EDGAR 10-K Filing

Company CIK: 1782524
Filing Year: 2025
Filename: 1782524_10-K_2025_0001782524-25-000009.json

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ITEM 1. BUSINESS
Item 1. Business
We are a non-diversified, externally managed specialty finance company focused on lending to middle-market companies. We have elected to be regulated as a BDC under the Investment Company Act of 1940, as amended (the “1940 Act”). For U.S. federal income tax purposes, we have elected to be treated, and intend to comply with the requirements to qualify annually, as a RIC under Subchapter M of the Code. We are classified as a non-diversified investment company within the meaning of the 1940 Act, which means that we are not limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer. We are externally managed by the Adviser, an indirect, wholly owned subsidiary of Morgan Stanley. We are not a subsidiary of, or consolidated with, Morgan Stanley.
Our investment objective is to achieve attractive risk-adjusted returns via current income and, to a lesser extent, capital appreciation by investing primarily in directly originated senior secured term loans issued by U.S. middle-market companies in which private equity sponsors have a controlling equity stake in the portfolio company. For the purposes of this report, “middle-market companies” refers to companies that, in general, generate annual earnings before interest, taxes, depreciation and amortization, or EBITDA, in the range of approximately $15 million to $200 million, although not all of our portfolio companies will meet this criterion.
We invest primarily in directly originated senior secured term loans including first lien senior secured term loans (including unitranche loans) and second lien senior secured term loans, with the balance of our investments expected to be in higher-yielding assets such as mezzanine debt, unsecured debt, equity investments and other opportunistic asset purchases. Typical middle-market senior loans may be issued by middle-market companies in the context of leveraged buyouts, or LBOs, acquisitions, debt refinancings, recapitalizations, and other similar transactions. We generally expect our debt investments to have a stated term of five to eight years and typically to bear interest at a floating rate usually determined on the basis of a benchmark such as the Secured Overnight Financing Rate, or SOFR.
We generate revenues primarily in the form of interest income from investments we hold. In addition, we generate income from dividends or distributions of income on any direct equity investments, capital gains on the sale of loans and debt and equity securities, and various other loan origination and other fees, including commitment, origination, amendment, structuring, syndication or due diligence fees, fees for providing managerial assistance and consulting fees.
The middle-market loans in which we generally invest are typically not rated by any rating agency, but we believe that if they were rated, they would be below investment grade (rated lower than “Baa3” by Moody’s Investors Service, lower than “BBB-” by Fitch Ratings or lower than “BBB-” by Standard & Poor’s Ratings Services), which under the guidelines established by these rating agencies is an indication of having predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. Debt instruments that are rated below investment grade are sometimes referred to as “high yield bonds” or “junk bonds.”
Our investment approach is focused on long-term credit performance, risk mitigation and preservation of principal. Utilizing our proprietary investment approach, we intend to execute on our investment objective by (1) utilizing the Adviser’s and the Firm’s longstanding and deep relationships with middle-market companies, private equity sponsors, commercial and investment banks, industry executives and financial intermediaries to provide a strong pipeline of investment opportunities, (2) implementing the Adviser’s rigorous, fundamentals-driven and disciplined investment and risk management process, (3) utilizing the investment committee’s extensive experience in credit and principal investing, credit analysis and structuring, and (4) accessing Morgan Stanley’s global resources.
By leveraging the established origination and underwriting capabilities within the MS Private Credit platform and targeting an attractive investing area in the U.S. middle-market, we believe we are able to offer attractive risk-adjusted returns to our investors. We remain highly focused on conducting extensive due diligence and leveraging the Morgan Stanley platform. We continue to seek to invest in companies that are led by strong management teams, generate substantial free cash flow, have leading market positions, benefit from sustainable business models, and are well positioned to perform well despite the impact of recent market volatility. We believe the current market environment continues to be attractive and offers opportunities to seek compelling risk adjusted returns. Our investment pace will depend on several factors including the market environment, including the current economic environment, and deal flow.
On December 23, 2019, we completed our initial closing (“Initial Closing”) of capital commitments to purchase shares of our Common Stock in a private placement pursuant to subscription agreements with investors (the “Subscription Agreements”). As of December 31, 2024 all of our capital commitments have been called.
On January 26, 2024, we closed our initial public offering (“IPO”), issuing 5,000,000 shares of our Common Stock at a public offering price of $20.67 per share. Net of underwriting fees, we received net cash proceeds, before offering expenses, of approximately $97.1 million. Our Common Stock began trading on The New York Stock Exchange ("NYSE") under the symbol “MSDL” on January 24, 2024.
The Adviser
Morgan Stanley launched its private credit platform in 2010. The private credit platform includes dedicated strategies targeting different credit products, asset yields and issuer sizes, resulting in a platform that we believe is well positioned to provide scale and flexible financing solutions to borrowers, maximize deal origination and enhance the ability to generate attractive risk adjusted returns for our stockholders. These strategies include MS Private Credit, European private credit and tactical credit.
Our Adviser, an indirect, wholly owned subsidiary of Morgan Stanley, was established in 2007 and serves as the investment adviser for various funds, accounts and strategies, including the funds and accounts on the MS Private Credit platform, including the MS BDCs, and managed approximately $23.5 billion in committed capital1 as of February 1, 2025.
MS Private Credit’s primary areas of focus include:
•Direct Lending. The Direct Lending strategy includes us, the other MS BDCs and other funds and separately managed accounts. Investments made primarily in directly originated first lien senior secured and second lien senior secured loans, mezzanine notes, unsecured debt, preferred stock, and common stock issued by U.S. middle-market companies owned by private equity firms, typically, although not always, with annual EBITDA of up to $200 million. As of February 1, 2025, Direct Lending managed approximately $20.5 billion in committed capital.
•Opportunistic Credit. Investments made primarily in complex assets, unusual credit situations or companies experiencing difficulties in sourcing capital. Other potential investments included in this category may include purchasing public or private securities in the open market at deep discounts to their fundamental value. Investments are made primarily in first lien senior secured and second lien senior secured loans, mezzanine notes, unsecured debt, preferred stock and common stock issued by U.S. middle-market companies, typically, although not always, with annual EBITDA of $10 million to $100+ million. As of February 1, 2025, Opportunistic Credit managed approximately $3.0 billion in committed capital.
Our Adviser’s investment committee servicing us, or the Investment Committee, is comprised of ten senior investment professionals of IM and is chaired by Jeffrey S. Levin, our Chief Executive Officer and a member of our Board of Directors. The Investment Committee members have an average of 25 years of relevant industry experience and have experience investing across multiple credit cycles and different investing environments, including the global financial crisis of 2008. All investment decisions are reviewed and approved by the Investment Committee, which has principal responsibility for approving new investments and overseeing the management of existing investments.
Our Adviser is served by experienced investment professionals, or the Investment Team, within the MS Private Credit platform. The Investment Team is responsible for origination, due diligence, underwriting, structuring and monitoring each investment throughout its life cycle. In addition to our executive officers and their support teams, the MS Private Credit platform is supported by numerous professionals in legal, compliance, risk management, finance, accounting and tax who help support the platform by providing guidance on our operations.
Morgan Stanley, the parent of our Adviser, is a global financial services firm whose predecessor companies date back to 1924 and, through its subsidiaries and affiliates, advises, originates, trades, manages and distributes capital for governments, institutions and individuals. Morgan Stanley maintains a significant market position in each of its business divisions-Institutional Securities Group, or ISG, Wealth Management, or WM, and IM. We are not a subsidiary of or consolidated with Morgan Stanley and Morgan Stanley does not guarantee any of our financial obligations.
IM is a global investment manager, delivering innovative investment solutions across public and private markets. As of December 31, 2024, IM managed approximately $1.7 trillion in assets under management across its business lines, which include equity, fixed income, liquidity, real assets and private investment funds.
The Administrator
Our Administrator, an indirect, wholly owned subsidiary of Morgan Stanley, provides the administrative services necessary for us to operate pursuant to an administration agreement, dated November 25, 2019, between us and the Administrator (the “Administration Agreement”). The Administration Agreement was most recently renewed by our Board of Directors in August 2024.
We pay our Administrator our allocable portion of certain expenses incurred by our Administrator in performing its obligations under the Administration Agreement, including our allocable portion of the cost of our Chief Financial Officer and Chief Compliance Officer. Our Administrator is reimbursed for certain expenses it incurs on our behalf. Our Administrator reserves the right to waive all or part of any reimbursements due from us at its sole discretion. See “- Administration Agreement” below for a discussion of the expenses that we reimburse to the Administrator (subject to the review and approval of our Independent Directors).
1 Committed capital is calculated as aggregate capital commitments received and total committed leverage within each of the funds or accounts with the exception for funds past their investment period, where committed capital is calculated as invested capital.
Investments
As of December 31, 2024, we had investments in 208 portfolio companies across 33 industries. Based on fair value as of December 31, 2024, approximately 99.6% of our debt portfolio was invested in debt bearing a floating interest rate, which floating rate debt investments primarily are subject to interest rate floors. Our weighted average total yield of investments in debt securities at amortized cost was 10.4%. Weighted average yields include the effect of accretion of discounts and amortization of premiums and are based on interest rates as of December 31, 2024.
Investment Strategy
Our primary investment strategy is to make privately negotiated senior secured credit investments in U.S. middle-market companies that have leading market positions, enjoy high barriers to entry, such as high startup costs or other obstacles that prevent new competitors from easily entering the portfolio company’s industry or area of business, generate strong and stable free cash flow and are led by a proven management team with strong private equity sponsor backing. Our investment approach is focused on long-term credit performance, risk mitigation and preservation of capital. Our Adviser employs a highly rigorous, fundamentals-driven and disciplined investment process developed and refined by the investment professionals of the MS Private Credit platform. The Investment Team works on a particular transaction from origination to close and continues to monitor each investment throughout its life cycle.
We invest primarily in companies backed by leading private equity sponsors with strong track records. We believe lending to sponsor-backed companies (or companies where private equity sponsors hold a controlling equity position) versus non-sponsor-backed companies (or companies where private equity sponsors do not hold a controlling equity position) has many distinct potential advantages including:
•Strong, predictable deal flow given significant private equity committed capital;
•Well-capitalized borrowers, including potential access to additional capital from sponsors, if needed;
•Access to detailed financial, operational, industry data, and third-party legal and accounting due diligence reports conducted by the sponsor as part of their due diligence;
•Proper oversight and governance provided by an experienced management team and a board of directors, as well as other industry and/or operating expertise from the sponsors;
•Natural alignment of interests between lender and sponsor given focus on exit strategy; and
•Supplemental diligence beyond the credit analysis of the borrower, given the ability to analyze track records of each private equity firm.
We have created what we believe is a defensive portfolio of investments that is anchored in first lien senior secured loans and focused on generally avoiding issuer or industry concentration in order to mitigate risk and achieve our investment objective.
We focus primarily on U.S. middle-market companies. However, to the extent that we invest in foreign companies, we intend to do so in accordance with the limitations under the 1940 Act and only in jurisdictions with established legal frameworks and a history of respecting creditor rights, including the United Kingdom and countries that are members of the European Union, as well as Canada, Australia and Japan. Our investment strategy is predicated on seeking to lend to companies with proven management teams in what we believe to be non-cyclical industry sectors. Additionally, we typically avoid direct exposure to investments in certain sectors such as in companies whose primary revenues are related to retail, restaurants, energy, alcohol, tobacco, pork manufacturing, gaming and gambling, and pornography, and for the avoidance of doubt, investments in such sectors is separate and apart from ESG (as defined below) considerations described below. See “-Investment Process-Due Diligence & Structuring” below.
Investment Criteria
In order to achieve our investment objectives, we seek to build an investment portfolio that consists primarily of directly originated floating-rate first lien senior secured term loans (including unitranche loans), and second lien senior secured term loans of U.S. middle-market companies. The balance of our investments is expected to be in higher-yielding assets such as mezzanine debt, unsecured debt and equity investments in U.S. middle-market companies, and other opportunistic asset purchases. Our debt investments typically have maturities of five to eight years. We seek to create and have created what we believe is a defensive portfolio of investments by focusing on generally avoiding issuer or industry concentration and anchoring our portfolio in first lien loans in order to mitigate risk and achieve our investment objective.
We expect our target portfolio companies to exhibit some, or all, of the following characteristics at the time of the initial investment, although not all of our portfolio companies will meet these criteria:
•EBITDA of $15 - $200 million;
•Defensible, leading market positions;
•Unique or specialized strategy or other meaningful barriers to entry;
•Low technology or market risks;
•Diversified product offering, customer and supplier base;
•Stable cash flows;
•Low capital expenditure requirements;
•General avoidance of what we believe to be cyclical industry sectors;
•Predominantly North American base of operations;
•Typical loan-to-value of up to 60%; and
•Experienced management teams with successful track records.
Key themes of our investment strategy include:
•Maintaining an appropriate allocation of first lien senior secured and second lien senior secured debt to allow us to achieve attractive returns within the targeted risk profile, while investing prudently based on the market and economic environment;
•Performing thorough fundamental business and industry due diligence;
•Conducting in-depth due diligence on management teams and sponsors to bolster our position that we are investing in businesses led by experienced professionals;
•Structuring investments focused on providing us with security, covenant protection and current income while seeking to provide our borrowers with adequate liquidity and flexibility to operate; and
•Ongoing active management of our portfolio companies through consistent dialogue with management and/or the sponsor, review of financial reporting, monitoring of key performance indicators and evaluation of exit strategies.
Market Opportunity
We believe the middle market direct lending market environment continues to be attractive, despite the recent market volatility resulting from elevated inflation and broader macroeconomic uncertainty. We expect that a series of market dynamics may provide for significant financing opportunities for lenders like us which have longstanding and deep relationships with middle market private equity firms. Additionally, we believe that sponsored, middle market direct lending provides investors with attractive risk-adjusted return opportunities relative to other asset classes.
Demand for Direct Lending Solutions
We believe that demand has increased for financing from direct lenders relative to other sources because of the attractiveness of the product as well as structural and market factors. According to Preqin, private credit’s share of the sub-investment grade credit market, relative to the high yield and syndicated loan markets, has increased from 3% in 2010 to 23% as of June 30, 2024.
•Fundamental Attributes of Product: We believe that when private equity sponsors experience the flexibility of private credit transactions and the speed and certainty of execution, they will continue to seek financing from non-bank lenders. We believe this presents a compelling opportunity for us to invest in quality companies on attractive terms and conditions.
•Market Share Gains for Direct Lending: Bank participation in middle-market secured loans has decreased in recent years. Additionally, certain private equity sponsors who historically sought to finance their transactions in the public, syndicated markets have turned to private credit providers, including us, to finance their transactions.
Large and Growing U.S. Middle-Market
We believe U.S. middle-market companies represent a large and growing opportunity set and will likely require additional amounts of private debt financing for various purposes. The U.S. middle market is the third largest economy, as measured by gross domestic product.
•Significant Refinancing Needs: Recent data from LSEG LPC, a premier global provider of information on the syndicated loan and high yield bond markets, indicates that there were more than $627 billion of middle-market loans with maturities between the first quarter of 2025 and the third quarter of 2030 that will likely require a refinancing event.
•Robust Private Equity Dry Powder: In addition, data from Preqin shows that global private equity managers currently have over $1.0 trillion of raised, but not yet invested, capital, representing a sizeable pool of support for both new and existing investments.
We expect that these two important dynamics will provide for significant financing opportunities for lenders like us who have longstanding and deep relationships with middle-market private equity firms.
Attractive Attributes of Middle Market Direct Lending
We believe that focusing on lending to private equity owned middle-market businesses provides for attractive risk adjusted return opportunities, due to a series of structural and market factors. Although leveraged buyout activity has remained subdued in recent quarters, the private credit market has continued to present high quality opportunities, that could offer compelling risk-adjusted returns.
•Seniority in Capital Structure: We believe senior secured middle market loans typically have strong defensive characteristics, including priority in payment among a portfolio company’s security holders, which generally means they carry the least risk among investments in the capital structure.
•Floating Rate: We believe that the Company is well positioned in the current elevated interest rate environment. The Company invests primarily in floating rate debt investments, which bear higher yields when base rates are higher.
•Covenants: We believe that the middle market loans that we expect will comprise a meaningful portion of our debt investment portfolio often avoid riskier large deal debt characteristics such as covenant-lite structures. Maintaining financial covenants allows us to diagnose and respond to borrower underperformance typically before value materially erodes. We believe it is this more conservative loan structuring that also contributes to the better overall performance of middle-market loans.
•Equity Support: Purchase price multiples for middle market leveraged buyouts have increased substantially since 2013, while the increase in leverage multiples has not been nearly as dramatic. As a result, private equity owners have been contributing a significant share of equity beneath the debt in the capital structure, which we believe provides us with meaningful cushion in the event of underperformance or an economic downturn. The private equity sponsor can also be a source for incremental ongoing support for the business in the event the borrower experiences stress.
•Illiquidity Premium: We believe middle market loans generally tend to offer more attractive economics, including higher spreads in exchange for their illiquidity, relative to syndicated loans. Since 2013, middle market loans have generally exhibited 100 - 250 basis points of incremental spread premium over broadly syndicated loans on average.
We believe that the combination of these structural and market benefits has contributed to the historical outperformance of middle-market loans. Since 1995, middle-market loans have produced higher returns, lower default rates, and higher cumulative recovery rates which resulted in lower cumulative loss rates.
Competitive Advantages
We believe we are able to execute on our investment objective and achieve attractive risk-adjusted returns as a result of our competitive strengths. In addition to the Adviser’s relationships with middle market private equity firms, the Firm has relationships with many middle-market private equity firms and middle-market companies that may provide significant investment opportunities. MS Private Credit is the primary private credit investment management platform of the Firm. The Adviser capitalizes on the significant number of lending opportunities with middle-market companies through relationships established by the Firm and otherwise. We believe the large volume of potential lending opportunities and scale of the MS Private Credit origination and due diligence platform allows us to increase investment selectivity and potentially enhance risk-adjusted returns.
Ability to Leverage Morgan Stanley’s Relationships and Network
Morgan Stanley has a substantial network of business relationships with individuals, companies, institutions and governments in the United States and around the world which we believe is a potential source of investment opportunities for us and differentiates us relative to other BDCs. Additionally, we believe that this network may potentially assist our portfolio companies through our efforts to make introductions and referrals to the investment banking and capital markets services of the Firm.
In all cases, subject to applicable laws, rules and regulations, information barriers, confidentiality provisions and policies and procedures, our Adviser utilizes Morgan Stanley’s global resources throughout the life cycle of each investment. The investment teams consult with teams across IM, ISG (and its business units, Investment Banking, Sales and Trading, Commodities and Equity and Fixed Income Research) and WM to assess potential investments and determine the investment opportunities to which we should devote substantial time and resources. We believe that we benefit, where appropriate, from the expertise, infrastructure, track record, relationships and institutional knowledge of Morgan Stanley.
Access to certain parts of Morgan Stanley may be limited in certain instances by a number of factors, including third-party confidentiality obligations and information barriers established by Morgan Stanley in order to manage compliance with applicable law and potential conflicts of interest and regulatory restrictions, including without limitation joint transaction restrictions pursuant to the 1940 Act and internal policies and procedures. The investment sources described above are not necessarily indicative of all sources that the Adviser may utilize in sourcing investments for us. There can be no assurance that the Adviser will be able to source investments from any one or more parts of the Morgan Stanley network, implement our strategy, achieve our investment objectives, find investments that fit its investment criteria or avoid substantial losses. See “Part 1 - Item 1A. Risk Factors-Risks Relating to Our Business and Structure-There are significant potential conflicts of interest that could affect our investment returns.”
Highly Differentiated Deal Sourcing Advantages
We believe the relationships that the Investment Team maintains with sponsors, commercial and investment banks, industry executives and financial intermediaries provides a strong pipeline of proprietary investment opportunities. However, unlike many other competing alternative lending strategies, our Adviser operates within a global financial institution with multiple groups within the Firm. We expect the broader Morgan Stanley platform to be a source of potential lending opportunities. We believe this position within the Firm is a key factor that differentiates us and constitutes a meaningful competitive advantage relative to other private credit funds and BDCs.
Distinctive Approach to Credit Investing and Due Diligence
We believe that our Adviser utilizes an investment approach that is differentiated in the industry. Our Adviser employs a highly rigorous, fundamentals-driven and disciplined investment process which has been developed utilizing Morgan Stanley’s extensive investing experience. The Adviser generally seeks to invest in companies that have leading, defensible market positions, generate strong and stable free cash flow, and have high barriers to entry, highly capable management teams and strong private equity sponsor ownership. We believe that our Adviser’s investment approach coupled with our portfolio construction strategy, flexible capital, and focus on financial covenant protection, differentiates us from our competitors.
Experienced and Accomplished Investment Team & Investment Committee
The Investment Team is led by investment professionals with extensive experience in credit and principal investing, credit analysis, credit origination and structuring. Jeffrey S. Levin, our Chief Executive Officer, and member of the Board of Directors, has principal management responsibility for us and serves as Chair of the Investment Committee. Mr. Levin has over 23 years of experience in direct lending, mezzanine lending, credit investing and leveraged finance, and he also currently serves as the Chief Executive Officer and a member of the board of directors of each of the MS BDCs. Prior to that, through his tenure at The Carlyle Group as Managing Director and Partner, a member of the management team of the Carlyle private credit platform and as President of certain BDCs managed by affiliates of The Carlyle Group, he also has direct experience in successfully capitalizing and managing BDCs. Before working at The Carlyle Group, Mr. Levin was a founding member of the MS Private Credit platform.
The Investment Committee members have an average of 25 years of relevant industry experience. The Investment Committee is comprised of senior members of IM and provides guidance to the Investment Team throughout the investment process.
In addition, the Investment Team has strong private equity sponsor and intermediary relationships and a highly developed network within Morgan Stanley. Collectively, the investment professionals of the Adviser have substantial leveraged lending experience, and we believe the Investment Team is well positioned to generate attractive risk-adjusted returns.
Efficient Expense Model
We believe that we have an efficient expense model, as compared to other publicly traded BDCs, based on our low operating expense rate as well as our low management fees. We believe that our efficient expense model reinforces our focus on alignment with stockholders and enhances the potential returns we are able to generate.
MS Credit Partners Holdings Investment
MS Credit Partners Holdings, Inc., or MS Credit Partners Holdings, an indirect, wholly owned subsidiary of Morgan Stanley and an affiliate of the Investment Adviser, made an equity investment of $200.0 million to us pursuant to a subscription agreement initially entered into in December 2019, and which was fully funded as of October 4, 2023. As of December 31, 2024 and December 31, 2023, MS Credit Partners Holdings held approximately 11.0% and 11.7% of our outstanding shares of Common Stock, respectively. Morgan Stanley has no other obligation, contractual or otherwise, to financially support us. Morgan Stanley has no history of financially supporting any of the BDCs on the MS Private Credit platform, even during periods of financial distress.
Investment Process
Our investment activities are managed by our Adviser. Our Adviser is responsible for origination, underwriting, structuring and monitoring our investments.
The Adviser’s investment process has five stages: Origination, Preliminary Screen, Due Diligence & Structuring, Investment Committee Approval & Closing and Portfolio Management, and it employs the same rigorous and disciplined investment process to all types of investments. The Investment Team works on a particular transaction from origination to close and continues to monitor each investment throughout its life cycle.
Origination
We believe we benefit from the Adviser’s highly differentiated direct origination platform. The MS Private Credit origination platform is complemented by opportunities sourced by other Morgan Stanley divisions and businesses.
The Firm has deep relationships with many middle-market private equity firms and middle-market companies that may provide significant investment opportunities. MS Private Credit is the primary private credit investment management platform across the Firm.
The Adviser seeks to capitalize on a significant number of lending opportunities with middle-market companies through relationships established by the Firm.
We believe the large volume of untapped potential lending opportunities and the scale of the MS Private Credit origination and due diligence platform allows us to increase investment selectivity and potentially enhance risk-adjusted returns.
Preliminary Screen
An initial review of each investment opportunity is conducted by the Investment Team to determine whether it is consistent with our investment objectives and credit standards. If the opportunity fits our investment objective and 1940 Act requirements, the opportunity is further evaluated by the Investment Team.
The Investment Team utilizes the extensive industry expertise resident in IM and ISG (subject in all cases to applicable regulations, confidentiality provisions, information barriers and policies and procedures) to assist in this preliminary evaluation. Access to these resources allows the Investment Team to assess each opportunity quickly and effectively and enables it to focus only on compelling opportunities.
If the members of the Investment Team conducting the initial review conclude that the investment opportunity meets our objectives, the Investment Team prepares a screening memo which is discussed with a subset of the Investment Committee at a Preliminary Screen meeting. At a Preliminary Screen meeting, the Investment Team presents an overview of the business, proposed capital structure, proposed terms (if applicable at this stage), key investment highlights and risks, and preliminary financial analysis. Opportunities that are approved at the Preliminary Screen meeting advance to the Due Diligence & Structuring phase.
Due Diligence & Structuring
All investment opportunities that pass the Preliminary Screen are subject to a comprehensive due diligence process. The Adviser uses both internal and external resources in its due diligence process including leveraging the extensive industry expertise resident in Morgan Stanley’s businesses (subject in all cases to applicable regulations, confidentiality provisions, information barriers and policies and procedures). Diligence typically involves meeting with company management and the private equity sponsor to achieve a comprehensive understanding of the portfolio company’s competitive positioning, competitive advantage, company strategy and risks and mitigants associated with the proposed investment.
Additionally, the Investment Team, to the extent applicable, conducts supplemental diligence including:
•Financial analysis;
•Capital structure review;
•Covenant analysis;
•Review of third-party due diligence reports (financial, industry, legal, technology, insurance and/or environmental);
•Industry research;
•Customer calls;
•Industry expert calls;
•Management background checks;
•Consideration of environmental, social and governance ("ESG") issues; and
•Negotiation of legal documentation.
The Investment Team reviews ESG considerations as part of its due diligence process, these considerations include but not limited to whether the borrower has formal ESG and compliance policies, type of activities carried on by the borrower (e.g., energy usage, carbon emissions, fossil fuel exposure, nuclear energy) and hiring practices. As a part of ESG due diligence, the Investment Team evaluates each potential borrower utilizing a standard ESG template to determine an ESG score for each potential borrower. Borrowers who score beneath an internally set threshold require additional discussion and consideration by the Investment Committee. The identification of a material ESG risk will not necessarily be determinative in our Adviser’s decision to lend to a potential borrower and we may invest in portfolio companies that score poorly in our Adviser’s ESG due diligence. In addition, material ESG issues are reported and discussed as part of the Adviser’s ongoing portfolio management processes on a regular basis.
Investment Committee Approval & Closing
The Investment Committee is engaged throughout the investment process to provide guidance on best practices, industry expertise and related deal experience drawn from their relevant experience.
Based on the findings in the Due Diligence & Structuring phase, the Investment Team prepares a detailed memo that is presented to the Investment Committee. A majority of the Investment Committee, including approval by Mr. Levin, must approve a transaction in order for us to pursue the opportunity. Once approved, the Investment Team works towards closing and funding the investment. Any
changes to the investment after approval along with key legal terms are documented and circulated to the Investment Committee prior to closing in the form of a closing memo.
Portfolio Management
We believe that proactive monitoring of our portfolio companies is an important part of the investment process. The Adviser engages in formal and informal dialogue with portfolio company management teams, private equity sponsors, suppliers and customers, as appropriate, through conversations facilitated, in part, by the Firm’s global network in an attempt to give us an ongoing advantage relative to other investors. The Adviser receives monthly or quarterly financial reports from portfolio companies. This information access and ongoing interactions with portfolio companies and sponsors should provide the Adviser with the ability to anticipate any potential performance or liquidity issues at an early stage and to work proactively toward mitigating potential losses. Our Adviser holds quarterly portfolio reviews. In conjunction with the quarterly portfolio reviews, the Adviser compiles a quarterly risk report that examines, among other things, migration in portfolio and loan level investment mix, industry diversification, ESG review, Internal Risk Ratings, revenue, EBITDA and leverage.
Frequency of review of individual loans is determined on a case-by-case basis, based on an Internal Risk Rating, total exposure and other criteria set forth by the Investment Committee. Performing loans, or loans on which the borrower has historically made payments of principal and interest on time, are typically discussed every quarter, while any loan that has been downgraded under our Internal Risk Rating scale is typically discussed quarterly at a minimum and more frequently as appropriate. In addition, the Adviser holds monthly “watchlist” meetings which include a discussion of all transactions that have been downgraded, or are at risk for downgrade, under our Adviser’s Internal Risk Rating system.
As part of the monitoring process, our Adviser has developed risk policies pursuant to which it regularly assesses the risk profile of each of our debt investments. Our Adviser has developed a classification system to group investments into four categories. The investments are evaluated regularly and assigned a category based on certain credit metrics. Our Adviser’s ratings do not constitute any rating of investments by a nationally recognized statistical rating organization or represent or reflect any third-party assessment of any of our investments. Please see below for a description of the four categories of the Investment Adviser’s Internal Risk Rating system:
Risk Rating 1 In the opinion of our Investment Adviser, investments in Risk Rating 1 involve the least amount of risk relative to our initial cost basis at the time of origination or acquisition. Risk Rating 1 investments performance is above our initial underwriting expectations and the business trends and risk factors are generally favorable, which may include the performance of the portfolio company, or the likelihood of a potential exit.
Risk Rating 2 In the opinion of our Investment Adviser, investments in Risk Rating 2 involve a level of risk relative to our initial cost basis at the time of origination or acquisition. Risk Rating 2 investments are generally performing in line with our initial underwriting expectations and risk factors to ultimately recoup the cost of our principal investment and are neutral to favorable. All new originated or acquired investments are initially included in Risk Rating 2.
Risk Rating 3 In the opinion of our Investment Adviser, investments in Risk Rating 3 indicate that the risk to our ability to recoup the initial cost basis at the time of origination or acquisition has increased materially since the origination or acquisition of the investment, such as declining financial performance and non-compliance with debt covenants; however principal and interest payments are not more than 120 days past due.
Risk Rating 4 In the opinion of our Investment Adviser, investments in Risk Rating 4 involve a borrower performing substantially below expectations and indicate that the loan’s risk has increased substantially since origination or acquisition. Most or all of the debt covenants are out of compliance and payments are substantially delinquent. For Risk Rating 4 investments, it is anticipated that we will not recoup our initial cost basis and may realize a substantial loss of our initial cost basis at the time of origination or acquisition upon exit.
Our Adviser rates the investments in our portfolio at least quarterly, and it is possible that the rating of a portfolio investment may be changed over time. For investments rated 3 or 4, our Adviser enhances its level of scrutiny over the monitoring of such portfolio company by conducting a formal review of the portfolio company on a monthly basis and taking any actions deemed appropriate from the results of such review. Refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Portfolio, Investment Activity and Results of Operations.” for further details.
Beyond the policies and protocols detailed above, our Investment Team performs analysis and projections in response to market conditions to assess potential exposure to our portfolio. Sample analysis includes evaluation of the impact from market, economic and geopolitical conditions that may from time to time result in periods of capital markets volatility and economic uncertainty.
The Internal Risk Ratings do not constitute any rating of investments by a nationally recognized statistical rating organization or represent or reflect any third-party assessment of any of our investments.
Allocation of Investment Opportunities and Potential Conflicts of Interest; Co-Investment Opportunities
As a diversified global financial services firm, Morgan Stanley engages in a broad spectrum of activities. In the ordinary course of its business, Morgan Stanley is a full-service investment banking and financial services firm and therefore engages in activities where Morgan Stanley’s interests or the interests of its clients may conflict with the interests of our stockholders. Morgan Stanley has advised and may advise clients and has sponsored, managed or advised Affiliated Investment Accounts (as defined below) with a wide variety of investment objectives that in some instances may overlap or conflict with our investment objectives and present conflicts of interest. Certain members of the Investment Team and the Investment Committee will make investment decisions on behalf of Affiliated Investment Accounts, including Affiliated Investment Accounts with investment objectives that overlap with ours. The term “Affiliated Investment Accounts” includes certain alternative investment funds, regulated funds and investment programs, accounts and businesses that are advised by or affiliated with the Adviser or its affiliates or through which IM otherwise conducts its business, together with any new or successor to such funds, programs, accounts or businesses. For instance, the Adviser serves as the investment adviser to the other MS BDCs. For the avoidance of doubt, we are not a subsidiary of or consolidated with Morgan Stanley. Furthermore, Morgan Stanley has no obligation, contractual or otherwise, to financially support us. Morgan Stanley has no history of financially supporting any of the BDCs on the MS Private Credit platform, even during periods of financial distress.
These activities create potential conflicts in allocating investment opportunities among us and other Affiliated Investment Accounts. As a BDC regulated under the 1940 Act, we are subject to certain limitations relating to co-investments and joint transactions with affiliates, which likely will, in certain circumstances, limit our ability to make investments or enter into other transactions alongside the Adviser and other Affiliated Investment Accounts. Although the Adviser has implemented allocation policies and procedures, there can be no assurance that such regulatory restrictions will not adversely affect our ability to capitalize on attractive investment opportunities. See “-Investments by Morgan Stanley and its Affiliated Investment Accounts.”
We may, however, invest alongside the Affiliated Investment Accounts, including the MS BDCs, and any proprietary accounts of Morgan Stanley, if applicable, in certain circumstances where doing so is consistent with our Adviser’s allocation policies and procedures, applicable law and SEC staff interpretations, guidance and any exemptive relief order applicable to us and/or the Adviser. The SEC has granted our Adviser an exemptive order (as amended, the “Order”) that allows us to enter into certain negotiated co-investment transactions alongside certain Affiliated Investment Accounts, including the MS BDCs, and any proprietary accounts of Morgan Stanley, as applicable, in a manner consistent with our investment objective, positions, policies, strategies, and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with the Order. Pursuant to the Order, we are permitted to co-invest with our affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) of our eligible directors makes certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transaction, including the consideration to be paid, are reasonable and fair to us and our unitholders and do not involve overreaching in respect of us or our unitholders on the part of any person concerned, and (2) the transaction is consistent with the interests of our unitholders and is consistent with our investment objective and strategies. See “-Co-Investment Transactions.”
Investments by Morgan Stanley and Its Affiliated Investment Accounts
Morgan Stanley has advised, and may advise, clients and has sponsored, managed or advised the Affiliated Investment Accounts with a wide variety of investment objectives that in some instances may overlap or conflict with our investment objectives and present conflicts of interest, including without limitation, the MS BDCs, whose investment objectives overlap with us. In addition, Morgan Stanley routinely makes equity and private debt investments in connection with its global business and operations. MS Private Credit may also from time to time create new or successor Affiliated Investment Accounts, which may include proprietary accounts of Morgan Stanley, that may compete with us for investment opportunities or overlap in terms of investment strategy and may present similar conflicts of interest. Morgan Stanley and/or some of its Affiliated Investment Accounts have routinely made, and will continue to make, investments that fall within our investment objectives. Certain members of the Investment Team and the Investment Committee may make investment decisions on behalf of Affiliated Investment Accounts, including Affiliated Investment Accounts with investment objectives that overlap with us.
Morgan Stanley currently invests and plans to continue to invest on its own behalf and on behalf of its Affiliated Investment Accounts in a wide variety of investment opportunities in North America, Europe and elsewhere. Morgan Stanley and, to the extent consistent with applicable law, exemptive relief and/or the Adviser’s allocation policies and procedures, its Affiliated Investment Accounts will be permitted to invest in investment opportunities without making such opportunities available to us beforehand. Subject to the requirements of any applicable exemptive relief, Morgan Stanley may offer investments that fall into the investment objectives of an Affiliated Investment Account to such account or make such investment on its own behalf, even though such investment also falls within our investment objectives. We may invest in opportunities that Morgan Stanley and/or one or more Affiliated Investment Accounts has declined, and vice versa. Certain of these Affiliated Investment Accounts may provide for higher management fees or incentive fees or have greater expense reimbursements or overhead allocations, or permit the Adviser and its affiliates to receive higher origination and other transaction fees, which may create an incentive for the Adviser to favor such Affiliated Investment Accounts. The Adviser expects to enter into one or more contractual arrangements with third parties (“Syndication Partners”), including certain third parties that may or may not be advisory clients of the Adviser, whereby, subject to certain investment criteria,
the Adviser would agree to present such third parties with certain co-investment opportunities alongside the MS Private Credit platform, including us.
To seek to reduce potential conflicts of interest and to attempt to allocate such investment opportunities in a fair and equitable manner, the Adviser has implemented allocation policies and procedures. These policies and procedures are intended to give all applicable Affiliated Investment Accounts, including us, fair access to new private credit investment opportunities consistent with the requirements of organizational documents, investment strategies, applicable laws and regulations, the fiduciary duties of the Adviser, and to meet the conditions of the Order. The Order allows certain of the Affiliated Investment Accounts to participate in negotiated co-investment transactions, subject to the conditions set forth therein as described under “Co-Investment Transactions” below. Each Affiliated Investment Account and Syndication Partner that is subject to the Adviser’s allocation policies and procedures, including us, is assigned a portfolio manager by the Adviser. The portfolio managers review potential investment opportunities and will make an initial determination with respect to the allocation of each applicable opportunity taking into account various factors, including, but not limited to those described under “-Co-Investment Transactions.” The Adviser is empowered to take into account other considerations it deems appropriate to ensure a fair and equitable allocation of opportunities. The allocation policies and procedures are subject to change. Investors should note that the conflicts inherent in making such allocation decisions may not always be resolved to our advantage. There can be no assurance that we will have an opportunity to participate in certain opportunities that fall within our investment objectives.
It is possible that Morgan Stanley or an Affiliated Investment Account will invest in a company that is or becomes a competitor of our portfolio company. Such investment could create a conflict between us, on the one hand, and Morgan Stanley or the Affiliated Investment Account, on the other hand. In such a situation, Morgan Stanley may also have a conflict in the allocation of its own resources to the portfolio company. In addition, certain Affiliated Investment Accounts will be focused primarily on investing in other funds which may have strategies that overlap and/or directly conflict and compete with us. In certain cases, we may be unable to invest in attractive opportunities because of the investment by these Affiliated Investment Accounts in such private equity or private credit funds.
It should be noted that Morgan Stanley has, directly or indirectly, made large investments in certain of its Affiliated Investment Accounts, including the MS BDCs, and accordingly Morgan Stanley’s investment in us may not be a determining factor in the outcome of any of the foregoing conflicts. Nothing herein restricts or in any way limits the activities of Morgan Stanley, including its ability to buy or sell interests in, or provide financing to, equity and/or debt instruments, funds or portfolio companies, for its own accounts or for the accounts of Affiliated Investment Accounts or other investment funds or clients in accordance with applicable law.
To the extent consistent with applicable law and/or any exemptive relief applicable to us and/or the Adviser, in addition to such co-investments, the Company and Morgan Stanley or an Affiliated Investment Account may, as part of unrelated transactions, invest in either the same or different tiers of a portfolio company’s capital structure or in an affiliate of such portfolio company. To the extent we hold investments in the same portfolio company or in an affiliate thereof that are different (including with respect to their relative seniority) than those held by Morgan Stanley or an Affiliated Investment Account, the Adviser and Morgan Stanley may be presented with decisions when the interests of the two co-investors are in conflict. In circumstances where there is a portfolio company in which we have an equity or debt investment and in which Morgan Stanley or an Affiliated Investment Account has an equity or senior debt investment elsewhere in the portfolio company’s capital structure, Morgan Stanley may have conflicting loyalties between its duties to its stockholders, the Affiliated Investment Account, us, certain of its other affiliates and the portfolio company. In that regard, actions may be taken for Morgan Stanley or such Affiliated Investment Account that are adverse to us, or actions may or may not be taken by us due to Morgan Stanley’s or such Affiliated Investment Account’s investment, which action or failure to act may be adverse to us. In addition, it is possible that in a bankruptcy proceeding, our interest may be subordinated or otherwise adversely affected by virtue of Morgan Stanley’s or such Affiliated Investment Account’s involvement and actions relating to its investment. Decisions about what action should be taken in a troubled situation, including whether to enforce claims, whether to advocate or initiate restructuring or liquidation inside or outside of bankruptcy, and the terms of any work-out or restructuring, raise conflicts of interest. If a portfolio company becomes troubled, we might arguably be best served by a liquidation that would result in its debt being paid, but leave nothing for Morgan Stanley or such Affiliated Investment Accounts. In those circumstances where we and Morgan Stanley or such Affiliated Investment Accounts hold investments in different classes of a company’s debt or equity, Morgan Stanley may also, to the fullest extent permitted by applicable law, take steps to reduce the potential for adversity between us and Morgan Stanley or such Affiliated Investment Accounts, including causing us to take certain actions that, in the absence of such conflict, it would not take, such as (A) remaining passive in a restructuring or similar situations (including electing not to vote or voting pro rata with other security-holders), (B) divesting investments or (C) otherwise taking an action designed to reduce adversity. A similar standard generally will apply if Morgan Stanley or such Affiliated Investment Accounts make an investment in a company or asset in which we hold an investment in a different class of such company’s debt or equity securities or such asset.
Our Adviser or its affiliates may engage in certain origination activities and receive arrangement, structuring or similar fees in connection with such activities. See “ Item 1A. Risk Factors-Risks Relating to our Business and Structure-Conflicts related to obligations the Investment Committee, the Adviser or its affiliates have to other clients and conflicts related to fees and expenses of such other clients.” Our Adviser’s liability is limited under our Investment Advisory Agreement, and we are required to indemnify our Adviser against certain liabilities. These protections may lead our Adviser to act in a riskier manner when acting on our behalf than it would when acting for its own account. See “Item 1A. Risk Factors-Risks Relating to Our Business and Structure-The liability of each of the Adviser, and the Administrator is limited, and we have agreed to indemnify each of the Adviser and the Administrator against certain liabilities, which may lead them to act in a riskier manner on our behalf than each would when acting for its own account.”
Co-Investment Transactions
Our Adviser has received the Order from the SEC that permits us, among other things, to co-invest with certain other persons, including certain Affiliated Investment Accounts, including the MS BDCs and which may include proprietary accounts of Morgan Stanley. Subject to the 1940 Act and the conditions of the Order, we may, under certain circumstances, co-invest with Affiliated Investment Accounts, which may include proprietary accounts of Morgan Stanley, in investments that are suitable for us and one or more of such Affiliated Investment Accounts or proprietary accounts of Morgan Stanley. Even though we and any such Affiliated Investment Account or proprietary account co-invest in the same securities, conflicts of interest may still arise. If the Adviser is presented with co-investment opportunities that generally fall within our investment objective and other board-established criteria and those of one or more Affiliated Investment Accounts advised by the Adviser, whether focused on a debt strategy or otherwise, the Adviser will allocate such opportunities among us and such Affiliated Investment Accounts in a manner consistent with the Order and our Adviser’s allocation policies and procedures, as discussed herein.
Investment opportunities for all other Affiliated Investment Accounts not advised by our Adviser, which may include proprietary accounts of Morgan Stanley, are allocated in accordance with their respective investment advisers’ and Morgan Stanley’s other allocation policies and procedures. Such policies and procedures may result in certain investment opportunities that are attractive to us being allocated to other Affiliated Investment Accounts, which may include proprietary accounts of Morgan Stanley.
With respect to co-investment transactions conducted under the Order, initial internal allocations among us and certain other Affiliated Investment Accounts, which may include proprietary accounts of Morgan Stanley, or the Internal Order, will generally be made taking into account a variety of factors which may include factors not limited to: investment guidelines, goals or restrictions of the applicable Affiliated Investment Accounts or proprietary account, available capital and liquidity restrictions, target position hold size, diversification requirements and objectives, issuer, industry and geographical considerations, leverage covenants or restrictions, tax considerations, legal or regulatory considerations and risk considerations, prohibitions or restrictions on “joint transactions” for entities regulated under the 1940 Act, compliance with co-investment order conditions pursuant to our Order and other applicable guidance and relief, as applicable. If we invest in a transaction under the Order and, immediately before the submission of the order for us and the other participating Affiliated Investment Accounts, which may include proprietary accounts of Morgan Stanley, the opportunity is oversubscribed, it will generally be allocated on a pro rata basis based on Internal Order’s size. Final allocations are generally approved by an allocation committee comprised of senior management, subject to certain exceptions described in the Order. Our Board of Directors regularly reviews the allocation policies and procedures and code of ethics of the Adviser.
All of the foregoing may reduce the number of investment opportunities available to us and may create conflicts of interest in allocating investment opportunities among us and the Affiliated Investment Accounts, including any proprietary accounts of Morgan Stanley.
Competition
Our primary competitors in providing financing to middle-market companies include public and private investment funds, other BDCs, commercial finance companies and, to the extent they provide an alternative form of financing, private equity, mezzanine and hedge funds, as well as issuers of collateralized loan obligations ("CLOs") and other structured loan funds, and to a lesser extent, commercial and investment banks. Some of our potential competitors may be more experienced and may have more resources than we do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us. Our competitors have incurred, or may in the future incur, leverage to finance their debt investments at levels or on terms more favorable than those available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments than we do, which could allow them to consider a wider variety of investments and establish more relationships than us.
Among other factors, the returns on investments available in the marketplace are a function of the supply of investment opportunities and the amount of capital investing in such opportunities. Strong competition for investments, including from new competitors, could result in fewer investment opportunities and less favorable pricing for us, as our competitors target the same or similar investments that we intend to purchase. Moreover, identifying attractive investment opportunities is difficult and involves a high degree of uncertainty. For additional information concerning the competitive risks we face, see “Item 1A. Risk Factors - Risks Relating to Our Business and Structure - We operate in a highly competitive market for investment opportunities, which could reduce returns and result in losses.”
Capital Resources and Borrowings
As a RIC, we intend to distribute substantially all of our net income to our stockholders. We anticipate generating cash from the issuance of shares and cash flows from operations, including interest received on our debt investments.
Additionally, we are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of shares senior to our Common Stock if our asset coverage, as defined in the 1940 Act, is at least equal to 150% immediately after each such issuance. As of December 31, 2024 and December 31, 2023, our asset coverage ratio was 193.0% and 215.0%, respectively.
While any indebtedness and senior securities remain outstanding, we must take provisions to prohibit any distribution to our stockholders (which may cause us to fail to distribute amounts necessary to avoid entity-level taxation under the Code), or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. In addition, we must also comply with positive and negative covenants customary for these types of facilities. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Financial Condition, Liquidity and Capital Resources.”
Share Repurchase Plan
On January 25, 2024, we entered into a share repurchase plan, or the Company 10b5-1 Plan, to acquire up to $100 million in the aggregate of our Common Stock at prices below our net asset value per share over a specified period, in accordance with the guidelines specified in Rule 10b5-1 and Rule 10b-18 of the Exchange Act. The Company 10b5-1 Plan was approved by the Board on September 11, 2023.
The Company 10b5-1 Plan requires Wells Fargo Securities, LLC, as our agent, to repurchase Common Stock on our behalf when the market price per share is below the most recently reported net asset value per share (including any updates, corrections or adjustments publicly announced by us to any previously announced net asset value per share, including any distributions declared). Under the Company 10b5-1 Plan, the volume of purchases is expected to increase as the price of our Common Stock declines, subject to volume restrictions. The timing and amount of any share repurchases depends on the terms and conditions of the Company 10b5-1 Plan, the market price of our Common Stock and trading volumes, and no assurance can be given that Common Stock will be repurchased in any particular amount or at all.
The repurchase of shares pursuant to the Company 10b5-1 Plan is intended to satisfy the conditions of Rule 10b5-1 and Rule 10b-18 under the Exchange Act, and will otherwise be subject to applicable law, including Regulation M, which may prohibit repurchases under certain circumstances.
The Company 10b5-1 Plan commenced beginning 60 calendar days following the end of the “restricted period” under Regulation M and will terminate upon the earliest to occur of (i) 12-months from the commencement date of the Company 10b5-1 Plan , (ii) the end of the trading day on which the aggregate purchase price for all shares purchased under the Company 10b5-1 Plan equals $100 million and (iii) the occurrence of certain other events described in the Company 10b5-1 Plan.
The “restricted period” under Regulation M ended upon the closing of the IPO and, therefore, the Common Stock repurchases/purchases described above began on March 26, 2024.
Dividend Reinvestment Plan
Effective as of January 26, 2024 and later amended on December 7, 2024, we adopted an “opt out” dividend reinvestment plan, or DRIP, that provides for reinvestment of dividends and other distributions on behalf of stockholders, unless a stockholder elects to receive cash as provided below. As a result, if the Board of Directors authorizes, and we declare, a cash dividend or other distribution, then the stockholders who have not “opted out” of the DRIP will have their cash dividends or distributions automatically reinvested in additional shares of Common Stock, rather than receiving cash.
No action is required on the part of a registered stockholder to have their cash dividend or other distribution reinvested in shares of our Common Stock. A registered stockholder may elect to receive an entire distribution in cash by notifying the plan administrator and our transfer agent and registrar in writing so that such notice is received by the plan administrator no later than 10 days prior to the record date for distributions to stockholders. The plan administrator will set up an account for each stockholder to acquire shares of Common Stock in non-certificated form through the plan if such stockholders have elected to receive their distributions in shares of Common Stock. Those stockholders who hold shares of Common Stock through a broker or other financial intermediary may receive dividends and other distributions in cash by notifying their broker or other financial intermediary of their election.
The Board reserves the right, subject to the provisions of the 1940 Act, to either issue new shares of Common Stock or to make open market purchases of shares of Common Stock for the accounts of participants or a combination of each. The number of shares of Common Stock to be issued to a participant is determined by dividing the total dollar amount of the distribution payable to such stockholder by the market price per share of our Common Stock at the close of regular trading on The New York Stock Exchange on the date of such distribution and/or the price to be paid by us to acquire shares of Common Stock on The New York Stock Exchange pursuant to the DRIP, provided that in the event the market price per share on the date of such distribution exceeds the most recently computed net asset value per share, we will issue shares at the greater of the most recently computed net asset value per share or 95% of the current market price per share (or such lesser discount to the current market price per share that still exceeds the most recently computed net asset value per share). The market price per share on that date will be the closing price for such shares on The New York Stock Exchange or, if no sale is reported for such day, at the average of their reported bid and asked prices. There will be no brokerage or other charges to stockholders who participate in the plan. The DRIP administrator’s fees under the plan will be paid by us.
Stockholders who receive dividends and other distributions in the form of shares of Common Stock are generally subject to the same U.S. federal, state and local tax consequences as are stockholders who elect to receive their distributions in cash. However, since a participating stockholder’s cash dividends would be reinvested in shares of our Common Stock (net of applicable withholding tax in case of non-U.S. stockholders), such stockholder will not receive cash with which to pay any applicable taxes on reinvested dividends. A stockholder’s basis for determining gain or loss upon the sale of shares of Common Stock received in a dividend or other distribution from us will generally be equal to the cash that would have been received if the stockholder had received the distribution in cash. Any shares of Common Stock received in a dividend or other distribution will have a new holding period for tax purposes commencing on the day following the day on which such shares are credited to the U.S. holder’s account.
No fractional shares of Common Stock will be issued pursuant to the DRIP, and participants who would otherwise have been entitled to receive a fraction of a share of Common Stock pursuant to the DRIP will receive, in lieu thereof, cash in an amount equal to the difference between the distributions declared and payable to such participant and the value of the whole shares of common stock issued to such participant pursuant to the DRIP.
We may terminate the DRIP upon notice in writing to each participant at least 30 days prior to any record date for the payment of any distribution by us. Participants may terminate their accounts under the plan by notifying the plan administrator by submitting a letter of instruction terminating the participant’s account under the plan to the plan administrator. Such termination is effective immediately if the participant’s notice is received by the plan administrator no later than 10 days prior to the record date for an applicable distribution; otherwise, such termination shall be effective only with respect to any subsequent distributions. Upon termination, participants will receive the shares of common stock held under the plan.
Investment Advisory Agreement
We entered into an investment advisory agreement with our Adviser on November 25, 2019 (the “Original Investment Advisory Agreement”).
On January 24, 2024, in connection with our IPO, we entered into an amended and restated investment advisory agreement with our Adviser (the “Investment Advisory Agreement”). The Investment Advisory Agreement will continue from year to year if approved annually by a majority of our stockholders or a majority of our Board, including a majority of the directors who are not “interested persons” as defined in Section 2(a)(19) of the 1940 Act, or the Independent Directors. The Investment Advisory Agreement was most recently re-approved in August 2024.
Pursuant to the Investment Advisory Agreement with our Adviser, we pay our Adviser a fee for investment advisory and management services consisting of two components-a base management fee and an incentive fee.
Base Management Fee
The base management fee is calculated at an annual rate of 1.0% of our average gross assets at the end of the two most recently completed calendar quarters, including assets purchased with borrowed funds or other forms of leverage but excluding cash and cash equivalents. The Adviser agreed to irrevocably waive any portion of the base management fee in excess of 0.75% of our average gross assets calculated in accordance with the Investment Advisory Agreement for the period from January 24, 2024 to January 24, 2025, or the Waiver Period. Waived base management fees are not subject to recoupment by the Adviser. For services rendered under the Investment Advisory Agreement, the base management fee is payable quarterly in arrears. Base management fees for any partial month or quarter will be appropriately pro-rated.
The Adviser and its affiliates, at their own expense and out of their own assets, may make payments to, or enter into arrangements with, financial intermediaries or other persons in consideration of services, arrangements, significant investments in shares of our Common Stock or other activities that the Adviser and its affiliates believe may, among other things, benefit our business, facilitate investment in our Common Stock or otherwise benefit our stockholders. Payments of the type described above are sometimes referred to as profit-sharing payments.
Incentive Fee
We also pay the Adviser an incentive fee consisting of two parts. The first part is determined and paid quarterly based on our pre-incentive fee net investment income, and is subject to an Incentive Fee Cap (as defined below) pursuant to the Investment Advisory Agreement, and the second part is determined and payable in arrears based on net capital gains as of the end of each calendar year or upon termination of the Investment Advisory Agreement. Pre-incentive fee net investment income is defined as interest income, dividend income and any other income accrued during the calendar quarter, minus operating expenses for the quarter, including the base management fee, expenses payable under the Administration Agreement, any interest expense and distributions paid on any issued and outstanding preferred stock, but excluding the incentive fee. Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.
Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as debt instruments with pay-in-kind (“PIK”) interest and zero coupon securities), accrued income that we have not yet received in cash. Our Adviser is not obligated to return to us the incentive fee it receives on PIK interest that is later determined to be uncollectible in cash.
Pursuant to the Investment Advisory Agreement, we pay our Adviser an incentive fee on our aggregate pre-incentive fee net investment income in respect of (1) for the quarter ending March 31, 2024 (the “First Calendar Quarter”), the First Calendar Quarter, and (2) commencing with the quarter ending June 30, 2024, the current calendar quarter and eleven preceding calendar quarters beginning with the calendar quarter commencing on April 1, 2024 (or the appropriate portion thereof in the case of any of our first eleven calendar quarters that commence on or after April 1, 2024) (in either case, the “Trailing Twelve Quarters”).
Pre-incentive fee net investment income in respect of the First Calendar Quarter will be compared to a hurdle rate equal to 1.5% (6.0% annualized), and, if pre-incentive fee net investment income for the First Calendar Quarter exceeds the hurdle rate, the incentive fee will be 100% of pre-incentive fee net investment income until our Adviser has received a “catch up” equal to 17.5%, plus 17.5% of pre-incentive fee net investment income above the catch up.
Commencing with the quarter ending June 30, 2024, pre-incentive fee net investment income in respect of the relevant Trailing Twelve Quarters will be compared to a “Hurdle Rate” equal to the product of (i) the hurdle rate of 1.5% per quarter (6% annualized) and (ii) the sum of our net assets (defined as total assets less indebtedness and before taking into account any incentive fees payable during the period) at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters. The incentive fee based on income for each calendar quarter will be determined as follows:
•No incentive fee based on pre-incentive fee net investment income in any calendar quarter in which our pre-incentive fee net investment income in respect of the relevant Trailing Twelve Quarters does not exceed the Hurdle Rate;
•100% of pre-incentive fee net investment income in respect of the Trailing Twelve Quarters with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 1.8182% in any calendar quarter (7.2728% annualized). We refer to this portion of the pre-incentive fee net investment income (which exceeds the hurdle rate but is less than 1.8182%) as the “catch-up.” The “catch-up” is meant to provide the Adviser with approximately 17.5% of our pre-incentive fee net investment income as if a hurdle rate did not apply if this net investment income exceeds 1.8182% in any calendar quarter; and
•17.5% of the pre-incentive fee net investment income in respect of the Trailing Twelve Quarters that exceeds 1.8182% in any calendar quarter (7.2728% annualized), which reflects that once the hurdle rate is reached and the catch-up is achieved, 17.5% of the pre-incentive fee net investment income that exceeds the catch-up amounts is paid to the Adviser.
Commencing with the quarter ending June 30, 2024, each income incentive fee will be subject to an incentive fee cap (the “Incentive Fee Cap”) that in respect of any calendar quarter is an amount equal to 17.5% of the Cumulative Pre-Incentive Fee Net Return (as defined herein) during the Trailing Twelve Quarters less the aggregate incentive fees based on income that were paid to the Adviser in the preceding eleven calendar quarters (or portion thereof) comprising the relevant Trailing Twelve Quarters. In the event the Incentive Fee Cap is zero or a negative value then no income incentive fee shall be payable and if the Incentive Fee Cap is less than the amount of incentive fee based on income that would otherwise be payable, the amount of incentive fee based on income shall be reduced to an amount equal to the Incentive Fee Cap.
“Cumulative Pre-Incentive Fee Net Return” (A) during the First Calendar Quarter, the sum of Pre-Incentive Fee Net Investment Income in the First Calendar Quarter and (B) during the relevant Trailing Twelve Quarters, the sum of (x) Pre-Incentive Fee Net Investment Income in respect of the Trailing Twelve Quarters and (y) Adjusted Capital Returns (as defined below) in respect of the Trailing Twelve Quarters. If, in any calendar quarter, the Incentive Fee Cap is zero or a negative value, we shall pay no income incentive fee to the Adviser in respect of that quarter. If, in any calendar quarter, the Incentive Fee Cap is a positive value but is less than the incentive fee calculated as described above, we shall pay the Adviser the Income Incentive Fee Cap in respect of such quarter. If, in any calendar quarter, the Incentive Fee Cap is equal to or greater than the incentive fee calculated as described above, we shall pay the Adviser the incentive fee in respect of such quarter. “Adjusted Capital Returns” in respect of a particular period means the sum of aggregate realized losses and aggregate realized capital gains in respect of such period.
For the Waiver Period, the Adviser irrevocably waived its right to receive each component of the income incentive fee in excess of amounts calculated as described above using (1) 15.0% instead of 17.5% and (2) a catch-up amount (as applicable) calculated using 1.7647% in place of 1.8182%. For periods in which the waiver described in this paragraph was in effect for less than a full quarter or calendar year, as applicable, the applicable incentive fee shall be calculated at a weighted rate during the applicable days in such period during the Waiver Period.
If market interest rates rise, we may be able to invest our funds in debt instruments that provide for a higher return, which would increase our pre-incentive fee net investment income and make it easier for the Adviser to surpass the hurdle rate and receive an incentive fee on such net investment income. PIK interest and original issue discount (“OID”) will also increase our pre-incentive fee
net investment income and make it easier to surpass the hurdle rate. Our pre-incentive fee net investment income used to calculate this part of the incentive fee is also included in the amount of our total assets (other than cash and cash equivalents but including assets purchased with borrowed amounts) used to calculate the base management fee.
The following is a graphical representative of the incentive fee calculation pursuant to the Investment Advisory Agreement:
Incentive Fee based on Income After the Waiver Period
Percentage of pre-incentive fee net income comprising the Incentive Fee based on Income
(expressed as an annualized rate of return on the value of net assets as of the beginning
of each of the quarters included in the Trailing Twelve Quarters)
Under the Investment Advisory Agreement, we pay the Adviser an incentive fee on capital gains calculated and payable in arrears in cash as of the end of each calendar year or upon the termination of the Investment Advisory Agreement in an amount equal to 17.5% of our realized capital gains, if any, on a cumulative basis from the date of our election to be regulated as a BDC through the end of a given calendar year or upon the termination of the Investment Advisory Agreement, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees (the “Cumulative Capital Gains”). For the purpose of computing the incentive fee on capital gains, the calculation methodology looks through derivative financial instruments or swaps as if we owned the reference assets directly. Therefore, realized gains and realized losses on the disposition of any reference assets, as well as unrealized depreciation on reference assets retained in the derivative financial instrument or swap, will be included on a cumulative basis in the calculation of the capital gains incentive fee.
For the Waiver Period, the Adviser irrevocably waived any capital gains incentive fee in excess of amounts calculated as described above using 15.0% instead of 17.5%. For periods in which the waiver described in this paragraph was in effect for less than a full quarter or calendar year, as applicable, the applicable incentive fee shall be calculated at a weighted rate during the applicable days in such period during the Waiver Period.
Our Board of Directors monitors the mix and performance of our investments over time and seeks to satisfy itself that the Adviser is acting in our interests and that our fee structure appropriately incentivizes the Adviser to do so.
Example 1: Income Related Portion of Incentive Fee under Amended and Restated Investment Advisory Agreement:
Alternative 1 - Three Quarters under Amended and Restated Investment Advisory Agreement in which Pre-Incentive Fee Net Investment Income Exceeds the Hurdle Amount and Catch-up Amount
Assumptions
Stable net asset value (NAV) of $1.8 billion across all quarters with 1.0x leverage
Hurdle rate(1) = 1.5%
Catch-up Amount = 100% of pre-incentive fee net investment income that is greater than the hurdle amount but less than 1.8182%
Pre-incentive fee net investment income for each quarter = 5.0% (*)
No Adjusted Capital Returns each quarter
Assumes no other quarters in the applicable relevant Trailing Twelve Quarters
Incentive fee for first quarter
Aggregate pre-incentive fee net investment income during the relevant Trailing Twelve Quarters = $45.0 million
Hurdle Amount = Q1 NAV × 1.5% = $1.8 billion × 0.015 = $27.0 million
Excess Income Amount = pre-incentive fee net investment income during the relevant Trailing Twelve Quarters - Hurdle Amount = $45.0 million - $27.0 million = $18.0 million
Catch-up Fee Amount = 100% of pre-incentive fee net investment income that is greater than $27.0 million (the Hurdle Amount) but less than 1.8182% × Q1 NAV, or $32.728 million. This Catch-up Fee Amount equals $5.727 million
Post Catch-up Fee Amount = 17.5% of pre-incentive fee net investment income that exceeds the Catch-up Amount = 0.175 × ($45.0 million - $32.7 million) = $2.148 million
Catch-up Fee Amount + Post Catch-up Fee Amount = income incentive fee payment = $7.875 million
Income incentive fee previously paid during the relevant Trailing Twelve Quarters = none
Incentive Fee Cap = 17.5% of Cumulative Net Return during the relevant Trailing Twelve Quarters
Cumulative Net Return = pre-incentive fee net investment income during the relevant Trailing Twelve Quarters - Net Adjusted Capital Returns in respect of the relevant Trailing Twelve Quarters
Therefore Incentive Fee Cap = 17.5% of Cumulative Net Return during the relevant Trailing Twelve Quarters is greater than the income incentive fee and the cap is not applied
Incentive fee for second quarter
Aggregate pre-incentive fee net investment income during the relevant Trailing Twelve Quarters = $45.0 million + $45.0 million = $90.0 million
Hurdle Amount = (Q1 NAV + Q2 NAV) × 1.5% = $3.6 billion × 0.015 = $54.0 million
Excess Income Amount = aggregate pre-incentive fee net investment income during the relevant Trailing Twelve Quarters (e.g., Q1 and Q2) - Hurdle Amount = $90.0 million - $54.0 million = $36.0 million
Catch-up Fee Amount = 100% of pre-incentive fee net investment income that is greater than $54.0 million (the Hurdle Amount) but less than 1.8182% × (Q1 NAV + Q2 NAV), or $65.5 million. This Catch-up Fee Amount equals $11.455 million
Post Catch-up Fee Amount = 17.5% of pre-incentive fee net investment income that exceeds the Catch-up Amount = 0.175 × ($90.0 million - $65.5 million) = $4.295 million
Catch-up Fee Amount + Post Catch-up Fee Amount = income incentive fee payment = $15.750 million
$7.875 million income incentive fee previously paid during the Trailing Twelve Quarters
Total income incentive fee payment for Q2 = income incentive fee payment - amount previously paid = $7.875 million
Incentive Fee Cap = 17.5% of Cumulative Net Return during the relevant Trailing Twelve Quarters
Cumulative Net Return = aggregate pre-incentive fee net investment income during the relevant Trailing Twelve Quarters - Net Adjusted Capital Returns in respect of the relevant Trailing Twelve Quarters
Therefore Incentive Fee Cap = 17.5% of Cumulative Net Return during the relevant Trailing Twelve Quarters is greater than income incentive fee and the cap is not applied
Incentive fee for third quarter
Aggregate pre-incentive fee net investment income during the relevant Trailing Twelve Quarters = $45.0 million + $45.0 million + $45.0 million = $135.0 million
Hurdle Amount = (Q1 NAV + Q2 NAV + Q3 NAV) × 1.5% = $5.4 billion × 0.015 = $81.0 million
Excess Income Amount = aggregate pre-incentive fee net investment income during the relevant Trailing Twelve Quarters (e.g., Q1, Q2 and Q3) - Hurdle Amount = $135.0 million - $81.0 million = $54.0 million
Catch-up Fee Amount = 100% of pre-incentive fee net investment income that is greater than $81.0 million (the Hurdle Amount) but less than 1.8182% × (Q1 NAV + Q2 NAV + Q3 NAV), or $98.2 million. This Catch-up Fee Amount equals $17.183 million
Post Catch-up Fee Amount = 17.5% of pre-incentive fee net investment income that exceeds the Catch-up Amount = 0.175 × ($135.0 million - $98.2 million) = $6.443 million
Catch-up Fee Amount + Post Catch-up Fee Amount = income incentive fee payment = $23.625 million
$15.750 million income incentive fee previously paid during the Trailing Twelve Quarters
Total income incentive fee payment for Q3 = income incentive fee payment - amount previously paid = $7.875 million
Incentive Fee Cap = 17.5% of Cumulative Net Return during the relevant Trailing Twelve Quarters
Cumulative Net Return = aggregate pre-incentive fee net investment income during the relevant Trailing Twelve Quarters - Net Adjusted Capital Returns in respect of the relevant Trailing Twelve Quarters
Therefore Incentive Fee Cap = 17.5% of Cumulative Net Return during the relevant Trailing Twelve Quarters is greater than the income incentive fee and the cap is not applied
Alternative 2 - Three Quarters under Amended and Restated Investment Advisory Agreement, in which Pre-Incentive Fee Net Investment Income does not meet the Hurdle Amount for one Quarter
Assumptions
Stable NAV of $1.8 billion across all quarters with 1.0x leverage
Hurdle rate(1) = 1.5%
Catch-up Amount = 100% of pre-incentive fee net investment income that is greater than the hurdle amount but less than 1.8182%
Pre-incentive fee net investment income for Q1 = 5.0% (*)
Pre-incentive fee net investment income for Q2 = 3.0% (*)
Pre-incentive fee net investment income for Q3 = 0.0% (*)
No Adjusted Capital Returns each quarter
Assumes no other quarters in the applicable relevant Trailing Twelve Quarters
Incentive fee for first quarter
Aggregate pre-incentive fee net investment income during the relevant Trailing Twelve Quarters = $45.0 million
Hurdle Amount = Q1 NAV × 1.5% = $1.8 billion × 0.015 = $27.0 million
Excess Income Amount = pre-incentive fee net investment income during the relevant Trailing Twelve Quarters - Hurdle Amount = $45.0 million - $27.0 million = $18.0 million
Catch-up Fee Amount = 100% of pre-incentive fee net investment income that is greater than $27.0 million (the Hurdle Amount) but less than 1.8182% × Q1 NAV, or $32.7 million. This Catch-up Fee Amount equals $5.727 million
Post Catch-up Fee Amount = 17.5% of pre-incentive fee net investment income that exceeds the Catch-up Amount = 0.175 × ($45.0 million - $32.7 million) = $2.148 million
Catch-up Fee Amount + Post Catch-up Fee Amount = income incentive fee payment = $7.875 million
No income incentive fee previously paid during the relevant Trailing Twelve Quarters
Incentive Fee Cap = 17.5% of Cumulative Net Return during the relevant Trailing Twelve Quarters
Cumulative Net Return = pre-incentive fee net investment income during the relevant Trailing Twelve Quarters - Net Adjust Capital Returns in respect of the relevant Trailing Twelve Quarters
Therefore Incentive Fee Cap = 17.5% of Cumulative Net Return during the relevant Trailing Twelve Quarters is greater than the income incentive fee and the cap is not applied
Incentive fee for second quarter
Aggregate pre-incentive fee net investment income during the relevant Trailing Twelve Quarters = $45.0 million + $27.0 million = $72.0 million
Hurdle Amount = (Q1 NAV + Q2 NAV) × 1.5% = $3.6 billion × 0.015 = $54.0 million
Excess Income Amount = (aggregate pre-incentive fee net investment income during the relevant Trailing Twelve Quarters (e.g., Q1 and Q2)) - Hurdle Amount - $72.0 million - $54.0 million = $18.0 million
Catch-up Fee Amount = 100% of pre-incentive fee net investment income that is greater than $54.0 million (the Hurdle Amount) but less than 1.8182% × (Q1 NAV + Q2 NAV), or $65.5 million. This Catch-up Fee Amount equals $65.5 million - $54.0 million, or $11.455 million
Post Catch-up Fee Amount = 17.5% of pre-incentive fee net investment income that exceeds the Catch-up Amount = 0.175 × ($72.0 million - $65.5 million) = $1.145 million
Catch-up Fee Amount + Post Catch-up Fee Amount = income incentive fee payment = $12.600 million
$7.875 million income incentive fee previously paid during the relevant Trailing Twelve Quarters
Total income incentive fee payment for Q2 = income incentive fee payment - amount previously paid = $4.725 million
Incentive Fee Cap = 17.5% of Cumulative Net Return during the relevant Trailing Twelve Quarters
Cumulative Net Return = pre-incentive fee net investment income during the relevant Trailing Twelve Quarters - Net Adjusted Capital Returns in respect of the relevant Trailing Twelve Quarters
Therefore Incentive Fee Cap = 17.5% of Cumulative Net Return during the relevant Trailing Twelve Quarters is greater than the income incentive fee and the cap is not applied
Incentive fee for third quarter
Aggregate pre-incentive fee net investment income during the relevant Trailing Twelve Quarters = $45.0 million + $27.0 million + $0.0 million = $72.0 million
Hurdle Amount = Q1 NAV + Q2 NAV + Q3 NAV × 1.5% = $5.4 billion × 0.015 = $81.0 million
Catch-up Amount = 100% of pre-incentive fee net investment income that is greater than the hurdle amount but less than 1.8182%
Aggregate pre-incentive fee net investment income < Hurdle Amount. Therefore, no income incentive fee is payable for the quarter
Alternative 3 - Three Quarters under Amended and Restated Investment Advisory Agreement in which Pre-Incentive Fee Net Investment Income Exceeds the Hurdle Rate with Net Capital Losses
Assumptions
Stable net asset value (NAV) of $1.8 billion across all quarters with 1.0x leverage
Hurdle rate(1) = 1.5%
Catch-up Amount = 100% of pre-incentive fee net investment income that is greater than the hurdle amount but less than 1.8182%
Pre-incentive fee net investment income for each quarter = 5.0% (*)
Net Realized losses of 0.25% of NAV each in Q1, Q2 and Q3
Assumes no other quarters in the applicable relevant Trailing Twelve Quarters
Incentive fee for first quarter
Aggregate pre-incentive fee net investment income during the relevant Trailing Twelve Quarters = $45.0 million
Hurdle Amount = Q1 NAV × 1.5% = $1.8 billion × 0.015 = $27.0 million
Excess Income Amount = pre-incentive fee net investment income during the relevant Trailing Twelve Quarters - Hurdle Amount = $45.0 million - $27.0 million = $18.0 million
Catch-up Fee Amount = 100% of pre-incentive fee net investment income that is greater than $27.0 million (the Hurdle Amount) but less than 1.8182% × Q1 NAV, or $32.7 million. This Catch-up Fee Amount equals $5.727 million
Post Catch-up Fee Amount = 17.5% of pre-incentive fee net investment income that exceeds the Catch-up Amount = 0.175 × ($45.0 million - $32.7 million) = $2.148 million
Catch-up Fee Amount + Post Catch-up Fee Amount = income incentive fee payment = $7.875 million
Incentive Fee Cap = 17.5% of Cumulative Net Return during the Trailing Twelve Quarters
Cumulative Net Return = aggregate pre-incentive fee net investment income during the relevant Trailing Twelve Quarters - Net Adjusted Capital Returns during the relevant Trailing Twelve Quarters
Adjusted Capital Returns (losses) = $9.0 million
Cumulative Net Return = $45.0 million - $9.0 million = $36.0 million
Therefore Incentive Fee Cap = 17.5% × $36.0 million = $6.300 million. Since the Incentive Fee Cap ($6.300 million) is less than the income incentive fee ($7.875 million), the Incentive Fee Cap is applied and a $6.300 million income incentive fee is paid for the quarter
Incentive fee for second quarter
Aggregate pre-incentive fee net investment income during the relevant Trailing Twelve Quarters = $45.0 million + $45.0 million = $90.0 million
Hurdle Amount = (Q1 NAV + Q2 NAV) × 1.5% = $3.6 billion × 0.015 = $54.0 million
Excess Income Amount = aggregate pre-incentive fee net investment income during the relevant Trailing Twelve Quarters (e.g., Q1 and Q2) - Hurdle Amount = $90.0 million - $54.0 million = $36.0 million
Catch-up Fee Amount = 100% of pre-incentive fee net investment income that is greater than $54.0 million (the Hurdle Amount) but less than 1.8182% × (Q1 NAV + Q2 NAV), or $65.5 million. This Catch-up Fee Amount equals $11.455 million
Post Catch-up Fee Amount = 17.5% of pre-incentive fee net investment income that exceeds the Catch-up Amount = 0.175 × ($90.0 million - $65.5 million) = $4.295 million
Catch-up Fee Amount + Post Catch-up Fee Amount = income incentive fee payment = $15.750 million
Total income incentive fee for Q2 = Catch-up Fee Amount + Post Catch-up Fee Amount - Q1 income incentive fee = $7.875 million
Incentive Fee Cap = 17.5% of Cumulative Net Return for the Trailing Twelve Quarters - income incentive fees previously paid for the Trailing Twelve Quarters
Cumulative Net Return = aggregate pre-incentive fee net investment income during the relevant Trailing Twelve Quarters - Net Adjusted Capital Returns in respect of the Trailing Twelve Quarters
Net Adjusted Capital Returns (losses) = $18.0 million Cumulative Net Return = $90.0 million - $18.0 million = $72.0 million
Therefore Incentive Fee Cap = (17.5% × $72.0 million) - $6.300 million = $6.300 million. Since the Incentive Fee Cap ($6.300 million) is less than the income incentive fee ($7.875 million), the Incentive Fee Cap is applied and a $6.300 million income incentive fee is paid for the quarter
Incentive fee for third quarter
Aggregate pre-incentive fee net investment income during the relevant Trailing Twelve Quarters = $45.0 million + $45.0 million + $45.0 million = $135.0 million
Hurdle Amount = (Q1 NAV + Q2 NAV + Q3 NAV) × 1.5% = $5.4 billion × 0.015 = $81.0 million
Excess Income Amount = aggregate pre-incentive fee net investment income during the relevant Trailing Twelve Quarters (e.g., Q1, Q2 and Q3) - Hurdle Amount = $135.0 million - $81.0 million = $54.0 million
Catch-up Fee Amount = 100% of pre-incentive fee net investment income that is greater than $81.0 million (the Hurdle Amount) but less than 1.8182% × (Q1 NAV + Q2 NAV + Q3 NAV), or $98.2 million. This Catch-up Fee Amount equals $17.183 million
Post Catch-up Fee Amount = 17.5% of pre-incentive fee net investment income that exceeds the Catch-up Amount = 0.175 × ($135.0 million - $98.2 million) = $6.443 million
Catch-up Fee Amount + Post Catch-up Fee Amount = income incentive fee payment = $23.626 million
Total income incentive fee for Q3 = Catch-up Fee Amount + Post Catch-up Fee Amount - Q1 income incentive fee - Q1 income incentive fee = $7.875 million
Incentive Fee Cap = 17.5% of Cumulative Net Return for the Trailing Twelve Quarters - income incentive fees previously paid for the Trailing Twelve Quarters
Cumulative Net Return = aggregate pre-incentive fee net investment income during the relevant Trailing Twelve Quarters - Net Capital Loss in respect of the Trailing Twelve Quarters
Net Capital Loss = $27.0 million
Cumulative Net Return = $135.0 million - $27.0 million = $108.0 million
Therefore Incentive Fee Cap = (17.5% × $108.0 million) - $12.600 million previously paid during the Trailing Twelve Quarters = $6.300 million. Since the Incentive Fee Cap ($6.3 million) is less than the income incentive fee ($7.875 million), the Incentive Fee Cap is applied and a $6.300 million income incentive fee is paid for the quarter
(1) Represents 6.0% annualized hurdle rate
* Hypothetical Pre incentive fee net investment income is comprised of investment income net of cost of debt, management fees, other expenses and before incentive fees
** Amount included in above example are rounded to the nearest 3 decimals in millions, where applicable
Administration Agreement
We entered into the Administration Agreement with our Administrator, who provides us with office space, office services and equipment. Under the Administration Agreement, our Administrator also performs, or oversees the performance of, our required administrative services, which include, among other things, providing assistance in accounting, legal, compliance, operations,
technology, internal audit and investor relations, and being responsible for the financial records that we are required to maintain and preparing reports to our stockholders and reports filed with the SEC. In addition, our Administrator assists us in determining and publishing our net asset value, overseeing the preparation and filing of our tax returns and the printing and dissemination of reports to our stockholders, our internal control assessment under the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and generally overseeing the payment of our expenses and the performance of administrative and professional services rendered to us by others. The Administration Agreement had an initial term of two years and continues thereafter from year to year if approved annually by our Board of Directors, which most recently approved the renewal of the Administration Agreement in August 2024.
Payments under the Administration Agreement are equal to an amount that reimburses our Administrator for its costs and expenses and our allocable portion of certain expenses incurred by our Administrator in performing its obligations under the Administration Agreement, including our allocable portion of the compensation paid to our Chief Compliance Officer and Chief Financial Officer. Our Board of Directors, including our Independent Directors, reviews the allocable portion of certain expenses incurred by our Administrator in performing its obligations under the Administration Agreement to determine whether such expenses are reasonable and reviews the methodology employed in determining how the expenses are allocated among us and the other MS BDCs. The Administration Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other party. Additionally, we ultimately bear the costs of any sub-administration agreements that our Administrator enters into.
Our Administrator reserves the right to waive all or part of any reimbursements due from us at its sole discretion.
The Administration Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, our Administrator and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with it will be entitled to indemnification from us for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of our Administrator’s services under the Administration Agreement or otherwise as an administrator for us, subject to the provisions of the 1940 Act.
In addition, our Administrator has, pursuant to a sub-administration agreement, engaged State Street Bank and Trust Company (“State Street”), to act on behalf of our Administrator in the performance of certain other administrative services for us. We have also engaged State Street directly to serve as our custodian, transfer agent, distribution paying agent and registrar.
Summary Risk Factors
The risk factors described below are a summary of the principal risk factors associated with an investment in us. These are not the only risks we face. You should carefully consider these risk factors, together with the risk factors set forth in “Item 1A. Risk Factors” of this report and other reports and documents we file with the SEC.
Risks Relating to Our Business and Structure
•Operating as a BDC imposes numerous constraints on us and significantly reduces our operating flexibility.
•We are subject to risks associated with the current interest rate environment and to the extent we use debt to finance our investments, changes in interest rates will affect our cost of capital and net investment income.
•We depend upon our Adviser and Administrator for our success and upon their access to the investment professionals and partners of Morgan Stanley and its affiliates.
•Our business model depends to a significant extent upon strong referral relationships with private equity sponsors.
•We may not replicate the historical results achieved by other entities advised by or sponsored by members of the Investment Committee or by the Adviser or its affiliates.
•The Adviser may frequently be required to make investment analyses and decisions on an expedited basis.
•There are significant potential conflicts of interest that could affect our investment returns.
•Our management fee and incentive fee structure may create incentives for the Adviser that are not fully aligned with the interests of our stockholders and may induce the Adviser to make speculative investments.
•Our ability to enter into transactions with our affiliates is restricted.
•We operate in a highly competitive market for investment opportunities.
•We will be subject to corporate-level income tax if we are unable to qualify as a RIC.
•We will need to raise additional capital to grow because we must distribute most of our income.
•Regulations governing our operation as a BDC affect our ability to, and the way in which we, raise additional capital.
•We are subject to risks associated with our Credit Facilities.
•We expose ourselves to risks when we engage in hedging transactions.
•Failure to qualify as a BDC would decrease our operating flexibility.
•Certain investors are limited in their ability to make significant investments in us
•The majority of our portfolio investments are recorded at fair value as determined in good faith by our Valuation Designee, and, as a result, there may be uncertainty as to the value of our portfolio investments.
•Our Board of Directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval, and we may temporarily deviate from our regular investment strategy.
•The Adviser and Administrator can each resign on 60 days’ notice, and we may not be able to find a suitable replacement within that time.
•The liability of each of the Adviser and the Administrator is limited.
Risks Relating to Our Investments
•Limitations of investment due diligence expose us to investment risk.
•Our debt investments may be risky, and we could lose all or part of our investments.
•Defaults by our portfolio companies will harm our operating results.
•Economic recessions or downturns could impair our portfolio companies and defaults by our portfolio companies will harm our operating results.
•Subordinated liens on collateral securing debt investments that we will make to our portfolio companies may be subject to control by senior creditors with first priority liens.
•Covenant-lite loans may expose us to different risks.
•The lack of liquidity in our investments may adversely affect our business.
•Price declines and illiquidity in the corporate debt markets may adversely affect the fair value of our portfolio investments, reducing our net asset value through increased net unrealized depreciation.
•Our portfolio companies may prepay loans, which may reduce our yields if capital returned cannot be invested in transactions with equal or greater expected yields.
•Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio.
•Because we generally do not hold controlling equity interests in our portfolio companies, we may not be able to exercise control over our portfolio companies.
•We can offer no assurance that portfolio company management will be able to operate their companies in accordance with our expectations.
•Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.
Risks Relating to Our Common Stock
•The market price of our Common Stock may be volatile and may fluctuate significantly.
•There is a risk you may not receive distributions.
•Investing in our Common Stock may involve an above average degree of risk.
•We have not established any limit on the amount of funds we may use from available sources to fund dividends.
Risks Relating to the Notes
•The Company’s 4.50% notes due 2027, or the 2027 Notes, and the Company’s 7.55% Series A Senior Notes due September 13, 2025, or the 2025 Notes and, the Company's 6.15% notes due 2029, or the 2029 Notes, together, the Notes, are unsecured and therefore are effectively subordinated to any secured indebtedness we may incur. Additionally, the Notes are not guaranteed by Morgan Stanley.
•The Notes are subordinated structurally to the indebtedness and other liabilities of our subsidiaries.
•A downgrade, suspension or withdrawal of the credit rating assigned by a rating agency to us or the Notes, if any, could cause the liquidity or market value of the Notes to decline significantly.
•An increase in market interest rates could result in a decrease in the value of the Notes.
General Risk Factors
•We are operating in a period of capital markets volatility and economic uncertainty.
•New or modified laws or regulations governing our or Morgan Stanley’s operations may adversely affect our business.
•We are highly dependent on information systems, and systems failures could significantly disrupt our business.
•Terrorist attacks, acts of war, natural disasters, outbreaks, or pandemics, may impact our portfolio companies and our Adviser and harm our business, operating results, and financial condition.
Regulation
On November 25, 2019, we elected to be regulated as a BDC under the 1940 Act. A BDC is a specialized investment vehicle that elects to be regulated under the 1940 Act as an investment company but is generally subject to less onerous requirements than other registered investment companies under a regime designed to encourage lending to U.S. based small and mid-sized businesses. Unlike many similar types of investment vehicles that are restricted to being private entities, the stock of a BDC is permitted to trade in the public equity markets. On January 26, 2024, we closed our IPO issuing 5,000,000 shares of our Common Stock at a public offering price of $20.67 per share. Our Common Stock began trading on the NYSE under the symbol “MSDL” on January 24, 2024. BDCs are also eligible to elect to be treated as a RIC under Subchapter M of the Code. A RIC typically does not incur significant entity-level income taxes, because it is generally entitled to deduct distributions made to its stockholders. We have elected to be treated and intend to qualify annually as a RIC. See “Certain Material U.S. Federal Income Tax Considerations.”
Qualifying Assets
Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the BDC’s total assets. The principal categories of qualifying assets relevant to our proposed business are the following:
1)Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC. An eligible portfolio company is defined in the 1940 Act as any issuer which:
a)is organized under the laws of, and has its principal place of business in, the United States;
b)is not an investment company (other than a small business investment company wholly owned by the BDC) or a company that would be an investment company but for certain exclusions under the 1940 Act; and
c)satisfies either of the following:
i)does not have any class of securities listed on a national securities exchange or has any class of securities listed on a national securities exchange subject to a $250 million market capitalization maximum; or
ii)is controlled by a BDC or a group of companies including a BDC, the BDC actually exercises a controlling influence over the management or policies of the eligible portfolio company, and, as a result, the BDC has an affiliated person who is a director of the eligible portfolio company.
2)Securities of any eligible portfolio company which we control.
3)Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities, was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements.
4)Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already own 60% of the outstanding equity of the eligible portfolio company.
5)Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of warrants or rights relating to such securities.
6)Cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment.
We deem certain U.S. Treasury bills, repurchase agreements and other high-quality, short-term debt securities as cash equivalents. We primarily make investments in securities described in paragraphs 1 through 3 of Section 55(a) of the 1940 Act. From time to time, including at or near the end of each fiscal quarter, we may consider using various temporary investment strategies for our business, including taking proactive steps by utilizing cash equivalents as temporary assets with the objective of enhancing our investment flexibility pursuant to Section 55 of the 1940 Act. More specifically, from time-to-time we may draw down our credit facilities, as deemed appropriate, and repay such borrowings subsequent to quarter end. We may also purchase U.S. Treasury bills or other high-quality, short-term debt securities at or near the end of the quarter and typically close out the position on a net cash basis subsequent to quarter end.
Managerial Assistance to Portfolio Companies
A BDC must have been organized and have its principal place of business in the United States and must be operated for the purpose of making investments in the types of securities described in (1), (2) or (3) above. However, in order to count portfolio securities as qualifying assets for the purpose of the 70% test, the BDC must either control the issuer of the securities or must offer to make available to the issuer of the securities significant managerial assistance. However, when a BDC purchases securities in conjunction with one or more other persons acting together, one of the other persons in the group may make available such managerial assistance. Making available managerial assistance means, among other things, any arrangement whereby the BDC, through its directors, officers or employees, offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company. The Investment Advisory Agreement excludes the amount of these transactions or such cash drawn for this purpose from total assets for purposes of computing the base management fee.
Temporary Investments
Pending investment in other types of “qualifying assets,” as described above, our investments may consist of cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment, which we refer to, collectively, as temporary investments, so that 70% of our assets are qualifying assets.
Senior Securities
As a BDC, we are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to shares of our Common Stock if our asset coverage, as defined in the 1940 Act, is at least equal to the percentage set forth in Section 61 of the 1940 Act that is applicable to us at such time. On December 16, 2019, our sole stockholder approved the application of the reduced asset coverage requirements in Section 61(a)(2) to us, effective as of December 17, 2019. As a result of stockholder approval, effective December 17, 2019, the asset coverage ratio under the 1940 Act applicable to us decreased to 150% from 200%, so long as we meet certain disclosure requirements, which means that for every $100 of net assets we hold, we may raise $200 from borrowing and issuing senior securities as compared to $100 from borrowing and issuing senior securities for every $100 of net assets under 200% asset coverage. In addition, while any senior securities remain outstanding, we will be required to make provisions to prohibit any dividend distribution to our stockholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. We are also permitted to borrow amounts up to 5% of the value of our total assets for temporary purposes without regard to asset coverage, which borrowings would not be considered senior securities, provided that any such borrowings in excess of 5% of the value of our total assets would be subject to the asset coverage ratio requirements of the 1940 Act, even if for temporary purposes. Regulations governing our operations as a BDC will affect our ability to raise, and the method of raising, additional capital, which may expose us to risks. We comply with the provisions of Section 61 of the 1940 Act governing capital structure and leverage on an aggregate basis with our wholly-owned, consolidated subsidiaries.
Code of Ethics
We and our Adviser have adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act that establishes procedures for personal investments and restricts certain personal securities transactions. Personnel subject to the code of ethics may invest in securities for their personal investment accounts, including securities that may be purchased or held by us, so long as such investments are made in accordance with the codes of ethics’ requirements. Our codes of ethics is available on our website at www.msdl.com. The code of ethics of the Adviser is available on the SEC's website at www.sec.gov and you may obtain copies of the code of ethics, after paying a duplicating fee, by electronic request at the following email address: publicinfo@sec.gov.
Proxy Voting Policies and Procedures
We have delegated our proxy voting responsibility to our Adviser. A summary of the Proxy Voting Policies and Procedures of our Adviser are set forth below. These policies and procedures are reviewed periodically by our Adviser and our Independent Directors, and, accordingly, are subject to change.
An investment adviser registered under the Investment Advisers Act of 1940, as amended, or the Advisers Act, has a fiduciary duty to act solely in the best interests of its clients. As part of this duty, we and the Adviser recognize that the Adviser must vote our securities in a timely manner free of conflicts of interest and in our best interests and the best interests of our stockholders.
These policies and procedures for voting proxies are intended to comply with Section 206 of, and Rule 206(4)-6 under, the Advisers Act.
The Adviser votes proxies relating to our portfolio securities in what it believes to be the best interest of our stockholders. To ensure that our vote is not the product of a conflict of interest, the Adviser requires that: (1) anyone involved in the decision making process disclose to our Chief Compliance Officer any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote; and (2) employees involved in the decision making process or vote administration are prohibited from revealing how the Adviser intends to vote on a proposal in order to reduce any attempted influence from interested parties.
A copy of the Adviser’s policies and procedures with respect to the voting of proxies relating to our portfolio securities is available without charge, upon request. Stockholders may obtain information regarding how the Adviser voted proxies by making a written request for proxy voting information to: Morgan Stanley Direct Lending Fund c/o Morgan Stanley 1585 Broadway, New York, NY 10036 Attn: Chief Compliance Officer.
Privacy Principles
The Adviser has established policies with respect to nonpublic personal information provided to it with respect to individuals who are investors in us, which policies also apply to the Administrator. We have adopted the privacy policies of the Adviser as applicable to us.
We and the Adviser each recognize the importance of maintaining the privacy of any nonpublic personal information received with respect to each investor. In the course of providing management services to us, the Adviser collects nonpublic personal information about investors from the Subscription Agreements and the certificates and exhibits thereto that each investor submits. We and the Adviser may also collect nonpublic personal information about each investor from conversations and correspondence between each investor and us or the Adviser, both prior to and during the course of each investor’s investment in us.
We and the Adviser each treat all of the nonpublic personal information we receive with respect to each investor as confidential. We and the Adviser restrict access to such information to those employees, affiliates and agents who need to know the information in
order for us and the Adviser to determine whether each investor meets the regulatory requirements for an investment in us and, in the case of the Adviser, to provide ongoing management services to us. The Adviser maintains physical, electronic, and procedural safeguards to comply with U.S. federal standards to guard each investor’s nonpublic personal information.
The Adviser does not disclose any nonpublic personal information about any investor to any third parties, other than the Adviser’s agents, representatives and/or affiliates, or as permitted or required by law. Among other things, the law permits the Adviser to disclose such information for purposes of making investments on our behalf, complying with anti-money laundering laws, preparing tax returns and reports for each investor and determining whether each investor meets the regulatory requirements for investing in us. The privacy policy is available on our website at www.msdl.com.
Other
We are prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our Independent Directors and, in some cases, prior approval by the SEC. We and our wholly-owned, consolidated subsidiaries comply with the provisions of the 1940 Act related to affiliated transactions and custody (Section 17 as modified by Section 57).
We will be periodically examined by the SEC for compliance with the 1940 Act.
We are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement. Furthermore, as a BDC, we are prohibited from protecting any director or officer against any liability to us or our stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.
We and our Adviser are each required to adopt and implement written policies and procedures reasonably designed to prevent violation of the federal securities laws, review these policies and procedures annually for their adequacy and the effectiveness of their implementation, and designate a chief compliance officer to be responsible for administering the policies and procedures.
Sarbanes-Oxley Act
The Sarbanes-Oxley Act imposes a variety of regulatory requirements on companies with a class of securities registered under the Exchange Act and their insiders. Many of these requirements affect us. For example:
•pursuant to Rule 13a-14 under the Exchange Act our principal executive officer and principal financial officer must certify the accuracy of the financial statements contained in our periodic reports;
•pursuant to Item 307 under Regulation S-K under the Securities Act our periodic reports must disclose our conclusions about the effectiveness of our disclosure controls and procedures;
•pursuant to Rule 13a-15 under the Exchange Act, our management must prepare an annual report regarding its assessment of our internal control over financial reporting, which is required to be audited by our independent registered public accounting firm; and
•pursuant to Item 308 of Regulation S-K under the Securities Act and Rule 13a-15 under the Exchange Act, our periodic reports must disclose whether there were significant changes in our internal controls over financial reporting or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
The Sarbanes-Oxley Act requires us to review our current policies and procedures to determine whether we comply with the Sarbanes-Oxley Act and the regulations promulgated under such act. We will continue to monitor our compliance with all regulations that are adopted under the Sarbanes-Oxley Act and will take actions necessary to ensure that we comply with that act in the future.
Bank Holding Company Act
As a bank holding company (“BHC”) that has elected Financial Holding Company, or FHC, status under the Bank Holding Company Act of 1956, as amended (the “BHCA”), Morgan Stanley and its affiliates are subject to comprehensive, consolidated supervision and regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Because a Morgan Stanley affiliate is acting as our Adviser and Morgan Stanley has a 5% or greater voting investment in us, we are subject to the certain federal banking and financial requirements, including the BHCA, regulations of the Federal Reserve, and certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act.
Because we are controlled by Morgan Stanley for purposes of the BHCA, we must generally comply with the investment and activity restrictions applicable to Morgan Stanley under the BHCA. Such restrictions may place certain limitations on our ability to engage in activities or make investments in companies. For instance, the BHCA permits a BHC as well as any non-bank affiliate of such BHC, to make investment representing less than 5% of any class of voting shares of another company so long as that investment is otherwise non-controlling under the BHCA. The BHCA also permits well-capitalized, well-managed BHCs that have elected to be treated as an FHC to engage in expanded “financial in nature” activities without prior approval of the Federal Reserve. Such financial in nature
activities include bona fide merchant banking activities, so long as (i) the FHC holds its merchant banking investments only for a period of time sufficient to enable the sale or disposition thereof on a reasonable basis (generally no more than 10 years) and (ii) the FHC does not routinely manage or operate the companies in which it invests except as necessary or required to obtain a reasonable return on its investment. The BHCA does not, however, require Morgan Stanley to financially support us.
The BHCA generally prohibits BHCs, such as Morgan Stanley, and its subsidiaries from acquiring more than de minimis equity interests in non-financial companies unless certain exemptions apply. Further, under the BHCA, eligible FHCs and their subsidiaries have authority to engage in a broader range of investments and activities than BHCs that are not FHCs.
A significant focus of the regulatory framework that applies to Morgan Stanley is to ensure that Morgan Stanley and its subsidiaries operate in a safe and sound manner, with sufficient capital, earnings and liquidity to allow Morgan Stanley to serve as a source of financial and managerial strength to Morgan Stanley Bank, N.A. and Morgan Stanley Private Bank, National Association, or the Banks. These Banks must remain well capitalized and well managed if Morgan Stanley is to maintain its FHC status and continue to engage in the widest range of permissible financial activities. In addition, the general exercise by the Federal Reserve of its regulatory, supervisory and enforcement authority with respect to Morgan Stanley and certain provisions of Dodd-Frank could result in the need for Morgan Stanley to change its business practices or the scope of its current lines of business, including certain limited divestitures. Although such changes could have an impact on and consequences for Morgan Stanley and the Adviser, any limited divestiture should not directly involve the Adviser.
Dodd-Frank and Volcker Rule Disclosure
Section 619 of Dodd-Frank, commonly known as the “Volcker Rule,” and regulations to implement the Volcker Rule issued by the U.S. federal financial regulators in December 2013, referred to as the Implementing Regulations, generally restrict any “banking entity” (which includes Morgan Stanley and most affiliates of Morgan Stanley) from engaging in “proprietary trading” as well as from acquiring or retaining any “ownership interest” in a “covered fund”, in each case unless the investment or activity is conducted in accordance with an exclusion or exemption. The Volcker Rule also generally prohibits certain transactions between a banking entity and any of its affiliates, on the one hand, and a covered fund for which the banking entity or any of its affiliates serves, directly or indirectly, as the investment manager, investment adviser, or that the banking entity or any of its affiliates sponsors in connection with organizing and offering that fund (or with any other covered fund that is controlled by such fund, on the other hand. The term “covered fund” includes, among others, hedge funds and private-equity funds that are privately offered in the United States and that rely on Sections 3(c)(1) or 3(c)(7) of the 1940 Act to avoid being treated as “investment companies” under the 1940 Act.
The Volcker Rule and the Implementing Regulations impose a number of restrictions on Morgan Stanley and its affiliates that affect us and the Adviser. As a BDC, we are not considered to be a covered fund. As a result, Morgan Stanley and its subsidiaries investments in us would not be subject to the Volcker Rule restrictions on investments in covered funds, but we would during that time be considered a banking entity subject to restrictions on proprietary trading to the extent we are “controlled” by Morgan Stanley or its affiliates. Generally, we will be deemed to be controlled for these purposes for so long as entities affiliated with Morgan Stanley own 5% or more of our outstanding voting securities. Because a Morgan Stanley affiliate is acting as our Adviser and Morgan Stanley has a 5% or greater voting investment in us Morgan Stanley and its subsidiaries would be deemed to control us for purposes of the Volcker Rule. For so long as we are deemed a banking entity under the Volcker Rule and the Implementing Regulations, our operations may be restricted, although, given the anticipated nature of the investments we make and intend to make, we do not anticipate that these restrictions, for so long as they apply, would impose material limitations on our operations, but can provide no assurances that they would not. Furthermore, we can offer no assurances that the rules and regulations enacted under the Volcker Rule, the BHCA and other statutes will not change in a future in a manner that would limit our operations and investments.
It is not certain how all aspects of the Volcker Rule will be interpreted and applied, or what the impact of the Volcker Rule will have on us. In addition, the restrictions and limitation on Morgan Stanley and us may change in the future as the Federal Reserve and other agencies consider whether and how to revise and apply the Volcker Rule. We believe that we may perform our activities and services without violation of applicable U.S. banking laws and regulations. However, it is possible that future changes or clarifications in the BHCA and Volcker Rule, as well as judicial or administrative decisions or interpretations of present of future laws or regulations, could restrict (or possibly prevent) our ability to continue to conduct our operations as currently contemplated. In such event, we, the Adviser and/or Morgan Stanley may agree to make certain amendments or changes to the extent necessary to permit the Adviser to continue to provide services to us, while enabling us to continue to achieve our purposes and objectives.
Exclusion of the Adviser from Commodity Pool Operator Definition
Engaging in commodity interest transactions such as swap transactions or futures contracts for us may cause the Adviser to fall within the definition of “commodity pool operator” under the Commodity Exchange Act (the “CEA”) and related Commodity Futures Trading Commission (the “CFTC”) regulations. On January 24, 2020, the Adviser claimed an exclusion from the definition of the term “commodity pool operator” under the CEA and the CFTC regulations in connection with its management of us (the “Exclusion”) and, therefore, the Adviser is not subject to CFTC registration or regulation under the CEA as a commodity pool operator with respect to its management of us. The Adviser intends to affirm the Exclusion on an annual basis, which current annual affirmation was filed by the Adviser on February 24, 2025.
Reporting Obligations and Available Information
We make available, free of charge, on our website our annual reports containing audited financial statements, quarterly reports, and other periodic reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our internet address is www.msdl.com. We are required to comply with all periodic reporting, proxy solicitation and other applicable requirements under the Exchange Act.
The SEC also maintains a website that contains annual reports, quarterly reports, current reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us, which can be accessed at www.sec.gov.
Certain Material U.S. Federal Income Tax Considerations
The following discussion is a general summary of the material U.S. federal income tax considerations applicable to us and to an investment in shares of our Common Stock. This summary does not purport to be a complete description of the income tax considerations applicable to such an investment. For example, we have not described certain considerations that may be relevant to certain types of holders subject to special treatment under U.S. federal income tax laws, including stockholders subject to the alternative minimum tax (the “AMT”), tax-exempt organizations, insurance companies, dealers in securities, traders in securities that elect to mark-to-market their securities holdings, pension plans and trusts, persons that have a functional currency (as defined in Section 985 of the Code) other than the U.S. dollar and financial institutions. This summary assumes that investors hold shares of our Common Stock as capital assets (within the meaning of Section 1221 of the Code). The discussion is based upon the Code, Treasury regulations, and administrative and judicial interpretations, each as of the date of the filing of this report and all of which are subject to change, possibly retroactively, which could affect the continuing validity of this discussion. We have not sought and will not seek any ruling from the Internal Revenue Service (the “IRS”), regarding any offering of our securities. This summary does not discuss any aspects of U.S. estate or gift tax or foreign, state or local tax. It does not discuss the special treatment under U.S. federal income tax laws that could result if we invested in tax-exempt securities or certain other investment assets. For purposes of this discussion, references to “dividends” are to dividends within the meaning of the U.S. federal income tax laws and associated regulations and may include amounts subject to treatment as a return of capital under section 19(a) of the 1940 Act.
A “U.S. stockholder” is a beneficial owner of shares of our Common Stock that is for U.S. federal income tax purposes:
•a citizen or individual resident of the United States;
•a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any state thereof or the District of Columbia;
•an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
•a trust if either a U.S. court can exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions or the trust was in existence on August 20, 1996, was treated as a U.S. person prior to that date, and has made a valid election to be treated as a U.S. person.
A “non-U.S. stockholder” is a beneficial owner of shares of our Common Stock that is not a U.S. stockholder.
If a partnership (including an entity treated as a partnership for U.S. federal income tax purposes) holds shares of Common Stock, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. A prospective investor that is a partner in a partnership that will hold shares of Common Stock should consult its tax advisors with respect to the purchase, ownership and disposition of shares of Common Stock.
Tax matters are very complicated and the tax consequences to an investor of an investment in shares of our Common Stock will depend on the facts of his, her or its particular situation. We encourage investors to consult their own tax advisors regarding the specific consequences of such an investment, including tax reporting requirements, the applicability of U.S. federal, state, local and foreign tax laws, eligibility for the benefits of any applicable tax treaty, and the effect of any possible changes in the tax laws.
Election to Be Taxed as a RIC
We have elected to be treated as a RIC under Subchapter M of the Code, and we intend to operate in a manner so as to continue to qualify for the tax treatment applicable to RICs. As a RIC, we generally will not have to pay corporate-level U.S. federal income taxes on any net ordinary income or capital gains that we timely distribute to our stockholders as dividends. To qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements (as described below). In addition, we must distribute to our stockholders, for each taxable year, dividends of an amount at least equal to 90% of our investment company taxable income (“ICTI”), as defined by the Code, which is generally our net ordinary income plus the excess of realized net short-term capital gains over realized net long-term capital losses and determined without regard to any deduction for dividends paid (the “Annual Distribution Requirement”). Although not required for us to maintain our RIC tax status, in order to preclude the imposition of a 4% nondeductible federal excise tax imposed on RICs, we must distribute to our stockholders in respect of each calendar year dividends of an amount at least equal to the sum of (1) 98% of our net ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of the excess (if any) of our realized capital gains over our realized capital losses, or capital gain net income (adjusted for certain ordinary losses), generally for the one-year period ending on October 31 of the calendar year and (3) the sum of
any net ordinary income plus capital gains net income for preceding years that were not distributed during such years and on which we paid no federal income tax (the “Excise Tax Avoidance Requirement”).
Taxation as a RIC
If we:
•qualify as a RIC; and
•satisfy the Annual Distribution Requirement;
then we will not be subject to U.S. federal income tax on the portion of our ICTI and net capital gain, defined as net long-term capital gains in excess of net short-term capital losses, we distribute to stockholders. As a RIC, we will be subject to U.S. federal income tax at regular corporate rates on any net income or net capital gain not distributed as dividends to our stockholders.
In order to qualify as a RIC for U.S. federal income tax purposes, we must, among other things:
•qualify to be regulated as a BDC under the 1940 Act at all times during each taxable year;
•derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to certain securities loans, gains from the sale of stock or other securities, or other income derived with respect to our business of investing in such stock or securities, and net income derived from interests in “qualified publicly traded partnerships” (partnerships that are traded on an established securities market or tradable on a secondary market, other than partnerships that derive 90% of their income from interest, dividends and other permitted RIC income) (the “90% Income Test”); and
•diversify our holdings so that at the end of each quarter of the taxable year:
◦at least 50% of the value of our assets consists of cash, cash equivalents, U.S. government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer; and
◦no more than 25% of the value of our assets is invested in the securities, other than U.S. government securities or securities of other RICs, of one issuer or of two or more issuers that are controlled, as determined under applicable tax rules, by us and that are engaged in the same or similar or related trades or businesses or in the securities of one or more qualified publicly traded partnerships.
We may invest in partnerships, including qualified publicly traded partnerships, which may result in our being subject to state, local or foreign income, franchise or other tax liabilities.
In addition, as a RIC we are subject to ordinary income and capital gain distribution requirements under the Excise Tax Avoidance Requirement. If we do not meet the required distributions under the Excise Tax Avoidance Requirement, we will be subject to a 4% nondeductible federal excise tax on the undistributed amount. The failure to meet the Excise Tax Avoidance Requirement will not cause us to lose our RIC status. Although we currently intend to make sufficient distributions each taxable year to satisfy the Excise Tax Avoidance Requirement, under certain circumstances, we may choose to retain taxable income or capital gains in excess of current year distributions into the next tax year in an amount less than what would trigger payments of federal income tax under Subchapter M of the Code. We may then be required to pay a 4% excise tax on such income or capital gains.
A RIC is limited in its ability to deduct expenses in excess of its ICTI. If our deductible expenses in a given taxable year exceed our ICTI, we may incur a net operating loss for that taxable year. However, a RIC is not permitted to carry forward net operating losses to subsequent taxable years and such net operating losses do not pass through to its stockholders. In addition, deductible expenses can be used only to offset ICTI, not net capital gain. A RIC may not use any net capital losses (that is, the excess of realized capital losses over realized capital gains) to offset its ICTI, but may carry forward such net capital losses, and use them to offset future capital gains, indefinitely. Due to these limits on deductibility of expenses and net capital losses, we may for tax purposes have aggregate taxable income for several taxable years that we are required to distribute and that is taxable to our stockholders even if such taxable income is greater than the net income we actually earn during those taxable years.
Any underwriting fees paid by us are not deductible. We may be required to recognize taxable income in circumstances in which we do not receive cash. For example, if we hold debt obligations that are treated under applicable tax rules as having OID (such as debt instruments with PIK interest or, in certain cases, with increasing interest rates or issued with warrants), we must include in income each year a portion of the OID that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. Because any OID accrued will be included in our ICTI for the taxable year of accrual, we may be required to make a distribution to our stockholders in order to satisfy the Annual Distribution Requirement, even though we will not have received any corresponding cash amount. Furthermore, a portfolio company in which we hold equity or debt instruments may face financial difficulty that requires us to work out, modify, or otherwise restructure such equity or debt instruments. Any such restructuring could, depending upon the terms of the restructuring, cause us to incur unusable or nondeductible losses or recognize future non-cash taxable income.
Certain of our investment practices may be subject to special and complex U.S. federal income tax provisions that may, among other things, (1) treat dividends that would otherwise constitute qualified dividend income as non-qualified dividend income, (2) treat dividends that would otherwise be eligible for the corporate dividends-received deduction as ineligible for such treatment, (3) disallow, suspend or otherwise limit the allowance of certain losses or deductions, (4) convert lower-taxed long-term capital gain into higher-taxed short-term capital gain or ordinary income, (5) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited), (6) cause us to recognize income or gain without a corresponding receipt of cash, (7) adversely affect the time as to when a purchase or sale of stock or securities is deemed to occur, (8) adversely alter the characterization of certain complex financial transactions and (9) produce income that will not be qualifying income for purposes of the 90% Income Test. We intend to monitor our transactions and may make certain tax elections to mitigate the effect of these provisions and prevent our ability to be subject to tax as a RIC.
Gain or loss realized by us from warrants acquired by us as well as any loss attributable to the lapse of such warrants generally will be treated as capital gain or loss. Such gain or loss generally will be long-term or short-term, depending on how long we held a particular warrant or security.
A portfolio company in which we invest may face financial difficulties that require us to work-out, modify or otherwise restructure its investment in the portfolio company. Any such transaction could, depending upon the specific terms of the transaction, result in unusable capital losses and future non-cash income. Any such transaction could also result in our receiving assets that give rise to income that is not qualifying income for purposes of the 90% Income Test.
Our investment in non-U.S. securities may be subject to non-U.S. income, withholding and other taxes. In that case, our yield on those securities would be decreased. stockholders generally will not be entitled to claim a U.S. foreign tax credit or deduction with respect to non-U.S. taxes paid by the Company.
Although we do not presently expect to do so, we are authorized to borrow funds and to sell assets in order to satisfy distribution requirements. However, under the 1940 Act, we are not permitted to make distributions to our stockholders while our debt obligations and other senior securities are outstanding unless certain “asset coverage” tests are met. See “Item 1. Business-Regulation as a Business Development Company-Senior Securities.” Moreover, our ability to dispose of assets to meet our distribution requirements may be limited by (1) the illiquid nature of our portfolio and/or (2) other requirements relating to our qualification as a RIC, including certain diversification tests in order to qualify as a RIC for U.S. federal income tax purposes (the “Diversification Tests”). If we dispose of assets in order to meet the Annual Distribution Requirement or the Excise Tax Avoidance Requirement, we may make such dispositions at times that, from an investment standpoint, are not advantageous.
Some of the income and fees that we may recognize, such as fees for providing managerial assistance, certain fees earned with respect to our investments, income recognized in a work-out or restructuring of a portfolio investment, or income recognized from an equity investment in an operating partnership, will not satisfy the 90% Income Test. In order to manage the risk that such income and fees might disqualify us as a RIC for a failure to satisfy the 90% Income Test, we may be required to recognize such income and fees indirectly through one or more entities treated as corporations for U.S. federal income tax purposes. Such corporations will be required to pay U.S. corporate income tax on their earnings, which ultimately will reduce our return on such income and fees.
There may be uncertainty as to the appropriate treatment of certain of our investments for U.S. federal income tax purposes. In particular, we may invest a portion of our net assets in below investment grade instruments. U.S. federal income tax rules with respect to such instruments are not entirely clear about issues such as if an instrument is treated as debt or equity, whether and to what extent we should recognize interest, OID or market discount, when and to what extent deductions may be taken for bad debts or worthless instruments, how payments received on obligations in default should be allocated between principal and income and whether exchanges of debt obligations in a bankruptcy or workout context are taxable. These and other issues will be addressed by us, to the extent necessary, in order to seek to ensure that we distribute sufficient income to qualify, and maintain our qualification as, a RIC and to ensure that we do not become subject to U.S. federal income or excise tax.
Income received by us from sources outside the United States may be subject to withholding and other taxes imposed by such countries, thereby reducing income available to us. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. We generally intend to conduct our investment activities to minimize the impact of foreign taxation, but there is no guarantee that we will be successful in this regard.
We may invest in stocks of foreign companies that are classified under the Code as passive foreign investment companies (“PFICs”). In general, a foreign company is classified as a PFIC if at least 50% of its assets constitute investment-type assets or 75% or more of its gross income is investment-type income. In general, under the PFIC rules, an “excess distribution” received with respect to PFIC stock is treated as having been realized ratably over the period during which we held the PFIC stock. We will be subject to tax on the portion, if any, of the excess distribution that is allocated to our holding period in prior taxable years (and an interest factor will be added to the tax, as if the tax had actually been payable in such prior taxable years) even though we distribute the corresponding income to stockholders. Excess distributions include any gain from the sale of PFIC stock as well as certain distributions from a PFIC. All excess distributions are taxable as ordinary income.
We may be eligible to elect alternative tax treatment with respect to PFIC stock. Under such an election, we generally would be required to include in our gross income its share of the earnings of a PFIC on a current basis, regardless of whether any distributions are received from the PFIC. If this election is made, the special rules, discussed above, relating to the taxation of excess distributions, would not apply. Alternatively, we may be able to elect to mark to market our PFIC stock, resulting in any unrealized gains at year end being treated as though they were realized and reported as ordinary income. Any mark-to-market losses and any loss from an actual disposition of the PFIC’s shares would be deductible as ordinary losses to the extent of any net mark-to-market gains included in income in prior years with respect to stock in the same PFIC.
Because the application of the PFIC rules may affect, among other things, the character of gains, the amount of gain or loss and the timing of the recognition of income with respect to PFIC stock, as well as subject us to tax on certain income from PFIC stock, the amount that must be distributed to stockholders, and which will be taxed to stockholders as ordinary income or long-term capital gain, may be increased or decreased substantially as compared to a fund that did not invest in PFIC stock.
Under the Code, gains or losses attributable to fluctuations in foreign currency exchange rates that occur between the time we accrue interest income or other receivables or accrues expenses or other liabilities denominated in a foreign currency and the time we actually collect such receivables or pays such liabilities generally are treated as ordinary income or ordinary loss. Similarly, on disposition of some investments, including debt securities and certain forward contracts denominated in a foreign currency, gains or losses attributable to fluctuations in the value of foreign currency between the date of acquisition of the security or contract and the date of disposition also are treated as ordinary gain or loss. These gains and losses, referred to under the Code as “section 988” gains and losses, may increase or decrease the amount of our ICTI to be distributed to stockholders as ordinary income. For example, fluctuations in exchange rates may increase the amount of income that we must distribute in order to qualify for treatment as a RIC and to prevent application of an excise tax on undistributed income. Alternatively, fluctuations in exchange rates may decrease or eliminate income available for distribution. If section 988 losses exceed other ICTI during a taxable year, we would not be able to make ordinary distributions, or distributions made before the losses were realized would be re-characterized as a return of capital to stockholders for U.S. federal income tax purposes, rather than as ordinary dividend income, and would reduce each stockholder’s basis in Common Stock.
Certain distributions reported by us as section 163(j) interest dividends may be treated as interest income by stockholders for purposes of the tax rules applicable to interest expense limitations under Code section 163(j). Such treatment by the stockholder is generally subject to holding period requirements and other potential limitations, although the holding period requirements are generally not applicable to dividends declared by money market funds and certain other funds that declare dividends daily and pay such dividends on a monthly or more frequent basis. The amount that we are eligible to report as a Section 163(j) dividend for a tax year is generally limited to the excess of our business interest income over the sum of our (i) business interest expense and (ii) other deductions properly allocable to our business interest income.
Failure to Qualify as a RIC
If we were unable to qualify for treatment as a RIC and are unable to cure the failure, for example, by disposing of certain investments quickly or raising additional capital to prevent the loss of RIC status, we would be subject to tax on all of our taxable income at regular corporate rates. The Code provides some relief from RIC disqualification due to failures to comply with the 90% Income Test and the Diversification Tests, although there may be additional taxes due in such cases. We cannot assure you that we would qualify for any such relief should we fail the 90% Income Test or the Diversification Tests.
Should failure occur, all our taxable income would be subject to tax at regular corporate rates and we would not be able to deduct our dividend distributions to stockholders. Additionally, we would no longer be required to distribute our income and gains. Distributions, including distributions of net long-term capital gain, would generally be taxable to our stockholders as ordinary dividend income to the extent of our current and accumulated earnings and profits. Subject to certain limitations under the Code, certain corporate stockholders would be eligible to claim a dividends-received deduction with respect to such dividends and non-corporate stockholders would generally be able to treat such dividends as “qualified dividend income,” which is subject to reduced rates of U.S. federal income tax. Distributions in excess of our current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholder’s tax basis, and any remaining distributions would be treated as a capital gain. If we fail to qualify as a RIC, we may be subject to regular corporate tax on any net built-in gains with respect to certain of our assets (i.e., the excess of the aggregate gains, including items of income, over aggregate losses that would have been realized with respect to such assets if we had been liquidated) that we elect to recognize on requalification or when recognized over the next five taxable years.
Staffing
We do not currently have any employees. Our day-to-day investment operations are managed by our Adviser, and our Administrator provides services necessary to conduct our business. We pay no compensation directly to any interested director or executive officer of the Company. We pay our Administrator our allocable portion of certain expenses incurred by our Administrator in performing its obligations under the Administration Agreement, including our allocable portion of the cost of our Chief Financial Officer and Chief Compliance Officer.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
Investing in shares of our Common Stock involves a number of significant risks. Before you invest in shares of our Common Stock, you should be aware of various risks, including those described below. The risks set out below are not the only risks we face. Additional risks and uncertainties not presently known to us or not presently deemed material by us may also impair our operations and performance. If any of the following events occur, our business, financial condition, results of operations and cash flows could be materially and adversely affected. In such case, our net asset value could decline, and you may lose all or part of your investment. The risk factors described below are the principal risk factors associated with an investment in us as well as those factors generally associated with an investment company with investment objectives, investment policies, capital structure or trading markets similar to ours.
Risks Relating to Our Business and Structure
Operating as a BDC imposes numerous constraints on us and significantly reduces our operating flexibility. In addition, if we fail to maintain our status as a BDC, we might be regulated as a closed-end investment company, which would subject us to additional regulatory restrictions.
The 1940 Act imposes numerous constraints on the operations of BDCs that do not apply to certain of the other investment vehicles advised by our Adviser and its affiliates. BDCs are required, for example, to invest at least 70% of their total assets primarily in securities of U.S. private or thinly traded public companies, cash, cash equivalents, U.S. government securities and other high-quality debt instruments that mature in one year or less from the date of investment. These constraints may hinder our ability to take advantage of attractive investment opportunities and to achieve our investment objective. Furthermore, any failure to comply with the requirements imposed on BDCs by the 1940 Act could cause the SEC to bring an enforcement action against us and/or expose us to claims of private litigants.
We may be precluded from investing in what our Adviser believes are attractive investments if such investments are not qualifying assets for purposes of the 1940 Act. If we do not invest a sufficient portion of our assets in qualifying assets, we will be prohibited from making any additional investment that is not a qualifying asset and could be forced to forgo attractive investment opportunities. Similarly, these rules could prevent us from making follow-on investments in existing portfolio companies (which could result in the dilution of our position).
If we fail to maintain our status as a BDC, we might be regulated as a closed-end investment company that is required to register under the 1940 Act, which would subject us to additional regulatory restrictions and significantly decrease our operating flexibility. In addition, any such failure could cause an event of default under any outstanding indebtedness we might have, which could have a material adverse effect on our business, financial condition or results of operations.
We are subject to risks associated with the current interest rate environment and to the extent we use debt to finance our investments, changes in interest rates will affect our cost of capital and net investment income.
To the extent we borrow money or issue debt securities or any preferred stock to make investments, our net investment income will depend, in part, upon the difference between the rate at which we borrow funds or pay interest or distributions on such debt securities or preferred stock and the rate at which we invest these funds. In addition, we anticipate that many of our debt investments and borrowings will have floating interest rates that reset on a periodic basis, and many of our investments will be subject to interest rate floors. As a result, a significant change in market interest rates could have a material adverse effect on our net investment income. Rising interest rates on floating rate loans we make to portfolio companies could drive an increase in defaults or accelerated refinancings. Some portfolio companies may be unable to refinance into fixed rate loans or repay outstanding amounts, leading to a gradual decline in the credit quality of our portfolio. In periods of rising interest rates, our cost of funds will increase because we expect that the interest rates on the majority of amounts we borrow will be floating. This change could reduce our net investment income to the extent any debt investments have fixed interest rates. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. Such techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act and applicable commodities laws. These activities may limit our ability to benefit from lower interest rates with respect to hedged borrowings. In the past, we have entered into certain hedging transactions, such as interest rate swap agreements, to mitigate our exposure to adverse fluctuations in interest rates, and we may do so again in the future. However, we cannot assure you that such transactions will be successful in mitigating our exposure to interest rate risk. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition and results of operations.
We depend upon our Adviser and Administrator for our success and upon their access to the investment professionals and partners of Morgan Stanley and its affiliates.
We do not have any internal management capacity or employees. We depend on the diligence, skill and network of business contacts of the senior investment professionals of our Adviser to achieve our investment objective. We cannot assure you that we will replicate the historical results achieved for other Morgan Stanley funds, and we caution you that our investment returns could be substantially lower than the returns achieved by them in prior periods. We expect that the Adviser will evaluate, negotiate, structure, close and monitor our investments in accordance with the terms of the Investment Advisory Agreement. We can offer no assurance, however, that the senior investment professionals of the Adviser will continue to provide investment advice to us. The loss of any member of the
Investment Committee or of other senior investment professionals of the Adviser and its affiliates could limit our ability to achieve our investment objective and operate as we anticipate. In addition, we can offer no assurance that the resources, relationships and expertise of Morgan Stanley will be available for every transaction or generally during the term of the Company. This could have a material adverse effect on our financial condition, results of operations and cash flows.
We depend on the diligence, skill and network of business contacts of the professionals available to our Administrator to carry out the administrative functions necessary for us to operate, including the ability to select and engage sub-administrators and third-party service providers. We can offer no assurance, however, that the professionals of the Administrator will continue to provide administrative services to us. In addition, we can offer no assurance that the resources, relationships and expertise of Morgan Stanley will be available to the Administrator throughout the term of the Company. This could have a material adverse effect on our financial condition, results of operations and cash flows.
Our business model depends to a significant extent upon strong referral relationships with private equity sponsors. Any inability of the Adviser to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business.
We depend upon the Adviser’s and its affiliates’ relationships with private equity sponsors, and we rely to a significant extent upon these relationships to provide us with potential investment opportunities. If the Adviser fails to maintain such relationships, or to develop new relationships with other sponsors or sources of investment opportunities, we will not be able to grow our investment portfolio. In addition, individuals with whom the principals of the Adviser and its affiliates have relationships are not obligated to provide us with investment opportunities, and, therefore, we can offer no assurance that these relationships will generate investment opportunities for us in the future.
The time and resources that individuals associated with our Adviser devote to us may be diverted, and we may face additional competition due to the fact that neither our Adviser nor its affiliates are prohibited from raising money for or managing another entity that makes the same types of investments that we target.
The Adviser and its affiliates currently serve as the investment adviser for various funds, accounts and strategies, including the funds and accounts on the MS Private Credit platform, including the other MS BDCs, and are not prohibited from raising money for and managing future investment entities that make the same or similar types of investments as those we target. As a result, the time and resources that our Adviser devotes to us may be diverted, and during times of intense activity in other investment programs they may devote less time and resources to our business than is necessary or appropriate. In addition, we may compete with any such investment entity also advised by the Adviser or its affiliates for the same investors and investment opportunities.
We may not replicate the historical results achieved by other entities advised or sponsored by members of the Investment Committee, or by the Adviser or its affiliates.
Our investments may differ from those of existing accounts that are or have been sponsored or advised by members of the Investment Committee, the Adviser or affiliates of the Adviser. Investors in our securities are not acquiring an interest in any accounts that are or have been sponsored or advised by members of the Investment Committee, the Adviser or affiliates of the Adviser. Subject to the requirements of the 1940 Act and the provisions of the Order, we may co-invest in portfolio investments with other Affiliated Investment Accounts, including the MS BDCs, and any proprietary accounts of Morgan Stanley, if applicable.. Any such investments are subject to regulatory limitations and approvals by the Independent Directors. We can offer no assurance, however, that we will obtain such approvals or develop opportunities that comply with such limitations. We also cannot assure you that we will replicate the historical results achieved for other Morgan Stanley funds by members of the Investment Committee (including the Affiliated Investment Accounts), and we caution you that our investment returns could be substantially lower than the returns achieved by them in prior periods. Additionally, all or a portion of the prior results may have been achieved in particular market conditions which may never be repeated. Moreover, current or future market volatility and regulatory uncertainty may have an adverse impact on our future performance. Our financial condition and results of operation depend on our ability to manage future growth effectively.
Our ability to achieve our investment objective depends on our ability to grow, which depends, in turn, on the Adviser’s ability to identify, invest in and monitor companies that meet our investment selection criteria. Accomplishing this result on a cost-effective basis is largely a function of the Adviser’s structuring of the investment process, its ability to provide competent, attentive and efficient services to us and our access to financing on acceptable terms. We can offer no assurance that any current or future employees of the Adviser will contribute effectively to the work of, or remain associated with, the Adviser. We caution you that the principals of our Adviser or Administrator may also be called upon to provide managerial assistance to our portfolio companies and those of other investment vehicles, including the MS BDCs, which are advised by the Adviser. Such demands on their time may distract them or slow our rate of investment. Any failure to manage our future growth effectively could have a material adverse effect on our business, financial condition and results of operations.
The Adviser may frequently be required to make investment analyses and decisions on an expedited basis in order to take advantage of investment opportunities, and our Adviser may not have knowledge of all circumstances that could impact our investments.
Investment analyses and decisions by the Adviser may frequently be required to be undertaken on an expedited basis to take advantage of investment opportunities. In such cases, the information available to the Adviser at the time of making an investment decision may be limited. Therefore, we can offer no assurance that the Adviser will have knowledge of all circumstances that may adversely affect a portfolio investment, and the Adviser may make portfolio investments which it would not have made if more extensive due diligence had been undertaken. In addition, the Adviser may rely upon independent consultants and advisors in connection with its evaluation of proposed investments, and we can offer no assurance as to the accuracy or completeness of the information provided by such independent consultants and advisors or to the Adviser’s right of recourse against them in the event errors or omissions do occur.
There are significant potential conflicts of interest that could affect our investment returns.
As a result of our Adviser and Administrator’s affiliation with, and the Investment Committee members’ employment by, Morgan Stanley, there may be times when the Adviser, the Administrator or such persons have interests that differ from those of our stockholders, giving rise to a conflict of interest. As a diversified global financial services firm, Morgan Stanley engages in a broad spectrum of activities, including financial advisory services, investment management activities, lending, commercial banking, sponsoring and managing private investment funds, engaging in broker-dealer transactions and principal securities, commodities and foreign exchange transactions, research publication and other activities. In the ordinary course of its business, Morgan Stanley is a full-service investment banking and financial services firm and therefore engages in activities where Morgan Stanley’s interests or the interests of its clients may conflict with the interests of our stockholders, notwithstanding Morgan Stanley’s participation as one of our investors. Investors should be aware that potential and actual conflicts of interest between Morgan Stanley or any Affiliated Investment Account, on the one hand, and us, on the other hand, may exist and others may arise in connection with our operation. Morgan Stanley’s employees may also have interests separate from those of Morgan Stanley and us. There is no assurance that conflicts of interest will be resolved in favor of the Company’s stockholders, and, in fact, they may not be.
Conflicts related to obligations the Investment Committee, the Adviser or its affiliates have to other clients and conflicts related to fees and expenses of such other clients.
Morgan Stanley, the parent company of the Adviser, has advised and may advise clients and has sponsored, managed or advised other Affiliated Investment Accounts with a wide variety of investment objectives that in some instances may overlap or conflict with our investment objectives and present conflicts of interest. In addition, Morgan Stanley routinely makes equity and debt investments in connection with its global business and operations. MS Private Credit may also from time to time create new or successor Affiliated Investment Accounts, which may include proprietary accounts of Morgan Stanley, that may compete with us and present similar conflicts of interest. In serving in these multiple capacities, Morgan Stanley, including the Adviser, the Investment Committee and the Investment Team, may have obligations to other clients or investors in Affiliated Investment Accounts, the fulfillment of which may not be in the best interests of us or our stockholders. For example, in connection with the management of investments for other Affiliated Investment Accounts, members of Morgan Stanley and its affiliates may serve on the boards of directors of or advise companies which may compete with our portfolio investments. Our investment objective may overlap with the investment objectives of certain Affiliated Investment Accounts. For example, the Adviser currently serves as the investment adviser to the MS BDCs. As a result, the members of the Investment Committee may face conflicts in the allocation of investment opportunities among us and other Affiliated Investment Accounts. Certain Affiliated Investment Accounts, including the MS BDCs, may provide for higher management fees, incentive fees, greater expense reimbursements or overhead allocations, or may permit the Adviser and its affiliates to receive higher origination and other transaction fees, all of which may contribute to this conflict of interest and create an incentive for the Adviser to favor such Affiliated Investment Accounts. For example, the 1940 Act restricts the Adviser from receiving more than a 1% fee in connection with loans that we acquire, or originate, a limitation that does not exist for certain other accounts.
Morgan Stanley currently invests and plans to continue to invest on its own behalf and on behalf of its Affiliated Investment Accounts in a wide variety of investment opportunities in North America, Europe and elsewhere. Morgan Stanley and, to the extent consistent with applicable law, exemptive relief and/or the Adviser's allocation policies and procedures, its Affiliated Investment Accounts will be permitted to invest in investment opportunities without making such opportunities available to us beforehand. Subject to the requirements of any applicable exemptive relief, Morgan Stanley may offer investments that fall into the investment objectives of an Affiliated Investment Account to such account or make such investment on its own behalf, even though such investment also falls within our investment objectives. We may invest in opportunities that Morgan Stanley and/or one or more Affiliated Investment Accounts has declined, and vice versa. The Adviser and/or one or more of its affiliates may enter into one or more contractual arrangements with third parties (“Syndication Partners”) including certain third parties that may or may not be advisory clients of the Adviser, whereby, subject to certain investment criteria, the Adviser would agree to present such third parties with certain co-investment opportunities alongside the MS Private Credit platform, including us. All of the foregoing may reduce the number of investment opportunities available to us and may create conflicts of interest in allocating investment opportunities among the Company and the Affiliated Investment Accounts, including any proprietary accounts of Morgan Stanley. Our Adviser has established allocation policies and procedures and will continue to allocate opportunities among one or more of the Company, such Affiliated Investment Accounts and Syndication Partners in accordance with the terms of such policies and procedures. Investors should note that such allocation decisions may not be resolved to our advantage. There can be no assurance that we will have an opportunity to participate in certain opportunities that fall within our investment objectives.
It is possible that Morgan Stanley or an Affiliated Investment Account will invest in a company that is or becomes a competitor of one of our portfolio companies. Such investment could create conflicts of interest among the Company, Morgan Stanley and/or the Affiliated Investment Account. Morgan Stanley may also have conflicts of interest in the allocation of Morgan Stanley resources to the portfolio company. In addition, certain Affiliated Investment Accounts will be focused primarily on investing in other funds which may have strategies that overlap and/or directly conflict and compete with us. In certain cases, we may be unable to invest in attractive opportunities because of the investment by these Affiliated Investment Accounts in such private equity or private credit sponsoring funds.
We do not expect to invest in, or hold securities of, companies that are controlled by an affiliate’s other clients. However, our Adviser or an affiliate’s other clients may invest in, and gain control over, one of our portfolio companies. If our Adviser or an affiliate’s other client, or clients, gains control over one of our portfolio companies, it may create conflicts of interest and may subject us to certain restrictions under the 1940 Act. As a result of these conflicts and restrictions our Adviser may be unable to implement our investment strategies as effectively as they could have in the absence of such conflicts or restrictions. For example, as a result of a conflict or restriction, our Adviser may be unable to engage in certain transactions that it would otherwise pursue. In order to avoid these conflicts and restrictions, our Adviser may choose to exit such investments prematurely and, as a result, we may forego any positive returns associated with such investments. In addition, to the extent that an affiliate’s other client holds a different class of securities than us as a result of such transactions, our interests may not be aligned.
It should be noted that Morgan Stanley has, directly and/or indirectly, made investments in certain of its Affiliated Investment Accounts, and accordingly Morgan Stanley’s investment in us in itself may not determine the outcome in the resolution of any of the foregoing conflicts.
In the course of our investing activities, we pay a management and incentive fees to the Adviser and reimburse certain expenses of the Administrator. As a result, investors in our Common Stock will invest on a “gross” basis and receive distributions on a “net” basis after expenses, resulting in a lower rate of return than one might achieve through direct investments. As a result of this arrangement, there may be times when the Adviser has interests that differ from those of our stockholders, giving rise to a conflict.
The Investment Committee, the Adviser or its affiliates may, from time to time, possess material non-public information, or may not have access to certain information held by Morgan Stanley, each of which would limit our investment discretion.
Principals of the Adviser and its affiliates and members of the Investment Committee may serve as directors of, or in a similar capacity with, companies in which we invest, the securities of which are purchased or sold on our behalf. In the event that material nonpublic information is obtained with respect to such companies, or we become subject to trading restrictions in order to comply with applicable law, regulatory restrictions or internal policies or procedures, including without limitation joint transaction restrictions pursuant to the 1940 Act, we could be prohibited for a period of time from purchasing or selling the securities of such companies, and this prohibition may have an adverse effect on us.
The Adviser and/or Morgan Stanley may also from time to time be subject to contractual “stand-still” obligations and/or confidentiality obligations that may restrict the Adviser’s ability to trade in or make certain investments on behalf of the Company. In addition, Morgan Stanley may be precluded from disclosing such information to the Investment Team, even in circumstances in which the information would benefit the Company if disclosed. Therefore, the Adviser may not be provided access to material nonpublic information in the possession of Morgan Stanley that might be relevant to an investment decision to be made by the Company, and the Company may initiate a transaction or sell an investment that, if such information had been known to it, may not have been undertaken.
In addition, certain members of the Investment Team and of the Investment Committee may be recused from certain investment-related discussions, including investment committee meetings, so that such members do not receive information that would limit their ability to perform functions of their employment with Morgan Stanley unrelated to the Company. Furthermore, access to certain parts of Morgan Stanley may be subject to third party confidentiality obligations and to information barriers established by Morgan Stanley in order to manage potential conflicts of interest and regulatory restrictions, including without limitation joint transaction restrictions pursuant to the 1940 Act. Accordingly, the Company’s ability to source investments from other business units within Morgan Stanley may be limited and there can be no assurance that the Company will be able to source any investments from any one or more parts of the Morgan Stanley network.
Our management fee and incentive fee structure may create incentives for the Adviser that are not fully aligned with the interests of our stockholders and may induce the Adviser to make speculative investments.
In the course of our investing activities, we pay a management fee and incentive fees to the Adviser. The base management fee is based on our average gross assets and the incentive fee is computed and paid on income, both of which include leverage. As a result, investors in shares of our Common Stock will invest on a “gross” basis and receive distributions on a “net” basis after expenses, resulting in a lower rate of return than one might achieve through direct investments. Because the management fee is based on our average gross assets, the Adviser benefits when we incur debt or use leverage. Under certain circumstances, the use of leverage may increase the likelihood of default, which would disfavor us and our stockholders.
Additional leverage would magnify positive returns, if any, on our portfolio, and our incentive fee would become payable to our Adviser (i.e., exceed the hurdle rate) at a lower average return on our portfolio. The Investment Advisory Agreement entitles our Adviser to receive an incentive fee based on our pre-incentive fee net investment income regardless of any capital losses. Thus, if we incur additional leverage, our Adviser may receive additional incentive fees without any corresponding increase (and potentially with a decrease) in our net performance. Additionally, the incentive fee payable by us to the Adviser may create an incentive for the Adviser to cause us to realize capital gains or losses that may not be in the best interests of us or our stockholders. Under the incentive fee structure, the Adviser benefits when we recognize capital gains and, because the Adviser determines when an investment is sold, the Adviser controls the timing of the recognition of such capital gains. Our Board of Directors is charged with protecting our stockholder’s interests by monitoring how the Adviser addresses these and other conflicts of interest associated with its management services and compensation.
Additionally, the part of the incentive fees payable to our Adviser that relates to our net investment income is computed and paid on income that may include interest income that has been accrued but not yet received in cash, such as market discount, debt instruments with PIK, interest, preferred stock with PIK dividends, zero coupon securities, and other deferred interest instruments and may create an incentive for the Adviser to make investments on our behalf that are riskier or more speculative than would be the case in the absence of such compensation arrangement. This fee structure may be considered to give rise to a conflict of interest for the Adviser to the extent that it may encourage the Adviser to favor debt financings that provide for deferred interest, rather than current cash payments of interest. Under these investments, we will accrue the interest over the life of the investment, but we will not receive the cash income from the investment until the end of the term. Our net investment income used to calculate the income portion of our investment fee, however, includes accrued interest. The Adviser may have an incentive to invest in deferred interest securities in circumstances where it would not have done so but for the opportunity to continue to earn the fees even when the issuers of the deferred interest securities would not be able to make actual cash payments to us on such securities. This risk could be increased because the Adviser is not obligated to reimburse us for any fees received even if we subsequently incur losses or never receive in cash the deferred income that was previously accrued.
For federal income tax purposes, we may be required to recognize taxable income in some circumstances in which we do not receive a corresponding payment in cash and to make distributions with respect to such income to maintain our tax treatment as a RIC and/or minimize corporate-level U.S. federal income or excise tax. Under such circumstances, we may have difficulty meeting the Annual Distribution Requirement (as defined below) necessary to maintain RIC tax treatment under the Code. See “Item 1. Business -Certain Material U.S. Federal Income Tax Considerations-Election to be Taxed as a RIC.” This difficulty in making the required distribution may be amplified to the extent that we are required to pay the incentive fee on income with respect to such accrued income. As a result, we may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital, or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level U.S. federal income tax.
Conflicts related to other arrangements with the Adviser and its affiliates.
We have entered into a license agreement, or the License Agreement, with Morgan Stanley Investment Management, Inc., an affiliate of our Adviser, under which Morgan Stanley Investment Management, Inc. has granted us a non-exclusive, royalty-free license to use the name “Morgan Stanley.” In addition, we pay to the Administrator our allocable portion of certain expenses incurred by the Administrator in performing its obligations under the Administration Agreement, such as our allocable portion of the cost of our Chief Financial Officer and Chief Compliance Officer. These arrangements create conflicts of interest that our Board of Directors monitors.
Our ability to enter into transactions with our affiliates is restricted.
As a BDC, we are prohibited under the 1940 Act from participating in certain transactions with certain of our affiliates without the prior approval of a majority of our Independent Directors and, in some cases, the SEC. Any person that owns, directly or indirectly, 5% or more of our outstanding voting securities is our affiliate for purposes of the 1940 Act, and we are generally prohibited from buying or selling any securities from or to such affiliate on a principal basis, absent the prior approval of our Board of Directors and, in some cases, the SEC. The 1940 Act also prohibits certain “joint” transactions with certain of our affiliates, which in certain circumstances could include investments in the same portfolio company (whether at the same or different times to the extent the transaction involves a joint investment), without prior approval of our Board of Directors and, in some cases, the SEC. If a person acquires more than 25% of our voting securities, we will be prohibited from buying or selling any security from or to such person or certain of that person’s affiliates, or entering into prohibited joint transactions with such persons, absent the prior approval of the SEC. Similar restrictions limit our ability to transact business with our officers or directors or their affiliates.
The SEC has interpreted the BDC regulations governing transactions with affiliates to prohibit certain joint transactions involving entities that share a common investment adviser. As a result of these restrictions, we are prohibited from buying or selling any security from or to any portfolio company that is controlled by a fund advised by the Adviser or their respective affiliates without the prior approval of the SEC, which may limit the scope of investment opportunities that would otherwise be available to us.
We may, however, invest alongside our Adviser’s and/or its affiliates’ other clients, in certain circumstances where doing so is consistent with applicable law and SEC staff interpretations, guidance and exemptive relief orders. However, although the Adviser endeavors to fairly allocate investment opportunities in the long-run, we can offer no assurance that investment opportunities will be
allocated to us fairly or equitably in the short-term or over time. The SEC has granted us and our Adviser the Order that allows us to enter into certain negotiated co-investment transactions alongside certain Regulated Funds and Affiliated Funds (each as defined in the Order) in a manner consistent with our investment objective, positions, policies, strategies, and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with the conditions specified in the Order. Pursuant to the Order, we are permitted to co-invest with our affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) of our eligible directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching in respect of us or our stockholders on the part of any person concerned, and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies.
In situations where co-investment with affiliates’ other clients is not permitted under the 1940 Act and related rules, existing or future staff guidance, or the terms and conditions of the Order (as discussed above), our Adviser will need to decide which client or clients will proceed with the investment. Generally, we will not have an entitlement to make a co-investment in these circumstances and, to the extent that another client elects to proceed with the investment, we will not be permitted to participate. Moreover, except in certain circumstances, we will not invest in any issuer in which an affiliate’s other client holds a controlling interest.
The recommendations given to us by our Adviser may differ from those rendered to their other clients.
Our Adviser and its affiliates may give advice and recommend securities to other clients which may differ from advice given to, or securities recommended or bought for, us even though such other clients’ investment objectives may be similar to ours.
We operate in a highly competitive market for investment opportunities, which could reduce returns and result in losses.
The business of identifying and structuring investments of the types contemplated by us is competitive and involves a high degree of uncertainty. We are competing for investments with other investment funds, including the MS BDCs, as well as more traditional lending institutions and private credit-focused competitors. Over the past several years, an increasing number of funds have been formed, with investment objectives similar to, or overlapping with, our investment objectives (and many such existing funds have grown substantially in size).
In addition, other firms and institutions are seeking to capitalize on the perceived opportunities with vehicles, funds and other products that are expected to compete with us for investments. Other investors may make competing offers for investment opportunities that we identify. Even after an agreement in principle has been reached with the board of directors or owners of an acquisition target, consummating the transaction is subject to a myriad of uncertainties, only some of which are foreseeable or within the control of the Adviser. Some of our competitors may have access to greater amounts of capital and to capital that may be committed for longer periods of time or may have different return thresholds than us, and thus these competitors may have advantages over us. In addition, issuers may prefer to take advantage of favorable high-yield markets and issue subordinated debt in those markets, which could result in fewer credit investment opportunities for us. In addition to competition from other investors, the availability of investment opportunities generally will be subject to market conditions as well as, in many cases, the prevailing regulatory or political climate. We can offer no assurance that we will be successful in obtaining suitable investments, or that if we make such investments, our objectives will be achieved.
We will be subject to corporate-level income tax if we are unable to qualify as a RIC.
In order to qualify as a RIC under the Code, we must meet certain source-of-income, asset diversification and distribution requirements. The distribution requirement for a RIC is satisfied if we distribute to our stockholders dividends for U.S. federal income tax purposes of an amount generally at least equal to 90% of our ICTI, which is generally our net ordinary income plus the excess of our net short-term capital gains in excess of our net long-term capital losses, determined without regard to any deduction for dividends paid, to our stockholders on an annual basis. We are subject, to the extent we use debt financing, to certain asset coverage ratio requirements under the 1940 Act and financial covenants under loan and credit agreements that could, under certain circumstances, restrict us from making distributions necessary to qualify as a RIC. If we are unable to obtain cash from other sources, we may fail to be subject to tax as a RIC, in which case we will be subject to corporate-level income tax. To qualify as a RIC, we must also meet certain asset diversification requirements at the end of each quarter of our taxable year. Failure to meet these requirements may result in our having to dispose of certain investments quickly in order to continue to qualify as a RIC. Because most of our investments are in private or thinly traded public companies, any such dispositions could be made at disadvantageous prices and may result in substantial losses. If we fail to qualify as a RIC for any reason and become subject to corporate-level income tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distributions to stockholders, the amount of our distributions and the amount of funds available for new investments. Such a failure would have a material adverse effect on us and our stockholders. See “Item 1. Business-Certain Material U.S. Federal Income Tax Considerations-Taxation as a RIC.”
We may have difficulty paying our required distributions if we recognize income before, or without, receiving cash representing such income.
For U.S. federal income tax purposes, we include in income certain amounts that we have not yet received in cash, such as the accretion of OID. This may arise if we receive warrants in connection with the making of a loan and in other circumstances, or through contracted PIK interest, which represents contractual interest added to the loan balance and due at the end of the loan term.
Such OID, which could be significant relative to our overall investment activities, or increases in loan balances as a result of contracted PIK arrangements, is included in our income before we receive any corresponding cash payments. We also may be required to include in income certain other amounts that we do not receive in cash.
That part of the incentive fee payable by us that relates to our net investment income is computed and paid on income that may include interest that has been accrued but not yet received in cash, such as market discount, debt instruments with PIK interest, preferred stock with PIK dividends and zero coupon securities. If a portfolio company defaults on a loan that is structured to provide accrued interest, it is possible that accrued interest previously used in the calculation of the incentive fee will become uncollectible, and the Adviser will have no obligation to refund any fees it received in respect of such accrued income.
Since in certain cases we may recognize income before or without receiving cash representing such income, we may have difficulty meeting the requirement in a given taxable year to distribute to our stockholders dividends for U.S. federal income tax purposes an amount at least equal to 90% of our ICTI, determined without regard to any deduction for dividends paid, to our stockholders to qualify and maintain our ability to be subject to tax as a RIC. In such a case, we may have to sell some of our investments at times we would not consider advantageous, raise additional debt or equity capital or reduce new investment originations to meet these distribution requirements. If we are not able to obtain such cash from other sources, we may fail to qualify as a RIC and thus be subject to corporate-level income tax.
We will need to raise additional capital to grow because we must distribute most of our income.
We will need additional capital to fund new investments and grow our portfolio of investments. We intend to access the capital markets periodically to issue debt or equity securities or borrow from financial institutions in order to obtain such additional capital. Unfavorable economic conditions could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. A reduction in the availability of new capital could limit our ability to grow. In addition, we are required to distribute each taxable year an amount at least equal to 90% of our ICTI, determined without regard to any deduction for dividends paid as dividends for U.S. federal income tax purposes, to our stockholders to maintain our ability to be subject to tax as a RIC. As a result, these earnings are not available to fund new investments. An inability to access the capital markets successfully could limit our ability to grow our business and execute our business strategy fully and could decrease our earnings, if any. This would have an adverse effect on the value of our securities. If we are not able to raise capital and are at or near our targeted leverage ratios, we may receive smaller allocations, if any, on new investment opportunities under the Adviser’s allocation policies and procedures.
Regulations governing our operation as a BDC affect our ability to, and the way in which we, raise additional capital. As a BDC, the necessity of raising additional capital exposes us to risks, including the typical risks associated with leverage.
We may issue debt securities or preferred stock and/or borrow money from banks or other financial institutions, which we refer to collectively as “senior securities,” up to the maximum amount permitted by the 1940 Act. Under the provisions of the 1940 Act, we are currently permitted to issue "senior securities," including borrowing money from banks or other financial institutions, only in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 150% of gross assets less all liabilities and indebtedness not represented by senior securities, after each issuance of senior securities. If we fail to comply with certain disclosure requirements, our asset coverage ratio under the 1940 Act would be 200%, which would decrease the amount of leverage we are able to incur. If the value of our assets declines, we may be unable to satisfy the applicable asset coverage ratio. If that happens, we may be required to sell a portion of our investments and, depending on the nature of our leverage, repay a portion of our indebtedness at a time when such sales may be disadvantageous. Also, any amounts that we use to service our indebtedness would not be available for distributions to holders of shares of our Common Stock. If we issue senior securities, we will be exposed to typical risks associated with leverage, including an increased risk of loss.
In the absence of an event of default, no person or entity from which we borrow money has a veto right or voting power over our ability to set policy, make investment decisions or adopt investment strategies. If we issue preferred stock, which is another form of leverage, the preferred stock would rank “senior” to Common Stock in our capital structure, preferred stockholders would have separate voting rights on certain matters and might have other rights, preferences or privileges more favorable than those of our common stockholders, and the issuance of preferred stock could have the effect of delaying, deferring or preventing a transaction or a change of control that might involve a premium price for holders of our Common Stock or otherwise be in the best interest of our common stockholders. Holders of our Common Stock will directly or indirectly bear all of the costs associated with offering and servicing any preferred stock that we issue. In addition, any interests of preferred stockholders may not necessarily align with the interests of holders of our Common Stock and the rights of holders of shares of preferred stock to receive distributions would be senior to those of holders of shares of Common Stock. We do not, however, anticipate issuing preferred stock in the next 12 months.
We are not generally able to issue and sell our Common Stock at a price below net asset value per share. We may, however, sell our Common Stock, or warrants, options or rights to acquire our Common Stock, at a price below the then-current net asset value per share of our Common Stock if our Board of Directors determines that such sale is in the best interests of us and our stockholders, and if our stockholders approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our Board of Directors, closely approximates the market value of such securities (less any distributing commission or discount). If we raise additional funds by issuing Common Stock or senior securities convertible into, or
exchangeable for, our Common Stock, then the percentage ownership of our stockholders at that time will decrease, and holders of our Common Stock might experience dilution.
We intend to finance our investments with borrowed money, which will magnify the potential for gain or loss on amounts invested and may increase the risk of investing in us.
The use of leverage magnifies the potential for gain or loss on amounts invested. The use of leverage is generally considered a speculative investment technique and increases the risks associated with investing in our securities. The amount of leverage that we employ will be subject to the restrictions of the 1940 Act and the supervision of our Board of Directors. At the time of any proposed borrowing, the amount of leverage we employ will also depend on our Adviser’s assessment of market and other factors. We cannot assure you that we will be able to obtain credit at all or on terms acceptable to us. For example, due to the interplay of the 1940 Act restrictions on principal and joint transactions and the U.S. risk retention rules adopted pursuant to Section 941 of Dodd-Frank, as a BDC we are limited in our ability to enter into any securitization transactions. We cannot assure you that the SEC or any other regulatory authority will modify such regulations or provide administrative guidance that would give us greater flexibility to enter into securitizations. We have in the past and may in the future issue senior debt securities to banks, insurance companies and other lenders. Lenders of these senior securities will have fixed dollar claims on our assets that are superior to the claims of our common stockholders, and we would expect such lenders to seek recovery against our assets in the event of a default. We may pledge up to 100% of our assets, may grant a security interest in all of our assets and may pledge the right to make capital calls of stockholders under the terms of any debt instruments we may enter into with lenders. Under the terms of any credit facility or debt instrument we enter into, we are likely to be required to comply with certain financial and operational covenants. Failure to comply with such covenants could result in a default under the applicable credit facility or debt instrument if we are unable to obtain a waiver from the applicable lender or holder, and such lender or holder could accelerate repayment under such indebtedness and negatively affect our business, financial condition, results of operations and cash flows. In addition, under the terms of any credit facility or other debt instrument we enter into, we are likely to be required by its terms to use the net proceeds of any investments that we sell to repay a portion of the amount borrowed under such facility or instrument before applying such net proceeds to any other uses. If the value of our assets decreases, leveraging would cause our net asset value to decline more sharply than it otherwise would have had we not leveraged, thereby magnifying losses or eliminating our equity stake in a leveraged investment. Similarly, any decrease in our net investment income will cause our net income to decline more sharply than it would have had we not borrowed. Such a decline would also negatively affect our ability to make distributions on our Common Stock or any outstanding preferred stock. Our ability to service our debt depends largely on our financial performance and is subject to prevailing economic conditions and competitive pressures. Our common stockholders bear the burden of any increase in our expenses as a result of our use of leverage, including interest expenses and any increase in the base management fee payable to the Adviser.
As a BDC, we generally are required to meet a coverage ratio of total assets to total borrowings and other senior securities, which include our borrowings and any preferred stock that we may issue in the future, which is currently 150%. If this ratio were to decline below 150% (or such other percentage as may be prescribed by law from time to time), we could not incur additional debt and could be required to sell a portion of our investments to repay some debt when it was disadvantageous to do so. This could have a material adverse effect on our operations, and we may not be able to make distributions in amounts sufficient to maintain our status as a RIC, or at all.
The following table illustrates the effect of leverage on returns from an investment in our Common Stock as of December 31, 2024, assuming various annual returns, net of expenses. The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearing in the table below (amounts in thousands).
Assumed Return on Our Portfolio (Net of Expenses)
(10)% (5)% 0% 5% 10%
Corresponding return to common stockholder assuming actual asset coverage as of December 31, 2024 (1)
(28.2)% (17.6)% (7.0)% 3.7% 14.3%
(1) Assumes $3,912,018 in total assets, $1,983,401 in debt outstanding and $1,842,156 in net assets as of December 31, 2024, and an effective weighted average annual interest of 6.46% as of December 31, 2024 (excluding unused fees and financing costs).
Based on our outstanding indebtedness of $1,983,401 as of December 31, 2024 and the effective weighted average annual interest rate of 6.46% (excluding unused fees and financing costs), our investment portfolio would have been required to experience an annual return of at least 3.28% to cover annual interest payments on the outstanding debt.
We expose ourselves to risks when we engage in hedging transactions.
We have entered, and may in the future enter, into hedging transactions, which may expose us to risks associated with such transactions. We may seek to utilize instruments such as forward contracts, currency options and interest rate swaps, caps, collars and floors to seek to hedge against fluctuations in the relative values of our portfolio positions from changes in currency exchange rates and market interest rates and the relative value of certain debt securities from changes in market interest rates. Use of these hedging instruments may include counter-party credit risk. To the extent we have non-U.S. investments, particularly investments denominated in non-U.S. currencies, our hedging costs will increase.
Hedging against a decline in the values of our portfolio positions would not eliminate the possibility of fluctuations in the values of such positions or prevent losses if the values of such positions were to decline. However, such hedging can establish other positions designed to gain from those same developments, thereby offsetting the decline in the value of such portfolio positions. Such hedging transactions may also limit the opportunity for gain if the values of the underlying portfolio positions were to increase. It also may not be possible to hedge against an exchange rate or interest rate fluctuation that is so generally anticipated that we are not able to enter into a hedging transaction at an acceptable price.
The success of our hedging strategy will depend on our ability to correctly identify appropriate exposures for hedging. In connection with the 2029 Notes, which bear interest at fixed rates, we entered into interest rate swaps to continue to align the interest rates of our liabilities with our investment portfolio, which consists of predominately floating rate loans. However, unanticipated changes in currency exchange rates or other exposures that we might hedge may result in poorer overall investment performance than if we had not engaged in any such hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged may vary, as may the time period in which the hedge is effective relative to the time period of the related exposure. Also, where a put or call option on a particular security is purchased to hedge against price movements in a related security, the price of the put or call option may move more or less than the price of the related security. If restrictions on exercise were imposed, we might be unable to exercise an option we had purchased. If we were unable to close out an option that we had purchased on a security, it would have to exercise the option in order to realize any profit or the option may expire worthless.
For a variety of reasons, we may not seek to (or be able to) establish a perfect correlation between such hedging instruments and the positions being hedged. Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss. In addition, it may not be possible to hedge fully or perfectly against currency fluctuations affecting the value of securities denominated in non-U.S. currencies because the value of those securities is likely to fluctuate as a result of factors not related to currency fluctuations. Income derived from hedging transactions also is not eligible to be distributed to non-U.S. stockholders free from withholding taxes. Changes to the regulations applicable to the financial instruments we use to accomplish our hedging strategy could affect the effectiveness of that strategy.
We are subject to risks associated with our Credit Facilities.
On July 16, 2021, we entered into a senior secured revolving credit agreement with the Company, as borrower, the lenders and issuing banks party thereto, Truist Bank, as administrative agent, and Truist Securities, Inc., as joint lead arranger and sole book runner (as amended, restated or otherwise modified from time to time, the “Truist Credit Facility”).
On October 14, 2020, DLF Financing SPV LLC, our wholly owned subsidiary, or DLF LLC, entered into a revolving credit and security agreement with DLF LLC, as borrower, BNP Paribas, as the administrative agent and lender, the Company, as the equity holder and as the servicer, and U.S. Bank National Association, as collateral agent (as amended, restated, supplemented or otherwise modified from time to time, the “BNP Funding Facility”).
We anticipate that we or a wholly owned and consolidated subsidiary of ours may enter into one or more senior revolving credit facilities of the Company or any subsidiary in the future (together with the Truist Credit Facility and BNP Funding Facility, each a “Credit Facility” ad collectively, the “Credit Facilities”). As a result of the Credit Facilities, we are subject to a variety of risks, including those set forth below.
Any inability to renew, extend or replace the Credit Facilities could adversely impact our liquidity and ability to find new investments or maintain distributions to our stockholders.
There can be no assurance that we would be able to renew, extend or replace the Credit Facilities upon their maturity on terms that are favorable to us, if at all. Our ability to renew, extend or replace the Credit Facilities would be constrained by then-current economic conditions affecting the credit markets. In the event that we were unable to renew, extend or replace the Credit Facilities at the time of maturity, this could have a material adverse effect on our liquidity and ability to fund new investments, our ability to make distributions to our stockholders and our ability to qualify as a RIC.
In addition to regulatory limitations on our ability to raise capital, our financing agreements contain various covenants, which, if not complied with, could accelerate our repayment obligations under such agreements, thereby materially and adversely affecting our liquidity, financial condition, results of operations and ability to pay distributions.
We will have a continuing need for capital to finance our investments. We are party to various financing agreements from time to time which contain customary representations and warranties and we are required to comply with various covenants, reporting requirements and other customary requirements for similar financing agreements.
Our continued compliance with the covenants contained under these financing agreements depends on many factors, some of which may be beyond our control. We can offer no assurances that we would continue to comply with any such covenants. Our failure to satisfy the respective covenants could result in foreclosure by the lenders under the applicable credit facility or governing instrument or acceleration by the applicable lenders or noteholders, which would accelerate our repayment obligations under the relevant agreement and thereby have a material adverse effect on our business, liquidity, financial condition, results of operations and ability to
pay distributions to our stockholders. These financing agreements may also include customary cross-default provisions, and, if the indebtedness is accelerated, we may be unable to repay or finance the amounts due.
Our interests in any subsidiary that enters into a Credit Facility would be subordinated, and we may not receive cash on our equity interests from any such subsidiary.
We consolidate the financial statements of our wholly owned subsidiaries in our consolidated financial statements and treat the indebtedness of any such subsidiary as our leverage. Our interests in any wholly owned direct or indirect subsidiary of ours would be subordinated in priority of payment to every other obligation of any such subsidiary and would be subject to certain payment restrictions set forth in any Credit Facility. We would receive cash distributions on our equity interests in any such subsidiary only if such subsidiary had made all required cash interest payments to the lenders and no default exists under any Credit Facility. We cannot assure you that distributions on the assets held by any such subsidiary would be sufficient to make any distributions to us or that such distributions would meet our expectations.
We would receive cash from any such subsidiary only to the extent that we would receive distributions on our equity interests in such subsidiary. Any such subsidiary would be able to make distributions on its equity interests only to the extent permitted by the payment priority provisions of the Credit Facility. We expect that any Credit Facility would generally provide that payments on such interests may not be made on any payment date unless all amounts owing to the lenders and other secured parties are paid in full. In addition, if such subsidiary would not meet the borrowing base test set forth in any Credit Facility documents, a default would occur. In the event of a default under any Credit Facility documents, cash would be diverted from us to pay the lender and other secured parties until they would be paid in full. In the event that we would fail to receive cash from such subsidiary, we could be unable to make distributions to our stockholders in amounts sufficient to maintain our status as a RIC, or at all. We also could be forced to sell investments in portfolio companies at less than their fair value in order to continue making such distributions.
Our equity interests in any such subsidiary would rank behind all of the secured and unsecured creditors, known or unknown, of such subsidiary, including the lenders in any Credit Facility.
Consequently, to the extent that the value of such subsidiary’s portfolio of loan investments would have been reduced as a result of conditions in the credit markets, defaulted loans, capital gains and losses on the underlying assets, prepayment or changes in interest rates, the return on our investment in such subsidiary could be reduced. Accordingly, our investment in such subsidiary may be subject to up to a complete loss.
Our ability to sell investments held by any subsidiary that enters into a Credit Facility would be limited.
Our existing Credit Facilities place significant restrictions on our ability, as servicer, to sell investments, and we expect that any Credit Facility we enter into in the future would include similar restrictions. As a result, there may be times or circumstances during which we would be unable to sell investments or take other actions that might be in our best interests.
We may enter into reverse repurchase agreements, which are another form of leverage.
We may enter into reverse repurchase agreements as part of our management of our temporary investment portfolio. Under a reverse repurchase agreement, we will effectively pledge our assets as collateral to secure a short-term loan. Generally, the other party to the agreement makes the loan in an amount equal to a percentage of the fair value of the pledged collateral. At the maturity of the reverse repurchase agreement, we will be required to repay the loan and correspondingly receive back our collateral. While used as collateral, the assets continue to pay principal and interest which are for the benefit of us. Our use of reverse repurchase agreements, if any, involves many of the same risks involved in our use of leverage, as the proceeds from reverse repurchase agreements generally will be invested in additional securities. There is a risk that the market value of the securities acquired in the reverse repurchase agreement may decline below the price of the securities that we have sold but remain obligated to purchase. In addition, there is a risk that the market value of the securities retained by us may decline. If a buyer of securities under a reverse repurchase agreement were to file for bankruptcy or experience insolvency, we may be adversely affected. Also, in entering into reverse repurchase agreements, we would bear the risk of loss to the extent that the proceeds of such agreements at settlement are less than the fair value of the underlying securities being pledged. In addition, due to the interest costs associated with reverse repurchase agreements, our net asset value will decline, and, in some cases, we may be worse off than if we had not used such agreements.
We may be subject to risks associated with any collateralized loan obligations, or CLOs, we enter into to finance our investments.
We may enter into CLOs through a direct or indirect subsidiary of ours (any such subsidiary, an “MS Issuer”). As a result of these CLOs, we would be subject to a variety of risks, including those set forth below. We use the term “CLO” to describe a form of secured borrowing under which an operating company (sometimes referred to as an “originator” or “sponsor”) acquires or originates mortgages, receivables, loans or other assets that earn income, whether on a one-time or recurring basis (collectively, “income producing assets”), and borrows money on a non-recourse basis against a legally separate pool of loans or other income producing assets. In a typical CLO, the originator transfers the loans or income producing assets to a single-purpose, bankruptcy-remote subsidiary (also referred to as a “special purpose entity”), which is established solely for the purpose of holding loans and income producing assets and issuing debt secured by these income producing assets. The special purpose entity completes the borrowing through the issuance of notes secured by the loans or other assets. The special purpose entity may issue the notes in the capital markets
to a variety of investors, including banks, non-bank financial institutions and other investors. In the CLOs, we would expect institutional investors to purchase the notes issued by an MS Issuer in a private placement, while we would retain the equity interest in the CLOs and consolidate the assets and liabilities of the CLOs on our balance sheet.
If we do not invest a sufficient portion of our assets in qualifying assets, we could fail to qualify as a BDC or be precluded from investing according to our current business strategy.
As a BDC, we may not acquire any assets other than “qualifying assets” unless, at the time of and after giving effect to such acquisition, at least 70% of our total assets are qualifying assets. See “Item 1. Business-Regulation as a Business Development Company-Qualifying Assets.”
In the future, we believe that most of our investments will constitute qualifying assets. However, we may be precluded from investing in what we believe are attractive investments if such investments are not qualifying assets for purposes of the 1940 Act. If we do not invest a sufficient portion of our assets in qualifying assets, we could violate the 1940 Act provisions applicable to BDCs. As a result of such violation, specific rules under the 1940 Act could prevent us, for example, from making follow-on investments in existing portfolio companies (which could result in the dilution of our position) or could require us to dispose of investments at inappropriate times in order to come into compliance with the 1940 Act. If we need to dispose of such investments quickly, it could be difficult to dispose of such investments on favorable terms. We may not be able to find a buyer for such investments and, even if we do find a buyer, we may have to sell the investments at a substantial loss. Any such outcomes would have a material adverse effect on our business, financial condition, results of operations and cash flows.
Failure to qualify as a BDC would decrease our operating flexibility.
If we do not maintain our status as a BDC, we would be subject to regulation as a registered closed-end investment company under the 1940 Act. As a registered closed-end investment company, we would be subject to substantially more regulatory restrictions under the 1940 Act which would significantly decrease our operating flexibility.
The majority of our portfolio investments are recorded at fair value as determined in good faith by our Valuation Designee, under the supervision of our Board of Directors and, as a result, there may be uncertainty as to the value of our portfolio investments.
The majority of our portfolio investments take the form of securities for which no market quotations are readily available. The fair value of securities and other investments that are not publicly traded may not be readily determinable, and we value these securities at fair value as determined in good faith by our Board of Directors, including to reflect significant events affecting the value of our securities. As discussed in more detail under “Note 5. Fair Value Measurements” in the notes to our consolidated financial statements, most, if not all, of our investments (other than cash and cash equivalents) are classified as Level 3 under ASC Topic 820, Fair Value Measurements (“ASC 820”). This means that our portfolio valuations are based on unobservable inputs and our Valuation Designee’s (as defined below) assumptions about how market participants would price the asset or liability in question. Inputs into the determination of fair value of our portfolio investments require significant management judgment or estimation. Even if observable market data are available, such information may be the result of consensus pricing information or broker quotes, which may include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimers materially reduces the reliability of such information.
The Board of Directors has delegated to the Adviser as a valuation designee, or the Valuation Designee, the responsibility of determining the fair value of the Company’s investment portfolio, subject to oversight of the Board of Directors, pursuant to Rule 2a-5 under the 1940 Act. As such, the Valuation Designee is charged with determining the fair value of the Company’s investment portfolio, subject to oversight of the Board of Directors. The participation of the Adviser’s investment professionals in our valuation process could result in a conflict of interest as the Adviser’s base management fee is based, in part, on our average gross assets and our incentive fees will be based, in part, on unrealized losses.
We have retained the services of independent service providers to review the valuation of these securities. The valuation of all or a portion of our portfolio investments for which a market quote is not readily available will be reviewed by an independent valuation firm at least quarterly or more often as determined by the Valuation Designee or the Board. The types of factors that our Valuation Designee, under the supervision of our Board of Directors may take into account in determining the fair value of our investments generally include, as appropriate, comparison to publicly traded securities, including such factors as yield, maturity and measures of credit quality, the enterprise value of a portfolio company, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business and other relevant factors. Because such valuations, and in particular, the valuations of private securities and private companies, are inherently uncertain, they may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. Our net asset value could be adversely affected if our determinations regarding the fair value of our investments were materially higher than the values that we ultimately realize upon the disposal of such securities.
We adjust quarterly (or as otherwise may be required by the 1940 Act in connection with the issuance of shares of our Common Stock) the valuation of our portfolio to reflect our Board of Directors’ approval of the fair value of each investment in our portfolio, as
determined by the Valuation Designee. Any changes in fair value are recorded in the aggregate in our consolidated statement of operations as a net change in unrealized appreciation or depreciation.
Our Board of Directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval, and we may temporarily deviate from our regular investment strategy.
Our Board of Directors has the authority, except as otherwise provided in the 1940 Act, to modify or waive our investment objective and certain of our operating policies and strategies without prior notice and without stockholder approval. However, absent stockholder approval, we may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC. We cannot predict the effect any changes to our current investment objective, operating policies and strategies would have on our business, operating results and the value of our Common Stock. Nevertheless, any such changes could adversely affect our business and impair our ability to make distributions.
Provisions of the Delaware General Corporation Law, as amended, or the DGCL, and of our Certificate of Incorporation and bylaws could deter takeover attempts and have an adverse effect on the price of shares of Common Stock.
The DGCL contains provisions that may discourage, delay or make more difficult a change in control of us or the removal of our directors. Our certificate of incorporation and bylaws contain provisions that limit liability and provide for indemnification of our directors and officers. These provisions and others which we may adopt also may have the effect of deterring hostile takeovers or delaying changes in control or management. We are subject to Section 203 of the DGCL, the application of which is subject to any applicable requirements of the 1940 Act. This section generally prohibits us from engaging in mergers and other business combinations with stockholders that beneficially own 15% or more of our voting stock, either individually or together with their affiliates, unless our directors or stockholders approve the business combination in the prescribed manner. Our Board of Directors has adopted a resolution exempting from Section 203 of the DGCL any business combination between us and any other person, subject to prior approval of such business combination by our Board of Directors, including approval by a majority of our Independent Directors. If our Board of Directors later repeals such resolution exempting business combinations, or if our Board of Directors does not approve a business combination, Section 203 of the DGCL may discourage third parties from trying to acquire control of us and increase the difficulty of consummating such an offer.
We have also adopted measures that may make it difficult for a third party to obtain control of us, including provisions of our certificate of incorporation that classify our Board of Directors in three classes serving staggered three-year terms, and provisions of our certificate of incorporation authorizing our Board of Directors to classify or reclassify shares of our preferred stock in one or more classes or series, to cause the issuance of additional shares of our Common Stock, and to amend our certificate of incorporation, without stockholder approval, to increase or decrease the number of shares of Common Stock that we have authority to issue. These provisions, as well as other provisions we have adopted in our certificate of incorporation and bylaws, may delay, defer or prevent a transaction or a change in control in circumstances that could give our stockholders the opportunity to realize a premium of the net asset value of shares of our Common Stock.
The Adviser can resign on 60 days’ notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.
The Adviser has the right to resign under the Investment Advisory Agreement at any time upon not less than 60 days’ written notice, whether we have found a replacement or not. If the Adviser resigns, we may not be able to find a new investment adviser or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 60 days, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our business, financial condition, results of operations and cash flows as well as our ability to pay distributions are likely to be adversely affected and the value of our shares may decline. In addition, the coordination of our internal management and investment activities is likely to suffer if we are unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by the Adviser and its affiliates. Even if we are able to retain comparable management, whether internal or external, the integration of such management and their lack of familiarity with our investment objective may result in additional costs and time delays that may adversely affect our business, financial condition, results of operations and cash flows.
The Administrator can resign on 60 days’ notice, and we may not be able to find a suitable replacement, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.
The Administrator has the right to resign under the Administration Agreement at any time upon not less than 60 days’ written notice, whether we have found a replacement or not. If the Administrator resigns, we may not be able to find a new administrator or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions are likely to be adversely affected and the value of our shares may decline. In addition, the coordination of our internal management and administrative activities is likely to suffer if we are unable to identify and reach an agreement with a service provider or individuals with the expertise possessed by the Administrator. Even if we are able to retain a comparable service provider or individuals to perform such services, whether internal or external, their integration into our
business and lack of familiarity with our investment objective may result in additional costs and time delays that may adversely affect our business, financial condition, results of operations and cash flows.
We are a non-diversified investment company within the meaning of the 1940 Act, and therefore we are not limited with respect to the proportion of our assets that may be invested in securities of a single issuer and our portfolio may be concentrated in a limited number of industries.
We are classified as a non-diversified investment company within the meaning of the 1940 Act, which means that we are not limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer. Additionally, our portfolio may be concentrated in a limited number of industries and a downturn in any particular industry in which we are invested could significantly impact the aggregate returns we realize.
To the extent that we assume large positions in the securities of a small number of issuers or our portfolio is concentrated in a limited number of industries, our net asset value may fluctuate to a greater extent than that of a diversified investment company as a result of changes in the financial condition or the market’s assessment of the issuer or particular industry. We may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company. Beyond our asset diversification requirements as a RIC under the Code, we do not have fixed guidelines for diversification, and our investments could be concentrated in relatively few portfolio companies. Although we are classified as a non-diversified investment company within the meaning of the 1940 Act, we maintain the flexibility to operate as a diversified investment company. To the extent that we operate as a non-diversified investment company, we may be subject to greater risk.
We may be subject to risks associated with our investments in the software industry.
We could invest in portfolio companies in the software industry and a downturn in the industry could significantly impact the aggregate returns we realize on such investments. For example, portfolio companies in the software industry are subject to a number of risks. The revenue, income (or losses) and valuations of software and other technology-related companies can and often do fluctuate suddenly and dramatically. In addition, because of rapid technological change, the average selling prices of software products have historically decreased over their productive lives. As a result, the average selling prices of software offered by our portfolio companies may decrease over time, which could adversely affect their operating results and, correspondingly, the value of any securities that we may hold. Additionally, companies operating in the software industry are subject to vigorous competition, changing technology, changing client and end-consumer needs, evolving industry standards and frequent introductions of new products and services. Our portfolio companies in the software industry could compete with companies that are larger and could be engaged in a greater range of businesses or have greater financial, technical, sales or other resources than our portfolio companies do. Our portfolio companies could lose market share if their competitors introduce or acquire new products that compete with their software and related services or add new features to existing products. Any deterioration in the results of our portfolio companies due to competition or otherwise could, in turn, materially adversely affect our business, financial condition and results of operations.
Laws and regulations regulating insurance activities are complex and could negatively affect the business of our portfolio companies in the insurance services industry, which could reduce their profitability and potentially limit their growth.
We could invest in portfolio companies in the insurance services industry and a downturn in the industry could significantly impact the aggregate returns we realize on such investments. For example, the insurance industry in the United States is heavily regulated, and the insurance regulatory framework addresses, among other things: (i) granting licenses to companies and agents to transact particular business activities and (ii) regulating trade, marketing, compensation, and claims practices. Certain of our portfolio companies may be subject to laws and regulations applicable to insurance brokers and to the authority of the insurance regulators in their respective jurisdictions of operation. The cost of compliance with such regulations or any non-compliance could impose material costs on our portfolio companies and negatively affect their business, marketing practices, and budgets. Any of these factors could affect our portfolio company investments and, in turn, materially adversely affect our business, financial condition and results of operations.
Furthermore, the laws and regulations governing the sale of insurance may change in ways that adversely impact the business of our portfolio companies. These changes could impact the manner in which our portfolio companies are permitted to conduct their businesses and could result in increased expenses and/or decreased revenues as well as negatively affect their marketing practices, budgets, and overall level of business, which could adversely impact our business, financial condition, operating results and cash flows.
The liability of each of the Adviser and the Administrator is limited, and we have agreed to indemnify each against certain liabilities, which may lead them to act in a riskier manner on our behalf than each would when acting for its own account.
Under the Investment Advisory Agreement, the Adviser does not assume any responsibility to us other than to render the services called for under that agreement, and it is not responsible for any action of our Board of Directors in following or declining to follow the Adviser’s advice or recommendations. Under the terms of the Investment Advisory Agreement, the Adviser, its directors, trustees, officers, stockholders or members (and their stockholders or members, including the owners of their stockholders or members), agents, employees, any person controlling or controlled by the Adviser, any other person affiliated with the Adviser and any other person or entity acting on behalf of the Adviser are not liable to us or any stockholders for acts or omissions performed by the Adviser in accordance with any of its duties or obligations under the Investment Advisory Agreement or otherwise as investment adviser of the
Company (except to the extent specified in Section 36(b) of the 1940 Act concerning loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services), except where attributable to the willful misfeasance, bad faith or gross negligence in the performance of the Adviser’s obligations or duties or by reason of reckless disregard of the Adviser’s duties or obligations under the Investment Advisory Agreement. In addition, we have agreed to indemnify the Adviser and each of its directors, trustees, officers, stockholders or members (and their stockholders or members, including the owners of their stockholders or members), agents, employees, any person controlling or controlled by the Adviser, any other person affiliated with the Adviser and any other person or entity acting on behalf of the Adviser from and against any claims or liabilities, including reasonable legal fees and other expenses reasonably incurred, arising out of or in connection with the performance of such person’s duties or obligations under the Investment Advisory Agreement or otherwise as an investment adviser to the Company, except where primarily attributable to the willful misfeasance, bad faith or gross negligence in the performance of the Adviser’s duties or by reason of reckless disregard of the Adviser’s obligations or duties under the Investment Advisory Agreement, subject to the provisions of the Company’s organizational documents, the 1940 Act, the laws of the State of New York.
Under the Administration Agreement, the Administrator and certain specified parties providing administrative services pursuant to that agreement are not liable to us or our stockholders for, and we have agreed to indemnify them for, any claims or losses arising out of the good faith performance of their duties or obligations under the Administration Agreement, except where primarily attributable to the willful misfeasance, bad faith or gross negligence or by reason of reckless disregard of the Administrator’s duties under the Administration Agreement, subject to the provisions of the 1940 Act. These protections may lead the Adviser or the Administrator to act in a riskier manner when acting on our behalf than it would when acting for its own account.
Our ability to enter into transactions involving derivatives and financial commitment transactions may be limited.
In November 2020, the SEC adopted a revised version of Rule 18f-4, which is designed to modernize the regulation of the use of derivatives by registered investment companies and BDCs. Among other things, Rule 18f-4 requires BDCs that use derivatives to be subject to a value-at-risk leverage limit and requires the adoption and implementation of a derivatives risk management program that is reasonably designed to identify, assess and manage its derivatives transaction trading risk, subject to certain exceptions. Additionally, subject to certain conditions, funds that do not invest heavily in derivatives may be deemed limited derivatives users and would not be subject to the full requirements of Rule 18f-4. The Company intends to operate under the limited derivatives user exemption of Rule 18f-4 and has adopted written policies and procedures reasonably designed to manage the Company’s derivatives risk pursuant to Rule 18f-4. In connection with the adoption of Rule 18f-4, the SEC also eliminated the asset segregation and cover framework arising from prior SEC guidance for covering derivatives and certain financial instruments. Compliance with Rule 18f-4 has been required since August 2022. Collectively, these requirements may limit our ability to use derivatives and/or enter into certain other financial contracts.
Risks Relating to Our Investments
Limitations of investment due diligence expose us to investment risk.
Our due diligence may not reveal all of a portfolio company’s liabilities and may not reveal other weaknesses in its business. We can offer no assurance that our due diligence processes will uncover all relevant facts that would be material to an investment decision. Before making an investment in, or a loan to, a company, our Adviser will assess the strength and skills of the company’s management and other factors that it believes are material to the performance of the investment.
In making the assessment and otherwise conducting customary due diligence, our Adviser will rely on the resources available to it and, in some cases, an investigation by third parties. This process is particularly important and highly subjective with respect to newly organized entities because there may be little or no information publicly available about the entities.
We may make investments in, or loans to, companies which are not subject to public company reporting requirements including requirements regarding preparation of financial statements and our portfolio companies may utilize divergent reporting standards that may make it difficult for the Adviser to accurately assess the prior performance of a portfolio company. We will, therefore, depend upon the compliance by investment companies with their contractual reporting obligations. As a result, the evaluation of potential investments and our ability to perform due diligence on, and effectively monitor investments, may be impeded, and we may not realize the returns which we expect on any particular investment. In the event of fraud by any company in which we invest or with respect to which we make a loan, we may suffer a partial or total loss of the amounts invested in that company.
Our debt investments may be risky and we could lose all or part of our investments.
The debt instruments in which we invest are typically not rated by any rating agency, but we believe that if such investments were rated, they would be below investment grade (rated lower than “Baa3” by Moody’s Investors Service, lower than “BBB-” by Fitch Ratings or lower than “BBB-” by Standard & Poor’s Ratings Services), which under the guidelines established by these entities is an indication of having predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. Bonds that are rated below investment grade are sometimes referred to as “high yield bonds” or “junk bonds.” Therefore, our investments may result in an above average amount of risk and volatility or loss of principal.
Defaults by our portfolio companies will harm our operating results.
A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, termination of its debt financing and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize a portfolio company’s ability to meet its obligations under the debt or equity securities that we hold. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of certain financial covenants, with a defaulting portfolio company. In addition, lenders in certain cases can be subject to lender liability claims for actions taken by them when they become too involved in the borrower’s business or exercise control over a borrower. It is possible that we could become subject to a lender’s liability claim, including as a result of actions taken if we render managerial assistance to the borrower.
We may experience fluctuations in our quarterly operating results.
We could experience fluctuations in our quarterly operating results due to a number of factors, including the interest rate payable on the debt securities we acquire, the default rate on such securities, the number and size of investments we originate or acquire, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. In light of these factors, results for any period should not be relied upon as being indicative of our performance in future periods.
Economic recessions or downturns could impair our portfolio companies and defaults by our portfolio companies will harm our operating results.
Many of our portfolio companies are susceptible to economic slowdowns or recessions and may be unable to repay our loans during these periods. Therefore, our non-performing assets are likely to increase and the value of our portfolio is likely to decrease during these periods. Adverse economic conditions may decrease the value of collateral securing some of our loans and the value of our equity investments. Economic slowdowns or recessions could lead to financial losses in our portfolio and a decrease in revenues, net income and assets. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could prevent us from increasing our investments and harm our operating results. For more information, see “-We are operating in a period of capital markets volatility and economic uncertainty. The conditions have materially and adversely affected debt and equity capital markets in the United States, and any future volatility or instability in capital markets may have negative impact on our business and operations.”
Inflation could adversely impact our portfolio companies and our results of our operations.
Certain of our portfolio companies are in industries that could be impacted by inflation. If such portfolio companies are unable to pass any increases in their costs of operations along to their customers, it could adversely affect their operating results and impact their ability to pay distributions on our equity investments and/or interest and principal on our loans, particularly if interest rates rise in response to inflation. In addition, any projected future decreases in our portfolio companies’ operating results due to inflation could adversely impact the fair value of those investments. Any decreases in the fair value of our investments could result in future realized or unrealized losses and therefore reduce our net increase (decrease) in net assets resulting from operations.
We may hold the debt securities of distressed companies that may enter into bankruptcy proceedings.
Companies that are financially distressed due to leverage or other factors may experience bankruptcy or similar financial distress. The bankruptcy process has a number of significant inherent risks. Many events in a bankruptcy proceeding are the product of contested matters and adversary proceedings and are beyond the control of the creditors. A bankruptcy filing by an issuer may adversely and permanently affect the issuer. If the proceeding is converted to a liquidation, the value of the issuer may not equal the liquidation value that was believed to exist at the time of the investment. The duration of a bankruptcy proceeding is also difficult to predict, and a creditor’s return on investment can be adversely affected by delays until the plan of reorganization or liquidation ultimately becomes effective. The administrative costs of a bankruptcy proceeding are frequently high and would be paid out of the debtor’s estate prior to any return to creditors. Because the standards for classification of claims under bankruptcy law are vague, our influence with respect to the class of securities or other obligations we own may be lost by increases in the number and amount of claims in the same class or by different classification and treatment. In the early stages of the bankruptcy process, it is often difficult to estimate the extent of, or even to identify, any contingent claims that might be made. In addition, certain claims that have priority by law (for example, claims for taxes) may be substantial.
Depending on the facts and circumstances of our investments and the extent of our involvement in the management of a portfolio company, upon the bankruptcy of a portfolio company, a bankruptcy court may recharacterize our debt investments as equity interests and subordinate all or a portion of our claim to that of other creditors. This could occur even though we may have structured our investment as senior debt.
Our investments in private middle-market portfolio companies are risky, and you could lose all or part of your investment.
Investments in private middle-market companies involve a number of significant risks. Generally, little public information exists about these companies, and we rely on the ability of the Adviser’s investment professionals to obtain adequate information to evaluate the potential returns from investing in these companies. Further, these companies may not have third-party debt ratings or audited financial statements. We must therefore rely solely on the ability of the Adviser to obtain adequate information through due diligence
to evaluate the creditworthiness and potential returns from investing in these companies, which information may not include all information or resources which may be available from other areas of Morgan Stanley. If the Adviser is unable to uncover all material information about these companies, it may not make a fully informed investment decision, and we may lose money on our investments. Middle-market companies generally have less predictable operating results and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position. Middle-market companies may have limited financial resources, may have difficulty accessing the capital markets to meet future capital needs and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of our realizing any guarantees we may have obtained in connection with our investment. In addition, such companies typically have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns. Additionally, middle-market companies are more likely to depend on the management talents and efforts of a small group of persons. Therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us. Middle-market companies also may be parties to litigation and may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence. In addition, our executive officers, directors and the Adviser may, in the ordinary course of business, be named as defendants in litigation arising from our investments.
Subordinated liens on collateral securing debt investments that we will make to our portfolio companies may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us.
Certain debt investments that we make in portfolio companies will be secured on a second priority basis by the same collateral securing senior debt of such companies. The first priority liens on the collateral will secure the portfolio company’s obligations under any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by the portfolio company under the agreements governing the debt. The holders of obligations secured by the first priority liens on the collateral will generally control the liquidation of and be entitled to receive proceeds from any realization of the collateral to repay their obligations in full before us. In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. We can offer no assurance that the proceeds, if any, from the sale or sales of all of the collateral would be sufficient to satisfy the debt obligations secured by the second priority liens after payment in full of all obligations secured by the first priority liens on the collateral. If such proceeds are not sufficient to repay amounts outstanding under the debt obligations secured by the second priority liens, then we, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against the portfolio company’s remaining assets, if any. Similarly, investments in “last out” pieces of tranched first lien loans will be similar to second lien loans in that such investments will be junior in priority to the “first out” piece of the same tranched loan with respect to payment of principal, interest and other amounts.
We may also make unsecured debt investments in portfolio companies, meaning that such investments will not benefit from any interest in collateral of such companies. Liens on such portfolio companies’ collateral, if any, will secure the portfolio company’s obligations under its outstanding secured debt and may secure certain future debt that is permitted to be incurred by the portfolio company under its secured debt agreements. The holders of obligations secured by such liens will generally control the liquidation of, and be entitled to receive proceeds from, any realization of such collateral to repay their obligations in full before us. In addition, the value of such collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. We can offer no assurance that the proceeds, if any, from sales of such collateral would be sufficient to satisfy our unsecured debt obligations after payment in full of all secured debt obligations. If such proceeds were not sufficient to repay the outstanding secured debt obligations, then our unsecured claims would rank equally with the unpaid portion of such secured creditors’ claims against the portfolio company’s remaining assets, if any.
The rights we may have with respect to the collateral securing the debt investments we make in our portfolio companies with senior debt outstanding, or first-out pieces of tranched first lien debt, may also be limited pursuant to the terms of one or more inter-creditor agreements that we enter into with the holders of senior debt. Under such an inter-creditor agreement, at any time that obligations that have the benefit of the first priority liens are outstanding, any of the following actions that may be taken in respect of the collateral will be at the direction of the holders of the obligations secured by the first priority liens: the ability to cause the commencement of enforcement proceedings against the collateral; the ability to control the conduct of such proceedings; the approval of amendments to collateral documents; releases of liens on the collateral; and waivers of past defaults under collateral documents. We may not have the ability to control or direct such actions, even if our rights are adversely affected.
Our investments in securities or assets of publicly traded companies are subject to the risks inherent in investing in public companies.
We may invest a portion of our portfolio in publicly traded companies. In such investments, it is not expected that we will be able to negotiate additional financial covenants or other contractual rights, which we might otherwise be able to obtain in making privately negotiated investments. Moreover, we may not have the same access to information in connection with investments in public companies, either when investigating a potential investment or after making an investment, as compared to privately negotiated investments. Furthermore, we may be limited in our ability to make investments and to sell existing investments in public securities because Morgan Stanley may be deemed to have material, non-public information regarding the issuers of those securities or as a
result of other internal policies. The inability to sell public securities in these circumstances could materially adversely affect our investment results. In addition, an investment may be sold by us to a public company where the consideration received is a combination of cash and stock of the public company, which may, depending on the securities laws of the relevant jurisdiction, be subject to lock-up periods.
Covenant-lite loans may expose us to different risks, including with respect to liquidity, ability to restructure loans, credit risks and less protective loan documentation, than is the case with loans that contain financial maintenance covenants.
Certain loans in our portfolio may consist of “covenant-lite” loans. Generally, covenant-lite loans permit borrowers more opportunity to negatively impact lenders because such loans may not require the borrower to maintain debt service or other financial ratios and do not include terms which allow the lender to monitor the performance of the borrower and declare a default if certain criteria are breached. Accordingly, to the extent we invest in covenant-lite loans, we may have less protection from borrower actions and may have a greater risk of loss on such investments as compared to investments in or exposure to loans with financial maintenance covenants. Ownership of covenant-lite loans may expose us to different risks, including with respect to liquidity, ability to restructure loans, credit risks and less protective loan documentation, than is the case with loans that contain financial maintenance covenants. As of December 31, 2024, approximately 35% of our portfolio, measured as percent of gross commitments, is in loans that are considered “covenant-lite.”
The lack of liquidity in our investments may adversely affect our business.
Our investments are illiquid in most cases, and we can offer no assurance that we will be able to realize on such investments in a timely manner. A substantial portion of our investments in leveraged companies are and will be subject to legal and other restrictions on resale or will otherwise be less liquid than more broadly traded public securities. The illiquidity of these investments may make it difficult for us to sell such investments if the need arises. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded our investments. We may also face other restrictions on our ability to liquidate an investment in a portfolio company to the extent that we, the Adviser or any of its affiliates have material nonpublic information regarding such portfolio company.
In addition, we generally expect to invest in securities, instruments and assets that are not, and are not expected to become, publicly traded. We will generally not be able to sell securities publicly unless the sale is registered under applicable securities laws, or unless an exemption from such registration requirements is available.
Investments may be illiquid and long-term. Illiquidity may result from the absence of an established or liquid market for investments as well as legal and contractual restrictions on their resale by us. It is generally expected that we will hold assets to maturity, and the amount of “discretionary sales” of investments generally will be limited. Our investment in illiquid investments may restrict its ability to dispose of investments in a timely fashion and for a fair price. Furthermore, we likely will be limited in our ability to sell investments because Morgan Stanley may have material, non-public information regarding the issuers of such loans or investments or as a result of measures established by Morgan Stanley in order to comply with applicable law, regulatory restrictions or internal policies or procedures, including without limitation joint transaction restrictions pursuant to the 1940 Act. This limited ability to sell investments could materially adversely affect our investment results. As a result, our exposure to losses, including a potential loss of principal, as a result of which you could potentially lose all or a portion of your investment in us, may be increased due to the illiquidity of our investments generally.
In certain cases, we may also be prohibited by contract from selling our investments for a period of time or otherwise be restricted from disposing of our investments. Furthermore, certain types of investments expected to be made may require a substantial length of time to realize a return or fully liquidate. We may exit some investments through distributions in kind to the stockholders, after which such you will still bear the risks associated with holding the securities and must make your own disposition decisions.
Given the nature of the investments contemplated by the Company, there is a material risk that we will be unable to realize our investment objectives by sale or other disposition at attractive prices or will otherwise be unable to complete any exit strategy. In particular, this risk could arise from changes in the financial condition or prospects of the portfolio company in which the investment is made, changes in national or international economic conditions, changes in debt and equity capital markets and changes in laws, regulations, fiscal policies or political conditions of countries in which investments are made.
In connection with the disposition of an investment in a portfolio company, we may be required to make representations about the business and financial affairs of the portfolio company, or may be responsible for the contents of disclosure documents under applicable securities laws. We may also be required to indemnify the purchasers of such investment or underwriters to the extent that any such representations or disclosure documents turn out to be incorrect, inaccurate or misleading. These arrangements may result in contingent liabilities, for which we may establish reserves or escrows. However, we can offer no assurance that we will adequately reserve for our contingent liabilities and that such liabilities will not have an adverse effect on us. Such contingent liabilities might ultimately have to be funded by proceeds, including the return of capital, from our other investments.
Price declines and illiquidity in the corporate debt markets may adversely affect the fair value of our portfolio investments, reducing our net asset value through increased net unrealized depreciation.
As a BDC, we are required to carry our investments at market value or, if no market value is ascertainable, at fair value as determined in good faith by our Valuation Designee, under the supervision of our Board of Directors. As part of the valuation process, we may take into account the following types of factors, if relevant, in determining the fair value of our investments:
•a comparison of the portfolio company’s securities to publicly traded securities;
•the enterprise value of the portfolio company;
•the nature and realizable value of any collateral;
•the portfolio company’s ability to make payments and its earnings and discounted cash flow;
•the markets in which the portfolio company does business; and
•the changes in the interest rate environment and the credit markets generally that may affect the price at which similar investments may be made in the future and other relevant factors.
When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we use the pricing indicated by the external event to corroborate our valuation. We record decreases in the market values or fair values of our investments as unrealized depreciation. Declines in prices and liquidity in the corporate debt markets may result in significant net unrealized depreciation in our portfolio. The effect of all of these factors on our portfolio may reduce our net asset value by increasing net unrealized depreciation in our portfolio. Any unrealized losses in our portfolio could be an indication of a portfolio company’s inability to meet its repayment obligations to us with respect to the affected loans. Depending on market conditions, we could incur substantial realized losses and ultimately experience reductions of our income available for distribution in future periods. We may also suffer additional unrealized losses in future periods, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, decreases in the market value or fair value of our investments will reduce our net asset value.
Our investments in OID and PIK instruments may expose us to investment risk.
To the extent that we invest in OID or PIK instruments and the accretion of OID or PIK interest income constitutes a portion of our income, we will be exposed to risks associated with the requirement to include such non-cash income in taxable and accounting income prior to receipt of cash, including the following:
•the interest rates on PIK loans are higher to reflect the time-value of money on deferred interest payments and the higher credit risk of borrowers who may need to defer interest payments, and PIK instruments generally represent a significantly higher credit risk than coupon loans;
•OID and PIK instruments may have unreliable valuations because the accruals require judgments about ultimate collectability of the deferred payments and the value of any associated collateral;
•an election to defer PIK interest payments by adding them to the principal on such instruments increases our future investment income which increases our net assets and, as such, increases the Adviser’s future management fees which, thus, increases the Adviser’s future income incentive fees at a compounding rate;
•market prices of OID and PIK instruments and other zero-coupon instruments are affected to a greater extent by interest rate changes, and may be more volatile than instruments that pay interest periodically in cash. While PIK instruments are usually less volatile than zero-coupon debt instruments, PIK instruments are generally more volatile than cash pay securities;
•the deferral of PIK interest on an instrument increases the loan-to-value ratio, which is a measure of the riskiness of a loan, with respect to such instrument;
•even if the conditions for income accrual under GAAP are satisfied, a borrower could still default when actual payment is due upon the maturity of such loan
•for accounting purposes, cash distributions to investors representing OID income do not come from paid-in capital, although they may be paid from the offering proceeds. Thus, although a distribution of OID income may come from the cash invested by investors, the 1940 Act does not require that investors be given notice of this fact;
•the required recognition of OID or PIK interest for U.S. federal income tax purposes may have a negative impact on liquidity, as it represents a non-cash component of our investment company taxable income that may require cash distributions to shareholders in order to maintain our ability to maintain tax treatment as a RIC for U.S. federal income tax purposes; and
•OID may create a risk of non-refundable cash payments to the Adviser based on non-cash accruals that may never be realized.
Our portfolio companies may be unable to repay or refinance outstanding principal on their loans at or prior to maturity, and rising interest rates may make it more difficult for portfolio companies to make periodic payments on their loans.
Our portfolio companies may be unable to repay or refinance outstanding principal on their loans at or prior to maturity. This risk and the risk of default is increased to the extent that the loan documents do not require the portfolio companies to pay down the outstanding principal of such debt prior to maturity. In addition, if general interest rates rise, there is a risk that our portfolio companies will be unable to pay escalating interest amounts, which could result in a default under their loan documents with us. Rising interest rates could also cause portfolio companies to shift cash from other productive uses to the payment of interest, which may have a material adverse effect on their business and operations and could, over time, lead to increased defaults. Any failure of one or more portfolio companies to repay or refinance its debt at or prior to maturity or the inability of one or more portfolio companies to make ongoing payments following an increase in contractual interest rates could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our portfolio companies may prepay loans, which may reduce our yields if capital returned cannot be invested in transactions with equal or greater expected yields.
The loans in our investment portfolio may be prepaid at any time, generally with little advance notice. Whether a loan is prepaid will depend both on the continued positive performance of the portfolio company and the existence of favorable financing market conditions that allow such company the ability to replace existing financing with less expensive capital. As market conditions change, we do not know when, and if, prepayment may be possible for each portfolio company. In some cases, the prepayment of a loan may reduce our achievable yield if the capital returned cannot be invested in transactions with equal or greater expected yields, which could have a material adverse effect on our business, financial condition and results of operations.
Our investments in portfolio companies may expose us to environmental risks.
We may invest in portfolio entities that are subject to changing and increasingly stringent environmental and health and safety laws, regulations and permit requirements and environmental costs that could place increasing financial burdens on such portfolio entities. Required expenditures for environmental compliance may adversely impact investment returns on portfolio entities. The imposition of new environmental and other laws, regulations and initiatives could adversely affect the business operations and financial stability of portfolio entities.
There can be no guarantee that all costs and risks regarding compliance with environmental laws and regulations can be identified. New and more stringent environmental and health and safety laws, regulations and permit requirements or stricter interpretations of current laws or regulations could impose substantial additional costs on portfolio investment or potential investments. Compliance with such current or future environmental requirements does not ensure that the operations of the portfolio investments will not cause injury to the environment or to people under all circumstances or that the portfolio investments will not be required to incur additional unforeseen environmental expenditures. Moreover, failure to comply with any such requirements could have a material adverse effect on an investment, and we can offer no assurance that the portfolio investments will at all times comply with all applicable environmental laws, regulations and permit requirements.
Additionally, our portfolio companies may be subject to certain so-called sustainability risks or ESG events or conditions that, if they occur, could cause an actual or potential material impact on the value of the Company, including, but not limited to, the following:
•Climate change risks include both global warming driven by human emissions of greenhouse gases and the resulting large-scale shifts in weather patterns. Risks associated with climate change include transition risks (policy changes, reputational impacts and shifts in market preferences, norms and technology) and physical risk (physical impacts of climate change such as droughts, floods or thawing ground);
•Natural resource risks including rising costs from resource scarcity or resource usage taxes and systemic risk from biodiversity loss;
•Pollution and waste risks including liabilities associated with contamination and waste management costs;
•Human capital risks include declining employee productivity, attrition and turnover costs, pandemics and supply chain reputational risks or disruption;
•Community risks factors including loss of license to operate, operational disruptions caused by protests or boycotts and systematic inequality and instability;
•Security and safety risks such as consumer security, data privacy and security; and
•Other climate-related conditions and events that present risks related to the physical impacts of the climate and risks related to a potential transition to a lower carbon economy.
We have not yet identified all of the portfolio company investments we will acquire and we may have difficulty sourcing investment opportunities.
We have not yet identified all of the potential investments for our portfolio that we will acquire with the proceeds of any sales of our securities or repayments of investments currently in our portfolio, and we cannot assure investors that we will be able to locate a sufficient number of suitable investment opportunities to allow us to deploy all available capital successfully. Privately negotiated
investments in loans and illiquid securities of private, middle-market companies require substantial due diligence and structuring, and we cannot assure you that we will achieve our anticipated investment pace. As a result, investors will be unable to evaluate any future portfolio company investments prior to purchasing our shares. The Adviser selects all of our investments, and our stockholders will have no input with respect to such investment decisions. These factors increase the uncertainty, and thus the risk, of investing in our securities. Until such appropriate investment opportunities can be found, we may also invest the net proceeds in cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less from the date of investment. We expect these temporary investments to earn yields substantially lower than the income that we expect to receive in respect of our targeted investment types. As a result, any distributions we make during this period may be substantially smaller than the distributions that we expect to pay when our portfolio is fully invested. To the extent we are unable to deploy all available capital, our investment income and, in turn, our results of operations, will likely be materially adversely affected. There is no assurance that we will be able to consummate investment transactions or that such transactions will be successful.
Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio.
Following an initial investment in a portfolio company, we may make additional investments in that portfolio company as “follow-on” investments, in seeking to:
•increase or maintain in whole or in part our position as a creditor or equity ownership percentage in a portfolio company;
•exercise warrants, options or convertible securities that were acquired in the original or subsequent financing; or
•preserve or enhance the value of our investment.
We have discretion to make follow-on investments, subject to the availability of capital resources and certain limitations on co-investment with affiliates under the 1940 Act. Failure on our part to make follow-on investments may, in some circumstances, jeopardize the continued viability of a portfolio company and our initial investment, or may result in a missed opportunity for us to increase our participation in a successful portfolio company. Even if we have sufficient capital to make a desired follow-on investment, we may elect not to make a follow-on investment because we may not want to increase our level of risk, because we prefer other opportunities or because of regulatory or other considerations. Our ability to make follow-on investments may also be limited by the Adviser’s allocation policies and procedures.
Because we generally do not hold controlling equity interests in our portfolio companies, we may not be able to exercise control over our portfolio companies or to prevent decisions by management of our portfolio companies that could decrease the value of our investments.
To the extent that we do not hold controlling equity interests in portfolio companies, we will have a limited ability to protect our position in such portfolio companies. We may also co-invest with third parties through partnerships, joint ventures or other entities. Such investments may involve risks in connection with such third-party involvement, including the possibility that a third-party co-investor may have economic or business interests or goals that are inconsistent with ours or may be in a position to take (or block) action in a manner contrary to our investment objective. In those circumstances where such third parties involve a management group, such third parties may receive compensation arrangements relating to such investments, including incentive compensation arrangements. We do not currently intend to create or acquire primary control of any entity that primarily engaged in investment activities in securities or other assets, other than entities wholly owned by us.
We can offer no assurance that portfolio company management will be able to operate their companies in accordance with our expectations.
The day-to-day operations of each portfolio company in which we invest are the responsibility of that portfolio company’s management team. Although we are responsible for monitoring the performance of each investment and generally intend to invest in portfolio companies operated by strong management, we can offer no assurance that the existing management team, or any successor, will be able to operate any such portfolio company in accordance with our expectations. We can offer no assurance that a portfolio company will be successful in retaining key members of its management team, the loss of whom could have a material adverse effect on us. Although we generally intend to invest in companies with strong management teams and defensible market positions, we can offer no assurance that the existing management of such companies will continue to operate a company successfully.
Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies and such portfolio companies may not generate sufficient cash flow to service their debt obligations to us.
We may invest a portion of our capital in second lien and subordinated loans issued by our portfolio companies. Our portfolio companies may have, or be permitted to incur, other debt that ranks equally with, or senior to, the debt securities in which we invest. Such subordinated investments are subject to greater risk of default than senior obligations as a result of adverse changes in the financial condition of the obligor or in general economic conditions. If we make a subordinated investment in a portfolio company, the portfolio company may be highly leveraged, and its relatively high debt-to-equity ratio may create increased risks that its operations might not generate sufficient cash flow to service all of its debt obligations. By their terms, such debt instruments may provide that the holders are entitled to receive payment of interest or principal on or before the dates on which we are entitled to receive payments in respect of the securities in which we invest. These debt instruments would usually prohibit the portfolio companies from paying
interest on or repaying our investments in the event of and during the continuance of a default under such debt. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of securities ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution in respect of our investment. After repaying senior creditors, the portfolio company may not have any remaining assets to use for repaying its obligation to us where we are junior creditor. In the case of debt ranking equally with debt securities in which we invest, we would have to share any distributions on an equal and ratable basis with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.
Additionally, certain loans that we make to portfolio companies may be secured on a second priority basis by the same collateral securing senior secured debt of such companies. The first priority liens on the collateral will secure the portfolio company’s obligations under any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by the portfolio company under the agreements governing the loans. The holders of obligations secured by first priority liens on the collateral will generally control the liquidation of, and be entitled to receive proceeds from, any realization of the collateral to repay their obligations in full before us. In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. Similarly, investments in “last out” pieces of tranched first lien loans will be similar to second lien loans in that such investments will be junior in priority to the “first out” piece of the same tranched first lien loan with respect to payment of principal, interest and other amounts. We can offer no assurance that the proceeds, if any, from sales of all of the collateral would be sufficient to satisfy the loan obligations secured by the second priority liens or the “last out” pieces of the tranched first lien loans after payment in full of all obligations secured by the first priority liens on the collateral. If such proceeds were not sufficient to repay amounts outstanding under the loan obligations secured by the second priority liens or the “last out” pieces of unitranche loans, then we, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against the portfolio company’s remaining assets, if any.
We may make unsecured loans to portfolio companies, meaning that such loans will not benefit from any interest in collateral of such companies. Liens on a portfolio company’s collateral, if any, will secure the portfolio company’s obligations under its outstanding secured debt and may secure certain future debt that is permitted to be incurred by the portfolio company under its secured loan agreements. The holders of obligations secured by such liens will generally control the liquidation of, and be entitled to receive proceeds from, any realization of such collateral to repay their obligations in full before us. In addition, the value of such collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. We can offer no assurance that the proceeds, if any, from sales of such collateral would be sufficient to satisfy our unsecured loan obligations after payment in full of all loans secured by collateral. If such proceeds were not sufficient to repay the outstanding secured loan obligations, then our unsecured claims would rank equally with the unpaid portion of such secured creditors’ claims against the portfolio company’s remaining assets, if any.
The rights we may have with respect to the collateral securing any junior priority loans, including any “last out” pieces of tranched first lien loans, we make to our portfolio companies may also be limited pursuant to the terms of one or more intercreditor agreements that we enter into (or the absence of an intercreditor agreement) with the holders of senior debt. Under a typical intercreditor agreement, at any time that obligations that have the benefit of the first priority liens are outstanding, any of the following actions that may be taken in respect of the collateral will be at the direction of the holders of the obligations secured by the first priority liens:
•the ability to cause the commencement of enforcement proceedings against the collateral;
•the ability to control the conduct of such proceedings;
•the approval of amendments to collateral documents;
•releases of liens on the collateral; and
•waivers of past defaults under collateral documents.
We may not have the ability to control or direct such actions, even if our rights as junior lenders are adversely affected.
We may suffer a loss if a portfolio company defaults on a loan and the underlying collateral is not sufficient.
In the event of a default by a portfolio company on a secured loan, we will only have recourse to the assets collateralizing the loan. If the underlying collateral value is less than the loan amount, we will suffer a loss. In addition, we may make loans that are unsecured, which are subject to the risk that other lenders may be directly secured by the assets of the portfolio company. In the event of a default, those collateralized lenders would have priority over us with respect to the proceeds of a sale of the underlying assets. In cases described above, we may lack control over the underlying asset collateralizing our loan or the underlying assets of the portfolio company prior to a default, and as a result the value of the collateral may be reduced by acts or omissions by owners or managers of the assets.
In the event of bankruptcy of a portfolio company, we may not have full recourse to its assets in order to satisfy our loan, or our loan may be subject to “equitable subordination.” This means that depending on the facts and circumstances, including the extent to which we actually provided significant “managerial assistance,” if any, to that portfolio company, a bankruptcy court might re-characterize our debt holding and subordinate all or a portion of our claim to that of other creditors. In addition, certain of our loans are subordinate
to other debt of the portfolio company. If a portfolio company defaults on our loan or on debt senior to our loan, or in the event of a portfolio company bankruptcy, our loan will be satisfied only after the senior debt receives payment. Where debt senior to our loan exists, the presence of inter-creditor arrangements may limit our ability to amend our loan documents, assign our loans, accept prepayments, exercise our remedies (through “standstill” periods) and control decisions made in bankruptcy proceedings relating to the portfolio company. Bankruptcy and portfolio company litigation can significantly increase collection losses and the time needed for us to acquire the underlying collateral in the event of a default, during which time the collateral may decline in value, causing us to suffer losses.
If the value of collateral underlying our loan declines or interest rates increase during the term of our loan, a portfolio company may not be able to obtain the necessary funds to repay our loan at maturity through refinancing. Decreasing collateral value and/or increasing interest rates may hinder a portfolio company’s ability to refinance our loan because the underlying collateral cannot satisfy the debt service coverage requirements necessary to obtain new financing. If a borrower is unable to repay our loan at maturity, we could suffer a loss which may adversely impact our financial performance.
We may be subject to risks under hedging transactions and may become subject to risks if we invest in foreign securities.
We may invest in non-U.S. companies, to the limited extent such investments are permitted under the 1940 Act. We expect that these investments would focus on the same types of investments that we make in U.S. middle-market companies. Investing in securities of non-U.S. companies involves many risks including economic, social, political, financial, tax and security conditions, potential inflationary economic environments, regulation by foreign governments, different accounting standards and political uncertainties. These factors could include changes in economic and fiscal policies, the possible imposition of, or changes in, currency exchange laws or other laws or restrictions applicable to the non-U.S. company or investments in their securities and the possibility of fluctuations in the rate of exchange between currencies.
We may engage in hedging transactions to the limited extent such transactions are permitted under the 1940 Act and applicable commodities laws. Engaging in hedging transactions or investing in foreign securities would entail additional risks to our stockholders. We could, for example, use instruments such as interest rate swaps, caps, collars and floors and, if we were to invest in foreign securities, we could use instruments such as forward contracts or currency options and borrow under a credit facility in currencies selected to minimize our foreign currency exposure. In each such case, we generally would seek to hedge against fluctuations of the relative values of our portfolio positions from changes in market interest rates or currency exchange rates. Hedging against a decline in the values of our portfolio positions would not eliminate the possibility of fluctuations in the values of such positions or prevent losses if the values of the positions declined. However, such hedging could establish other positions designed to gain from those same developments, thereby offsetting the decline in the value of such portfolio positions. Such hedging transactions could also limit the opportunity for gain if the values of the underlying portfolio positions increased. Moreover, it might not be possible to hedge against an exchange rate or interest rate fluctuation that was so generally anticipated that we would not be able to enter into a hedging transaction at an acceptable price. Use of a hedging transaction could involve counterparty credit risk. The success of any hedging transactions we may enter into will depend on our ability to correctly predict movements in currencies and interest rates. Therefore, while we may enter into hedging transactions to seek to reduce currency exchange rate and interest rate risks, unanticipated changes in currency exchange rates or interest rates could result in poorer overall investment performance than if we had not engaged in any such hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged could vary. Moreover, for a variety of reasons, we might not seek to (or be able to) establish a perfect correlation between the hedging instruments and the portfolio holdings being hedged. Any such imperfect correlation could prevent us from achieving the intended hedge and expose us to risk of loss. In addition, it might not be possible to hedge fully or perfectly against currency fluctuations affecting the value of securities denominated in non-U.S. currencies because the value of those securities is likely to fluctuate as a result of factors not related to currency fluctuations. Our ability to engage in hedging transactions may also be adversely affected by rules adopted by the CFTC.
We may not realize gains from our equity investments.
When we invest in unitranche, second lien and subordinated loans, we may acquire warrants or other equity securities of portfolio companies as well. We may also invest in equity securities directly. To the extent we hold equity investments, we will seek to dispose of them and realize gains upon our disposition of them. However, the equity interests we receive may not appreciate in value and may decline in value. As a result, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience.
We may be subject to risks to the extent we provide managerial assistance to our portfolio companies.
To the extent we participate substantially in the conduct of the management of certain of our portfolio companies, such as designating directors to serve on the boards of directors of certain portfolio companies, such designation of representatives and other measures contemplated could expose our assets to claims by a portfolio company in which we invest, its security-holders and its creditors, including claims that we are a controlling person and thus are liable for securities laws violations of a portfolio company. These measures also could result in certain liabilities in the event of the bankruptcy or reorganization of a portfolio company, could result in claims against us if a designated director violates their fiduciary or other duties to a portfolio company or fail to exercise appropriate
levels of care under applicable corporate or securities laws, environmental laws or other legal principles, and could expose us to claims that we have interfered in management to the detriment of a portfolio company.
Risks Relating to an Investment in our Securities
Investing in our Common Stock may involve an above average degree of risk.
The investments we make in accordance with our investment objective may result in a higher amount of risk than alternative investment options and a higher risk of volatility or loss of principal. Our investments in portfolio companies involve higher levels of risk, and therefore, an investment in our shares may not be suitable for someone with lower risk tolerance. In addition, our Common Stock is intended for long-term investors who can accept the risks of investing primarily in illiquid loans and other debt or debt-like instruments and should not be treated as a trading vehicle.
We cannot assure you that the market price of our Common Stock will not decline below our net asset value. The market price of our Common Stock may be volatile and may fluctuate significantly.
We currently list our Common Stock on the NYSE under the symbol “MSDL.” We cannot assure you that the trading market can be sustained. In addition, we cannot predict the prices at which our Common Stock will trade. Shares of closed-end investment companies, including BDCs, frequently trade at a discount from their net asset value and our shares may also be discounted in the market. This characteristic of closed-end investment companies is separate and distinct from the risk that our net asset value per share may decline. We cannot predict whether our Common Stock will trade at, above or below net asset value. The risk of loss associated with this characteristic of closed-end management investment companies may be greater for investors expecting to sell Common Stock purchased in the offering soon after the offering. In addition, if our Common Stock trades below its net asset value, we will generally not be able to sell additional Common Stock to the public at its market price without first obtaining the approval of a majority of our stockholders (including a majority of our unaffiliated stockholder) and our independent directors for such issuance.
The market price and liquidity of the market for our Common Stock that will prevail in the market after this offering may be higher or lower than the price you pay and may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include:
•Significant volatility in the market price and trading volume of securities of BDCs or other companies in our sector, which are not necessarily related to the operating performance of these companies;
•Price and volume fluctuations in the overall stock market from time to time;
•The inclusion or exclusion of our Common Stock from certain indices;
•Changes in the value of our portfolio of investments and derivative instruments as a result of changes in market factors, such as interest rate shifts, and also portfolio specific performance, such as portfolio company defaults, among other reasons;
•Changes in regulatory policies or tax guidelines, particularly with respect to RICs or BDCs;
•Loss of RIC tax treatment or BDC status;
•Distributions that exceed our net investment income and net income as reported according to the generally accepted accounting principles in the United States of America;
•Changes in earnings or variations in operating results;
•Changes in accounting guidelines governing valuation of our investments;
•Any shortfall in revenue or net income or any increase in losses from levels expected by investors;
•Departure of our Adviser or certain of its key personnel;
•Inability of the Adviser to employ additional experienced investment professionals;
•General economic trends and other external factors;
•Escalation of tensions and conflicts in Europe and elsewhere, including in Ukraine and Russia, the Middle East, and disruptions in local, regional, national and global markets and economies affected thereby, including the potential for volatility in energy prices and its impact on the industries in which we invest;
•Inflation, and its impact on our portfolio companies and on the industries in which we invest;
•The impact of supply chain constraints on our portfolio companies and the global economy;
•Loss of a major funding source;
•The impact of information technology system failures, data security breaches, data privacy compliance, network disruptions, and cybersecurity attacks; and
•The economic and other impacts of disease outbreaks, pandemics, or any other serious public health concern in the United States as well as worldwide.
There is a risk that you may not receive distributions or that our distributions may not grow over time and a portion of our distributions may be a return of capital.
We intend to make periodic distributions to our stockholders out of assets legally available for distribution. We may fund our cash distributions to stockholders from any sources of funds available to us, including offering proceeds, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets, dividends or
other distributions paid to us on account of preferred and common equity investments in portfolio companies and fee and expense reimbursement waivers from the Adviser or the Administrator, if any. We cannot assure you that we will achieve investment results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions. Our ability to pay distributions might be adversely affected by the impact of one or more of the risk factors described in this report.
Due to the asset coverage test applicable to us under the 1940 Act as a BDC, we may be limited in our ability to make distributions. To the extent we make distributions to stockholders that include a return of capital, such portion of the distribution essentially constitutes a return of the stockholder’s investment. Although such return of capital may not be taxable, such distributions may increase an investor’s tax liability for capital gains upon the future sale of our Common Stock. A return of capital distribution may cause a stockholder to recognize a capital gain from the sale of our Common Stock even if the stockholder sells its shares for less than the original purchase price.
Purchases of our Common Stock by us under the Company 10b5-1 Plan may result in the price of our Common Stock being higher than the price might otherwise exist in the open market.
Whether purchases will be made under the Company 10b5-1 Plan and how much will be purchased at any time is uncertain, dependent on prevailing market prices and trading volumes, all of which we cannot predict. These activities may have the effect of maintaining the market price of our Common Stock or retarding a decline in the market price of the Common Stock, and, as a result, the price of our Common Stock may be higher than the price that otherwise might exist in the open market.
Purchases of our Common Stock by us under the Company 10b5-1 Plan may result in dilution to our net asset value per share.
The Company 10b5-1 Plan is intended to require Wells Fargo Securities, LLC, as our agent, to repurchase our Common Stock on our behalf when the market price per share is below the most recently reported net asset value per share (including any updates, corrections or adjustments publicly announced by us to any previously announced net asset value per share, including any distributions declared). Under the Company 10b5-1 Plan, the agent will increase the volume of purchases made as the price of our Common Stock declines, subject to volume restrictions.
Because purchases under the Company 10b5-1 Plan will be made beginning at any price below our most recently reported net asset value per share, if our net asset value per share as of the end of a quarter is lower than the net asset per share as of the end of the prior quarter, purchases under the Company 10b5-1 Plan during the period from the end of a quarter to the time of our earnings release announcing the new net asset value per share for that quarter may result in dilution to our net asset value per share. This dilution would occur because we would repurchase Common Stock under the Company 10b5-1 Plan at a price above the net asset value per share as of the end of the most recent quarter end, which would cause a proportionately smaller increase in our stockholders’ interest in our earnings and assets and their voting interest in us than the decrease in our assets resulting from such repurchase. As a result of any such dilution, our market price per share may decline. The actual dilutive effect will depend on the number of Common Stock that could be so repurchased, the price and the timing of any repurchases under the Company 10b5-1 Plan.
We have not established any limit on the amount of funds we may use from available sources, such as borrowings, if any, or proceeds from any offering of securities, to fund dividends (which may reduce the amount of capital we ultimately invest in assets).
Stockholders should understand that any distributions made from sources other than cash flow from operations or relying on fee or expense reimbursement waivers, if any, from the Adviser of the Administrator are not based on our investment performance and can only be sustained if we achieve positive investment performance in future periods and/or the Adviser or the Administrator continues to make such expense reimbursements, if any. The extent to which we pay distributions from sources other than cash flow from operations will depend on various factors, including the level of participation in our distribution reinvestment plan, how quickly we invest the proceeds from any securities offerings and the performance of our investments. There can be no assurance that we will achieve such performance in order to sustain these distributions or be able to pay distributions at all. The Adviser and the Administrator have no obligation to waive fees or receipt of expense reimbursements, if any.
Sales of substantial amounts of our Common Stock in the public market, including shares of our Common Stock held by MS Credit Partners Holdings, may have an adverse effect on the market price of our Common Stock.
Sales of substantial amounts of our Common Stock, or the availability of such Common Stock for sale, could adversely affect the prevailing market prices for our Common Stock. If this occurs and continues, it could impair our ability to raise additional capital through the sale of securities should we desire to do so.
Our stockholders may experience dilution in their ownership percentage.
Our stockholders do not have preemptive rights to purchase any shares of our Common Stock we issue in the future. To the extent that we issue additional equity interests at or below net asset value your percentage ownership interest in us may be diluted. In addition, depending upon the terms and pricing of any future sales of Common Stock and the value of our investments, you may also experience dilution in the book value and fair value of your shares of Common Stock.
Under the 1940 Act, we generally are prohibited from issuing or selling shares of our Common Stock at a price below net asset value per share, which may be a disadvantage as compared with certain public companies. We may, however, sell shares of our Common Stock, or warrants, options, or rights to acquire shares of our Common Stock, at a price below the current net asset value of shares of
our Common Stock if our Board of Directors determines that such sale is in our best interests and the best interests of our stockholders, and our stockholders, including a majority of those stockholders that are not affiliated with us, approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our Board of Directors, closely approximates the fair value of such securities (less any distributing commission or discount). If we raise additional funds by issuing shares of our Common Stock or senior securities convertible into, or exchangeable for, shares of our Common Stock, then the percentage ownership of our stockholders at that time will decrease and you will experience dilution.
Our stockholders will experience dilution in their ownership percentage if they opt out of our DRIP.
We have an “opt out” DRIP (as defined below) pursuant to which stockholders will have their cash distributions automatically reinvested in additional shares of Common Stock unless they elect to receive their distributions in cash. As a result, our stockholders that “opt out” of our DRIP will experience dilution in their ownership percentage of our shares of Common Stock over time. See “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities-Distribution Reinvestment Plan.”
Our stockholders may receive shares of our Common Stock as dividends, which could result in adverse tax consequences to them.
In order to satisfy the Annual Distribution Requirement applicable to RICs, we will have the ability to declare a large portion of a dividend in shares of our Common Stock instead of in cash. Revenue procedures issued by the IRS, allow a publicly offered regulated investment company (as defined in the Code) to distribute its own stock as a dividend for the purpose of fulfilling its distribution requirements, if certain conditions are satisfied. As long as a portion of such dividend is paid in cash (which portion may be as low as 20% of such dividend) and certain requirements are met, the entire distribution will be treated as a dividend for U.S. federal income tax purposes. As a result, a stockholder generally would be subject to tax on 100% of the fair market value of the dividend on the date the dividend is received by the stockholder in the same manner as a cash dividend, even though most of the dividend was paid in shares of our Common Stock.
We may in the future determine to issue preferred stock, which could adversely affect the value of shares of Common Stock.
The issuance of preferred stock with dividend or conversion rights, liquidation preferences or other economic terms favorable to the holders of preferred stock could make an investment in shares of Common Stock less attractive. In addition, the dividends on any preferred stock we issue must be cumulative. Payment of dividends and repayment of the liquidation preference of preferred stock must take preference over any distributions or other payments to holders of Common Stock, and holders of preferred stock are not subject to any of our expenses or losses and are not entitled to participate in any income or appreciation in excess of their stated preference (other than convertible preferred stock that converts into shares of Common Stock). In addition, under the 1940 Act, preferred stock would constitute a “senior security” for purposes of the 150% asset coverage test.
Our stockholders may be subject to filing requirements under the Exchange Act as a result of an investment in us.
Because our Common Stock is registered under the Exchange Act, ownership information for any person who beneficially owns 5% or more of our Common Stock must be disclosed in a Schedule 13G or other filings with the SEC. Beneficial ownership for these purposes is determined in accordance with the rules of the SEC, and includes having voting or investment power over the securities. Although we will provide in our quarterly financial statements the amount of outstanding stock and the amount of the investor’s stock, the responsibility for determining the filing obligation and preparing the filing remains with the investor. In addition, owners of 10% or more of our Common Stock are subject to reporting obligations under Section 16(a) of the Exchange Act.
Our stockholders may be subject to the short-swing profits rules under the Exchange Act as a result of an investment in us.
Persons with the right to appoint a director or who hold 10% or more of a class of our shares may be subject to Section 16(b) of the Exchange Act, which recaptures for the benefit of the issuer profits from the purchase and sale of registered stock within a six-month period.
Holders of any preferred stock that we may issue will have the right to elect certain members of our Board of Directors and have class voting rights on certain matters.
The 1940 Act requires that holders of any preferred stock that we may issue must be entitled as a class to elect two directors at all times. In addition, in accordance with the 1940 Act and the terms of any preferred stock we may issue in the future, if distributions paid upon our preferred stock are unpaid in an amount equal to at least two years of distributions, the holders of our preferred stock will be entitled to elect a majority of our Board of Directors. Holders of our preferred stock may have the right to vote, including in the election of directors, in ways that may benefit their interests but not the interests of holders of our Common Stock.
Risks Related to the Notes
The Notes are unsecured and therefore are effectively subordinated to any secured indebtedness we may incur. Additionally, the Notes are not guaranteed by Morgan Stanley.
The Notes are not secured by any of our assets or any of the assets of our subsidiaries. As a result, the Notes are effectively subordinated to any secured indebtedness we or our subsidiaries have outstanding or that we or our subsidiaries may incur in the future
(or any indebtedness that is initially unsecured in respect of which we subsequently grant security) to the extent of the value of the assets securing such indebtedness. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness and the secured indebtedness of our subsidiaries may assert rights against the assets pledged to secure that indebtedness in order to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of the Notes.
The Notes are not obligations of Morgan Stanley nor are they guaranteed by Morgan Stanley and Morgan Stanley has no obligation to pay any amounts due on the Notes. The Company is not a subsidiary of or consolidated with Morgan Stanley. Furthermore, Morgan Stanley has no obligation, contractual or otherwise, to financially support us. Morgan Stanley has no history of financially supporting any of the MS BDCs on the MS Private Credit platform, even during periods of financial distress.
The Notes are subordinated structurally to the indebtedness and other liabilities of our subsidiaries.
The 2027 Notes and 2029 Notes are obligations exclusively of the Company and not of any of our subsidiaries. None of our subsidiaries is a guarantor of the 2027 Notes or the 2029 Notes and the 2027 Notes and the 2029 Notes are not required to be guaranteed by any subsidiaries we may acquire or create in the future. Although the 2025 Notes are guaranteed by certain of our subsidiaries, the 2025 Notes are not secured by any of the assets of our subsidiaries and are effectively subordinated to any secured indebtedness our subsidiaries have outstanding or that our subsidiaries may incur in the future.
As of December 31, 2024, approximately $0.9 billion of the indebtedness required to be consolidated on our balance sheet was held through subsidiary financing vehicles and/or secured by assets of the Company and its subsidiaries. Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of creditors, including trade creditors, and holders of preferred stock, if any, of our subsidiaries will have priority over our claims (and therefore the claims of our creditors, including holders of the Notes) with respect to the assets of such subsidiaries. Even if we were recognized as a creditor of one or more of our subsidiaries, our claims (and therefore the claims of our creditors, including the Notes) would still be effectively subordinated to any security interests in the assets of any such subsidiary and to any indebtedness or other liabilities of any such subsidiary senior to our claims. Consequently, the Notes are subordinated structurally to all existing indebtedness and other liabilities of any of our subsidiaries and the 2027 Notes and 2029 Notes are subordinated structurally to all indebtedness of any subsidiaries that we may in the future acquire or establish as financing vehicles or otherwise. All of the existing indebtedness of our subsidiaries is structurally senior to the Notes. In addition, our subsidiaries may incur substantial additional indebtedness in the future, all of which would be structurally senior to the 2027 Notes and 2029 Notes.
A downgrade, suspension or withdrawal of the credit rating assigned by a rating agency to us or the Notes, if any, could cause the liquidity or market value of the Notes to decline significantly.
Our credit ratings are an internal assessment by rating agencies of our ability to pay our debts when due. Consequently, real or anticipated changes in our credit ratings will generally affect the market value of the Notes or other debt securities we may issue. Our credit ratings, however, may not reflect the potential impact of risks related to market conditions generally or other factors discussed above on the market value of or trading market of our debt securities, if any. These credit ratings may not reflect the potential impact of risks relating to the structure or marketing of the Notes or an investment in other debt securities we may issue. Credit ratings are not a recommendation to buy, sell or hold any security, and may be revised or withdrawn at any time by the issuing organization in its sole discretion. We undertake no obligation to maintain our credit ratings or to advise any holders of the Notes of any changes in our credit ratings, except as may be required under the terms of any applicable indenture or other governing document, including the Note Purchase Agreement.
The Notes are rated by certain credit rating agencies. There can be no assurance that the respective credit ratings will remain for any given period of time or that such credit ratings will not be lowered or withdrawn entirely by the applicable ratings agency if in its judgment future circumstances relating to the basis of the credit rating, such as adverse changes in our business, financial condition and results of operations, so warrant.
An increase in market interest rates could result in a decrease in the value of the Notes.
The condition of the financial markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future, which could have an adverse effect on the market prices, if any, or values of the Notes. In general, as market interest rates rise, debt securities bearing interest at fixed rates of interest decline in value. Consequently, if an investor purchases notes bearing interest at fixed rates and market interest rates increase, the market prices, if any, or values of those notes may decline. We cannot predict the future level of market interest rates.
The Indentures governing the 2027 Notes and 2029 Notes contain limited protection for holders of such notes.
The Indentures governing the 2027 Notes and the 2029 Notes offer limited protection to holders of the such notes. The terms of the Indentures do not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a party to, a variety of corporate transactions, circumstances or events that could have an adverse impact on a holder’s investment in the 2027 Notes and 2029 Notes. In particular, the terms of the Indentures do not place any restrictions on our or our subsidiaries’ ability to:
•issue securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be equal in right of payment to the 2027 Notes and 2029 Notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to the 2027 Notes and 2029 Notes to the extent of the values of the assets securing such debt, (3) indebtedness of ours that is guaranteed by one or more of our subsidiaries and which therefore is structurally senior to the 2027 Notes and 2029 Notes and (4) securities, indebtedness or obligations issued or incurred by our subsidiaries that would be senior to our equity interests in our subsidiaries and therefore rank structurally senior to the 2027 Notes and 2029 Notes with respect to the assets of our subsidiaries, in each case other than an incurrence of indebtedness or other obligation that would cause a violation of Section 18(a)(1)(A) of the 1940 Act as modified by Section 61(a)(1) and (2) of the 1940 Act or any successor provisions, as such obligations may be amended or superseded, giving effect to any exemptive relief granted to us by the SEC;
•pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities ranking junior in right of payment to the 2027 Notes and 2029 Notes;
•sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets);
•enter into transactions with affiliates;
•create liens (including liens on the shares of our subsidiaries) or enter into sale and leaseback transactions;
•make investments; or
•create restrictions on the payment of dividends or other amounts to us from our subsidiaries.
In addition, the terms of the Indentures and the 2027 Notes and 2029 Notes do not protect holders of such notes in the event that we experience changes (including significant adverse changes) in our financial condition, results of operations or credit ratings, as they do not require that we or our subsidiaries adhere to any financial tests or ratios or specified levels of net worth, revenues, income, cash flow or liquidity other than certain events of default under the Indentures.
Our ability to recapitalize, incur additional debt and take a number of other actions are not limited by the terms of the 2027 Notes and 2029 Notes and may have important consequences for holders of such notes, including making it more difficult for us to satisfy our obligations with respect to such notes or negatively affecting the trading value of the 2027 Notes and 2029 Notes.
Other debt we issue or incur in the future could contain more protections for its holders than the Indentures, including additional covenants and events of default. The issuance or incurrence of any such debt with incremental protections could affect the market for and trading levels and prices of the 2027 Notes and 2029 Notes. The Indentures do not place any restrictions on the operations of Morgan Stanley or its subsidiaries.
The optional redemption provision for the Notes may materially adversely affect the return on the Notes.
The Notes are redeemable in whole or in part upon certain conditions at any time or from time to time at our option. We may choose to redeem the Notes at times when prevailing interest rates are lower than the interest rate paid on the Notes. In this circumstance, a holder of the Notes may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as the Notes being redeemed.
If an active trading market for the Unrestricted 2027 Notes and/or Unrestricted 2029 Notes does not develop or is not maintained, a noteholder may not be able to sell such notes.
The unrestricted 2027 Notes and unrestricted 2029 Notes have been registered for resale under the Securities Act. However, the restricted 2027 Notes, restricted 2029 Notes and the 2025 Notes have not been registered under the Securities Act and may only be offered or sold in transactions that are not subject to, or that are otherwise exempt from, the registration requirements of the Securities Act and applicable state securities laws or pursuant to an effective registration statement. Therefore, a holder of the restricted 2027 Notes, restricted 2029 Notes or the 2025 Notes may be required to bear the risk of its investment until the maturity, as applicable.
We cannot provide any assurances that an active trading market for any of the Notes will exist in the future or that holders will be able to sell their Notes. We do not currently intend to apply for listing of the Notes on any securities exchange or for quotation of the Notes on any automated dealer quotation system. Even if an active trading market does exist, the unrestricted 2027 Notes and unrestricted 2029 Notes may trade at a discount from their initial offering price depending on prevailing interest rates, the market for similar securities, our credit ratings, if any, general economic conditions, our financial condition, performance and prospects and other factors. To the extent an active trading market does not exist, the liquidity and trading price for the unrestricted 2027 Notes and unrestricted 2029 Notes may be harmed. Accordingly, a holder of the Notes may be required to bear the financial risk of an investment in the Notes for an indefinite period of time.
We may not be able to repurchase the Notes upon a Change of Control Repurchase Event.
We may not be able to repurchase the Notes upon a Change of Control Repurchase Event (as defined in the Indentures or the Note Purchase Agreement, as applicable) because we may not have sufficient funds. Upon a Change of Control Repurchase Event, holders
of the Notes may require us to repurchase for cash some or all of the Notes at a repurchase price equal to 100% of the aggregate principal amount of the Notes being repurchased, plus accrued and unpaid interest to, but not including, the repurchase date. Our failure to purchase such tendered Notes upon the occurrence of such Change of Control Repurchase Event would cause an event of default under the Indentures or the Note Purchase Agreement, as applicable, and a cross-default under the agreements governing certain of our other indebtedness, which may result in the acceleration of such indebtedness requiring us to repay that indebtedness immediately. If a Change of Control Repurchase Event were to occur, we may not have sufficient funds to repay any such accelerated indebtedness and/or to make the required repurchase of the Notes. For the avoidance of doubt, Morgan Stanley does not have any obligation to provide us with funding to repurchase the Notes upon a Change of Control Repurchase Event or otherwise.
General Risk Factors
We are operating in a period of capital markets volatility and economic uncertainty. The conditions have materially and adversely affected debt and equity capital markets in the United States, and any future volatility or instability in capital markets may have a negative impact on our business and operations.
In addition to the factors described above, other factors described herein that may affect market, economic and geopolitical conditions, and thereby adversely affect the Company including, without limitation, economic slowdown in the United States and internationally, changes in interest rates and/or a lack of availability of credit in the United States and internationally, commodity price volatility and changes in law and/or regulation, and uncertainty regarding government and regulatory policy. Any future market disruptions and/or illiquidity could have an adverse effect on our business, financial condition, results of operations and cash flows, as well as the businesses of our portfolio companies, and the broader financial and credit markets. The full impact of any such risks is uncertain and difficult to predict.
Capital markets volatility and instability have also occurred in the past and may occur in the future. For example, from 2008 to 2009, the global capital markets were unstable as evidenced by the lack of liquidity in the debt capital markets, significant write-offs in the financial services sector, the re-pricing of credit risk in the broadly syndicated credit market and the failure of major financial institutions. Despite actions of the U.S. federal government and various foreign governments, these events contributed to worsening general economic conditions that materially and adversely impacted the broader financial and credit markets and reduced the availability of debt and equity capital for the market as a whole and financial services firms in particular. There have been more recent periods of volatility and there can be no assurance that adverse market conditions will not repeat themselves in the future. Furthermore, uncertainty between the United States and other countries with respect to trade policies, treaties and tariffs, among other factors, have caused volatility in the global markets, and we cannot assure you that these market conditions will not continue or worsen in the future. Terrorist acts, acts of war, natural disasters, or disease outbreaks, pandemics or other public health crises may cause periods of market instability and volatility and may disrupt the operations of us and our portfolio companies for extended periods of time.
Moreover, the re-appearance of market conditions similar to those experienced from 2008 through 2009 for any substantial length of time or worsened market conditions, including as a result of U.S. government shutdowns or the perceived creditworthiness of the United States, could make it difficult for us to borrow money or to extend the maturity of or refinance any indebtedness we may have under similar terms and any failure to do so could have a material adverse effect on our business. The debt capital that will be available to us in the future, if any, may be at a higher cost and on less favorable terms and conditions than would currently be available. If we are unable to raise or refinance debt, stockholders may not benefit from the potential for increased returns on equity resulting from leverage and we may be limited in our ability to make new commitments or to fund existing commitments to our portfolio companies.
Given the periods of extreme volatility and dislocation in the capital markets from time to time, many BDCs have faced, and may in the future face, a challenging environment in which to raise or access capital. In addition, significant changes in the capital markets, including the extreme volatility and disruption over the past several years, has had, and may in the future have, a negative effect on asset valuations and on the potential for liquidity events. While most of our investments will not be publicly traded, applicable accounting standards require us to assume as part of our valuation process that our investments are sold in a principal market to market participants (even if we plan on holding an investment through to maturity). As a result, volatility in the capital markets can adversely affect the valuations of our investments. Further, the illiquidity of our investments may make it difficult for us to sell such investments to access capital if required. As a result, we could realize significantly less than the value at which we have recorded our investments if we were required to sell them for liquidity purposes. In addition, a prolonged period of market illiquidity may cause us to reduce the volume of loans and debt securities we originate and/or fund and adversely affect the value of our portfolio investments, which could have a material and adverse effect on our business, financial condition, results of operations and cash flows. An inability to raise or access capital could have a material adverse impact on our business, financial condition or results of operations.
New or modified laws or regulations governing our or Morgan Stanley’s operations may adversely affect our business.
We and certain of our portfolio companies are subject to regulation by laws at the U.S. federal, state and local levels. These laws and regulations, as well as their interpretation, may change from time to time, including as the result of interpretive guidance or other directives from the relevant government agencies charged with implementing those laws and regulations, and new laws, regulations and interpretations may also come into effect. For example, because a Morgan Stanley affiliate is acting as the Adviser and Morgan
Stanley has a 5% or greater voting investment in us, we are subject to the certain federal banking and financial requirements, including the BHCA, regulations of the Federal Reserve, and certain provisions of the Dodd-Frank Act. See “Regulation as a Business Development Company - Bank Holding Company Act and Dodd Frank and Volcker Rule Disclosure.” Because we are controlled by Morgan Stanley for purposes of the BHCA, we must generally comply with the investment and activity restrictions applicable to Morgan Stanley under the BHCA. Such restrictions may place certain limitations on our ability to engage in activities or make investments in companies. For instance, the BHCA permits a BHC as well as any non-bank affiliate of such BHC, to make investment representing less than 5% of any class of voting shares of another company so long as that investment is otherwise non-controlling under the BHCA. The BHCA also permits well-capitalized, well- managed BHCs that have elected to be treated as a FHC to engage in expanded “financial in nature” activities without prior approval of the Federal Reserve. Such financial in nature activities include bona fide merchant banking activities, so long as (i) the FHC holds its merchant banking investments only for a period of time sufficient to enable the sale or disposition thereof on a reasonable basis (generally no more than 10 years) and (ii) the FHC does not routinely manage or operate the companies in which it invests except as necessary or required to obtain a reasonable return on its investment. The BHCA does not, however, require Morgan Stanley to financially support us.
Similarly, the Volcker Rule generally restricts any banking entity (which includes Morgan Stanley and most affiliates of Morgan Stanley, including us as a BDC controlled by Morgan Stanley) from engaging in “proprietary trading” as well as from acquiring or retaining any “ownership interest” in a “covered fund”, in each case unless the investment or activity is conducted in accordance with an exclusion or exemption. The Volcker Rule also generally prohibits certain transactions between a banking entity and any of its affiliates, on the one hand, and a covered fund for which the banking entity or any of its affiliates serves, directly or indirectly, as the investment manager, investment adviser, or that the banking entity or any of its affiliates sponsors in connection with organizing and offering that fund (or with any other covered fund that is controlled by such fund, on the other hand. It is not certain how all aspects of the Volcker Rule will be interpreted and applied, or what the impact of the Volcker Rule will have on us. In addition, the restrictions and limitation on Morgan Stanley and us may change in the future as the Federal Reserve and other agencies consider whether and how to revise and apply the Volcker Rule. We believe that we may perform our activities and services without violation of applicable U.S. banking laws and regulations. However, it is possible that future changes or clarifications in the BHCA and Volcker Rule, as well as judicial or administrative decisions or interpretations of present of future laws or regulations, could restrict (or possibly prevent) our ability to continue to conduct our operations as currently contemplated. In such event, we, the Adviser and/or Morgan Stanley may agree to make certain amendments or changes to the extent necessary to permit the Adviser to continue to provide services to us, while enabling us to continue to achieve our purposes and objectives.
These regulations and any future legislative and regulatory proposals, as well as future interpretations of existing rules, that are directed at the financial services industry, including those that may be proposed or pending in the U.S. Congress, may negatively impact the operations, cash flows or financial condition of us or our portfolio companies, impose additional costs on us or our portfolio companies, intensify the regulatory supervision of us or our portfolio companies or otherwise adversely affect our business or the business of our portfolio companies. Laws that apply to us, either now or in the future, are often highly complex and may include licensing requirements. The licensing process can be lengthy and can be expected to subject us to increased regulatory oversight. Failure, even if unintentional, to comply fully with applicable laws may result in sanctions, fines or limitations on the ability of the Company or the Adviser to do business in the relevant jurisdiction or to procure required licenses in other jurisdictions, all of which could have a material adverse effect on us. In addition, if we do not comply with applicable laws and regulations, we could lose any licenses that we then hold for the conduct of our business and may be subject to civil fines and criminal penalties.
Additionally, changes to the laws and regulations governing our operations, including those associated with RICs and BDCs, may cause us to alter our investment strategy in order to avail ourselves of new or different opportunities, or to comply with additional restrictions on our investments or capital structure, or result in the imposition of corporate-level taxes on us. Such changes could result in material differences to our strategies and plans and may shift our investment focus from the areas of expertise of the Adviser to other types of investments in which the Adviser may have little or no expertise or experience. Any such changes, if they occur, could have a material adverse effect on our results of operations and the value of your investment. The Adviser currently acts pursuant to an exemption from registration as a commodity trading advisor with the CFTC. These requirements restrict the types of commodity investment strategies that the Adviser can pursue while remaining exempt, and if the Adviser were to seek other investment strategies that required it to register with the CFTC, that registration would increase their, and therefore our, costs. In addition, new legislation and any U.S. Treasury regulations, administrative interpretations or court decisions interpreting such legislation could significantly and negatively affect our ability to qualify for tax treatment as a RIC or the U.S. federal income tax consequences to us and our stockholders of such qualification, or could have other adverse consequences. Stockholders are urged to consult with their tax advisor regarding tax legislative, regulatory, or administrative developments and proposals and their potential effect on an investment in our securities.
In addition, certain regulations applicable to debt securitizations implementing credit risk retention requirements in effect in both the United States and in Europe may adversely affect or prevent us from entering into any future securitization transaction. These risk retention rules may cause an increase in our cost of funds under or may prevent us from completing any future securitization transactions. The U.S. risk retention rules require the sponsor (directly or through a majority-owned affiliate) of a debt securitization subject to such rules, such as collateralized loan obligations, in the absence of an exemption, to retain an economic interest in the credit risk of the assets being securitized. If, and to the extent that, we engage in securitization transactions that require the retention of
an economic interest, these rules would increase our financing costs in comparison to other types of financings and this increase in financing costs would ultimately be borne by our stockholders.
Over the last several years, there also has been an increase in regulatory attention to the extension of credit outside of the traditional banking sector, raising the possibility that some portion of the non-bank financial sector will be subject to new regulation. While it cannot be known at this time whether any regulation will be implemented or what form it will take, increased regulation of non-bank credit extension could negatively impact our operations, cash flows or financial condition, impose additional costs on us, intensify the regulatory supervision of us or otherwise adversely affect our business, financial condition and results of operations.
There is significant uncertainty with respect to legislation, regulation and government policy at the federal level, as well as the state and local levels. Recent events, including the 2024 U.S. presidential election, have created a climate of heightened uncertainty and introduced new and difficult-to-quantify macroeconomic and political risks with potentially far-reaching implications. To the extent the U.S. Congress or the presidential administration implements changes to U.S. policy, those changes may impact, among other things, the U.S. and global economy, international trade and relations, unemployment, immigration, corporate taxes, healthcare, the U.S. regulatory environment, inflation and other areas. Although we cannot predict the impact, if any, of these changes to our business, they could adversely affect our business, financial condition, operating results and cash flows. Until we know what policy changes are made and how those changes impact our business and the business of our competitors over the long term, we will not know if, overall, we will benefit from them or be negatively affected by them.
We are highly dependent on information systems, and systems failures could significantly disrupt our business, which may, in turn, negatively affect the value of shares of our Common Stock and our ability to pay distributions.
The operations of the Company, the Adviser, the Administrator and any third-party service provider to any of the foregoing are susceptible to risks from cybersecurity attacks and incidents due to reliance on the secure processing, storage and transmission of confidential and other information in the relevant computer systems and networks. In particular, cyber security incidents and cyber-attacks have been occurring globally at a more frequent and severe level and will likely continue to increase in frequency in the future. These attacks could involve gaining unauthorized access to information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption and result in disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our business relationships, any of which could have a material adverse effect on our business, financial condition and results of operations. We, the Adviser and the Administrator must each continuously monitor and innovate our cybersecurity to protect our technology and data from corruption or unauthorized access. In addition, due to the use of third-party vendors, agents, exchanges, clearing houses and other financial institutions and service providers, we, the Adviser and the Administrator could be adversely impacted if any of us are subject to a successful cyber-attack or other breach of our information.
Furthermore, in recent years cybersecurity risks for financial institutions have significantly increased in part because of the proliferation of new technologies, the use of the internet, mobile telecommunications and cloud technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists and other external extremist parties, including foreign state actors in some circumstances as a means to promote political ends. Global events and geopolitical instability may lead to increased nation state targeting of financial institutions in the U.S. and abroad. Any of these parties may also attempt to fraudulently induce employees, customers, clients, vendors, or other third parties or users of the Company, the Adviser, the Administrator and their affiliates’ systems to disclose sensitive information in order to gain access to such parties’ data or that of their employees or clients. Cybersecurity risks may also derive from human error, fraud or malice on the part of the Adviser or the Administrator and their affiliates’ employees or third parties, or may result from software bugs, server malfunctions, software or hardware failure or other accidental technological failure. For example, human error has led to the loss of Morgan Stanley’s physical data-bearing devices in the past. These risks may be heightened by several factors, including remote work, reliance on new technologies (such as generative artificial intelligence) or as a result of the integration of acquisitions and other strategic initiatives that may subject us to new technology, customers or third-party providers. In addition, third parties with whom we do business or share information, and each of their service providers, our regulators and the third parties with whom our customers and clients share information used for authentication, may also be sources of cybersecurity and information security risks, particularly where activities of customers are beyond our security and control systems. There is no guarantee that the measures we take will provide absolute security or recoverability given that the techniques used in cyberattacks are complex, frequently change and are difficult to anticipate.
Like other financial services firms, Morgan Stanley, its third party-providers and its clients continue to be the subject of unauthorized access attacks, mishandling or misuse of information, computer viruses or malware, cyber attacks designed to obtain confidential information, destroy data, disrupt or degrade service, sabotage systems or networks or cause other damage, denial of service attacks, data breaches, social engineering attacks, phishing attacks and other events, and there can be no assurance that such unauthorized access, mishandling or misuse of information, or cyber incidents will not occur in the future, and they could occur more frequently and on a more significant scale. Given Morgan Stanley’s global footprint and the high volume of transactions it processes, the large number of clients, partners, vendors and counterparties with which it does business, and the increasing sophistication of cyber attacks, a cyber attack, information or security breaches could occur and persist for an extended period of time without detection.
Although we, the Adviser, the Administrator and Morgan Stanley have developed protocols, processes, internal controls and other protective measures to help mitigate cybersecurity risks and cyber intrusions, these measures, as well as our increased awareness of the nature and extent of the risk of a cyber incident, may be ineffective and do not guarantee that a cyber incident will not occur or that our financial results, operations or confidential information will not be negatively impacted by such an incident. If any of the foregoing events occur, the confidential and other information of the Company, the Adviser, and the Administrator could be compromised. Such events could also cause interruptions or malfunctions in the operations of the Company, the Adviser or the Administrator, and in particular the Adviser’s investment activities on our behalf and the provision of administrative services to us by the Administrator. In addition, the Company, the Adviser, the Administrator or our portfolio companies could be required to make a significant investment to remedy the effects of any cybersecurity incident, harm to their reputations, legal claims that they and their respective affiliates may be subjected to, regulatory action or enforcement arising out of applicable privacy and other laws, adverse publicity, and other events that may affect their business and financial performance. The increased use of mobile and cloud technologies can heighten these and other operational risks. We, the Adviser and the Administrator currently or in the future are expected to routinely transmit and receive personal, confidential and proprietary information by email and other electronic means. We, the Adviser and the Administrator have discussed and worked with clients, vendors, service providers, counterparties and other third parties to develop secure transmission capabilities and protect against cyber-attacks. However, we, the Adviser and the Administrator may not be able to ensure secure capabilities with all of our clients, vendors, service providers, counterparties and other third parties to protect the confidentiality of the information.
The systems and technology resources used by us, our Adviser, our Administrator and our and their respective affiliates could be strained by extended periods of remote working by our Adviser, our Administrator and their affiliate’s employees and such extended remote working could introduce operational risks, including heightened cybersecurity risk. Remote working environments may be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts.
While many of our agreements with partners and third-party vendors include indemnification provisions, we may not be able to recover sufficiently, or at all, under such provisions to adequately offset any losses we may incur. In addition, although we maintain insurance coverage that may, subject to policy terms and conditions, cover certain aspects of cyber and information security risks, such insurance coverage may be insufficient to cover any or all losses we may incur, and we cannot be sure that such insurance will continue to be available to us on commercially reasonable terms, or at all, or that our insurers will not deny coverage as to any future claim.
In addition, cybersecurity continues to be a key priority for regulators around the world, and some jurisdictions have enacted laws requiring companies to notify individuals or the general investing public of data security breaches involving certain types of personal data, including the SEC, which, on July 26, 2023, adopted amendments requiring the prompt public disclosure of certain cybersecurity breaches. If we fail to comply with the relevant laws and regulations, we could suffer financial losses, a disruption of our business, liability to investors, regulatory intervention or reputational damage.
We, the Advisor and the Administrator currently or in the future are expected to routinely transmit and receive personal, confidential and proprietary information by email and other electronic means.
We, the Adviser and the Administrator have discussed and worked with clients, vendors, service providers, counterparties and other third parties to develop secure transmission capabilities and protect against cyber-attacks. However, we, the Adviser and the Administrator may not be able to ensure secure capabilities with all of our clients, vendors, service providers, counterparties and other third parties to protect the confidentiality of the information.
The systems and technology resources used by us, our Adviser, our Administrator and our and their respective affiliates could be strained by extended periods of remote working by our Adviser, our Administrator and their affiliate’s employees and such extended remote working could introduce operational risks, including heightened cybersecurity risk. Remote working environments may be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts. In addition, cybersecurity continues to be a key priority for regulators around the world, and some jurisdictions have enacted laws requiring companies to notify individuals or the general investing public of data security breaches involving certain types of personal data, including the SEC, which, on July 26, 2023, adopted amendments requiring the prompt public disclosure of certain cybersecurity breaches. If we fail to comply with the relevant laws and regulations, we could suffer financial losses, a disruption of our business, liability to investors, regulatory intervention or reputational damage.
We are subject to risks associated with artificial intelligence and machine learning technology
Artificial intelligence, including machine learning and similar tools and technologies that collect, aggregate, analyze or generate data or other materials, or collectively, AI, and its current and potential future applications including in the private investment and financial industries, as well as the legal and regulatory frameworks within which AI operates, continue to rapidly evolve.
Recent technological advances in AI pose risks to the Company, the Adviser, and our portfolio investments. The Company and our portfolio investments could also be exposed to the risks of AI if third-party service providers or any counterparties, whether or not known to the Company, also use AI in their business activities. We and our portfolio companies may not be in a position to control the use of AI technology in third-party products or services.
Use of AI could include the input of confidential information in contravention of applicable policies, contractual or other obligations or restrictions, resulting in such confidential information becoming part accessible by other third-party AI applications and users. While the Adviser does not currently use AI to make investment recommendations, the use of AI could also exacerbate or create new and unpredictable risks to our business, the Adviser’s business, and the business of our portfolio companies, including by potentially significantly disrupting the markets in which we and our portfolio companies operate or subjecting us, our portfolio companies and the Adviser to increased competition and regulation, which could materially and adversely affect business, financial condition or results of operations of us, our portfolio companies and the Adviser. In addition, the use of AI by bad actors could heighten the sophistication and effectiveness of cyber and security attacks experienced by our portfolio companies and the Adviser.
Independent of its context of use, AI technology is generally highly reliant on the collection and analysis of large amounts of data, and it is not possible or practicable to incorporate all relevant data into the model that AI technology utilizes to operate. Certain data in such models will inevitably contain a degree of inaccuracy and error-potentially materially so-and could otherwise be inadequate or flawed, which would be likely to degrade the effectiveness of AI technology. To the extent that we or our portfolio investments are exposed to the risks of AI use, any such inaccuracies or errors could have adverse impacts on the Company or our investments.
AI technology and its applications, including in the private investment and financial sectors, continue to develop rapidly, and it is impossible to predict the future risks that may arise from such developments.
Terrorist attacks, acts of war, natural disasters, outbreaks or pandemics, may impact our portfolio companies and our Adviser and harm our business, operating results and financial condition.
Terrorist acts, acts of war, natural disasters, disease outbreaks, pandemics or other similar events may disrupt our operations, as well as the operations of our portfolio companies and our Adviser. Such acts have created, and continue to create, economic and political uncertainties and have contributed to recent global economic instability. For example, many countries have experienced outbreaks of infectious illnesses in recent decades, including polio, swine flu, avian influenza, SARS, coronaviruses and the monkeypox virus.
The conflict between Russia and Ukraine and in the Middle East, and resulting market volatility, could also adversely affect the Company’s business, operating results, and financial condition. The extent and duration or escalation of such conflicts, resulting sanctions and resulting future market disruptions are impossible to predict, but could be significant. Any disruptions resulting from such conflicts and any future conflict (including cyberattacks, espionage or the use or threatened use of nuclear weapons) or resulting from actual or threatened responses to such actions could cause disruptions to any of our portfolio companies located in Europe or the Middle East or that have substantial business relationships with companies in affected regions. It is not possible to predict the duration or extent of longer-term consequences of these conflicts, which could include further sanctions, retaliatory and escalating measures, embargoes, regional instability, geopolitical shifts and adverse effects on or involving macroeconomic conditions, the energy sector, supply chains, inflation, security conditions, currency exchange rates and financial markets around the globe. Any such market disruptions could affect our portfolio companies’ operations and, as a result, could have a material adverse effect on our business, financial condition and results of operations.
Market volatility has had a material adverse impact on local economies in the affected jurisdictions and also on the global economy, as cross border commercial activity and market sentiment continue to be impacted by such events. In addition to these and any future developments potentially having adverse consequences for certain portfolio companies and other issuers in or through which we may invest and the value of our investments therein, the operations of the Adviser (including those relating to us) have been, and could continue to be, adversely impacted. Any of the foregoing events could materially and adversely affect our ability to source, manage and divest our investments and our ability to fulfill our investment objectives. Similar consequences could arise with respect to other comparable infectious diseases.
The extent to which any disease outbreaks or health pandemics may negatively affect our and our portfolio companies’ operating results, or the duration of any potential business or supply-chain disruption, is uncertain. These potential impacts, while uncertain, could adversely affect our operating results and the operating results of the portfolio companies in which we invest. There is a risk that any future disease outbreaks or health pandemics (including a recurrence of the Coronavirus) would impact our ability to achieve our investment objectives. Further, if a future pandemic occurs during a period when our investments are maturing, we may not be able to realize our investments within the Company’s term, or at all. In addition, future terrorist activities, military or security operations, natural disasters, disease outbreaks, pandemics or other similar events could weaken the domestic/global economies and create additional uncertainties, which may negatively impact our portfolio companies and, in turn, could have a material adverse impact on our business, operating results and financial condition.
We may be the target of litigation.
We may be the target of securities litigation in the future, particularly if the value of shares of our Common Stock fluctuates significantly. We could also generally be subject to litigation, including derivative actions by our stockholders. Any litigation could result in substantial costs and divert management’s attention and resources from our business and cause a material adverse effect on our business, financial condition and results of operations.
Our Compliance with Section 404 of the Sarbanes-Oxley Act involves significant expenditures, and non-compliance with Section 404 of the Sarbanes-Oxley Act would adversely affect us and the market price of our common stock.
Under current SEC rules, we are required to report on our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act and related rules and regulations of the SEC. As such, we are required to review on an annual basis our internal control over financial reporting, and on a quarterly and annual basis to evaluate and disclose changes in our internal control over financial reporting. As a result, we incur expenses that could negatively impact our financial performance and our ability to make distributions. This process also results in a diversion of management’s time and attention. We cannot ensure that our evaluation, testing and remediation process is effective or that our internal control over financial reporting will be effective. In the event that we are unable to maintain compliance with Section 404 of the Sarbanes-Oxley Act and related rules, we and the market price of our securities would be adversely affected.
We and our portfolio companies may maintain cash balances at financial institutions that exceed federally insured limits with the
FDIC and may otherwise be materially affected by adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties.
Cash held by us and by our portfolio companies in non-interest-bearing and interest-bearing operating accounts may exceed the FDIC insurance limits. If such banking institutions were to fail, we or our portfolio companies could lose all or a portion of those amounts held in excess of such FDIC insurance limitations. In addition, actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems, which could adversely affect our and our portfolio companies’ business, financial condition, results of operations, or prospects.
Although we assess our and our portfolio companies’ banking relationships as we believe necessary or appropriate, our and our portfolio companies’ access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our respective current and projected future business operations could be significantly impaired by factors that affect us or our portfolio companies, the financial institutions with which we, or our portfolio companies have arrangements directly, or the financial services industry or economy in general. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry. These factors could involve financial institutions or financial services industry companies with which we or our portfolio companies have financial or business relationships, but could also include factors involving financial markets or the financial services industry generally. In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us or our portfolio companies to acquire financing on acceptable terms or at all.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
None.

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ITEM 2. PROPERTIES
Item 2. Properties
Our headquarters are located at 1585 Broadway, New York, NY 10036. We do not own any real estate.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
The Company, the Adviser and the Administrator may become party to certain lawsuits in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. Each of the Company, the Adviser and the Administrator is not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against the Company.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
PART II.

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities (dollar amounts in thousands, except per share amounts)
Market Information
Our Common Stock began trading on the NYSE on January 24, 2024 under the symbol “MSDL” in connection with the IPO. Shares of BDCs may trade at a market price that is less than the value of the net assets attributable to those shares. The possibility that our shares of Common Stock will trade at a discount from net asset value per share or at premiums that are unsustainable over the long term are separate and distinct from the risk that our net asset value per share will decrease. It is not possible to predict whether our Common Stock will trade at, above, or below net asset value per share. See “Item 1A. Risk Factors-Risks Related to an Investment in Our Common Stock.” On February 26, 2025, the last reported closing sales price of our Common Stock on the NYSE was $20.75 per share, which represented a discount of approximately 0.3% to net asset value per share reported by us as of December 31, 2024.
Price Range of Common Stock
The following table sets forth the net asset value per share of our Common Stock, the range of high and low closing sales prices of our common stock reported on the NYSE, the closing sales price as a premium (discount) to net asset value and the dividends declared by us in each fiscal quarter since we began trading on the NYSE.
Closing Sales Price
Period NAV(1)
High Low Premium
of High
Sales
Price(2)
Premium
(Discount) of
Low Sales
Price to
NAV Dividends
and
Distributions
Declared(3)
Fiscal year ending December 31, 2024
Fourth quarter $ 20.81 $ 21.39 $ 19.56 2.8 % (6.0) % $ 0.50
Third quarter $ 20.83 $ 23.47 $ 19.33 12.7 % (7.2) % $ 0.50
Second quarter $ 20.83 $ 24.13 $ 20.87 15.8 % 0.2 % $ 0.50
First quarter $ 20.67 $ 22.53 $ 19.63 9.0 % (5.0) % $ 0.70 (4)(5)
Fiscal year ending December 31, 2023
Fourth quarter $ 20.67 N/A N/A N/A N/A $ 0.60
Third quarter $ 20.57 N/A N/A N/A N/A $ 0.60
Second quarter $ 20.15 N/A N/A N/A N/A $ 0.57
First quarter $ 19.93 N/A N/A N/A N/A $ 0.50
(1) Net Asset Value, or NAV, per share is determined as of the last day in the relevant quarter and therefore may not reflect the NAV per share on the date of the high and low closing sales prices. The NAVs shown are based on outstanding shares at the end of each period.
(2) Calculated as of the respective high or low closing sales price divided by the quarter-end NAV.
(3) Represents the dividend or distribution declared in the relevant quarter.
(4) Includes a special distribution of $0.10 per share payable on October 25, 2024 to holders of record of common stock as of August 5, 2024.
(5) Includes a special distribution of $0.10 per share payable on January 24, 2025 to holders of record of common stock as of November 4, 2024.
No shares of our Common Stock were publicly traded on the NYSE prior to January 24, 2024.
Holders
As of February 26, 2025, we had 31 stockholders of record, which did not include stockholders for whom shares are held in "nominee" or "street name."
Distribution Policy
To the extent that we have income available, we intend to make quarterly distributions to our stockholders. We have elected to be taxed as a RIC under Subchapter M of the Code. To maintain our RIC tax status, we intend to distribute at least 90% of our ICTI (as defined by the Code, which generally includes net ordinary income and net short-term taxable gains) to our stockholders in respect of each taxable year and to distribute net capital gains (that is, net long-term capital gains in excess of net short-term capital losses), if any, at least annually out of the assets legally available for such distributions as well as satisfy other applicable requirements under the Code. See “Item 1. Business-Certain Material U.S. Federal Income Tax Considerations.”
We cannot assure you that we will achieve results that will permit us to pay any cash distributions, and we will be prohibited from making distributions if doing so would cause us to fail to maintain the asset coverage ratios stipulated by the 1940 Act.
Dividend Reinvestment Plan
Unless our stockholders elect to receive their distribution in cash, we intend to make such distributions in additional shares of our common stock under our DRIP. See “Item 1. Business-Dividend Reinvestment Plan.”
The following table summarizes our distributions declared and payable for the years ended December 31, 2024 and December 31, 2023, respectively:
Date Declared Record Date Payment Date Per Share Amount Shares(1)
For the Year Ended December 31, 2024
February 29, 2024 March 29, 2024 April 25, 2024 $ 0.50 512,519
May 08, 2024 June 28, 2024 July 25, 2024 0.50 553,637 (2)
January 11, 2024 August 05, 2024 October 25, 2024 0.10 111,159 (2)(3)
August 06, 2024 September 30, 2024 October 25, 2024 0.50 546,673 (2)
January 11, 2024 November 04, 2024 January 24, 2025 0.10 101,485 (2)(3)
November 04, 2024 December 31, 2024 January 24, 2025 0.50 473,635 (2)
Total Distributions $ 2.20 2,299,108
Date Declared Record Date Payment Date Per Share Amount Shares
For the Year Ended December 31, 2023
March 28, 2023 March 28, 2023 April 25, 2023 $ 0.50 482,721
June 27, 2023 June 27, 2023 July 25, 2023 0.57 554,001 (4)
September 26, 2023 September 26, 2023 October 25, 2023 0.60 579,388 (5)
December 28, 2023 December 28, 2023 January 25, 2024 0.60 615,660 (5)
Total Distributions $ 2.27 2,231,770
(1) In connection with the distributions with payment dates on January 25, 2024 and January 25, 2023, 615,660 and 445,235 DRIP shares were issued, respectively.
(2) In accordance with the Company’s DRIP, shares were purchased in the open market.
(3) Represents a special distribution declared by the Board on January 11, 2024.
(4) Includes a supplemental distribution of $0.07.
(5) Includes a supplemental distribution of $0.10.
Share Repurchase Plan
On January 25, 2024, we entered into the Company 10b5-1 Plan, to acquire up to $100 million in the aggregate of our Common Stock at prices below our net asset value per share over a specified period, in accordance with the guidelines specified in Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934, as amended.
The following table summarizes the shares repurchased under the Company 10b5-1 Plan during the year ended December 31, 2024:
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions)
July 1, 2024 - July 31, 2024 39,344 $ 19.99 39,344 $ 99.2
August 1, 2024 - August 31, 2024 217,796 20.10 217,796 94.8
September 1, 2024 - September 30, 2024 172,513 20.04 172,513 91.4
October 1, 2024 - October 31, 2024 187,607 19.99 187,607 87.6
November 1, 2024 - November 30, 2024 307,336 20.34 307,336 81.9
December 1, 2024 - December 31, 2024 - - - 81.9
Total Repurchases 924,596 924,596
No shares were repurchased under our 10b5-1 Plan during the six months ended June 30, 2024.
No shares were repurchased under our 10b5-1 Plan during the year ended December 31, 2023.
Stock Performance Graph
This graph compares the stockholder return on our Common Stock from January 24, 2024 (the date our common stock commenced trading on the NYSE) to December 31, 2024, with that of the Standard & Poor’s 500 Stock Index, Standard & Poor’s 500 Financials Index, Standard & Poor’s BDC Index and Morningstar LSTA Leveraged Loan Index. This graph assumes that on January 24, 2024, $100 was invested in our Common Stock, the Standard & Poor’s 500 Stock Index, the Standard & Poor’s 500 Financials Index, the Standard & Poor’s BDC Index, and the Morningstar LSTA Leveraged Loan Index. The graph also assumes the reinvestment of all cash dividends prior to any tax effect. The graph and other information furnished under this Part II Item 5 of this Annual Report on Form 10-K shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C under, or to the liabilities of Section 18 of, the Exchange Act. The stock price performance included in the below graph is not necessarily indicative of future stock performance.
Fees and Expenses
The following table is being provided to update, as of December 31, 2024, certain information in our registration statement on Form N-2 (File No. 333-283477). The following table is intended to assist you in understanding the fees and expenses that an investor in shares of our Common Stock will bear directly or indirectly. We caution you that some of the percentages indicated in the table below are estimates and may vary. The following table should not be considered a representation of our future expenses. Actual expenses may be greater or less than shown. Except where the context suggests otherwise, whenever this Report contains a reference to fees or expenses paid by “us” or that “we” will pay fees or expenses, our stockholders will indirectly bear such fees or expenses as our investors.
Stockholder transaction expenses (as a percentage of offering price):
Sales load - % (1)
Offering expenses - % (2)
Dividend reinvestment plan expenses None % (3)
Total stockholder transaction expenses: - %
Annual expenses (as a percentage of net assets attributable to common stock):
Base management fee 1.90 % (4)
Incentive fees 2.34 % (5)
Interest payments on borrowed funds 6.60 % (6)
Other expenses 0.54 % (7)
Total annual expenses: 11.38 %
(1) In the event that the securities to which any applicable prospectus relates are sold to or through underwriters or agents, a corresponding prospectus supplement will disclose the applicable sales load (underwriting discount or commission).
(2) The related prospectus supplement will disclose the estimated amount of total offering expenses (which may include offering expenses borne by third parties on our behalf), the offering price and the offering expenses borne by us as a percentage of the offering price.
(3) The expenses of the dividend reinvestment plan are included in “other expenses” in the table above. For additional information, see “-Dividend Reinvestment Plan.”
(4) Our base management fee is calculated at an annual rate of 1.0% of our average gross assets at the end of the two most recently completed calendar quarters, including assets purchased with borrowed funds or other forms of leverage but excluding cash and cash equivalents. The base management fee reflected in the table above is based on actual amounts incurred under the Investment Advisory Agreement for the fiscal year ended December 31, 2024 at a rate of 1.0%. The Investment Adviser has agreed to waive its right to receive the base management fee in excess of 0.75% the average value of the Company’s gross assets at the end of the two most recently completed calendar quarters for the Waiver Period. For the avoidance of doubt, the fee waiver is not reflected in the table above. For purposes of this table, the SEC requires the base management fee to be calculated by determining the ratio that the base management fee bears to our net assets attributable to Common Stock rather than our gross assets as set forth in the Investment Advisory Agreement. See “Part I, Item 1. Business-Investment Advisory Agreement-Base Management Fee.”
(5) Our incentive fee consists of two parts. The first part is determined and paid quarterly based on our pre-incentive fee net investment income and the second part is determined and payable in arrears based on net capital gains as of the end of each calendar year or upon termination of the Investment Advisory Agreement. The table reflects each incentive fee calculated at a rate of 17.5% based on actual amounts incurred under the Investment Advisory Agreement for the fiscal year ended December 31, 2024. Similar to the waiver referenced in footnote (4) above, the Adviser has agreed to waive its right to receive each component of the incentive fee above 15% during the Waiver Period. This fee waiver is not reflected in the table above. See “Part I, Item 1. Business-Investment Advisory Agreement-Incentive Fee.”
(6) Interest payments on borrowed funds represents an estimate of our annualized interest expense based on our actual interest and credit facility expenses incurred for the fiscal year ended December 31, 2024, which includes the impact of interest rate swaps. For the fiscal year ended December 31, 2024, our average borrowings outstanding was $1,681.4 million and our weighted average effective interest rate for total debt outstanding was 6.90%. We may borrow additional funds from time to time to make investments to the extent we determine that the economic situation is conducive to doing so. We may also issue preferred stock, subject to our compliance with applicable requirements under the 1940 Act.
(7) “Other expenses” includes estimated overhead expenses, including payments under the Administration Agreement with our Administrator, and is based on actual amounts incurred during the year ended December 31, 2024. See “Part I, Item 1. Business-Administration Agreement.”
Example
The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our Common Stock. In calculating the following expense amounts, we have assumed that our annual operating expenses remain at the levels set forth in the table above, except for the incentive fee based on income. This example and the expenses in the table above should not be considered a representation of our future expenses, and actual expenses (including the cost of debt, if any, and other expenses) may be greater or less than those shown.
1 year 3 years 5 years 10 years
You would pay the following expenses on a $1,000 common stock investment, assuming a 5% annual return (none of which is subject to the incentive fee based on capital gains)(1)
$ 89 $ 255 $ 409 $ 741
You would pay the following expenses on a $1,000 common stock investment, assuming a 5% annual return resulting entirely from net realized capital gains (all of which is subject to the incentive fee based on capital gains)(2)
$ 97 $ 276 $ 439 $ 780
(1) Assumes that we will not realize any capital gains computed net of all realized capital losses and unrealized capital depreciation.
(2) Assumes no unrealized capital depreciation and a 5% annual return resulting entirely from net realized capital gains and not otherwise deferrable under the terms of the Investment Advisory Agreement and therefore subject to the incentive fee based on capital gains. Because our investment strategy involves investments that generate primarily current income, we believe that a 5% annual return resulting entirely from net realized capital gains is unlikely.
The foregoing table is to assist you in understanding the various costs and expenses that an investor in our common stock will bear directly or indirectly. While the example assumes, as required by the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%. The incentive fee under the Investment Advisory Agreement, which, assuming a 5% annual return, would either not be payable or have an immaterial impact on the expense amounts shown above, is not included in the example. Under our Investment Advisory Agreement, no incentive fee would be payable if we have a 5% annual return. If we achieve sufficient returns on our investments, including through the realization of capital gains, to trigger an incentive fee of a material amount, our expenses, and returns to our investors, would be higher. The example assumes that all dividends and other distributions are reinvested at net asset value. Under certain circumstances, reinvestment of dividends and other distributions under our dividend reinvestment plan may occur at a price per share that differs from net asset value. See “-Dividend Reinvestment Plan” for more information.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. [Reserved]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollar amounts in thousands, except per share amounts, unless otherwise indicated)
The discussion and analysis contained in this section refers to our financial condition, results of operations and cash flows. The information contained in this section should be read in conjunction with the consolidated financial statements and notes thereto in Part II, Item 8 of this Form 10-K, “Consolidated Financial Statements and Supplementary Data.” This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to those described in Part I, Item 1A of this Form 10-K, “Risk Factors.” Our actual results could differ materially from those anticipated by such forward-looking
information due to factors discussed under “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” appearing elsewhere in this Form 10-K.
OVERVIEW
We are a non-diversified, externally managed specialty finance company focused on lending to middle-market companies. We have elected to be regulated as a BDC under the 1940 Act. In addition, for U.S. federal income tax purposes, we have elected to be treated, and intend to comply with the requirements to qualify annually, as a RIC under Subchapter M of the Code. We are classified as a non-diversified investment company within the meaning of the 1940 Act, which means that we are not limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer. We are externally managed by our Adviser, an indirect, wholly owned subsidiary of Morgan Stanley. We are not a subsidiary of, or consolidated with, Morgan Stanley.
Our investment objective is to achieve attractive risk-adjusted returns via current income and, to a lesser extent, capital appreciation by investing primarily in directly originated senior secured term loans issued by U.S. middle-market companies in which private equity sponsors have a controlling equity stake in the portfolio company. For the purposes of this Report, “middle-market companies” refers to companies that, in general, generate annual EBITDA in the range of approximately $15 million to $200 million, although not all of our portfolio companies will meet this criterion.
We invest primarily in directly originated senior secured term loans including first lien senior secured term loans (including unitranche loans) and second lien senior secured term loans, with the balance of our investments expected to be in higher-yielding assets such as mezzanine debt, unsecured debt, equity investments and other opportunistic asset purchases. Typical middle-market senior loans may be issued by middle-market companies in the context of LBOs, acquisitions, debt refinancings, recapitalizations, and other similar transactions. We generally expect our debt investments to have a stated term of five to eight years and typically bear interest at a floating rate usually determined on the basis of a benchmark (such as SOFR).
We generate revenues primarily in the form of interest income from investments we hold. In addition, we generate income from dividends or distributions of income on any direct equity investments, capital gains on the sale of loans and equity investments and various other loan origination and other fees, including commitment, origination, amendment, structuring, syndication or due diligence fees, fees for providing managerial assistance and consulting fees.
Pursuant to the Order, we are able to enter into certain negotiated co-investment transactions alongside certain Regulated Funds and Affiliated Funds (each as defined in the Order) in a manner consistent with our investment objective, positions, policies, strategies, and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with the Order. Pursuant to the Order, we are permitted to co-invest with our affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) of our eligible directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching in respect of us or our stockholders on the part of any person concerned, and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies.
KEY COMPONENTS OF OUR RESULTS OF OPERATIONS
Investments
Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debt available to middle-market companies, the general economic environment and the competitive environment for the type of investments we make.
Revenue
We generate revenue primarily in the form of interest income on debt investments we hold. In addition, we generate income from dividends or distributions of income on direct equity investments, capital gains on the sales of loans and equity securities and various loan origination and other fees. Our debt investments generally have a stated term of five to eight years and typically bear interest at a floating rate usually determined on the basis of a benchmark such as SOFR. Interest on these debt investments is generally paid quarterly. In some instances, we receive payments on our debt investments based on scheduled amortization of the outstanding balances. In addition, we may receive repayments of some of our debt investments prior to their scheduled maturity date. The frequency or volume of these repayments fluctuates significantly from period to period. Our portfolio activity also reflects the proceeds of sales of securities.
We may also generate revenue in the form of commitment, origination, amendment, structuring, syndication or due diligence fees, fees for providing managerial assistance and consulting fees.
Expenses
Our primary operating expenses include the payment of: (i) investment advisory fees, including base management fees and incentive fees, to our Adviser pursuant to the Investment Advisory Agreement; (ii) costs and other expenses and our allocable portion of overhead incurred by our Administrator in performing its administrative obligations under the Administration Agreement between us and the Administrator; and (iii) other operating expenses as detailed below:
•costs of any other offerings of our Common Stock and other securities;
•calculating individual asset values and our net asset value (including the cost and expenses of any third-party valuation services);
•out of pocket expenses, including travel, entertainment, lodging, and meal expenses, incurred by the Investment Adviser, or members of its investment team or payable to third parties, in evaluating, developing, negotiating, structuring and performing due diligence on prospective portfolio companies (including, without limitation, any reverse termination fees and any liquidated damage and any costs related to broken deals) and monitoring actual portfolio companies and, if necessary, enforcing our rights;
•base management fee and any incentive fees payable under the Investment Advisory Agreement;
•certain costs and expenses relating to distributions paid by us;
•administration fees payable under the Administration Agreement and any sub-administration agreements, including related expenses;
•arrangement, debt service and other costs of borrowings, senior securities or other financing arrangements;
•the allocated costs incurred by the Investment Adviser in providing managerial assistance to those portfolio companies that request it;
•amounts payable to third parties relating to, or associated with, making or holding investments;
•the costs associated with subscriptions to data service, research-related subscriptions and expenses and quotation equipment and services used in making or holding investments;
•transfer agent and custodial fees;
•costs of derivatives and hedging;
•commissions and other compensation payable to brokers or dealers;
•any stock exchange listing fees and fees payable to rating agencies;
•cost of effecting any sales and repurchases of our Common Stock and other securities;
•federal and state registration fees;
•U.S. federal, state and local taxes, including any excise taxes;
•independent director fees and expenses;
•costs of preparing consolidated financial statements and maintaining books and records, costs of preparing tax returns, costs of Sarbanes-Oxley Act compliance and attestation and costs of filing reports or other documents with the SEC (or other regulatory bodies), and other reporting and compliance costs, including registration and listing fees, and the compensation of professionals responsible for the preparation or review of the foregoing;
•the costs of any reports, proxy statements or other notices to our stockholders (including printing and mailing costs), the costs of any stockholders’ meetings, and costs and expenses of preparation for the foregoing and related matters;
•the costs of specialty and custom software for monitoring risk, compliance and overall investments;
•fees and expenses associated with marketing efforts;
•any fidelity bond required by applicable law;
•any necessary insurance premiums;
•any extraordinary expenses (such as litigation or indemnification payments or amounts payable pursuant to any agreement to provide indemnification entered into by the Company);
•direct fees and expenses associated with independent audits, agency, consulting and legal costs;
•cost of winding up; and
•all other expenses incurred by either the Administrator or us in connection with administering our business, including payments under the Administration Agreement based upon our allocable portion of the compensation paid to our Chief Financial Officer and Chief Compliance Officer and reimbursing third-party expenses incurred by the Administrator in carrying out its administrative services including, but not limited to, the fees and expenses associated with performing compliance functions.
We reimburse the Administrator or its affiliates for amounts paid or costs borne that properly constitute Company expenses as set forth in the Administration Agreement or otherwise. We expect our general and administrative expenses to be relatively stable or to decline as a percentage of total assets during periods of asset growth and to increase during periods of asset declines.
PORTFOLIO AND INVESTMENT ACTIVITY
The composition of our portfolio is presented below:
December 31, 2024 December 31, 2023(1)
Cost Fair Value % of Total Investments at Fair Value Cost Fair Value % of Total Investments at Fair Value
First Lien Debt $ 3,669,886 $ 3,654,538 96.5 % $ 3,027,413 $ 3,004,544 94.1 %
Second Lien Debt 78,803 69,367 1.8 146,014 132,415 4.1
Other Debt Investments 9,755 9,198 0.2 3,410 2,064 0.1
Equity 54,683 58,391 1.5 49,939 54,538 1.7
Total $ 3,813,127 $ 3,791,494 100.0 % $ 3,226,776 $ 3,193,561 100.0 %
(1) We reclassified certain investment composition groupings by breaking out Other Securities into Other Debt Investments and Equity. These reclassifications had no impact on the Consolidated Statement of Assets and Liabilities as of December 31, 2023.
Our debt portfolio displayed the following characteristics of each of our investments(1)(2) unless otherwise noted:
As of
December 31, 2024 December 31, 2023
Number of portfolio companies 208 172
Number of new investment commitments in portfolio companies 60 29
Number of portfolio companies exited or fully repaid 24 7
Percentage of performing debt bearing a floating rate, at fair value 99.6 % 99.9 %
Percentage of performing debt bearing a fixed rate, at fair value 0.4 % 0.1 %
Weighted average yield on debt and income producing investments, at cost(3)
10.4 % 12.0 %
Weighted average yield on debt and income producing investments, at fair value(3)
10.5 % 12.1 %
Weighted average 12-month EBITDA $ 147.7 $ 153.1
Median 12-month EBITDA 86.3 80.0
Weighted average net leverage through tranche(4)
5.8x 6.0x
Weighted average interest coverage(5)
1.6x 1.5x
Weighted average loan to value(6)
39.7 % 43.0 %
Percentage of debt investments with one or more financial covenants 64.6 % 74.6 %
Percentage of our debt investments that are sponsor backed 99.7 % 98.5 %
Percentage of loans and other debt in support of LBOs and acquisitions 69.2 % 76.3 %
Percentage of our debt portfolio subject to business cycle volatility 4.8 % 6.0 %
Percentage of our total portfolio on non-accrual, at cost 0.2 % 0.6 %
Average position size of our investments $ 18.2 $ 18.6
1 Calculated as a percentage of gross debt commitments (funded and unfunded). Weighted average EBITDA, net leverage through the tranche that the Company is a lender, interest coverage and loan to value exclude recurring revenue investments, which are investments in portfolio companies in which the Company lends based on a multiple of recurring revenue generated by the portfolio company and not based on a multiple of EBITDA.
2 Amounts were derived from investment due diligence information provided by the portfolio company. Such amounts have not been independently estimated by us, and accordingly, we take no responsibility for such numbers and make no representation or warranty in respect of this information.
3 Computed as (a) the annual stated spread, plus reference rate, as applicable, plus the annual accretion of discounts, as applicable on debt securities divided by (b) total debt investments (at fair value or cost, as applicable) included in such securities. Actual yields earned over the life of each investment could differ materially from the yields presented herein.
4 Net leverage is the ratio of total debt minus cash divided by EBITDA and taking into account leverage through the tranche that the Company is a lender, excluding recurring revenue investments.
5 Interest coverage for a particular portfolio company is calculated by taking credit agreement EBITDA and dividing by annualized latest reported interest expense. Total interest coverage is calculated on a weighted average basis based on total gross debt commitments (funded and unfunded). Calculation excludes recurring revenue deals which are investments in portfolio companies in which the Company lends based on a multiple of recurring revenue generated by the portfolio company and not based on a multiple of EBITDA. Portfolio company statistics are derived from the most recently available financial statements of each portfolio company as of the reported end date. Statistics of the portfolio companies have not been independently verified by us and may reflect a normalized or adjusted amount.
6 Calculated using total outstanding debt through the tranche that the Company is a lender divided by total enterprise value from the private equity sponsor or market comparables.
Investment Activity
Our investment activity is presented below (information presented herein is at amortized cost unless otherwise indicated):
As of and For the Year Ended
December 31, 2024 December 31, 2023 December 31, 2022
New investments committed
Gross principal balance(1)
$ 1,549,656 $ 667,870 $ 809,313
Less: Syndications - 40,751 69,477
Net new investments committed $ 1,549,656 $ 627,119 $ 739,836
Investments, at cost
Investments, beginning of period $ 3,226,775 $ 2,939,646 $ 2,373,435
New investments purchased 1,232,384 632,105 945,209
Net accretion of discount on investments 14,866 11,314 11,418
Payment-in-kind 13,073 6,069 2,714
Net realized gain (loss) on investments (16,480) 118 537
Investments sold or repaid (657,491) (362,476) (393,667)
Investments, end of period $ 3,813,127 $ 3,226,776 $ 2,939,646
Amount of investments funded, at principal
First lien debt investments $ 1,239,271 $ 637,946 $ 938,043
Second lien debt investments - 8,588 16,033
Other debt investments 5,887 1,812 8,315
Equity(2)
2,163 - -
Total $ 1,247,321 $ 648,346 $ 962,391
Amount of investments sold/fully repaid, at principal
First lien debt investments $ 488,183 $ 239,383 $ 207,907
Second lien debt investments 57,950 - -
Equity(2)
1,481 - -
Total $ 547,614 $ 239,383 $ 207,907
(1)Includes new investment commitments, excluding sale/repayments and including new unfunded investment commitments.
(2)Represents dollar amount of other investments funded.
Investment Performance Rating
As part of the monitoring process, our Investment Adviser has developed risk policies pursuant to which it regularly assesses the risk profile of each of our debt investments. Our Investment Adviser has developed a classification system to group investments into four categories. The investments are evaluated regularly and assigned a category based on certain credit metrics. Our Investment Adviser’s ratings do not constitute any rating of investments by a nationally recognized statistical rating organization or represent or reflect any third-party assessment of any of our investments. Please see below for a description of the four categories of the Investment Adviser’s Internal Risk Rating system:
Risk Rating 1 - In the opinion of our Investment Adviser, investments in Risk Rating 1 involve the least amount of risk relative to our initial cost basis at the time of origination or acquisition. Risk Rating 1 investments performance is above our initial underwriting expectations and the business trends and risk factors are generally favorable, which may include the performance of the portfolio company, or the likelihood of a potential exit.
Risk Rating 2 - In the opinion of our Investment Adviser, investments in Risk Rating 2 involve a level of risk relative to our initial cost basis at the time of origination or acquisition. Risk Rating 2 investments are generally performing in line with our initial underwriting expectations and risk factors to ultimately recoup the cost of our principal investment are neutral to favorable. All new originated or acquired investments are initially included in Risk Rating 2.
Risk Rating 3 - In the opinion of our Investment Adviser, investments in Risk Rating 3 indicate that the risk to our ability to recoup the initial cost basis at the time of origination or acquisition has increased materially since the origination or acquisition of the investment, such as declining financial performance and non-compliance with debt covenants; however, principal and interest payments are not more than 120 days past due.
Risk Rating 4 - In the opinion of our Investment Adviser, investments in Risk Rating 4 involve a borrower performing substantially below expectations and indicate that the loan’s risk has increased substantially since origination or acquisition. Most or all of the debt
covenants are out of compliance and payments are substantially delinquent. For Risk Rating 4 investments, it is anticipated that we will not recoup our initial cost basis and may realize a substantial loss of our initial cost basis at the time of origination or acquisition upon exit.
The distribution of our portfolio on the Investment Adviser’s Internal Risk Rating System is as follows:
December 31, 2024 December 31, 2023
Fair Value % of Total Fair Value % of Total
Risk rating 1 $ 62,631 1.7 % $ 5,950 0.2 %
Risk rating 2 3,662,337 96.6 3,126,464 97.9
Risk rating 3 61,597 1.6 49,257 1.5
Risk rating 4 4,929 0.1 11,890 0.4
$ 3,791,494 100.0 % $ 3,193,561 100.0 %
CONSOLIDATED RESULTS OF OPERATIONS
The following table represents our operating results:
For the Year Ended
December 31, 2024 December 31, 2023
Total investment income $ 416,075 $ 367,738
Less: Net expenses 193,403 168,158
Net investment income (loss) before taxes 222,672 199,580
Less: Excise tax expense 2,437 1,519
Net investment income (loss) after taxes 220,235 198,061
Net change in unrealized appreciation (depreciation) 11,796 32,835
Net realized gain (loss) (16,467) 118
Net increase (decrease) in net assets resulting from operations $ 215,564 $ 231,014
Investment Income
Investment income was as follows:
For the Year Ended
December 31, 2024 December 31, 2023
Investment income:
Interest income $ 396,421 $ 355,530
Payment-in-kind 10,709 4,276
Dividend income 2,591 2,124
Other income 6,354 5,808
Total investment income $ 416,075 $ 367,738
In the table above, total investment income increased from $367,738 for the year ended December 31, 2023 to $416,075 for the year ended December 31, 2024. The increase was primarily driven by our deployment of capital. The size of our investment portfolio at amortized cost increased from $3,226,776 as of December 31, 2023 to $3,813,127 as of December 31, 2024. This was partially offset by a decrease in our weighted average yield at cost and fair value to 10.4% and 10.5%, respectively, at December 31, 2024 from 12.0% and 12.1% at December 31, 2023, respectively, which was primarily driven by the reduction in base rates and repricing on our existing portfolio.
Expenses
Expenses were as follows:
For the Year Ended
December 31, 2024 December 31, 2023
Expenses:
Interest and other financing expenses $ 122,928 $ 112,883
Management fees 35,415 30,550
Income based incentive fees 43,467 42,012
Professional fees 6,718 4,470
Directors’ fees 533 345
Administrative service fees 216 178
General and other expenses 97 633
Total expenses 209,374 191,071
Management fees waiver (9,936) (22,913)
Incentive fees waiver (6,035) -
Net expenses $ 193,403 $ 168,158
Excise tax expense $ 2,437 $ 1,519
Interest and Other Financing Expenses
Interest and other financing expenses, including unused commitment fees, amortization of debt issuance costs, net change in unrealized (appreciation) depreciation on effective interest rate swaps and hedged items and deferred financing costs, were $122,928 and $112,883 for the year ended December 31, 2024 and December 31, 2023 respectively. The increase was primarily due to higher average borrowings outstanding over time. For the year ended December 31, 2024 and December 31, 2023, average borrowings outstanding were $1,681,358 and $1,576,285 respectively.
Management Fees
Base management fees, net of waiver, were $25,479 and $7,637 for the year ended December 31, 2024 and December 31, 2023, respectively. The increase was primarily due to an increase in average gross assets as well as the management fee waiver pre and post IPO.
Incentive Fee
The incentive fee consists of two components: (1) income based incentive fee and (2) capital gains incentive fee. The income based incentive fees, net of waiver, were $37,432 and $42,012 for the year ended December 31, 2024 and December 31, 2023, respectively. The decrease was primarily due to the incentive fee waiver pre and post IPO.
Professional Fees, Administrative Service Fee and Other Expenses
Professional fees include legal, audit, tax, valuation and other professional fees incurred related to the management of our Company. Administrative service fee represents fees paid to the Administrator for our allocable portion of the cost of certain of our executive officers that perform duties for us. Other general and administrative expenses include insurance, filing, research, subscriptions and other costs.
Net Realized Gain (Loss) and Unrealized Gain (Loss) on Investments
For the Year Ended
December 31, 2024 December 31, 2023
Net realized and unrealized gains (losses) on investment transactions:
Net realized gain (loss):
Non-controlled/non-affiliated investments $ (16,480) $ 118
Foreign currency and other transactions 13 -
Net realized gain (loss) (16,467) 118
Net change in unrealized appreciation (depreciation):
Non-controlled/non-affiliated investments 11,904 32,835
Foreign currency translations and other transactions (108) -
Net unrealized appreciation (depreciation) 11,796 32,835
Net realized and unrealized gains (losses) $ (4,671) $ 32,953
For the year ended December 31, 2024, net realized losses on our investments was $16,480, which was primarily due to the restructuring of certain portfolio companies.
For the year ended December 31, 2024, net change in unrealized appreciation on our investments of $11,904, was primarily the result of the changes in spreads in the primary and secondary markets. For the year ended December 31, 2023, net change in unrealized appreciation on our investments of $32,835 was primarily driven by changes in spreads in the primary and secondary markets.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
We generate cash from the net proceeds of offerings of our Common Stock, net borrowings from our credit facilities, and net proceeds of our unsecured debt issuances and through cash flows from operations, including investment sales and repayments as well as income earned on investments. Details of our credit facilities and unsecured debt issuance are described in “-Debt” below. We may from time to time enter into new credit facilities, increase the size of existing credit facilities or issue additional debt securities. Any such incurrence or issuance would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors.
As of December 31, 2024, we had approximately $70.4 million of unrestricted cash and cash equivalents, which taken together with our approximately $284.0 million and $680.8 million of availability under the BNP Funding Facility and the Truist Credit Facility (subject to borrowing base availability) (each as defined in Note 6. “Debt” in the notes to the accompanying consolidated financial statements), respectively, we expect to be sufficient for our investing activities and sufficient to conduct our operations in the near term. As of December 31, 2024, we believed we had adequate financial resources to satisfy unfunded portfolio company commitments of $564.8 million.
Equity
On January 26, 2024, we closed our IPO, issuing 5,000,000 shares of our Common Stock at a public offering price of $20.67 per share. Net of underwriting fees, we received net cash proceeds, before offering expenses, of approximately $97.1 million. Our Common Stock began trading on the NYSE under the symbol “MSDL” on January 24, 2024.
In connection with the IPO, we redeemed any fractional shares of Common Stock outstanding for cash in an amount equal to the pro rata portion of $20.67 per share of Common Stock, which was the initial public offering price in the IPO.
The following table summarizes the total shares issued and proceeds received from our capital drawdowns delivered pursuant to the Subscription Agreements for the year ended December 31, 2023:
Share Issuance Date Shares Issued Amount
October 04, 2023 10,680,808 $ 220,238
Total 10,680,808 $ 220,238
Following the above capital call, we did not have any remaining undrawn capital commitments.
Distributions and Dividend Reinvestment
Prior to January 26, 2024, we had an “opt in” DRIP. As a result, our stockholders who elected to “opt in” to the DRIP had their cash dividends or distributions automatically reinvested in additional shares of Common Stock, rather than receiving cash. We adopted an “opt out” DRIP effective as of January 26, 2024 and later amended effective December 7, 2024. As a result, our stockholders who have not “opted out” of the DRIP will have their cash dividends or distributions automatically reinvested in additional shares of Common Stock, rather than receiving cash. Stockholders who receive distributions in the form of shares of Common Stock will generally be subject to the same U.S. federal, state and local tax consequences as if they received cash distributions; however, those stockholders will not receive cash with which to pay any applicable taxes.
The following table summarize our distributions declared and payable for the year ended December 31, 2024 and December 31, 2023, respectively:
Date Declared Record Date Payment Date Per Share Amount Shares(1)
For the year ended December 31, 2024
February 29, 2024 March 29, 2024 April 25, 2024 $ 0.50 512,519
May 08, 2024 June 28, 2024 July 25, 2024 0.50 553,637 (2)
January 11, 2024 August 05, 2024 October 25, 2024 0.10 111,159 (2)(3)
August 06, 2024 September 30, 2024 October 25, 2024 0.50 546,673 (2)
January 11, 2024 November 04, 2024 January 24, 2025 0.10 101,485 (2)(3)
November 04, 2024 December 31, 2024 January 24, 2025 0.50 473,635 (2)
Total Distributions $ 2.20 2,299,108
For the year ended December 31, 2023
March 28, 2023 March 28, 2023 April 25, 2023 $ 0.50 482,721
June 27, 2023 June 27, 2023 July 25, 2023 0.57 554,001 (4)
September 26, 2023 September 26, 2023 October 25, 2023 0.60 579,388 (5)
December 28, 2023 December 28, 2023 January 25, 2024 0.60 615,660 (5)
Total Distributions $ 2.27 2,231,770
(1) In connection with the distributions with payment dates on January 25, 2024 and January 25, 2023, 615,660 and 445,235 DRIP shares were issued, respectively.
(2) In accordance with the Company’s DRIP, shares were purchased in the open market.
(3) Represents a special distribution declared by the Board on January 11, 2024.
(4) Includes a supplemental distribution of $0.07.
(5) Includes a supplemental distribution of $0.10.
Share Repurchase Plan
On January 25, 2024, we entered into the Company 10b5-1 Plan, to acquire up to $100 million in the aggregate of our Common Stock at prices below our net asset value per share over a specified period, in accordance with the guidelines specified in Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934, as amended.
The following table summarizes the shares repurchased under our 10b5-1 Plan during the year ended December 31, 2024:
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions)
July 1, 2024 - July 31, 2024 39,344 $ 19.99 39,344 $ 99.2
August 1, 2024 - August 31, 2024 217,796 20.10 217,796 94.8
September 1, 2024 - September 30, 2024 172,513 20.04 172,513 91.4
October 1, 2024 - October 31, 2024 187,607 19.99 187,607 87.6
November 1, 2024 - November 30, 2024 307,336 20.34 307,336 81.9
December 1, 2024 - December 31, 2024 - - - 81.9
Total Repurchases 924,596 924,596
No shares were repurchased under our 10b5-1 Plan during the six months ended June 30, 2024.
No shares were repurchased under our 10b5-1 Plan during the year ended December 31, 2023.
Debt
Our outstanding debt obligations were as follows:
December 31, 2024 December 31, 2023
Aggregate Principal Committed Outstanding Principal Unused Portion Aggregate Principal Committed Outstanding Principal Unused Portion
CIBC Subscription Facility(1)
$ - $ - $ - $ - $ - $ -
BNP Funding Facility 600,000 316,000 284,000 600,000 282,000 318,000
Truist Credit Facility(2)
1,300,000 617,401 680,770 1,120,000 520,263 599,484
2027 Notes(3)
425,000 425,000 - 425,000 425,000 -
2025 Notes(3)
275,000 275,000 - 275,000 275,000 -
2029 Notes(3)
350,000 350,000 - - - -
Total $ 2,950,000 $ 1,983,401 $ 964,770 $ 2,420,000 $ 1,502,263 $ 917,484
(1)The CIBC Subscription Facility matured and was fully paid off as of December 31, 2022.
(2)As of December 31, 2024 and December 31, 2023, a letter of credit of $1,828 and $253, respectively, was outstanding, which reduced the unused availability under the Truist Credit Facility by the same amount. Under the Truist Credit Facility, the Company may borrow in U.S. dollars or certain other permitted currencies. As of December 31, 2024 and December 31, 2023, the Company had borrowings denominated in Euros (EUR) of 3,298 and 238, respectively, Canadian dollars (CAD) of 300 and 0, respectively and Pound Sterling (GBP) of 1,020 and 0, respectively.
(3)As of December 31, 2024, the carrying value of the Company’s 2027 Notes, 2025 Notes and 2029 Notes were presented net of unamortized debt issuance costs of $2,374, $856 and $3,297 and unamortized original issuance discount of $452, $0 and $3,398, respectively. As of December 31, 2023, the carrying value of the Company’s 2027 Notes, 2025 Notes and 2029 Notes were presented net of unamortized debt issuance costs of $3,499, $2,065 $0, and unamortized original issuance discount of $667, $0 and $0, respectively.
For additional information on our debt obligations, see Note 6. “Debt” to our consolidated financial statements included in this Report.
RECENT DEVELOPMENTS
Pursuant to a Registration Statement on Form N-14 (File No. 333-283653), which went effective on January 14, 2025, we closed an exchange offer in which holders of the 2029 Notes that were restricted because they were issued in a private placement were offered the opportunity to exchange such notes for new, registered notes with substantially identical terms. Through this exchange offer, holders representing 99.32% of the outstanding principal of the then restricted 2029 Notes obtained registered, unrestricted 2029 Notes.
On February 25, 2025, we amended and restated that certain senior secured revolving credit agreement with Truist Bank (the “A&R Credit Agreement”). The A&R Credit Agreement amended certain terms of the Truist Credit Facility, including, but not limited to, amendments to (a) increase the facility size from $1,300,000 to $1,450,000, (b) extend the revolving period and maturity date with respect to the loans and commitments held by the lenders who consented to the maturity extension until February 23, 2029 and February 25, 2030, respectively, (c) reprice the Truist Credit Facility to S + 1.775% and (d) modify certain covenant restrictions.
From January 1, 2025 through February 26, 2025, we repurchased 11,401 shares at an average price of $20.31, as part of the Company 10b5-1 plan.
On February 27, 2025, our Board authorized an amended and restated share repurchase plan, or the Amended and Restated Company 10b5-1 Plan. Under the Amended and Restated Company 10b5-1 Plan, we may acquire up to $100 million in the aggregate of our Common Stock at prices below our net asset value per share over a specified period, in accordance with the guidelines specified in Rule 10b5-1 and Rule 10b-18 of the Exchange Act. The Amended and Restated Company 10b5-1 Plan will terminate upon the earliest to occur of (i) 24-months from the commencement date of the original Company 10b5-1 Plan, (ii) the end of the trading day on which the aggregate purchase price for all shares purchased under the Amended and Restated Company 10b5-1 Plan equals $100 million and (iii) the occurrence of certain other events described in the Amended and Restated Company 10b5-1 Plan.
On February 27, 2025, our Board declared a distribution of $0.50 per share, which is payable on April 25, 2025 to shareholders of record as of March 31, 2025.
CRITICAL ACCOUNTING ESTIMATES
The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Changes in the economic environment, financial markets, and any other parameters used in determining such estimates could cause actual results to differ. Our critical accounting estimates including those relating to the valuation of our investment portfolio, should be read in connection with our consolidated financial statements in Part II, Item 8 of this Report, including Note 2 “Significant Accounting Policies.”
We consider the most significant accounting policies to be those related to our Investments, Revenue Recognition, Deferred Financing Costs and Debt Issuance Costs and Income Taxes. The valuation of investments is our most significant critical estimate. The most significant input is the discount rate used in yield analysis that is based on comparable market yields. Significant increases in the discount rates in isolation would result in a significantly lower fair value measurement. For a further discussion and disclosure of key inputs and considerations related to this estimate, refer to "Note 5-Fair Value Measurements" included in the notes to the consolidated financial statements included in this Report.
RELATED PARTY TRANSACTIONS
We have entered into a number of business relationships with affiliated or related parties, including the following (which are defined
in the notes to the accompanying consolidated financial statements if not defined herein):
•the Investment Advisory Agreement; and
•the Administration Agreement
See Note 3. “Related Party Transactions” to our consolidated financial statements included in this Report.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are subject to financial market risks, including valuation risk, market risk and interest rate risk.
Valuation Risk
We have invested, and plan to continue to invest, primarily in illiquid debt and equity securities of portfolio companies. During periods of market dislocation, we will seek to invest prudently in the secondary loan market to provide our investors better risk adjusted returns while adhering to our core investment tenants. Most of our investments will not have a readily available market price. To ensure accurate valuations, our investments are valued at fair value in good faith by the Board based on, among other things, the input of the Investment Adviser, including the Valuation Designee, our Audit Committee and independent third-party valuation firms engaged at the direction of the Board of Directors, or Valuation Designee, and in accordance with our valuation policy. There is no single standard for determining fair value. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each investment while employing a consistently applied valuation process for the investments we hold. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we may realize amounts that are different from the amounts presented and such differences could be material.
Market Risk
The market value of a security may move up or down, sometimes rapidly and unpredictably. These fluctuations may cause a security to be worth less than the price originally paid for it, or less than it was worth at an earlier time. Market risk may affect a single issuer, industry, sector of the economy or the market as a whole. Global economies and financial markets are increasingly interconnected, which increases the probabilities that conditions in one country or region might adversely impact issuers in a different country or region. Conditions affecting the general economy, including political, social, or economic instability at the local, regional, or global level, may also affect the market value of a security. Health crises, such as pandemic and epidemic diseases, as well as other incidents that interrupt the expected course of events, such as natural disasters, war or civil disturbance, acts of terrorism, power outages and other unforeseeable and external events, and the public response to or fear of such diseases or events, have and may in the future have an adverse effect on a company’s investments and net asset value and can lead to increased market volatility. See “Part I, Item 1A. Risk Factors-General Risk Factors-We are operating in a period of capital markets disruption and economic uncertainty. The conditions have materially and adversely affected debt and equity capital markets in the United States, and any future volatility or instability in capital markets may have a negative impact on our business and operations.” of our Form 10-K and - "Part I, Item 1A. Risk Factors - General Risk Factors - Terrorist attacks, acts of war, natural disasters, outbreaks or pandemics, such as the Coronavirus pandemic, may impact our portfolio companies and our Adviser and harm our business, operating results and financial condition” of this Report.
Interest Rate Risk
We are subject to financial market risks, most significantly changes in interest rates. Interest rate sensitivity refers to the change in our earnings that may result from changes in the level of interest rates. Because we expect to fund a portion of our investments with borrowings, our net investment income is expected to be affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.
As of December 31, 2024, approximately 99.6% of our debt investments were at floating rates. Based on our Consolidated Statements of Assets and Liabilities as of December 31, 2024, the following table shows the annualized impact on net income of hypothetical reference rate changes in interest rates (considering interest rate floors and ceilings for floating rate debt instruments assuming no changes in our investments and borrowing structure as of December 31, 2024) (dollar amounts in thousands):
Interest Interest Net
Basis Point Change - Interest Rates Income Expense(1)
Income
Up 300 basis points $ 113,227 $ (38,355) $ 74,872
Up 200 basis points $ 75,485 $ (25,570) $ 49,915
Up 100 basis points $ 37,742 $ (12,785) $ 24,957
Up 25 basis points $ 9,436 $ (3,196) $ 6,240
Down 25 basis points $ (9,436) $ 3,196 $ (6,240)
Down 100 basis points $ (37,742) $ 12,785 $ (24,957)
Down 200 basis points $ (75,485) $ 25,570 $ (49,915)
Down 300 basis points $ (113,227) $ 38,355 $ (74,872)
(1) Includes the impact of our interest rate swaps as a result of interest rate changes.
We may hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts or our credit facilities, subject to the requirements of the 1940 Act and applicable commodities laws. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates or higher exchange rates with respect to our portfolio of investments with fixed interest rates or investments denominated in foreign currencies. During the periods covered by this Report, we did not engage in interest rate hedging activities.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Consolidated Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Assets and Liabilities
Consolidated Statements of Operations
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Consolidated Schedules of Investments
Notes to the Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Morgan Stanley Direct Lending Fund
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying consolidated statements of assets and liabilities of Morgan Stanley Direct Lending Fund and subsidiaries (the "Company"), including the consolidated schedules of investments, as of December 31, 2024 and 2023, the related consolidated statements of operations, changes in net assets and cash flows for each of the three years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes (collectively referred to as the “consolidated financial statements and financial highlights”). In our opinion, the consolidated financial statements and financial highlights present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations, changes in net assets and cash flows for each of the three years in the period then ended, and the financial highlights for each of the five years in the period then ended in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2025, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These consolidated financial statements and financial highlights are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements and financial highlights are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and financial highlights. Our procedures included confirmation of investments owned as of December 31, 2024 and 2023, by correspondence with the custodian, loan agents, and borrowers; when replies were not received, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Investments -Level 3 Fair Value Measurements (for first and second lien debt) - Refer to Notes 2 and 5 to the financial statements
Critical Audit Matter Description
The Company held first and second lien debt classified as Level 3 investments under accounting principles generally accepted in the United States of America. The valuation techniques used in estimating the fair value of these investments vary and certain significant inputs used were unobservable.
We identified the valuation of first and second lien debt Level 3 investments as a critical audit matter given the judgments involved in estimating fair value, including the selection of valuation approaches and development of unobservable inputs. This required a high degree of auditor judgment and extensive audit effort, including the need to involve fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to valuation techniques and unobservable inputs used by management to estimate the fair value of first and second lien debt Level 3 investments included the following, among others:
•We tested the effectiveness of controls over management’s valuation of first and second lien debt Level 3 investments, including those related to valuation techniques and significant unobservable inputs.
•We evaluated the appropriateness of the valuation techniques used for first and second lien debt Level 3 investments and tested the related significant unobservable inputs by comparing these inputs to external sources or, as applicable, by comparing to independently developed estimates. For selected investments, we used the assistance of our fair value specialists.
•For certain investments, we developed our own independent estimate of the fair value and compared our estimate to management’s estimate. For selected investments, we used the assistance of our fair value specialists.
•We evaluated management’s ability to reasonably estimate fair value by comparing management’s historical estimates to subsequent transactions, taking into account changes in market or investment specific conditions, where applicable.
/s/Deloitte & Touche LLP
New York, NY
February 27, 2025
We have served as the Company's auditor since 2019.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Morgan Stanley Direct Lending Fund
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Morgan Stanley Direct Lending Fund and subsidiaries (the “Company”) as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2024, of the Company and our report dated February 27, 2025, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/Deloitte & Touche LLP
New York, NY
February 27, 2025
Morgan Stanley Direct Lending Fund
Consolidated Statements of Assets and Liabilities
(In thousands, except share and per share amounts)
As of
December 31, 2024 December 31, 2023
(Audited) (Audited)
Assets
Non-controlled/non-affiliated investments, at fair value (amortized cost of $3,813,127 and $3,226,776)
$ 3,791,494 $ 3,193,561
Cash and cash equivalents (restricted cash of $2,000 and $0)
72,372 69,705
Deferred financing costs 16,498 14,317
Interest and dividend receivable from non-controlled/non-affiliated investments 30,554 28,884
Subscription receivable - 41
Receivable for investments sold/repaid 470 173
Prepaid expenses and other assets 630 53
Total assets 3,912,018 3,306,734
Liabilities
Debt (net of unamortized debt issuance costs of $6,527 and $5,564)
1,973,479 1,496,032
Payable for investment purchased 192 8
Payable to affiliates (Note 3) 29 2,870
Dividends payable 53,229 49,968
Management fees payable 7,042 2,012
Income based incentive fees payable 8,956 11,766
Interest payable 21,205 18,823
Accrued expenses and other liabilities 5,730 4,104
Total liabilities 2,069,862 1,585,583
Commitments and contingencies (Note 7)
Net assets
Preferred stock, $0.001 par value (1,000,000 shares authorized; no shares issued and outstanding)
- -
Common stock, par value $0.001 (100,000,000 shares authorized; 88,511,089 and 83,278,831 shares issued and outstanding)
89 83
Paid-in capital in excess of par value 1,812,443 1,712,609
Total distributable earnings (loss) 29,624 8,459
Total net assets $ 1,842,156 $ 1,721,151
Total liabilities and net assets $ 3,912,018 $ 3,306,734
Net asset value per share $ 20.81 $ 20.67
The accompanying notes are an integral part of these audited consolidated financial statements
Morgan Stanley Direct Lending Fund
Consolidated Statements of Operations
(In thousands, except share and per share amounts)
For the Year Ended
December 31, 2024 December 31, 2023 December 31, 2022
Investment Income:
From non-controlled/non-affiliated investments:
Interest income $ 396,421 $ 355,530 $ 223,119
Payment-in-kind 10,709 4,276 1,626
Dividend income 2,591 2,124 1,488
Other income 6,354 5,808 4,360
Total investment income 416,075 367,738 230,593
Expenses:
Interest and other financing expenses 122,928 112,883 67,182
Management fees 35,415 30,550 26,715
Income based incentive fees 43,467 42,012 26,635
Capital gains incentive fees - - (2,441)
Professional fees 6,718 4,470 3,206
Directors’ fees 533 345 362
Administrative service fees 216 178 72
General and other expenses 97 633 510
Total expenses 209,374 191,071 122,241
Expense support (Note 3) - - 44
Management fees waiver (Note 3) (9,936) (22,913) (20,036)
Incentive fees waiver (Note 3) (6,035) - -
Net expenses 193,403 168,158 102,249
Net investment income (loss) before taxes 222,672 199,580 128,344
Excise tax expense 2,437 1,519 334
Net investment income (loss) after taxes 220,235 198,061 128,010
Net realized and unrealized gain (loss):
Realized gain (loss):
Net realized gain (loss) on non-controlled/non-affiliated investments (16,480) 118 537
Foreign currency and other transactions 13 - -
Net realized gain (loss) (16,467) 118 537
Net change in unrealized appreciation (depreciation):
Net change in unrealized appreciation (depreciation) on non-controlled/non-affiliated investments 11,904 32,835 (80,005)
Translation of assets and liabilities in foreign currencies (108) - -
Net unrealized appreciation (depreciation) 11,796 32,835 (80,005)
Net realized and unrealized gain (loss) (4,671) 32,953 (79,468)
Net increase (decrease) in net assets resulting from operations $ 215,564 $ 231,014 $ 48,542
Net investment income (loss) per share (basic and diluted) $ 2.48 $ 2.67 $ 2.08
Earnings per share (basic and diluted) $ 2.43 $ 3.11 $ 0.79
Weighted average shares outstanding 88,649,149 74,239,743 61,676,363
The accompanying notes are an integral part of these audited consolidated financial statements
Morgan Stanley Direct Lending Fund
Consolidated Statements of Changes in Net Assets
(In thousands, except share and per share amount)
For the Year Ended
December 31, 2024 December 31, 2023 December 31, 2022
Net assets at the beginning of period $ 1,721,151 $ 1,397,305 $ 1,188,587
Increase (decrease) in net assets resulting from operations:
Net investment income (loss) 220,235 198,061 128,010
Net realized gain (loss) (16,467) 118 537
Net change in unrealized appreciation (depreciation) 11,796 32,835 (80,005)
Net increase in net assets resulting from operations 215,564 231,014 48,542
Distributions to stockholders from:
Distributable earnings (195,729) (169,291) (119,437)
Total distributions to stockholders (195,729) (169,291) (119,437)
Capital transactions:
Issuance of common stock, net of underwriting and offering costs 95,847 220,238 249,291
Reinvestment of dividends 23,385 41,885 30,322
Repurchase of common stock (18,062) - -
Net increase (decrease) in net assets resulting from capital transactions 101,170 262,123 279,613
Total increase (decrease) in net assets 121,005 323,846 208,718
Net assets at end of period $ 1,842,156 $ 1,721,151 $ 1,397,305
Dividends per share $ 2.20 $ 2.27 $ 1.92
The accompanying notes are an integral part of these audited consolidated financial statements
Morgan Stanley Direct Lending Fund
Consolidated Statements of Cash Flows
(In thousands)
For the Year Ended
December 31, 2024 December 31, 2023 December 31, 2022
Cash flows from operating activities:
Net increase (decrease) in net assets resulting from operations $ 215,564 $ 231,014 $ 48,542
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Net unrealized (appreciation) depreciation on investments (11,904) (32,835) 80,005
Net unrealized (appreciation) depreciation on translation of assets and liabilities in foreign currencies 108 - -
Net unrealized (appreciation) depreciation on interest rate swap attributed to unsecured notes 10 - -
Net realized (gain) loss on investments 16,480 (118) (537)
Net realized (gain) loss on foreign currency and other transactions (13) - -
Net accretion of discount and amortization of premium on investments (14,866) (11,314) (11,418)
Payment-in-kind interest and dividend capitalized
(13,073) (6,069) (2,714)
Amortization of deferred financing costs 3,726 3,249 3,735
Amortization of debt issuance costs and original issuance discount on unsecured notes 3,853 2,548 1,551
Purchases of investments and change in payable for investments purchased (1,232,200) (632,097) (945,209)
Proceeds from sale of investments and principal repayments and change in receivable for investments sold/repaid 657,194 362,493 393,780
Changes in operating assets and liabilities:
(Increase) decrease in interest and dividend receivable from non-controlled/non-affiliated investments
(1,670) (7,973) (9,171)
(Increase) decrease in prepaid expenses and other assets (132) (13) 228
(Decrease) increase in payable to affiliates (2,841) 784 (2,345)
(Decrease) increase in management fees payable 5,030 229 477
(Decrease) increase in incentive fees payable (2,810) 3,648 (541)
(Decrease) increase in interest payable 2,382 1,804 13,738
(Decrease) increase in accrued expenses and other liabilities 1,626 826 44
Net cash provided by (used in) operating activities (373,536) (83,824) (429,835)
Cash flows from financing activities:
Borrowings on debt 1,189,469 408,000 1,566,175
Repayments on debt (712,000) (438,000) (1,284,850)
Deferred financing costs paid (5,907) (9,942) (4,006)
Debt issuance costs paid (4,114) - (9,259)
Dividends paid in cash (169,083) (110,497) (85,748)
Proceeds from issuance of common stock, net of underwriting & offering costs 95,888 222,753 254,585
Repurchases of common stock (18,062) - -
Net cash provided by (used in) financing activities 376,191 72,314 436,897
Net increase (decrease) in cash, cash equivalents and restricted cash 2,655 (11,510) 7,062
Morgan Stanley Direct Lending Fund
Consolidated Statements of Cash Flows
(In thousands)
Effect of foreign exchange rate changes on cash 12 - -
Cash, cash equivalents and restricted cash, beginning of period 69,705 81,215 74,153
Cash, cash equivalents and restricted cash, end of period $ 72,372 $ 69,705 $ 81,215
Supplemental information and non-cash activities:
Excise tax paid $ 1,516 $ 361 $ 57
Interest expense paid $ 112,955 $ 105,282 $ 48,565
Reinvestment of dividends $ 23,385 $ 41,885 $ 30,322
Dividends payable $ 53,229 $ 49,968 $ 33,058
Non-cash purchases of investments $ (24,930) $ - $ -
Non-cash sales of investments $ 24,930 $ - $ -
Subscriptions receivable $ - $ 41 $ 2,556
The accompanying notes are an integral part of these audited consolidated financial statements
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments
December 31, 2024
(In thousands, except share amounts)
Investments-non-controlled/non-affiliated(1) (2)
Footnotes Investment Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares(4)
Cost(5)
Fair Value Percentage of Net Assets
Debt Investments
Aerospace & Defense
Jonathan Acquisition Company (6) (8) First Lien Debt S + 5.00% 9.43% 12/22/2026 3,389 $ 3,346 $ 3,389 0.18 %
Mantech International CP (6) (9) First Lien Debt S + 5.00% 9.59% 9/14/2029 4,194 4,190 4,194 0.23
Mantech International CP (6) (9) (16) First Lien Debt S + 5.00% 9.59% 9/14/2029 - (1) - -
Mantech International CP (6) (9) (16) First Lien Debt S + 5.00% 9.59% 9/14/2028 - (1) - -
PCX Holding Corp. (6) (7) (8) First Lien Debt S + 6.25% 10.73% 4/22/2027 17,862 17,781 16,647 0.90
PCX Holding Corp. (6) (8) First Lien Debt S + 6.25% 10.73% 4/22/2027 17,986 17,816 16,763 0.91
PCX Holding Corp. (6) (8) First Lien Debt S + 6.25% 10.73% 4/22/2027 1,851 1,844 1,725 0.09
Two Six Labs, LLC (6) (9) First Lien Debt S + 5.25% 9.90% 8/20/2027 34,367 33,937 34,314 1.86
Two Six Labs, LLC (6) (9) (16) First Lien Debt S + 5.25% 9.90% 8/20/2027 4,210 4,150 4,192 0.23
Two Six Labs, LLC (6) (9) (16) First Lien Debt S + 5.25% 9.90% 8/20/2027 - (19) (6) -
83,043 81,218 4.41
Air Freight & Logistics
AGI-CFI Holdings, Inc. (6) (9) First Lien Debt S + 5.75% 10.23% 6/11/2027 14,118 13,960 14,118 0.77
RoadOne IntermodaLogistics (6) (8) First Lien Debt S + 6.25% 10.84% 12/29/2028 1,639 1,602 1,602 0.09
RoadOne IntermodaLogistics (6) (8) First Lien Debt S + 6.25% 10.84% 12/29/2028 150 147 147 0.01
RoadOne IntermodaLogistics (6) (8) (16) First Lien Debt S + 6.25% 10.84% 12/29/2028 75 68 68 -
15,777 15,935 0.87
Automobile Components
Continental Battery Company (6) (8) First Lien Debt S + 7.00% (incl. 4.08% PIK)
11.48% 1/20/2027 6,473 6,415 4,571 0.25
PAI Holdco, Inc. (6) (8) Second Lien Debt S + 7.50% (incl. 2.00% PIK)
12.24% 10/28/2028 27,110 26,683 23,862 1.30
Randy's Holdings, Inc. (6) (8) First Lien Debt S + 5.00% 9.45% 11/1/2029 6,608 6,467 6,608 0.36
Randy's Holdings, Inc. (6) (8) (16) First Lien Debt S + 5.00% 9.45% 11/1/2029 664 634 664 0.04
Randy's Holdings, Inc. (6) (8) (16) First Lien Debt S + 5.00% 9.45% 11/1/2029 305 288 305 0.02
Sonny's Enterprises, LLC (6) (7) (8) First Lien Debt S + 5.50% 10.17% 8/5/2028 45,548 45,098 44,086 2.39
Sonny's Enterprises, LLC (6) (8) (16) First Lien Debt S + 5.50% 10.17% 8/5/2028 113 103 68 -
Spectrum Automotive Holdings Corp. (6) (7) (9) First Lien Debt S + 5.25% 9.58% 6/29/2028 23,170 22,970 23,040 1.25
Spectrum Automotive Holdings Corp. (6) (9) (16) First Lien Debt S + 5.25% 9.58% 6/29/2028 7,449 7,322 7,360 0.40
Spectrum Automotive Holdings Corp. (6) (9) (16) First Lien Debt S + 5.25% 9.58% 6/29/2027 - (5) (5) -
115,975 110,559 6.00
Automobiles
ARI Network Services, Inc. (6) (9) First Lien Debt S + 5.00% 9.36% 8/28/2026 20,614 20,459 20,533 1.11
ARI Network Services, Inc. (6) (7) (9) First Lien Debt S + 5.00% 9.36% 8/28/2026 3,557 3,530 3,544 0.19
ARI Network Services, Inc. (6) (9) (16) First Lien Debt S + 5.00% 9.36% 8/28/2026 1,380 1,376 1,369 0.07
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Investments-non-controlled/non-affiliated(1) (2)
Footnotes Investment Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares(4)
Cost(5)
Fair Value Percentage of Net Assets
COP Collisionright Parent, LLC (6) (7) (8) First Lien Debt S + 5.50% 10.09% 1/29/2030 6,364 $ 6,252 $ 6,289 0.34 %
COP Collisionright Parent, LLC (6) (8) (16) First Lien Debt S + 5.50% 10.09% 1/29/2030 1,864 1,815 1,821 0.10
COP Collisionright Parent, LLC (6) (8) (16) First Lien Debt S + 5.50% 10.09% 1/29/2030 154 137 142 0.01
Drivecentric Holdings, LLC (6) (9) First Lien Debt S + 4.75% 9.27% 8/15/2031 26,470 26,216 26,449 1.44
Drivecentric Holdings, LLC (6) (9) (16) First Lien Debt S + 4.75% 9.27% 8/15/2031 - (33) (3) -
LeadVenture, Inc. (6) (9) (16) First Lien Debt S + 5.00% 9.36% 8/28/2026 367 360 363 0.02
Turbo Buyer, Inc. (6) (8) First Lien Debt S + 6.00% 10.48% 12/2/2025 37,170 36,996 35,899 1.95
Turbo Buyer, Inc. (6) (8) First Lien Debt S + 6.00% 10.48% 12/2/2025 37,353 37,140 36,076 1.96
Vehlo Purchaser, LLC (6) (9) First Lien Debt S + 5.25% 9.61% 5/24/2028 2,936 2,911 2,917 0.16
Vehlo Purchaser, LLC (6) (9) (16) First Lien Debt S + 5.25% 9.61% 5/24/2028 713 633 617 0.03
Vehlo Purchaser, LLC (6) (9) (16) First Lien Debt S + 5.25% 9.61% 5/24/2028 - (1) (1) -
137,791 136,015 7.38
Biotechnology
GraphPad Software, LLC (6) (9) First Lien Debt S + 4.75% 9.08% 6/30/2031 26,824 26,698 26,824 1.46
GraphPad Software, LLC (6) (9) (16) First Lien Debt S + 4.75% 9.08% 6/30/2031 796 759 796 0.04
GraphPad Software, LLC (6) (9) (16) First Lien Debt S + 4.75% 9.08% 6/30/2031 - (14) - -
27,443 27,620 1.50
Building Products
Project Potter Buyer, LLC (6) (8) First Lien Debt S + 6.00% 10.33% 4/23/2027 13,617 13,617 13,617 0.74
Project Potter Buyer, LLC (6) (8) (16) First Lien Debt S + 6.00% 10.33% 4/23/2026 - - - -
13,617 13,617 0.74
Chemicals
Tank Holding Corp. (7) (9) First Lien Debt S + 5.75% 10.27% 3/31/2028 13,845 13,676 13,571 0.74
Tank Holding Corp. (6) (7) (9) First Lien Debt S + 5.75% 10.27% 3/31/2028 1,709 1,671 1,701 0.09
Tank Holding Corp. (6) (9) (16) First Lien Debt S + 5.75% 10.27% 3/31/2028 414 403 412 0.02
Tank Holding Corp. (9) (16) First Lien Debt S + 5.75% 10.27% 3/31/2028 - (9) (16) -
V Global Holdings, LLC (6) (7) (9) First Lien Debt S + 5.75% 10.42% 12/22/2027 4,805 4,747 4,567 0.25
V Global Holdings, LLC (6) (9) (16) First Lien Debt S + 5.75% 10.42% 12/22/2025 393 389 359 0.02
20,877 20,594 1.12
Commercial Services & Supplies
365 Retail Markets, LLC (6) (8) First Lien Debt S + 4.50% 9.24% 12/26/2028 16,929 16,773 16,929 0.92
365 Retail Markets, LLC (6) (8) First Lien Debt S + 4.50% 9.24% 12/26/2028 5,432 5,394 5,432 0.29
Atlas Us Finco, Inc. (6) (8) (12) First Lien Debt S + 5.00% 9.63% 12/9/2029 8,970 8,802 8,970 0.49
Atlas Us Finco, Inc. (6) (8) (12) (16) First Lien Debt S + 5.00% 9.63% 12/9/2028 - (4) - -
BPG Holdings IV Corp. (6) (9) First Lien Debt S + 6.00% 10.33% 7/29/2029 11,529 10,952 9,927 0.54
Consor Intermediate II, LLC (6) (9) First Lien Debt S + 4.50% 8.83% 5/12/2031 5,022 4,975 4,994 0.27
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Investments-non-controlled/non-affiliated(1) (2)
Footnotes Investment Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares(4)
Cost(5)
Fair Value Percentage of Net Assets
Consor Intermediate II, LLC (6) (9) (16) First Lien Debt S + 4.50% 8.83% 5/12/2031 - $ (21) $ (26) - %
Consor Intermediate II, LLC (6) (9) (16) First Lien Debt S + 4.50% 8.83% 5/12/2031 - (11) (7) -
CRCI Longhorn Holdings, Inc. (6) (7) (9) First Lien Debt S + 5.00% 9.36% 8/27/2031 9,882 9,787 9,882 0.54
CRCI Longhorn Holdings, Inc. (6) (9) (16) First Lien Debt S + 5.00% 9.36% 8/27/2031 - (12) - -
CRCI Longhorn Holdings, Inc. (6) (9) (16) First Lien Debt S + 5.00% 9.36% 8/27/2031 741 726 741 0.04
Encore Holdings, LLC (6) (9) First Lien Debt S + 5.25% 9.58% 11/23/2028 1,812 1,792 1,805 0.10
Encore Holdings, LLC (6) (9) (16) First Lien Debt S + 5.25% 9.58% 11/23/2028 12,409 12,226 12,285 0.67
Encore Holdings, LLC (6) (16) First Lien Debt P + 4.00% 11.50% 11/23/2027 - (5) (2) -
Energy Labs Holdings Corp. (6) (8) First Lien Debt S + 5.00% 9.46% 4/7/2028 467 462 461 0.03
Energy Labs Holdings Corp. (6) (8) First Lien Debt S + 5.00% 9.46% 4/7/2028 195 189 189 0.01
Energy Labs Holdings Corp. (6) (8) (16) First Lien Debt S + 5.00% 9.46% 4/7/2028 - (2) (3) -
FLS Holding, Inc. (6) (8) (12) First Lien Debt S + 5.25% 9.71% 12/15/2028 18,833 18,591 16,825 0.91
FLS Holding, Inc. (6) (8) (12) First Lien Debt S + 5.25% 9.71% 12/15/2028 4,416 4,357 3,945 0.21
FLS Holding, Inc. (6) (8) (12) (16) First Lien Debt S + 5.25% 9.71% 12/17/2027 901 883 709 0.04
Ground Penetrating Radar Systems, LLC (6) (7) (8) First Lien Debt S + 5.25% 9.77% 4/2/2031 20,460 20,183 20,460 1.11
Ground Penetrating Radar Systems, LLC (6) (8) (16) First Lien Debt S + 5.25% 9.77% 4/2/2031 - (52) - -
Ground Penetrating Radar Systems, LLC (6) (16) First Lien Debt P + 4.25% 11.75% 4/2/2031 326 291 326 0.02
Helios Service Partners, LLC (6) (8) First Lien Debt S + 5.00% 9.59% 3/19/2027 6,790 6,678 6,788 0.37
Helios Service Partners, LLC (6) (8) (16) First Lien Debt S + 5.00% 9.59% 3/19/2027 11,098 10,864 11,059 0.60
Helios Service Partners, LLC (6) (8) (16) First Lien Debt S + 5.00% 9.59% 3/19/2027 - (19) - -
Hercules Borrower, LLC (6) (9) (16) First Lien Debt S + 5.25% 9.68% 12/15/2026 C$ 824 448 363 0.02
HSI Halo Acquisition, Inc. (6) (9) First Lien Debt S + 5.00% 9.59% 6/30/2031 13,587 13,458 13,587 0.74
HSI Halo Acquisition, Inc. (6) (9) (16) First Lien Debt S + 5.00% 9.59% 6/30/2031 563 545 563 0.03
HSI Halo Acquisition, Inc. (6) (9) (16) First Lien Debt S + 5.00% 9.59% 6/28/2030 - (20) - -
Iris Buyer, LLC (6) (8) First Lien Debt S + 6.25% 10.84% 10/2/2030 6,938 6,771 6,938 0.38
Iris Buyer, LLC (6) (8) (16) First Lien Debt S + 6.25% 10.84% 10/2/2030 654 635 654 0.04
Iris Buyer, LLC (6) (8) (16) First Lien Debt S + 6.25% 10.84% 10/2/2029 - (22) - -
Procure Acquireco, Inc. (Procure Analytics) (6) (9) First Lien Debt S + 4.75% 9.49% 12/20/2028 3,849 3,800 3,849 0.21
Procure Acquireco, Inc. (Procure Analytics) (6) (9) (16) First Lien Debt S + 4.75% 9.49% 12/20/2028 190 185 187 0.01
Procure Acquireco, Inc. (Procure Analytics) (6) (9) (16) First Lien Debt S + 4.75% 9.49% 12/20/2028 - (3) - -
Pye-Barker Fire & Safety, LLC (6) (9) First Lien Debt S + 4.50% 8.83% 5/26/2031 26,325 26,325 26,325 1.43
Pye-Barker Fire & Safety, LLC (6) (9) (16) First Lien Debt S + 4.50% 8.83% 5/26/2031 3,752 3,685 3,752 0.20
Pye-Barker Fire & Safety, LLC (6) (9) (16) First Lien Debt S + 4.50% 8.83% 5/24/2030 456 423 456 0.02
Routeware, Inc. (6) (8) First Lien Debt S + 5.25% 9.60% 9/18/2031 3,182 3,151 3,182 0.17
Routeware, Inc. (6) (8) (16) First Lien Debt S + 5.25% 9.60% 9/18/2031 - (7) - -
Routeware, Inc. (6) (8) (16) First Lien Debt S + 5.25% 9.60% 9/18/2031 - (3) - -
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Investments-non-controlled/non-affiliated(1) (2)
Footnotes Investment Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares(4)
Cost(5)
Fair Value Percentage of Net Assets
Sherlock Buyer Corp. (6) (8) First Lien Debt S + 5.75% 10.18% 12/08/2028 10,838 $ 10,699 $ 10,838 0.59 %
Sherlock Buyer Corp. (6) (8) (16) First Lien Debt S + 5.75% 10.18% 12/8/2027 - (13) - -
Surewerx Purchaser III, Inc. (6) (9) (12) First Lien Debt C + 5.25% 9.58% 12/28/2029 C$ 5,647 5,451 5,570 0.30
Surewerx Purchaser III, Inc. (6) (9) (12) (16) First Lien Debt S + 5.25% 9.58% 12/28/2029 - (16) - -
Surewerx Purchaser III, Inc. (6) (9) (12) First Lien Debt C + 5.25% 9.58% 12/28/2028 C$ 793 757 776 0.04
Sweep Midco, LLC (6) (14) Second Lien Debt 3/12/2034 1,674 836 1,085 0.06
Sweep Midco, LLC (6) (14) Second Lien Debt 3/12/2036 4,872 - - -
Sweep Purchaser, LLC (6) First Lien Debt S + 5.75% PIK
10.24% 6/30/2027 6,129 6,129 6,129 0.33
Sweep Purchaser, LLC (6) (8) First Lien Debt S + 5.75% 10.24% 6/30/2027 3,163 3,163 3,163 0.17
Sweep Purchaser, LLC (6) (8) (16) First Lien Debt S + 5.75% 10.24% 6/30/2027 - - - -
Tamarack Intermediate, LLC (6) (9) First Lien Debt S + 5.75% 10.30% 3/13/2028 7,019 6,939 7,019 0.38
Tamarack Intermediate, LLC (6) (9) First Lien Debt S + 5.75% 10.30% 3/13/2028 595 584 595 0.03
Tamarack Intermediate, LLC (6) (9) (16) First Lien Debt S + 5.75% 10.30% 3/13/2028 - (10) - -
Transit Technologies, LLC (6) (7) (9) First Lien Debt S + 4.75% 9.51% 8/20/2031 7,955 7,878 7,955 0.43
Transit Technologies, LLC (6) (9) (16) First Lien Debt S + 4.75% 9.51% 8/20/2031 - (13) - -
Transit Technologies, LLC (6) (9) (16) First Lien Debt S + 4.75% 9.51% 8/20/2030 - (16) - -
United Flow Technologies Intermediate Holdco II, LLC (6) (8) First Lien Debt S + 5.25% 9.58% 6/23/2031 8,888 8,762 8,888 0.48
United Flow Technologies Intermediate Holdco II, LLC (6) (8) (16) First Lien Debt S + 5.25% 9.58% 6/23/2031 485 447 485 0.03
United Flow Technologies Intermediate Holdco II, LLC (6) (8) (16) First Lien Debt S + 5.25% 9.58% 6/21/2030 - (14) - -
US Infra Svcs Buyer, LLC (6) (7) (8) First Lien Debt S + 7.25% (incl. 4.75% PIK)
12.01% 4/13/2027 13,851 13,747 12,111 0.66
US Infra Svcs Buyer, LLC (6) (7) (8) First Lien Debt S + 7.25% (incl. 4.75% PIK)
12.01% 4/13/2027 1,955 1,945 1,709 0.09
US Infra Svcs Buyer, LLC (6) (8) First Lien Debt S + 7.25% (incl. 4.75% PIK)
12.01% 4/13/2027 2,250 2,240 1,967 0.11
Vensure Employer Services, Inc. (6) (10) First Lien Debt S + 5.00% 9.33% 9/29/2031 7,972 7,895 7,972 0.43
Vensure Employer Services, Inc. (6) (10) (16) First Lien Debt S + 5.00% 9.33% 9/29/2031 309 296 309 0.02
VRC Companies, LLC (6) (8) First Lien Debt S + 5.75% 10.27% 6/29/2027 72,257 71,720 72,257 3.92
VRC Companies, LLC (6) (8) First Lien Debt S + 5.75% 10.27% 6/29/2027 496 491 496 0.03
VRC Companies, LLC (6) (8) (16) First Lien Debt S + 5.75% 10.27% 6/29/2027 - (10) - -
343,057 340,869 18.50
Construction & Engineering
Arcoro Holdings Corp. (6) (8) First Lien Debt S + 5.50% 9.83% 3/28/2030 12,978 12,744 12,883 0.70
Arcoro Holdings Corp. (6) (8) (16) First Lien Debt S + 5.50% 9.83% 3/28/2030 - (34) (14) -
KPSKY Acquisition, Inc. (6) (9) First Lien Debt S + 5.50% 10.19% 10/19/2028 33,518 33,103 29,640 1.61
KPSKY Acquisition, Inc. (6) (9) First Lien Debt S + 5.50% 10.19% 10/19/2028 7,675 7,573 6,788 0.37
LJ Avalon Holdings, LLC (6) (8) First Lien Debt S + 5.00% 9.53% 2/1/2030 4,090 3,992 4,090 0.22
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Investments-non-controlled/non-affiliated(1) (2)
Footnotes Investment Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares(4)
Cost(5)
Fair Value Percentage of Net Assets
LJ Avalon Holdings, LLC (6) (8) (16) First Lien Debt S + 5.00% 9.53% 2/1/2030 1,674 $ 1,627 $ 1,674 0.09 %
LJ Avalon Holdings, LLC (6) (8) (16) First Lien Debt S + 5.00% 9.53% 2/1/2029 - (14) - -
Superman Holdings, LLC (6) (9) First Lien Debt S + 4.50% 8.86% 8/29/2031 20,047 19,951 20,047 1.09
Superman Holdings, LLC (6) (9) (16) First Lien Debt S + 4.50% 8.86% 8/29/2031 - (16) - -
Superman Holdings, LLC (6) (9) (16) First Lien Debt S + 4.50% 8.86% 8/29/2031 - (14) - -
78,912 75,108 4.08
Consumer Staples Distribution & Retail
PDI TA Holdings, Inc. (6) (9) First Lien Debt S + 5.50% 10.09% 2/3/2031 22,395 22,204 22,279 1.21
PDI TA Holdings, Inc. (6) (9) (16) First Lien Debt S + 5.50% 10.09% 2/3/2031 2,911 2,862 2,884 0.16
PDI TA Holdings, Inc. (6) (9) (16) First Lien Debt S + 5.50% 10.09% 2/3/2031 - (20) (12) -
25,046 25,151 1.37
Containers & Packaging
BP Purchaser, LLC (6) (9) First Lien Debt S + 5.50% 10.16% 12/11/2028 17,030 16,811 15,794 0.86
FORTIS Solutions Group, LLC (6) (9) First Lien Debt S + 5.50% 9.93% 10/13/2028 26,676 26,346 26,676 1.45
FORTIS Solutions Group, LLC (6) (9) (16) First Lien Debt S + 5.50% 9.93% 10/13/2028 145 140 145 0.01
FORTIS Solutions Group, LLC (6) (9) (16) First Lien Debt S + 5.50% 9.93% 10/15/2027 945 920 945 0.05
44,217 43,560 2.36
Distributors
48Forty Solutions, LLC (6) (8) First Lien Debt S + 6.00% (incl. 4.00% PIK)
10.65% 11/30/2029 17,476 17,267 11,291 0.61
48Forty Solutions, LLC (6) (8) (16) First Lien Debt S + 6.00% (incl. 4.00% PIK)
10.65% 11/30/2029 1,167 1,140 207 0.01
ABB Concise Optical Group, LLC (6) (9) First Lien Debt S + 7.50% 11.98% 2/23/2028 17,008 16,749 15,899 0.86
Avalara, Inc. (6) (9) First Lien Debt S + 6.25% 10.58% 10/19/2028 10,402 10,224 10,402 0.56
Avalara, Inc. (6) (16) First Lien Debt S + 6.25% 10.58% 10/19/2028 - (16) - -
Bradyplus Holdings, LLC (6) (7) (8) First Lien Debt S + 5.00% 9.52% 10/31/2029 7,950 7,817 7,950 0.43
Bradyplus Holdings, LLC (6) (8) (16) First Lien Debt S + 5.00% 9.52% 10/31/2029 50 47 50 -
PT Intermediate Holdings III, LLC (6) (9) First Lien Debt S + 5.00% (incl. 1.75% PIK)
9.33% 4/9/2030 41,594 41,239 41,594 2.26
PT Intermediate Holdings III, LLC (6) (9) (16) First Lien Debt S + 5.00% (incl. 1.75% PIK)
9.33% 4/9/2030 - (4) - -
94,463 87,393 4.74
Diversified Consumer Services
Any Hour, LLC (6) (7) First Lien Debt S + 5.00% 9.33% 5/23/2030 23,604 23,277 23,354 1.27
Any Hour, LLC (6) (16) First Lien Debt S + 5.00% 9.33% 5/23/2030 669 617 595 0.03
Any Hour, LLC (6) (16) First Lien Debt S + 5.00% 9.33% 5/23/2030 1,662 1,616 1,626 0.09
Any Hour, LLC (6) Other Debt 13.00% PIK
13.00% 5/23/2031 6,371 6,260 6,304 0.34
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Investments-non-controlled/non-affiliated(1) (2)
Footnotes Investment Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares(4)
Cost(5)
Fair Value Percentage of Net Assets
Apex Service Partners, LLC (6) (7) (8) First Lien Debt S + 5.00% 9.51% 10/24/2030 36,909 $ 36,334 $ 36,909 2.00 %
Apex Service Partners, LLC (6) (8) First Lien Debt S + 5.00% 9.51% 10/24/2030 8,789 8,629 8,789 0.48
Apex Service Partners, LLC (6) (8) (16) First Lien Debt S + 5.00% 9.51% 10/24/2029 1,980 1,937 1,980 0.11
Assembly Intermediate, LLC (6) (8) First Lien Debt S + 5.25% 9.58% 10/19/2027 20,741 20,518 20,741 1.13
Assembly Intermediate, LLC (6) (8) First Lien Debt S + 5.25% 9.58% 10/19/2027 4,148 4,106 4,148 0.23
Assembly Intermediate, LLC (6) (8) (16) First Lien Debt S + 5.25% 9.58% 10/19/2027 - (19) - -
Eclipse Buyer, Inc. (6) (10) First Lien Debt S + 4.75% 9.26% 9/8/2031 4,244 4,203 4,244 0.23
Eclipse Buyer, Inc. (6) (10) (16) First Lien Debt S + 4.75% 9.26% 9/8/2031 - (3) - -
Eclipse Buyer, Inc. (6) (10) (16) First Lien Debt S + 4.75% 9.26% 9/6/2031 - (4) - -
Essential Services Holding Corporation (6) (9) First Lien Debt S + 5.00% 9.65% 6/17/2031 17,244 17,082 17,244 0.94
Essential Services Holding Corporation (6) (9) (16) First Lien Debt S + 5.00% 9.65% 6/17/2031 - (22) - -
Essential Services Holding Corporation (6) (9) (16) First Lien Debt S + 5.00% 9.65% 6/17/2030 - (27) - -
EVDR Purchaser, Inc. (6) (9) First Lien Debt S + 5.50% 9.86% 2/14/2031 20,428 20,057 20,428 1.11
EVDR Purchaser, Inc. (6) (9) (16) First Lien Debt S + 5.50% 9.86% 2/14/2031 - (51) - -
EVDR Purchaser, Inc. (6) (9) (16) First Lien Debt S + 5.50% 9.86% 2/14/2031 588 526 588 0.03
FPG Intermediate Holdco, LLC (6) (8) (11) First Lien Debt S + 6.75% (incl. 5.75% PIK)
11.09% 3/5/2027 435 431 346 0.02
FPG Intermediate Holdco, LLC (6) (8) (11) (16) First Lien Debt S + 6.75% (incl. 5.75% PIK)
11.09% 3/5/2027 11 11 11 -
Heartland Home Services (6) (9) First Lien Debt S + 5.75% 10.18% 12/15/2026 1,926 1,919 1,825 0.10
Lightspeed Solution, LLC (6) (9) First Lien Debt S + 6.50% (incl. 2.17% PIK)
10.86% 3/1/2028 8,200 8,109 8,200 0.45
Lightspeed Solution, LLC (6) (9) First Lien Debt S + 6.50% (incl. 2.17% PIK)
10.86% 3/1/2028 541 534 541 0.03
LUV Car Wash Group, LLC (6) (8) First Lien Debt S + 7.00% 11.74% 12/9/2026 887 882 887 0.05
Magnolia Wash Holdings (6) (8) First Lien Debt S + 6.50% 11.36% 7/14/2028 3,263 3,219 2,959 0.16
Magnolia Wash Holdings (6) (8) First Lien Debt S + 6.50% 11.36% 7/14/2028 692 682 627 0.03
Magnolia Wash Holdings (6) (8) (16) First Lien Debt S + 6.50% 11.36% 7/14/2028 87 85 72 -
Project Accelerate Parent, LLC (6) (9) First Lien Debt S + 5.25% 9.61% 2/24/2031 8,706 8,627 8,706 0.47
Project Accelerate Parent, LLC (6) (9) (16) First Lien Debt S + 5.25% 9.61% 2/24/2031 - (11) - -
Vertex Service Partners, LLC (6) (7) (9) First Lien Debt S + 5.75% 10.11% 11/8/2030 1,761 1,722 1,761 0.10
Vertex Service Partners, LLC (6) (9) (16) First Lien Debt S + 5.75% 10.11% 11/8/2030 3,409 3,330 3,405 0.18
Vertex Service Partners, LLC (6) (9) (16) First Lien Debt S + 5.75% 10.11% 11/8/2030 407 398 407 0.02
174,974 176,697 9.59
Electrical Equipment
Spark Buyer, LLC (6) (9) First Lien Debt S + 5.25% 9.77% 10/15/2031 2,188 2,155 2,155 0.12
Spark Buyer, LLC (6) (9) (16) First Lien Debt S + 5.25% 9.77% 10/15/2031 - (6) (6) -
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Investments-non-controlled/non-affiliated(1) (2)
Footnotes Investment Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares(4)
Cost(5)
Fair Value Percentage of Net Assets
Spark Buyer, LLC (6) (9) (16) First Lien Debt S + 5.25% 9.77% 10/15/2031 - $ (6) $ (6) - %
2,143 2,143 0.12
Electronic Equipment, Instruments & Components
Abracon Group Holdings, LLC (6) (9) First Lien Debt S + 6.60% (incl. 4.60% PIK)
11.30% 7/6/2028 6,061 5,986 4,496 0.24
Abracon Group Holdings, LLC (6) (9) First Lien Debt S + 6.60% (incl. 4.60% PIK)
11.30% 7/6/2028 401 396 297 0.02
Dwyer Instruments, Inc. (6) (9) First Lien Debt S + 4.75% 9.13% 7/20/2029 14,308 14,127 14,270 0.77
Dwyer Instruments, Inc. (6) (9) (16) First Lien Debt S + 4.75% 9.13% 7/20/2029 4,956 4,877 4,954 0.27
Dwyer Instruments, Inc. (6) (9) (16) First Lien Debt S + 4.75% 9.13% 7/20/2029 233 214 233 0.01
Infinite Bidco, LLC (6) (10) First Lien Debt S + 6.25% 10.77% 3/2/2028 12,235 11,986 12,235 0.66
Infinite Bidco, LLC (10) Second Lien Debt S + 7.00% 11.85% 3/2/2029 25,500 25,454 22,440 1.22
Magneto Components Buyco, LLC (6) (7) (9) First Lien Debt S + 6.00% (incl. 1.50% PIK)
10.33% 12/5/2030 15,365 15,118 15,261 0.83
Magneto Components Buyco, LLC (6) (9) (16) First Lien Debt S + 6.00% (incl. 1.50% PIK)
10.33% 12/5/2030 - (24) (21) -
Magneto Components Buyco, LLC (6) (9) (16) First Lien Debt S + 6.00% (incl. 1.50% PIK)
10.33% 12/5/2029 - (38) (17) -
NSi Holdings, Inc. (6) (9) First Lien Debt S + 5.00% 9.36% 11/15/2031 7,368 7,296 7,296 0.40
NSi Holdings, Inc. (6) (9) (16) First Lien Debt S + 5.00% 9.36% 11/15/2031 - (6) (6) -
NSi Holdings, Inc. (6) (9) (16) First Lien Debt S + 5.00% 9.36% 11/15/2031 - (13) (13) -
85,373 81,425 4.42
Financial Services
Applitools, Inc. (6) (9) (12) First Lien Debt S + 6.25% PIK
10.58% 5/25/2029 4,023 3,987 3,989 0.22
Applitools, Inc. (6) (9) (12) (16) First Lien Debt S + 6.25% 10.58% 5/25/2028 - (5) (4) -
Cerity Partners, LLC (6) (9) First Lien Debt S + 5.25% 9.76% 7/30/2029 4,707 4,598 4,707 0.26
Cerity Partners, LLC (6) (9) (16) First Lien Debt S + 5.25% 9.76% 7/30/2029 7,568 7,410 7,568 0.41
Cerity Partners, LLC (6) (9) (16) First Lien Debt S + 5.25% 9.76% 7/30/2029 - (2) - -
GC Waves Holdings, Inc. (6) (9) First Lien Debt S + 4.75% 9.21% 10/4/2030 8,909 8,830 8,841 0.48
GC Waves Holdings, Inc. (6) (9) (16) First Lien Debt S + 4.75% 9.21% 10/4/2030 463 368 434 0.02
GC Waves Holdings, Inc. (6) (9) (16) First Lien Debt S + 4.75% 9.21% 10/4/2030 - (5) (3) -
MAI Capital Management Intermediate, LLC (6) (7) (9) First Lien Debt S + 4.75% 9.08% 8/29/2031 4,632 4,587 4,632 0.25
MAI Capital Management Intermediate, LLC (6) (9) (16) First Lien Debt S + 4.75% 9.08% 8/29/2031 866 849 866 0.05
MAI Capital Management Intermediate, LLC (6) (9) (16) First Lien Debt S + 4.75% 9.08% 8/29/2031 138 128 138 0.01
PMA Parent Holdings, LLC (6) (9) First Lien Debt S + 5.50% 9.83% 1/31/2031 3,036 2,992 2,992 0.16
PMA Parent Holdings, LLC (6) (9) (16) First Lien Debt S + 5.50% 9.83% 1/31/2031 - (3) (3) -
RFS Opco, LLC (6) (10) First Lien Debt S + 4.75% 9.08% 4/4/2031 14,464 14,330 14,407 0.78
RFS Opco, LLC (6) (10) (16) First Lien Debt S + 3.50% 7.83% 4/4/2029 90 86 88 -
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Investments-non-controlled/non-affiliated(1) (2)
Footnotes Investment Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares(4)
Cost(5)
Fair Value Percentage of Net Assets
SitusAMC Holdings Corp. (6) (9) First Lien Debt S + 5.50% 9.93% 12/22/2027 7,217 $ 7,180 $ 7,217 0.39 %
Smarsh, Inc. (6) (9) First Lien Debt S + 5.75% 10.08% 2/16/2029 4,286 4,228 4,286 0.23
Smarsh, Inc. (6) (9) (16) First Lien Debt S + 5.75% 10.08% 2/16/2029 536 526 536 0.03
Smarsh, Inc. (6) (9) (16) First Lien Debt S + 5.75% 10.08% 2/16/2029 107 104 107 0.01
Trintech, Inc. (6) (7) (8) First Lien Debt S + 5.50% 9.86% 7/25/2029 33,745 33,195 33,252 1.81
Trintech, Inc. (6) (8) (16) First Lien Debt S + 5.50% 9.86% 7/25/2029 837 793 794 0.04
94,176 94,844 5.15
Food Products
AMCP Pet Holdings, Inc. (Brightpet) (6) (8) First Lien Debt S + 7.00% (incl. 3.00% PIK)
11.74% 10/5/2026 41,811 41,312 39,875 2.16
AMCP Pet Holdings, Inc. (Brightpet) (6) (8) First Lien Debt S + 7.00% (incl. 3.00% PIK)
11.74% 10/5/2026 5,903 5,850 5,630 0.31
Familia Intermediate Holdings I Corp. (Teasdale Latin Foods) (6) (13) Other Debt 16.25% PIK
16.25% 6/18/2026 1,500 1,500 885 0.05
Nellson Nutraceutical, Inc. (6) (7) (8) First Lien Debt S + 5.75% 10.40% 12/23/2025 18,270 18,192 18,270 0.99
Teasdale Foods, Inc. (Teasdale Latin Foods) (6) (8) First Lien Debt S + 6.25% 10.99% 12/18/2025 10,812 10,764 10,504 0.57
77,618 75,164 4.08
Ground Transportation
SV Newco 2, Inc. (6) (9) (12) First Lien Debt S + 4.75% 9.26% 6/2/2031 22,853 22,530 22,672 1.23
SV Newco 2, Inc. (6) (9) (12) (16) First Lien Debt S + 4.75% 9.26% 6/2/2031 - (98) (113) (0.01)
SV Newco 2, Inc. (6) (9) (12) (16) First Lien Debt S + 4.75% 9.26% 6/2/2031 - (118) (68) -
22,314 22,491 1.22
Health Care Equipment & Supplies
Performance Health & Wellness (6) (7) (8) First Lien Debt S + 5.75% 10.21% 7/12/2027 9,398 9,305 9,398 0.51
PerkinElmer U.S., LLC (6) (7) (8) First Lien Debt S + 5.00% 9.34% 3/13/2029 4,340 4,244 4,310 0.23
Tidi Legacy Products, Inc. (6) (8) First Lien Debt S + 5.25% 9.61% 12/19/2029 1,858 1,825 1,854 0.10
Tidi Legacy Products, Inc. (6) (8) (16) First Lien Debt S + 5.25% 9.61% 12/19/2029 - (4) (1) -
Tidi Legacy Products, Inc. (6) (8) (16) First Lien Debt S + 5.25% 9.61% 12/19/2029 - (6) (1) -
YI, LLC (6) (7) (8) First Lien Debt S + 5.75% 10.39% 12/3/2029 5,597 5,501 5,597 0.30
YI, LLC (6) (8) (16) First Lien Debt S + 5.75% 10.39% 12/3/2029 - (10) - -
YI, LLC (6) (8) (16) First Lien Debt S + 5.75% 10.39% 12/3/2029 - (14) - -
20,841 21,157 1.15
Health Care Providers & Services
Advarra Holdings, Inc. (6) (9) First Lien Debt S + 4.50% 8.86% 9/15/2031 449 441 447 0.02
Advarra Holdings, Inc. (6) (9) (16) First Lien Debt S + 4.50% 8.86% 9/15/2031 - - - -
DCA Investment Holdings, LLC (6) (9) First Lien Debt S + 6.50% 10.77% 4/3/2028 20,283 20,026 20,126 1.09
DCA Investment Holdings, LLC (6) (9) First Lien Debt S + 6.50% 10.77% 4/3/2028 1,783 1,749 1,769 0.10
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Investments-non-controlled/non-affiliated(1) (2)
Footnotes Investment Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares(4)
Cost(5)
Fair Value Percentage of Net Assets
Gateway US Holdings, Inc. (6) (9) (12) First Lien Debt S + 4.75% 9.08% 9/22/2028 744 $ 740 $ 744 0.04 %
Gateway US Holdings, Inc. (6) (9) (12) First Lien Debt S + 4.75% 9.08% 9/22/2028 210 209 210 0.01
Gateway US Holdings, Inc. (6) (9) (12) (16) First Lien Debt S + 4.75% 9.08% 9/22/2028 - - - -
Heartland Veterinary Partners, LLC (6) (8) First Lien Debt S + 4.75% 9.47% 12/10/2026 1,828 1,820 1,828 0.10
Heartland Veterinary Partners, LLC (6) (8) Second Lien Debt 14.50% (incl. 7.00% PIK)
14.50% 12/10/2027 4,174 4,130 4,174 0.23
Heartland Veterinary Partners, LLC (6) (8) First Lien Debt S + 4.75% 9.47% 12/10/2026 4,139 4,124 4,139 0.22
Heartland Veterinary Partners, LLC (6) (8) Second Lien Debt 14.50% (incl. 7.00% PIK)
14.50% 12/10/2027 1,623 1,605 1,623 0.09
Heartland Veterinary Partners, LLC (6) (8) (16) First Lien Debt S + 4.75% 9.47% 12/10/2026 - (1) - -
iCIMS, Inc. (6) (9) First Lien Debt S + 5.75% 10.38% 8/18/2028 7,080 6,997 7,080 0.38
iCIMS, Inc. (6) (9) (16) First Lien Debt S + 5.75% 10.38% 8/18/2028 9 9 9 -
Imagine 360, LLC (6) (9) First Lien Debt S + 4.75% 9.10% 10/2/2028 12,157 12,043 12,157 0.66
Imagine 360, LLC (6) (9) (16) First Lien Debt S + 4.75% 9.10% 10/2/2028 - (8) - -
Imagine 360, LLC (6) (9) (16) First Lien Debt S + 4.75% 9.10% 10/2/2028 - (10) - -
Intelerad Medical Systems Incorporated (6) (8) (12) First Lien Debt S + 6.50% 11.24% 8/21/2026 490 483 475 0.03
Intelerad Medical Systems Incorporated (6) (8) (12) First Lien Debt S + 6.50% 11.24% 8/21/2026 34 33 33 -
Invictus Buyer, LLC (6) (9) First Lien Debt S + 4.75% 9.08% 6/3/2031 4,040 4,002 4,028 0.22
Invictus Buyer, LLC (6) (9) (16) First Lien Debt S + 4.75% 9.08% 6/3/2031 - (8) (5) -
Invictus Buyer, LLC (6) (9) (16) First Lien Debt S + 4.75% 9.08% 6/3/2031 - (6) (2) -
mPulse Mobile, Inc. (6) (9) First Lien Debt S + 6.25% 10.68% 12/17/2027 11,989 11,854 11,968 0.65
mPulse Mobile, Inc. (6) (9) First Lien Debt S + 6.25% 10.68% 12/17/2027 19,928 19,554 19,697 1.07
mPulse Mobile, Inc. (6) (9) (16) First Lien Debt S + 6.25% 10.68% 12/17/2027 934 889 901 0.05
Pareto Health Intermediate Holdings, Inc. (6) (8) First Lien Debt S + 5.00% 9.33% 6/1/2030 28,593 28,263 28,593 1.55
Pareto Health Intermediate Holdings, Inc. (6) (8) (16) First Lien Debt S + 5.00% 9.33% 6/1/2030 - (28) (28) -
Pareto Health Intermediate Holdings, Inc. (6) (8) (16) First Lien Debt S + 5.00% 9.33% 6/1/2029 - (12) - -
PPV Intermediate Holdings, LLC (6) (9) First Lien Debt S + 5.75% 10.26% 8/31/2029 4,335 4,199 4,332 0.24
PPV Intermediate Holdings, LLC (6) (9) First Lien Debt S + 6.00% 10.52% 8/31/2029 15,048 14,918 15,048 0.82
Promptcare Infusion Buyer, Inc. (6) (8) First Lien Debt S + 6.00% 10.44% 9/1/2027 8,889 8,798 8,773 0.48
Promptcare Infusion Buyer, Inc. (6) (8) (16) First Lien Debt S + 6.00% 10.44% 9/1/2027 2,767 2,723 2,713 0.15
Stepping Stones Healthcare Services, LLC (6) (9) First Lien Debt S + 4.75% 9.08% 1/2/2029 4,255 4,213 4,255 0.23
Stepping Stones Healthcare Services, LLC (6) (9) (16) First Lien Debt S + 4.75% 9.08% 1/2/2029 1,079 1,061 1,077 0.06
Stepping Stones Healthcare Services, LLC (6) (9) (16) First Lien Debt S + 4.75% 9.08% 12/30/2026 - (4) - -
Suveto (6) (9) First Lien Debt S + 4.75% 9.11% 9/9/2027 11,716 11,653 11,604 0.63
Suveto (6) (16) First Lien Debt P + 3.75% 11.25% 9/9/2027 65 55 52 -
Suveto Buyer, LLC (6) (9) (16) First Lien Debt S + 4.75% 9.11% 9/9/2027 62 61 61 -
Tivity Health, Inc. (6) (9) First Lien Debt S + 5.00% 9.36% 6/28/2029 8,612 8,572 8,612 0.47
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Investments-non-controlled/non-affiliated(1) (2)
Footnotes Investment Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares(4)
Cost(5)
Fair Value Percentage of Net Assets
Vardiman Black Holdings, LLC (6) (10) First Lien Debt S + 7.00% (incl. 2.00% PIK)
11.65% 03/18/2027 5,767 $ 5,767 $ 5,767 0.31 %
Vardiman Black Holdings, LLC (6) (10) (11) (16) First Lien Debt S + 7.00% (incl. 2.00% PIK)
11.65% 03/18/2027 597 582 597 0.03
181,496 182,857 9.93
Health Care Technology
Hyland Software, Inc. (6) (7) (9) First Lien Debt S + 6.00% 10.36% 9/19/2030 39,259 38,748 39,259 2.13
Hyland Software, Inc. (6) (9) (16) First Lien Debt S + 6.00% 10.36% 9/19/2029 - (22) - -
Lightspeed Buyer, Inc. (6) (7) (8) First Lien Debt S + 4.75% 9.08% 2/3/2027 23,156 22,981 23,156 1.26
Lightspeed Buyer, Inc. (6) (8) (16) First Lien Debt S + 4.75% 9.08% 2/3/2027 - (5) - -
Lightspeed Buyer, Inc. (6) (8) (16) First Lien Debt S + 4.75% 9.08% 2/3/2027 - (1) - -
61,701 62,415 3.39
Industrial Conglomerates
Aptean, Inc. (6) (7) (9) First Lien Debt S + 5.00% 9.59% 1/30/2031 11,746 11,646 11,730 0.64
Aptean, Inc. (6) (9) (16) First Lien Debt S + 5.00% 9.59% 1/30/2031 192 182 191 0.01
Aptean, Inc. (6) (9) (16) First Lien Debt S + 5.00% 9.59% 1/30/2031 - (9) (1) -
Excelitas Technologies Corp. (6) (9) First Lien Debt S + 5.25% 9.61% 8/13/2029 1,298 1,278 1,284 0.07
Excelitas Technologies Corp. (6) (9) First Lien Debt E + 5.25% 8.11% 8/13/2029 € 237 242 243 0.01
Excelitas Technologies Corp. (6) (9) (16) First Lien Debt S + 5.25% 9.61% 8/13/2029 - (13) (20) -
Excelitas Technologies Corp. (6) (9) (16) First Lien Debt S + 5.25% 9.61% 8/14/2028 - (2) (1) -
Raptor Merger Sub Debt, LLC (7) (9) First Lien Debt S + 5.50% 9.83% 4/1/2029 31,907 31,206 31,801 1.73
Raptor Merger Sub Debt, LLC (9) (16) First Lien Debt S + 5.50% 9.83% 4/1/2029 488 435 480 0.03
44,965 45,707 2.48
Insurance Services
Amerilife Holdings, LLC (6) (9) First Lien Debt S + 5.00% 9.70% 8/31/2029 2,863 2,821 2,863 0.16
Amerilife Holdings, LLC (6) (9) (16) First Lien Debt S + 5.00% 9.70% 8/31/2029 1,257 1,248 1,257 0.07
Amerilife Holdings, LLC (6) (9) (16) First Lien Debt S + 5.00% 9.70% 8/31/2028 - (5) - -
Fetch Insurance Services, LLC (6) Other Debt 12.75% (incl. 3.75% PIK)
12.75% 10/31/2027 2,029 1,995 2,009 0.11
Foundation Risk Partners Corp. (6) (9) First Lien Debt S + 5.25% 9.58% 10/29/2030 42,100 41,635 42,100 2.29
Foundation Risk Partners Corp. (6) (9) First Lien Debt S + 5.25% 9.58% 10/29/2030 9,156 9,056 9,156 0.50
Foundation Risk Partners Corp. (6) (9) (16) First Lien Debt S + 5.25% 9.58% 10/29/2029 - (60) - -
Galway Borrower, LLC (6) (9) First Lien Debt S + 4.50% 8.83% 9/29/2028 30,430 30,061 30,430 1.65
Galway Borrower, LLC (6) (9) (16) First Lien Debt S + 4.50% 8.83% 9/29/2028 1,698 1,668 1,698 0.09
Galway Borrower, LLC (6) (9) (16) First Lien Debt S + 4.50% 8.83% 9/29/2028 185 160 185 0.01
Higginbotham Insurance Agency, Inc. (6) (7) (8) First Lien Debt S + 4.50% 8.86% 11/24/2028 23,662 23,484 23,560 1.28
Higginbotham Insurance Agency, Inc. (6) (8) (16) First Lien Debt S + 4.50% 8.86% 11/24/2028 2,304 2,260 2,270 0.12
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Investments-non-controlled/non-affiliated(1) (2)
Footnotes Investment Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares(4)
Cost(5)
Fair Value Percentage of Net Assets
High Street Buyer, Inc. (6) (7) (9) First Lien Debt S + 5.25% 9.58% 4/14/2028 9,789 $ 9,682 $ 9,789 0.53 %
High Street Buyer, Inc. (6) (9) (16) First Lien Debt S + 5.25% 9.58% 4/14/2028 39,313 38,797 39,288 2.13
High Street Buyer, Inc. (6) (9) (16) First Lien Debt S + 5.25% 9.58% 4/16/2027 - (16) - -
Inszone Mid, LLC (6) (8) First Lien Debt S + 5.25% 9.50% 11/30/2029 4,410 4,335 4,410 0.24
Inszone Mid, LLC (6) (8) (16) First Lien Debt S + 5.25% 9.50% 11/30/2029 5,425 5,321 5,425 0.29
Inszone Mid, LLC (6) (8) (16) First Lien Debt S + 5.25% 9.50% 11/30/2029 - (45) - -
Inszone Mid, LLC (6) (8) (16) First Lien Debt S + 5.25% 9.50% 11/30/2029 - (20) - -
Integrity Marketing Acquisition, LLC (6) (7) (9) First Lien Debt S + 5.00% 9.51% 8/25/2028 44,454 44,454 44,454 2.41
Integrity Marketing Acquisition, LLC (6) (9) (16) First Lien Debt S + 5.00% 9.51% 8/25/2028 - - - -
Long Term Care Group, Inc. (6) (9) (11) First Lien Debt S + 6.00% (incl. 3.73% PIK)
10.33% 9/8/2027 5,425 5,371 4,650 0.25
Majesco (6) (7) (8) First Lien Debt S + 4.75% 9.08% 9/21/2028 33,555 33,077 33,555 1.82
Majesco (6) (8) (16) First Lien Debt S + 4.75% 9.08% 9/21/2027 - (14) - -
Patriot Growth Insurance Services, LLC (6) (7) (9) First Lien Debt S + 5.00% 9.48% 10/16/2028 61,723 60,953 61,723 3.35
Patriot Growth Insurance Services, LLC (6) (9) (16) First Lien Debt S + 5.00% 9.48% 10/16/2028 2,243 2,194 2,243 0.12
Peter C. Foy & Associates Insurance Services, LLC (6) (9) First Lien Debt S + 5.50% 9.83% 11/1/2028 19,998 19,854 19,998 1.09
Peter C. Foy & Associates Insurance Services, LLC (6) (9) (16) First Lien Debt S + 5.50% 9.83% 11/1/2028 8,511 8,443 8,504 0.46
Peter C. Foy & Associates Insurance Services, LLC (6) (9) (16) First Lien Debt S + 5.50% 9.83% 11/1/2027 - (4) - -
RSC Acquisition, Inc. (6) (9) First Lien Debt S + 4.75% 9.21% 11/1/2029 32,129 31,780 32,129 1.74
RSC Acquisition, Inc. (6) (9) First Lien Debt S + 4.75% 9.21% 11/1/2029 3,781 3,758 3,781 0.21
World Insurance Associates, LLC (6) (7) (8) First Lien Debt S + 6.00% 10.34% 4/3/2028 66,670 65,501 66,557 3.61
World Insurance Associates, LLC (6) (8) (16) First Lien Debt S + 6.00% 10.34% 4/3/2028 - (6) (28) -
447,738 452,006 24.54
Interactive Media & Services
FMG Suite Holdings, LLC (6) (8) First Lien Debt S + 5.50% 9.85% 10/30/2026 23,534 23,319 23,371 1.27
FMG Suite Holdings, LLC (6) (8) First Lien Debt S + 5.50% 9.85% 10/30/2026 4,522 4,492 4,487 0.24
FMG Suite Holdings, LLC (6) (8) (16) First Lien Debt S + 5.50% 9.85% 10/30/2026 - (16) (18) -
Spectrio, LLC (6) (7) (8) First Lien Debt S + 6.00% 10.51% 12/9/2026 31,725 31,518 29,197 1.58
Spectrio, LLC (6) (8) First Lien Debt S + 6.00% 10.51% 12/9/2026 12,798 12,770 11,778 0.64
Spectrio, LLC (6) (8) First Lien Debt S + 6.00% 10.51% 12/9/2026 4,036 4,011 3,715 0.20
Triple Lift, Inc. (6) (7) (9) First Lien Debt S + 5.75% 10.25% 5/5/2028 27,020 26,721 25,864 1.40
Triple Lift, Inc. (6) (9) (16) First Lien Debt S + 5.75% 10.25% 5/5/2028 - (38) (171) (0.01)
102,777 98,223 5.33
IT Services
Apollo Acquisition, Inc. (6) First Lien Debt S + 5.00% 9.33% 12/30/2031 17,469 17,294 17,294 0.94
Apollo Acquisition, Inc. (6) (16) First Lien Debt S + 5.00% 9.33% 12/30/2031 - (31) (31) -
Apollo Acquisition, Inc. (6) (16) First Lien Debt S + 5.00% 9.33% 12/30/2030 - (24) (24) -
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Investments-non-controlled/non-affiliated(1) (2)
Footnotes Investment Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares(4)
Cost(5)
Fair Value Percentage of Net Assets
Atlas Purchaser, Inc. (6) (7) (9) First Lien Debt S + 7.50% (incl. 5.50% PIK)
11.33% 5/5/2028 5,811 $ 5,811 $ 3,463 0.19 %
Atlas Purchaser, Inc. (6) (7) (9) First Lien Debt S + 7.50% (incl. 6.50% PIK)
11.33% 5/5/2028 2,510 2,510 2,510 0.14
Catalis Intermediate, Inc. (6) (7) (9) First Lien Debt S + 5.50% 9.98% 8/4/2027 38,954 38,469 38,370 2.08
Catalis Intermediate, Inc. (6) (9) First Lien Debt S + 5.50% 9.98% 8/4/2027 8,765 8,665 8,633 0.47
Catalis Intermediate, Inc. (6) (9) (16) First Lien Debt S + 5.50% 9.98% 8/4/2027 1,460 1,414 1,396 0.08
Donuts, Inc. (6) (8) First Lien Debt S + 5.00% 9.49% 12/29/2027 24,599 24,415 24,550 1.33
GI DI Cornfield Acquisition, LLC (6) First Lien Debt S + 4.50% 8.84% 3/9/2028 30,393 29,999 30,098 1.63
GI DI Cornfield Acquisition, LLC (6) (16) First Lien Debt S + 4.50% 8.84% 3/9/2028 - (99) (152) (0.01)
Help/Systems Holdings, Inc. (Fortra LLC) (9) Second Lien Debt S + 6.75% 11.44% 11/19/2027 17,500 17,500 13,576 0.74
Idera, Inc. (6) (9) Second Lien Debt S + 6.75% 11.47% 3/2/2029 2,607 2,595 2,607 0.14
Recovery Point Systems, Inc. (6) (7) (8) First Lien Debt S + 6.00% 10.73% 8/12/2026 40,215 39,955 40,215 2.18
Recovery Point Systems, Inc. (6) (8) (16) First Lien Debt S + 6.00% 10.73% 8/12/2026 - (21) - -
Redwood Services Group, LLC (6) (9) First Lien Debt S + 6.25% 10.68% 6/15/2029 10,720 10,615 10,720 0.58
Redwood Services Group, LLC (6) (9) First Lien Debt S + 6.25% 10.68% 6/15/2029 8,845 8,723 8,827 0.48
Ridge Trail US Bidco, Inc. (6) (8) (12) First Lien Debt S + 4.50% 8.83% 9/30/2031 23,976 23,626 23,912 1.30
Ridge Trail US Bidco, Inc. (6) (8) (12) (16) First Lien Debt S + 4.50% 8.83% 9/30/2031 - (60) (22) -
Ridge Trail US Bidco, Inc. (6) (8) (12) (16) First Lien Debt S + 4.50% 8.83% 3/31/2031 744 704 737 0.04
Syntax Systems, Ltd. (6) (9) (12) First Lien Debt S + 5.00% 9.46% 10/27/2028 37,377 37,153 37,296 2.02
Thrive Buyer, Inc. (Thrive Networks) (6) (8) First Lien Debt S + 6.00% 10.78% 1/22/2027 22,702 22,490 22,702 1.23
Thrive Buyer, Inc. (Thrive Networks) (6) (8) First Lien Debt S + 6.00% 10.78% 1/22/2027 16,740 16,595 16,740 0.91
Thrive Buyer, Inc. (Thrive Networks) (6) (8) (16) First Lien Debt S + 6.00% 10.78% 1/22/2027 1,321 1,307 1,321 0.07
UpStack, Inc. (6) (7) (9) First Lien Debt S + 5.00% 9.52% 8/25/2031 9,750 9,656 9,750 0.53
UpStack, Inc. (6) (9) (16) First Lien Debt S + 5.00% 9.52% 8/25/2031 - (18) - -
UpStack, Inc. (6) (9) (16) First Lien Debt S + 5.00% 9.52% 8/25/2031 225 211 225 0.01
Victors Purchaser, LLC (6) (10) First Lien Debt S + 4.75% 9.08% 8/15/2031 5,094 5,045 5,094 0.28
Victors Purchaser, LLC (6) (10) (16) First Lien Debt S + 4.75% 9.08% 8/15/2031 - (6) - -
Victors Purchaser, LLC (6) (10) (16) First Lien Debt S + 4.75% 9.08% 8/15/2031 C$ 146 99 101 0.01
324,592 319,908 17.37
Life Sciences Tools & Services
Model N, Inc. (6) (9) First Lien Debt S + 5.00% 9.33% 6/27/2031 11,934 11,821 11,934 0.65
Model N, Inc. (6) (9) (16) First Lien Debt S + 5.00% 9.33% 6/27/2031 - (15) - -
Model N, Inc. (6) (9) (16) First Lien Debt S + 5.00% 9.33% 6/27/2031 - (16) - -
11,790 11,934 0.65
Machinery
Answer Acquisition, LLC (6) (8) First Lien Debt S + 6.00% 10.48% 12/30/2026 13,394 13,255 13,303 0.72
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Investments-non-controlled/non-affiliated(1) (2)
Footnotes Investment Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares(4)
Cost(5)
Fair Value Percentage of Net Assets
Answer Acquisition, LLC (6) (8) (16) First Lien Debt S + 6.00% 10.48% 12/30/2026 - $ (11) $ (9) - %
Chase Intermediate, LLC (6) (16) First Lien Debt S + 4.75% 9.08% 10/30/2028 4,303 4,206 4,288 0.23
Chase Intermediate, LLC (6) (16) First Lien Debt S + 4.75% 9.08% 10/30/2028 - (8) - -
MHE Intermediate Holdings, LLC (6) (7) (8) First Lien Debt S + 6.00% 10.79% 7/21/2027 11,731 11,611 11,731 0.64
MHE Intermediate Holdings, LLC (6) (8) First Lien Debt S + 6.00% 10.79% 7/21/2027 3,636 3,599 3,636 0.20
MHE Intermediate Holdings, LLC (6) (8) (16) First Lien Debt S + 6.00% 10.79% 7/21/2027 500 479 500 0.03
33,131 33,449 1.82
Multi-Utilities
AWP Group Holdings, Inc. (6) (7) (8) First Lien Debt S + 4.75% 9.11% 12/23/2030 7,423 7,205 7,423 0.40
AWP Group Holdings, Inc. (6) (8) (16) First Lien Debt S + 4.75% 9.11% 12/23/2030 1,549 1,525 1,549 0.08
AWP Group Holdings, Inc. (6) (8) (16) First Lien Debt S + 4.75% 9.11% 12/23/2030 40 26 40 -
Vessco Midco Holdings, LLC (6) (9) First Lien Debt S + 4.75% 9.11% 7/24/2031 11,199 11,093 11,199 0.61
Vessco Midco Holdings, LLC (6) (9) (16) First Lien Debt S + 4.75% 9.11% 7/24/2031 983 961 983 0.05
Vessco Midco Holdings, LLC (6) (9) (16) First Lien Debt S + 4.75% 9.11% 7/24/2031 - (12) - -
20,798 21,194 1.15
Pharmaceuticals
Caerus US 1, Inc. (6) (9) (12) First Lien Debt S + 5.00% 9.33% 5/25/2029 10,927 10,765 10,594 0.58
Caerus US 1, Inc. (6) (9) (12) First Lien Debt S + 5.00% 9.33% 5/25/2029 1,599 1,574 1,550 0.08
Caerus US 1, Inc. (6) (9) (12) (16) First Lien Debt S + 5.00% 9.33% 5/25/2029 88 72 52 -
12,411 12,196 0.66
Professional Services
Abacus Data Holdings, Inc. (AbacusNext) (6) (7) (8) First Lien Debt S + 6.25% 11.17% 3/10/2027 9,130 9,041 9,130 0.50
Abacus Data Holdings, Inc. (AbacusNext) (6) (8) (16) First Lien Debt S + 6.25% 11.17% 3/10/2027 - (12) - -
Accordion Partners, LLC (6) (9) First Lien Debt S + 5.25% 9.58% 11/17/2031 27,391 27,121 27,121 1.47
Accordion Partners, LLC (6) (9) (16) First Lien Debt S + 5.25% 9.58% 11/17/2031 - (22) (22) -
Accordion Partners, LLC (6) (9) (16) First Lien Debt S + 5.25% 9.58% 11/17/2031 - (30) (30) -
Ascend Partner Services, LLC (6) (9) First Lien Debt S + 4.50% 8.86% 8/11/2031 4,899 4,852 4,899 0.27
Ascend Partner Services, LLC (6) (9) (16) First Lien Debt S + 4.50% 8.86% 8/11/2031 - (40) - -
Ascend Partner Services, LLC (6) (9) (16) First Lien Debt S + 4.50% 8.86% 8/11/2031 1,010 994 1,010 0.05
Bridgepointe Technologies, LLC (6) (8) First Lien Debt S + 5.00% 9.33% 12/31/2027 17,057 16,665 16,927 0.92
Bridgepointe Technologies, LLC (6) (8) (16) First Lien Debt S + 5.00% 9.33% 12/31/2027 15,295 14,886 15,158 0.82
Bullhorn, Inc. (6) (8) First Lien Debt S + 5.00% 9.36% 10/1/2029 15,407 15,313 15,407 0.84
Bullhorn, Inc. (6) (8) First Lien Debt S + 5.00% 9.36% 10/1/2029 1,920 1,909 1,920 0.10
Bullhorn, Inc. (6) (8) (16) First Lien Debt S + 5.00% 9.36% 10/1/2029 - (5) - -
Carr, Riggs and Ingram Capital, LLC (6) (10) First Lien Debt S + 4.75% 9.24% 11/18/2031 4,313 4,270 4,270 0.23
Carr, Riggs and Ingram Capital, LLC (6) (10) (16) First Lien Debt S + 4.75% 9.24% 11/18/2031 - (11) (11) -
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Investments-non-controlled/non-affiliated(1) (2)
Footnotes Investment Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares(4)
Cost(5)
Fair Value Percentage of Net Assets
Carr, Riggs and Ingram Capital, LLC (6) (10) (16) First Lien Debt S + 4.75% 9.24% 11/18/2031 125 $ 115 $ 115 0.01 %
Citrin Cooperman Advisors, LLC (6) (9) First Lien Debt S + 5.00% 9.30% 10/1/2027 24,260 23,968 24,260 1.32
Citrin Cooperman Advisors, LLC (6) (9) First Lien Debt S + 5.00% 9.30% 10/1/2027 15,218 15,003 15,218 0.83
ComPsych Investment Corp. (6) (9) First Lien Debt S + 4.75% 9.38% 7/22/2031 13,973 13,907 13,973 0.76
ComPsych Investment Corp. (6) (9) (16) First Lien Debt S + 4.75% 9.38% 7/22/2031 - (9) - -
GPS Merger Sub, LLC (6) (8) First Lien Debt S + 6.00% 10.36% 10/2/2029 6,786 6,675 6,757 0.37
GPS Merger Sub, LLC (6) (8) (16) First Lien Debt S + 6.00% 10.36% 10/2/2029 - (10) - -
GPS Merger Sub, LLC (6) (8) (16) First Lien Debt S + 6.00% 10.36% 10/2/2029 - (16) - -
IG Investment Holdings, LLC (6) (9) First Lien Debt S + 5.00% 9.57% 9/22/2028 10,788 10,684 10,684 0.58
IG Investment Holdings, LLC (6) (9) (16) First Lien Debt S + 5.00% 9.57% 9/22/2028 - (12) (12) -
KENG Acquisition, Inc. (6) (8) First Lien Debt S + 5.00% 9.36% 8/1/2029 3,189 3,123 3,173 0.17
KENG Acquisition, Inc. (6) (8) (16) First Lien Debt S + 5.00% 9.36% 8/1/2029 1,086 1,040 1,067 0.06
KENG Acquisition, Inc. (6) (8) (16) First Lien Debt S + 5.00% 9.36% 8/1/2029 - (17) (4) -
KWOR Acquisition, Inc. (6) (13) First Lien Debt P + 4.25% 11.75% 12/22/2028 5,299 5,224 3,891 0.21
KWOR Acquisition, Inc. (6) (13) First Lien Debt P + 4.25% 11.75% 12/22/2028 1,292 1,272 948 0.05
KWOR Acquisition, Inc. (6) (13) First Lien Debt P + 4.25% 11.75% 12/22/2027 122 121 90 -
Project Boost Purchaser, LLC (6) (9) First Lien Debt S + 5.25% 9.76% 5/2/2029 5,610 5,573 5,610 0.30
Project Boost Purchaser, LLC (6) (9) (16) First Lien Debt S + 5.25% 9.76% 5/2/2028 176 173 176 0.01
UHY Advisors, Inc. (6) (9) First Lien Debt S + 4.75% 9.26% 11/21/2031 2,208 2,186 2,186 0.12
UHY Advisors, Inc. (6) (9) (16) First Lien Debt S + 4.75% 9.26% 11/21/2031 - (11) (11) -
UHY Advisors, Inc. (6) (9) (16) First Lien Debt S + 4.75% 9.26% 11/21/2031 - (6) (6) -
Verdantas, LLC (6) (9) First Lien Debt S + 5.00% 9.45% 5/6/2031 16,409 16,179 16,243 0.88
Verdantas, LLC (6) (9) (16) First Lien Debt S + 5.00% 9.45% 5/6/2031 693 663 668 0.04
Verdantas, LLC (6) (9) (16) First Lien Debt S + 5.00% 9.45% 5/6/2030 - (23) (18) -
200,733 200,787 10.90
Real Estate Management & Development
Associations, Inc. (6) (8) First Lien Debt S + 6.50% 11.32% 7/3/2028 10,893 10,884 10,893 0.59
Associations, Inc. (6) (8) (16) First Lien Debt S + 6.50% 11.32% 7/3/2028 141 141 141 0.01
Associations, Inc. (6) (8) (16) First Lien Debt S + 6.50% 11.32% 7/3/2028 339 338 339 0.02
MRI Software, LLC (6) (7) (8) First Lien Debt S + 4.75% 9.08% 2/10/2027 58,735 58,439 58,694 3.19
MRI Software, LLC (6) (8) (16) First Lien Debt S + 4.75% 9.08% 2/10/2027 4 3 4 -
MRI Software, LLC (6) (8) (16) First Lien Debt S + 4.75% 9.08% 2/10/2027 128 120 126 0.01
Pritchard Industries, LLC (6) (9) First Lien Debt S + 5.75% 10.29% 10/13/2027 25,016 24,750 24,718 1.34
Pritchard Industries, LLC (6) (9) First Lien Debt S + 5.75% 10.29% 10/13/2027 5,981 5,915 5,910 0.32
Zarya Intermediate, LLC (6) (8) (12) First Lien Debt S + 6.50% 11.01% 7/1/2027 35,142 35,142 35,107 1.91
Zarya Intermediate, LLC (6) (8) (12) (16) First Lien Debt S + 6.50% 11.01% 7/1/2027 - - (4) -
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Investments-non-controlled/non-affiliated(1) (2)
Footnotes Investment Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares(4)
Cost(5)
Fair Value Percentage of Net Assets
$ 135,732 $ 135,928 7.38 %
Software
Alert Media, Inc. (6) (8) First Lien Debt S + 6.75% (incl. 5.75% PIK)
11.08% 4/12/2027 22,389 22,197 22,123 1.20
Alert Media, Inc. (6) (8) (16) First Lien Debt S + 6.75% (incl. 5.75% PIK)
11.08% 4/12/2027 - (41) (63) -
Anaplan, Inc. (6) (9) First Lien Debt S + 5.25% 9.58% 6/21/2029 33,040 32,619 32,918 1.79
Appfire Technologies, LLC (6) (8) First Lien Debt S + 5.00% 9.33% 3/9/2028 20,468 20,400 20,468 1.11
Appfire Technologies, LLC (6) (8) (16) First Lien Debt S + 5.00% 9.33% 3/9/2028 - (23) - -
Appfire Technologies, LLC (6) (8) (16) First Lien Debt S + 5.00% 9.33% 3/9/2028 12 11 12 -
Apryse Software Corp. (6) (7) (8) (12) First Lien Debt S + 5.00% 9.59% 7/15/2027 39,356 39,008 39,308 2.13
Artifact Bidco, Inc. (6) First Lien Debt S + 4.50% 8.83% 7/1/2031 31,700 31,397 31,700 1.72
Artifact Bidco, Inc. (6) (16) First Lien Debt S + 4.50% 8.83% 7/1/2031 - (36) - -
Artifact Bidco, Inc. (6) (16) First Lien Debt S + 4.50% 8.83% 7/1/2030 - (51) - -
AuditBoard, Inc. (6) (8) First Lien Debt S + 4.75% 9.08% 7/14/2031 22,200 21,989 22,200 1.21
AuditBoard, Inc. (6) (8) (16) First Lien Debt S + 4.75% 9.08% 7/14/2031 - (49) - -
AuditBoard, Inc. (6) (8) (16) First Lien Debt S + 4.75% 9.08% 7/14/2031 - (39) - -
Bottomline Technologies, Inc. (6) (9) First Lien Debt S + 5.75% 10.32% 5/14/2029 3,656 3,603 3,656 0.20
Bottomline Technologies, Inc. (6) (9) (16) First Lien Debt S + 5.75% 10.32% 5/15/2028 - (3) - -
CLEO Communications Holding, LLC (6) (7) (8) First Lien Debt S + 5.50% 9.96% 6/9/2027 39,698 39,511 39,698 2.15
CLEO Communications Holding, LLC (6) (8) (16) First Lien Debt S + 5.50% 9.96% 6/9/2027 - (51) - -
Coupa Holdings, LLC (6) (9) First Lien Debt S + 5.50% 10.09% 2/27/2030 2,253 2,207 2,243 0.12
Coupa Holdings, LLC (6) (9) (16) First Lien Debt S + 5.50% 10.09% 2/27/2030 - (10) (5) -
Coupa Holdings, LLC (6) (9) (16) First Lien Debt S + 5.50% 10.09% 2/27/2029 - (14) (4) -
Cyara AcquisitionCo, LLC (6) (8) First Lien Debt S + 6.25% (incl. 2.25% PIK)
10.85% 6/28/2029 5,830 5,718 5,830 0.32
Cyara AcquisitionCo, LLC (6) (8) (16) First Lien Debt S + 6.25% (incl. 2.25% PIK)
10.85% 6/28/2029 - (6) - -
Diligent Corporation (6) (9) First Lien Debt S + 5.00% 10.09% 8/2/2030 28,138 27,943 28,138 1.53
Diligent Corporation (6) (9) (16) First Lien Debt S + 5.00% 10.09% 8/2/2030 - (28) - -
Diligent Corporation (6) (9) (16) First Lien Debt S + 5.00% 10.09% 8/2/2030 - (18) - -
E-Discovery AcquireCo, LLC (6) (8) First Lien Debt S + 6.25% 10.70% 8/29/2029 19,505 19,120 19,427 1.05
E-Discovery AcquireCo, LLC (6) (8) (16) First Lien Debt S + 6.25% 10.70% 8/29/2029 - (39) (10) -
Everbridge Holdings, LLC (6) (9) First Lien Debt S + 5.00% 9.59% 7/2/2031 39,380 39,194 39,380 2.14
Everbridge Holdings, LLC (6) (9) (16) First Lien Debt S + 5.00% 9.59% 7/2/2031 4,374 4,337 4,374 0.24
Everbridge Holdings, LLC (6) (9) (16) First Lien Debt S + 5.00% 9.59% 7/2/2031 - (21) - -
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Investments-non-controlled/non-affiliated(1) (2)
Footnotes Investment Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares(4)
Cost(5)
Fair Value Percentage of Net Assets
Formstack Acquisition Co (6) (8) First Lien Debt S + 5.25% 9.58% 3/28/2030 10,896 $ 10,749 $ 10,828 0.59 %
Formstack Acquisition Co (6) (8) (16) First Lien Debt S + 5.25% 9.58% 3/28/2030 1,089 1,053 1,061 0.06
Formstack Acquisition Co (6) (8) (16) First Lien Debt S + 5.25% 9.58% 3/28/2030 219 190 205 0.01
Fullsteam Operations, LLC (6) (8) First Lien Debt S + 8.25% 12.91% 11/27/2029 10,860 10,576 10,860 0.59
Fullsteam Operations, LLC (6) (8) (16) First Lien Debt S + 8.25% 12.91% 11/27/2029 5,672 5,483 5,672 0.31
Fullsteam Operations, LLC (6) (8) (16) First Lien Debt S + 8.25% 12.91% 11/27/2029 - (15) - -
Granicus, Inc. (6) (9) First Lien Debt S + 5.75% (incl. 2.25% PIK)
10.34% 1/17/2031 12,874 12,761 12,874 0.70
Granicus, Inc. (6) (9) (16) First Lien Debt S + 5.75% (incl. 2.25% PIK)
10.34% 1/17/2031 6,972 6,906 6,970 0.38
Granicus, Inc. (6) (9) (16) First Lien Debt S + 5.75% (incl. 2.25% PIK)
10.34% 1/17/2031 - (16) - -
GS AcquisitionCo, Inc. (6) (7) (8) First Lien Debt S + 5.25% 9.58% 5/25/2028 74,547 74,178 74,547 4.05
GS AcquisitionCo, Inc. (6) (8) (16) First Lien Debt S + 5.25% 9.58% 5/25/2028 15 14 15 -
GS AcquisitionCo, Inc. (6) (8) (16) First Lien Debt S + 5.25% 9.58% 5/25/2028 - (13) - -
Hootsuite, Inc. (6) (12) First Lien Debt S + 5.50% 9.83% 5/22/2030 22,388 22,077 22,190 1.20
Hootsuite, Inc. (6) (12) (16) First Lien Debt S + 5.50% 9.83% 5/22/2030 - (34) (22) -
Icefall Parent, Inc. (6) (8) First Lien Debt S + 6.50% 10.86% 1/25/2030 5,323 5,229 5,239 0.28
Icefall Parent, Inc. (6) (8) (16) First Lien Debt S + 6.50% 10.86% 1/25/2030 - (9) (8) -
Kaseya, Inc. (6) (9) First Lien Debt S + 5.50% 10.09% 6/25/2029 14,329 14,180 14,329 0.78
Kaseya, Inc. (6) (9) First Lien Debt S + 5.50% 10.09% 6/25/2029 220 215 220 0.01
Kaseya, Inc. (6) (9) (16) First Lien Debt S + 5.50% 10.09% 6/25/2029 216 208 216 0.01
LegitScript, LLC (6) (9) First Lien Debt S + 5.75% 10.11% 6/24/2029 26,300 25,926 26,300 1.43
LegitScript, LLC (6) (9) First Lien Debt S + 5.75% 10.11% 6/24/2029 695 686 695 0.04
LegitScript, LLC (6) (9) (16) First Lien Debt S + 5.75% 10.11% 6/24/2028 1,333 1,285 1,333 0.07
LogRhythm, Inc. (6) (8) First Lien Debt S + 7.50% 11.86% 7/2/2029 9,091 8,838 8,925 0.48
LogRhythm, Inc. (6) (8) (16) First Lien Debt S + 7.50% 11.86% 7/2/2029 - (25) (17) -
Montana Buyer, Inc. (6) (9) First Lien Debt S + 5.00% 9.36% 7/22/2029 8,511 8,452 8,511 0.46
Montana Buyer, Inc. (6) (16) First Lien Debt P + 4.00% 11.50% 7/22/2028 168 163 168 0.01
Nasuni Corporation (6) (9) First Lien Debt S + 5.75% 10.18% 9/10/2030 14,483 14,274 14,483 0.79
Nasuni Corporation (6) (9) (16) First Lien Debt S + 5.75% 10.18% 9/10/2030 - (43) - -
Netwrix Corporation And Concept Searching, Inc. (6) (9) First Lien Debt S + 4.75% 9.26% 6/11/2029 6,901 6,853 6,857 0.37
Netwrix Corporation And Concept Searching, Inc. (6) (9) (16) First Lien Debt S + 4.75% 9.26% 6/11/2029 - (3) (3) -
Oak Purchaser, Inc. (6) (9) First Lien Debt S + 5.50% 9.83% 4/28/2028 3,336 3,309 3,307 0.18
Oak Purchaser, Inc. (6) (9) (16) First Lien Debt S + 5.50% 9.83% 4/28/2028 1,993 1,974 1,968 0.11
Oak Purchaser, Inc. (6) (9) (16) First Lien Debt S + 5.50% 9.83% 4/28/2028 - (2) (3) -
Optimizely North America, Inc. (6) (9) (12) First Lien Debt S + 5.00% 9.36% 10/30/2031 8,394 8,312 8,312 0.45
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Investments-non-controlled/non-affiliated(1) (2)
Footnotes Investment Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares(4)
Cost(5)
Fair Value Percentage of Net Assets
Optimizely North America, Inc. (6) (9) (12) First Lien Debt E + 5.25% 8.11% 10/30/2031 € 3,090 $ 3,324 $ 3,168 0.17 %
Optimizely North America, Inc. (6) (9) (12) First Lien Debt SA + 5.50% 10.20% 10/30/2031 £ 1,030 1,327 1,277 0.07
Optimizely North America, Inc. (6) (9) (12) (16) First Lien Debt S + 5.00% 9.36% 10/30/2031 - (12) (12) -
PDFTron Systems, Inc. (6) (8) (12) (16) First Lien Debt S + 5.00% 9.59% 7/15/2026 2,567 2,519 2,557 0.14
Pound Bidco, Inc. (6) (8) (12) First Lien Debt S + 6.00% 10.86% 2/1/2027 22,180 22,008 22,122 1.20
Pound Bidco, Inc. (6) (8) (12) (16) First Lien Debt S + 6.00% 10.86% 2/1/2027 528 528 522 0.03
Pound Bidco, Inc. (6) (7) (8) (12) (16) First Lien Debt S + 6.00% 10.86% 2/1/2027 - (8) (3) -
Project Leopard Holdings, Inc. (10) (12) First Lien Debt S + 5.25% 9.94% 7/20/2029 6,154 5,840 5,493 0.30
Reorganized Mobileum Acquisition Co, LLC (6) (8) First Lien Debt S + 6.00% (incl. 5.00% PIK)
10.45% 9/11/2029 187 187 187 0.01
Revalize, Inc. (6) (8) First Lien Debt S + 5.75% 10.49% 4/15/2027 19,255 19,205 17,949 0.97
Revalize, Inc. (6) (8) (16) First Lien Debt S + 5.75% 10.49% 4/15/2027 51 51 47 -
Riskonnect Parent, LLC (6) (9) First Lien Debt S + 5.25% 9.57% 12/7/2028 5,679 5,586 5,635 0.31
Riskonnect Parent, LLC (6) (9) (16) First Lien Debt S + 5.25% 9.57% 12/7/2028 4,187 4,103 4,145 0.23
Riskonnect Parent, LLC (6) (9) (16) First Lien Debt S + 5.25% 9.57% 12/7/2028 - (15) (7) -
Runway Bidco, LLC (6) (10) First Lien Debt S + 5.00% 9.33% 12/17/2031 10,928 10,819 10,819 0.59
Runway Bidco, LLC (6) (10) (16) First Lien Debt S + 5.00% 9.33% 12/17/2031 - (14) (13) -
Runway Bidco, LLC (6) (10) (16) First Lien Debt S + 5.00% 9.33% 12/17/2031 - (14) (13) -
Securonix, Inc. (6) (9) First Lien Debt S + 7.00% (incl. 3.75% PIK)
12.34% 4/5/2028 21,010 20,782 19,151 1.04
Securonix, Inc. (6) (9) (16) First Lien Debt S + 7.00% (incl. 3.75% PIK)
12.34% 4/5/2028 85 49 (249) (0.01)
Trunk Acquisition, Inc. (6) (8) First Lien Debt S + 6.00% 10.48% 2/19/2030 8,869 8,827 8,822 0.48
Trunk Acquisition, Inc. (6) (8) First Lien Debt S + 6.00% 10.48% 2/19/2030 742 735 735 0.04
Trunk Acquisition, Inc. (6) (8) (16) First Lien Debt S + 6.00% 10.48% 2/19/2030 - (4) (4) -
Trunk Acquisition, Inc. (6) (8) (16) First Lien Debt S + 6.00% 10.48% 2/19/2026 - (2) (4) -
User Zoom Technologies, Inc. (6) (9) First Lien Debt S + 7.00% 12.25% 4/5/2029 38,689 38,145 38,689 2.10
696,522 698,438 37.91
Wireless Telecommunication Services
Mobile Communications America, Inc. (6) (7) (8) First Lien Debt S + 5.25% 9.78% 10/16/2029 5,895 5,820 5,895 0.32
Mobile Communications America, Inc. (6) (8) (16) First Lien Debt S + 5.25% 9.78% 10/16/2029 366 352 366 0.02
Mobile Communications America, Inc. (6) (8) (16) First Lien Debt S + 5.25% 9.78% 10/16/2029 240 229 240 0.01
6,401 6,501 0.35
Total Debt Investments $ 3,758,444 $ 3,733,103 202.65 %
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Investments-non-controlled/non-affiliated(1) (2)
Footnotes Investment Reference Rate and Spread Acquisition Date Par Amount/ Shares(4)
Cost(5)
Fair Value Percentage of Net Assets
Equity Investments
Aerospace & Defense
PCX Holding Corp. (6) (14) (15) Common Equity 4/22/2021 6,538 $ 654 $ 446 0.02 %
654 446 0.02
Automobile Components
Shelby Co-invest, LP (Spectrum Automotive) (6) (14) (15) Common Equity 6/29/2021 8,500 850 1,463 0.08
850 1,463 0.08
Commercial Services & Supplies
Encore Holdings, LLC (6) (14) (15) Common Equity 11/21/2021 3,013 395 1,103 0.06
Procure Acquiom Financial, LLC (Procure Analytics) (6) (14) (15) Common Equity 12/20/2021 1,000,000 1,000 1,470 0.08
Surewerx Topco, LP (6) (12) (14) (15) Common Equity 12/28/2022 512 512 684 0.04
1,907 3,257 0.18
Containers & Packaging
BP Purchaser, LLC (6) (14) (15) Common Equity 12/10/2021 1,383,156 1,379 659 0.04
BP Purchaser, LLC Rights (6) (14) (15) Common Equity 3/12/2024 1,666,989 75 83 0.00
FORTIS Solutions Group, LLC (6) (15) Preferred Equity 12.25% 6/24/2022 1,000,000 1,337 980 0.05
2,791 1,722 0.09
Distributors
48Forty Solutions, LLC (6) (14) (15) Common Equity 11/1/2024 2,748 - - 0.00
- - 0.00
Diversified Consumer Services
Eclipse Topco, Inc. (6) (15) Preferred Equity 12.50% PIK
9/5/2024 120 1,180 1,175 0.06
LUV Car Wash (6) (14) (15) Common Equity 4/6/2022 123 123 83 0.00
1,303 1,258 0.07
Electrical Equipment
Sparkstone Electrical Group (6) (14) (15) Common Equity 10/15/2024 1,500 150 150 0.01
150 150 0.01
Food Products
Pet Holdings, Inc. (Brightpet) (6) (14) (15) Common Equity 3/22/2021 17,543 2,013 1,028 0.06
2,013 1,028 0.06
Health Care Providers & Services
mPulse Mobile, Inc. (6) (14) (15) Common Equity 12/17/2021 165,761 1,220 2,117 0.11
SDB Holdco, LLC (6) (14) (15) Common Equity 3/29/2024 5,460,555 - - 0.00
Suveto Buyer, LLC (6) (12) (14) (15) Common Equity 11/19/2021 19,257 1,926 1,870 0.10
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Investments-non-controlled/non-affiliated(1) (2)
Footnotes Investment Reference Rate and Spread Acquisition Date Par Amount/ Shares(4)
Cost(5)
Fair Value Percentage of Net Assets
Vardiman Black Holdings, LLC (6) (15) Preferred Equity 6.00% PIK
3/29/2024 2,649,446 $ 1,809 $ 923 0.05 %
4,955 4,910 0.27
Insurance Services
Amerilife Holdings, LLC (6) (14) (15) Common Equity 9/1/2022 908 25 54 0.00
Frisbee Holdings, LP (Fetch) (6) (14) (15) Common Equity 10/31/2022 21,744 277 350 0.02
Integrity Marketing Acquisition, LLC (6) (15) Preferred Equity 10.50% 12/21/2021 3,250,000 4,402 4,323 0.23
4,704 4,727 0.26
IT Services
CSC Thrive Holdings, LP (Thrive Networks) (6) (14) (15) Common Equity 3/1/2021 162,309 421 1,082 0.06
Help HP SCF Investor, LP (Help/Systems) (12) (14) (15) Common Equity 5/12/2021 9,619,564 12,461 17,193 0.93
Recovery Point Systems, Inc. (6) (14) (15) Common Equity 3/5/2021 1,000,000 1,000 570 0.03
13,882 18,845 1.02
Professional Services
Abacus Data Holdings, Inc. (AbacusNext) (6) (14) (15) Common Equity 2/9/2024 67,388 2,981 1,571 0.09
Verdantas, LLC (6) (14) (15) Common Equity 5/3/2024 4,780 5 6 0.00
Verdantas, LLC (6) (15) Preferred Equity 10.00% 5/3/2024 473,220 506 572 0.03
3,492 2,149 0.12
Real Estate Management & Development
Pritchard Industries, LLC (6) (14) (15) Common Equity 10/13/2021 1,882,739 1,937 1,770 0.10
Software
Diligent Corporation (6) (15) Preferred Equity 10.50% 4/5/2021 5,000 7,037 7,110 0.39
Fullsteam Operations, LLC (6) (14) (15) Common Equity 11/27/2023 2,966 100 239 0.01
Knockout Intermediate Holdings I, Inc. (6) (15) Preferred Equity 11.75% 6/25/22 2,790 3,668 3,784 0.21
Reorganized Mobileum Grandparent, LLC (6) (14) (15) Common Equity 9/12/24 25,375 - - 0.00
Revalize, Inc. (6) (15) Preferred Equity S + 10.00% 12/14/21 2,255 3,196 3,272 0.18
Reveal Data Solutions (6) (14) (15) Common Equity 8/29/23 477,846 621 783 0.04
RSK Holdings, Inc. (Riskonnect) (6) (15) Preferred Equity S + 10.50% 7/7/22 1,012,200 1,423 1,478 0.08
16,045 16,666 0.90
Total Equity Investments $ 54,683 $ 58,391 3.17 %
Total Portfolio Investments $ 3,813,127 $ 3,791,494 205.82 %
Cash and Cash Equivalents
J.P. Morgan US Government Money Market Fund $ 8,976 $ 8,976 0.49 %
Cash 63,396 63,396 3.44
Total Cash and Cash Equivalents $ 72,372 $ 72,372 3.93 %
Total Portfolio Investments, Cash and Cash Equivalents $ 3,885,499 $ 3,863,866 209.75 %
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Interest Rate Swaps(a)(b)(c)
Counterparty Hedged Instrument Company Receives Company Pays Maturity Date Notional Amount Fair Value Upfront Payments/Receipts Change in Unrealized Appreciation/(Depreciation)
BNP Paribas 2029 Notes 6.41% S + 2.37%
5/17/2029 350,000 445 - 445
(a) Contains a variable rate structure. Bears interest at a rate determined by SOFR.
(b) Instrument is used in a hedge accounting relationship. The associated change in fair value is recorded along with the change in fair value of the hedging item within interest expense.
(c) For further details, see Note 6 “Debt” to our consolidated financial statements included in this report.
(1) Unless otherwise indicated, issuers of debt and equity investments held by the Company (which such term “Company” shall include the Company’s consolidated subsidiaries for purposes of this Consolidated Schedule of Investments) are denominated in dollars. All debt investments are income producing unless otherwise indicated. All equity investments (including preferred equity investments) are non-income producing unless otherwise noted. Certain portfolio company investments are subject to contractual restrictions on sales. Under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “1940 Act”), the Company would be deemed to “control” a portfolio company if the Company owned more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. As of December 31, 2024 the Company does not “control” any of these portfolio companies. Under the 1940 Act, the Company would be deemed an “affiliated person” of a portfolio company if the Company owns 5% or more of the portfolio company’s outstanding voting securities. As of December 31, 2024, the Company is not an “affiliated person” of any of its portfolio companies.
(2) Unless otherwise indicated, the Company’s investments are pledged as collateral supporting the amounts outstanding under the Truist Credit Facility (as defined below). See Note 6 “Debt”.
(3) Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to either CORRA ("C") or EURIBOR ("E") or SOFR ("S") or SONIA ("SA") or an alternate base rate (commonly based on the Federal Funds Rate ("F") or the U.S. Prime Rate ("P")), each of which generally resets periodically. For each loan, the Company has indicated the reference rate used and provided the spread and the interest rate in effect as of December 31, 2024. For investments with multiple reference rates or alternate base rates, the interest rate shown is the weighted average interest rate in effect at December 31, 2024. As of December 31, 2024, the reference rates for our variable rate loans were the C at 3.32%, 1-month E at 2.85%, 1-month S at 4.33%, 3-month S at 4.31%, 6-month S at 4.25%, SA at 4.70% and the P at 7.50%.
(4) Par amount is presented for debt investments, while the number of shares or units owned is presented for equity investments. Par amount is denominated in U.S. Dollars ("$" or "USD") unless otherwise noted, Euro ("€"), Great British Pound (“GBP”), or Canadian dollar ("CAD").
(5) The cost represents the original cost adjusted for the amortization of discounts and premiums, as applicable, on debt investments using the effective interest method.
(6) These investments were valued using unobservable inputs and are considered Level 3 investments. Fair value was determined in good faith by or under the direction of the Company's Valuation Designee, under the supervision of the Board of Directors (the "Board of Directors" or the "Board") (see Note 2 and Note 5), pursuant to the Company’s valuation policy.
(7) Assets or a portion thereof are pledged as collateral for the BNP Funding Facility (as defined below). See Note 6 “Debt”.
(8) Loan includes interest rate floor of 1.00%.
(9) Loan includes interest rate floor of 0.75%.
(10) Loan includes interest rate floor of 0.50%.
(11) The investment includes an exit fee that is receivable upon certain conditions being met. See Note 2 "Significant Accounting Policies".
(12) The investment is not a qualifying asset under Section 55(a) of the 1940 Act. The Company may not acquire any non-qualifying asset unless, at the time of acquisition, qualifying assets represent at least 70% of the Company’s total assets. As of December 31, 2024, non-qualifying assets represented 7.63% of total assets as calculated in accordance with regulatory requirements.
(13) Investment was on non-accrual status as of December 31, 2024.
(14) Non-income producing security.
(15) Securities exempt from registration under the Securities Act of 1933, and may be deemed to be “restricted securities”. As of December 31, 2024, the aggregate fair value of these securities is $58,391 or 3.17% of the Company’s net assets. The initial acquisition dates have been included for such securities.
(16) Position or portion thereof is an unfunded loan commitment, and no interest is being earned on the unfunded portion, although the investment may earn unused commitment fees. Negative cost and fair value, if any, results from unamortized fees, which are capitalized to the cost of the investment. The unfunded loan commitment may be subject to a commitment termination date that may expire prior to the maturity date stated. See below for more information on the Company’s unfunded commitments as of December 31, 2024:
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Investments - non-controlled/non-affiliated Commitment Type Commitment Expiration Date Unfunded Commitment Fair Value
First Lien Debt
48Forty Solutions, LLC Revolver 11/30/2029 $ 1,547 $ (548)
ARI Network Services, Inc. Revolver 8/28/2026 1,841 (7)
AWP Group Holdings, Inc. Delayed Draw Term Loan 8/23/2026 1,284 -
AWP Group Holdings, Inc. Revolver 12/23/2030 750 -
Abacus Data Holdings, Inc. (AbacusNext) Revolver 3/10/2027 1,400 -
Accordion Partners, LLC Delayed Draw Term Loan 11/15/2026 4,565 (22)
Accordion Partners, LLC Revolver 11/17/2031 3,043 (30)
Advarra Holdings, Inc. Delayed Draw Term Loan 9/14/2026 41 -
Alert Media, Inc. Revolver 4/12/2027 4,266 (62)
Amerilife Holdings, LLC Delayed Draw Term Loan 6/17/2026 1,335 -
Amerilife Holdings, LLC Revolver 8/31/2028 437 -
Answer Acquisition, LLC Revolver 12/30/2026 1,249 (8)
Any Hour, LLC Delayed Draw Term Loan 5/23/2026 6,255 (66)
Any Hour, LLC Revolver 5/23/2030 1,801 (19)
Apex Service Partners, LLC Revolver 10/24/2029 932 -
Apollo Acquisition, Inc. Delayed Draw Term Loan 12/30/2026 6,094 (30)
Apollo Acquisition, Inc. Revolver 12/30/2030 2,437 (24)
Appfire Technologies, LLC Delayed Draw Term Loan 3/31/2025 569 -
Appfire Technologies, LLC Delayed Draw Term Loan 6/28/2026 4,005 -
Appfire Technologies, LLC Revolver 3/9/2028 155 -
Applitools, Inc. Revolver 5/25/2028 433 (4)
Aptean, Inc. Delayed Draw Term Loan 1/30/2026 537 (1)
Aptean, Inc. Revolver 1/30/2031 984 (1)
Arcoro Holdings Corp. Revolver 3/28/2030 1,957 (14)
Artifact Bidco, Inc. Delayed Draw Term Loan 5/22/2027 7,759 -
Artifact Bidco, Inc. Revolver 7/26/2030 5,542 -
Ascend Partner Services, LLC Delayed Draw Term Loan 8/9/2026 8,418 -
Ascend Partner Services, LLC Revolver 8/11/2031 673 -
Assembly Intermediate, LLC Revolver 10/19/2027 2,074 -
Associations, Inc. Delayed Draw Term Loan 7/3/2028 705 -
Associations, Inc. Revolver 7/3/2028 339 -
Atlas Us Finco, Inc. Revolver 12/9/2028 186 -
AuditBoard, Inc. Delayed Draw Term Loan 7/12/2026 10,571 -
AuditBoard, Inc. Revolver 7/14/2031 4,229 -
Avalara, Inc. Revolver 10/19/2028 1,040 -
Bottomline Technologies, Inc. Revolver 5/15/2028 267 -
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Investments - non-controlled/non-affiliated Commitment Type Commitment Expiration Date Unfunded Commitment Fair Value
Bradyplus Holdings, LLC Delayed Draw Term Loan 10/31/2025 $ 184 $ -
Bridgepointe Technologies, LLC Delayed Draw Term Loan 6/3/2026 1,578 (18)
Bullhorn, Inc. Delayed Draw Term Loan 5/11/2026 386 -
Bullhorn, Inc. Revolver 10/1/2029 717 -
CLEO Communications Holding, LLC Revolver 6/9/2027 12,502 -
COP Collisionright Parent, LLC Delayed Draw Term Loan 1/29/2026 1,842 (22)
COP Collisionright Parent, LLC Revolver 1/29/2030 884 (10)
CRCI Longhorn Holdings, Inc. Delayed Draw Term Loan 8/27/2026 2,471 -
CRCI Longhorn Holdings, Inc. Revolver 8/27/2031 906 -
Caerus US 1, Inc. Revolver 5/25/2029 1,083 (33)
Carr, Riggs and Ingram Capital, LLC Delayed Draw Term Loan 11/18/2026 2,188 (11)
Carr, Riggs and Ingram Capital, LLC Revolver 11/18/2031 875 (9)
Catalis Intermediate, Inc. Revolver 8/4/2027 2,778 (42)
Cerity Partners, LLC Delayed Draw Term Loan 6/7/2026 1,141 -
Cerity Partners, LLC Revolver 7/30/2029 236 -
Chase Intermediate, LLC Delayed Draw Term Loan 8/31/2025 6,276 (9)
Chase Intermediate, LLC Revolver 10/30/2028 530 -
Citrin Cooperman Advisors, LLC Delayed Draw Term Loan 12/13/2025 1,263 -
ComPsych Investment Corp. Delayed Draw Term Loan 7/23/2027 4,000 -
Consor Intermediate II, LLC Delayed Draw Term Loan 5/10/2026 4,577 (26)
Consor Intermediate II, LLC Revolver 5/12/2031 1,220 (7)
Coupa Holdings, LLC Delayed Draw Term Loan 8/27/2025 1,085 (5)
Coupa Holdings, LLC Revolver 2/27/2029 831 (4)
Cyara AcquisitionCo, LLC Revolver 6/28/2029 313 -
Diligent Corporation Delayed Draw Term Loan 4/30/2026 4,118 -
Diligent Corporation Revolver 8/2/2030 2,745 -
Drivecentric Holdings, LLC Revolver 8/15/2031 3,529 (3)
Dwyer Instruments, Inc. Delayed Draw Term Loan 11/20/2026 505 (2)
Dwyer Instruments, Inc. Revolver 7/20/2029 1,387 -
E-Discovery AcquireCo, LLC Revolver 8/29/2029 2,384 (10)
EVDR Purchaser, Inc. Delayed Draw Term Loan 8/14/2025 5,881 -
EVDR Purchaser, Inc. Revolver 2/14/2031 2,940 -
Eclipse Buyer, Inc. Delayed Draw Term Loan 9/6/2026 719 -
Eclipse Buyer, Inc. Revolver 9/6/2031 365 -
Encore Holdings, LLC Delayed Draw Term Loan 10/31/2026 126 (1)
Encore Holdings, LLC Delayed Draw Term Loan 12/20/2026 2,500 (6)
Encore Holdings, LLC Revolver 11/23/2027 539 (2)
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Investments - non-controlled/non-affiliated Commitment Type Commitment Expiration Date Unfunded Commitment Fair Value
Energy Labs Holdings Corp. Delayed Draw Term Loan 5/24/2026 $ 477 $ (4)
Energy Labs Holdings Corp. Revolver 4/7/2028 222 (3)
Essential Services Holding Corporation Delayed Draw Term Loan 6/17/2026 4,773 -
Essential Services Holding Corporation Revolver 6/17/2030 2,983 -
Everbridge Holdings, LLC Delayed Draw Term Loan 7/2/2026 6,783 -
Everbridge Holdings, LLC Revolver 7/2/2031 4,463 -
Excelitas Technologies Corp. Delayed Draw Term Loan 5/1/2025 44 -
Excelitas Technologies Corp. Delayed Draw Term Loan 5/1/2026 2,000 (19)
Excelitas Technologies Corp. Revolver 8/14/2028 131 (1)
FLS Holding, Inc. Revolver 12/17/2027 901 (96)
FMG Suite Holdings, LLC Revolver 10/30/2026 2,319 (18)
FORTIS Solutions Group, LLC Delayed Draw Term Loan 6/24/2025 688 -
FORTIS Solutions Group, LLC Revolver 10/15/2027 1,754 -
FPG Intermediate Holdco, LLC Delayed Draw Term Loan 12/31/2025 6 -
Formstack Acquisition Co Delayed Draw Term Loan 3/30/2026 3,273 (21)
Formstack Acquisition Co Revolver 3/28/2030 1,969 (12)
Foundation Risk Partners Corp. Revolver 10/29/2029 6,709 -
Fullsteam Operations, LLC Delayed Draw Term Loan 8/25/2025 4,083 -
Fullsteam Operations, LLC Delayed Draw Term Loan 2/23/2026 807 -
Fullsteam Operations, LLC Delayed Draw Term Loan 5/1/2026 2,250 -
Fullsteam Operations, LLC Delayed Draw Term Loan 6/30/2026 250 -
Fullsteam Operations, LLC Revolver 11/27/2029 608 -
GC Waves Holdings, Inc. Delayed Draw Term Loan 10/4/2026 3,398 (26)
GC Waves Holdings, Inc. Revolver 10/4/2030 331 (2)
GI DI Cornfield Acquisition, LLC Delayed Draw Term Loan 5/31/2026 15,667 (152)
GPS Merger Sub, LLC Delayed Draw Term Loan 10/2/2026 1,274 -
GPS Merger Sub, LLC Revolver 10/2/2029 1,019 -
GS AcquisitionCo, Inc. Delayed Draw Term Loan 3/26/2026 51 -
GS AcquisitionCo, Inc. Revolver 5/25/2028 2,470 -
Galway Borrower, LLC Delayed Draw Term Loan 2/6/2026 1,257 -
Galway Borrower, LLC Revolver 9/29/2028 2,029 -
Gateway US Holdings, Inc. Revolver 9/22/2028 30 -
Granicus, Inc. Delayed Draw Term Loan 1/17/2026 1,955 (2)
Granicus, Inc. Revolver 1/17/2031 1,800 -
GraphPad Software, LLC Delayed Draw Term Loan 6/28/2026 7,184 -
GraphPad Software, LLC Revolver 6/30/2031 2,993 -
Ground Penetrating Radar Systems, LLC Delayed Draw Term Loan 4/2/2027 7,733 -
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Investments - non-controlled/non-affiliated Commitment Type Commitment Expiration Date Unfunded Commitment Fair Value
Ground Penetrating Radar Systems, LLC Revolver 4/2/2031 $ 2,279 $ -
HSI Halo Acquisition, Inc. Delayed Draw Term Loan 6/28/2026 2,685 -
HSI Halo Acquisition, Inc. Revolver 6/28/2030 2,165 -
Heartland Veterinary Partners, LLC Revolver 12/10/2026 375 -
Helios Service Partners, LLC Delayed Draw Term Loan 2/10/2025 5,193 (36)
Helios Service Partners, LLC Revolver 3/19/2027 1,290 -
Hercules Borrower, LLC Delayed Draw Term Loan 4/5/2026 4,519 (14)
Hercules Borrower, LLC Delayed Draw Term Loan 4/17/2025 2,176 (670)
Higginbotham Insurance Agency, Inc. Delayed Draw Term Loan 3/27/2026 5,655 (24)
High Street Buyer, Inc. Delayed Draw Term Loan 3/11/2026 7,587 (25)
High Street Buyer, Inc. Revolver 4/16/2027 2,136 -
Hootsuite, Inc. Revolver 5/22/2030 2,500 (22)
Hyland Software, Inc. Revolver 9/19/2029 1,879 -
IG Investment Holdings, LLC Revolver 9/22/2028 1,211 (11)
Icefall Parent, Inc. Revolver 1/25/2030 507 (8)
Imagine 360, LLC Delayed Draw Term Loan 9/20/2026 1,718 -
Imagine 360, LLC Revolver 10/2/2028 1,064 -
Inszone Mid, LLC Delayed Draw Term Loan 11/10/2025 1,082 -
Inszone Mid, LLC Delayed Draw Term Loan 7/24/2026 10,025 -
Inszone Mid, LLC Revolver 11/12/2029 1,569 -
Integrity Marketing Acquisition, LLC Revolver 8/25/2028 434 -
Invictus Buyer, LLC Delayed Draw Term Loan 6/3/2026 1,688 (5)
Invictus Buyer, LLC Revolver 6/3/2031 625 (2)
Iris Buyer, LLC Delayed Draw Term Loan 4/2/2025 340 -
Iris Buyer, LLC Revolver 10/2/2029 1,001 -
KENG Acquisition, Inc. Delayed Draw Term Loan 8/1/2025 1,346 (7)
KENG Acquisition, Inc. Delayed Draw Term Loan 7/17/2026 1,465 (7)
KENG Acquisition, Inc. Revolver 8/1/2029 878 (4)
Kaseya, Inc. Delayed Draw Term Loan 6/23/2025 637 -
Kaseya, Inc. Revolver 6/25/2029 642 -
LJ Avalon Holdings, LLC Delayed Draw Term Loan 10/1/2025 1,339 -
LJ Avalon Holdings, LLC Revolver 2/1/2029 675 -
LeadVenture, Inc. Delayed Draw Term Loan 8/28/2026 826 (3)
LegitScript, LLC Revolver 6/24/2028 2,833 -
Lightspeed Buyer, Inc. Delayed Draw Term Loan 6/1/2025 545 -
Lightspeed Buyer, Inc. Revolver 2/3/2027 146 -
LogRhythm, Inc. Revolver 7/2/2029 909 (16)
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Investments - non-controlled/non-affiliated Commitment Type Commitment Expiration Date Unfunded Commitment Fair Value
MAI Capital Management Intermediate, LLC Delayed Draw Term Loan 8/29/2026 $ 1,869 $ -
MAI Capital Management Intermediate, LLC Revolver 8/29/2031 894 -
MHE Intermediate Holdings, LLC Revolver 7/21/2027 2,000 -
MRI Software, LLC Delayed Draw Term Loan 9/4/2026 34 -
MRI Software, LLC Revolver 2/10/2027 2,174 (2)
Magneto Components Buyco, LLC Delayed Draw Term Loan 6/5/2025 3,035 (21)
Magneto Components Buyco, LLC Revolver 12/5/2029 2,529 (17)
Magnolia Wash Holdings Revolver 7/14/2028 71 (7)
Majesco Revolver 9/21/2027 1,575 -
Mantech International CP Delayed Draw Term Loan 6/14/2025 636 -
Mantech International CP Revolver 9/14/2028 507 -
Mobile Communications America, Inc. Delayed Draw Term Loan 10/16/2025 1,553 -
Mobile Communications America, Inc. Revolver 10/16/2029 720 -
Model N, Inc. Delayed Draw Term Loan 6/26/2026 3,265 -
Model N, Inc. Revolver 6/27/2031 1,741 -
Montana Buyer, Inc. Revolver 7/22/2028 812 -
NSi Holdings, Inc. Delayed Draw Term Loan 11/15/2026 1,316 (6)
NSi Holdings, Inc. Revolver 11/15/2031 1,316 (13)
Nasuni Corporation Revolver 9/10/2030 3,017 -
Netwrix Corporation And Concept Searching, Inc. Revolver 6/11/2029 431 (3)
Oak Purchaser, Inc. Delayed Draw Term Loan 2/1/2025 878 (8)
Oak Purchaser, Inc. Revolver 4/28/2028 372 (3)
Optimizely North America, Inc. Revolver 10/30/2031 1,236 (12)
PDFTron Systems, Inc. Revolver 7/15/2026 5,133 (6)
PDI TA Holdings, Inc. Delayed Draw Term Loan 2/1/2026 2,301 (12)
PDI TA Holdings, Inc. Revolver 2/3/2031 2,280 (12)
PMA Parent Holdings, LLC Revolver 1/31/2031 214 (3)
PT Intermediate Holdings III, LLC Delayed Draw Term Loan 4/8/2026 2,937 -
Pareto Health Intermediate Holdings, Inc. Delayed Draw Term Loan 6/20/2026 5,602 (28)
Pareto Health Intermediate Holdings, Inc. Revolver 6/1/2029 792 -
Patriot Growth Insurance Services, LLC Revolver 10/16/2028 2,243 -
Peter C. Foy & Associates Insurance Services, LLC Delayed Draw Term Loan 4/23/2026 269 (1)
Peter C. Foy & Associates Insurance Services, LLC Revolver 11/1/2027 832 -
Pound Bidco, Inc. Delayed Draw Term Loan 2/1/2027 1,631 (4)
Pound Bidco, Inc. Delayed Draw Term Loan 2/1/2027 59 -
Pound Bidco, Inc. Revolver 2/1/2027 1,163 (3)
Procure Acquireco, Inc. (Procure Analytics) Delayed Draw Term Loan 10/31/2026 700 (3)
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Investments - non-controlled/non-affiliated Commitment Type Commitment Expiration Date Unfunded Commitment Fair Value
Procure Acquireco, Inc. (Procure Analytics) Revolver 12/20/2028 $ 238 $ -
Project Accelerate Parent, LLC Revolver 2/24/2031 1,250 -
Project Boost Purchaser, LLC Revolver 5/2/2028 273 -
Project Potter Buyer, LLC Revolver 4/23/2026 1,173 -
Promptcare Infusion Buyer, Inc. Delayed Draw Term Loan 10/19/2025 1,389 (18)
Pye-Barker Fire & Safety, LLC Delayed Draw Term Loan 5/24/2026 6,778 -
Pye-Barker Fire & Safety, LLC Revolver 5/24/2030 3,189 -
RFS Opco, LLC Revolver 4/4/2029 410 (2)
Randy's Holdings, Inc. Delayed Draw Term Loan 11/1/2025 1,580 -
Randy's Holdings, Inc. Revolver 11/1/2029 594 -
Raptor Merger Sub Debt, LLC Revolver 4/1/2029 1,953 (7)
Recovery Point Systems, Inc. Revolver 8/12/2026 4,000 -
Redwood Services Group, LLC Delayed Draw Term Loan 2/5/2026 151 (1)
Revalize, Inc. Revolver 4/15/2027 19 (1)
Ridge Trail US Bidco, Inc. Delayed Draw Term Loan 8/30/2027 8,268 (22)
Ridge Trail US Bidco, Inc. Revolver 3/31/2031 2,012 (5)
Riskonnect Parent, LLC Delayed Draw Term Loan 3/1/2026 1,264 (10)
Riskonnect Parent, LLC Revolver 12/7/2028 915 (7)
RoadOne IntermodaLogistics Revolver 12/29/2028 255 (6)
Routeware, Inc. Delayed Draw Term Loan 9/18/2026 1,477 -
Routeware, Inc. Revolver 9/18/2031 341 -
Runway Bidco, LLC Delayed Draw Term Loan 12/17/2026 2,715 (13)
Runway Bidco, LLC Revolver 12/17/2031 1,357 (13)
SV Newco 2, Inc. Delayed Draw Term Loan 5/31/2026 14,319 (113)
SV Newco 2, Inc. Revolver 6/2/2031 8,591 (68)
Securonix, Inc. Revolver 4/5/2028 3,697 (327)
Sherlock Buyer Corp. Revolver 12/8/2027 1,286 -
Smarsh, Inc. Delayed Draw Term Loan 2/18/2025 536 -
Smarsh, Inc. Revolver 2/16/2029 161 -
Sonny's Enterprises, LLC Delayed Draw Term Loan 6/5/2026 1,302 (42)
Spark Buyer, LLC Delayed Draw Term Loan 10/15/2026 875 (6)
Spark Buyer, LLC Revolver 10/15/2031 438 (6)
Spectrum Automotive Holdings Corp. Delayed Draw Term Loan 3/24/2026 8,432 (47)
Spectrum Automotive Holdings Corp. Revolver 6/29/2027 881 (5)
Stepping Stones Healthcare Services, LLC Delayed Draw Term Loan 4/25/2026 1,125 (3)
Stepping Stones Healthcare Services, LLC Revolver 12/30/2026 625 -
Superman Holdings, LLC Delayed Draw Term Loan 8/28/2026 6,552 -
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Investments - non-controlled/non-affiliated Commitment Type Commitment Expiration Date Unfunded Commitment Fair Value
Superman Holdings, LLC Revolver 8/29/2031 $ 2,901 $ -
Surewerx Purchaser III, Inc. Delayed Draw Term Loan 12/28/2025 1,128 -
Surewerx Purchaser III, Inc. Revolver 12/28/2028 341 -
Suveto Revolver 9/9/2027 1,231 (12)
Suveto Buyer, LLC Delayed Draw Term Loan 11/15/2026 240 (1)
Sweep Purchaser, LLC Revolver 6/30/2027 1,406 -
Tamarack Intermediate, LLC Revolver 3/13/2028 900 -
Tank Holding Corp. Delayed Draw Term Loan 11/22/2025 73 -
Tank Holding Corp. Revolver 3/31/2028 800 (16)
Thrive Buyer, Inc. (Thrive Networks) Revolver 1/22/2027 661 -
Tidi Legacy Products, Inc. Delayed Draw Term Loan 6/19/2025 494 (1)
Tidi Legacy Products, Inc. Revolver 12/19/2029 356 (1)
Transit Technologies, LLC Delayed Draw Term Loan 8/20/2026 2,841 -
Transit Technologies, LLC Revolver 8/20/2030 1,704 -
Trintech, Inc. Revolver 7/25/2029 2,092 (31)
Triple Lift, Inc. Revolver 5/5/2028 4,000 (171)
Trunk Acquisition, Inc. Delayed Draw Term Loan 12/20/2026 755 (4)
Trunk Acquisition, Inc. Revolver 2/19/2026 857 (4)
Two Six Labs, LLC Delayed Draw Term Loan 10/9/2025 2,200 (6)
Two Six Labs, LLC Revolver 8/20/2027 2,134 (6)
UHY Advisors, Inc. Delayed Draw Term Loan 11/22/2026 2,208 (11)
UHY Advisors, Inc. Revolver 11/21/2031 584 (6)
United Flow Technologies Intermediate Holdco II, LLC Delayed Draw Term Loan 6/21/2026 4,465 -
United Flow Technologies Intermediate Holdco II, LLC Revolver 6/21/2030 990 -
UpStack, Inc. Delayed Draw Term Loan 8/23/2026 3,750 -
UpStack, Inc. Revolver 8/25/2031 1,275 -
V Global Holdings, LLC Revolver 12/22/2025 279 (14)
VRC Companies, LLC Revolver 6/29/2027 1,653 -
Vardiman Black Holdings, LLC Delayed Draw Term Loan 3/29/2026 87 -
Vehlo Purchaser, LLC Delayed Draw Term Loan 10/5/2025 14,495 (91)
Vehlo Purchaser, LLC Revolver 5/24/2028 143 (1)
Vensure Employer Services, Inc. Delayed Draw Term Loan 9/27/2026 1,719 -
Verdantas, LLC Delayed Draw Term Loan 11/8/2026 2,500 (18)
Verdantas, LLC Revolver 5/6/2030 1,754 (18)
Vertex Service Partners, LLC Delayed Draw Term Loan 10/1/2026 734 (3)
Vertex Service Partners, LLC Revolver 11/8/2030 53 -
Vessco Midco Holdings, LLC Delayed Draw Term Loan 7/24/2026 2,750 -
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2024
(In thousands, except share amounts)
Investments - non-controlled/non-affiliated Commitment Type Commitment Expiration Date Unfunded Commitment Fair Value
Vessco Midco Holdings, LLC Revolver 7/24/2031 $ 1,244 $ -
Victors Purchaser, LLC Delayed Draw Term Loan 8/15/2026 1,213 -
Victors Purchaser, LLC Revolver 8/15/2031 570 -
World Insurance Associates, LLC Revolver 4/3/2028 1,269 (28)
YI, LLC Delayed Draw Term Loan 6/1/2025 1,178 -
YI, LLC Revolver 12/3/2029 883 -
Zarya Intermediate, LLC Revolver 7/1/2027 3,649 (4)
iCIMS, Inc. Revolver 8/18/2028 36 -
mPulse Mobile, Inc. Revolver 12/17/2027 1,734 (22)
Total First Lien Debt Unfunded Commitments $ 564,839 $ (3,621)
Total Unfunded Commitments $ 564,839 $ (3,621)
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments
December 31, 2023
(In thousands)
Investments-non-controlled/non-affiliated(1)(2)
Footnotes Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares Cost(4)
Fair Value Percentage of Net Assets
First Lien Debt
Aerospace & Defense
Jonathan Acquisition Company (5) (7) S + 5.00% 10.45% 12/22/2026 2,684 $ 2,641 $ 2,659 0.15 %
Mantech International CP (5) (8) S + 5.75% 11.13% 9/14/2029 355 349 355 0.02
Mantech International CP (5) (8) (13) S + 5.75% 11.13% 9/14/2029 31 30 31 -
Mantech International CP (5) (8) (13) S + 5.75% 11.13% 9/14/2028 - (1) - -
PCX Holding Corp. (5) (6) (7) S + 6.25% 11.75% 4/22/2027 18,047 17,936 17,944 1.04
PCX Holding Corp. (5) (7) S + 6.25% 11.75% 4/22/2027 18,172 17,937 18,068 1.05
PCX Holding Corp. (5) (7) (13) S + 6.25% 11.75% 4/22/2027 864 854 853 0.05
Two Six Labs, LLC (5) (6) (8) S + 5.50% 10.85% 8/20/2027 25,894 25,465 25,366 1.47
Two Six Labs, LLC (5) (8) S + 5.50% 10.85% 8/20/2027 4,231 4,169 4,136 0.24
Two Six Labs, LLC (5) (8) (13) S + 5.50% 10.85% 8/20/2027 - (26) (48) -
69,354 69,364 4.03
Air Freight & Logistics
AGI-CFI Holdings, Inc. (5) (8) S + 5.75% 11.18% 6/11/2027 14,263 14,048 14,159 0.82
Omni Intermediate Holdings, LLC (5) (7) S + 5.00% 10.54% 12/30/2026 12,410 12,324 11,824 0.69
Omni Intermediate Holdings, LLC (5) (7) (13) S + 5.00% 10.54% 12/30/2026 1,263 1,247 1,196 0.07
Omni Intermediate Holdings, LLC (5) (7) (13) P + 4.00% 12.50% 12/30/2025 832 826 781 0.05
RoadOne IntermodaLogistics (5) (7) S + 6.25% 11.61% 12/29/2028 1,655 1,612 1,626 0.09
RoadOne IntermodaLogistics (5) (7) (13) S + 6.25% 11.61% 12/29/2028 152 144 144 0.01
RoadOne IntermodaLogistics (5) (7) (13) S + 6.25% 11.61% 12/29/2028 20 12 14 -
30,213 29,744 1.73
Automobile Components
Continental Battery Company (5) (7) S + 6.75% (incl. 4.08% PIK)
12.34% 1/20/2027 6,204 6,121 5,165 0.30
Randy's Holdings, Inc. (5) (7) S + 6.50% 11.87% 11/1/2028 6,676 6,505 6,653 0.39
Randy's Holdings, Inc. (5) (7) (13) S + 6.50% 11.87% 11/1/2028 - (27) (8) -
Randy's Holdings, Inc. (5) (7) (13) S + 6.50% 11.87% 11/1/2028 260 238 257 0.01
Sonny's Enterprises, LLC (5) (6) (7) S + 6.75% 12.28% 8/5/2028 46,018 45,462 46,018 2.67
Spectrum Automotive Holdings Corp. (5) (6) (8) S + 5.75% 11.22% 6/29/2028 23,410 23,162 22,888 1.33
Spectrum Automotive Holdings Corp. (5) (8) (13) S + 5.75% 11.22% 6/29/2028 5,366 5,301 5,220 0.30
Spectrum Automotive Holdings Corp. (5) (8) (13) S + 5.75% 11.22% 6/29/2027 - (8) (20) -
86,754 86,173 5.01
Automobiles
ARI Network Services, Inc. (5) (6) (8) S + 5.25% 10.60% 2/28/2025 20,512 20,369 20,315 1.18
ARI Network Services, Inc. (5) (6) (8) S + 5.25% 10.60% 2/28/2025 3,594 3,569 3,559 0.21
ARI Network Services, Inc. (5) (8) (13) S + 5.25% 10.60% 2/28/2025 - (19) (29) -
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments
December 31, 2023
(In thousands)
Investments-non-controlled/non-affiliated(1)(2)
Footnotes Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares Cost(4)
Fair Value Percentage of Net Assets
Summit Buyer, LLC (5) (7) S + 5.75% 11.26% 1/14/2026 21,896 $ 21,670 $ 21,370 1.24 %
Summit Buyer, LLC (5) (7) (13) S + 5.75% 11.26% 1/14/2026 32,011 31,671 31,239 1.82
Summit Buyer, LLC (5) (13) P + 4.75% 13.25% 1/14/2026 - (22) (59) -
Turbo Buyer, Inc. (5) (7) S + 6.00% 11.50% 12/2/2025 37,555 37,197 37,202 2.16
Turbo Buyer, Inc. (5) (7) S + 6.00% 11.50% 12/2/2025 37,738 37,306 37,383 2.17
151,741 150,980 8.77
Biotechnology
GraphPad Software, LLC (5) (6) (7) S + 5.50% 11.20% 4/27/2027 14,807 14,714 14,751 0.86
GraphPad Software, LLC (5) (6) (13) P + 5.00% 13.50% 4/27/2027 875 866 868 0.05
15,580 15,619 0.91
Chemicals
Tank Holding Corp. (5) (6) (8) S + 5.75% 11.21% 3/31/2028 15,713 15,452 15,050 0.87
Tank Holding Corp. (5) (8) (13) S + 5.75% 11.21% 3/31/2028 250 237 236 0.01
Tank Holding Corp. (8) (13) S + 5.75% 11.21% 3/31/2028 213 202 177 0.01
V Global Holdings, LLC (5) (6) (8) S + 5.75% 11.21% 12/22/2027 4,854 4,780 4,756 0.28
V Global Holdings, LLC (5) (8) (13) S + 5.75% 11.21% 12/22/2025 276 269 262 0.02
20,940 20,481 1.19
Commercial Services & Supplies
365 Retail Markets, LLC (5) (7) S + 4.75% 10.30% 12/23/2026 17,105 16,922 17,105 0.99
365 Retail Markets, LLC (5) (7) S + 4.75% 10.30% 12/23/2026 5,488 5,442 5,488 0.32
365 Retail Markets, LLC (5) (7) (13) S + 4.75% 10.30% 12/23/2026 - (27) - -
Atlas Us Finco, Inc. (5) (7) (10) S + 7.25% 12.51% 12/9/2029 2,009 1,955 2,009 0.12
Atlas Us Finco, Inc. (5) (7) (10) (13) S + 7.25% 12.51% 12/9/2028 - (5) - -
BPG Holdings IV Corp. (5) (8) S + 6.00% 11.36% 7/29/2029 11,647 10,972 11,374 0.66
Encore Holdings, LLC (5) (8) S + 4.50% 10.45% 11/23/2028 1,831 1,807 1,831 0.11
Encore Holdings, LLC (5) (8) S + 4.50% 10.45% 11/23/2028 3,561 3,511 3,561 0.21
Encore Holdings, LLC (5) (8) (13) S + 4.50% 10.45% 11/23/2027 - (6) - -
Energy Labs Holdings Corp. (5) (7) S + 5.25% 10.71% 4/7/2028 384 379 379 0.02
Energy Labs Holdings Corp. (5) (7) S + 5.25% 10.71% 4/7/2028 36 36 36 -
Energy Labs Holdings Corp. (5) (7) (13) S + 5.25% 10.71% 4/7/2028 24 23 23 -
FLS Holding, Inc. (5) (7) (10) S + 5.25% 10.77% 12/15/2028 19,025 18,733 18,911 1.10
FLS Holding, Inc. (5) (7) (10) S + 5.25% 10.77% 12/15/2028 4,461 4,390 4,434 0.26
FLS Holding, Inc. (5) (7) (10) (13) S + 5.25% 10.77% 12/17/2027 - (24) (11) -
Helios Service Partners, LLC (5) (7) S + 6.25% 11.88% 3/19/2027 6,859 6,703 6,790 0.39
Helios Service Partners, LLC (5) (7) (13) S + 6.25% 11.88% 3/19/2027 6,965 6,737 6,836 0.40
Helios Service Partners, LLC (5) (7) (13) S + 6.00% 11.62% 3/19/2027 748 719 735 0.04
Iris Buyer, LLC (5) (7) S + 6.25% 11.60% 10/2/2030 7,008 6,820 6,820 0.40
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments
December 31, 2023
(In thousands)
Investments-non-controlled/non-affiliated(1)(2)
Footnotes Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares Cost(4)
Fair Value Percentage of Net Assets
Iris Buyer, LLC (5) (7) (13) S + 6.25% 11.60% 10/2/2030 145 $ 130 $ 130 0.01 %
Iris Buyer, LLC (5) (7) (13) S + 6.25% 11.60% 10/2/2029 - (26) (26) -
Atlas Us Finco, Inc. (5) (10) S + 7.25% 12.51% 12/9/2029 6,984 6,845 6,845 0.40
PDFTron Systems, Inc. (5) (6) (7) (10) S + 5.50% 10.86% 7/15/2027 30,030 29,694 29,550 1.72
PDFTron Systems, Inc. (5) (7) (10) S + 5.50% 10.86% 7/15/2027 9,727 9,595 9,571 0.56
PDFTron Systems, Inc. (5) (7) (10) (13) S + 5.50% 10.86% 7/15/2026 3,850 3,772 3,727 0.22
Procure Acquireco, Inc. (Procure Analytics) (5) (8) S + 5.00% 10.54% 12/20/2028 3,889 3,829 3,773 0.22
Procure Acquireco, Inc. (Procure Analytics) (5) (8) S + 5.00% 10.54% 12/20/2028 192 189 186 0.01
Procure Acquireco, Inc. (Procure Analytics) (5) (8) (13) S + 5.00% 10.54% 12/20/2028 - (3) (7) -
Sherlock Buyer Corp. (5) (7) S + 5.75% 11.20% 12/8/2028 10,950 10,782 10,943 0.64
Sherlock Buyer Corp. (5) (7) (13) S + 5.75% 11.20% 12/8/2028 - (23) (2) -
Sherlock Buyer Corp. (5) (7) (13) S + 5.75% 11.20% 12/8/2027 - (17) (1) -
Surewerx Purchaser III, Inc. (5) (8) (10) S + 6.75% 12.10% 12/28/2029 5,447 5,300 5,447 0.32
Surewerx Purchaser III, Inc. (5) (8) (10) (13) S + 6.75% 12.10% 12/28/2029 - (19) - -
Surewerx Purchaser III, Inc. (5) (8) (10) (13) S + 6.75% 12.10% 12/28/2028 574 547 574 0.03
Sweep Purchaser, LLC (5) (7) S + 5.75% 11.23% 11/30/2026 8,616 8,522 6,878 0.40
Sweep Purchaser, LLC (5) (7) (13) S + 5.75% 11.23% 11/30/2026 5,873 5,803 4,634 0.27
Sweep Purchaser, LLC (5) (7) (13) S + 5.75% 11.23% 11/30/2026 1,378 1,364 1,094 0.06
Tamarack Intermediate, LLC (5) (8) S + 5.75% 11.28% 3/13/2028 5,548 5,462 5,415 0.31
Tamarack Intermediate, LLC (5) (8) (13) S + 5.75% 11.28% 3/13/2028 202 192 192 0.01
Tamarack Intermediate, LLC (5) (8) (13) S + 5.75% 11.28% 3/13/2028 - (13) (22) -
United Flow Technologies Intermediate Holdco II, LLC (5) (7) S + 5.75% 11.28% 10/29/2027 16,801 16,566 16,577 0.96
United Flow Technologies Intermediate Holdco II, LLC (5) (7) (13) S + 5.75% 11.28% 10/29/2027 19,651 19,349 19,390 1.13
United Flow Technologies Intermediate Holdco II, LLC (5) (7) (13) S + 5.75% 11.28% 10/29/2026 1,845 1,811 1,805 0.10
US Infra Svcs Buyer, LLC (5) (6) (7) S + 7.25% (incl. 0.50% PIK)
12.33% 4/13/2026 14,973 14,842 14,193 0.82
US Infra Svcs Buyer, LLC (5) (6) (7) S + 7.25% (incl. 0.50% PIK)
12.33% 4/13/2026 2,113 2,095 2,003 0.12
US Infra Svcs Buyer, LLC (5) (7) S + 7.25% (incl. 0.50% PIK)
12.33% 4/13/2026 2,250 2,233 2,133 0.12
Vensure Employer Services, Inc. (5) (8) (13) S + 5.25% 10.63% 4/1/2027 328 306 306 0.02
VRC Companies, LLC (5) (6) (7) S + 5.75% 11.12% 6/29/2027 63,939 63,310 63,856 3.71
VRC Companies, LLC (5) (7) S + 5.75% 11.12% 6/29/2027 9,063 8,966 9,051 0.53
VRC Companies, LLC (5) (7) (13) S + 5.75% 11.12% 6/29/2027 - (15) (2) -
306,475 304,534 17.69
Construction & Engineering
KPSKY Acquisition, Inc. (5) (8) S + 5.25% 10.74% 10/19/2028 33,864 33,358 33,085 1.92
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments
December 31, 2023
(In thousands)
Investments-non-controlled/non-affiliated(1)(2)
Footnotes Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares Cost(4)
Fair Value Percentage of Net Assets
KPSKY Acquisition, Inc. (5) (8) S + 5.25% 10.74% 10/19/2028 7,754 $ 7,630 $ 7,576 0.44 %
LJ Avalon Holdings, LLC (5) (7) S + 6.50% 12.04% 2/1/2030 4,131 4,019 4,036 0.23
LJ Avalon Holdings, LLC (5) (7) (13) S + 6.50% 12.04% 2/1/2030 658 626 619 0.04
LJ Avalon Holdings, LLC (5) (7) (13) S + 6.50% 12.04% 2/1/2029 - (17) (15) -
Superman Holdings, LLC (5) (7) S + 6.13% 11.47% 8/31/2027 1,601 1,566 1,581 0.09
Superman Holdings, LLC (5) (7) (13) S + 6.13% 11.47% 8/31/2027 - (4) (5) -
47,178 46,877 2.72
Containers & Packaging
BP Purchaser, LLC (5) (8) S + 5.50% 10.95% 12/11/2028 17,161 16,898 16,677 0.97
FORTIS Solutions Group, LLC (5) (8) S + 5.50% 10.95% 10/15/2028 26,772 26,371 26,772 1.56
FORTIS Solutions Group, LLC (5) (8) (13) S + 5.50% 10.95% 10/15/2028 104 96 104 0.01
FORTIS Solutions Group, LLC (5) (8) (13) S + 5.50% 10.95% 10/15/2027 135 101 135 0.01
43,466 43,688 2.54
Distributors
48Forty Solutions, LLC (5) (6) (7) S + 6.00% 11.44% 11/30/2026 17,722 17,455 16,618 0.97
48Forty Solutions, LLC (5) (13) P + 5.00% 13.50% 11/30/2026 1,629 1,594 1,459 0.08
ABB Concise Optical Group, LLC (5) (8) S + 7.50% 13.01% 2/23/2028 17,008 16,685 14,653 0.85
Avalara, Inc. (5) (8) S + 7.25% 12.60% 10/19/2028 11,302 11,070 11,302 0.66
Avalara, Inc. (5) (8) (13) S + 7.25% 12.60% 10/19/2028 - (22) - -
Bradyifs Holdings, LLC (5) (6) (7) S + 6.00% 11.38% 10/31/2029 7,444 7,298 7,298 0.42
Bradyifs Holdings, LLC (5) (7) (13) S + 6.00% 11.38% 10/31/2029 201 191 191 0.01
Bradyifs Holdings, LLC (5) (7) (13) S + 6.00% 11.38% 10/31/2029 - (12) (12) -
PT Intermediate Holdings III, LLC (5) (8) S + 5.98% 11.47% 11/1/2028 28,342 28,128 27,257 1.58
PT Intermediate Holdings III, LLC (5) (8) S + 5.98% 11.47% 11/1/2028 15,768 15,646 15,164 0.88
98,033 93,930 5.46
Diversified Consumer Services
Apex Service Partners, LLC (5) (6) (7) S + 7.00% (incl. 2.00% PIK)
12.38% 10/24/2030 31,834 31,235 31,235 1.81
Apex Service Partners, LLC (5) (7) (13) S + 7.00% (incl. 2.00% PIK)
12.38% 10/24/2030 1,692 1,598 1,598 0.09
Apex Service Partners, LLC (5) (7) (13) S + 7.00% (incl. 2.00% PIK)
12.38% 10/24/2029 203 156 156 0.01
Assembly Intermediate, LLC (5) (7) S + 6.00% 11.45% 10/19/2027 20,741 20,451 19,961 1.16
Assembly Intermediate, LLC (5) (7) (13) S + 6.00% 11.45% 10/19/2027 3,630 3,568 3,435 0.20
Assembly Intermediate, LLC (5) (7) (13) S + 6.00% 11.45% 10/19/2027 - (26) (78) -
FPG Intermediate Holdco, LLC (5) (7) S + 6.50% 12.04% 3/5/2027 418 412 385 0.02
Groundworks, LLC (5) (6) (7) S + 6.50% 11.90% 3/14/2030 1,164 1,134 1,157 0.07
Groundworks, LLC (5) (7) (13) S + 6.50% 11.90% 3/14/2030 28 25 28 -
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments
December 31, 2023
(In thousands)
Investments-non-controlled/non-affiliated(1)(2)
Footnotes Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares Cost(4)
Fair Value Percentage of Net Assets
Groundworks, LLC (5) (7) (13) S + 6.50% 11.90% 3/14/2029 - $ (2) $ - - %
Heartland Home Services, Inc. (5) (8) S + 5.75% 11.11% 12/15/2026 1,946 1,936 1,942 0.11
Lightspeed Solution, LLC (5) (8) S + 6.50% (incl. 2.17% PIK)
11.86% 3/1/2028 7,881 7,768 7,741 0.45
Lightspeed Solution, LLC (5) (8) (13) S + 6.50% (incl. 2.17% PIK)
11.86% 3/1/2028 423 402 379 0.02
LUV Car Wash Group, LLC (5) (7) (13) S + 7.00% 12.55% 12/9/2026 714 708 711 0.04
Magnolia Wash Holdings (5) (7) S + 6.50% 12.16% 7/14/2028 3,263 3,210 2,947 0.17
Magnolia Wash Holdings (5) (7) S + 6.50% 12.16% 7/14/2028 699 687 631 0.04
Magnolia Wash Holdings (5) (7) (13) S + 6.50% 12.16% 7/14/2028 87 85 72 -
Spotless Brands, LLC (5) (7) S + 6.50% 12.03% 7/25/2028 4,503 4,429 4,463 0.26
Spotless Brands, LLC (5) (7) S + 6.50% 12.03% 7/25/2028 852 838 845 0.05
Spotless Brands, LLC (5) (7) (13) S + 6.50% 12.03% 7/25/2028 31 29 30 -
Vertex Service Partners, LLC (5) (6) (8) S + 5.50% 10.90% 11/8/2030 1,774 1,730 1,730 0.10
Vertex Service Partners, LLC (5) (8) (13) S + 5.50% 10.90% 11/8/2030 854 802 802 0.05
Vertex Service Partners, LLC (5) (8) (13) S + 5.50% 10.90% 11/8/2030 - (11) (11) -
81,164 80,159 4.66
Electronic Equipment, Instruments & Components
Abracon Group Holdings, LLC (5) (8) S + 6.00% 11.54% 7/6/2028 6,037 5,943 4,986 0.29
Abracon Group Holdings, LLC (5) (8) (13) S + 6.00% 11.54% 7/6/2028 - (8) (77) -
Abracon Group Holdings, LLC (5) (8) S + 6.00% 11.54% 7/6/2028 401 395 331 0.02
Dwyer Instruments, Inc. (5) (8) S + 5.75% 11.17% 7/21/2027 10,512 10,342 10,303 0.60
Dwyer Instruments, Inc. (5) (8) (13) S + 5.75% 11.17% 7/21/2027 2,023 1,960 1,953 0.11
Dwyer Instruments, Inc. (5) (8) (13) S + 5.75% 11.17% 7/21/2027 - (14) (20) -
Infinite Bidco, LLC (5) (9) S + 6.25% 11.88% 3/2/2028 12,360 12,043 12,285 0.71
Magneto Components Buyco, LLC (5) (6) (8) S + 6.00% 11.36% 12/5/2030 15,302 15,024 15,024 0.87
Magneto Components Buyco, LLC (5) (8) (13) S + 6.00% 11.36% 12/5/2030 - (28) (28) -
Magneto Components Buyco, LLC (5) (8) (13) S + 6.00% 11.36% 12/5/2029 - (46) (46) -
45,611 44,711 2.60
Financial Services
Applitools, Inc. (5) (8) (10) S + 6.25% PIK
11.61% 5/25/2029 3,584 3,541 3,498 0.20
Applitools, Inc. (5) (8) (10) (13) S + 6.25% 11.61% 5/25/2028 - (6) (10) -
Cerity Partners, LLC (5) (8) S + 6.75% 12.11% 7/30/2029 4,767 4,639 4,767 0.28
Cerity Partners, LLC (5) (8) S + 6.75% 12.11% 7/30/2029 6,698 6,528 6,698 0.39
GC Waves Holdings, Inc. (5) (8) S + 6.00% 11.46% 8/11/2028 2,302 2,259 2,259 0.13
GC Waves Holdings, Inc. (5) (8) (13) S + 6.00% 11.46% 8/11/2028 628 476 503 0.03
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments
December 31, 2023
(In thousands)
Investments-non-controlled/non-affiliated(1)(2)
Footnotes Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares Cost(4)
Fair Value Percentage of Net Assets
GC Waves Holdings, Inc. (5) (8) (13) S + 6.00% 11.46% 8/11/2028 - $ (6) $ (6) - %
SitusAMC Holdings Corp. (5) (8) S + 5.50% 10.95% 12/22/2027 3,337 3,312 3,330 0.19
Smarsh, Inc. (5) (8) S + 5.75% 11.10% 2/16/2029 4,286 4,217 4,213 0.24
Smarsh, Inc. (5) (8) (13) S + 5.75% 11.10% 2/16/2029 536 523 518 0.03
Smarsh, Inc. (5) (8) (13) S + 5.75% 11.10% 2/16/2029 - (4) (5) -
Trintech, Inc. (5) (6) (7) S + 6.50% 11.86% 7/25/2029 34,086 33,440 33,445 1.94
Trintech, Inc. (5) (7) (13) S + 6.50% 11.86% 7/25/2029 837 782 782 0.05
59,701 59,992 3.49
Food Products
AMCP Pet Holdings, Inc. (Brightpet) (5) (6) (7) S + 7.00% (incl. 0.75% PIK)
12.50% 10/5/2026 41,763 41,011 40,856 2.37
AMCP Pet Holdings, Inc. (Brightpet) (5) (7) (13) S + 7.00% (incl. 0.75% PIK)
12.50% 10/5/2026 3,798 3,715 3,671 0.21
Nellson Nutraceutical, Inc. (5) (6) (7) S + 5.75% 11.30% 12/23/2025 18,419 18,265 18,329 1.06
Teasdale Foods, Inc. (Teasdale Latin Foods) (5) (7) S + 7.25% (incl. 1.00% PIK)
12.68% 12/18/2025 10,837 10,742 9,928 0.58
73,733 72,784 4.23
Health Care Equipment & Supplies
Performance Health Holdings, Inc. (5) (6) (7) S + 5.75% 11.32% 7/12/2027 9,398 9,275 9,350 0.54
PerkinElmer U.S., LLC (5) (6) (7) S + 6.75% 12.00% 3/13/2029 4,383 4,268 4,373 0.25
Tidi Legacy Products, Inc. (5) (7) S + 5.50% 10.86% 12/19/2029 3,470 3,400 3,400 0.20
Tidi Legacy Products, Inc. (5) (7) (13) S + 5.50% 10.86% 12/19/2029 - (9) (9) -
Tidi Legacy Products, Inc. (5) (7) (13) S + 5.50% 10.86% 12/19/2029 - (13) (13) -
YI, LLC (5) (6) (7) S + 5.75% 11.09% 12/3/2029 5,654 5,542 5,542 0.32
YI, LLC (5) (7) (13) S + 5.75% 11.09% 12/1/2029 - (12) (12) -
YI, LLC (5) (7) (13) S + 5.75% 11.09% 12/3/2029 - (17) (17) -
22,434 22,614 1.31
Health Care Providers & Services
Advarra Holdings, Inc. (5) (9) S + 5.25% 10.61% 8/24/2029 454 447 447 0.03
Advarra Holdings, Inc. (5) (9) (13) S + 5.25% 10.61% 8/24/2029 - - (1) -
DCA Investment Holdings, LLC (5) (6) (8) S + 6.50% 11.85% 4/3/2028 18,680 18,377 18,247 1.06
DCA Investment Holdings, LLC (5) (8) S + 6.50% 11.85% 4/3/2028 3,625 3,564 3,541 0.21
Gateway US Holdings, Inc. (5) (8) (10) S + 6.50% 11.85% 9/22/2026 750 745 750 0.04
Gateway US Holdings, Inc. (5) (8) (10) S + 6.50% 11.85% 9/22/2026 211 210 211 0.01
Gateway US Holdings, Inc. (5) (8) (10) (13) S + 6.50% 11.85% 9/22/2026 - - - -
Heartland Veterinary Partners, LLC (5) (7) S + 4.75% 10.21% 12/10/2026 1,847 1,835 1,830 0.11
Heartland Veterinary Partners, LLC (5) (7) S + 4.75% 10.21% 12/10/2026 4,182 4,158 4,143 0.24
Heartland Veterinary Partners, LLC (5) (7) (13) S + 4.75% 10.21% 12/10/2026 - (2) (3) -
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments
December 31, 2023
(In thousands)
Investments-non-controlled/non-affiliated(1)(2)
Footnotes Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares Cost(4)
Fair Value Percentage of Net Assets
iCIMS, Inc. (5) (8) S + 7.25% (incl. 3.88% PIK)
12.62% 8/18/2028 7,064 $ 6,963 $ 7,064 0.41 %
iCIMS, Inc. (5) (8) (13) S + 7.25% (incl. 3.88% PIK)
12.62% 8/18/2028 - (1) - -
iCIMS, Inc. (5) (8) (13) S + 7.25% (incl. 3.88% PIK)
12.62% 8/18/2028 8 7 8 -
Intelerad Medical Systems Incorporated (5) (7) (10) S + 6.50% 12.03% 8/21/2026 495 484 466 0.03
Intelerad Medical Systems Incorporated (5) (7) (10) S + 6.50% 12.03% 8/21/2026 34 33 32 -
mPulse Mobile, Inc. (5) (8) S + 6.50% 11.83% 12/17/2027 40,740 39,916 39,947 2.32
mPulse Mobile, Inc. (5) (8) S + 6.50% 11.98% 12/17/2027 5,417 5,300 5,308 0.31
mPulse Mobile, Inc. (5) (8) (13) S + 6.50% 11.83% 12/17/2027 - (60) (59) -
Pareto Health Intermediate Holdings, Inc. (5)(7) S + 6.50% 11.97% 5/31/2030 6,745 6,619 6,695 0.39
Pareto Health Intermediate Holdings, Inc. (5) (7)(13) S + 6.50% 11.97% 5/31/2029 - (14) (6) -
PPV Intermediate Holdings, LLC (5) (8) S + 5.75% 11.14% 8/31/2029 4,357 4,198 4,275 0.25
PPV Intermediate Holdings, LLC (5) (8) (13) S + 5.75% 11.14% 8/31/2029 - (71) (124) (0.01)
Promptcare Infusion Buyer, Inc. (5) (7) S + 6.00% 11.46% 9/1/2027 8,981 8,860 8,865 0.52
Promptcare Infusion Buyer, Inc. (5) (7) S + 6.00% 11.46% 9/1/2027 1,399 1,385 1,381 0.08
Stepping Stones Healthcare Services, LLC (5) (8) S + 5.75% 11.20% 1/2/2029 4,288 4,237 4,227 0.25
Stepping Stones Healthcare Services, LLC (5) (8) (13) S + 5.75% 11.20% 1/2/2029 965 952 947 0.06
Stepping Stones Healthcare Services, LLC (5) (8) (13) S + 5.75% 11.20% 12/30/2026 - (6) (9) -
Suveto (5) (8) S + 4.25% 9.71% 9/9/2027 11,837 11,753 11,597 0.67
Suveto (5) (8) (13) S + 4.25% 9.71% 9/9/2027 366 352 340 0.02
Tivity Health, Inc. (5) (8) S + 6.00% 11.35% 6/28/2029 3,674 3,627 3,668 0.21
Vardiman Black Holdings, LLC (5) (9) (11) S + 9.00% (incl. 2.00% PIK)
14.40% 3/18/2027 3,386 3,360 2,815 0.16
Vardiman Black Holdings, LLC (5) (9) (11) S + 9.00% (incl. 2.00% PIK)
14.40% 3/18/2027 4,020 3,988 3,342 0.19
Vermont Aus Pty Ltd (5) (8) (10) S + 5.50% 11.00% 3/23/2028 8,351 8,190 8,194 0.48
139,406 138,138 8.03
Health Care Technology
Hyland Software, Inc. (5) (6) (8) S + 6.00% 11.36% 9/19/2030 39,656 39,077 39,212 2.28
Hyland Software, Inc. (5) (8) (13) S + 6.00% 11.36% 9/19/2029 - (27) (21) -
Lightspeed Buyer, Inc. (5) (6) (7) S + 5.25% 10.71% 2/3/2026 12,540 12,381 12,429 0.72
Lightspeed Buyer, Inc. (5) (7) S + 5.25% 10.71% 2/3/2026 9,911 9,774 9,823 0.57
61,205 61,443 3.57
Industrial Conglomerates
Excelitas Technologies Corp. (5) (8) S + 5.75% 11.23% 8/13/2029 1,455 1,431 1,442 0.08
Excelitas Technologies Corp. (5) (8) E + 5.75% 9.74% 8/13/2029 € 239 244 262 0.02
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments
December 31, 2023
(In thousands)
Investments-non-controlled/non-affiliated(1)(2)
Footnotes Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares Cost(4)
Fair Value Percentage of Net Assets
Excelitas Technologies Corp. (5) (8) (13) S + 5.75% 11.23% 8/13/2029 126 $ 124 $ 125 0.01 %
Excelitas Technologies Corp. (5) (8) (13) S + 5.75% 11.23% 8/14/2028 80 78 79 -
Raptor Merger Sub Debt, LLC (5) (6) (8) S + 6.75% 12.10% 4/1/2029 32,233 31,399 32,201 1.87
Raptor Merger Sub Debt, LLC (5) (8) (13) S + 6.75% 12.10% 4/1/2028 488 431 486 0.03
33,707 34,595 2.01
Insurance Services
Amerilife Holdings, LLC (5) (8) S + 5.75% 11.15% 8/31/2029 2,024 1,989 1,997 0.12
Amerilife Holdings, LLC (5) (8) (13) S + 5.75% 11.15% 8/31/2029 722 708 710 0.04
Amerilife Holdings, LLC (5) (8) (13) S + 5.75% 11.15% 8/31/2028 - (7) (6) -
Foundation Risk Partners Corp. (5) (8) S + 6.00% 11.45% 10/29/2028 42,533 42,053 42,533 2.47
Foundation Risk Partners Corp. (5) (8) S + 6.00% 11.45% 10/29/2028 9,251 9,146 9,251 0.54
Foundation Risk Partners Corp. (5) (8) (13) S + 6.00% 11.45% 10/29/2027 - (44) - -
Galway Borrower, LLC (5) (8) S + 5.25% 10.71% 9/29/2028 33,377 32,879 32,430 1.88
Galway Borrower, LLC (5) (8) (13) S + 5.25% 10.71% 9/29/2028 - (15) (18) -
Galway Borrower, LLC (5) (8) (13) S + 5.25% 10.71% 9/30/2027 - (26) (59) -
Higginbotham Insurance Agency, Inc. (5) (6) (7) S + 5.50% 10.96% 11/24/2028 18,295 18,118 18,290 1.06
Higginbotham Insurance Agency, Inc. (5) (7) (13) S + 5.50% 10.96% 11/24/2028 2,494 2,464 2,493 0.14
High Street Buyer, Inc. (5) (6) (8) S + 5.75% 11.25% 4/14/2028 9,890 9,756 9,890 0.57
High Street Buyer, Inc. (5) (6) (8) S + 5.75% 11.25% 4/14/2028 39,719 39,156 39,719 2.31
High Street Buyer, Inc. (5) (8) (13) S + 5.75% 11.25% 4/16/2027 - (23) - -
Long Term Care Group, Inc. (5) (8) S + 7.00% (incl. 6.00% PIK)
12.66% 9/8/2027 5,115 5,043 4,235 0.25
Inszone Mid, LLC (5) (7) S + 5.75% 11.11% 11/12/2029 4,460 4,372 4,372 0.25
Inszone Mid, LLC (5) (7) (13) S + 5.75% 11.11% 11/12/2029 533 463 464 0.03
Inszone Mid, LLC (5) (7) (13) S + 5.75% 11.11% 11/12/2029 - (16) (16) -
Integrity Marketing Acquisition, LLC (5) (6) (8) S + 6.00% 11.39% 8/27/2026 392 385 384 0.02
Integrity Marketing Acquisition, LLC (5) (6) (8) S + 6.00% 11.54% 8/27/2026 85,345 84,685 83,705 4.86
Integrity Marketing Acquisition, LLC (5) (8) (13) S + 6.00% 11.39% 8/27/2026 - (2) (1) -
Keystone Agency Investors (5) (7) S + 5.50% 11.00% 5/3/2027 3,480 3,442 3,429 0.20
Keystone Agency Investors (5) (7) S + 5.50% 11.00% 5/3/2027 4,007 3,964 3,948 0.23
Majesco (5) (6) (7) S + 7.25% 12.60% 9/21/2027 23,182 22,792 22,920 1.33
Majesco (5) (7) (13) S + 7.25% 12.60% 9/21/2026 - (21) (18) -
Patriot Growth Insurance Services, LLC (5) (6) (8) S + 5.50% 11.00% 10/16/2028 62,358 61,419 61,747 3.59
Patriot Growth Insurance Services, LLC (5) (8) (13) S + 5.50% 11.00% 10/16/2028 - (61) (44) -
Peter C. Foy & Associates Insurance Services, LLC (5) (6) (8) S + 6.00% 11.47% 11/1/2028 20,205 20,029 19,938 1.16
Peter C. Foy & Associates Insurance Services, LLC (5) (8) (13) S + 6.00% 11.47% 11/1/2028 7,140 7,060 7,033 0.41
Peter C. Foy & Associates Insurance Services, LLC (5) (8) (13) S + 6.00% 11.47% 11/1/2027 - (5) (12) -
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments
December 31, 2023
(In thousands)
Investments-non-controlled/non-affiliated(1)(2)
Footnotes Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares Cost(4)
Fair Value Percentage of Net Assets
RSC Acquisition, Inc. (5) (6) (8) S + 5.50% 11.02% 11/1/2029 32,400 $ 31,989 $ 32,125 1.87 %
RSC Acquisition, Inc. (5) (8) (13) S + 6.00% 11.39% 11/1/2029 135 124 128 0.01
Summit Acquisition, Inc. (5) (6) (8) S + 6.75% 12.10% 5/1/2030 7,353 7,146 7,242 0.42
Summit Acquisition, Inc. (5) (8) (13) S + 6.75% 12.10% 5/1/2030 - (22) (25) -
Summit Acquisition, Inc. (5) (8) (13) S + 6.75% 12.10% 5/1/2029 - (22) (12) -
World Insurance Associates, LLC (5) (6) (7) S + 6.00% 11.36% 4/3/2028 64,847 63,382 62,776 3.65
World Insurance Associates, LLC (5) (7) (13) S + 6.00% 11.36% 4/3/2028 - (11) (41) -
472,289 471,507 27.39
Interactive Media & Services
FMG Suite Holdings, LLC (5) (7) S + 5.50% 10.78% 10/30/2026 23,574 23,267 23,392 1.36
FMG Suite Holdings, LLC (5) (7) S + 5.50% 10.78% 10/30/2026 4,568 4,521 4,538 0.26
FMG Suite Holdings, LLC (5) (13) P + 4.25% 12.75% 10/30/2026 777 753 762 0.04
Spectrio, LLC (5) (6) (7) S + 6.00% (incl. 5.00% PIK)
11.38% 12/9/2026 31,645 31,343 30,028 1.74
Spectrio, LLC (5) (7) S + 6.00% (incl. 5.00% PIK)
11.38% 12/9/2026 12,765 12,725 12,113 0.70
Spectrio, LLC (5) (7) (13) S + 6.00% (incl. 5.00% PIK)
11.38% 12/9/2026 3,498 3,460 3,294 0.19
Triple Lift, Inc. (5) (6) (8) S + 5.75% 11.17% 5/5/2028 27,300 26,926 25,400 1.48
Triple Lift, Inc. (5) (8) (13) S + 5.75% 11.17% 5/5/2028 1,533 1,484 1,255 0.07
104,479 100,782 5.86
IT Services
Atlas Purchaser, Inc. (6) (8) S + 5.25% 10.88% 5/8/2028 8,831 8,710 5,210 0.30
Catalis Intermediate, Inc. (5) (6) (8) S + 5.50% 11.00% 8/4/2027 39,357 38,709 37,192 2.16
Catalis Intermediate, Inc. (5) (8) S + 5.50% 11.00% 8/4/2027 8,855 8,723 8,368 0.49
Catalis Intermediate, Inc. (5) (8) (13) S + 5.50% 11.00% 8/4/2027 1,460 1,396 1,227 0.07
Donuts, Inc. (5) (6) (7) S + 6.00% 11.59% 12/29/2027 24,855 24,618 24,838 1.44
Recovery Point Systems, Inc. (5) (6) (7) S + 6.50% 11.07% 8/12/2026 40,635 40,229 40,635 2.36
Recovery Point Systems, Inc. (5) (7) (13) S + 6.50% 11.07% 8/12/2026 - (35) - -
Redwood Services Group, LLC (5) (8) S + 6.25% 11.70% 6/15/2029 10,829 10,648 10,563 0.61
Redwood Services Group, LLC (5) (8) (13) S + 6.25% 11.70% 6/15/2029 5,706 5,645 5,553 0.32
Syntax Systems Ltd (5) (8) (10) S + 5.50% 10.96% 10/29/2028 35,093 34,830 34,469 2.00
Syntax Systems Ltd (5) (8) (10) (13) S + 5.50% 10.96% 10/29/2026 2,295 2,274 2,229 0.13
Thrive Buyer, Inc. (Thrive Networks) (5) (6) (7) S + 6.00% 11.55% 1/22/2027 22,937 22,634 22,516 1.31
Thrive Buyer, Inc. (Thrive Networks) (5) (7) S + 6.00% 11.50% 1/22/2027 16,912 16,705 16,577 0.96
Thrive Buyer, Inc. (Thrive Networks) (5) (13) P + 5.00% 13.50% 1/22/2027 661 639 621 0.04
UpStack, Inc. (5) (7) S + 5.75% 11.60% 8/20/2027 8,250 8,115 8,044 0.47
UpStack, Inc. (5) (7) (13) S + 6.25% 11.60% 8/20/2027 6,767 6,548 6,442 0.37
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments
December 31, 2023
(In thousands)
Investments-non-controlled/non-affiliated(1)(2)
Footnotes Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares Cost(4)
Fair Value Percentage of Net Assets
UpStack, Inc. (5) (7) (13) S + 6.25% 11.60% 8/20/2027 263 $ 248 $ 241 0.01 %
230,636 224,725 13.06
Leisure Products
GSM Acquisition Corp. (GSM Outdoors) (5) (6) (7) S + 5.00% 10.47% 11/16/2026 17,269 17,170 17,096 0.99
GSM Acquisition Corp. (GSM Outdoors) (5) (7) S + 5.00% 10.47% 11/16/2026 4,445 4,411 4,400 0.26
GSM Acquisition Corp. (GSM Outdoors) (5) (7) (13) S + 5.00% 10.47% 11/16/2026 - (29) (43) -
21,552 21,453 1.25
Machinery
Answer Acquisition, LLC (5) (7) S + 5.75% 11.25% 12/30/2026 10,611 10,472 10,454 0.61
Answer Acquisition, LLC (5) (7) (13) S + 5.75% 11.25% 12/30/2026 641 631 629 0.04
Chase Intermediate, LLC (5) (13) S + 5.25% 11.00% 10/30/2028 - (99) (196) (0.01)
Chase Intermediate, LLC (5) (13) S + 5.25% 11.00% 10/30/2028 - (10) (10) -
Komline Sanderson Engineering Corp. (5) (6) (9) S + 6.00% 11.78% 3/17/2026 17,218 17,124 16,681 0.97
Komline Sanderson Engineering Corp. (5) (9) (13) S + 6.00% 11.78% 3/17/2026 17,776 17,634 16,955 0.99
Komline Sanderson Engineering Corp. (5) (13) P + 5.00% 13.50% 3/17/2026 - (21) (148) (0.01)
MHE Intermediate Holdings, LLC (5) (6) (7) S + 6.00% 11.60% 7/21/2027 19,165 18,905 18,990 1.10
MHE Intermediate Holdings, LLC (5) (7) S + 6.00% 11.60% 7/21/2027 3,674 3,624 3,636 0.21
MHE Intermediate Holdings, LLC (5) (7) (13) S + 6.00% 11.60% 7/21/2027 - (30) (25) -
68,230 66,966 3.89
Multi-Utilities
AWP Group Holdings, Inc. (5) (6) (7) S + 5.50% 10.95% 12/24/2029 6,152 5,917 6,058 0.35
AWP Group Holdings, Inc. (5) (7) (13) S + 5.50% 10.95% 12/24/2029 79 63 54 -
AWP Group Holdings, Inc. (5) (7) (13) S + 5.50% 10.95% 12/24/2029 170 154 158 0.01
Ground Penetrating Radar Systems, LLC (5) (6) (7) S + 4.50% 10.03% 6/26/2026 10,202 10,098 10,114 0.59
Ground Penetrating Radar Systems, LLC (5) (7) (13) S + 4.50% 10.03% 6/26/2025 - (11) (14) -
Vessco Midco Holdings, LLC (5) (6) (7) S + 4.50% 9.97% 11/2/2026 2,687 2,673 2,687 0.16
Vessco Midco Holdings, LLC (5) (7) S + 4.50% 9.97% 11/2/2026 1,751 1,742 1,751 0.10
Vessco Midco Holdings, LLC (5) (13) P + 3.50% 12.00% 10/18/2026 20 18 20 -
20,654 20,828 1.21
Pharmaceuticals
Caerus US 1, Inc. (5) (8) (10) S + 5.75% 11.11% 5/25/2029 11,038 10,846 11,038 0.64
Caerus US 1, Inc. (5) (8) (10) (13) S + 5.75% 11.11% 5/25/2029 713 693 713 0.04
Caerus US 1, Inc. (5) (8) (10) (13) S + 5.75% 11.11% 5/25/2029 878 859 878 0.05
12,398 12,629 0.73
Professional Services
Abacus Data Holdings, Inc. (AbacusNext) (5) (6) (7) S + 6.25% 11.71% 3/10/2027 18,427 18,180 18,427 1.07
Abacus Data Holdings, Inc. (AbacusNext) (5) (7) S + 6.25% 11.71% 3/10/2027 1,931 1,919 1,931 0.11
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments
December 31, 2023
(In thousands)
Investments-non-controlled/non-affiliated(1)(2)
Footnotes Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares Cost(4)
Fair Value Percentage of Net Assets
Abacus Data Holdings, Inc. (AbacusNext) (5) (7) (13) S + 6.25% 11.71% 3/10/2027 1,050 $ 1,032 $ 1,050 0.06 %
Bridgepointe Technologies, LLC (5) (7) S + 6.50% 12.00% 12/31/2027 17,230 16,726 16,944 0.98
Bridgepointe Technologies, LLC (5) (7) (13) S + 6.50% 12.00% 12/31/2027 10,091 9,582 9,850 0.57
Bullhorn, Inc. (5) (6) (7) S + 5.50% 10.96% 9/30/2026 15,447 15,364 15,399 0.89
Bullhorn, Inc. (5) (7) S + 5.50% 10.96% 9/30/2026 63 61 62 -
Bullhorn, Inc. (5) (7) (13) S + 5.50% 10.96% 9/30/2026 - (4) (2) -
Citrin Cooperman Advisors, LLC (5) (8) S + 5.75% 11.37% 10/1/2027 24,505 24,123 24,486 1.42
Citrin Cooperman Advisors, LLC (5) (8) (13) S + 5.75% 11.37% 10/1/2027 9,330 9,115 9,260 0.54
GPS Merger Sub, LLC (5) (6) (7) S + 6.00% 11.38% 10/2/2029 4,927 4,831 4,831 0.28
GPS Merger Sub, LLC (5) (7) (13) S + 6.00% 11.38% 10/2/2029 - (12) (12) -
GPS Merger Sub, LLC (5) (7) (13) S + 6.00% 11.38% 10/2/2029 - (20) (20) -
KENG Acquisition, Inc. (5) (7) S + 6.25% 11.60% 8/1/2029 3,221 3,144 3,180 0.18
KENG Acquisition, Inc. (5) (7) (13) S + 6.25% 11.60% 8/1/2029 400 367 369 0.02
KENG Acquisition, Inc. (5) (7) (13) S + 6.25% 11.60% 8/1/2029 98 77 86 -
KWOR Acquisition, Inc. (5) (7) S + 5.25% 10.71% 12/22/2028 5,333 5,250 5,257 0.31
KWOR Acquisition, Inc. (5) (7) (13) S + 5.25% 10.71% 12/22/2028 1,301 1,253 1,233 0.07
KWOR Acquisition, Inc. (5) (13) P + 4.25% 12.75% 12/22/2027 52 51 51 -
Project Boost Purchaser, LLC (5) (8) S + 5.25% 10.64% 5/2/2029 5,668 5,623 5,662 0.33
Project Boost Purchaser, LLC (5) (8) (13) S + 5.25% 10.64% 5/2/2029 - (4) (1) -
Project Boost Purchaser, LLC (5) (8) (13) S + 5.25% 10.64% 5/2/2028 - (3) - -
116,655 118,043 6.86
Real Estate Management & Development
Associations, Inc. (5) (6) (7) S + 6.50% (incl. 2.50% PIK)
12.17% 7/2/2027 17,780 17,669 17,610 1.02
Associations, Inc. (5) (7) (13) S + 6.50% (incl. 2.50% PIK)
12.17% 7/2/2027 21,896 21,757 21,687 1.26
Associations, Inc. (5) (7) (13) S + 6.50% (incl. 2.50% PIK)
12.17% 7/2/2027 657 646 640 0.04
MRI Software, LLC (5) (6) (7) S + 5.50% 10.90% 2/10/2027 59,262 58,975 58,936 3.42
MRI Software, LLC (5) (7) (13) S + 5.50% 10.90% 2/10/2027 - - - -
MRI Software, LLC (5) (7) (13) S + 5.50% 10.90% 2/10/2027 - (8) (12) -
Pritchard Industries, LLC (5) (8) S + 5.50% 10.94% 10/13/2027 25,274 24,925 24,771 1.44
Pritchard Industries, LLC (5) (8) S + 5.50% 10.94% 10/13/2027 6,043 5,956 5,922 0.34
Zarya Intermediate, LLC (5) (7) (10) S + 6.50% 11.89% 7/1/2027 35,408 35,408 35,408 2.06
Zarya Intermediate, LLC (5) (7) (10) (13) S + 6.50% 11.89% 7/1/2027 3,128 3,128 3,128 0.18
168,456 168,090 9.77
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments
December 31, 2023
(In thousands)
Investments-non-controlled/non-affiliated(1)(2)
Footnotes Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares Cost(4)
Fair Value Percentage of Net Assets
Software
Alert Media, Inc. (5) (6) (7) S + 6.25% 13.08% 4/12/2027 19,283 $ 19,048 $ 18,983 1.10 %
Alert Media, Inc. (5) (7) (13) S + 6.25% 13.08% 4/12/2027 - (37) (53) -
Anaplan, Inc. (5) (8) S + 6.50% 11.85% 6/21/2029 24,000 23,597 24,000 1.39
Appfire Technologies, LLC (5) (7) S + 5.65% 11.03% 3/9/2027 18,667 18,576 18,426 1.07
Appfire Technologies, LLC (5) (7) (13) S + 5.65% 11.03% 3/9/2027 - (9) (14) -
Appfire Technologies, LLC (5) (13) P + 4.50% 13.00% 3/9/2027 38 36 36 -
Bottomline Technologies, Inc. (5) (8) S + 5.25% 10.68% 5/14/2029 3,692 3,630 3,682 0.21
Bottomline Technologies, Inc. (5) (8) (13) S + 5.25% 10.68% 5/15/2028 - (4) - -
CLEO Communications Holding, LLC (5) (6) (7) S + 6.50% 11.96% 6/9/2027 39,998 39,743 39,370 2.29
CLEO Communications Holding, LLC (5) (7) (13) S + 6.50% 11.96% 6/9/2027 - (72) (196) (0.01)
Coupa Holdings, LLC (5) (8) S + 7.50% 12.86% 2/27/2030 2,264 2,212 2,239 0.13
Coupa Holdings, LLC (5) (8) (13) S + 7.50% 12.86% 2/27/2030 - (12) (12) -
Coupa Holdings, LLC (5) (8) (13) S + 7.50% 12.86% 2/27/2029 - (18) (9) -
Cyara AcquisitionCo, LLC (5) (7) S + 6.75% (incl. 2.75% PIK)
12.08% 6/28/2029 4,664 4,545 4,580 0.27
Cyara AcquisitionCo, LLC (5) (7) (13) S + 6.75% (incl. 2.75% PIK)
12.08% 6/28/2029 - (8) (6) -
Diligent Corporation (5) (6) (7) S + 5.75% 11.28% 8/4/2025 29,740 29,629 29,678 1.72
Diligent Corporation (5) (6) (7) S + 5.75% 11.23% 8/4/2025 2,179 2,170 2,174 0.13
Diligent Corporation (5) (7) (13) S + 5.75% 11.23% 8/4/2025 2,430 2,413 2,421 0.14
E-Discovery AcquireCo, LLC (5) (7) S + 6.50% 11.89% 8/29/2029 17,795 17,368 17,482 1.02
E-Discovery AcquireCo, LLC (5) (7) (13) S + 6.50% 11.89% 8/29/2029 - (38) (29) -
Fullsteam Operations, LLC (5) (7) S + 8.25% 13.78% 11/27/2029 10,860 10,538 10,538 0.61
Fullsteam Operations, LLC (5) (7) (13) S + 8.25% 13.78% 11/27/2029 1,034 947 946 0.05
Fullsteam Operations, LLC (5) (7) (13) S + 8.25% 13.78% 11/27/2029 - (18) (18) -
GS AcquisitionCo, Inc. (5) (6) (7) S + 5.50% 11.00% 5/22/2026 75,145 74,784 75,145 4.37
GS AcquisitionCo, Inc. (5) (7) (13) S + 5.50% 11.00% 5/22/2026 - (13) - -
Kaseya, Inc. (5) (8) S + 6.00% (incl. 2.50% PIK)
11.38% 6/25/2029 14,219 14,043 14,155 0.82
Kaseya, Inc. (5) (8) (13) S + 6.00% (incl. 2.50% PIK)
11.38% 6/25/2029 53 47 49 -
Kaseya, Inc. (5) (8) (13) S + 6.00% (incl. 2.50% PIK)
11.38% 6/25/2029 216 206 212 0.01
LegitScript, LLC (5) (8) S + 5.75% 11.11% 6/24/2029 26,569 26,128 26,332 1.53
LegitScript, LLC (5) (8) (13) S + 5.75% 11.11% 6/24/2029 702 641 637 0.04
LegitScript, LLC (5) (8) (13) S + 5.75% 11.11% 6/24/2028 1,000 938 963 0.06
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments
December 31, 2023
(In thousands)
Investments-non-controlled/non-affiliated(1)(2)
Footnotes Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares Cost(4)
Fair Value Percentage of Net Assets
Matrix Parent, Inc. (8) S + 5.00% 10.35% 3/1/2029 499 $ 370 $ 339 0.02 %
Montana Buyer, Inc. (5) (8) S + 5.75% 11.11% 7/22/2029 4,089 4,020 4,056 0.24
Montana Buyer, Inc. (5) (13) P + 4.75% 13.25% 7/22/2028 67 60 63 -
Netwrix Corporation And Concept Searching, Inc. (5) (8) S + 5.00% 10.39% 6/11/2029 5,489 5,446 5,407 0.31
Netwrix Corporation And Concept Searching, Inc. (5) (8) (13) S + 5.00% 10.39% 6/11/2029 - (7) (23) -
Netwrix Corporation And Concept Searching, Inc. (5) (8) (13) S + 5.00% 10.39% 6/11/2029 - (3) (6) -
Oak Purchaser, Inc. (5) (8) S + 5.50% 10.85% 4/28/2028 2,792 2,770 2,732 0.16
Oak Purchaser, Inc. (5) (8) (13) S + 5.50% 10.85% 4/28/2028 1,735 1,721 1,694 0.10
Oak Purchaser, Inc. (5) (8) (13) S + 5.50% 10.85% 4/28/2028 - (3) (8) -
Pound Bidco, Inc. (5) (6) (7) (10) S + 6.50% 11.96% 1/30/2026 10,832 10,707 10,796 0.63
Pound Bidco, Inc. (5) (7) (10) (13) S + 6.50% 11.96% 1/30/2026 - - - -
Pound Bidco, Inc. (5) (6) (7) (10) (13) S + 6.50% 11.96% 1/30/2026 - (10) - -
Project Leopard Holdings, Inc. (9) (10) S + 5.25% 10.73% 7/20/2029 6,217 5,849 5,590 0.32
Revalize, Inc. (5) (7) S + 5.75% 11.21% 4/15/2027 19,455 19,376 19,053 1.11
Revalize, Inc. (5) (7) (13) S + 5.75% 11.21% 4/15/2027 18 17 16 -
Riskonnect Parent, LLC (5) (8) S + 5.50% 11.00% 12/7/2028 519 511 518 0.03
Riskonnect Parent, LLC (5) (8) (13) S + 5.50% 11.00% 12/7/2028 - (5) (1) -
Securonix, Inc. (5) (8) S + 6.00% 11.41% 4/5/2028 21,010 20,727 19,846 1.15
Securonix, Inc. (5) (8) (13) S + 6.00% 11.41% 4/5/2028 - (47) (210) (0.01)
Skykick, Inc. (5) (7) S + 10.25% (incl. 7.00% PIK)
15.91% 9/1/2027 7,754 7,647 7,181 0.42
Skykick, Inc. (5) (7) S + 10.25% (incl. 7.00% PIK)
15.91% 9/1/2027 2,470 2,426 2,250 0.13
Trunk Acquisition, Inc. (5) (7) S + 5.75% 11.25% 2/19/2027 8,960 8,901 8,797 0.51
Trunk Acquisition, Inc. (5) (7) (13) S + 5.75% 11.25% 2/19/2026 - (4) (16) -
User Zoom Technologies, Inc. (5) (8) S + 7.00% 12.49% 4/5/2029 38,689 38,050 38,070 2.21
419,529 417,855 24.28
Wireless Telecommunication Services
Mobile Communications America, Inc. (5) (6) (7) S + 6.00% 11.35% 10/16/2029 5,955 5,868 5,868 0.34
Mobile Communications America, Inc. (5) (7) (13) S + 6.00% 11.35% 10/16/2029 - (14) (14) -
Mobile Communications America, Inc. (5) (7) (13) S + 6.00% 11.35% 10/16/2029 - (14) (14) -
5,840 5,840 0.34
Total First Lien Debt $ 3,027,413 $ 3,004,544 174.57 %
Second Lien Debt
Air Freight & Logistics
Omni Intermediate Holdings, LLC (5) (7) S + 9.15% 14.53% 12/30/2027 4,500 $ 4,393 $ 4,223 0.25 %
Automobile Components
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments
December 31, 2023
(In thousands)
Investments-non-controlled/non-affiliated(1)(2)
Footnotes Reference Rate and Spread Interest Rate(3)
Maturity Date Par Amount/ Shares Cost(4)
Fair Value Percentage of Net Assets
PAI Holdco, Inc. (5) (7) S + 7.50% (incl. 2.00% PIK)
13.03% 10/28/2028 26,565 $ 26,053 $ 24,823 1.44 %
Electronic Equipment, Instruments & Components
Infinite Bidco, LLC (9) S + 7.00% 12.65% 3/2/2029 25,500 25,446 21,420 1.24
Energy Equipment & Services
QBS Parent, Inc. (5) S + 8.50% 14.04% 9/21/2026 15,000 14,853 14,400 0.84
Health Care Providers & Services
Heartland Veterinary Partners, LLC (5) (7) S + 8.00% 13.46% 12/10/2027 3,960 3,903 3,879 0.23
Heartland Veterinary Partners, LLC (5) (7) S + 8.00% 13.46% 12/10/2027 1,540 1,516 1,508 0.09
5,419 5,387 0.31
Industrial Conglomerates
Aptean, Inc. (5)(8) S + 7.00% 12.46% 4/23/2027 5,950 5,950 5,950 0.35
IT Services
Help/Systems Holdings, Inc. (8) S + 6.75% 12.35% 11/19/2027 17,500 17,500 14,147 0.82
Idera, Inc. (5) (8) S + 6.75% 12.28% 3/2/2029 3,887 3,865 3,887 0.23
Red Dawn SEI Buyer, Inc. (5) (7) S + 8.50% 13.86% 11/20/2026 19,000 18,727 18,945 1.10
40,092 36,979 2.15
Software
Flexera Software, LLC (5) (7) S + 7.00% 12.47% 3/3/2029 13,500 13,303 13,500 0.78
Matrix Parent, Inc. (5) (9) (11) S + 8.00% 13.53% 3/1/2030 10,667 10,505 5,733 0.33
23,808 19,233 1.12
Total Second Lien Debt $ 146,014 $ 132,415 7.69 %
Other Investments
Unsecured Debt
Familia Intermediate Holdings I Corp. (Teasdale Latin Foods) (5) (11) 16.25% PIK
6/18/2026 1,500 1,500 170 0.01
Fetch Insurance Services, LLC (5) 12.75% (incl. 3.75% PIK)
10/31/2027 1,953 1,910 1,894 0.11
Total Unsecured Debt $ 3,410 $ 2,064 0.12 %
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments
December 31, 2023
(In thousands)
Investments-non-controlled/non-affiliated(1)(2)
Footnotes Reference Rate and Spread Acquisition Date Par Amount/ Shares Cost(4)
Fair Value Percentage of Net Assets
Preferred Equity
Diligent Corporation (5) (12) 10.50% 4/5/2021 5,000 $ 6,329 $ 6,513 0.38 %
FORTIS Solutions Group, LLC (5) (12) 12.25% 6/24/2022 1,000,000 1,179 970 0.06
Integrity Marketing Acquisition, LLC (5) (12) 10.50% 12/21/2021 3,250,000 3,956 3,900 0.23
Knockout Intermediate Holdings I, Inc. (5) (12) 11.75% 6/25/2022 2,790 3,265 3,267 0.19
Revalize, Inc. (5) (7) (12) S + 10.00% 12/14/2021 2,255 2,776 2,833 0.16
RSK Holdings, Inc. (Riskonnect) (5) (8) (12) S + 10.50% 7/7/2022 1,012,200 1,137 1,275 0.07
Skykick, Inc. (5) (12) 8/31/2021 134,101 1,275 1,275 0.07
Total Preferred Equity $ 19,917 $ 20,033 1.16 %
Common Equity
Abacus Data Holdings, Inc. (AbacusNext) (5) (12) 3/9/2021 29,441 $ 2,944 $ 2,586 0.15 %
Amerilife Holdings, LLC (5) (12) 9/1/2022 908 25 33 0.00
BP Purchaser, LLC (5) (12) 12/10/2021 1,383,156 1,378 1,297 0.08
CSC Thrive Holdings, LP (Thrive Networks) (5) (12) 3/1/2021 162,309 421 855 0.05
Encore Holdings, LLC (5) (12) 11/23/2021 2,796 348 696 0.04
Frisbee Holdings, LP (Fetch) (5) (12) 10/31/2022 21,744 277 277 0.02
Fullsteam Operations, LLC (5) (12) 11/27/2023 3,043 100 100 0.01
GSM Equity Investors, LP (GSM Outdoors) (5) (12) 11/16/2020 4,500 450 884 0.05
Help HP SCF Investor, LP (Help/Systems) (10) (12) 5/12/2021 9,619,564 12,460 15,966 0.93
LUV Car Wash (5) (12) 4/6/2022 123 123 68 0.00
mPulse Mobile, Inc. (5) (12) 12/17/2021 165,761 1,220 1,218 0.07
PCX Holding Corp. (5) (12) 4/22/2021 6,538 654 675 0.04
Pet Holdings, Inc. (Brightpet) (5) (12) 10/6/2020 17,543 2,013 1,762 0.10
Pritchard Industries, Inc. (5) (12) 10/13/2021 1,700,000 1,700 1,785 0.10
Procure Acquiom Financial, LLC (Procure Analytics) (5) (12) 12/20/2021 1,000,000 1,000 1,290 0.07
Recovery Point Systems, Inc. (5) (12) 3/5/2021 1,000,000 1,000 810 0.05
Reveal Data Solutions (5) (12) 8/29/2023 477,846 621 621 0.04
Shelby Co-invest, LP. (Spectrum Automotive) (5) (12) 6/29/2021 8,500 850 1,316 0.08
Surewerx Topco, LP (5) (10) (12) 12/28/2022 512 512 565 0.03
Suveto Buyer, LLC (5) (10) (12) 11/19/2021 19,257 1,926 1,701 0.10
Total Common Equity 30,022 34,505 2.00
Total Other Investments $ 53,349 $ 56,602 3.29 %
Total Portfolio Investments $ 3,226,776 $ 3,193,561 185.55 %
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments
December 31, 2023
(In thousands)
(1) Unless otherwise indicated, issuers of debt and equity investments held by the Company (where such term “Company” shall include the Company’s consolidated subsidiaries for purposes of this Consolidated Schedule of Investments) are denominated in dollars. All debt investments are income producing unless otherwise indicated. All equity investments are non-income producing unless otherwise noted. Certain portfolio company investments are subject to contractual restrictions on sales. Under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “1940 Act”), the Company would be deemed to “control” a portfolio company if the Company owned more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. As of December 31, 2023, the Company does not “control” any of these portfolio companies. Under the 1940 Act, the Company would be deemed an “affiliated person” of a portfolio company if the Company owns 5% or more of the portfolio company’s outstanding voting securities. As of December 31, 2023, the Company is not an “affiliated person” of any of its portfolio companies.
(2) Unless otherwise indicated, the Company’s investments are pledged as collateral supporting the amounts outstanding under the Truist Credit Facility (as defined below). See Note 6 “Debt”.
(3) Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to either EURIBOR (“E”) or SOFR (“S”) or an alternate base rate (commonly based on the Federal Funds Rate (“F”) or the U.S. Prime Rate (“P”)), each of which generally resets periodically. For each loan, the Company has indicated the reference rate used and provided the spread and the interest rate in effect as of December 31, 2023. For investments with multiple reference rates or alternate base rates, the interest rate shown is the weighted average interest rate in effect at December 31, 2023. As of December 31, 2023, the reference rates for our variable rate loans were the 3-month E at 3.91%, 1-month S at 5.35%, the 3-month S at 5.33%; the 6-month S at 5.16% and the P at 8.50% .
(4) The cost represents the original cost adjusted for the amortization of discounts and premiums, as applicable, on debt investments using the effective interest method.
(5) These investments were valued using unobservable inputs and are considered Level 3 investments. Fair value was determined in good faith by or under the direction of the Company’s Valuation Designee, under the supervision of the Board of Directors (the “Board of Directors” or the “Board”) (see Note 2 and Note 5), pursuant to the Company’s valuation policy.
(6) Assets or a portion thereof are pledged as collateral for the BNP Funding Facility (as defined below). See Note 6 “Debt”.
(7) Loan includes interest rate floor of 1.00% .
(8) Loan includes interest rate floor of 0.75%.
(9) Loan includes interest rate floor of 0.50%.
(10) The investment is not a qualifying asset under Section 55(a) of the 1940 Act. The Company may not acquire any non-qualifying asset unless, at the time of acquisition, qualifying assets represent at least 70% of the Company’s total assets. As of December 31, 2023, non-qualifying assets represented 6.55% of total assets as calculated in accordance with regulatory requirements.
(11) Investment was on non-accrual status as of December 31, 2023.
(12) Securities exempt from registration under the Securities Act of 1933, as amended, and may be deemed to be “restricted securities”. As of December 31, 2023, the aggregate fair value of these securities is $54,538 or 3.17% of the Company’s net assets. The initial acquisition dates have been included for such securities.
(13) Position or portion thereof is an unfunded loan commitment, and no interest is being earned on the unfunded portion, although the investment may earn unused commitment fees. Negative cost and fair value, if any, results from unamortized fees, which are capitalized to the cost of the investment. The unfunded loan commitment may be subject to a commitment termination date that may expire prior to the maturity date stated. See below for more information on the Company’s unfunded commitments as of December 31, 2023:
Investments - non-controlled/non-affiliated Commitment Type Commitment Expiration Date Unfunded Commitment Fair Value
First Lien Debt
365 Retail Markets, LLC Revolver 12/23/2026 $ 2,800 $ -
48Forty Solutions, LLC Revolver 11/30/2026 1,086 (68)
AMCP Pet Holdings, Inc. (Brightpet) Revolver 10/5/2026 2,042 (44)
ARI Network Services, Inc. Revolver 2/28/2025 3,030 (29)
AWP Group Holdings, Inc. Delayed Draw Term Loan 8/1/2025 1,579 (24)
AWP Group Holdings, Inc. Revolver 12/24/2029 620 (9)
Abacus Data Holdings, Inc. (AbacusNext) Revolver 3/10/2027 350 -
Abracon Group Holdings, LLC Delayed Draw Term Loan 7/6/2024 441 (77)
Advarra Holdings, Inc. Delayed Draw Term Loan 8/26/2024 41 (1)
Alert Media, Inc. Revolver 4/10/2026 3,043 (53)
Amerilife Holdings, LLC Delayed Draw Term Loan 10/7/2025 147 (2)
Amerilife Holdings, LLC Revolver 8/31/2028 437 (6)
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments
December 31, 2023
(In thousands)
Investments - non-controlled/non-affiliated Commitment Type Commitment Expiration Date Unfunded Commitment Fair Value
Answer Acquisition, LLC Revolver 12/30/2026 $ 192 $ (3)
Apex Service Partners, LLC Delayed Draw Term Loan 10/24/2025 5,922 (73)
Apex Service Partners, LLC Revolver 10/24/2029 2,335 (43)
Appfire Technologies, LLC Delayed Draw Term Loan 6/13/2024 1,083 (14)
Appfire Technologies, LLC Revolver 3/9/2027 129 (2)
Applitools, Inc. Revolver 5/25/2028 433 (10)
Assembly Intermediate, LLC Delayed Draw Term Loan 1/1/2024 1,556 (58)
Assembly Intermediate, LLC Revolver 10/19/2027 2,074 (78)
Associations, Inc. Delayed Draw Term Loan 6/10/2024 60 (1)
Associations, Inc. Revolver 7/2/2027 1,203 (11)
Atlas Us Finco, Inc. Revolver 12/9/2028 186 -
Avalara, Inc. Revolver 10/19/2028 1,130 -
Bottomline Technologies, Inc. Revolver 5/15/2028 267 -
Bradyifs Holdings, LLC Delayed Draw Term Loan 10/31/2025 619 (8)
Bradyifs Holdings, LLC Revolver 10/31/2029 631 (12)
Bridgepointe Technologies, LLC Delayed Draw Term Loan 4/1/2025 4,426 (73)
Bullhorn, Inc. Revolver 9/30/2026 593 (2)
CLEO Communications Holding, LLC Revolver 6/9/2027 12,502 (196)
Caerus US 1, Inc. Delayed Draw Term Loan 10/28/2024 893 -
Caerus US 1, Inc. Revolver 5/25/2029 293 -
Catalis Intermediate, Inc. Revolver 8/4/2027 2,778 (153)
Chase Intermediate, LLC Delayed Draw Term Loan 8/31/2025 10,601 (196)
Chase Intermediate, LLC Revolver 10/30/2028 530 (10)
Citrin Cooperman Advisors, LLC Delayed Draw Term Loan 12/13/2025 7,275 (70)
Coupa Holdings, LLC Delayed Draw Term Loan 8/27/2024 1,085 (12)
Coupa Holdings, LLC Revolver 2/27/2029 831 (9)
Cyara AcquisitionCo, LLC Revolver 6/28/2029 313 (6)
Diligent Corporation Revolver 8/24/2025 2,070 (4)
Dwyer Instruments, Inc. Delayed Draw Term Loan 12/22/2025 2,954 (29)
Dwyer Instruments, Inc. Revolver 7/21/2027 1,014 (20)
E-Discovery AcquireCo, LLC Revolver 8/29/2029 1,618 (28)
Encore Holdings, LLC Revolver 11/23/2027 539 -
Energy Labs Holdings Corp. Revolver 4/7/2028 39 -
Excelitas Technologies Corp. Delayed Draw Term Loan 8/12/2024 44 -
Excelitas Technologies Corp. Revolver 8/14/2028 51 -
FLS Holding, Inc. Revolver 12/17/2027 1,802 (11)
FMG Suite Holdings, LLC Revolver 10/30/2026 1,542 (10)
FORTIS Solutions Group, LLC Delayed Draw Term Loan 6/24/2024 908 -
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments
December 31, 2023
(In thousands)
Investments - non-controlled/non-affiliated Commitment Type Commitment Expiration Date Unfunded Commitment Fair Value
FORTIS Solutions Group, LLC Revolver 10/15/2027 $ 2,564 $ -
Foundation Risk Partners Corp. Revolver 10/29/2027 4,571 -
Fullsteam Operations, LLC Delayed Draw Term Loan 5/27/2025 3,902 (68)
Fullsteam Operations, LLC Revolver 11/27/2029 608 (18)
GC Waves Holdings, Inc. Delayed Draw Term Loan 12/31/2024 6,095 (113)
GC Waves Holdings, Inc. Revolver 8/11/2028 331 (6)
GPS Merger Sub, LLC Delayed Draw Term Loan 10/2/2025 1,274 (12)
GPS Merger Sub, LLC Revolver 10/2/2029 1,019 (20)
GS AcquisitionCo, Inc. Revolver 5/22/2026 2,420 -
GSM Acquisition Corp. (GSM Outdoors) Revolver 11/16/2026 4,280 (43)
Galway Borrower, LLC Delayed Draw Term Loan 4/28/2024 1,712 (18)
Galway Borrower, LLC Revolver 9/30/2027 2,053 (60)
Gateway US Holdings, Inc. Revolver 9/22/2026 30 -
GraphPad Software, LLC Revolver 4/27/2027 875 (3)
Ground Penetrating Radar Systems, LLC Revolver 6/26/2025 1,641 (14)
Groundworks, LLC Delayed Draw Term Loan 9/14/2024 54 -
Groundworks, LLC Revolver 3/14/2029 62 -
Heartland Veterinary Partners, LLC Revolver 12/10/2026 375 (3)
Helios Service Partners, LLC Delayed Draw Term Loan 2/7/2025 5,933 (59)
Helios Service Partners, LLC Revolver 3/19/2027 542 (5)
Higginbotham Insurance Agency, Inc. Delayed Draw Term Loan 8/23/2025 1,254 -
High Street Buyer, Inc. Revolver 4/16/2027 2,136 -
Hyland Software, Inc. Revolver 9/19/2029 1,879 (21)
Inszone Mid, LLC Delayed Draw Term Loan 11/10/2025 6,000 (64)
Inszone Mid, LLC Revolver 11/12/2029 817 (16)
Integrity Marketing Acquisition, LLC Revolver 8/27/2026 52 (1)
Iris Buyer, LLC Delayed Draw Term Loan 10/2/2030 856 (13)
Iris Buyer, LLC Revolver 10/2/2029 1,001 (26)
KENG Acquisition, Inc. Delayed Draw Term Loan 8/1/2025 2,040 (26)
KENG Acquisition, Inc. Revolver 8/1/2029 781 (10)
KWOR Acquisition, Inc. Delayed Draw Term Loan 6/22/2024 3,473 (50)
KWOR Acquisition, Inc. Revolver 12/22/2027 70 (1)
Kaseya, Inc. Delayed Draw Term Loan 6/23/2024 803 (4)
Kaseya, Inc. Revolver 6/25/2029 642 (3)
Komline Sanderson Engineering Corp. Delayed Draw Term Loan 5/27/2024 8,529 (266)
Komline Sanderson Engineering Corp. Revolver 3/17/2026 4,746 (148)
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments
December 31, 2023
(In thousands)
Investments - non-controlled/non-affiliated Commitment Type Commitment Expiration Date Unfunded Commitment Fair Value
LJ Avalon Holdings, LLC Delayed Draw Term Loan 8/1/2024 $ 1,028 $ (24)
LJ Avalon Holdings, LLC Revolver 2/1/2029 675 (16)
LUV Car Wash Group, LLC Delayed Draw Term Loan 3/14/2024 274 (1)
LegitScript, LLC Delayed Draw Term Loan 6/24/2024 6,612 (59)
LegitScript, LLC Revolver 6/24/2028 3,167 (28)
Lightspeed Solution, LLC Delayed Draw Term Loan 3/1/2024 2,024 (36)
MHE Intermediate Holdings, LLC Revolver 7/21/2027 2,500 (25)
MRI Software, LLC Delayed Draw Term Loan 12/19/2025 74 -
MRI Software, LLC Revolver 2/10/2026 2,252 (12)
Magneto Components Buyco, LLC Delayed Draw Term Loan 6/5/2025 3,035 (28)
Magneto Components Buyco, LLC Revolver 12/5/2029 2,529 (46)
Magnolia Wash Holdings Revolver 7/14/2028 71 (7)
Majesco Revolver 9/21/2026 1,575 (18)
Mantech International CP Delayed Draw Term Loan 9/14/2024 56 -
Mantech International CP Revolver 9/14/2028 53 -
Mobile Communications America, Inc. Delayed Draw Term Loan 10/16/2025 1,921 (14)
Mobile Communications America, Inc. Revolver 10/16/2029 960 (14)
Montana Buyer, Inc. Revolver 7/22/2028 400 (3)
Netwrix Corporation And Concept Searching, Inc. Delayed Draw Term Loan 6/10/2024 1,528 (23)
Netwrix Corporation And Concept Searching, Inc. Revolver 6/11/2029 431 (6)
Oak Purchaser, Inc. Delayed Draw Term Loan 4/28/2024 127 (3)
Oak Purchaser, Inc. Revolver 4/28/2028 372 (8)
Omni Intermediate Holdings, LLC Delayed Draw Term Loan 6/24/2024 138 (7)
Omni Intermediate Holdings, LLC Revolver 12/30/2025 233 (11)
PCX Holding Corp. Revolver 4/22/2027 987 (6)
PDFTron Systems, Inc. Revolver 7/15/2026 3,850 (62)
PPV Intermediate Holdings, LLC Delayed Draw Term Loan 8/31/2025 15,090 (124)
Pareto Health Intermediate Holdings, Inc. Revolver 6/1/2029 792 (6)
Patriot Growth Insurance Services, LLC Revolver 10/16/2028 4,485 (44)
Peter C. Foy & Associates Insurance Services, LLC Delayed Draw Term Loan 10/19/2024 1,695 (8)
Peter C. Foy & Associates Insurance Services, LLC Revolver 11/1/2027 832 (12)
Pound Bidco, Inc. Delayed Draw Term Loan 12/31/2024 297 -
Pound Bidco, Inc. Revolver 1/30/2026 1,163 -
Procure Acquireco, Inc. (Procure Analytics) Revolver 12/20/2028 238 (7)
Project Boost Purchaser, LLC Delayed Draw Term Loan 5/2/2024 589 (1)
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments
December 31, 2023
(In thousands)
Investments - non-controlled/non-affiliated Commitment Type Commitment Expiration Date Unfunded Commitment Fair Value
Project Boost Purchaser, LLC Revolver 5/2/2028 $ 449 $ -
RSC Acquisition, Inc. Delayed Draw Term Loan 2/14/2025 610 (5)
Randy's Holdings, Inc. Delayed Draw Term Loan 11/1/2024 2,248 (8)
Randy's Holdings, Inc. Revolver 11/1/2028 639 (2)
Raptor Merger Sub Debt, LLC Revolver 4/1/2028 1,953 (2)
Recovery Point Systems, Inc. Revolver 8/12/2026 4,000 -
Redwood Services Group, LLC Delayed Draw Term Loan 1/31/2025 505 (12)
Revalize, Inc. Revolver 4/15/2027 53 (1)
Riskonnect Parent, LLC Delayed Draw Term Loan 7/7/2024 558 (1)
RoadOne IntermodaLogistics Delayed Draw Term Loan 6/30/2024 273 (5)
RoadOne IntermodaLogistics Revolver 12/29/2028 309 (6)
Securonix, Inc. Revolver 4/5/2028 3,782 (210)
Sherlock Buyer Corp. Delayed Draw Term Loan 9/6/2025 3,215 (2)
Sherlock Buyer Corp. Revolver 12/8/2027 1,286 (1)
Smarsh, Inc. Delayed Draw Term Loan 2/18/2024 536 (9)
Smarsh, Inc. Revolver 2/16/2029 268 (5)
Spectrio, LLC Revolver 12/9/2026 493 (25)
Spectrum Automotive Holdings Corp. Delayed Draw Term Loan 6/29/2024 1,154 (26)
Spectrum Automotive Holdings Corp. Revolver 6/29/2027 881 (20)
Spotless Brands, LLC Revolver 7/25/2028 114 (1)
Stepping Stones Healthcare Services, LLC Delayed Draw Term Loan 1/1/2024 276 (4)
Stepping Stones Healthcare Services, LLC Revolver 12/30/2026 625 (9)
Summit Acquisition, Inc. Delayed Draw Term Loan 11/1/2024 1,638 (25)
Summit Acquisition, Inc. Revolver 5/1/2029 819 (12)
Summit Buyer, LLC Delayed Draw Term Loan 8/25/2025 197 (5)
Summit Buyer, LLC Revolver 1/14/2026 2,443 (59)
Superman Holdings, LLC Delayed Draw Term Loan 5/1/2025 380 (5)
Surewerx Purchaser III, Inc. Delayed Draw Term Loan 6/28/2024 1,128 -
Surewerx Purchaser III, Inc. Revolver 12/28/2028 494 -
Suveto Revolver 9/9/2027 930 (19)
Sweep Purchaser, LLC Delayed Draw Term Loan 5/5/2024 273 (55)
Sweep Purchaser, LLC Revolver 11/30/2026 28 (6)
Syntax Systems Ltd Revolver 10/29/2026 1,447 (26)
Tamarack Intermediate, LLC Delayed Draw Term Loan 10/6/2025 398 (6)
Tamarack Intermediate, LLC Revolver 3/13/2028 900 (22)
Tank Holding Corp. Delayed Draw Term Loan 5/22/2024 494 (10)
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments
December 31, 2023
(In thousands)
Investments - non-controlled/non-affiliated Commitment Type Commitment Expiration Date Unfunded Commitment Fair Value
Tank Holding Corp. Revolver 3/31/2028 $ 587 $ (26)
Thrive Buyer, Inc. (Thrive Networks) Revolver 1/22/2027 1,321 (26)
Tidi Legacy Products, Inc. Delayed Draw Term Loan 6/19/2025 913 (9)
Tidi Legacy Products, Inc. Revolver 12/19/2029 657 (13)
Trintech, Inc. Revolver 7/25/2029 2,092 (39)
Triple Lift, Inc. Revolver 5/5/2028 2,467 (172)
Trunk Acquisition, Inc. Revolver 2/19/2026 857 (16)
Two Six Labs, LLC Revolver 8/20/2027 2,134 (48)
United Flow Technologies Intermediate Holdco II, LLC Delayed Draw Term Loan 1/1/2024 32 -
United Flow Technologies Intermediate Holdco II, LLC Revolver 10/29/2026 1,155 (15)
UpStack, Inc. Delayed Draw Term Loan 6/30/2025 6,197 (155)
UpStack, Inc. Revolver 8/20/2027 613 (15)
V Global Holdings, LLC Revolver 12/22/2025 396 (8)
VRC Companies, LLC Revolver 6/29/2027 1,653 (2)
Vensure Employer Services, Inc. Delayed Draw Term Loan 6/15/2025 2,362 (20)
Vertex Service Partners, LLC Delayed Draw Term Loan 11/8/2025 2,562 (39)
Vertex Service Partners, LLC Revolver 11/8/2030 460 (11)
Vessco Midco Holdings, LLC Revolver 10/18/2026 428 -
World Insurance Associates, LLC Revolver 4/3/2028 1,269 (41)
YI, LLC Delayed Draw Term Loan 6/6/2025 1,178 (12)
YI, LLC Revolver 12/3/2029 883 (17)
Zarya Intermediate, LLC Revolver 7/1/2027 521 -
iCIMS, Inc. Delayed Draw Term Loan 8/18/2025 101 -
iCIMS, Inc. Revolver 8/18/2028 38 -
mPulse Mobile, Inc. Revolver 12/18/2027 2,668 (59)
Total First Lien Debt Unfunded Commitments $ 294,950 $ (4,552)
Total Unfunded Commitments $ 294,950 $ (4,552)
Morgan Stanley Direct Lending Fund
Notes to Consolidated Financial Statements
December 31, 2024
(In thousands, except shares and per share amounts)
(1) ORGANIZATION
Morgan Stanley Direct Lending Fund (the “Company”) is a non-diversified, externally managed specialty finance company focused on lending to middle-market companies. The Company has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, for U.S. federal income tax purposes, the Company has elected to be treated, and intends to comply with the requirements to qualify annually, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). The Company is not a subsidiary of or consolidated with Morgan Stanley.
The Company was formed as a Delaware limited liability company on May 30, 2019 and, effective November 25, 2019, converted to a Delaware corporation. The Company commenced investment operations in January 2020. The Company is externally managed by MS Capital Partners Adviser Inc., an indirect wholly owned subsidiary of Morgan Stanley (the “Adviser” or “Investment Adviser”). The Investment Adviser is an indirect, wholly owned subsidiary of Morgan Stanley.
The Company’s investment objective is to achieve attractive risk-adjusted returns via current income and, to a lesser extent, capital appreciation by investing primarily in directly originated senior secured term loans issued by U.S. middle-market companies in which private equity sponsors have a controlling equity stake in the portfolio company.
The Company conducted private offerings of its common stock, par value $0.001 per share (the “Common Stock”), to investors in reliance on exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). At the closing of each private offering, each investor made a capital commitment (a “Capital Commitment”) to purchase shares of Common Stock pursuant to a subscription agreement entered into with the Company. As of October 4, 2023, all Capital Commitments had been fully funded.
On January 26, 2024, the Company closed its initial public offering (“IPO”), issuing 5,000,000 shares of its Common Stock at a public offering price of $20.67 per share. Net of underwriting fees, the Company received net cash proceeds, before offering expenses, of $97.1 million. The Company’s Common Stock began trading on the NYSE under the symbol “MSDL” on January 24, 2024.
(2) SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). As an investment company, the Company applies the accounting and reporting guidance in Accounting Standards Codification (“ASC”) Topic 946, Financial Services - Investment Companies (“ASC 946”) issued by the Financial Accounting Standards Board (“FASB”).
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Such amounts could differ from those estimates and such differences could be material. Management’s estimates are based on historical experiences and other factors, including expectations of future events that management believes to be reasonable under the circumstances. Assumptions and estimates regarding the valuation of investments involve a higher degree of judgment and complexity and these assumptions and estimates may be significant to the consolidated financial statements.
Consolidation
As provided under ASC 946, the Company will not consolidate its investment in a company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the accounts of the Company’s wholly owned subsidiaries in the consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation.
The Company has formed wholly owned subsidiaries, which are structured as Delaware limited liability companies, for the purpose of holding certain investments in portfolio companies made by the Company. The Company’s wholly owned subsidiaries include: DLF CA SPV LLC (“CA SPV”), DLF SPV LLC (“DLF SPV”), DLF Financing SPV LLC (“Financing SPV”) and DLF Equity Holdings LLC (“Equity Holdings,” and collectively with CA SPV, DLF SPV and Financing SPV, the “subsidiaries”). The Company consolidates its wholly owned subsidiaries in these consolidated financial statements.
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents consist of demand deposits and highly liquid investments, such as money market funds, with original maturities of three months or less, and restricted cash pledged as collateral. Cash and cash equivalents are carried at cost, which approximates fair value. The Company deposits its cash and cash equivalents with financial institutions and, at times, may exceed the Federal Deposit Insurance Corporation insured limit.
Foreign Currency Translation
The functional currency of the Company is the U.S. Dollar. Investments denominated in foreign currencies are translated into U.S. Dollars based upon currency exchange rates effective on the last business day of the current reporting period. Net changes in fair value of investments due to foreign exchange rates fluctuation is recorded as change in unrealized appreciation (depreciation) from translation of assets and liabilities in foreign currencies on the Consolidated Statements of Operations. Investment and non-investment activities denominated in foreign currencies, including purchase and sales of investments, borrowings and repayments of debt, income and expenses, are translated into U.S. dollars based upon currency exchange rates prevailing on the transaction dates.
Investments
Investment transactions are recorded on the trade date. Receivables/payables from investments sold/purchased on the Consolidated Statements of Assets and Liabilities consist of amounts receivable to or payable by the Company for transactions that have not settled at the reporting date. Realized gains or losses are measured by the difference between the net proceeds received (excluding prepayment fees, if any) and the amortized cost basis of the investment using the specific identification method without regard to unrealized gains or losses previously recognized, and include investments charged off during the period, net of recoveries. The net change in unrealized gains or losses primarily reflects the change in investment values, including the reversal of previously recorded unrealized gains or losses with respect to investments realized during the period.
The Company's Board of Directors (the “Board of Directors” or the “Board”), with the assistance of the Company’s audit committee (the “Audit Committee”), determines the fair value of the Company’s investments in accordance with ASC Topic 820, Fair Value Measurements (“ASC 820”) issued by the FASB. The Board of Directors has delegated to the Investment Adviser as the valuation designee (the “Valuation Designee”) the responsibility of determining the fair value of the Company’s investment portfolio, subject to oversight of the Board of Directors, pursuant to Rule 2a-5 under the 1940 Act. As such, the Valuation Designee is charged with determining the fair value of the Company’s investment portfolio, subject to oversight of the Board of Directors. ASC 820 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Fair value is a market-based measurement, not an entity-specific measurement. For some investments, observable market transactions or market information might be available. For other investments, observable market
transactions and market information might not be available. However, the objective of a fair value measurement in both cases is the same - to estimate the price when an orderly transaction to sell the investment would take place between market participants at the measurement date under current market conditions (that is, an exit price at the measurement date from the perspective of a market participant). Refer to Note 5 “Fair Value Measurements” for the Company’s framework for determining fair value, fair value hierarchies, and the composition of the Company’s portfolio.
Derivative Instruments
Pursuant to ASC 815 Derivatives and Hedging, all derivative instruments entered into by the Company are designated as hedging instruments. For all derivative instruments designated as a hedge, the entire change in the fair value of the hedging instrument shall be recorded in the same line item of the Consolidated Statements of Operations as the hedged item. The Company’s derivative instruments are used to hedge certain of the Company’s fixed rate debt, and therefore both the periodic payment and the change in fair value for the effective hedge, if applicable, will be recognized as components of interest expense in the Consolidated Statements of Operations. Fair value is estimated by discounting remaining payments using applicable current market rates, or market quotes, if available. Rule 18f-4 requires BDCs that use derivatives to, among other things, comply with a value-at-risk leverage limit, adopt a derivatives risk management program, and implement certain testing and Board reporting procedures. Rule 18f-4 exempts BDCs that qualify as “limited derivatives users” from the aforementioned requirements, provided that these BDCs adopt written policies and procedures that are reasonably designed to manage the BDC’s derivatives risks and comply with certain recordkeeping requirements. Rule 18f-4 provides that a BDC may enter into an unfunded commitment agreement that is not a derivatives transaction, such as an agreement to provide financing to a portfolio company, if the BDC has, among other things, a reasonable belief, at the time it enters into such an agreement, that it will have sufficient cash and cash equivalents to meet its obligations with respect to all of its unfunded commitment agreements, in each case as it becomes due. Pursuant to Rule 18f-4, when we trade reverse repurchase agreements or similar financing transactions, including certain tender option bonds, we need to aggregate the amount of any other senior securities representing indebtedness (e.g., bank borrowings, if applicable) when calculating our asset coverage ratio. The Company currently qualifies as a “limited derivatives user” and expects to continue to do so.
Revenue Recognition
Interest Income
Interest income is recorded on an accrual basis and includes the accretion of discounts and amortizations of premiums. Discounts from and premiums to par value on debt investments purchased are accreted/amortized into interest income over the life of the respective investment using the effective interest method. The amortized cost of debt investments represents the original cost, including loan origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion of discounts and amortization of premiums, if any. Exit fees that are receivable upon repayment of a loan or debt security are amortized into interest income over the life of the respective investment. Upon prepayment of a loan or debt investment, any prepayment premiums, unamortized upfront loan origination fees and unamortized discounts are recorded as interest income in the current period.
PIK Income
The Company has debt investments in its portfolio that contain payment-in-kind (“PIK”) provisions. PIK represents interest that is accrued and recorded as interest income at the contractual rates, increases the loan principal on the respective capitalization dates, and is generally due at maturity. Such income is included in PIK income on the Consolidated Statements of Operations. If at any point the Company believes PIK is not expected to be realized, the investment generating PIK will be placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest is generally reversed through PIK income. This non-cash source of income is included when determining what must be paid out to stockholders in the form of distributions in order for the Company to maintain its status as a RIC, even though the Company has not yet collected cash.
Dividend Income
Dividend income on preferred equity investments is recorded on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity investments is recorded on the record date for private portfolio companies. Dividend income is presented net of withholding tax, if any.
Other Income
The Company may receive various fees in the ordinary course of business such as structuring, consent, waiver, amendment and syndication fees as well as fees for managerial assistance rendered by the Company to the portfolio companies. Such fees are recognized in income when earned or when the services are rendered and there is no uncertainty or contingency related to the amount to be received.
Non-Accrual Investments
Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected in full. Accrued interest is generally reversed when a loan is placed on non-accrual status. Additionally, any original issue discount and market discount are no longer accreted to interest income as of the date the loan is placed on non-accrual status. Interest payments
received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest are paid current and, in management’s judgment, are likely to remain current. Management may determine to not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection.
As of December 31, 2024 and December 31, 2023, the Company had certain investments in two and three portfolio companies, respectively, that were on non-accrual status. The amortized cost of investments on non-accrual status as of December 31, 2024 and December 31, 2023 was $8,117 and $19,353, respectively.
Offering Costs
The Company records expenses related to public equity offerings as a reduction of capital upon completion of an offering of registered securities.
Deferred Financing Costs and Debt Issuance Costs
Deferred financing and debt issuance costs consist of fees and expenses paid in connection with the closing of and amendments to the Company’s borrowings. The aforementioned costs are amortized using the straight-line method over each instrument’s term. Deferred financing costs related to a revolving credit facility is presented separately as an asset on the Company’s Consolidated Statements of Assets and Liabilities. Deferred debt issuance costs related to any notes are presented net against the outstanding debt balance on the Consolidated Statements of Assets and Liabilities.
Income Taxes
The Company has elected to be treated as a RIC under Subchapter M of the Code. So long as the Company maintains its status as a RIC, it generally will not pay corporate U.S. federal income taxes on any ordinary income or capital gains that it distributes, at least annually, to its stockholders as distributions.
In order to continue to qualify as a RIC, the Company must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then the Company is generally required to pay income taxes only on the portion of its taxable income and gains it does not distribute.
The minimum distribution requirements applicable to RICs require the Company to distribute to its stockholders at least 90% of its investment company taxable income (the “ICTI”), as defined by the Code, each year. Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward ICTI in excess of current year distributions into the next tax year. Any such carryover ICTI must be distributed before the end of that next tax year through a distribution declared prior to filing the final tax return related to the year which generated such ICTI.
In addition, based on the excise distribution requirements, the Company is subject to a 4% nondeductible federal excise tax on undistributed income unless the Company distributes in a timely manner an amount at least equal to the sum of (1) 98% of its ordinary income for each calendar year, (2) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed, in the preceding year. For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate income tax is considered to have been distributed. For the year ended December 31, 2024, December 31, 2023 and December 31, 2022, the Company accrued $2,437, $1,519 and $334 of U.S. federal excise tax, respectively.
The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more likely than not” to be sustained by the applicable tax authority. All penalties and interest associated with income taxes, if any, are included in income tax expense.
Recent Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which enhances disclosure requirements about significant segment expenses that are regularly provided to the chief operating decision maker (the “CODM”). ASU 2023-07, among other things, (i) requires a single segment public entity to provide all of the disclosures as required by ASC 280, (ii) requires a public entity to disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources and (iii) provides the ability for a public entity to elect more than one performance measure. ASU 2023-07 is effective for the fiscal years beginning after December 15, 2023, and interim periods beginning with the first quarter ended March 31, 2025. Early adoption is permitted and retrospective adoption is required for all prior periods presented. The Company has adopted ASU 2023-07 effective December 31, 2024 and concluded that the application of this guidance did not have any material impact on its consolidated financial statements. See Note 13 for more information.
In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” (“ASU 2023-09”). ASU 2023-09 requires additional disaggregated disclosures on the entity’s effective tax rate reconciliation and additional details on income taxes paid. ASU 2023-09 is effective on a prospective basis, with the option for retrospective application, for annual
periods beginning after December 15, 2024 and early adoption is permitted. The Company does not expect the adoption of ASU 2023-09 to have a material impact on its consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 requires disclosure of certain costs and expenses on an interim and annual basis in the notes to the financial statements. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The disclosures required under the guidance can be applied either prospectively to financial statements issued for reporting periods after the effective date or retrospectively to any or all periods presented in the financial statements. The Company is currently evaluating the impact that this guidance will have on its financial statement disclosures.
(3)SIGNIFICANT AGREEMENTS AND RELATED PARTY TRANSACTIONS
Investment Advisory Agreement
On November 25, 2019, the Company entered into an investment advisory agreement with our Adviser (the "Original Investment Advisory Agreement").
On January 24, 2024, the Company entered into the Amended and Restated Investment Advisory Agreement with the Adviser (as amended and restated, the “Investment Advisory Agreement”). The Investment Advisory Agreement incorporates (i) a cumulative three-year lookback provision and (ii) a cap on quarterly income incentive fee payments based on net realized capital loss, if any, during the applicable three-year lookback period. The Investment Advisory Agreement was most recently re-approved by the Board in August 2024 and will continue from year to year if approved annually the Board of Directors or the Company’s stockholders, including, in each case, a majority of the directors who are not "interested persons" as defined in Section 2(a)(19) of the 1940 Act (the "Independent Directors").
The Company pays the Investment Adviser a fee for its services under the Investment Advisory Agreement consisting of two components: a base management fee (the “Base Management Fee”) and an incentive fee. The cost of both the Base Management Fee and the incentive fee are ultimately be borne by the stockholders.
Base Management Fee
The Base Management Fee is calculated at an annual rate of 1.0% of the Company's average gross assets at the end of the two most recently completed calendar quarters, including assets purchased with borrowed funds or other forms of leverage but excluding cash and cash equivalents.
Pursuant to the Original Investment Advisory Agreement, the Adviser agreed to irrevocably waive the portion of the Base Management Fee in excess of 0.25% of the Company’s average gross assets calculated in accordance with the Original Investment Advisory Agreement prior to a listing of the Common Stock on a national securities exchange.
Pursuant to the Investment Advisory Agreement, the Adviser has agreed to irrevocably waive any portion of the Base Management Fee in excess of 0.75% of the Company's average gross assets calculated in accordance with the Investment Advisory Agreement for the period from January 24, 2024 to January 24, 2025 (the “Waiver Period”).
Base Management Fees waived during the Waiver Period are not subject to recoupment by the Adviser. For services rendered under the Investment Advisory Agreement, the Base Management Fee is payable quarterly in arrears. Base Management Fees for any partial month or quarter will be appropriately pro-rated.
For the year ended December 31, 2024, December 31, 2023 and December 31, 2022, Base Management Fees were $25,479, $7,637 and $6,679, net of waiver, respectively. As of December 31, 2024 and December 31, 2023, $7,042 and $2,012, respectively, were payable to the Investment Adviser relating to Base Management Fees.
Incentive Fee
The incentive fee consists of two components that are determined independently of each other, with the result that one component may be payable even if the other is not. One component is based on income and the other component is based on capital gains.
i.Incentive Fee Based on Income
The first part is determined and paid quarterly based on the Company's pre-incentive fee net investment income, and is subject to an Incentive Fee Cap (as defined below) pursuant to the Investment Advisory Agreement. Pre-incentive fee net investment income is defined as interest income, dividend income and any other income accrued during the calendar quarter, minus operating expenses for the quarter, including the base management fee, expenses payable under the Administration Agreement (as defined below), any interest expense and distributions paid on any issued and outstanding preferred stock, but excluding the incentive fee. Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.
Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as debt instruments with PIK interest and zero coupon securities), accrued income that the Company has not yet received in cash. The Investment Adviser is not obligated to return any incentive fee it receives on PIK interest that is later determined to be uncollectible in cash.
Pursuant to the Original Investment Advisory Agreement, the Company paid its Adviser an income-based incentive fee with respect to the Company’s pre-incentive fee net investment income in each calendar quarter as follows:
•No income based incentive fee if the Company’s pre-incentive fee net investment income, expressed as a return on the value of the Company’s net assets at the end of the immediately preceding calendar quarter, does not exceed the hurdle rate of 1.5% (6.0% annualized);
•100% of the Company’s pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 1.8182% (7.2728% annualized). This portion of the pre-incentive fee net investment income (which exceeds the Hurdle Rate but is less than 1.8182%) is referred to as the “catch-up”. This “catch-up” portion is meant to provide the Adviser with approximately 17.5% of the Company’s pre-incentive fee net investment income as if a hurdle rate did not apply if the “catch up” is achieved; and
•17.5% of the Company’s pre-incentive fee net investment income, if any, that exceeds the rate of return of 1.8182% (7.2728% annualized).
Pursuant to the Investment Advisory Agreement, the Company pays its Adviser an incentive fee on its aggregate pre-incentive fee net investment income in respect of (1) for the quarter ending March 31, 2024 (the “First Calendar Quarter”), the First Calendar Quarter, and (2) commencing with the quarter ending June 30, 2024, the current calendar quarter and eleven preceding calendar quarters beginning with the calendar quarter commencing on April 1, 2024 (or the appropriate portion thereof in the case of any of our first eleven calendar quarters that commence on or after April 1, 2024) (in either case, the “Trailing Twelve Quarters”).
Pre-incentive fee net investment income in respect of the First Calendar Quarter was compared to a hurdle rate equal to 1.5% (6.0% annualized), and, if pre-incentive fee net investment income for the First Calendar Quarter exceeded the hurdle rate, the incentive fee would be 100% of pre-incentive fee net investment income until the Adviser has received a “catch up” equal to 17.5%, plus 17.5% of pre-incentive fee net investment income above the catch up.
Commencing with the quarter ending June 30, 2024, pre-incentive fee net investment income in respect of the relevant Trailing Twelve Quarters is compared to a “Hurdle Rate” equal to the product of (i) the hurdle rate of 1.5% per quarter (6% annualized) and (ii) the sum of the Company's net assets (defined as total assets less indebtedness and before taking into account any incentive fees payable during the period) at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters. The incentive fee based on income for each calendar quarter will be determined as follows:
•No incentive fee based on pre-incentive fee net investment income in any calendar quarter in which pre-incentive fee net investment income in respect of the relevant Trailing Twelve Quarters does not exceed the Hurdle Rate;
•100% of pre-incentive fee net investment income in respect of the Trailing Twelve Quarters with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 1.8182% in any calendar quarter (7.2728% annualized). This portion of the pre-incentive fee net investment income (which exceeds the hurdle rate but is less than 1.8182%) is referred to as the “catch-up.” The “catch-up” is meant to provide the Adviser with approximately 17.5% of the Company's pre-incentive fee net investment income as if a hurdle rate did not apply if this net investment income exceeds 1.8182% in any calendar quarter; and
•17.5% of the pre-incentive fee net investment income in respect of the Trailing Twelve Quarters that exceeds 1.8182% in any calendar quarter (7.2728% annualized), which reflects that once the hurdle rate is reached and the catch-up is achieved, 17.5% of the Company's pre-incentive fee net investment income that exceeds the catch-up amount is paid to the Adviser.
Commencing with the quarter ending June 30, 2024, each income incentive fee is subject to an incentive fee cap (the “Incentive Fee Cap”) that in respect of any calendar quarter is an amount equal to 17.5% of the Cumulative Pre-Incentive Fee Net Return (as defined herein) during the Trailing Twelve Quarters less the aggregate incentive fees based on income that were paid to the Adviser in the preceding eleven calendar quarters (or portion thereof) comprising the relevant Trailing Twelve Quarters. In the event the Incentive Fee Cap is zero or a negative value then no income incentive fee shall be payable and if the Incentive Fee Cap is less than the amount of incentive fee based on income that would otherwise be payable, the amount of incentive fee based on income shall be reduced to an amount equal to the Incentive Fee Cap.
“Cumulative Pre-Incentive Fee Net Return” (A) during the First Calendar Quarter, the sum of pre-incentive fee net investment income in the First Calendar Quarter and (B) during the relevant Trailing Twelve Quarters, the sum of (x) pre-incentive fee net investment income in respect of the Trailing Twelve Quarters and (y) Adjusted Capital Returns (as defined below) in respect of the Trailing Twelve Quarters. If, in any calendar quarter, the Incentive Fee Cap is zero or a negative value, the Company shall pay no income incentive fee to the Adviser in respect of that quarter. If, in any calendar quarter, the Incentive Fee Cap is a positive value but is less
than the incentive fee calculated as described above, the Company shall pay the Adviser the Income Incentive Fee Cap in respect of such quarter. If, in any calendar quarter, the Incentive Fee Cap is equal to or greater than the incentive fee calculated as described above, the Company shall pay the Adviser the incentive fee in respect of such quarter. “Adjusted Capital Returns” in respect of a particular period means the sum of aggregate realized losses and aggregate realized capital gains in respect of such period.
For the Waiver Period, the Adviser has irrevocably waived its right to receive each component of the income incentive fee in excess of amounts calculated as described above using (1) 15.0% instead of 17.5% and (2) a catch-up amount (as applicable) calculated using 1.7647% in place of 1.8182%. For periods in which the waiver described in this paragraph is in effect for less than a full quarter or calendar year, as applicable, the applicable incentive fee shall be calculated at a weighted rate during the applicable days in such period during the Waiver Period.
For the year ended December 31, 2024, December 31, 2023 and December 31, 2022, income based incentive fees were $37,432, $42,012 and $26,635, net of waiver respectively. As of December 31, 2024 and December 31, 2023, $8,956 and $11,766, respectively, were payable to the Investment Adviser relating to income based incentive fees.
ii.Incentive Fee Based on Capital Gains
The second part of the incentive fee is determined on realized capital gains calculated and payable in arrears in cash as of the end of each calendar year or upon the termination of the Investment Advisory Agreement in an amount equal to 17.5% of realized capital gains, if any, on a cumulative basis from the date of the Company's election to be regulated as a BDC through the end of a given calendar year or upon the termination of the Investment Advisory Agreement, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees (the “Cumulative Capital Gains”). For the purpose of computing the incentive fee on capital gains, the calculation methodology looks through derivative financial instruments or swaps as if the Company owned the reference assets directly. Therefore, realized gains and realized losses on the disposition of any reference assets, as well as unrealized depreciation on reference assets retained in the derivative financial instrument or swap, will be included on a cumulative basis in the calculation of the capital gains incentive fee
For the calendar years ended December 31, 2024 and December 31, 2025, the Adviser has irrevocably waived any capital gains incentive fee in excess of amounts calculated as described above using 15.0% instead of 17.5% in the calculation of any such capital gains incentive fee solely with respect to the Waiver Period, such that the capital gains incentive fee shall be calculated at a weighted rate calculated based on this waiver being applicable only during the applicable days in such calendar year during the Waiver Period, based, in each case, on the number of days in the applicable year.
Under U.S. GAAP, the Company is required to accrue an incentive fee on capital gains, including unrealized capital appreciation even though such unrealized capital appreciation is not included in calculating the incentive fee payable under the Investment Advisory Agreement. If such amount is positive at the end of a period, then the Company records an incentive fee on capital gain incentive fee equal to 17.5% (or 15% during the Waiver Period) of such amount, less the aggregate amount of any previously paid capital gain incentive fees. If such amount is negative, no accrual is recorded for such period.
For the year ended December 31, 2024, December 31, 2023 and December 31, 2022, the Investment Adviser accrued $0, $0 and $(2,441) capital gains incentive fees. The Investment Advisory Agreement does not permit unrealized capital appreciation for purposes of calculating the amount payable to the Investment Adviser. Amounts due related to unrealized capital appreciation, if any, will not be paid to the Investment Adviser until realized under the terms of the Investment Advisory Agreement and determined based on the calculation. Incentive fees on Cumulative Capital Gains crystallize at calendar year-end.
As of December 31, 2024 and December 31, 2023, $0 and $0, respectively, were payable to the Investment Adviser relating to capital gains incentive fees payable.
Administration Agreement
MS Private Credit Administrative Services LLC (the “Administrator”) is the administrator of the Company pursuant to an administration agreement (the “Administration Agreement”). The Administrator is an indirect, wholly owned subsidiary of Morgan Stanley. Pursuant to the Administration Agreement, the Administrator provides services and receives reimbursements from the Company for its costs and expenses and the Company’s allocable portion of overhead costs incurred by the Administrator in performing its obligations under the Administration Agreement, including the Company’s allocable portion of the compensation paid to its Chief Financial Officer and Chief Compliance Officer. Reimbursement under the Administration Agreement occurs quarterly in arrears. The Administration Agreement had an initial term of two years and continues thereafter from year to year if approved annually by the Board of Directors.
For the year ended December 31, 2024, December 31, 2023 and December 31, 2022, the Company incurred $216, $178 and $72, respectively, in expenses under the Administration Agreement, which were recorded in administrative service fees on the Consolidated Statements of Operations.
Amounts unpaid and included in payable to affiliates on the Consolidated Statements of Assets and Liabilities as of December 31, 2024 and December 31, 2023 were $29 and $178, respectively.
Expense Support and Waiver Agreement
On December 31, 2019, the Company entered into an expense support and waiver agreement (the “Expense Support and Waiver Agreement”) with the Investment Adviser. Under the terms of the Expense Support and Waiver Agreement, the Investment Adviser agreed to waive any reimbursement by the Company of offering and organizational expenses incurred by the Investment Adviser on behalf of the Company in excess of $1,000 or 0.10% of the aggregate capital commitments of the Company, whichever is greater. If actual organization and offering costs incurred exceeded the greater of $1,000 or 0.10% of the Company’s total capital commitments, the Investment Adviser or its affiliate would bear the excess costs.
For the year ended December 31, 2024, December 31, 2023 and December 31, 2022, the Investment Adviser recaptured $0, $0 and $44, respectively, of previously waived amounts from the Company.
Sub-Administration Agreement
The Company has entered into sub-administration agreement with State Street Bank and Trust Company (the “Sub-Administrator”) under which the Sub-Administrator provides various accounting and administrative services to the Company. The Sub-Administrator also serves as the Company’s custodian, transfer agent, distribution paying agent and registrar.
Placement Agent Agreement
On August 30, 2019, the Company entered into a placement agent agreement (the “Placement Agent Agreement”) with Morgan Stanley Distribution Inc. (the “Paying Agent”), Morgan Stanley Smith Barney LLC (the “Placement Agent”) and the Investment Adviser. Under the terms of the Placement Agent Agreement, the Placement Agent and certain of its affiliates assisted in the placement of Common Stock in the Company’s private offerings. The Company was not liable for any payments to the Placement Agent pursuant to the Placement Agent Agreement. Payments were made by the Investment Adviser to the Placement Agent. To the extent the Paying Agent received any payments it would remit the payment to the Placement Agent. The Placement Agent Agreement terminated on January 24, 2024.
MS Credit Partners Holdings, Inc. Investment
MS Credit Partners Holdings, Inc., or MS Credit Partners Holdings, a wholly owned subsidiary of Morgan Stanley and an affiliate of the Investment Adviser, made an aggregate capital commitment of $200,000 to the Company pursuant to a subscription agreement entered into in December 2019, which had been fully funded as of October 4, 2023. As of December 31, 2024 and December 31, 2023, MS Credit Partners Holdings held approximately 11.0% and 11.7% of the Company’s outstanding shares of Common Stock, respectively. Morgan Stanley has no further capital, liquidity or other financial obligation to the Company beyond this equity investment.
Morgan Stanley & Co. Related Transactions
Morgan Stanley & Co. LLC, an indirect, wholly owned subsidiary of Morgan Stanley and an affiliate of the Investment Adviser, served as an initial purchaser in connection with the private placement of the Company’s 2027 Notes (as defined below in Note 6. “Debt”) and received fees of $213 at closing on February 11, 2022, under the purchase agreement entered into by the Company in connection with such private placement.
Morgan Stanley & Co. LLC served as a co-agent in connection with the private placement of the Company’s 2025 Notes (as defined below in Note 6. “Debt”) and received fees of $138 at closing on September 13, 2022.
Morgan Stanley & Co. LLC served as a co-agent in connection with the private placement of the Company’s 2029 Notes (as defined below in Note 6. “Debt”) and received fees of $210 at closing on May 27, 2024.
Morgan Stanley & Co. LLC served as an underwriter in the IPO and received $1,241 of underwriting fees at closing on January 26, 2024.
(4) INVESTMENTS
The composition of the Company’s investment portfolio at cost and fair value was as follows:
December 31, 2024 December 31, 2023(1)
Cost Fair Value % of Total Investments at Fair Value Cost Fair Value % of Total Investments at Fair Value
First Lien Debt $ 3,669,886 $ 3,654,538 96.5 % $ 3,027,413 $ 3,004,544 94.1 %
Second Lien Debt 78,803 69,367 1.8 146,014 132,415 4.1
Other Debt Investments 9,755 9,198 0.2 3,410 2,064 0.1
Equity 54,683 58,391 1.5 49,939 54,538 1.7
Total $ 3,813,127 $ 3,791,494 100.0 % $ 3,226,776 $ 3,193,561 100.0 %
(1) The Company reclassified certain investment composition groupings by breaking out Other Securities into Other Debt Investments and Equity. These reclassifications had no impact on the Consolidated Statements of Assets and Liabilities as of December 31, 2023.
The industry composition of investments at fair value was as follows:
December 31, 2024 December 31, 2023
Aerospace & Defense 2.2 % 2.2 %
Air Freight & Logistics 0.3 1.1
Automobile Components 3.0 3.5
Automobiles 3.6 4.7
Biotechnology 0.7 0.5
Building Products 0.4 -
Chemicals 0.5 0.6
Commercial Services & Supplies 9.1 9.6
Construction & Engineering 2.0 1.5
Consumer Staples Distribution & Retail 0.7 -
Containers & Packaging 1.2 1.4
Distributors 2.3 2.9
Diversified Consumer Services 4.7 2.5
Electrical Equipment 0.1 -
Electronic Equipment, Instruments & Components 2.1 2.1
Energy Equipment & Services - 0.5
Financial Services 2.5 1.9
Food Products 2.0 2.3
Ground Transportation 0.6 -
Health Care Equipment & Supplies 0.6 0.7
Health Care Providers & Services 5.0 4.6
Health Care Technology 1.6 1.9
Industrial Conglomerates 1.2 1.3
Insurance Services 12.0 14.9
Interactive Media & Services 2.6 3.2
IT Services 8.9 8.7
Leisure Products - 0.7
Life Sciences Tools & Services 0.3 -
Machinery 0.9 2.1
Multi-Utilities 0.6 0.7
Pharmaceuticals 0.3 0.4
Professional Services 5.4 3.8
Real Estate Management & Development 3.6 5.3
Software 18.9 14.2
Wireless Telecommunication Services 0.1 0.2
Total 100.0 % 100.0 %
The geographic composition of investments at cost and fair value was as follows:
December 31, 2024 December 31, 2023
Cost Fair Value % of Total
Investments at
Fair Value Cost Fair Value % of Total
Investments at
Fair Value
Australia $ 8,798 $ 8,970 0.2 % $ 16,985 $ 17,048 0.5 %
Canada 153,734 154,953 4.1 98,674 98,387 3.1
United Kingdom 12,411 12,196 0.3 12,398 12,629 0.4
United States 3,638,184 3,615,375 95.4 3,098,719 3,065,497 96.0
Total $ 3,813,127 $ 3,791,494 100.0 % $ 3,226,776 $ 3,193,561 100.0 %
(5) FAIR VALUE MEASUREMENTS
ASC 820 establishes a hierarchical disclosure framework which ranks the observability of inputs used in measuring financial instruments at fair value. The observability of inputs is impacted by a number of factors, including the type of financial instruments and their specific characteristics. Financial instruments with readily available quoted prices, or for which fair value can be measured from quoted prices in active markets, generally will have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.
The three-level hierarchy for fair value measurements is defined as follows:
Level 1-inputs to the valuation methodology are quoted prices available in active markets for identical financial instruments as of the measurement date. The types of financial instruments in this category include unrestricted securities, including equities and derivatives, listed in active markets. The Company will not adjust the quoted price for these instruments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price.
Level 2-inputs to the valuation methodology are quoted prices in markets that are not active or for which all significant inputs are either directly or indirectly observable as of the measurement date. The types of financial instruments in this category include less liquid and restricted securities listed in active markets, securities traded in markets that are not active, and certain over-the-counter derivatives where the fair value is based on observable inputs.
Level 3-inputs to the valuation methodology are unobservable and significant to the overall fair value measurement, and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation. The types of financial instruments in this category include investments in privately held entities, first and second lien debt, non-investment grade residual interests in securitizations and certain over-the-counter derivatives where the fair value is based on unobservable inputs.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement. Assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.
Pursuant to the framework set forth above, the Company values securities traded in active markets on the measurement date by multiplying the exchange closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. The Company may also obtain quotes with respect to certain of the investments from pricing services, brokers or dealers’ quotes, or counterparty marks in order to value liquid assets that are not traded in active markets. Pricing services aggregate, evaluate and report pricing from a variety of sources including observed trades of identical or similar securities, broker or dealer quotes, model-based valuations and internal fundamental analysis and research. When doing so, the Company determines whether the quote obtained is sufficient according to U.S. GAAP to determine the fair value of the security. If determined adequate, the Company uses the quote obtained.
Securities that are illiquid or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Valuation Designee or the Board of Directors, does not represent fair value, each is valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data is available. These valuation techniques may vary by investment but include comparable public market valuations, comparable precedent transaction valuations and discounted cash flow analyses. Non-controlled debt investments are generally fair valued using discounted cash flow technique. Expected cash flows are projected based on contractual terms and discounted back to the measurement date based on a discount rate. Discount rate is determined based upon an assessment of current and expected yields for similar investments and risk profiles. Non-controlled equity investments are generally fair valued using a market approach and/or an income approach. The market approach typically utilizes market value multiples of comparable publicly traded companies. The income approach typically utilizes a discounted cash flow analysis of the portfolio company. The Valuation Designee, under the supervision of the Board of Directors undertakes a multi-step valuation process each quarter, as described below:
1)each portfolio company or investment is initially valued by using a standardized template designed to approximate fair market value based on observable market inputs and updated credit statistics and unobservable inputs;
2)preliminary valuation conclusions are documented and reviewed by a valuation committee comprised of members of the Investment Adviser’s senior management;
3)the Board of Directors or Valuation Designee engages independent third-party valuation firms to provide positive assurance on a portion of the Company’s illiquid investments each quarter (such that each illiquid investment is reviewed by an independent valuation firm at least once on a rolling twelve-month basis) including review of management’s preliminary valuation and conclusion of fair value;
4)the Audit Committee reviews the assessments of the Valuation Designee and the independent third-party valuation firms and provides the Board of Directors with recommendations with respect to the fair value of each investment in the Company’s portfolio; and
5)the Board of Directors discusses the valuation recommendations of the Audit Committee and determine the fair value of each investment in the Company’s portfolio in good faith based on the input of the Valuation Designee and, where applicable, the third-party valuation firms.
The fair value is generally determined based on the assessment of the following factors, as relevant:
• the nature and realizable value of any collateral;
• call features, put features and other relevant terms of debt;
• the portfolio company’s leverage and ability to make payments;
• the portfolio company’s public or private letter credit ratings;
• the portfolio company’s actual and expected earnings and discounted cash flow;
• prevailing interest rates for like securities and expected volatility in future interest rates;
• the markets in which the issuer does business and recent economic and/or market events; and
• comparisons to publicly traded securities.
Investment performance data utilized will be the most recently available as of the measurement date which in many cases may reflect up to a one quarter lag in information.
The Board of Directors is ultimately responsible for the determination, in good faith, of the fair value of the Company’s portfolio investments.
The following tables present the fair value hierarchy of investments:
December 31, 2024 December 31, 2023(2)
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
First Lien Debt $ - $ 51,329 $ 3,603,209 $ 3,654,538 $ - $ 24,674 $ 2,979,870 $ 3,004,544
Second Lien Debt - 36,016 33,351 69,367 - 35,567 96,848 132,415
Other Debt Investments - - 9,198 9,198 - - 2,064 2,064
Equity - - 41,198 41,198 - - 38,572 38,572
Subtotal $ - $ 87,345 $ 3,686,956 $ 3,774,301 $ - $ 60,241 $ 3,117,354 $ 3,177,595
Investment measured at net asset value(1)
17,193 15,966
Total Investments $ 3,791,494 $ 3,193,561
Cash equivalents $ 8,976 $ - $ - $ 8,976 $ - $ - $ - $ -
(1) The Company, as a practical expedient, estimates the fair value of its investment in Help HP SCF Investor, LP using the net asset value of the Company’s members’ interest in the entity. As such, the fair value has not been classified within the fair value hierarchy.
(2) The Company reclassified certain investment composition groupings by breaking out Other Securities into Other Debt Investments and Equity. These reclassifications had no impact on the Consolidated Statements of Assets and Liabilities as of December 31, 2023.
The following table presents changes in the fair value of the investments for which Level 3 inputs were used to determine the fair value for the year ended December 31, 2024:
First Lien Debt Second Lien Debt Other Debt Investments Equity Total Investments
Fair value, beginning of period $ 2,979,870 $ 96,848 $ 2,064 $ 38,572 $ 3,117,354
Purchases of investments(1)
1,220,903 836 5,770 3,888 1,231,397
Proceeds from principal repayments and sales of investments(2)
(594,707) (59,230) - (1,481) (655,418)
Accretion of discount/amortization of premium 13,762 837 16 - 14,615
Payment-in-kind 9,091 842 560 2,580 13,073
Net change in unrealized appreciation (depreciation) 7,497 3,723 788 (2,117) 9,891
Net realized gains (losses) (5,731) (10,505) - (244) (16,480)
Transfers into/(out) of Level 3(3)
(27,476) - - - (27,476)
Fair value, end of period $ 3,603,209 $ 33,351 $ 9,198 $ 41,198 $ 3,686,956
Net change in unrealized appreciation (depreciation) from investments still held as of December 31, 2024 $ 4,259 $ (1,256) $ 788 $ (1,682) $ 2,109
(1) Purchases may include investments received in corporate action and restructurings.
(2) Sales may include investments received in corporate action and restructurings.
(3) Transfer of portfolio investments within the three-level hierarchy is recorded during the period of such reclassification occurrence at the fair value as of the beginning of the respective period. Generally, reclassifications are primarily due to increase/decrease of price transparency.
The following table presents changes in the fair value of the investments for which Level 3 inputs were used to determine the fair value for the year ended December 31, 2023:
First Lien Debt Second Lien Debt Other Securities Total Investments
Fair value, beginning of period $ 2,668,749 $ 122,891 $ 36,395 $ 2,828,035
Purchases of investments 618,914 86 1,812 620,812
Proceeds from principal repayments and sales of investments (359,835) - - (359,835)
Accretion of discount/amortization of premium 10,908 269 10 11,187
Payment-in-kind 3,417 532 2,120 6,069
Net change in unrealized appreciation (depreciation) 37,599 (6) 299 37,892
Net realized gains (losses) 118 - - 118
Transfers into/(out) of Level 3(1)
- (26,924) - (26,924)
Fair value, end of period $ 2,979,870 $ 96,848 $ 40,636 $ 3,117,354
Net change in unrealized appreciation (depreciation) from investments still held as of December 31, 2023 $ 37,547 $ (6) $ 299 $ 37,840
(1) Transfer of portfolio investments within the three-level hierarchy is recorded during the period of such reclassification occurrence at the fair value as of the beginning of the respective period. Generally, reclassifications are primarily due to increase/decrease of price transparency.
The following tables present quantitative information about the significant unobservable inputs of the Company’s Level 3 financial instruments. The tables are not intended to be all-inclusive but instead captures the significant unobservable inputs relevant to the Company’s determination of fair value.
December 31, 2024
Range(1)
Asset Category Fair
Value Valuation Technique (2)
Significant Unobservable
Input Low High Weighted
Average(3)
Investments in first lien debt $ 3,597,236 Yield Analysis Discount Rate 8.05 % 34.06 % 10.31 %
5,973 Market Approach EBITDA Multiple 6.50x
Investments in second lien debt 33,351 Yield Analysis Discount Rate 10.18 % 16.41 % 15.09 %
Other debt 8,313 Yield Analysis Discount Rate 9.42 % 14.90 % 10.74 %
885 Market Approach EBITDA Multiple 9.00x
Preferred equity 22,694 Income Approach Discount Rate 12.15 % 17.50 % 13.71 %
923 Market Approach EBITDA Multiple 8.50x
Common equity 14,442 Market Approach EBITDA Multiple 3.90x 18.70x 13.47x
3,139 Market Approach Revenue Multiple 7.60x 12.70x 8.80x
Total Investments $ 3,686,956
(1) For an asset category that contains a single investment, the range is not included.
(2) During the year ended December 31, 2024, one unsecured debt position with a fair value of $2.01 million transitioned from an income approach to a yield analysis valuation technique.
(3) Weighted average for an asset category consisting of multiple investments is calculated by weighting the significant unobservable input by the relative fair value of the investment. Weighted average for an asset category consisting of a single investment represents the significant unobservable input used in the fair value of the investment.
December 31, 2023
Range
Asset Category Fair
Value Valuation Technique Significant Unobservable
Input Low High Weighted
Average(1)
Investments in first lien debt $ 2,979,870 Yield Analysis Discount Rate 8.61 % 25.09 % 11.00 %
Investments in second lien debt 96,848 Yield Analysis Discount Rate 10.80 % 31.13 % 14.37 %
Other debt 1,894 Income Approach Discount Rate 14.60 % 14.60 % 14.60 %
170 Market Approach EBITDA Multiple 9.00x 9.00x 9.00x
Preferred equity 18,758 Income Approach Discount Rate 12.19 % 15.68 % 13.47 %
1,275 Market Approach Revenue Multiple 7.50x 7.50x 7.50x
Common equity 16,600 Market Approach EBITDA Multiple 8.10x 18.70x 13.26x
1,939 Market Approach Revenue Multiple 7.60x 9.80x 8.47x
Total Investments $ 3,117,354
(1) Weighted average is calculated by weighting the significant unobservable input by the relative fair value of the investment.
The significant unobservable input used in yield analysis is discount rate based on comparable market yields. Significant increases in discount rates in isolation would result in a significantly lower fair value measurement. The significant unobservable input used in the market approach is the comparable company multiple. The multiple is used to estimate the enterprise value of the underlying investment. An increase/decrease in the multiple would result in an increase/decrease, respectively, in the fair value. The significant unobservable inputs used in the income approach are the comparative yield or discount rate. The comparative yield and discount rate are used to discount the estimated future cash flows expected to be received from the underlying investment. An increase/decrease in the comparative yield or discount rate would result in a decrease/increase, respectively, in the fair value.
Financial instruments disclosed but not carried at fair value
The Company’s debt is presented at carrying value on the Consolidated Statements of Assets and Liabilities. The fair value of the Company’s 2027 Notes (as defined below in Note 6. “Debt”) are based on third party pricing received by the Company. The fair value of the Company’s credit facilities, 2025 Notes and 2029 Notes are estimated in accordance with the Company's valuation policy. The carrying value, fair value and level of the Company’s debt were as follows:
December 31, 2024 December 31, 2023
Level Carrying Value Fair Value Carrying Value Fair Value
CIBC Subscription Facility(1)
3 $ - $ - $ - $ -
BNP Funding Facility 3 316,000 316,000 282,000 282,000
Truist Credit Facility 3 617,401 617,401 520,263 520,263
2027 Notes(2)
2 422,174 418,370 420,834 407,617
2025 Notes(2)
3 274,144 275,000 272,935 275,000
2029 Notes(2)
3 343,760 350,455 - -
Total $ 1,973,479 $ 1,977,226 $ 1,496,032 $ 1,484,880
(1)The CIBC Subscription Facility matured and was fully paid off as of December 31, 2022.
(2)As of December 31, 2024, the carrying value of the Company’s 2027 Notes, 2025 Notes and 2029 Notes were presented net of unamortized debt issuance costs of $2,374, $856 and $3,297 and unamortized original issuance discount of $452, $0 and $3,398, respectively. As of December 31, 2023, the carrying value of the Company’s 2027 Notes, 2025 Notes and 2029 Notes were presented net of unamortized debt issuance costs of $3,499, $2,065 $0, and unamortized original issuance discount of $667, $0 and $0, respectively.
The carrying amounts of the Company’s assets and liabilities, other than investments at fair value and debt, approximate fair value. These financial instruments are categorized as Level 3 within the hierarchy.
(6) DEBT
The Company’s debt obligations were as follows.
December 31, 2024 December 31, 2023
Aggregate Principal Committed Outstanding Principal Unused Portion Aggregate Principal Committed Outstanding Principal Unused Portion
CIBC Subscription Facility(1)
$ - $ - $ - $ - $ - $ -
BNP Funding Facility 600,000 316,000 284,000 600,000 282,000 318,000
Truist Credit Facility(2)
1,300,000 617,401 680,770 1,120,000 520,263 599,484
2027 Notes(3)
425,000 425,000 - 425,000 425,000 -
2025 Notes(3)
275,000 275,000 - 275,000 275,000 -
2029 Notes(3)
350,000 350,000 - - - -
Total $ 2,950,000 $ 1,983,401 $ 964,770 $ 2,420,000 $ 1,502,263 $ 917,484
(1)The CIBC Subscription Facility matured and was fully paid off as of December 31, 2022.
(2)As of December 31, 2024 and December 31, 2023, a letter of credit of $1,828 and $253, respectively, was outstanding, which reduced the unused availability under the Truist Credit Facility by the same amount. Under the Truist Credit Facility, the Company may borrow in U.S. dollars or certain other permitted currencies. As of December 31, 2024 and December 31, 2023, the Company had borrowings denominated in Euros (EUR) of 3,298 and 238, respectively, Canadian dollars (CAD) of 300 and 0, respectively and Pound Sterling (GBP) of 1,020 and 0, respectively.
(3)As of December 31, 2024, the carrying value of the Company’s 2027 Notes, 2025 Notes and 2029 Notes were presented net of unamortized debt issuance costs of $2,374, $856 and $3,297 and unamortized original issuance discount of $452, $0 and $3,398, respectively. As of December 31, 2023, the carrying value of the Company’s 2027 Notes, 2025 Notes and 2029 Notes were presented net of unamortized debt issuance costs of $3,499, $2,065 $0, and unamortized original issuance discount of $667, $0 and $0, respectively.
The Company's summary information of its debt obligations were as follows:
For the Year Ended
December 31, 2024 December 31, 2023 December 31, 2022
Combined weighted average interest rate (1)
6.46 % 6.51 % 4.05 %
Combined weighted average effective interest rate (2)
6.90 % 6.85 % 4.41 %
Combined weighted average debt outstanding $ 1,681,358 $ 1,576,285 $ 1,432,492
(1) Excludes unused commitment fees, amortization of financing costs, accretion of original issue discount and net change in unrealized (appreciation) depreciation on effective interest rate swaps and hedged items.
(2) Excludes unused commitment fees and net change in unrealized (appreciation) depreciation on effective interest rate swaps and hedged items.
As of December 31, 2024 and December 31, 2023, the Company was in compliance with all covenants and other requirements of each of the credit facilities, and each of the respective unsecured notes.
CIBC Subscription Facility
On December 31, 2019, the Company entered into a revolving credit agreement (as amended, restated or otherwise modified from time to time, the "CIBC Subscription Facility") with CIBC Bank USA as administrative agent and arranger. The CIBC Subscription Facility allowed the Company to borrow up to the maximum revolving commitment at any one time outstanding, subject to certain
restrictions, including availability under the borrowing base, which is based on unused Capital Commitments. The CIBC Subscription Facility bore interest at a rate at the Company’s election of either (i) the per annum one or three-month LIBOR, divided by a number determined by subtracting from 1.00 the then stated maximum reserve percentage for determining reserves to be maintained by member banks of the Federal Reserve System for Eurocurrency funding or liabilities, plus 1.65% or (ii) the prime rate plus 0.65%, as calculated under the CIBC Subscription Facility. The CIBC Subscription Facility was secured by the unfunded commitments of certain stockholders of the Company. The CIBC Subscription Facility matured and was fully paid off as of December 31, 2022.
The summary information of the CIBC Subscription Facility is as follows:
For the Year Ended
December 31, 2024 December 31, 2023 December 31, 2022
Borrowing interest expense $ - $ - $ 8,312
Facility unused commitment fees - - 26
Amortization of deferred financing costs - - 1,347
Total $ - $ - $ 9,685
Weighted average interest rate - % - % 3.13 %
Weighted average outstanding balance $ - $ - $ 262,184
BNP Funding Facility
On October 14, 2020, DLF LLC entered into a Revolving Credit and Security Agreement (as amended, restated or otherwise modified from time to time, the “Credit and Security Agreement”) with DLF LLC, as the borrower, BNP Paribas (“BNP”), as the administrative agent and lender, the Company, as the equity holder and as the servicer, and U.S. Bank National Association, as collateral agent to (as amended, the “BNP Funding Facility”). As of December 31, 2024, the borrowing capacity under the BNP Funding Facility was $600,000. The applicable margin on borrowings during the reinvestment period is 2.25% and, after the reinvestment period, 2.75%. The obligations of DLF LLC under the BNP Funding Facility are secured by the assets held by DLF LLC. The BNP Funding Facility reinvestment period ends on August 21, 2027 and the facility has a final maturity date of August 21, 2029.
The summary information of the BNP Funding Facility is as follows:
For the Year Ended
December 31, 2024 December 31, 2023 December 31, 2022
Borrowing interest expense $ 20,662 $ 27,086 $ 15,376
Facility unused commitment fees 2,068 771 507
Amortization of deferred financing costs 1,650 1,257 1,145
Total $ 24,380 $ 29,114 $ 17,028
Weighted average interest rate 7.77 % 7.51 % 3.90 %
Weighted average outstanding balance $ 261,541 $ 355,507 $ 389,216
Truist Credit Facility
On July 16, 2021, the Company entered into a Senior Secured Revolving Credit Agreement with Truist Bank (as amended, restated or otherwise modified from time to time, the “Truist Credit Facility). The maximum principal amount of the Truist Credit Facility is $1,300,000, subject to availability under the borrowing base. The Truist Credit Facility includes an uncommitted accordion feature that, as of December 31, 2024, allows the Company, under certain circumstances, to increase the borrowing capacity to up to $1,950,000. As of December 31, 2024, the availability period of the Truist Credit Facility will terminate on April 19, 2028. The Truist Credit Facility is guaranteed by certain domestic subsidiaries of the Company (the “Guarantors”). The Company’s obligations to the lenders under the Truist Credit Facility are secured by a first priority security interest in substantially all of the assets of the Company and each Guarantor, subject to certain exceptions.
The Company may borrow amounts in U.S. dollars or certain other permitted currencies. Borrowings under the Truist Credit Facility bear interest at a per annum rate equal to, (x) for loans for which the Company elects the base rate option, the “alternate base rate” (which is the highest of (a) the prime rate as publicly announced by Truist Bank, (b) the sum of (i) the weighted average of the rates on overnight federal funds transactions, as published by the Federal Reserve Bank of New York plus (ii) 0.5%, and (c) Term SOFR (as defined in the Truist Credit Facility agreement) on such day plus 1% per annum) plus either (A) 0.75% or (B) 0.875%, based on certain borrowing base conditions and (y) for loans for which the Company elects the term benchmark option, Term SOFR, for borrowings denominated in U.S. dollars, or the applicable term benchmark rate for borrowings denominated in certain foreign currencies, in each case for the related interest period for such borrowing plus 1.875% per annum or such other applicable margin as is applicable to such foreign currency borrowings. The Company pays an unused fee of 0.375% per annum on the daily unused amount of the revolver commitments. The Company pays letter of credit participation fees and a fronting fee on the average daily amount of
any letter of credit issued and outstanding under the Truist Credit Facility, as applicable. As of December 31, 2024, the Truist Credit Facility has a maturity date of April 19, 2029.
The summary information of the Truist Credit Facility is as follows:
For the Year Ended
December 31, 2024 December 31, 2023 December 31, 2022
Borrowing interest expense $ 36,415 $ 37,055 $ 11,959
Facility unused commitment fees 2,912 2,287 2,487
Amortization of deferred financing costs 2,077 1,992 1,243
Total $ 41,404 $ 41,334 $ 15,689
Weighted average interest rate 7.15 % 7.02 % 3.68 %
Weighted average outstanding balance $ 500,828 $ 520,778 $ 320,955
Unsecured Notes
2027 Notes
On February 11, 2022, the Company issued $425,000 in aggregate principal amount of 4.50% notes due 2027 (the restricted securities initially issued on February 11, 2022 together with the unrestricted securities issued pursuant to the exchange offer described below, the “2027 Notes”) pursuant to the First Supplemental Indenture dated February 11, 2022 (the “First Supplemental Indenture”), which supplements a base indenture, dated as of February 11, 2022 (as may be further amended, supplemented or otherwise modified from time to time, the “Base Indenture” and together with the First Supplemental Indenture, the “February 2027 Notes Indenture”).
The 2027 Notes will mature on February 11, 2027 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the February 2027 Notes Indenture. Interest on the 2027 Notes is due semiannually in February and August of each year. The 2027 Notes are general unsecured obligations of the Company that rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the 2027 Notes, rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank effectively junior to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries, financing vehicles or similar facilities.
Pursuant to a Registration Statement on Form N-14 (File No. 333-264774), filed on July 20, 2022, the Company closed an exchange offer in which holders of the 2027 Notes that were restricted because they were issued in a private placement were offered the opportunity to exchange such notes for new, registered notes with substantially identical terms. Through this exchange offer, holders representing 85.87% of the outstanding principal of the then restricted 2027 Notes obtained registered unrestricted 2027 Notes.
The summary information of 2027 Notes is as follows:
For the Year Ended
December 31, 2024 December 31, 2023 December 31, 2022
Borrowing interest expense $ 19,125 $ 19,125 $ 17,000
Accretion of original issuance discount 215 214 190
Amortization of debt issuance costs 1,133 1,122 996
Total $ 20,473 $ 20,461 $ 18,186
Stated interest rate 4.50 % 4.50 % 4.50 %
2025 Notes
On September 13, 2022, the Company entered into a Master Note Purchase Agreement (the “Note Purchase Agreement”) governing the issuance of $275,000 in aggregate principal amount of Series A Senior Notes due September 13, 2025 (the “2025 Notes”) to certain qualified institutional investors in a private placement. The 2025 Notes were delivered and paid for on September 13, 2022, subject to certain customary closing conditions. The 2025 Notes have a fixed interest rate of 7.55% per year. The 2025 Notes will mature on September 13, 2025 unless redeemed, purchased or prepaid prior to such date by the Company in accordance with the terms of the Note Purchase Agreement. Interest on the 2025 Notes is due semiannually in February and August of each year. Subject to the terms of the Note Purchase Agreement, the Company may redeem the 2025 Notes in whole or in part at any time or from time to time at the Company’s option at par plus accrued interest to the prepayment date and, if redeemed on or before June 13, 2025, a make-whole premium. The Company’s obligations under the Note Purchase Agreement are general unsecured obligations that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by the Company.
The summary information of 2025 Notes is as follows:
For the Year Ended
December 31, 2024 December 31, 2023 December 31, 2022
Borrowing interest expense $ 20,762 $ 20,762 $ 6,229
Amortization of debt issuance costs 1,216 1,212 365
Total $ 21,978 $ 21,974 $ 6,594
Stated interest rate 7.55 % 7.55 % 7.55 %
2029 Notes
On May 17, 2024, the Company issued $350,000 in aggregate principal amount of 6.150% notes due 2029 (the “2029 Notes”), pursuant to the Second Supplemental Indenture dated May 17, 2024 (the “Second Supplemental Indenture”), which supplements the Base Indenture (together with the Second Supplemental Indenture, the “March 2029 Notes Indenture”).
The 2029 Notes will mature on May 17, 2029 and may be redeemed in whole or in part at the Company’s option at any time prior to April 17, 2029 at par value plus a “make-whole” premium calculated in accordance with the terms under “optional redemption” in the March 2029 Notes Indenture and at par value on April 17, 2029 or thereafter. Interest on the 2029 Notes is due semiannually in May and November of each year. The 2029 Notes are general unsecured obligations of the Company that rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the 2029 Notes, rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank effectively junior to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries, financing vehicles or similar facilities.
In connection with the 2029 Notes Offering, the Company entered into interest rate swaps. Under the interest rate swap agreement related to the 2029 Notes, the Company receives a fixed interest rate of 6.413% per annum and pays a floating interest rate of SOFR + 2.37% per annum on $350,000 of the 2029 Notes. For the year ended December 31, 2024, the Company paid no periodic payments. The interest expense related to the 2029 Notes is equally offset by the proceeds received from the interest rate swaps. The swap adjusted interest expense is included as a component of interest expense on the Company's Consolidated Statements of Operations. As of December 31, 2024, the interest rate swaps had a fair value of $445. Based on the fair value measurement hierarchy, the swaps are classified as level 3 investments. Depending on the nature of the balance at period end, the fair value of the interest rate swaps are either included as a component of accrued expenses and other liabilities or prepaid expenses and other assets on the Company's Consolidated Statements of Assets and Liabilities. The change in fair value of the interest rate swaps is offset by the change in fair value of the 2029 Notes, with the remaining difference included as a component of interest expense on the Consolidated Statements of Operations. The Company designated each interest rate swap as the hedging instrument in a qualifying hedge accounting relationship.
The summary information of 2029 Notes is as follows:
For the Year Ended
December 31, 2024 December 31, 2023 December 31, 2022
Borrowing interest expense $ 13,393 $ - $ -
Accretion of original issuance discount 488 - -
Net change in unrealized (appreciation) depreciation on effective interest rate swaps and hedged items 10 - -
Amortization of debt issuance costs 802 - -
Total $ 14,693 $ - $ -
Stated interest rate 6.15 % - % - %
(7) COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company may enter into contracts that provide a variety of general indemnifications. Any exposure to the Company under these arrangements could involve future claims that may be made against the Company. Currently, no such claims exist or are expected to arise and, accordingly, the Company has not accrued any liability in connection with such indemnifications.
The Company’s investment portfolio contains debt investments which are in the form of lines of credit or delayed draw commitments, which require us to provide funding when requested by portfolio companies in accordance with underlying loan agreements. As of December 31, 2024 and December 31, 2023, the Company had $564,839 and $294,950 of unfunded commitments to fund delayed draw and revolving senior secured loans, respectively.
(8) NET ASSETS
Equity
The following table shows the components of total distributable earnings (loss) as shown on the Consolidated Statements of Assets and Liabilities:
As of
December 31, 2024 December 31, 2023 December 31, 2022
Total distributable earnings (loss), beginning of period $ 8,459 $ (54,779) $ 15,782
Net investment income (loss) after taxes 220,235 198,061 128,010
Net realized gain (loss) (16,467) 118 537
Net unrealized appreciation (depreciation) 11,796 32,835 (80,005)
Dividends declared (195,729) (169,291) (119,437)
Tax reclassification of stockholders’ equity 1,330 1,515 334
Total distributable earnings (loss), end of period $ 29,624 $ 8,459 $ (54,779)
On January 26, 2024, the Company closed its IPO, issuing 5,000,000 shares of its Common Stock at a public offering price of $20.67 per share. Net of underwriting fees, the Company received net cash proceeds, before offering expenses, of approximately $97.1 million. The Company’s Common Stock began trading on the NYSE under the symbol “MSDL” on January 24, 2024.
In connection with the IPO, the Company redeemed any fractional shares of Common Stock outstanding for cash in an amount equal to the pro rata portion of $20.67 per share of Common Stock, which was the initial public offering price in the IPO.
The following table summarizes the total shares issued and proceeds received from the Company’s capital drawdowns delivered pursuant to the Subscription Agreements for the year ended December 31, 2023:
Share Issuance Date Shares Issued Amount
October 04, 2023 10,680,808 $ 220,238
Total 10,680,808 $ 220,238
Following the above capital call, the Company did not have any remaining undrawn capital commitments.
Distributions
Prior to January 26, 2024, the Company had an “opt in” dividend reinvestment plan, or the Prior DRIP. As a result, the Company’s stockholders who elected to “opt in” to the Prior DRIP had their cash dividends or distributions automatically reinvested in additional shares of Common Stock, rather than receiving cash. The Company adopted an “opt out” DRIP on January 26, 2024 as amended and restated effective December 7, 2024, the DRIP. As a result, the Company’s stockholders who have not “opted out” of the DRIP will have their cash dividends or distributions automatically reinvested in additional shares of Common Stock, rather than receiving cash. The shares of Common Stock distributed in the Company’s DRIP are either through (i) newly issued shares of Common Stock or (ii) acquired by the plan administrator through the purchase of outstanding shares of Common Stock on the open market. If, on the payment date for any distribution, the most recently computed net asset value per share as of the DRIP is equal to or less than the closing market price plus estimated per share fees, the plan administrator will invest the distribution amount in newly issued shares of Common Stock. Otherwise, the plan administrator will invest the dividend amount in shares acquired by purchasing shares of
Common Stock on the open market. The following table summarizes the distributions declared on shares of the Company’s Common Stock and shares distributed pursuant to the DRIP to stockholders who had not opted out of the DRIP.
The following table summarizes the Company’s distributions declared as well as the DRIP shares issued for the year ended December 31, 2024, and December 31, 2023:
Date Declared Record Date Payment Date Per Share Amount Shares(1)
For the year ended December 31, 2024
February 29, 2024 March 29, 2024 April 25, 2024 $ 0.50 512,519
May 08, 2024 June 28, 2024 July 25, 2024 0.50 553,637 (2)
January 11, 2024 August 05, 2024 October 25, 2024 0.10 111,159 (2)(3)
August 06, 2024 September 30, 2024 October 25, 2024 0.50 546,673 (2)
January 11, 2024 November 04, 2024 January 24, 2025 0.10 101,485 (2)(3)
November 04, 2024 December 31, 2024 January 24, 2025 0.50 473,635 (2)
$ 2.20 2,299,108
For the year ended December 31, 2023
March 28, 2023 March 28, 2023 April 25, 2023 $ 0.50 482,721
June 27, 2023 June 27, 2023 July 25, 2023 0.57 554,001 (4)
September 26, 2023 September 26, 2023 October 25, 2023 0.60 579,388 (5)
December 28, 2023 December 28, 2023 January 25, 2024 0.60 615,660 (5)
$ 2.27 2,231,770
(1) In connection with the distributions with payment dates on January 25, 2024 and January 25, 2023, 615,660 and 445,235 DRIP shares were issued, respectively.
(2) In accordance with the Company’s DRIP, shares were purchased in the open market.
(3) Represents a special distribution declared by the Board on January 11, 2024.
(4) Includes a supplemental distribution of $0.07.
(5) Includes a supplemental distribution of $0.10.
Share Repurchase Plan
On January 25, 2024, the Company entered into a share repurchase plan, or the Company 10b5-1 Plan, to acquire up to $100 million in the aggregate of the Company’s Common Stock at prices below the Company’s net asset value per share over a specified period, in accordance with the guidelines specified in Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The Company 10b5-1 Plan was approved by the Board of Directors on September 11, 2023. The Company 10b5-1 Plan requires Wells Fargo Securities, LLC, as the Company’s agent, to repurchase Common Stock on its behalf when the market price per share is below the most recently reported net asset value per share (including any updates, corrections or adjustments publicly announced by the Company to any previously announced net asset value per share, including any distributions declared). Under the Company 10b5-1 Plan, the volume of purchases would be expected to increase as the price of the Company’s Common Stock declines, subject to volume restrictions. The timing and amount of any share repurchases will depend on the terms and conditions of the Company 10b5-1 Plan, the market price of the Company’s Common Stock and trading volumes, and no assurance can be given that Common Stock will be repurchased in any particular amount or at all. The repurchase of shares pursuant to the Company 10b5-1 Plan is intended to satisfy the conditions of Rule 10b5-1 and Rule 10b-18 under the Exchange Act, and will otherwise be subject to applicable law, including Regulation M, which may prohibit repurchases under certain circumstances. The Company 10b5-1 Plan commenced beginning 60 calendar days following the end of the “restricted period” under Regulation M and will terminate upon the earliest to occur of (i) 12-months from the commencement date of the Company 10b5-1 Plan, (ii) the end of the trading day on which the aggregate purchase price for all shares purchased under the Company 10b5-1 Plan equals $100 million and (iii) the occurrence of certain other events described in the Company 10b5-1 Plan.
The “restricted period” under Regulation M ended upon the closing of the Company's IPO and, therefore, the Common Stock repurchases/purchases described above began on March 26, 2024.
The following table summarizes the shares repurchased under the Company 10b5-1 Plan during the year ended December 31, 2024:
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions)
July 1, 2024 - July 31, 2024 39,344 $ 19.99 39,344 $ 99.2
August 1, 2024 - August 31, 2024 217,796 20.10 217,796 94.8
September 1, 2024 - September 30, 2024 172,513 20.04 172,513 91.4
October 1, 2024 - October 31, 2024 187,607 19.99 187,607 87.6
November 1, 2024 - November 30, 2024 307,336 20.34 307,336 81.9
December 1, 2024 - December 31, 2024 - - - 81.9
Total Repurchases 924,596 924,596
No shares were repurchased under the Company's 10b5-1 plan during the six months ended June 30, 2024.
No shares were repurchased under the Company's 10b5-1 Plan during the year ended December 31, 2023.
(9) EARNINGS (LOSS) PER SHARE
The following table sets forth the computation of basic and diluted earnings per share:
For the Year Ended
December 31, 2024 December 31, 2023 December 31, 2022
Numerator-net increase/(decrease) in net assets resulting from operations $ 215,564 $ 231,014 $ 48,542
Denominator-weighted average shares outstanding 88,649,149 74,239,743 61,676,363
Basic and diluted earnings (loss) per share $ 2.43 $ 3.11 $ 0.79
(10) INCOME TAXES
For income tax purposes, distributions made to the Company’s stockholders are reported as ordinary income, capital gains, or a combination thereof. The tax character of distributions made were as follows:
For the Year Ended
December 31, 2024 December 31, 2023 December 31, 2022
Distributions paid from:
Ordinary income (including net short-term capital gains) $ 195,611 $ 168,975 $ 119,433
Net long-term capital gains 118 316 4
Total taxable distributions $ 195,729 $ 169,291 $ 119,437
Taxable income generally differs from net increase in net assets resulting from operations for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized gains or losses, and incentive fee accrual associated with any unrealized gains, as unrealized gains or losses are generally not included in taxable income until they are realized.
For the year ended December 31, 2024, the Company estimated U.S. federal taxable income exceeded its distributions made from such taxable income during the year; consequently, the Company has elected to carry forward the excess for distribution to stockholders in 2024. The amount carried forward to 2025 is estimated to be approximately $68,618, of which $68,618 is expected to be ordinary income and $0 is expected to be capital gains, although these amounts will not be finalized until the 2024 tax returns are filed in 2025.
The Company makes certain adjustments to the classification of net assets as a result of permanent book-to-tax differences, which include differences in the book-to-tax treatment of net operating losses, dividend re-designations and timing of the deductibility of certain business expenses, as applicable. To the extent these differences are permanent, they are charged or credited to additional paid-in capital, undistributed net investment income or undistributed net realized gains on investments, as appropriate.
The book-to-tax differences relating to distributions made to the Company’s stockholders resulted in reclassifications among certain capital accounts as follows:
As of
December 31, 2024 December 31, 2023 December 31, 2022
Paid-in capital in excess of par value $ (1,330) $ (1,515) $ (334)
Total distributable earnings (loss) 1,330 1,515 334
The cost and unrealized gain (loss) on the Company’s consolidated financial instruments, as calculated on a tax basis, were as follows (amounts calculated using book-to-tax differences as of the most recent fiscal year ended December 31, 2024, December 31, 2023 and December 31, 2022):
As of
December 31, 2024 December 31, 2023 December 31, 2022
Gross unrealized appreciation $ 38,155 $ 19,066 $ 6,529
Gross unrealized depreciation (59,527) (52,242) (72,587)
Net unrealized appreciation (depreciation) $ (21,372) $ (33,176) $ (66,058)
Tax cost of investments at year end $ 3,813,066 $ 3,226,720 $ 2,939,635
At December 31, 2024 the Company had available for federal income tax purposes unused capital losses of approximately $17,387, of which $11,768 are short-term and $5,619 are long-term, that do not have an expiration date.
To the extent that capital loss carryforwards are used to offset any future capital gains realized, no capital gains tax liability will be incurred by the Company for gains realized and not distributed. To the extent that capital gains are offset, such gains will not be distributed to the shareholders.
(11) CONSOLIDATED FINANCIAL HIGHLIGHTS
The following are the financial highlights (dollar amounts in thousands, except per share amounts):
For the Year Ended
December 31, 2024 December 31, 2023 December 31, 2022 December 31, 2021 December 31, 2020
Per Share Data:(1)
Net asset value, beginning of period $ 20.67 $ 19.81 $ 20.91 $ 20.08 $ 20.00
Net investment income (loss)
2.48 2.67 2.08 2.34 1.41
Net unrealized and realized gain (loss)(2)
(0.07) 0.46 (1.26) 0.52 (0.28)
Net increase (decrease) in net assets resulting from operations 2.41 3.13 0.82 2.86 1.13
Dividends declared (2.20) (2.27) (1.92) (2.07) (1.30)
Repurchase of common Stock 0.01 - - - -
Issuance of common stock, net of underwriting and offering costs (0.08) - - 0.04 0.25
Total increase (decrease) in net assets 0.14 0.86 (1.10) 0.83 0.08
Net asset value, end of period $ 20.81 $ 20.67 $ 19.81 $ 20.91 $ 20.08
Per share market value, end of period 20.66 n/a n/a n/a n/a
Shares outstanding, end of period 88,511,089 83,278,831 70,536,678 56,838,027 15,024,425
Weighted average shares outstanding 88,649,149 74,239,743 61,676,363 31,159,302 7,559,426
Total return based on net asset value(3)
12.00 % 16.40 % 3.99 % 14.83 % 7.07 %
Total return based on market value(4)
11.19 % n/a n/a n/a n/a
Ratio/Supplemental Data (all amounts in thousands except ratios and shares):
Net assets, end of period(5)
$ 1,842,156 $ 1,721,151 $ 1,397,305 $ 1,188,587 $ 301,620
Ratio of net expenses to average net assets(5)
10.52 % 11.14 % 7.99 % 6.77 % 7.02 %
Ratio of expenses before waivers to average net assets(5)
11.38 % 12.65 % 9.55 % 8.26 % 8.20 %
Ratio of net investment income to average net assets(5)
11.83 % 13.01 % 9.97 % 10.55 % 6.62 %
Ratio of total contributed capital to total committed capital, end of period n/a 100.00 % 86.48 % 88.87 % 20.57 %
Asset coverage ratio(6)
193.00 % 215.00 % 191.00 % 195.00 % 190.00 %
Portfolio turnover rate 18.85 % 11.98 % 14.87 % 27.18 % 31.11 %
(1)The per share data was derived by using the weighted average shares outstanding during the period, except otherwise noted.
(2)The amount shown does not correspond with the aggregate amount for the period as it includes the effect of the timing of capital transactions.
(3)Total return (not annualized) is calculated assuming a purchase of Common Stock at the opening of the first day of the period and a sale on the closing of the last business day of the period. Dividends and distributions, if any, are assumed for purposes of this calculation, to be reinvested at prices obtained under the Company’s DRIP.
(4)Total return based on market value is calculated as the change in market value per share during the respective periods, taking into account distributions, if any, reinvested in accordance with the Company’s DRIP. The beginning market value per share is based on the initial public offering price of $20.67 per share and not annualized.
(5)Amounts are annualized except for incentive fees, organization and offering costs and other expenses for which expense support was provided, as applicable.
(6)Effective December 17, 2019, in accordance with Section 61(a)(2) of the 1940 Act, with certain limited exceptions, the Company is allowed to borrow amounts such that its asset coverage, as defined in the 1940 Act, is at least 150% after such borrowing. Prior to December 17, 2019, in accordance with the 1940 Act, with certain limited exceptions, the Company was allowed to borrow amounts such that its asset coverage, as defined in the 1940 Act, was at least 200% after such borrowing.
(12) SENIOR SECURITIES
The following is information about the Company's senior securities as of dates indicated in the table below:
Class and Period Total Amount Outstanding Exclusive of Treasury Securities(1)
Asset Coverage per Unit(2)
Liquidating Preference per Unit(3)
Average Market Value per Unit
($in thousands) ($in thousands)
2025 Notes
December 31, 2024 $ 275,000 1,930 - N/A(4)
December 31, 2023 $ 275,000 2,146 - N/A(4)
December 31, 2022 $ 275,000 1,912 - N/A(4)
2027 Notes
December 31, 2024 $ 425,000 1,930 - N/A(4)
December 31, 2023 $ 425,000 2,146 - N/A(4)
December 31, 2022 $ 425,000 1,912 - N/A(4)
2029 Notes
December 31, 2024 $ 350,000 1,930 - N/A(4)
Truist Credit Facility
December 31, 2024 $ 617,401 1,930 - N/A(4)
December 31, 2023 $ 520,263 2,146 - N/A(4)
December 31, 2022 $ 432,254 1,912 - N/A(4)
December 31, 2021 $ 476,000 1,951 - N/A(4)
BNP Funding Facility
December 31, 2024 $ 316,000 1,930 - N/A(4)
December 31, 2023 $ 282,000 2,146 - N/A(4)
December 31, 2022 $ 400,000 1,912 - N/A(4)
December 31, 2021 $ 463,500 1,951 - N/A(4)
December 31, 2020 $ - - - N/A(4)
CIBC Subscription Facility
December 31, 2024 $ - - - N/A(4)
December 31, 2023 $ - - - N/A(4)
December 31, 2022 $ - - - N/A(4)
December 31, 2021 $ 310,350 1,951 - N/A(4)
December 31, 2020 $ 333,850 1,903 - N/A(4)
December 31, 2019 $ - - - N/A(4)
(1)Total amount of each class of senior securities outstanding at the end of the period presented.
(2)Asset coverage per unit is the ratio of the carrying value of our total assets, less all liabilities excluding indebtedness represented by senior securities in this table, to the aggregate amount of senior securities representing indebtedness. Asset coverage per unit is expressed in terms of dollar amounts per $1,000 of indebtedness and is calculated on a consolidated basis.
(3)The amount to which such class of senior security would be entitled upon our involuntary liquidation in preference to any security junior to it. The “ - ” in this column indicates information that the SEC expressly does not require to be disclosed for certain types of senior securities.
(4)Not applicable because the senior securities are not registered for public trading on a stock exchange.
(13) SEGMENT REPORTING
The Company operates through a single operating and reporting segment with an investment objective to generate current income and, to a lesser extent, capital appreciation, primarily from directly originated senior secured term loans. The Company’s chief operating decision maker (the “CODM”) includes the Chief Executive Officer, President, Chief Financial Officer, and Chief Operating Officer. The CODM uses the net increase (decrease) in net assets resulting from operations to assess the performance and makes operating decisions of the Company. The evaluation of this metric is used in determining the Company’s distribution policy, portfolio construction and deployment, and strategic initiatives. Segment assets are reflected on the accompanying consolidated statements of assets and liabilities as “total assets” and the significant segment expenses are listed on the accompanying consolidated statements of operations.
(14) SUBSEQUENT EVENTS
Subsequent events have been evaluated through the date the consolidated financial statements were issued. There have been no subsequent events that require recognition or disclosure through the date the consolidated financial statements were issued, except as disclosed below.
Pursuant to a Registration Statement on Form N-14 (File No. 333-283653), which went effective on January 14, 2025, the Company closed an exchange offer in which holders of the 2029 Notes that were restricted because they were issued in a private placement were offered the opportunity to exchange such notes for new, registered notes with substantially identical terms. Through this exchange offer, holders representing 99.32% of the outstanding principal of the then restricted 2029 Notes obtained registered, unrestricted 2029 Notes.
On February 25, 2025, the Company amended and restated that certain senior secured revolving credit agreement with Truist Bank (the “A&R Credit Agreement”). The A&R Credit Agreement amended certain terms of the Truist Credit Facility, including, but not limited to, amendments to (a) increase the facility size from $1,300,000 to $1,450,000, (b) extend the revolving period and maturity date with respect to the loans and commitments held by the lenders who consented to the maturity extension until February 23, 2029 and February 25, 2030, respectively, (c) reprice the Truist Credit Facility to S + 1.775% and (d) modify certain covenant restrictions.
From January 1, 2025 through February 26, 2025, the Company repurchased 11,401 shares at an average price of $20.31, as part of the Company 10b5-1 plan
On February 27, 2025, the Board authorized an amended and restated share repurchase plan, or the Amended and Restated Company 10b5-1 Plan. Under the Amended and Restated Company 10b5-1 Plan, the Company may acquire up to $100 million in the aggregate of Common Stock at prices below its net asset value per share over a specified period, in accordance with the guidelines specified in Rule 10b5-1 and Rule 10b-18 of the Exchange Act. The Amended and Restated Company 10b5-1 Plan will terminate upon the earliest to occur of (i) 24-months from the commencement date of the original Company 10b5-1 Plan (refer to Note 8 “Net Assets” for information on the original Company 10b5-1 plan), (ii) the end of the trading day on which the aggregate purchase price for all shares purchased under the Amended and Restated Company 10b5-1 Plan equals $100 million and (iii) the occurrence of certain other events described in the Amended and Restated Company 10b5-1 Plan.
On February 27, 2025, the Board declared a distribution of $0.50 per share, which is payable on April 25, 2025 to shareholders of record as of March 31, 2025.
.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes and Disagreements with Accountants on Accounting and Financial Disclosure
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of December 31, 2024 (the end of the period covered by this Report), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (Principal Executive Officer) and our Chief Financial Officer (Principal Financial Officer), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our Chief Executive Officer (Principal Executive Officer) and our Chief Financial Officer (Principal Financial Officer) have concluded that our current disclosure controls and procedures are effective in timely alerting them of material information relating to the Company that is required to be disclosed by us in the reports we file or submit under the Exchange Act.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). The Company’s internal control over financial reporting is a process designed under the supervision of its Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer) and effected by the Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of its consolidated financial statements for external reporting purposes in accordance with GAAP.
The Company’s internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of the Company’s assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of the consolidated financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and the directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on its consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024 based on the framework established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that the Company’s internal control over financial reporting as of December 31, 2024 was effective.
Attestation Report of the Registered Public Accounting Firm
Our independent registered public accounting firm, Deloitte & Touche LLP, has issued an attestation report on the effectiveness of our internal control over financial reporting which is set forth under the heading “Report of our Independent Registered Public Accounting Firm.”
Changes in Internal Controls Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred for the fiscal quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
Rule 10b5-1 Trading Plans
During the fiscal quarter ended December 31, 2024, none of our directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”
On February 25, 2025, we amended and restated that certain senior secured revolving credit agreement with Truist Bank (the “A&R Credit Agreement”). The A&R Credit Agreement amended certain terms of the Truist Credit Facility, including, but not limited to, amendments to (a) increase the facility size from $1,300,000 to $1,450,000, (b) extend the revolving period and maturity date with respect to the loans and commitments held by the lenders who consented to the maturity extension until February 23, 2029 and February 25, 2030, respectively, (c) reprice the Truist Credit Facility to S + 1.775% and (d) modify certain covenant restrictions.
The foregoing description is only a summary of the material provisions of the A&R Credit Agreement and is qualified in its entirety by reference to a copy of the A&R Credit Agreement, which is filed as an exhibit to this Annual Report on Form 10-K.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
Information in response to this item is incorporated by reference from our Proxy Statement relating to our 2025 annual meeting of stockholders. The Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10-K pursuant to Regulation 14A under the Exchange Act.
Information relating to our and the Adviser’s codes of ethics, which apply to, among others, our Chief Executive Officer and Chief Financial Officer, is included in “Part I, Item 1. Business-Regulation-Code of Ethics” of this Form 10-K.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
Information in response to this item is incorporated by reference from our Proxy Statement relating to our 2025 annual meeting of stockholders.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information in response to this item is incorporated by reference from our Proxy Statement relating to our 2025 annual meeting of stockholders.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information in response to this item is incorporated by reference from our Proxy Statement relating to our 2025 annual meeting of stockholders.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services
Information in response to this item is incorporated by reference from our Proxy Statement relating to our 2025 annual meeting of stockholders.
PART IV.

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits
(a) Documents filed as part of this Report
The following documents are filed as part of this Report:
(1) Financial Statements - Financial statements are included in Item 8. See the Index to the consolidated financial statements on page 86 of this annual report on Form 10-K.
(2) Financial Statement Schedules - None. We have omitted financial statement schedules because they are not required or are not applicable, or the required information is shown in the consolidated statements or notes to the consolidated financial statements.
(3) Exhibits - The following is a list of all exhibits filed as a part of this annual report on Form 10-K, including those incorporated by reference. Please note that the agreements included as exhibits to this Form 10-K are included to provide information regarding their terms and are not intended to provide any other factual or disclosure information about us or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement that have been made solely for the benefit of the other parties to the applicable agreement and may not describe the actual state of affairs as of the date they were made or at any other time.
(b) Exhibits
Exhibit
3.1 Form of Certificate of Incorporation (Incorporated by reference to the Company’s Form 10-12G/A filed by the Company on November 19, 2019 (File No. 000-56098)).
3.2 Amended and Restated Bylaws(Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10- Q, filed by the Company on May 10, 2023 (File No. 814-01332).
4.1* Description of Securities.
4.2 Indenture, dated as of February 11, 2022, by and between the Company and U.S. Bank Trust Company, National Association, as trustee (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed by the Company on February 11, 2022 (File No. 814-01332)).
4.3 First Supplemental Indenture, dated as of February 11, 2022, relating to the 4.500% Notes due 2027, by and between the Company and U.S. Bank Trust Company, National Association, as trustee (Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed by the Company on February 11, 2022 (File No. 814-01332)).
4.4 Form of 4.500% Notes due 2027 (Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed by the Company on February 11, 2022 (File No. 814-01332)).
4.5 Second Supplemental Indenture, dated as of May 17, 2024, relating to the 6.150% Notes due 2029, by and between the Company and U.S. Bank Trust Company, National Association, as trustee (Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed by the Company on May 17, 2024 (File No. 814-01332)).
4.6 Form of 6.150% Notes due 2029 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed by the Company on May 17, 2024 (File No. 814-01332)).
10.1 Amended and Restated Investment Advisory Agreement, dated as of January 24, 2024 (Incorporated by reference to the Company’s Post Effective Amendment No. 1 to the Registration Statement on Form N-2, filed by the Company on January 30, 2024 (File No. 333-276056)).
10.2 Form of Waiver Letter Agreement to the Investment Advisory Agreement (Incorporated by reference to the Company’s Form 10-12G/A filed by the Company on November 19, 2019 (File No. 000-56098)).
10.3 Form of Administration Agreement (Incorporated by reference to the Company’s Form 10-12G/A filed by the Company on November 19, 2019 (File No. 000-56098)).
10.4 Form of Custody Agreement (Incorporated by reference to the Company’s Form 10-12G/A filed by the Company on November 19, 2019 (File No. 000-56098)).
10.5 Form of License Agreement (Incorporated by reference to the Company’s Form 10-12G/A filed by the Company on November 19, 2019 (File No. 000-56098)).
10.6** Form of Indemnification Agreement (Incorporated by reference to the Company’s Form 10-12G/A filed by the Company on November 19, 2019 (File No. 000-56098)).
10.7 Amended and Restated Dividend Reinvestment Plan (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed by the Company on November 7, 2024 (File No. 814-01332)).
Exhibit
10.8 Revolving Credit and Security Agreement, dated as of October 14, 2020, among DLF Financing SPV LLC, as borrower, the lenders from time to time parties thereto, BNP Paribas, as administrative agent and lender, Morgan Stanley Direct Lending Fund, as equity holder and servicer, and U.S. Bank National Association, as collateral agent (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed by the Company on October 20, 2020 (File No. 814-01332)).
10.9 Purchase and Sale Agreement, dated as of October 14, 2020, between DLF Financing SPV LLC, as purchaser, and Morgan Stanley Direct Lending Fund, as seller (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed by the Company on October 20, 2020 (File No. 814-01332)).
10.10 Amendment No. 1 to Revolving Credit and Security Agreement, dated as of December 11, 2020, among DLF Financing SPV LLC, as borrower, the lenders from time to time parties thereto, BNP Paribas, as administrative agent and lender, Morgan Stanley Direct Lending Fund, as equity holder and servicer, and U.S. Bank National Association, as collateral agent (Incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K, filed by the Company on March 19, 2021 (File No. 814-01332)).
10.11 Amendment No. 2 to Revolving Credit and Security Agreement, dated as of March 2, 2021, among DLF Financing SPV LLC, as borrower, the lenders from time to time parties thereto, BNP Paribas, as administrative agent and lender, Morgan Stanley Direct Lending Fund, as equity holder and servicer, and U.S. Bank National Association, as collateral agent (Incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K, filed by the Company on March 19, 2021 (File No. 814-01332)).
10.12 Amendment No. 3 to Revolving Credit and Security Agreement, dated as of September 22, 2023, among DLF Financing SPV LLC, as borrower, the lenders from time to time parties thereto, BNP Paribas, as administrative agent and lender, Morgan Stanley Direct Lending Fund, as equity holder and servicer, and U.S. Bank National Association, as collateral agent (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed by the Company on September 28, 2023 (File No. 814-01332)).
10.13 Amendment No. 4 to Revolving Credit and Security Agreement, dated as of June 26, 2024, among DLF Financing SPV LLC, as borrower, the lenders from time to time parties thereto, BNP Paribas, as administrative agent and lender, Morgan Stanley Direct Lending Fund, as equity holder and servicer, and U.S. Bank National Association, as collateral agent (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed by the Company on August 8, 2024 (File No. 814-01332)).
10.14 Amendment No. 5 to Revolving Credit and Security Agreement, dated as of August 21, 2024, among DLF Financing SPV LLC, as borrower, the lenders from time to time parties thereto, BNP Paribas, as administrative agent and lender, Morgan Stanley Direct Lending Fund, as equity holder and servicer, and U.S. Bank National Association, as collateral agent (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed by the Company on August 27, 2024 (File No. 814-01332)).
10.15 Senior Secured Revolving Credit Agreement, dated as of July 16, 2021, among Morgan Stanley Direct Lending Fund, as Borrower, the Lenders and Issuing Banks party thereto, Truist Bank, as Administrative Agent, and Truist Securities, Inc., as Joint Lead Arranger and Sole Book Runner (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed by the Company on July 22, 2021 (File No. 814-01332)).
10.16 Amendment No. 1 to Senior Secured Revolving Credit Agreement, dated as of December 3, 2021, among Morgan Stanley Direct Lending Fund, as Borrower, the Lenders and Issuing Banks party thereto, Truist Bank, as Administrative Agent, and Truist Securities, Inc., as Joint Lead Arranger and Sole Book Runner (Incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K, filed by the Company on March 18, 2022 (File No. 814-01332 )).
10.17 Amendment No. 2 to Senior Secured Revolving Credit Agreement, dated May 20, 2022, among Morgan Stanley Direct Lending Fund, as Borrower, the Lenders party thereto, and Truist Bank, as Administrative Agent (Incorporated by reference to Exhibit 10.01 to the Company’s Current Report on Form 8-K, filed by the Company on May 20, 2022 (File No. 814-01332)).
10.18 Amendment No. 3 to Senior Secured Revolving Credit Agreement, dated as of January 31, 2023, among Morgan Stanley Direct Lending Fund, as Borrower, the Lenders and Issuing Banks party thereto, Truist Bank, as Administrative Agent, Truist Securities, Inc, as Joint Lead Arranger and Sole Book Runner, and ING Capital LLC, MUFG Bank, LTD and Sumitomo Mitsui Banking Corporation, as Joint Lead Arrangers (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed by the Company on February 6, 2023 (File No. 814-01332)).
10.19 Amendment No. 4 to Senior Secured Revolving Credit Agreement, dated as of April 19, 2024, among Morgan Stanley Direct Lending Fund, as Borrower, the Lenders and Issuing Banks party thereto, Truist Bank, as Administrative Agent, and Truist Securities, Inc., as Joint Lead Arranger and Sole Book Runner, and ING Capital LLC, MUFG Bank, Ltd., and Sumitomo Mitsui Banking Corporation, as additional Joint Lead Arrangers (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed by the Company on April 23, 2024 (File No. 814-01332)).
Exhibit
10.20* Amended and Restated Senior Secured Revolving Credit Agreement, dated as of February 25, 2025, among Morgan Stanley Direct Lending Fund, as Borrower, the Lenders and Issuing Banks party thereto, Truist Bank, as Administrative Agent, and Truist Securities, Inc., as Joint Lead Arranger and Sole Book Runner, and ING Capital LLC, MUFG Bank, Ltd., and Sumitomo Mitsui Banking Corporation, as additional Joint Lead Arrangers
10.21 Note Purchase Agreement by and between the Company and the purchasers party thereto, dated September 13, 2022 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed by the Company on September 14, 2022 (File No. 814-01332)).
10.22 Registration Rights Agreement, dated as of February 11, 2022, relating to the 4.500% Notes due 2027, by and among the Company and SMBC Nikko Securities America, Inc., J.P. Morgan Securities LLC, MUFG Securities Americas Inc. and Truist Securities, Inc., as the representatives of the Initial Purchasers (Incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K, filed by the Company on February 11, 2022 (File No. 814-01332)).
10.23 Registration Rights Agreement, dated as of May 17, 2024, relating to the 6.150% Notes due 2029, by and among the Company and Truist Securities, Inc., BNP Paribas Securities Corp., ING Financial Markets LLC, J.P. Morgan Securities LLC and SMBC Nikko Securities America, Inc., as the representatives of the Initial Purchasers (Incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K, filed by the Company on May 17, 2024 (File No. 814-01332)).
14.1 Code of Ethics of Morgan Stanley Direct Lending Fund (Incorporated by reference to the Company’s Form 10-12G/A filed by the Company on November 19, 2019 (File No. 000-56098)).
14.2 Code of Ethics of MS Capital Partners Adviser Inc. (Incorporated by reference to the Company’s Form 10-12G/A filed by the Company on November 19, 2019 (File No. 000-56098)).
19.1* Insider Trading Policy.
21.1* Subsidiaries of the Registrant.
23.1* Consent of Independent Registered Public Accounting Firm.
31.1* Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
31.2* Certification of Chief Financial Officer (Principal Financial Officer) Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.
32.1*** Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*** Certification of Chief Financial Officer (Principal Financial Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.7 Morgan Stanley Direct Lending Fund Clawback Policy (Incorporated by reference to Exhibit 99.7 to the Company’s Annual Report on Form 10-K, filed by the Company on March 1, 2024 (File No. 814-01332)).
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* Filed herein.
** Management contract or compensatory plan or arrangement.
*** Furnished herein.