Morgan Stanley Direct Lending Fund
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
MSDL$13.62-3.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-09.
0001782524-24-000020
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0001782524-24-000029
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 140 previous paragraphs and 143 current paragraphs.
124 unchanged; 15 reworded; 4 added; 1 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 11 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (4)
Current report
(1)We reclassified certain investment composition groupings by breaking out Other Securities into Other Debt Investments and Equity. These reclassifications had no impact on the Consolidated Statement of Assets and Liabilities as of December 31, 2023.
Current report
(2) In accordance with the Company’s DRIP, shares were purchased in the open market.
Current report
(3) Includes a supplemental distribution of $0.07.
Current report
We consider the most significant accounting policies to be those related to our Investments, Revenue Recognition, Deferred Financing Costs and Debt Issuance Costs and Income Taxes. The valuation of investments is our most significant critical estimate. The most significant input is the discount rate used in yield analysis that is based on comparable market yields. Significant increases in the discount rates in isolation would result in a significantly lower fair value measurement. For a further discussion and disclosure of key inputs and considerations related to this estimate, refer to "Note 5—Fair Value Measurements" included in the notes to the consolidated financial statements.
Removed paragraphs (1)
Previous report
On April 19, 2024, we entered into an amendment (the “Fourth Amendment”) to the Truist Credit Facility. The Fourth Amendment amended certain terms of the Truist Credit Facility, including, but not limited to amendments to (a) increase the size of the facility to $1,300,000, (b) extend the revolving period and maturity date of the Truist Credit Facility with respect to the loans and commitments held by the lenders who consented to the maturity extension until April 19, 2028 and April 19, 2029, respectively, and (c) modify certain covenant restrictions.
Reworded paragraphs (15)
Previous wording
5Interest coverage for a particular portfolio company is calculated by taking credit agreement EBITDA and dividing by annualized latest reported interest expense. Total interest coverage is calculated on a weighted average basis based on total gross debt commitments (funded and unfunded). Calculation excludes recurring revenue deals which are investments in portfolio companies in which the Company lends based on a multiple of recurring revenue generated by the portfolio company and not based on a multiple of EBITDA. Portfolio company statistics are derived from the most recently available financial statements of each portfolio company as of the reported end date. Statistics of the portfolio companies have not been independently verified by us and may reflect a normalized or adjusted amount.
Current wording
5 Interest coverage for a particular portfolio company is calculated by taking credit agreement EBITDA and dividing by annualized latest reported interest expense. Total interest coverage is calculated on a weighted average basis based on total gross debt commitments (funded and unfunded). Calculation excludes recurring revenue deals which are investments in portfolio companies in which the Company lends based on a multiple of recurring revenue generated by the portfolio company and not based on a multiple of EBITDA. Portfolio company statistics are derived from the most recently available financial statements of each portfolio company as of the reported end date. Statistics of the portfolio companies have not been independently verified by us and may reflect a normalized or adjusted amount.
Previous wording
(2)Represents dollar amount of other investments funded.
Current wording
(2)Represents dollar amount of equity investments funded.
Previous wording
In the table above, total investment income increased from $83,639 for the three months ended March 31, 2023 to $99,101 for the three months ended March 31, 2024. The increase was primarily driven by our deployment of capital and rising SOFR rates on our floating-rate debt investments. The size of our investment portfolio at amortized cost increased from $2,992,717 as of March 31, 2023 to $3,323,767 as of March 31, 2024. Weighted average asset yield of debt investments at cost increased from 11.5% at March 31, 2023 to 11.9% at March 31, 2024.
Current wording
In the table above, total investment income increased from $88,894 and $172,533 for the three and six months ended June 30, 2023 to $104,188 and $203,289 for the three and six months ended June 30, 2024, respectively. The increase was primarily driven by our deployment of capital. The size of our investment portfolio at amortized cost increased from $3,041,700 as of June 30, 2023 to $3,542,035 as of June 30, 2024.
Previous wording
Interest and other financing expenses, including unused commitment fees, amortization of debt issuance costs and deferred financing costs, were $27,260 and $26,667 for the three months ended March 31, 2024 and March 31, 2023, respectively. The increase was primarily due to increased reference rates and higher cost of unsecured debt issued partially offset by lower average borrowings outstanding. For the three months ended March 31, 2024 and March 31, 2023, average borrowings outstanding were $1,462,796 and $1,584,809, respectively. The combined weighted average interest rate (excluding unused fees and financing costs) of the aggregate borrowings outstanding for the three months ended March 31, 2024 and March 31, 2023 was 6.69% and 6.23%, respectively. The combined weighted average effective interest rate (excluding unused fees only) of the aggregate borrowings outstanding for the three months ended March 31, 2024 and March 31, 2023 was 7.12% and 6.57%, respectively.
Current wording
In the table above, interest and other financing expenses, including unused commitment fees, amortization of debt issuance costs and deferred financing costs, increased from $27,907 and $54,574 for the three and six months ended June 30, 2023 to $29,302 and $56,562 for the three and six months ended June 30, 2024, respectively. The increase was primarily due to increased reference rates, as the combined weighted average interest rate was 6.57% and 6.63% for three and six months ended June 30, 2024 compared to 6.47% and 6.35% for the three and six months ended June 30, 2023.
Previous wording
Base management fees, net of waiver, were $5,132 and $1,826 for the three months ended March 31, 2024 and March 31, 2023. The increases were primarily due to an increase in average gross assets. Refer to Note 3 “Related Party Transactions” for additional information about the management fee waiver.
Current wording
Base management fees, net of waiver, were $6,479 and $1,862 for the three months ended June 30, 2024 and June 30, 2023, and $11,612 and $3,688 for the six months ended June 30, 2024 and June 30, 2023, respectively. The increases were primarily due to an increase in average gross assets. Refer to Note 3 “Related Party Transactions” for additional information about the management fee waiver.
Previous wording
The incentive fee consists of two components: (1) income based incentive fee and (2) capital gains incentive fee. The income based incentive fees, net of waiver, were $10,126 and $9,381 for the three months ended March 31, 2024 and March 31, 2023. The increases were primarily due to an increase in pre-incentive fee net investment income. Refer to Note 3 “Related Party Transactions” for additional information about the incentive fees waiver.
Current wording
The incentive fee consists of two components: (1) income based incentive fee and (2) capital gains incentive fee. The income based incentive fees, net of waiver, were $9,903 and $10,138 for the three months ended June 30, 2024 and June 30, 2023 and $20,028 and $19,519 for the six months ended June 30, 2024 and June 30, 2023. Refer to Note 3 “Related Party Transactions” for additional information about the incentive fees waiver.
Previous wording
For the three months ended March 31, 2024 net realized losses on our investments was $5,625, which was primarily due to the restructuring of three portfolio companies.
Current wording
For the three and six months ended June 30, 2024 net realized losses on our investments was $108 and $(5,517), which was primarily due to the restructuring of three portfolio companies.
Previous wording
For the three months ended March 31, 2024, net change in unrealized appreciation on our investments of $2,658, was primarily the result of the changes in spreads in the primary and secondary markets.
Current wording
For the three and six months ended June 30, 2024, net change in unrealized appreciation on our investments of $2,816 and $5,474, was primarily the result of the changes in spreads in the primary and secondary markets. For the three and six months ended June 30, 2023, net change in unrealized appreciation on our investments of $8,647 and $8,080, respectively, was primarily driven by changes in spreads in the primary and secondary markets.
Previous wording
As of March 31, 2024, we had approximately $64.8 million of cash, which taken together with our approximately $300.0 million and $623.7 million of availability under the BNP Funding Facility and the Truist Credit Facility (subject to borrowing base availability) (each as defined in Note 6. “Debt” in the notes to the accompanying consolidated financial statements), respectively, we expect to be sufficient for our investing activities and sufficient to conduct our operations in the near term. As of March 31, 2024, we believed we had adequate financial resources to satisfy unfunded portfolio company commitments of $363.8 million.
Current wording
As of June 30, 2024, we had approximately $93.0 million of unrestricted cash and cash equivalents, which taken together with our approximately $406.0 million and $864.4 million of availability under the BNP Funding Facility and the Truist Credit Facility (subject to borrowing base availability) (each as defined in Note 6. “Debt” in the notes to the accompanying consolidated financial statements), respectively, we expect to be sufficient for our investing activities and sufficient to conduct our operations in the near term. As of June 30, 2024, we believed we had adequate financial resources to satisfy unfunded portfolio company commitments of $511.2 million.
Previous wording
During the three months ended March 31, 2023, we did not issue any capital calls to purchase Common Stock pursuant to such subscription agreements.
Current wording
During the six months ended June 30, 2023, we did not issue any capital calls to purchase Common Stock pursuant to such subscription agreements.
Previous wording
The following table summarize our distributions declared and payable for the three months ended March 31, 2024 and March 31, 2023, respectively:
Current wording
The following table summarize our distributions declared and payable for the six months ended June 30, 2024 and June 30, 2023, respectively:
Previous wording
(1) In connection with the distributions with payment dates of January 25, 2024 and January 25, 2023, 618,878 and 445,235 DRIP shares were issued, respectively.
Current wording
(1) In connection with the distributions with payment dates of January 25, 2024 and January 25, 2023, 615,660 and 445,235 DRIP shares were issued, respectively.
Previous wording
As of March 31, 2024, no shares were repurchased under the 10b5-1 Plan.
Current wording
For the six months ended June 30, 2024, no shares were repurchased under the 10b5-1 Plan.
Previous wording
(1)As of March 31, 2024 and December 31, 2023, a letter of credit of $3,998 and $253, respectively, was outstanding, which reduced the unused availability under the Truist Credit Facility by the same amount. Under the Truist Credit Facility, the Company may borrow in U.S. dollars or certain other permitted currencies. As of March 31, 2024 and December 31, 2023, the Company had borrowings denominated in Euros (EUR) of 238 and 238, respectively.
Current wording
(1)As of June 30, 2024 and December 31, 2023, a letter of credit of $4,161 and $253, respectively, was outstanding, which reduced the unused availability under the Truist Credit Facility by the same amount. Under the Truist Credit Facility, the Company may borrow in U.S. dollars or certain other permitted currencies. As of June 30, 2024 and December 31, 2023, the Company had borrowings denominated in Euros (EUR) of 238 and 238, respectively and Canadian dollars (CAD) of $300 and 0, respectively.
Previous wording
(2)As of March 31, 2024, the carrying value of the Company’s 2027 Notes and 2025 Notes were presented on the Consolidated Statements of Assets and Liabilities net of unamortized debt issuance costs of $3,219 and $1,763, and unamortized original issuance discount of $614 and $0, respectively. As of December 31, 2023, the carrying value of the Company’s 2027 Notes and 2025 Notes were presented on the Consolidated Statements of Assets and Liabilities net of unamortized debt issuance costs of $3,499 and $2,065, and unamortized original issuance discount of $667 and $0, respectively.
Current wording
(2)As of June 30, 2024, the carrying value of the Company’s 2027 Notes, 2025 Notes and 2029 Notes were presented net of unamortized debt issuance costs of $2,940, $1,461 and $3,930 and unamortized original issuance discount of $560, $0 and $3,789, respectively. As of December 31, 2023, the carrying value of the Company’s 2027 Notes, 2025 Notes and 2029 Notes were presented net of unamortized debt issuance costs of $3,499, $2,065 $0, and unamortized original issuance discount of $667, $0 and $0, respectively.