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- **Solid Earnings Consistency**: $0.50 per share NII maintained, supported by high-quality asset performance and stable dividend policy.
- **Deal Activity Surge**: 23% Q/Q increase in new investments, with 75% of non-refinancing volume from new platforms, signaling strong origination momentum.
- **Cost Optimization**: CLO and ABL repricing reduce funding costs, offsetting base rate declines and enhancing ROE.
- **Defensive Portfolio**: 96% first lien debt, low nonaccrual rate, and focus on middle-market companies with stable EBITDA growth.
- **M&A Tailwinds**: Private credit demand expected to outpace supply by 2x over 2 years, potentially driving spread widening and improved lender terms.

**【CEO Summary Section】**
- Generated net investment income of $0.50 per share, consistent with the prior quarter, driven by high-quality earnings with minimal PIK income contribution.
- Committed $183 million to new investments, a 23% increase from Q2, with 75% of non-refinancing volume from new platforms.
- Maintained a defensive investment strategy, focusing on first lien senior secured loans to middle-market companies, with a 96% first lien debt portfolio.
- Closed an inaugural CLO ($401 million) and repriced the ABL facility, reducing funding costs and expecting benefits in Q4.
- Dividend policy remains stable at $0.50 per share, supported by earnings and risk-adjusted returns.

**【CFO Financial Commentary】**
- Total investment income of $99.7 million, with PIK income at 4.1% of total income, reflecting high-quality asset performance.
- Portfolio fair value of $3.8 billion, with 218 companies across 33 industries, average borrower exposure of 50 basis points.
- Weighted average yield on debt and income-producing investments was 9.9% at fair value, down 35bps Q/Q due to base rate declines.
- Nonaccrual rate remained low at 120bps of the portfolio at cost, with 2 new positions added to nonaccrual status.
- Debt-to-equity ratio increased to 1.17x, with 54% of debt unsecured.
- Repurchased $3 million of shares under a 10b5-1 plan, focusing on accretive capital allocation.

**【Q&A Key Highlights】**
- **M&A Outlook**: Pipeline activity accelerating, with LBOs and take-private deals expected to drive demand for private credit, potentially exceeding supply by 2x over 2 years.
- **Dividend Sustainability**: Board committed to maintaining $0.50 dividend, with spillover income as a potential buffer against base rate declines.
- **Pipeline Quality**: High-quality deals dominate the funnel, with selective origination allowing avoidance of weaker credits.
- **Team Expansion**: Headcount growth of over 10% since Q3, leveraging Morgan Stanley's broader resources to enhance deal flow.
- **Buyback Program**: Formulaic share repurchases focus on NAV accretion, balanced with other capital allocation priorities.

Morgan Stanley Direct Lending Fund (MSDL) Q3 2025 Earnings Call Transcript

- **Leadership Transition**: New CEO and CIO appointed, reinforcing 40-year track record of disciplined credit strategy.
- **Q2 Performance**: $0.50 NII per share, stable credit metrics (40% LTV, $90M EBITDA median), and 1.15x leverage.
- **Liability Management**: 130bps cost savings on $350M unsecured bond, $100M CLO issuance, and 5%+ annual repayment rate.
- **Portfolio Resilience**: 98%+ high credit quality, minimal tariff impact, and focus on defensive sectors.

**【Management Opening Remarks】**
- Leadership transition: Michael Occi appointed CEO, Ashwin Krishnan as CIO, and Jeff Day/Orit Mizrachi as co-Presidents.
- Platform growth to $20B+ committed capital, emphasizing continuity and experience.
- Focus on defensive credit strategy and risk-adjusted returns.

**【CEO Summary Section】**
- Q2 net investment income: $0.50 per share (inline with dividend), driven by stable credit performance.
- Gross investment of $204M offset by $208M repayments, maintaining portfolio stability.
- Proactive liability management: 1.15x leverage, 5-year unsecured bond refinanced at 6% (130bps improvement), and $100M CLO issuance.
- Deployment focus on high-quality middle-market companies with less cyclicality.

**【CFO Financial Commentary】**
- Portfolio: $3.8B fair value, 96% first lien debt, 214 companies, 10.2% yield on debt.
- Credit metrics: 40% LTV, $90M median EBITDA, 98%+ risk-rated 2+.
- Q2 results: $43.7M NII ($0.50 per share), 3.9% PIK income, 1.15x debt-to-equity.
- Refinancing benefits expected in Q3, with $350M unsecured note at 6% replacing 7.55% debt.

**【Q&A Highlights】**
- **Share Buybacks**: $30M utilized in H1, 70% of $43M program remaining; formulaic 10b5-1 plan.
- **Deployment Outlook**: 5%+ quarterly repayment rate, capacity to deploy with 1.15-1.20x leverage target.
- **Tariff Impact**: Portfolio resilient in services sectors; 48Forty Solutions on nonaccrual but minimal impact.
- **Management Transition**: Business-as-usual strategy, no changes to investment committee process.

Morgan Stanley Direct Lending Fund (MSDL) Q2 2025 Earnings Call Transcript

- **Q1 2025 Performance**: $0.52 NII per share vs. $0.50 dividend, with 70% of $233M new investments in new borrowers.
- **Market Position**: $20B+ direct lending platform with <35% LTV on new deals, 98% portfolio at top credit rating.
- **Tariff Mitigation**: <2% portfolio exposure; new capital allocated to software/services (19.5% of portfolio).
- **Leverage Strategy**: 1.11x debt/NAV (target 1.15-1.20x); secured credit facility extended to 2030 with improved pricing.
- **M&A Outlook**: Private equity dry powder (~$1.2T) suggests 2025+ recovery, but LBO volumes likely delayed to H2 2025+.


**【CEO Summary Section】**
- Q1 2025 net investment income of $0.52 per share, exceeding the $0.50 dividend, with high-quality credit performance and minimal PIK income contribution.
- New investment commitments of $233 million, a 44% increase from the prior quarter, with 70% allocated to new borrowers.
- Debt to NAV ratio rose to 1.11x, reflecting strategic leverage to support deployment.
- Direct lending market share growth as public sub-investment grade credit access remains episodic.
- $20 billion+ sponsor-backed direct lending platform underscores origination strength, with selectivity driven by excess deal flow.

**【President’s Market Commentary】**
- M&A activity delayed due to tariff uncertainty, but private equity dry powder (~$1.2 trillion) remains a tailwind for 2025+ deployment.
- MSDL’s deployment in Q1 2025 ($233M) highlights ability to source high-quality opportunities despite slower M&A.
- Portfolio bias towards software (19.5%) and insurance services (12%), with <35% LTV on new investments, mitigates tariff risk.
- U.S. middle market resilience (rising EBITDA coverage) supports credit stability, though slower growth could challenge margins.

**【CFO Financial Results】**
- Total portfolio fair value $3.8B, 96% first lien debt, with average position size $18M and top 10 companies representing 15% of fair value.
- Weighted average yield 10.3%, stable vs. prior quarter, with 98% of portfolio at internal risk rating 2+.
- Q1 NII of $46.2M ($0.52/share) vs. $50.7M ($0.57) in Q4, driven by expiring IPO fee waivers and yield normalization.
- NAV per share $20.65, down 0.8% Q/Q, with $71M spillover NII available for future distributions.
- Secured credit facility extended to 2030 with improved pricing, and $300M ATM equity program established for accretive capital raises.

**【Q&A Highlights】**
- **Interest Rate Impact**: SOFR-related changes fully reflected in Q1 results; ~$0.01/share residual impact from expiring fee waivers in Q2.
- **Stock Repurchases**: $10M repurchased in Q1 via 10b5-1 plan; program remains active but formulaic.
- **Tariff Strategy**: Portfolio <2% directly exposed to tariffs; new capital allocated to software/services vs. manufacturing/consumer goods.
- **Leverage Outlook**: Target 1.15-1.20x; current 1.11x reflects cautious deployment amid macro uncertainty.
- **M&A Recovery**: Private equity waiting for tariff clarity; LBO volumes likely pushed to H2 2025+ but MSDL’s origination engine remains active.


Morgan Stanley Direct Lending Fund (MSDL) Q1 2025 Earnings Call Transcript

- **Stable NAV and Strong Coverage**: Q4 NAV per share held steady at $20.81, with 114% dividend coverage and a special $0.10 dividend.
- **Active Deployment**: $144M net funded in Q4 (up 16% QoQ), achieving 1.08x leverage within target range.
- **Defensive Portfolio**: 97% first lien debt, 40% LTV, and 98% internal risk rating of 2+.
- **Tariff Resilience**: Core software and insurance sectors insulated, but secondary impacts under active monitoring.
- **2025 M&A Optimism**: 60 new 2024 deployments suggest strong pipeline; LBO activity poised to accelerate post-policy clarity.

**【CEO Summary Section】**
- Q4 2024 net asset value per share remained stable at $20.81, with net investment income of $0.57 per share (114% dividend coverage). A special dividend of $0.10 was paid in November 2024.
- New investment commitments totaled $188 million in Q4, with net funded deployment of $144 million, up from $124 million in Q3. Debt-to-NAV ratio increased to 1.08x, within the 1.0-1.25x target range.
- Over 75% of 2024 non-refinancing deployments were to new borrowers, highlighting the strength of the origination engine. 90% of new borrowers were led or co-led by MSDL.
- The portfolio remains defensively positioned with a median EBITDA of $86 million and a weighted average loan-to-value of 40%.

**【CFO Financial Commentary】**
- Total portfolio fair value reached $3.8 billion at year-end, up 19% YoY. 97% of assets are first lien debt, with 100% floating rate exposure.
- Q4 2024 net investment income was $50.7 million ($0.57 per share), down 14% QoQ due to yield compression from rate cuts. Management fee and incentive fee waivers expired in January 2025.
- Debt capital stack includes $1.45 billion in secured facilities (extended to 2030) and 53% unsecured notes. A $100 million share repurchase program was authorized post-year-end.

**【Q&A Key Highlights】**
- **Tariff Impact**: Auto sector exposure is indirect (software/services to dealerships). Core sectors (software, insurance) are insulated, but secondary impacts remain uncertain.
- **M&A Outlook**: 2024 saw 60 new portfolio companies; 2025 LBO activity expected to accelerate with deregulation and $1.5T+ PE dry powder. Q2+ could see pickup as policy clarity emerges.
- **NII Trends**: ~2/3 of portfolio reset in Q4, with remaining lag expected in Q1. Core NII decline was fully explained by rate cuts, with no one-time gains.
- **Leverage Strategy**: Target 1.0-1.25x range maintained. Deployment will prioritize quality over leverage, with no plans to deploy at higher multiples for short-term gains.

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