Contradictions Unveiled: MSC Income Fund's 2025Q2 Earnings Call on Tariffs, M&A, and Dividend Strategies

Tariff exposure and pricing adjustment, M&A activity and dividend income, private loan pricing and spreads, dividend growth and strategy are the key contradictions discussed in MSC Income Fund's latest 2025Q2 earnings call.



Private Loan Activity and Pricing Strategy:
- MSC Income Fund reported a net decrease in private loan investments of $30 million for the second quarter, primarily due to lower overall private equity investment activity.
- Despite this, the company expects to maintain its private loan strategy, optimistic about increased activity in the second half of the year.
- Optimism is supported by more deals closing recently and an expected increase in follow-on financing for existing portfolio companies.

Dividend Policy and Income Growth:
- The Fund declared a regular quarterly dividend of $0.35 per share and a supplemental quarterly dividend of $0.01 per share, with a total payout of $0.36 per share.
- This was driven by favorable net investment income (NII) per share of $0.37, an increase from $0.36 in the prior year.
- The company expects to continue this dividend policy, aligning total quarterly dividends with pretax NII.

Credit Quality and Nonaccrual Investments:
- Nonaccrual investments increased to 6.3% of the total investment portfolio at cost, from 6.1% in the previous quarter.
- This is due to the performance of certain private loan portfolio companies, particularly those with consumer exposure.
- MSC Income Fund is actively working with these investments to achieve the best possible outcomes, expecting resolutions in Q3 and Q4.

Tariff Exposure and Management:
- MSC Income Fund is comfortable with its estimated tariff exposure due to the diversity of its private loan portfolio, with most companies having flexibility to mitigate tariff impacts.
- This is a result of close collaboration with private equity owners and management teams to understand tariff exposures and develop mitigation plans.