Morgan Stanley Direct Lending Fund reported second-quarter results on August 6, keeping its regular dividend unchanged at $0.45 per share, matching the quarter’s net investment income. However, underlying metrics deteriorated, with net investment income falling to $0.45 from $0.47 in the prior quarter, and net asset value declining from $19.81 to $19.50 per share.
The company executed several financial maneuvers during and after the quarter. It repurchased 831,486 shares at an average price of $15.06, representing a discount to the reported net asset value. The company amended its Truist Credit Facility to extend the termination date to April 2030 and final maturity to April 2031. Following quarter-end, the fund issued $350 million of 6.10% notes due July 2031 to bolster liquidity ahead of $425 million in senior unsecured notes maturing in February 2027.
Operational performance showed pressure across multiple dimensions. Total investment income declined slightly to $88.8 million from $89.1 million, attributed partly 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 plus increased incentive fees. Net investment income consequently fell to $38.2 million from $40.5 million. The quarter included $22.8 million in net unrealized depreciation and $7.4 million in net realized losses.
Portfolio activity showed net negative deployment, with new commitments of $95 million and fundings of $146.2 million outpaced by sales and repayments totaling $240.5 million. Seven portfolio companies were on non-accrual status, representing 2.9% of total investments at amortized cost. The weighted average yield on debt investments declined to 9.1% at amortized cost from 9.3%, and to 9.4% at fair value from 9.5%. Floating rate debt investments remained stable at 99.6% of the portfolio, and the debt-to-equity ratio improved slightly to 1.21x from 1.22x. The fund had $1.47 billion available under credit facilities and $71.6 million in unrestricted cash as of quarter-end.
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