Morgan Stanley Direct Lending (MSDL) Holds Its Dividend As Profits Slip

On August 6, Morgan Stanley Direct Lending Fund (NYSE: MSDL ) reported financial results for the quarter ended June 30, and its board kept the regular dividend at $0.45 per share for shareholders of record as of that date. The payout matched net investment income of $0.45 per share for the quarter, down from $0.47 per share for the quarter ended March 31. Net asset value slipped too, from $19.81 to $19.50 per share over the same three months. The dividend held steady. The numbers underneath it moved in the other direction.

During the quarter, Morgan Stanley Direct Lending repurchased 831,486 shares at an average price of $15.06, a meaningful discount to the $19.50 net asset value the company reported for the same period. On April 23, the company amended its Truist Credit Facility, pushing the termination date out to April 2030 and final maturity to April 2031.

After the quarter closed, the company issued $350 million of 6.10% notes due July 2031, adding runway ahead of the $425 million in senior unsecured notes coming due in February 2027. Floating rate debt investments held at 99.6% of the portfolio on a fair value basis, unchanged from March 31, and the debt-to-equity ratio edged down slightly to 1.21x from 1.22x. The company also kept building out Capstone Lending LLC, its joint venture with an institutional investor, with approximately 52.3% of total capital commitments called as of June 30. As of that date, the company had $1.47 billion of availability under its credit facilities alongside $71.6 million in unrestricted cash.

Total investment income came in at $88.8 million for the quarter, down slightly from $89.1 million in the prior quarter, a decline the company attributed to positions placed on non-accrual status. Total net expenses rose to $49.8 million from $47.7 million, driven by higher interest and financing costs along with a net increase in incentive fees. Net investment income fell to $38.2 million from $40.5 million as a result. The quarter also brought $22.8 million in net unrealized depreciation and $7.4 million in net realized losses.

New investment commitments totaled $95 million, and fundings reached $146.2 million, but sales and repayments of $240.5 million outpaced both, leaving net funded deployment at negative $94.2 million. As of June 30, seven portfolio companies sat on non-accrual status, representing 2.9% of total investments at amortized cost, and the weighted average yield on debt investments slipped to 9.1% at amortized cost and 9.4% at fair value, down from 9.3% and 9.5% three months earlier.