8-K
Morgan Stanley Direct Lending Fund (MSDL)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) ofthe
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):May 9, 2024
Morgan Stanley Direct Lending Fund
(Exact name of registrant as specified in itscharter)
| Delaware | 814-01332 | 84-2009506 |
|---|---|---|
| (State or other jurisdiction<br><br> <br>of incorporation) | (Commission<br><br> <br>File Number) | (IRS Employer<br><br> <br>Identification Number) |
| 1585 Broadway<br><br> <br>New York, NY | 10036 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
1 (212) 761-4000
(Registrant’s telephone number, includingarea code)
Not Applicable
(Former Name or Former Address, if changedsince last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written<br> communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ¨ | Soliciting<br> material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ¨ | Pre-commencement<br> communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ¨ | Pre-commencement<br> communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title<br> of each class | Trading<br> Symbol(s) | Name<br> of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.001 per share | MSDL | The New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x
Item 2.02. Results of Operations and Financial Condition.
On May 9, 2024, Morgan Stanley Direct Lending Fund (the “Company”) issued a press release announcing its financial results for the first quarter ended March 31, 2024. The text of the press release is included as Exhibit 99.1 to this Form 8-K.
The information disclosed under this Item 2.02, including Exhibit 99.1 hereto, is being “furnished” and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, and shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 7.01. Regulation FD Disclosure.
On May 8, 2024, the Board of Directors of the Company declared a regular distribution to stockholders in the amount of $0.50 per share. The distribution will be payable on or around July 25, 2024 to stockholders of record as of June 28, 2024.
The information disclosed under this Item 7.01, including Exhibit 99.1 hereto, is being “furnished” and shall not be deemed “filed” by the Company for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that Section, and shall not be deemed incorporated by reference into any filing under the Securities Act, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits:
| Exhibit<br><br>Number | Description |
|---|---|
| 99.1 | Press Release of Morgan Stanley Direct Lending Fund, dated May 9, 2024. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Dated: May 9, 2024 | MORGAN STANLEY DIRECT LENDING FUND | |
|---|---|---|
| By: | /s/ David Pessah | |
| David Pessah | ||
| Chief Financial Officer |
Exhibit 99.1
Morgan Stanley Direct Lending Fund AnnouncesMarch 31, 2024 Financial Results and Declares Second Quarter 2024 Dividend of $0.50 per Share
NEW YORK, NY, May 9, 2024 — 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 first quarter ended March 31, 2024.
“MSDL generated strong first quarter operating results, supported by continued stable credit performance,” said Jeffrey Levin, President and Chief Executive Officer of Morgan Stanley Direct Lending Fund. “We have constructed what we believe to be a resilient middle-market portfolio of senior, sponsor-backed loans and believe we are well positioned to generate strong risk-adjusted returns for our investors as market trends evolve.”
QUARTERLY HIGHLIGHTS
| · | Net investment income of $54.7 million, or $0.63 per share; |
|---|---|
| · | Net asset value of $20.67 per share, unchanged as compared to December 31, 2023, despite dilution<br>from our initial public offering (“IPO”); |
| · | Debt-to-equity was 0.81x as of March 31, 2024, as compared to 0.87x as of December 31, 2023; |
| · | New investment commitments of $232.1 million, fundings of $168.4 million and sales and repayments of $71.7<br>million, resulting in net funded portfolio increase of $96.7 million; and |
| · | The Company’s Board of Directors (the “Board”) declared a regular dividend of $0.50<br>per share, paid on April 25, 2024 to stockholders of record as of March 29, 2024. |
SELECTED FINANCIAL HIGHLIGHTS
| For the Quarter Ended | ||||||
|---|---|---|---|---|---|---|
| March 31, 2024 | December 31, 2023 | |||||
| Net investment income per share | $ | 0.63 | $ | 0.67 | ||
| Net realized and unrealized gains (losses) per share^1^ | $ | (0.05 | ) | $ | 0.03 | |
| Earnings per share | $ | 0.59 | $ | 0.70 | ||
| Regular dividend per share | $ | 0.50 | $ | 0.50 | ||
| Special dividend per share | - | $ | 0.10 | |||
| As of | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| ($<br> in thousands, except per share information) | March 31, 2024 | December 31, 2023 | ||||
| Investments, at fair value | $ | 3,293,205 | $ | 3,193,561 | ||
| Total debt outstanding, at principal | $ | 1,492,257 | $ | 1,502,263 | ||
| Net assets | $ | 1,837,027 | $ | 1,721,151 | ||
| Net asset value per share | $ | 20.67 | $ | 20.67 | ||
| Debt to equity | 0.81 | x | 0.87 | x | ||
| Net debt to equity | 0.77 | x | 0.83 | x |
**^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 first quarter ended March 31, 2024 was $99.1 million, compared to $100.8 million for the fourth quarter ended December 31, 2023. The slight decrease was driven by a reduction in non-recurring repayment related income.
Total operating expenses for the quarter ended March 31, 2024 were $44.5 million, compared to $45.3 million for the quarter ended December 31, 2023. The decrease in operating expenses quarter over quarter was attributable to lower interest and other financing expenses and lower incentive fees due to the partial incentive fee waiver for one year after the Company’s IPO and partially offset by higher management fees.
Net investment income for the quarter ended March 31, 2024 was $54.7 million, or $0.63 per share, compared to $55.5 million, or $0.67 per share, for the quarter ended December 31, 2023.
For the quarter ended March 31, 2024, net change in unrealized appreciation on investments was $2.7 million offset by realized losses of $5.6 million.
PORTFOLIO AND INVESTMENT ACTIVITY
As of March 31, 2024, the Company’s investment portfolio had a fair value of approximately $3.3 billion, comprised of 178 portfolio companies across 31 industries, with an average investment size of $18.5 million, or 0.6% of our total portfolio on a fair value basis. The composition of the Company’s investments was the following:
| March 31, 2024 | December 31, 2023 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ($ in thousands) | Cost | Fair Value | % of Total<br><br> Investments at <br><br>Fair Value | Cost | Fair Value | % of Total<br><br> Investments Fair <br><br>Value | ||||||||
| First Lien Debt | $ | 3,131,129 | $ | 3,115,404 | 94.6 | % | $ | 3,027,413 | $ | 3,004,544 | 94.1 | % | ||
| Second Lien Debt | 136,708 | 118,107 | 3.6 | 146,014 | 132,415 | 4.1 | ||||||||
| Other Investments | 55,930 | 59,694 | 1.8 | 53,349 | 56,602 | 1.8 | ||||||||
| Total | $ | 3,323,767 | $ | 3,293,205 | 100.0 | % | $ | 3,226,776 | $ | 3,193,561 | 100.0 | % |
Investment activity for the three months ended March 31, 2024 and December 31, 2023, was as follows:
| Investment Activity: | March 31, 2024 | December 31, 2023 | ||
|---|---|---|---|---|
| New investment commitments, at par | $ | 232,120 | $ | 242,891 |
| Investment fundings | $ | 168,357 | $ | 253,867 |
| Number of new Investment commitments in portfolio companies | 9 | 12 | ||
| Number of portfolio companies exited or fully repaid | 3 | 5 |
Total weighted average yield of investments in debt securities at amortized cost and fair value was 11.9% and 12.0%, respectively, as of March 31, 2024, compared to 12.0% and 12.1%, respectively as of December 31, 2023. Floating rate debt investments as a percentage of total portfolio on a fair value basis remained unchanged from December 31, 2023 at 99.9% as of March 31, 2024. As of March 31, 2024, three investments were on non-accrual status, representing approximately 0.4% of total investments at amortized cost.
CAPITAL AND LIQUIDITY
As of March 31, 2024, the Company had total principal debt outstanding of $1,492.3 million, including $300.0 million outstanding in the Company’s BNP funding facility, $492.3 million outstanding in the Company’s Truist credit facility, $275.0 million outstanding in the Company’s senior unsecured notes due September 2025, and $425.0 million outstanding in the Company’s senior unsecured notes due February 2027. The combined weighted average interest rate on debt outstanding was 6.69% for the quarter ended March 31, 2024. As of March 31, 2024, the Company had $923.7 million of availability under its credit facilities and $64.8 million in cash. Debt to equity was 0.81x and 0.87x as of March 31, 2024 and December 31, 2023, respectively, with the decline primarily attributable to the IPO being executed during the first quarter.
RECENT DEVELOPMENTS
| · | On May 8, 2024, the Board declared a distribution of $0.50 per share, which is payable on July 25,<br>2024 to shareholders of record as of June 28, 2024. |
|---|---|
| · | On April 19, 2024, the Company executed an amendment to its Senior Secured Revolving Credit Facility<br>with Truist Bank, extending the maturity from January 2028 to April 2029. As part of the amendment, the total commitment was<br>increased from $1.12 to $1.30 billion and pricing terms were maintained. |
| · | In late March, Fitch Ratings affirmed MSDL’s BBB- (stable) rating. |
CONFERENCE CALL INFORMATION
Morgan Stanley Direct Lending Fund will host a conference call on Friday, May 10, 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<br> Webcast |
|---|---|
| · | Conference<br> Call |
| · | Domestic: 888-256-1007 |
| · | International: 323-701-0225 |
| · | Passcode: 6641924 |
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.
Contacts
InvestorsMichael Occi
msdl@morganstanley.com
MediaAlyson Barnes
212-762-0514
alyson.barnes@morganstanley.com
Consolidated Statements of Assets and Liabilities
(In thousands,except share and per share amounts)
| December 31, 2023 | |||
| (Audited) | |||
| Assets | |||
| Non-controlled/non-affiliated investments, at fair value (amortized cost of 3,323,767 and 3,226,776) | 3,293,205 | $ | 3,193,561 |
| Cash | 64,762 | 69,705 | |
| Deferred financing costs | 13,391 | 14,317 | |
| Interest and dividend receivable from non-controlled/non-affiliated investments | 29,341 | 28,884 | |
| Subscription receivable | — | 41 | |
| Receivable for investments sold/repaid | 348 | 173 | |
| Prepaid expenses and other assets | 300 | 53 | |
| Total assets | 3,401,347 | 3,306,734 | |
| Liabilities | |||
| Debt (net of unamortized debt issuance costs of 4,982 and 5,564) | 1,486,661 | 1,496,032 | |
| Payable for investment purchased | 2,972 | 8 | |
| Payable to affiliates (Note 3) | 2,511 | 2,870 | |
| Dividends payable | 44,447 | 49,968 | |
| Management fees payable | 5,132 | 2,012 | |
| Income based incentive fees payable | 10,126 | 11,766 | |
| Interest payable | 8,963 | 18,823 | |
| Accrued expenses and other liabilities | 3,508 | 4,104 | |
| Total liabilities | 1,564,320 | 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; 88,894,490 and 83,278,831 shares issued and outstanding) | 89 | 83 | |
| Paid-in capital in excess of par value | 1,821,242 | 1,712,609 | |
| Total distributable earnings (loss) | 15,696 | 8,459 | |
| Total net assets | 1,837,027 | $ | 1,721,151 |
| Total liabilities and net assets | 3,401,347 | $ | 3,306,734 |
| Net asset value per share | 20.67 | $ | 20.67 |
All values are in US Dollars.
Consolidated Statements of Operations (unaudited)
(In thousands,except share amounts)
| For the Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| March 31, 2024 | March 31, 2023 | |||||
| Investment Income: | ||||||
| From non-controlled/non-affiliated investments: | ||||||
| Interest income | $ | 94,631 | $ | 81,717 | ||
| Payment-in-kind | 2,644 | 441 | ||||
| Dividend income | 565 | 496 | ||||
| Other income | 1,261 | 985 | ||||
| Total investment income | 99,101 | 83,639 | ||||
| Expenses: | ||||||
| Interest and other financing expenses | 27,260 | 26,667 | ||||
| Management fees | 8,230 | 7,304 | ||||
| Income based incentive fees | 11,336 | 9,381 | ||||
| Professional fees | 1,217 | 1,241 | ||||
| Directors’ fees | 146 | 80 | ||||
| Administrative service fees | 25 | 54 | ||||
| General and other expenses | 108 | 168 | ||||
| Total expenses | 48,322 | 44,895 | ||||
| Management fees waiver (Note 3) | (3,098 | ) | (5,478 | ) | ||
| Incentive fees waiver (Note 3) | (1,210 | ) | — | |||
| Net expenses | 44,014 | 39,417 | ||||
| Net investment income (loss) before taxes | 55,087 | 44,222 | ||||
| Excise tax expense | 436 | — | ||||
| Net investment income (loss) after taxes | 54,651 | 44,222 | ||||
| Net realized and unrealized gain (loss): | ||||||
| Net realized gain (loss) on non-controlled/non-affiliated investments | (5,625 | ) | 122 | |||
| Net change in unrealized appreciation (depreciation) on non-controlled/non-affiliated investments | 2,658 | (567 | ) | |||
| Net realized and unrealized gain (loss) | (2,967 | ) | (445 | ) | ||
| Net increase (decrease) in net assets resulting from operations | $ | 51,684 | $ | 43,777 | ||
| Net investment income (loss) per share (basic and diluted) | $ | 0.63 | $ | 0.62 | ||
| Earnings per share (basic and diluted) | $ | 0.59 | $ | 0.62 | ||
| Weighted average shares outstanding: | 87,358,527 | 70,863,184 |