dial-in numbers or audio webcast link available on the MSDL Investor Relations website:

• Audio Webcast
• Conference Call
• Domestic: 323-994-2093
• International: 888-394-8218
• Passcode: 1797706

To avoid potential delays, please join at least 10 minutes prior to the start of the earnings call. An archived replay will also be available on the MSDL Investor Relations website.

About Morgan Stanley Direct Lending Fund

Morgan Stanley Direct Lending Fund (NYSE: MSDL) is a non-diversified, externally managed specialty finance company focused on lending to middle-market companies. MSDL has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended. MSDL is externally managed by MS Capital Partners Adviser Inc., an indirect, wholly owned subsidiary of Morgan Stanley. MSDL is not a subsidiary of or consolidated with Morgan Stanley. For more information about Morgan Stanley Direct Lending Fund, please visit www.msdl.com.

Forward-Looking Statements

Statements included herein or on the webcast/conference call may constitute “forward-looking statements,” which relate to future events or MSDL’s future performance or financial condition. These statements are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. Actual results and conditions may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in MSDL’s filings with the U.S. Securities and Exchange Commission. MSDL undertakes no duty to update any forward-looking statements made herein or on the webcast/conference call.

Consolidated Statements of Assets and Liabilities

(In thousands, except share and per share amounts)

 

 

 

As of

 

 

September 30, 2024

 

December 31, 2023

 

 

(Unaudited)

 

(Audited)

Assets

 

 

 

 

Non-controlled/non-affiliated investments, at fair value (amortized cost of $3,662,618 and $3,226,776)

 

$

3,640,324

 

$

3,193,561

Cash and cash equivalents (restricted cash of $2,000 and $0)

 

 

90,428

 

 

69,705

Deferred financing costs

 

 

17,499

 

 

14,317

Interest and dividend receivable from non-controlled/non-affiliated investments

 

 

31,793

 

 

28,884

Subscription receivable

 

 

—

 

 

41

Receivable for investments sold

 

 

1,869

 

 

173

Prepaid expenses and other assets

 

 

11,455

 

 

53

Total assets

 

 

3,793,368

 

 

3,306,734

 

 

 

 

 

Liabilities

 

 

 

 

Debt (net of unamortized debt issuance costs of $7,420 and $5,564)

 

 

1,841,565

 

 

1,496,032

Payable for investment purchased

 

 

7,101

 

 

8

Payable to affiliates (Note 3)

 

 

173

 

 

2,870

Dividends payable

 

 

53,527

 

 

49,968

Management fees payable

 

 

6,825

 

 

2,012

Income based incentive fees payable

 

 

8,448

 

 

11,766

Interest payable

 

 

16,824

 

 

18,823

Accrued expenses and other liabilities

 

 

5,713

 

 

4,104

Total liabilities

 

 

1,939,646

 

 

1,585,583

 

 

 

 

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

 

Net assets

 

 

 

 

Preferred stock, $0.001 par value (1,000,000 shares authorized; no shares issued and outstanding)

 

 

—

 

 

—

Common stock, par value $0.001 (100,000,000 shares authorized; 89,008,972 and 83,278,831 shares issued and outstanding)

 

 

89

 

 

83

Paid-in capital in excess of par value

 

 

1,823,833

 

 

1,712,609

Total distributable earnings (loss)

 

 

29,800

 

 

8,459

Total net assets

 

$

1,853,722

 

$

1,721,151

Total liabilities and net assets

 

$

3,793,368

 

$

3,306,734

Net asset value per share

 

$

20.83

 

$

20.67

Consolidated Statements of Operations (unaudited)

(In thousands, except share amounts)

 

 

 

For the Three Months Ended

 

For the Nine Months Ended

 

 

September 30, 2024

 

September 30, 2023

 

September 30, 2024

 

September 30, 2023

Investment Income:

 

 

 

 

 

 

 

 

From non-controlled/non-affiliated investments:

 

 

 

 

 

 

 

 

Interest income

 

$

105,129

 

 

$

90,977

 

 

$

298,832

 

 

$

259,267

 

Payment-in-kind

 

 

2,150

 

 

 

1,141

 

 

 

7,644

 

 

 

2,204

 

Dividend income

 

 

670

 

 

 

564

 

 

 

1,881

 

 

 

1,564

 

Other income

 

 

1,803

 

 

 

1,769

 

 

 

4,684

 

 

 

3,949

 

Total investment income

 

 

109,752

 

 

 

94,451

 

 

 

313,041

 

 

 

266,984

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

Interest and other financing expenses

 

 

33,153

 

 

 

29,686

 

 

 

89,715

 

 

 

84,260

 

Management fees

 

 

9,100

 

 

 

7,754

 

 

 

25,969

 

 

 

22,503

 

Income based incentive fees

 

 

10,128

 

 

 

10,727

 

 

 

33,018

 

 

 

30,246

 

Professional fees

 

 

1,708

 

 

 

1,296

 

 

 

4,612

 

 

 

3,385

 

Directors’ fees

 

 

130

 

 

 

85

 

 

 

404

 

 

 

253

 

Administrative service fees

 

 

138

 

 

 

27

 

 

 

180

 

 

 

141

 

General and other expenses

 

 

120

 

 

 

118

 

 

 

279

 

 

 

483

 

Total expenses

 

 

54,477

 

 

 

49,693

 

 

 

154,177

 

 

 

141,271

 

Management fees waiver (Note 3)

 

 

(2,275

)

 

 

(5,816

)

 

 

(7,532

)

 

 

(16,878

)

Incentive fees waiver (Note 3)

 

 

(1,680

)

 

 

—

 

 

 

(4,542

)

 

 

—

 

Net expenses

 

 

50,522

 

 

 

43,877

 

 

 

142,103

 

 

 

124,393

 

Net investment income (loss) before taxes

 

 

59,230

 

 

 

50,574

 

 

 

170,938

 

 

 

142,591

 

Excise tax expense

 

 

501

 

 

 

—

 

 

 

1,437

 

 

 

—

 

Net investment income (loss) after taxes

 

 

58,729

 

 

 

50,574

 

 

 

169,501

 

 

 

142,591

 

 

 

 

 

 

 

 

 

 

Net realized and unrealized gain (loss):

 

 

 

 

 

 

 

 

Net realized gain (loss) on non-controlled/non-affiliated investments

 

 

(10,965

)

 

 

5

 

 

 

(16,482

)

 

 

127

 

Net change in unrealized appreciation (depreciation) on non-controlled/non-affiliated investments

 

 

5,442

 

 

 

22,829

 

 

 

 

 

10,916

 

 

 

 

30,909

 

Net realized and unrealized gain (loss)

 

 

(5,523

)

 

 

22,834

 

 

 

(5,566

)

 

 

31,036

 

Net increase (decrease) in net assets resulting from operations

 

$

59,045

 

 

$

73,408

 

 

$

163,935

 

 

$

173,627

 

 

 

 

 

 

 

 

 

 

Net investment income (loss) per share (basic and diluted)

 

$

0.66

 

 

$

0.70

 

 

$

1.91

 

 

$

2.00

 

Earnings per share (basic and diluted)

 

$

0.60

 

 

$

1.02

 

 

$

1.85

 

 

$

2.43

 

Weighted average shares outstanding

 

 

89,264,686

 

 

 

71,874,113

 

 

 

88,633,994

 

 

 

71,361,910

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20241107601356/en/

Investors Michael Occi msdl@morganstanley.com

Media Alyson Barnes 212-762-0514 alyson.barnes@morganstanley.com