Morgan Stanley Direct Lending Fund Announces June 30, 2024 Financial Results and Declares Third Quarter 2024 Dividend of $0.50 per Share

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 second quarter ended June 30, 2024.

“In the second quarter of 2024, our first full quarter operating as a public company, MSDL generated strong operating results,” said Jeffrey Levin, President and Chief Executive Officer of Morgan Stanley Direct Lending Fund. “This performance was supported by continued credit stability in our portfolio of senior, sponsor-backed middle market loans.”

QUARTERLY HIGHLIGHTS

• Net investment income of $56.1 million, or $0.63 per share;
• Net asset value of $20.83 per share, as compared to $20.67 as of March 31, 2024;
• Debt-to-equity was 0.90x as of June 30, 2024, as compared to 0.81x as of March 31, 2024;
• New investment commitments of $673.9 million, fundings of $499.7 million and sales and repayments of $289.3 million, resulting in net funded deployment of $210.4 million; and
• The Company’s Board of Directors (the “Board”) declared a regular dividend of $0.50 per share, paid on July 25, 2024 to stockholders of record as of June 28, 2024.

SELECTED FINANCIAL HIGHLIGHTS

For the Quarter Ended

 

June 30, 2024

March 31, 2024

Net investment income per share

$0.63

$0.63

Net realized and unrealized gains (losses) per share1

$0.03

($0.05)

Earnings per share

$0.66

$0.59

Regular dividend per share

$0.50

$0.50

 

As of

($ in thousands, except per share information)

June 30, 2024

March 31, 2024

Investments, at fair value

$3,514,286

$3,293,205

Total debt outstanding, at principal

$1,675,474

$1,492,257

Net assets

$1,861,961

$1,837,027

Net asset value per share

$20.83

$20.67

Debt to equity

0.90x

0.81x

Net debt to equity

0.85x

0.77x

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.

RESULTS OF OPERATIONS

Total investment income for the second quarter ended June 30, 2024 was $104.2 million, compared to $99.1 million for the first quarter ended March 31, 2024. The increase was driven by deployment of capital and prepayment related income.

Total expenses for the quarter ended June 30, 2024 were $48.1 million, compared to $44.5 million for the quarter ended March 31, 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 June 30, 2024 was $56.1 million, or $0.63 per share, compared to $54.7 million, or $0.63 per share, for the quarter ended March 31, 2024.

For the quarter ended June 30, 2024, net change in unrealized appreciation on investments was $2.8 million.

PORTFOLIO AND INVESTMENT ACTIVITY

As of June 30, 2024, the Company’s investment portfolio had a fair value of approximately $3.5 billion, comprised of 192 portfolio companies across 34 industries, with an average investment size of $18.3 million, or 0.5% of our total portfolio on a fair value basis. The composition of the Company’s investments was the following:

 

 

June 30, 2024

March 31, 2024

($ in thousands)

 

Cost

 

Fair Value

 

% of Total Investments at Fair Value

 

Cost

 

Fair Value

 

% of Total Investments at Fair Value

First Lien Debt

 

$3,356,586

 

$3,345,743

 

95.3%

 

$3,131,129

 

$3,115,404

 

94.6%

Second Lien Debt

 

122,416

 

103,144

 

2.9

 

136,708

 

118,107

 

3.6

Other Debt Investments

 

9,289

 

8,467

 

0.2

 

3,430

 

2,163

 

0.1

Equity

 

53,735

 

56,932

 

1.6

 

52,500

 

57,531

 

1.7

Total

 

$3,542,035

 

$3,514,286

 

100.0%

 

$3,323,767

 

$3,293,205

 

100.0%

Investment activity for the three months ended June 30, 2024 and March 31, 2024, was as follows:

Investment Activity:

June 30, 2024

March 31, 2024

New investment commitments, at par

$673,902

$232,120

Investment fundings

$499,684

$168,357

Number of new Investment commitments in portfolio companies

22

9

Number of portfolio companies exited or fully repaid

8

3

Total weighted average yield of investments in debt securities at amortized cost and fair value was 11.6% and 11.7%, respectively, as of June 30, 2024, compared to 11.9% and 12.0%, respectively, as of March 31, 2024. Floating rate debt investments as a percentage of total portfolio on a fair value basis was 99.6% as of June 30, 2024, compared to 99.9% as of March 31, 2024. As of June 30, 2024, portions of two portfolio companies were on non-accrual status, representing approximately 0.3% of total investments at amortized cost.

CAPITAL AND LIQUIDITY

As of June 30, 2024, the Company had total principal debt outstanding of $1,675.5 million, including $194.0 million outstanding in the Company’s BNP funding facility, $431.5 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 newly issued senior unsecured notes due May 2029. The combined weighted average interest rate on debt outstanding was 6.57% for the quarter ended June 30, 2024. As of June 30, 2024, the Company had $1,270.4 million of availability under its credit facilities and $93.0 million in unrestricted cash. Debt to equity was 0.90x and 0.81x as of June 30, 2024 and March 31, 2024, respectively.

OTHER DEVELOPMENTS

• On August 6, 2024, the Board declared a distribution of $0.50 per share, which is payable on October 25, 2024 to shareholders of record as of September 30, 2024.
• The Board previously declared a $0.10 per share special dividend to shareholders of record as of August 5, 2024.
• In July, Moody’s affirmed MSDL’s Baa3 (stable) rating.

CONFERENCE CALL INFORMATION

Morgan Stanley Direct Lending Fund will host a conference call on Friday, August 9, 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: 5963189

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

 

 

June 30, 2024

 

December 31, 2023

 

 

(Unaudited)

 

(Audited)

Assets

 

 

 

 

Non-controlled/non-affiliated investments, at fair value (amortized cost of $3,542,035 and $3,226,776)

 

$

3,514,286

 

$

3,193,561

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

 

 

94,966

 

 

69,705

Deferred financing costs

 

 

17,000

 

 

14,317

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

 

 

27,594

 

 

28,884

Subscription receivable

 

 

—

 

 

41

Receivable for investments sold/repaid

 

 

136

 

 

173

Prepaid expenses and other assets

 

 

1,917

 

 

53

Total assets

 

 

3,655,899

 

 

3,306,734

 

 

 

 

 

Liabilities

 

 

 

 

Debt (net of unamortized debt issuance costs of $8,331 and $5,564)

 

 

1,664,423

 

 

1,496,032

Payable for investment purchased

 

 

31,469

 

 

8

Payable to affiliates (Note 3)

 

 

1,508

 

 

2,870

Dividends payable

 

 

44,704

 

 

49,968

Management fees payable

 

 

6,479

 

 

2,012

Income based incentive fees payable

 

 

9,903

 

 

11,766

Interest payable

 

 

20,664

 

 

18,823

Accrued expenses and other liabilities

 

 

14,788

 

 

4,104

Total liabilities

 

 

1,793,938

 

 

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; 89,407,009 and 83,278,831 shares issued and outstanding)

 

 

89

 

 

83

Paid-in capital in excess of par value

 

 

1,831,835

 

 

1,712,609

Total distributable earnings (loss)

 

 

30,037

 

 

8,459

Total net assets

 

$

1,861,961

 

$

1,721,151

Total liabilities and net assets

 

$

3,655,899

 

$

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 Six Months Ended

 

 

June 30, 2024

 

June 30, 2023

 

June 30, 2024

 

June 30, 2023

Investment Income:

 

 

 

 

 

 

 

 

From non-controlled/non-affiliated investments:

 

 

 

 

 

 

 

 

Interest income

 

$

99,072

 

 

$

86,573

 

 

$

193,703

 

 

$

168,290

 

Payment-in-kind

 

 

2,850

 

 

 

622

 

 

 

5,494

 

 

 

1,063

 

Dividend income

 

 

646

 

 

 

504

 

 

 

1,211

 

 

 

1,000

 

Other income

 

 

1,620

 

 

 

1,195

 

 

 

2,881

 

 

 

2,180

 

Total investment income

 

 

104,188

 

 

 

88,894

 

 

 

203,289

 

 

 

172,533

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

Interest and other financing expenses

 

 

29,302

 

 

 

27,907

 

 

 

56,562

 

 

 

54,574

 

Management fees

 

 

8,639

 

 

 

7,446

 

 

 

16,869

 

 

 

14,750

 

Income based incentive fees

 

 

11,554

 

 

 

10,138

 

 

 

22,890

 

 

 

19,519

 

Professional fees

 

 

1,687

 

 

 

847

 

 

 

2,904

 

 

 

2,088

 

Directors’ fees

 

 

128

 

 

 

88

 

 

 

274

 

 

 

168

 

Administrative service fees

 

 

17

 

 

 

60

 

 

 

42

 

 

 

114

 

General and other expenses

 

 

51

 

 

 

197

 

 

 

159

 

 

 

365

 

Total expenses

 

 

51,378

 

 

 

46,683

 

 

 

99,700

 

 

 

91,578

 

Management fees waiver (Note 3)

 

 

(2,160

)

 

 

(5,584

)

 

 

(5,257

)

 

 

(11,062

)

Incentive fees waiver (Note 3)

 

 

(1,651

)

 

 

—

 

 

 

(2,862

)

 

 

—

 

Net expenses

 

 

47,567

 

 

 

41,099

 

 

 

91,581

 

 

 

80,516

 

Net investment income (loss) before taxes

 

 

56,621

 

 

 

47,795

 

 

 

111,708

 

 

 

92,017

 

Excise tax expense

 

 

500

 

 

 

—

 

 

 

936

 

 

 

—

 

Net investment income (loss) after taxes

 

 

56,121

 

 

 

47,795

 

 

 

110,772

 

 

 

92,017

 

 

 

 

 

 

 

 

 

 

Net realized and unrealized gain (loss):

 

 

 

 

 

 

 

 

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

 

 

108

 

 

 

—

 

 

 

(5,517

)

 

 

122

 

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

 

 

2,816

 

 

 

8,647

 

 

 

5,474

 

 

 

8,080

 

Net realized and unrealized gain (loss)

 

 

2,924

 

 

 

8,647

 

 

 

(43

)

 

 

8,202

 

Net increase (decrease) in net assets resulting from operations

 

$

59,045

 

 

$

56,442

 

 

$

110,729

 

 

$

100,219

 

 

 

 

 

 

 

 

 

 

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

 

$

0.63

 

 

$

0.67

 

 

$

1.25

 

 

$

1.29

 

Earnings per share (basic and diluted)

 

$

0.66

 

 

$

0.79

 

 

$

1.25

 

 

$

1.41

 

Weighted average shares outstanding

 

 

89,271,839

 

 

 

71,337,323

 

 

 

88,315,183

 

 

 

71,101,563

 

 

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