On August 8, 2024, Morgan Stanley Direct Lending Fund (MSDL, Financial) released its 8-K filing for the second quarter ended June 30, 2024. The company, which aims to achieve attractive risk-adjusted returns through investments in senior secured term loans issued by U.S. middle-market companies, reported solid financial results in its first full quarter as a public entity.
Quarterly Financial Highlights
MSDL reported net investment income per share of $0.63, aligning with analyst estimates. The company also posted earnings per share (EPS) of $0.66, surpassing the previous quarter's EPS of $0.59. Total investment income for the quarter was $104.2 million, up from $99.1 million in the first quarter of 2024. This increase was driven by capital deployment and prepayment-related income.
| Metric | Q2 2024 | Q1 2024 |
|---|---|---|
| Net Investment Income per Share | $0.63 | $0.63 |
| Earnings per Share | $0.66 | $0.59 |
| Total Investment Income | $104.2 million | $99.1 million |
| Regular Dividend per Share | $0.50 | $0.50 |
Investment Portfolio and Activity
As of June 30, 2024, MSDL's investment portfolio had a fair value of approximately $3.5 billion, comprising 192 portfolio companies across 34 industries. The portfolio's composition included 95.3% in first lien debt, 2.9% in second lien debt, and 1.6% in equity investments. The total weighted average yield of investments in debt securities at amortized cost and fair value was 11.6% and 11.7%, respectively.
| Investment Type | Cost (Q2 2024) | Fair Value (Q2 2024) | % of Total Investments |
|---|---|---|---|
| First Lien Debt | $3,356,586 | $3,345,743 | 95.3% |
| Second Lien Debt | $122,416 | $103,144 | 2.9% |
| Equity | $53,735 | $56,932 | 1.6% |
Capital and Liquidity
MSDL reported total principal debt outstanding of $1,675.5 million as of June 30, 2024, with a combined weighted average interest rate on debt outstanding of 6.57%. 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, up from 0.81x in the previous quarter.
Commentary and Outlook
"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."
MSDL's performance in Q2 2024 demonstrates its ability to generate stable income and manage its investment portfolio effectively. The company's focus on senior secured term loans and its diversified portfolio across multiple industries provide a solid foundation for future growth. However, the increase in expenses due to higher interest and financing costs is a point of concern that investors should monitor closely.
For more detailed information, readers are encouraged to review the full 8-K filing.
Explore the complete 8-K earnings release (here) from Morgan Stanley Direct Lending Fund for further details.
