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 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20240808695411/en/
Contacts
Investors
Michael Occi
msdl@morganstanley.com
Media
Alyson Barnes
212-762-0514
alyson.barnes@morganstanley.com
