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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

Revenue

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Financing Services Revenue

Other Revenue

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Selling, General and Administrative Expenses

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Net Income

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MSDL

MSDL fundamentals

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