MSDL lists wide mix of floating-rate loans and equity stakes
Rhea-AI Filing Summary
MSDL provides a detailed schedule of non-controlled, non-affiliated investments, showing a large portfolio of primarily first-lien floating-rate loans across software, professional services, healthcare, industrials, and other sectors. Many loans are priced at spreads such as S + 4.50% to S + 7.50%, with some including PIK (paid-in-kind) components, and current cash interest rates generally in the high single to low double digits.
The portfolio also includes second-lien positions, delayed draw term loans, revolving credit commitments and several preferred and common equity stakes. Stated loan maturity dates extend roughly from 2025 through 2033, illustrating a broadly laddered schedule of contractual cash flows and financing commitments to a wide range of middle-market borrowers.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____ to _____
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the Registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the Registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of June 30, 2025, the aggregate market value of the Company's common stock, par value $0.001 per share (“Common Stock”) held by non-affiliates of the Registrant was $
The number of shares of the registrant’s Common Stock outstanding at February 25, 2026 was
Documents Incorporated by Reference:
Auditor Firm ID:
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MORGAN STANLEY DIRECT LENDING FUND
TABLE OF CONTENTS
Part I |
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Item 1. |
Business |
5 |
Item 1A. |
Risk Factors |
32 |
Item 1B. |
Unresolved Staff Comments |
64 |
Item 1C. |
Cybersecurity |
64 |
Item 2. |
Properties |
66 |
Item 3. |
Legal Proceedings |
66 |
Item 4. |
Mine Safety Disclosures |
66 |
Part II |
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Item 5. |
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
67 |
Item 6. |
[Reserved] |
71 |
Item 7. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
72 |
Item 7A. |
Quantitative and Qualitative Disclosures About Market Risk |
81 |
Item 8. |
Consolidated Financial Statements and Supplementary Data |
83 |
Item 9. |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
165 |
Item 9A. |
Controls and Procedures |
165 |
Item 9B. |
Other Information |
165 |
Item 9C. |
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections |
165 |
Part III |
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Item 10. |
Directors, Executive Officers and Corporate Governance |
166 |
Item 11. |
Executive Compensation |
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Item 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
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Item 13. |
Certain Relationships and Related Transactions, and Director Independence |
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Item 14. |
Principal Accountant Fees and Services |
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Part IV |
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Item 15. |
Exhibits and Financial Statement Schedules |
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SIGNATURES
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EXPLANATORY NOTE
In this report, except where the context suggests otherwise:
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report, including the documents we incorporate by reference into this report, contains forward-looking statements that involve substantial risks and uncertainties. Such statements involve known and unknown risks, uncertainties and other factors and you should not place undue reliance on such statements. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our current and prospective portfolio investments, our industry, our beliefs and opinions and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” “potential,” “predicts” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including:
Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of the assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statements in this report should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in the section entitled “Item 1A.
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Risk Factors” and elsewhere in this report. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this report. Moreover, we assume no duty and do not undertake to update the forward-looking statements. You are advised to consult any additional disclosures that we make directly to you or through reports that we have filed or in the future file with the Securities and Exchange Commission (the “SEC”), including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.You should understand that under Section 27A(b)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E(b)(2)(B) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 do not apply to forward-looking statements made in periodic reports we file under the Exchange Act.
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PART I
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.
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) drawing on 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 and will continue to deploy capital in a prudent manner. Our investment pace will depend on several factors including the market environment, the current economic environment, and deal flow.
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, Flexible Credit and Growth Credit.
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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 $26.2 billion in committed capital1 as of February 1, 2026.
MS Private Credit’s primary areas of focus include:
Our Adviser’s investment committee servicing us, or the Investment Committee, is comprised of nine senior investment professionals of IM and is chaired by Ashwin Krishnan, our Chief Investment Officer. 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.
IM is a global investment manager, delivering innovative investment solutions across public and private markets. As of December 31, 2025, IM managed approximately $1.9 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 (the “Board” or the “Board of Directors”) in August 2025.
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).
Investments
As of December 31, 2025, we had investments in 227 portfolio companies across 35 industries. Based on fair value as of December 31, 2025, 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 9.3%. Weighted average yields include the effect of accretion of discounts and amortization of premiums and are based on interest rates as of December 31, 2025.
Investment Strategy
Our primary investment strategy is to make privately negotiated senior secured credit investments in U.S. middle-market companies that have leading, defensible market positions, enjoy high barriers to entry, such as high startup costs or other obstacles that prevent new competitors from
1 Committed capital is calculated as aggregate capital commitments received and total committed leverage within each of the funds or accounts with the exception of funds past their investment period, where committed capital is calculated as invested capital.
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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:
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 Canada, the United Kingdom and countries that are members of the European Union, as well as 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 are 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:
Key themes of our investment strategy include:
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Market Opportunity
We believe the middle market direct lending market environment continues to be attractive, despite the recent market volatility driven in part by trade policy, uncertainty surrounding the implementation of artificial intelligence, or AI, among other factors. 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 25% as of June 30, 2025.
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.
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 several structural and market factors. We have seen some recovery in leveraged buyout activity in recent quarters, and we believe that the private credit market continues to present high quality opportunities, that could offer compelling risk-adjusted returns.
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We believe that the combination of these structural and market benefits has contributed to the historical outperformance of middle-market loans. From 2017 to 2025, senior middle-market loans have produced lower loss rates than leveraged loans and high yield bonds.
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 may 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.
Morgan Stanley has no obligation, contractual or otherwise, to 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. 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 provide 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, right-sized capital base, and focus on documentation 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. Ashwin Krishnan, our Chief Investment Officer, has principal portfolio management responsibility for us and serves as Chair of the Investment Committee. Mr. Krishnan has 25 years of experience in private credit, including origination, senior secured, mezzanine and opportunistic lending, and leveraged finance, and he also currently serves in the same capacity for each of the MS BDCs. Mr. Krishnan
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serves as the Head and Chief Investment Officer of Morgan Stanely’s North America Private Credit Platform and chairs the investment committees of the 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, 2025, and December 31, 2024, MS Credit Partners Holdings held approximately 11.3% and 11.0% of our outstanding shares of Common Stock, respectively.
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, if available. 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
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businesses (subject in all cases to availability, 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:
The Investment Team reviews ESG considerations as part of its due diligence process, these considerations include, but are not limited to, whether the borrower has formal ESG and compliance policies, the type of activities carried on by the borrower (e.g., energy usage, carbon emissions, fossil fuel exposure, or nuclear energy) and the borrower's hiring practices. The identification of a material ESG risk will not necessarily be determinative in our Adviser’s decision on whether to lend to a potential borrower, and we may invest in portfolio companies that score poorly in our Adviser’s ESG due diligence.
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 Ashwin Krishnan, 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 and private equity sponsors, and uses internal resources including leveraging the extensive industry expertise resident in Morgan Stanley’s businesses, as appropriate (subject in all cases to applicable regulations, confidentiality provisions, information barriers and policies and procedures), in an attempt to give us an ongoing advantage relative to other investors in the portfolio company. The Adviser typically receives quarterly financial reports from portfolio companies. This information access and ongoing interaction 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, review of trends of specific industries, internal risk ratings (“Internal Risk Ratings”), revenue, EBITDA and leverage.
Frequency of review of individual portfolio companies 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 more frequently as appropriate. In addition, the Adviser holds weekly “watchlist” meetings which include a discussion of all investments 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. Please see below for a description of the four categories of the Investment Adviser’s Internal Risk Rating system:
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Risk Rating 1 |
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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 investment performance is above our initial underwriting expectations, and the business trends and risk factors present are generally favorable, which may include trends and factors such as the performance of the portfolio company or the likelihood of a potential exit. |
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Risk Rating 2 |
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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. |
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Risk Rating 3 |
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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. |
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Risk Rating 4 |
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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.
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. Pursuant to the exemptive relief granted by the SEC to us and our Adviser on June 3, 2025 (the “Order”), which supersedes the co-investment order issued to us and the Adviser on August 2, 2022 and amended on January 14, 2025, we are able to enter into certain negotiated co-investment transactions alongside certain Regulated Funds and Affiliated Entities (each as defined in the Order) in a manner consistent with our investment objective, positions, policies,
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strategies, and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with the Order. The Order contains certain conditions and requires the Board to maintain oversight of our participation in the co-investment program. The Order also requires a “required majority” (as defined in Section 57(o) of the 1940 Act) of our eligible directors to make certain conclusions pursuant to Section 57(f) of the 1940 Act in connection with certain co-investment transactions, including co-investment transactions in which an affiliate is an existing investor in the portfolio company, non-pro rata follow on investments and non-pro rata dispositions of investments. 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 ours. 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 ours.
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 have 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 has in the past and may in the future 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.
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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, which includes, among other things, the requirement to ensure a fair and equitable allocation of investment opportunities to the MS BDCs, 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 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, allocations among us and certain other Affiliated Investment Accounts, which may include proprietary accounts of Morgan Stanley, 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. Final allocations are generally approved by an allocation committee comprised of senior management, subject to certain exceptions. Our Board of Directors regularly reviews the allocation policies and procedures and code of ethics of the Adviser.
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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, 2025, and December 31, 2024, our asset coverage ratio was 183.0% and 193.0%, 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 Program
In January 2024, our Board authorized a share repurchase program 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 all applicable securities laws and regulations. In February 2025, our Board authorized an amended share repurchase program to acquire up to $100 million in the aggregate of Common Stock at prices below our net asset value per share over a specified period, in accordance with all applicable securities laws and regulations.
In February 2026, our Board most recently approved a share repurchase program (the “Program”), under which we can repurchase up to $100 million in the aggregate of our Common Stock at prices below our net asset value per share over a 24-month period, in accordance with all applicable securities laws and regulations. We have in the past, and could in the future, enter into a plan to repurchase shares of our Common Stock pursuant to the Program in a manner intended to comply with the requirements of Rule 10b5-1 under the Exchange Act. The Program is discretionary and whether purchases will be made under the Program and how much will be purchased at any time is uncertain and dependent on prevailing market prices and trading volumes, all of which we cannot predict.
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 (net of applicable withholding tax) 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.
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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 2025.
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
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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 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 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 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 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:
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, 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
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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
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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
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$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
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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
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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
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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 2025.
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 into which our Administrator enters.
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
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Risks Relating to Our Investments
Risks Relating to Our Common Stock
Risks Relating to the Notes
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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:
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.
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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. 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% 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 code of ethics’ requirements. Our code 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.
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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. 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:
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.
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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 limitations 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
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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 23, 2026.
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 “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,
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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:
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:
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
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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 our 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.
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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.
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
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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. This change could also reduce our net investment income to the extent any debt investments have fixed interest rates, or floating interest rates subject to an interest rate cap below the then-current levels, and as a result such interest rates of these debt investments will not increase. In periods of rising interest rates, our cost of funds will also increase because we expect that the interest rates on the majority of amounts we borrow will be floating. In periods of declining interest rates, our net investment income could be reduced as the interest income earned on our floating rate debt investments declines and any new fixed rate debt may be issued at lower coupon rates. Additionally, in periods of declining interest rates, the rate of prepayments has historically tended to increase (as does price fluctuation) as borrowers are motivated to pay off debt and refinance at new lower rates. During such periods, we would expect reinvestment of the prepayment proceeds by us to generally be at lower rates of return than the return on the assets that were prepaid. There can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. 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.
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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 sponsored or advised 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 operations 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.
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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 have declined, and vice versa. The Adviser and/or one or more of its affiliates has in the past and may in the future 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
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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 and internal policies and procedures. 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 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.
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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.
In addition, 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.”
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 able to enter into certain negotiated co-investment transactions alongside certain Regulated Funds and Affiliated Entities (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. The Order contains certain conditions and requires the Board to maintain oversight of our participation in the co-investment program. The Order also requires a “required majority” (as defined in Section 57(o) of the 1940 Act) of our eligible directors to make certain conclusions pursuant to Section 57(f) of the 1940 Act in connection with certain co-investment transactions, including co-investment transactions in which an affiliate is an existing investor in the portfolio company, non-pro rata follow on investments and non-pro rata dispositions of investments.
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
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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 dividends 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, are 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 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
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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, 2025, 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).
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Based on our outstanding indebtedness of $2,093,153 as of December 31, 2025 and the weighted average annual interest rate of
We are subject to risks associated with our Credit Facilities.
We have 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”).
DLF Financing SPV LLC, our wholly owned subsidiary, or Financing SPV, has entered into a revolving credit and security agreement with Financing SPV, 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” and 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.
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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 are subject to risks associated with any collateralized loan obligations, or CLOs, we enter into to finance our investments.
We have in the past and may in the future enter into CLOs through a direct or indirect subsidiary of ours (any such subsidiary, an “MS Issuer”). As a result of these CLOs, including the 2025-1 Debt Securitization (as defined in Note 6. “Debt” in the notes to the accompanying consolidated financial statements), we are 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 a CLO transaction, institutional investors purchase the notes issued by an MS Issuer in a private placement, while we retain the equity interest in the CLOs and consolidate the assets and liabilities of the CLOs on our balance sheet.
In connection with the 2025-1 Debt Securitization (and any other CLO we may form in the future), we depend (or will depend) in part on distributions from the CLO’s assets out of its earnings and cash flows to enable us to make distributions to shareholders. The ability of a CLO to make distributions will be, and in connection with the 2025-1 Debt Securitization is, subject to various limitations, including the terms and covenants of the debt it issues. The Subordinated Notes and that portion of the Class D Notes (each as defined in Note 6. “Debt” in the notes to the accompanying consolidated financial statements) issued by North Haven Private Credit CLO 1 LLC (“CLO 2025-1 Issuer”) and retained by us are the most junior classes of notes issued by CLO 2025-1 Issuer, are subordinated in priority of payment to the other CLO 2025-1 Debt (as defined in Note 6. “Debt” in the notes to the accompanying consolidated financial statements) issued by CLO 2025-1 Issuer and are subject to certain payment restrictions set forth in the indenture governing the CLO 2025-1 Senior Secured Notes (as defined in Note 6. “Debt” in the notes to the accompanying consolidated financial statements) and Subordinated Notes issued by CLO 2025-1 Issuer. Therefore, we only receive cash distributions on the Subordinated Notes and those Class D Notes retained by us if CLO 2025-1 Issuer has made all cash interest payments to all other CLO 2025-1 Senior Secured Notes it has issued.
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Also, a CLO may take actions to retain cash or other assets to satisfy asset coverage requirements or other tests commonly provided for holders of the CLO’s debt, which could impact our ability to receive distributions from the CLO. With respect to the 2025-1 Debt Securitization, if CLO 2025-1 Issuer does not meet the asset coverage tests or the interest coverage test set forth in the documents governing the 2025-1 Debt Securitization, cash would be diverted from the Subordinated Notes and/or Class D Notes that we hold to first pay the more senior CLO 2025-1 Notes issued by CLO 2025-1 Issuer in amounts sufficient to cause such tests to be satisfied. If we do not receive cash flow from any such CLO, including in connection with the 2025-1 Debt Securitization, that is necessary to satisfy the annual distribution requirement for maintaining RIC status, and we are unable to obtain cash from other sources necessary to satisfy this requirement, we may not maintain our qualification as a RIC, which would have a material adverse effect on an investment in the shares.
In addition, a decline in the credit quality of loans in a CLO due to poor operating results of the relevant borrower or increases in defaults, among other things, may result in a reduction of earnings and, in turn, cash potentially available for distribution to us for distribution to shareholders. To the extent that any losses are incurred by the CLO in respect of any collateral, including, with respect to the 2025-1 Debt Securitization, the value of the portfolio of loan investments held by CLO 2025-1 Issuer, such losses will be borne first by us as owner of equity interests in the CLO and, in the case of the 2025-1 Debt Securitization, the value of the Subordinated Notes and Class D Notes that we have retained could be reduced at their redemption and could not be paid in full or at all.
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 Valuation Designee (as defined below), subject to oversight by the Board, 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 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 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
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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, and thus 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 Common Stock 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
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are likely to be adversely affected and the value of our Common Stock 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
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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 such person’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 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, and 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 attributable to the willful misfeasance, bad faith or gross negligence or by reason of reckless disregard of the Administrator’s duties or obligations 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.
We may invest in derivatives or other assets that expose us to certain risks, including market risk, liquidity risk and other risks similar to those associated with the use of leverage.
We may invest in derivatives and other assets that are subject to many of the same types of risks related to the use of leverage. Derivative transactions, if any, will generally create leverage for us and involve significant risks. The primary risks related to derivative transactions include counterparty, correlation, liquidity, leverage, volatility, over-the-counter trading, operational and legal risks. In addition, a small investment in derivatives could have a large potential impact on our performance, effecting a form of investment leverage on our portfolio. In certain types of derivative transactions, we could lose the entire amount of our investment; in other types of derivative transactions the potential loss is theoretically unlimited.
Rule 18f-4 under the 1940 Act 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. Collectively, these requirements may limit our ability to use derivatives and/or enter into certain other financial contracts. Rule 18f-4 also permits us to enter into reverse repurchase agreements or similar financing transactions notwithstanding the senior security provision of the 1940 Act if we aggregate the amount of indebtedness associated with our reverse repurchase agreements or similar financing transactions with the aggregate amount of any other senior securities representing indebtedness when calculating the asset coverage ratios as discussed herein. In addition, under the “delayed-settlement securities” provision of Rule 18f-4, we are permitted to invest in a security on a when-issued or forward-settling basis, or with a non-standard settlement cycle, and the transaction will be deemed not to involve a senior security under the 1940 Act, provided that (i) we intend to physically settle the transaction and (ii) the transaction will settle within 35 days of its trade date. We may otherwise engage in such transaction as a “derivatives transaction” for purposes of compliance with the rule. Furthermore, we are permitted to enter into an unfunded commitment agreement, and such unfunded commitment agreement will not be subject to the asset coverage requirements under the 1940 Act if we reasonably believe, at the time we enter into such agreement, that we will have sufficient cash and cash equivalents to meet our obligations with respect to all such agreements as they come due. We cannot predict the effects of these requirements.
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.
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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 periodic operating results.
We could experience fluctuations in our periodic 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 dividends 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
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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
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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.
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, 2025, 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:
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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:
Our portfolio companies may be unable to repay or refinance outstanding principal on their loans at or prior to maturity.
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. 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
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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:
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:
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
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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
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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:
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 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 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 would 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 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 is so generally anticipated that we are not able to enter into a hedging transaction at an acceptable price.
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The success of our hedging strategy will depend on our ability to correctly identify appropriate exposures for hedging. In connection with the 2029 Notes and the 2030 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 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 Common Stock
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:
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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 in the Company and does not represent income or capital. 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.
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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 or 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. Stockholders should also understand that any future repayments to the Adviser will reduce the distributions they would otherwise receive. 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.
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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 (net of applicable withholding tax) 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 do not currently intend to pay dividends in 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 such series 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 securities (except exempted securities) 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.
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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.
The Notes are subordinated structurally to the indebtedness and other liabilities of our subsidiaries.
The Notes are obligations exclusively of the Company and not of any of our subsidiaries. None of our subsidiaries is a guarantor of the Notes and the Notes are not required to be guaranteed by any subsidiaries we may acquire or create in the future.
As of December 31, 2025, approximately $1.0 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 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 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 Notes contain limited protection for holders of such notes.
The Indentures governing the 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 Notes. In particular, the terms of the Indentures do not place any restrictions on our or our subsidiaries’ ability to:
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In addition, the terms of the Indentures and the 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 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 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 Notes does not develop or is not maintained, a noteholder may not be able to sell such notes.
The Notes (except for certain restricted 2027 Notes and restricted 2029 Notes) have been registered for resale under the Securities Act. 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 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 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) 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, 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.
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General Risk Factors
We are operating in a period of capital markets volatility and economic uncertainty. These market conditions , when they occur, 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.
Our business and operations may be adversely affected by market, economic and geopolitical conditions 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 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. At various times, such disruptions in the past have resulted in, and may in the future result in, a 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. 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, geopolitical tensions, 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.
Such conditions may occur for a prolonged period of time, and may materially worsen in the future, 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 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.
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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.
The outcome of the U.S. presidential, congressional and other elections creates significant uncertainty with respect to the legal, tax and regulatory regime in which we and our portfolio companies will operate.
Changes in the composition of the U.S. government following an election could result in changes to U.S. and non-U.S. fiscal, tax and other policies, as well as the global financial markets generally. Any significant changes in economic policy, the regulation of the asset management industry, international trade policy and/or tax law, among other things, could have a material adverse impact on us and our investments. General fluctuations in the market prices of securities and interest rates could affect our investment opportunities and the value of our investments. We could also be affected by difficult conditions in the capital markets and any overall weakening of the financial services industry. Ongoing disruptions in the global credit markets could affect issuers’ ability to pay debts and obligations on a timely basis. If defaults occur, we could lose both invested capital in, and anticipated profits from, any affected investments.
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While the current U.S. administration has signaled a reduced emphasis on regulation, past U.S. administrations supported an enhanced regulatory agenda. Changes in regulation can impose greater costs on certain sectors, including financial services, or otherwise impact the competitive environment for obligors, which could adversely impact us and our clients.
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.
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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. 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
The Company and the Adviser may use or rely on proprietary and/or third-party technology, including artificial intelligence solutions. Artificial intelligence (“AI”) refers to computer systems capable of performing tasks that typically require human intelligence, including but not limited to machine learning, natural language processing, and generative and agentic AI technologies. These systems are designed to analyze data, learn from patterns, make decisions and solve problems. Actual usage of AI will vary and is likely to change over time. Investors should be aware that the use of AI tools, while potentially beneficial, presents a range of risks and may result in material adverse consequences (including the risks discussed in further detail below) for the Company or its third-party service providers or counterparties, and no assurance can be given that any controls adopted to govern the use of AI will fully mitigate the risks associated with AI technologies.
AI tools may produce inaccurate, biased, insufficient, discriminatory, misleading, incomplete, undetectable manipulative or otherwise flawed responses due to (among other things) limitations in training data, algorithmic design or operational oversight. Such deficiencies may result in operational errors, investment losses, reputational, financial, or social harm, legal liability, regulatory scrutiny or other adverse effects. The deployment and supervision of AI tools may increase operational and compliance risks. Inappropriate use of AI tools or overreliance on AI outputs without adequate human oversight may further exacerbate these risks.
The legal and regulatory environment relating to AI is uncertain and evolving and future changes, such as those related to privacy, data protection and intellectual property, could have an impact on the use of AI and existing or emerging technologies that could impact the Company. It is possible that future changes in applicable legal and regulatory requirements could increase compliance costs. Any of these risks could adversely affect the Company. Additionally, regulatory actions or legal challenges may impose restrictions or obligations that affect operational efficiency or compliance posture.
The misuse of AI tools, whether intentional or inadvertent, may expose the Company to additional risks. In addition, AI tools and technology are evolving rapidly and the integration of AI in systems and operations create new risks that can be difficult to assess and anticipate.
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.
The use of third-party and open-source AI tools (if any) can pose additional risks relating to data protection and information security, including the potential exposure of confidential information to unauthorized recipients and the misuse of intellectual property, which could adversely affect the Company.
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. The use of AI by bad actors could heighten the security vulnerabilities and sophistication and effectiveness of cyber and security attacks experienced by our portfolio companies and the Adviser.
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.
Geopolitical conflicts 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 affected regions 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
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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 incur significant costs as a result of being registered under the Exchange Act.
We incur legal, accounting and other expenses, including costs associated with the periodic reporting requirements applicable to a company whose securities are registered under the Exchange Act, as well as additional corporate governance requirements, including requirements under the Sarbanes-Oxley Act and other rules implemented by the SEC.
We invest through a joint venture and could enter into additional joint ventures in the future.
We have entered into a joint venture and from time to time, we could hold a portion of our investments through partnerships, additional joint ventures, securitization vehicles or other entities with third-party investors (collectively, “joint ventures”). Joint venture investments involve various risks, including the risk that we will not be able to implement investment decisions or exit strategies because of limitations on our control under applicable agreements with joint venture partners, the risk that a joint venture partner could become bankrupt or could at any time have economic or business interests or goals that are inconsistent with those of us, the risk that a joint venture partner could be in a position to take action contrary to our objectives, the risk of liability based upon the actions of a joint venture partner and the risk of disputes or litigation with such partner and the inability to enforce fully all rights (or the incurrence of additional risk in connection with enforcement of rights) one partner could have against the other, including in connection with foreclosure on partner loans, because of risks arising under state law. In addition, we could, in certain cases, be liable for actions of our joint venture partners. The joint venture in which we participate could sometimes be allocated investment opportunities that might have otherwise gone entirely to us, which could reduce our return on equity. Additionally, our joint venture investments could be held on an unconsolidated basis and at times could be highly leveraged. Such leverage would not count toward the investment limits imposed on us by the 1940 Act. We do not intend to create or acquire primary control of any entity that primarily engages in investment activities in securities and other assets other than joint ventures or entities wholly owned by us.
We and our portfolio companies may maintain cash balances at financial institutions that exceed federally insured limits with the
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Federal Deposit Insurance Corporation, or 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.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Risk management and strategy
The Company and the broader financial services industry face an increasingly complex and evolving threat environment.
Morgan Stanley has made and continues to make substantial investments in cybersecurity and fraud prevention technology, and employ experienced talent to lead its Cybersecurity and Information Security organizations and program under the oversight of Morgan Stanley’s Board of Directors (the “MS Board”) and the Operations and Technology Committee of the MS Board (“BOTC”).
The Adviser and the Administrator manage the Company’s day-to-day operations, and the Company uses the Cybersecurity Program to assess, identify and manage material cybersecurity risks affecting the Company and its operations.
Processes for assessing, identifying, and managing material risks from cybersecurity threats
Morgan Stanley’s Cybersecurity Program takes into account industry best practices and addresses risks from cybersecurity threats to the Firm’s network, infrastructure, computing environment, and the third-parties Morgan Stanley relies on, including third parties relied on by the Company. Morgan Stanley periodically assesses the design of its cybersecurity controls against the Cyber Risk Institute Cyber Profile, which is based on the National Institute of Standards and Technology Cybersecurity (“NIST”) Framework for Improving Critical Infrastructure Cybersecurity, as well as against global cybersecurity regulations, and develops improvements to those controls in response to those assessments. Morgan Stanley’s Cybersecurity Program also includes cybersecurity and information security policies, procedures, and technologies that are designed to address regulatory requirements and protect Morgan Stanley’s clients’, employees’ and own data, and the data of the Company and its officers and stockholders, against unauthorized disclosure, modification, and misuse. These policies, procedures, and technologies cover a broad range of areas, including: identification of internal and external threats, access control, data security, protective controls, detection of malicious or unauthorized activity, incident response, and recovery planning.
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Morgan Stanley’s threat intelligence function within the Cybersecurity Program actively engages in private and public information sharing communities and leverages both commercial and proprietary products to collect a wide variety of industry and governmental information regarding the latest cybersecurity threats, which informs Morgan Stanley’s cybersecurity risk assessments and strategy, including as applicable to the Company. This information is also provided to an internal Morgan Stanley cyber threat detection team, which develops and implements strategies designed to defend against these cybersecurity threats across Morgan Stanley’s environment, including systems and applications that may be relied upon by the Company. Morgan Stanley’s vulnerability management team, as well as Morgan Stanley’s Non-Financial Risk function (“NFR”) review external cybersecurity incidents that may be relevant to the Firm and the Company, to further inform the design of the Cybersecurity Program. To assess the efficacy of Morgan Stanley’s controls and defenses designed to mitigate cybersecurity risk, it utilizes internal and external testing, including penetration testing and red team engagements. The results of these assessments are used to strengthen the Cybersecurity Program. Additionally, Morgan Stanley maintains a global training program covering cybersecurity risks and requirements, including heightened security training to specialized employees, and conducts regular phishing email simulations for its employees and consultants as preventative measures.
When a threat is identified in Morgan Stanley’s environment, its incident response team follows an incident response plan to evaluate the impact to the Firm and coordinate appropriate remediation. If warranted, the cybersecurity incident will be reported to applicable regulators, authorities, impacted clients or counterparties, as appropriate. The Firm’s cybersecurity incident response and remediation processes, including assessing materiality and reporting requirements, are reviewed through tabletop exercises.
Morgan Stanley’s Cybersecurity Program is regularly assessed by the Morgan Stanley Internal Audit Department (“IAD”) through various assurance activities, with the results reported to the Audit Committee of the MS Board (“BAC”) and the BOTC and, as applicable to the Board of Directors of the Company. Annually, key elements of the Cybersecurity Program are subject to review by an independent third-party, the results of which, including opportunities identified for improvement and related remediation plans, are reviewed with the BOTC. The Cybersecurity Program is also examined regularly by the Firm’s prudential and conduct regulators within the scope of their jurisdiction.
Governance
Morgan Stanley and Company Management’s role in assessing and managing material risks from cybersecurity threats
Morgan Stanley’s Cybersecurity Program is operated and maintained by its management, including the Chief Information Officer (“CIO”) of Cyber, Data, Risk and Resilience and the Chief Information Security Officer (“CISO”). These senior officers are responsible for assessing and managing the Firm’s cybersecurity risks, which includes cybersecurity risks faced by the Company. Morgan Stanley’s Cybersecurity Program strategy, which is set by the CISO and overseen by the Morgan Stanley’s Head of Operational Cyber, Technology, and Information Security Non-Financial Risk, (“Head of NFR CTIS”), is informed by various risk and control assessments, control testing, external assessments, threat intelligence, and public and private information sharing. Morgan Stanley’s Cybersecurity Program also includes processes for escalating and considering the materiality of incidents that impact the Firm and the Company, including escalation to senior management of Morgan Stanley, the MS Board, and management of the Company.
Risk levels and mitigating measures are presented to and monitored by dedicated management-level cybersecurity risk committees at Morgan Stanley. These committees include representatives from Firm management as well as business and control stakeholders who review, challenge and, where appropriate, consider exceptions to the Firm’s policies and procedures. Significant cybersecurity risks are escalated from these committees to Morgan Stanley’s Non-Financial Risk Committee. The CIO and the Head of NFR CTIS report on the status of Morgan Stanley’s Cybersecurity Program, including significant cybersecurity risks; review metrics related to the program; and discuss the status of regulatory and remedial actions and incidents to the Firm Risk Committee, the BOTC and the MS Board. To the extent any cybersecurity incidents relate to the Company, the status of such incidents and remedial actions will be reported to our
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Board oversight of risks from cybersecurity threats
Our Board provides strategic oversight on cybersecurity matters, including risks associated with cybersecurity threats. Our Board receives periodic updates from the CCO of the Company, the CIO, CISO, and Operational Risk functions, regarding the overall state of Morgan Stanley’s Cybersecurity Program, information on the current threat landscape, and risks from cybersecurity threats and cybersecurity incidents impacting the Company.
Material cybersecurity risks are addressed by Morgan Stanley management-level ERM committees with escalation to the BOTC and Board, as appropriate. The BOTC has primary responsibility for assisting the Morgan Stanley board in its oversight of significant operational risk exposures of the Firm and its business units, including IT, information security, fraud, third-party oversight, business disruption and resilience, and cybersecurity risks (including review of cybersecurity risks against established risk management methodologies) and the steps management has taken to monitor and control such exposures.
In accordance with its charter, the BOTC receives quarterly reports from (i) Technology, including the CIO or the CISO; (ii) Operations; and (iii) NFR. Such reporting includes updates on Morgan Stanley’s Cybersecurity Program, risks from cybersecurity threats, our programs to address and mitigate the risks associated with the evolving cybersecurity threat environment, and NFR’s assessment of cybersecurity risks. Senior officers in Technology and NFR also provide an annual report to the BOTC on the status of Morgan Stanley’s broader information security program in compliance with the Gramm-Leach-Bliley Act, which includes a discussion of risks arising from cybersecurity threats. At least annually, senior management representatives in Technology and NFR discuss the status of the Cybersecurity Program and key cybersecurity risks with the Morgan Stanley board and, in accordance with such board’s Corporate Governance Policies, all board members are invited to attend BOTC meetings and have access to meeting materials. The BOTC, which meets at least quarterly, also reviews and approves significant policies related to cybersecurity, receives an annual independent assessment of key aspects of Morgan Stanley’s Cybersecurity Program from an independent third party and holds joint meetings with the BAC and BRC, as necessary and appropriate. The chair of the BOTC regularly discusses cybersecurity developments with senior Morgan Stanley management and reports to the Morgan Stanley board on cybersecurity risks and threats and other related matters.
Assessment of Cybersecurity Risk
The potential impact of risks from cybersecurity threats on the Company are assessed on an ongoing basis, and how such risks could materially affect the Company’s business strategy, operational results, and financial condition are regularly evaluated.
Item 2. Properties
Our headquarters are located at 1585 Broadway, New York, NY 10036. We do not own any real estate.
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.
Item 4. Mine Safety Disclosures
Not applicable.
66
Table of Contents
PART II
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 is 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 25, 2026, the last reported closing sales price of our Common Stock on the NYSE was $15.62 per share, which represented a discount of approximately 22.9% to net asset value per share reported by us as of December 31, 2025.
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 |
|
|
Premium |
|
|
Dividends |
|
|
||||||
Fiscal year ending December 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fourth quarter |
|
$ |
20.26 |
|
|
$ |
17.79 |
|
|
$ |
15.82 |
|
|
|
(12.2 |
)% |
|
|
(21.9 |
)% |
|
$ |
0.50 |
|
|
Third quarter |
|
$ |
20.41 |
|
|
$ |
19.79 |
|
|
$ |
16.08 |
|
|
|
(3.0 |
)% |
|
|
(21.2 |
)% |
|
$ |
0.50 |
|
|
Second quarter |
|
$ |
20.59 |
|
|
$ |
20.38 |
|
|
$ |
17.79 |
|
|
|
(1.0 |
)% |
|
|
(13.6 |
)% |
|
$ |
0.50 |
|
|
First quarter |
|
$ |
20.65 |
|
|
$ |
21.61 |
|
|
$ |
19.91 |
|
|
|
4.7 |
% |
|
|
(3.6 |
)% |
|
$ |
0.50 |
|
|
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) |
No shares of our Common Stock were publicly traded on the NYSE prior to January 24, 2024.
Holders
As of February 26, 2026, we had 17 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.
67
Table of Contents
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, 2025 and December 31, 2024, respectively:
Date Declared |
|
Record Date |
|
Payment Date |
|
Per Share Amount |
|
|
Shares |
|
|
||
For the Year Ended December 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
||
February 27, 2025 |
|
March 31, 2025 |
|
April 25, 2025 |
|
$ |
0.50 |
|
|
|
438,274 |
|
(1) |
May 08, 2025 |
|
June 30, 2025 |
|
July 25, 2025 |
|
|
0.50 |
|
|
|
400,773 |
|
(1) |
August 05, 2025 |
|
September 30, 2025 |
|
October 24, 2025 |
|
|
0.50 |
|
|
|
434,456 |
|
(1) |
November 04, 2025 |
|
December 31, 2025 |
|
January 23, 2026 |
|
|
0.50 |
|
|
|
415,727 |
|
(1) |
Total Distributions |
|
|
|
|
|
$ |
2.00 |
|
|
|
1,689,230 |
|
|
Date Declared |
|
Record Date |
|
Payment Date |
|
Per Share Amount |
|
|
Shares |
|
|
||
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 |
|
(1) |
January 11, 2024 |
|
August 05, 2024 |
|
October 25, 2024 |
|
|
0.10 |
|
|
|
111,159 |
|
(1)(2) |
August 06, 2024 |
|
September 30, 2024 |
|
October 25, 2024 |
|
|
0.50 |
|
|
|
546,673 |
|
(1) |
January 11, 2024 |
|
November 04, 2024 |
|
January 24, 2025 |
|
|
0.10 |
|
|
|
101,485 |
|
(1)(2) |
November 04, 2024 |
|
December 31, 2024 |
|
January 24, 2025 |
|
|
0.50 |
|
|
|
473,635 |
|
(1) |
Total Distributions |
|
|
|
|
|
$ |
2.20 |
|
|
|
2,299,108 |
|
|
Share Repurchase Program
In January 2024, our Board authorized a share repurchase program 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 all applicable securities laws and regulations, which was further amended by our Board in February 2025. For more information, see “—Recent Developments.”
The following table summarizes the shares repurchased under the share repurchase program during the year ended December 31, 2025:
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) |
|
||||
January 1 - January 31, 2025 |
|
|
11,401 |
|
|
$ |
20.31 |
|
|
|
11,401 |
|
|
$ |
81.9 |
|
February 1 - February 27, 2025 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
81.9 |
|
February 28, 2025 |
|
|
20,789 |
|
|
|
20.24 |
|
|
|
20,789 |
|
|
|
99.6 |
|
March 1 - March 31, 2025 |
|
|
459,142 |
|
|
|
20.38 |
|
|
|
459,142 |
|
|
|
90.2 |
|
April 1 - April 30, 2025 |
|
|
753,096 |
|
|
|
18.79 |
|
|
|
753,096 |
|
|
|
76.1 |
|
May 1 - May 31, 2025 |
|
|
277,558 |
|
|
|
19.22 |
|
|
|
277,558 |
|
|
|
70.7 |
|
June 1 - June 30, 2025 |
|
|
26,473 |
|
|
|
19.54 |
|
|
|
26,473 |
|
|
|
70.2 |
|
July 1 - July 31, 2025 |
|
|
93,507 |
|
|
|
18.99 |
|
|
|
93,507 |
|
|
|
68.4 |
|
August 1 - August 31, 2025 |
|
|
57,910 |
|
|
|
18.45 |
|
|
|
57,910 |
|
|
|
67.4 |
|
September 1 - September 30, 2025 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
67.4 |
|
October 1 - October 31, 2025 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
67.4 |
|
November 1 - November 30, 2025 |
|
|
204,300 |
|
|
|
16.79 |
|
|
|
204,300 |
|
|
|
64.1 |
|
December 1- December 31, 2025 |
|
|
330,608 |
|
|
|
17.18 |
|
|
|
330,608 |
|
|
|
58.3 |
|
Total Repurchases |
|
|
2,234,784 |
|
|
|
|
|
|
2,234,784 |
|
|
|
|
||
The following table summarizes the shares repurchased under the share repurchase program during the year ended December 31, 2024:
68
Table of Contents
Period |
|
Total |
|
|
Average Price |
|
|
Total Number of |
|
|
Approximate Dollar |
|
||||
January 1 - June 30, 2024 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
100.0 |
|
July 1 - July 31, 2024 |
|
|
39,344 |
|
|
|
19.99 |
|
|
|
39,344 |
|
|
|
99.2 |
|
August 1 - August 31, 2024 |
|
|
217,796 |
|
|
|
20.10 |
|
|
|
217,796 |
|
|
|
94.8 |
|
September 1 - September 30, 2024 |
|
|
172,513 |
|
|
|
20.04 |
|
|
|
172,513 |
|
|
|
91.4 |
|
October 1 - October 31, 2024 |
|
|
187,607 |
|
|
|
19.99 |
|
|
|
187,607 |
|
|
|
87.6 |
|
November 1 - November 30, 2024 |
|
|
307,336 |
|
|
|
20.34 |
|
|
|
307,336 |
|
|
|
81.9 |
|
December 1 - December 31, 2024 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
81.9 |
|
Total Repurchases |
|
|
924,596 |
|
|
|
|
|
|
924,596 |
|
|
|
|
||
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, 2025, 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.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG MORGAN STANLEY DIRECT LENDING FUND, STANDARD & POOR’S 500 INDEX, STANDARD & POOR’S 500 FINANCIALS INDEX, STANDARD & POOR’S BDC INDEX AND MORNINGSTAR’S LSTA LEVERAGED LOAN INDEX
69
Table of Contents
Fees and Expenses
The following table is being provided to update, as of December 31, 2025, 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 |
|
|
2.16 |
|
% |
|
(4 |
) |
Incentive fees |
|
|
2.00 |
|
% |
|
(5 |
) |
Interest payments on borrowed funds |
|
|
7.63 |
|
% |
|
(6 |
) |
Other expenses |
|
|
0.67 |
|
% |
|
(7 |
) |
Total annual expenses: |
|
|
12.46 |
|
% |
|
|
|
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 |
|
$ |
102 |
|
|
$ |
289 |
|
|
$ |
456 |
|
|
$ |
801 |
|
You would pay the following expenses on a $1,000 common stock |
|
$ |
110 |
|
|
$ |
309 |
|
|
$ |
484 |
|
|
$ |
833 |
|
70
Table of Contents
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.
Item 6. [Reserved]
71
Table of Contents
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 Entities (as defined in the Order), which may include proprietary accounts of Morgan Stanley, 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. The Order contains certain conditions and requires the Board to maintain oversight of our participation in the co-investment program. The Order also requires a “required majority” (as defined in Section 57(o) of the 1940 Act) of our eligible directors to make certain conclusions pursuant to Section 57(f) of the 1940 Act in connection with certain co-investment transactions, including co-investment transactions in which an affiliate of ours is an existing investor in the portfolio company, non-pro rata follow on investments and non-pro rata dispositions of investments.
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.
72
Table of Contents
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 the Administrator in performing its administrative obligations under the Administration Agreement between us and the Administrator; and (iii) other operating expenses as detailed below:
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.
73
Table of Contents
PORTFOLIO AND INVESTMENT ACTIVITY
The composition of our portfolio is presented below:
|
|
December 31, 2025 |
|
|
December 31, 2024 |
|
||||||||||||||||||
|
|
Cost |
|
|
Fair Value |
|
|
% of Total |
|
|
Cost |
|
|
Fair Value |
|
|
% of Total |
|
||||||
First Lien Debt |
|
$ |
3,686,118 |
|
|
$ |
3,631,498 |
|
|
|
96.2 |
% |
|
$ |
3,669,886 |
|
|
$ |
3,654,538 |
|
|
|
96.5 |
% |
Second Lien Debt |
|
|
83,428 |
|
|
|
75,210 |
|
|
|
2.0 |
|
|
|
78,803 |
|
|
|
69,367 |
|
|
|
1.8 |
|
Other Debt Investments |
|
|
11,857 |
|
|
|
10,114 |
|
|
|
0.3 |
|
|
|
9,755 |
|
|
|
9,198 |
|
|
|
0.2 |
|
Equity |
|
|
57,636 |
|
|
|
54,724 |
|
|
|
1.5 |
|
|
|
54,683 |
|
|
|
58,391 |
|
|
|
1.5 |
|
Total |
|
$ |
3,839,039 |
|
|
$ |
3,771,546 |
|
|
|
100.0 |
% |
|
$ |
3,813,127 |
|
|
$ |
3,791,494 |
|
|
|
100.0 |
% |
Our debt portfolio displayed the following characteristics of each of our investments(1)(2) unless otherwise noted:
|
|
As of |
|
|||||
|
|
December 31, 2025 |
|
|
December 31, 2024 |
|
||
Number of portfolio companies |
|
|
227 |
|
|
|
208 |
|
Number of new investment commitments in portfolio companies |
|
|
44 |
|
|
|
60 |
|
Number of portfolio companies exited or fully repaid |
|
|
25 |
|
|
|
24 |
|
Percentage of performing debt bearing a floating rate, at fair value |
|
|
99.6 |
% |
|
|
99.6 |
% |
Percentage of performing debt bearing a fixed rate, at fair value |
|
|
0.4 |
% |
|
|
0.4 |
% |
Weighted average yield on debt and income producing investments, at cost(3) |
|
|
9.3 |
% |
|
|
10.4 |
% |
Weighted average yield on debt and income producing investments, at fair value(3) |
|
|
9.5 |
% |
|
|
10.5 |
% |
Weighted average yield on total portfolio, at cost(4) |
|
|
9.2 |
% |
|
|
10.3 |
% |
Weighted average yield on total portfolio, at fair value(4) |
|
|
9.4 |
% |
|
|
10.4 |
% |
Weighted average 12-month EBITDA |
|
$ |
155.3 |
|
|
$ |
147.7 |
|
Median 12-month EBITDA |
|
|
90.3 |
|
|
|
86.3 |
|
Weighted average net leverage through tranche(5) |
|
5.9x |
|
|
5.8x |
|
||
Weighted average interest coverage(6) |
|
1.7x |
|
|
1.6x |
|
||
Weighted average loan to value(7) |
|
|
39.9 |
% |
|
|
39.7 |
% |
Percentage of debt investments with one or more financial covenants |
|
|
54.1 |
% |
|
|
64.6 |
% |
Percentage of our debt investments that are sponsor backed |
|
|
98.9 |
% |
|
|
99.7 |
% |
Percentage of loans and other debt in support of LBOs and acquisitions |
|
|
69.9 |
% |
|
|
69.2 |
% |
Percentage of our debt portfolio subject to business cycle volatility |
|
|
4.7 |
% |
|
|
4.8 |
% |
Average position size of our investments |
|
$ |
16.6 |
|
|
$ |
18.2 |
|
74
Table of Contents
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, 2025 |
|
|
December 31, 2024 |
|
|
December 31, 2023 |
|
|||
New investments committed |
|
|
|
|
|
|
|
|
|
|||
Gross principal balance(1) |
|
$ |
734,495 |
|
|
$ |
1,549,656 |
|
|
$ |
667,870 |
|
Less: Syndications |
|
|
22,547 |
|
|
|
— |
|
|
|
40,751 |
|
Net new investments committed |
|
$ |
711,948 |
|
|
$ |
1,549,656 |
|
|
$ |
627,119 |
|
Investments, at cost |
|
|
|
|
|
|
|
|
|
|||
Investments, beginning of period |
|
$ |
3,813,127 |
|
|
$ |
3,226,775 |
|
|
$ |
2,939,646 |
|
New investments purchased |
|
|
771,395 |
|
|
|
1,232,384 |
|
|
|
632,105 |
|
Net accretion of discount on investments |
|
|
15,688 |
|
|
|
14,866 |
|
|
|
11,314 |
|
Payment-in-kind |
|
|
18,178 |
|
|
|
13,073 |
|
|
|
6,069 |
|
Net realized gain (loss) on investments |
|
|
(7,480 |
) |
|
|
(16,480 |
) |
|
|
118 |
|
Investments sold or repaid |
|
|
(771,869 |
) |
|
|
(657,491 |
) |
|
|
(362,476 |
) |
Investments, end of period |
|
$ |
3,839,039 |
|
|
$ |
3,813,127 |
|
|
$ |
3,226,776 |
|
Amount of investments funded, at principal |
|
|
|
|
|
|
|
|
|
|||
First lien debt investments |
|
$ |
777,954 |
|
|
$ |
1,239,271 |
|
|
$ |
637,946 |
|
Second lien debt investments |
|
|
— |
|
|
|
— |
|
|
|
8,588 |
|
Other debt investments |
|
|
— |
|
|
|
5,887 |
|
|
|
1,812 |
|
Equity(2) |
|
|
1,211 |
|
|
|
2,163 |
|
|
|
— |
|
Total |
|
$ |
779,165 |
|
|
$ |
1,247,321 |
|
|
$ |
648,346 |
|
Amount of investments sold/fully repaid, at principal |
|
|
|
|
|
|
|
|
|
|||
First lien debt investments |
|
$ |
664,932 |
|
|
$ |
488,183 |
|
|
$ |
239,383 |
|
Second lien debt investments |
|
|
— |
|
|
|
57,950 |
|
|
|
— |
|
Equity(2) |
|
|
4,106 |
|
|
|
1,481 |
|
|
|
— |
|
Total |
|
$ |
669,038 |
|
|
$ |
547,614 |
|
|
$ |
239,383 |
|
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 present are generally favorable, which trends or factors 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 due to 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.
75
Table of Contents
The distribution of our portfolio on the Investment Adviser’s Internal Risk Rating System is as follows:
|
|
December 31, 2025 |
|
|
December 31, 2024 |
|
||||||||||
|
|
Fair Value |
|
|
% of Total |
|
|
Fair Value |
|
|
% of Total |
|
||||
Risk rating 1 |
|
$ |
73,976 |
|
|
|
2.0 |
% |
|
$ |
62,631 |
|
|
|
1.7 |
% |
Risk rating 2 |
|
|
3,535,074 |
|
|
|
93.7 |
|
|
|
3,662,337 |
|
|
|
96.6 |
|
Risk rating 3 |
|
|
125,908 |
|
|
|
3.3 |
|
|
|
61,597 |
|
|
|
1.6 |
|
Risk rating 4 |
|
|
36,588 |
|
|
|
1.0 |
|
|
|
4,929 |
|
|
|
0.1 |
|
Total |
|
$ |
3,771,546 |
|
|
|
100.0 |
% |
|
$ |
3,791,494 |
|
|
|
100.0 |
% |
The table below presents the amortized cost of our performing and non-accrual investments as of the following periods:
|
|
December 31, 2025 |
|
|
December 31, 2024 |
|
||||||||||
|
|
Amortized Cost |
|
|
% of Total |
|
|
Amortized Cost |
|
|
% of Total |
|
||||
Performing |
|
$ |
3,778,647 |
|
|
|
98.4 |
% |
|
$ |
3,805,010 |
|
|
|
99.8 |
% |
Non-accrual(1) |
|
|
60,392 |
|
|
1.6 |
|
|
|
8,117 |
|
|
0.2 |
|
||
Total |
|
$ |
3,839,039 |
|
|
|
100.0 |
% |
|
$ |
3,813,127 |
|
|
|
100.0 |
% |
Investments are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected in full. Accrued interest is reversed when an investment 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 investment is placed on non-accrual status. We may determine to not place an investment on non-accrual status if the investment has sufficient collateral value and is in the process of collection.
CONSOLIDATED RESULTS OF OPERATIONS
The following table represents our operating results:
|
|
For the Year Ended |
|
|||||
|
|
December 31, 2025 |
|
|
December 31, 2024 |
|
||
Total investment income |
|
$ |
397,287 |
|
|
$ |
416,075 |
|
Less: Net expenses |
|
|
218,447 |
|
|
|
193,403 |
|
Net investment income (loss) before taxes |
|
|
178,840 |
|
|
|
222,672 |
|
Less: Excise tax expense |
|
|
2,814 |
|
|
|
2,437 |
|
Net investment income (loss) after taxes |
|
|
176,026 |
|
|
|
220,235 |
|
Net change in unrealized appreciation (depreciation) |
|
|
(46,510 |
) |
|
|
11,796 |
|
Net realized gain (loss) |
|
|
(7,422 |
) |
|
|
(16,467 |
) |
Net increase (decrease) in net assets resulting from operations |
|
$ |
122,094 |
|
|
$ |
215,564 |
|
Investment Income
Investment income was as follows:
|
|
For the Year Ended |
|
|||||
|
|
December 31, 2025 |
|
|
December 31, 2024 |
|
||
Investment income: |
|
|
|
|
|
|
||
Interest income |
|
$ |
371,961 |
|
|
$ |
396,421 |
|
Payment-in-kind |
|
|
15,873 |
|
|
|
10,709 |
|
Dividend income |
|
|
2,895 |
|
|
|
2,591 |
|
Other income |
|
|
6,558 |
|
|
|
6,354 |
|
Total investment income |
|
$ |
397,287 |
|
|
$ |
416,075 |
|
In the table above, total investment income decreased from $416,075 for the year ended December 31, 2024 to $397,287 for the year ended December 31, 2025. The decrease was primarily driven by declining base rates and repricings on our existing portfolio. Our weighted average yield at cost decreased to 9.3% as of December 31, 2025 from 10.4% as of December 31, 2024.
76
Table of Contents
Additionally, for the year ended December 31, 2025, we recorded $5,967 of non-recurring interest income (e.g., prepayment premiums, accelerated accretion of upfront loan origination fees and unamortized discounts, etc.) as compared to $5,036 for the same periods in the prior year, primarily as a result of prepayments.
Expenses
Expenses were as follows:
|
|
For the Year Ended |
|
|||||
|
|
December 31, 2025 |
|
|
December 31, 2024 |
|
||
Expenses: |
|
|
|
|
|
|
||
Interest and other financing expenses |
|
$ |
136,132 |
|
|
$ |
122,928 |
|
Management fees |
|
|
38,466 |
|
|
|
35,415 |
|
Income based incentive fees |
|
|
35,685 |
|
|
|
43,467 |
|
Professional fees |
|
|
8,017 |
|
|
|
6,718 |
|
Directors’ fees |
|
|
517 |
|
|
|
533 |
|
Administrative service fees |
|
|
287 |
|
|
|
216 |
|
General and other expenses |
|
|
359 |
|
|
|
97 |
|
Total expenses |
|
|
219,463 |
|
|
|
209,374 |
|
Management fees waiver |
|
|
(641 |
) |
|
|
(9,936 |
) |
Incentive fees waiver |
|
|
(375 |
) |
|
|
(6,035 |
) |
Net expenses |
|
$ |
218,447 |
|
|
$ |
193,403 |
|
Excise tax expense |
|
$ |
2,814 |
|
|
$ |
2,437 |
|
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, increased to $136,132 for the year ended December 31, 2025 from $122,928 for the year ended December 31, 2024. The increase was primarily due to higher average borrowings outstanding for the year ended December 31, 2025. For the year ended December 31, 2025 and December 31, 2024, average borrowings outstanding were $2,045,024 and $1,681,358, respectively, which was offset by the reduction of our average interest rate which decreased from 6.46% to 5.95%, for the year ended December 31, 2024 and December 31, 2025, respectively.
Management Fees
Base management fees, net of waiver, were $37,825 for the year ended December 31, 2025 and $25,479 for the year ended December 31, 2024, respectively. The increase was primarily due to an increase in average gross assets. In addition, the management fee waiver expired on January 24, 2025.
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 $35,310 for the year ended December 31, 2025 and $37,432 for the year ended December 31, 2024, respectively. The decrease was primarily related to lower pre-incentive fee net investment income primarily related to lower base rates on our assets. In addition, the incentive fee waiver expired on January 24, 2025.
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.
77
Table of Contents
Net Realized Gain (Loss) and Unrealized Gain (Loss) on Investments
|
|
For the Year Ended |
|
|||||
|
|
December 31, 2025 |
|
|
December 31, 2024 |
|
||
Net realized and unrealized gains (losses) on investment transactions: |
|
|
|
|
|
|
||
Net realized gain (loss): |
|
|
|
|
|
|
||
Net realized gain (loss) on investments |
|
$ |
(7,480 |
) |
|
$ |
(16,480 |
) |
Foreign currency and other transactions |
|
|
58 |
|
|
|
13 |
|
Net realized gain (loss) |
|
|
(7,422 |
) |
|
|
(16,467 |
) |
Net change in unrealized appreciation (depreciation): |
|
|
|
|
|
|
||
Net change in unrealized appreciation (depreciation) on investments |
|
|
(46,588 |
) |
|
|
11,904 |
|
Foreign currency translations and other transactions |
|
|
78 |
|
|
|
(108 |
) |
Net unrealized appreciation (depreciation) |
|
|
(46,510 |
) |
|
|
11,796 |
|
Net realized and unrealized gains (losses) |
|
$ |
(53,932 |
) |
|
$ |
(4,671 |
) |
For the year ended December 31, 2025, net realized losses on investments were $7,480. For the year ended December 31, 2024, net realized losses were $16,480. Net realized losses on investments was primarily due to the sale and/or restructuring of certain portfolio companies.
For the year ended December 31, 2025, net change in unrealized depreciation on our investments of $46,588 was primarily the result of the changes in spreads in the secondary markets as well as financial performance in certain portfolio companies. For the year ended December 31, 2024, net change in unrealized appreciation on our investments of $11,904 was primarily driven by changes in spreads in the primary and secondary markets.
For the years ended December 31, 2024 and December 31, 2023
A comparison of the fiscal years ended December 31, 2024 and December 31, 2023 can be found in our Form 10-K for the fiscal year ended December 31, 2024 within “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”, which is incorporated herein by reference.
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, net proceeds of our unsecured debt issuances and debt securitization and through cash flows from operations, including investment sales and repayments as well as income earned on investments. Details of our credit facilities, unsecured debt issuances and debt securitizations 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, 2025, we had approximately $90,590 of unrestricted cash, cash equivalents, and short term investments (including investments in money market funds), which, taken together with our approximately $249,000 and $1,132,072 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, 2025, we believed we had adequate financial resources to satisfy unfunded portfolio company commitments of $497,340.
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.
At-the-market (“ATM”) Offering
We may, from time to time, issue and sell shares of our common stock through public or at-the-market (“ATM”) offerings. On March 28, 2025, we entered into equity distribution agreements (the “Equity Distribution Agreements”) by and among us, the Adviser, and each of Truist Securities, Inc., Keefe, Bruyette & Woods, Inc., RBC Capital Markets, LLC, Raymond James & Associates, Inc. and Regions Securities LLC.
For further details regarding the Equity Distribution Agreements, see Note 8 “Net Assets” to our consolidated financial statements included in this Report.
78
Table of Contents
For the year ended December 31, 2025 and December 31, 2024, there were no shares issued through ATM offerings.
Distributions and Dividend Reinvestment
We adopted an “opt out” DRIP effective as of January 26, 2024, which was later amended effective as of December 7, 2024. As a result, our stockholders who have not “opted out” of the DRIP will have their cash dividends or distributions (net of applicable withholding tax) 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 summarizes our distributions declared and payable for the year ended December 31, 2025 and December 31, 2024, respectively:
Date Declared |
|
Record |
|
Payment |
|
Per Share |
|
|
Shares |
|
|
||
For the year ended December 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
||
February 27, 2025 |
|
March 31, 2025 |
|
April 25, 2025 |
|
$ |
0.50 |
|
|
|
438,274 |
|
(1) |
May 08, 2025 |
|
June 30, 2025 |
|
July 25, 2025 |
|
|
0.50 |
|
|
|
400,773 |
|
(1) |
August 05, 2025 |
|
September 30, 2025 |
|
October 24, 2025 |
|
|
0.50 |
|
|
|
434,456 |
|
(1) |
November 04, 2025 |
|
December 31, 2025 |
|
January 23, 2026 |
|
|
0.50 |
|
|
|
415,727 |
|
(1) |
Total Distribution |
|
|
|
|
|
$ |
2.00 |
|
|
|
1,689,230 |
|
|
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 |
|
(1) |
January 11, 2024 |
|
August 05, 2024 |
|
October 25, 2024 |
|
|
0.10 |
|
|
|
111,159 |
|
(1)(2) |
August 06, 2024 |
|
September 30, 2024 |
|
October 25, 2024 |
|
|
0.50 |
|
|
|
546,673 |
|
(1) |
January 11, 2024 |
|
November 04, 2024 |
|
January 24, 2025 |
|
|
0.10 |
|
|
|
101,485 |
|
(1)(2) |
November 04, 2024 |
|
December 31, 2024 |
|
January 24, 2025 |
|
|
0.50 |
|
|
|
473,635 |
|
(1) |
Total Distributions |
|
|
|
|
|
$ |
2.20 |
|
|
|
2,299,108 |
|
|
Share Repurchase Program
In January 2024, our Board authorized a share repurchase program 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 all applicable securities laws and regulations, which was further amended by our Board on February 27, 2025.
For additional information, see “—Recent Developments.”
The following table summarizes the shares repurchased under our share repurchase program during the year ended December 31, 2025:
79
Table of Contents
Period |
|
Total Number |
|
|
Average Price |
|
|
Total Number of |
|
|
Approximate Dollar |
|
||||
January 1 - January 31, 2025 |
|
|
11,401 |
|
|
$ |
20.31 |
|
|
|
11,401 |
|
|
$ |
81.9 |
|
February 1 - February 27, 2025 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
81.9 |
|
February 28, 2025 |
|
|
20,789 |
|
|
|
20.24 |
|
|
|
20,789 |
|
|
|
99.6 |
|
March 1 - March 31, 2025 |
|
|
459,142 |
|
|
|
20.38 |
|
|
|
459,142 |
|
|
|
90.2 |
|
April 1 - April 30, 2025 |
|
|
753,096 |
|
|
|
18.79 |
|
|
|
753,096 |
|
|
|
76.1 |
|
May 1 - May 31, 2025 |
|
|
277,558 |
|
|
|
19.22 |
|
|
|
277,558 |
|
|
|
70.7 |
|
June 1 - June 30, 2025 |
|
|
26,473 |
|
|
|
19.54 |
|
|
|
26,473 |
|
|
|
70.2 |
|
July 1 - July 31, 2025 |
|
|
93,507 |
|
|
|
18.99 |
|
|
|
93,507 |
|
|
|
68.4 |
|
August 1 - August 31, 2025 |
|
|
57,910 |
|
|
|
18.45 |
|
|
|
57,910 |
|
|
|
67.4 |
|
September 1 - September 30, 2025 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
67.4 |
|
October 1 - October 31, 2025 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
67.4 |
|
November 1 - November 30, 2025 |
|
|
204,300 |
|
|
|
16.79 |
|
|
|
204,300 |
|
|
|
64.1 |
|
December 1- December 31, 2025 |
|
|
330,608 |
|
|
|
17.18 |
|
|
|
330,608 |
|
|
|
58.3 |
|
Total Repurchases |
|
|
2,234,784 |
|
|
|
|
|
|
2,234,784 |
|
|
|
|
||
The following table summarizes the shares repurchased under our share repurchase program during the year ended December 31, 2024:
Period |
|
Total |
|
|
Average Price |
|
|
Total Number of |
|
|
Approximate Dollar |
|
||||
January 1 - June 30, 2024 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
100.0 |
|
July 1 - July 31, 2024 |
|
|
39,344 |
|
|
|
19.99 |
|
|
|
39,344 |
|
|
|
99.2 |
|
August 1 - August 31, 2024 |
|
|
217,796 |
|
|
|
20.10 |
|
|
|
217,796 |
|
|
|
94.8 |
|
September 1 - September 30, 2024 |
|
|
172,513 |
|
|
|
20.04 |
|
|
|
172,513 |
|
|
|
91.4 |
|
October 1 - October 31, 2024 |
|
|
187,607 |
|
|
|
19.99 |
|
|
|
187,607 |
|
|
|
87.6 |
|
November 1 - November 30, 2024 |
|
|
307,336 |
|
|
|
20.34 |
|
|
|
307,336 |
|
|
|
81.9 |
|
December 1 - December 31, 2024 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
81.9 |
|
Total Repurchases |
|
|
924,596 |
|
|
|
|
|
|
924,596 |
|
|
|
|
||
Debt
Our outstanding debt obligations were as follows (each as defined in Note 6. “Debt” in the notes to the accompanying consolidated financial statements):
|
|
December 31, 2025 |
|
|
December 31, 2024 |
|
||||||||||||||||||
|
|
Aggregate Principal Committed |
|
|
Outstanding Principal |
|
|
Unused Portion |
|
|
Aggregate Principal Committed |
|
|
Outstanding Principal |
|
|
Unused Portion |
|
||||||
BNP Funding Facility |
|
$ |
600,000 |
|
|
$ |
351,000 |
|
|
$ |
249,000 |
|
|
$ |
600,000 |
|
|
$ |
316,000 |
|
|
$ |
284,000 |
|
Truist Credit Facility(1) |
|
|
1,450,000 |
|
|
|
308,153 |
|
|
|
1,132,072 |
|
|
|
1,300,000 |
|
|
|
617,401 |
|
|
|
680,770 |
|
CLO 2025-1 Issued Debt(2) |
|
|
309,000 |
|
|
|
309,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
2027 Notes(3) |
|
|
425,000 |
|
|
|
425,000 |
|
|
|
— |
|
|
|
425,000 |
|
|
|
425,000 |
|
|
|
— |
|
2025 Notes(3)(4) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
275,000 |
|
|
|
275,000 |
|
|
|
— |
|
2029 Notes(3) |
|
|
350,000 |
|
|
|
350,000 |
|
|
|
— |
|
|
|
350,000 |
|
|
|
350,000 |
|
|
|
— |
|
2030 Notes(3) |
|
|
350,000 |
|
|
|
350,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
3,484,000 |
|
|
$ |
2,093,153 |
|
|
$ |
1,381,072 |
|
|
$ |
2,950,000 |
|
|
$ |
1,983,401 |
|
|
$ |
964,770 |
|
80
Table of Contents
For additional information on our debt obligations, see Note 6 “Debt” to our consolidated financial statements included in this Report.
RECENT DEVELOPMENTS
Capstone Lending LLC, a Delaware limited liability company, formed as a joint venture (“Capstone Lending”) between us and an institutional partner (the “JV Partner”), commenced operations on January 2, 2026 and operates under a limited liability company agreement. Capstone Lending's principal purpose is to make investments, primarily in senior secured loans issued by middle-market companies. We and the JV Partner each agreed to contribute up to $200,000 and $50,000, respectively, to Capstone Lending. We and the JV Partner have equal control of Capstone Lending's investment decisions and generally all other decisions in respect of Capstone Lending must be approved by Capstone Lending's investment committee or board of directors, each of which consists of an equal number of representatives of us and the JV Partner.
We and the JV Partner initially contributed $94,532 and $23,633, respectively, of equity to Capstone Lending. On February 19, 2026, Capstone Lending acquired a portfolio of 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 with aggregate principal of $372.8 million.
On February 19, 2026, Capstone Lending entered into a senior secured revolving credit facility (the “JV Credit Facility”) with a third party lender, providing for total commitments of up to $500,000. The JV Credit Facility is secured by substantially all of the assets of Capstone Lending.
On February 26, 2026, our Board declared a distribution of $0.45 per share, which is payable on April 24, 2026 to shareholders of record as of March 31, 2026.
On February 26, 2026, our Board approved a share repurchase program under which we can repurchase up to $100 million in the aggregate of our Common Stock at prices below our net asset value per share over a 24-month period, in accordance with all applicable securities laws and regulations. We have in the past, and could in the future, enter into a plan to repurchase shares of our Common Stock pursuant to the Program in a manner intended to comply with the requirements of Rule 10b5-1 under the Exchange Act. The Program is discretionary and whether purchases will be made under the Program and how much will be purchased at any time is uncertain and dependent on prevailing market prices and trading volumes, all of which we cannot predict.
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 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):
See Note 3 “Related Party Transactions” to our consolidated financial statements included in this Report.
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 our Valuation
81
Table of Contents
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, international conflicts, trade policies and tariffs, government shutdowns, 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 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.” and — "Part I, Item 1A. Risk Factors — General Risk Factors — 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” of this Report.
Interest Rate Risk
We are subject to financial market risks, and 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, 2025, approximately 99.6% of our debt investments were at floating rates. Based on our Consolidated Statements of Assets and Liabilities as of December 31, 2025, 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, 2025) (dollar amounts in thousands):
Basis Point Change - Interest Rates |
|
Interest Income |
|
|
Interest Expense(1) |
|
|
Net Income |
|
|||
Up 300 basis points |
|
$ |
112,184 |
|
|
$ |
(40,775 |
) |
|
$ |
71,409 |
|
Up 200 basis points |
|
$ |
74,790 |
|
|
$ |
(27,183 |
) |
|
$ |
47,607 |
|
Up 100 basis points |
|
$ |
37,395 |
|
|
$ |
(13,592 |
) |
|
$ |
23,803 |
|
Up 25 basis points |
|
$ |
9,349 |
|
|
$ |
(3,398 |
) |
|
$ |
5,951 |
|
Down 25 basis points |
|
$ |
(9,349 |
) |
|
$ |
3,398 |
|
|
$ |
(5,951 |
) |
Down 100 basis points |
|
$ |
(37,395 |
) |
|
$ |
13,592 |
|
|
$ |
(23,803 |
) |
Down 200 basis points |
|
$ |
(74,746 |
) |
|
$ |
27,183 |
|
|
$ |
(47,563 |
) |
Down 300 basis points |
|
$ |
(108,647 |
) |
|
$ |
40,775 |
|
|
$ |
(67,872 |
) |
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.
82
Table of Contents
Item 8. Consolidated Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm |
|
84 |
Consolidated Statements of Assets and Liabilities |
|
87 |
Consolidated Statements of Operations |
|
88 |
Consolidated Statements of Changes in Net Assets |
|
89 |
Consolidated Statements of Cash Flows |
|
90 |
Consolidated Schedules of Investments |
|
92 |
Notes to the Consolidated Financial Statements |
|
141 |
83
Table of Contents
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 schedule of investments, as of December 31, 2025 and 2024, the related consolidated statements of operations, changes in net assets and cash flows for each of the three years in the period then ended, financial highlights for each of the five years in the period then ended, and the related notes (collectively referred to as the “financial statements and financial highlights”). In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, 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, 2025, 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 26, 2026, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's 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 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 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 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 financial statements and financial highlights. Our procedures included confirmation of investments owned as of December 31, 2025 and 2024, 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.
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Table of Contents
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:
/s/Deloitte & Touche LLP
New York, NY
February 26, 2026
We have served as the Company's auditor since 2019.
85
Table of Contents
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, 2025, 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, 2025, 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, 2025, of the Company and our report dated February 26, 2026, 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 26, 2026
86
Table of Contents
Morgan Stanley Direct Lending Fund
Consolidated Statements of Assets and Liabilities
(In thousands, except share and per share amounts)
|
|
As of |
|
|||||
|
|
December 31, 2025 |
|
|
December 31, 2024 |
|
||
|
|
(Audited) |
|
|
(Audited) |
|
||
Assets |
|
|
|
|
|
|
||
Non-controlled/non-affiliated investments, at fair value (amortized cost of $ |
|
$ |
|
|
$ |
|
||
Non-controlled/affiliated investments, at fair value (amortized cost of $ |
|
|
|
|
|
|
||
Total investments, at fair value (cost of $ |
|
|
|
|
|
|
||
Cash and cash equivalents (restricted cash of $ |
|
|
|
|
|
|
||
Investments in unaffiliated money market fund (cost of $ |
|
|
|
|
|
|
||
Deferred financing costs |
|
|
|
|
|
|
||
Interest and dividend receivable from non-controlled/non-affiliated investments |
|
|
|
|
|
|
||
Interest receivable from non-controlled/affiliated investments |
|
|
|
|
|
|
||
Receivable for investments sold/repaid |
|
|
|
|
|
|
||
Prepaid expenses and other assets |
|
|
|
|
|
|
||
Total assets |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Liabilities |
|
|
|
|
|
|
||
Debt (net of unamortized debt issuance costs of $ |
|
|
|
|
|
|
||
Payable for investment purchased |
|
|
|
|
|
|
||
Payable to affiliates (Note 3) |
|
|
|
|
|
|
||
Dividends payable |
|
|
|
|
|
|
||
Management fees payable |
|
|
|
|
|
|
||
Income based incentive fees payable |
|
|
|
|
|
|
||
Interest payable |
|
|
|
|
|
|
||
Accrued expenses and other liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
||
Net assets |
|
|
|
|
|
|
||
Preferred stock, $ |
|
|
|
|
|
|
||
Common stock, par value $ |
|
|
|
|
|
|
||
Paid-in capital in excess of par value |
|
|
|
|
|
|
||
Total distributable earnings (loss) |
|
|
( |
) |
|
|
|
|
Total net assets |
|
$ |
|
|
$ |
|
||
Total liabilities and net assets |
|
$ |
|
|
$ |
|
||
Net asset value per share |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these audited consolidated financial statements
87
Table of Contents
Morgan Stanley Direct Lending Fund
Consolidated Statements of Operations
(In thousands, except share and per share amounts)
|
|
For the Year Ended |
|
|||||||||
|
|
December 31, 2025 |
|
|
December 31, 2024 |
|
|
December 31, 2023 |
|
|||
Investment Income: |
|
|
|
|
|
|
|
|
|
|||
From non-controlled/non-affiliated investments: |
|
|
|
|
|
|
|
|
|
|||
Interest income |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Payment-in-kind income |
|
|
|
|
|
|
|
|
|
|||
Dividend income |
|
|
|
|
|
|
|
|
|
|||
Other income |
|
|
|
|
|
|
|
|
|
|||
From non-controlled/affiliated investments: |
|
|
|
|
|
|
|
|
|
|||
Interest income |
|
|
|
|
|
|
|
|
|
|||
Payment-in-kind income |
|
|
|
|
|
|
|
|
|
|||
Dividend income |
|
|
|
|
|
|
|
|
|
|||
Total investment income |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Expenses: |
|
|
|
|
|
|
|
|
|
|||
Interest and other financing expenses |
|
|
|
|
|
|
|
|
|
|||
Management fees |
|
|
|
|
|
|
|
|
|
|||
Income based incentive fees |
|
|
|
|
|
|
|
|
|
|||
Professional fees |
|
|
|
|
|
|
|
|
|
|||
Directors’ fees |
|
|
|
|
|
|
|
|
|
|||
Administrative service fees |
|
|
|
|
|
|
|
|
|
|||
General and other expenses |
|
|
|
|
|
|
|
|
|
|||
Total expenses |
|
|
|
|
|
|
|
|
|
|||
Management fees waiver (Note 3) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Incentive fees waiver (Note 3) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Net expenses |
|
|
|
|
|
|
|
|
|
|||
Net investment income (loss) before taxes |
|
|
|
|
|
|
|
|
|
|||
Excise tax expense |
|
|
|
|
|
|
|
|
|
|||
Net investment income (loss) after taxes |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Net realized and unrealized gain (loss): |
|
|
|
|
|
|
|
|
|
|||
Realized gain (loss): |
|
|
|
|
|
|
|
|
|
|||
Net realized gain (loss) on non-controlled/non-affiliated investments |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Foreign currency and other transactions |
|
|
|
|
|
|
|
|
|
|||
Net realized gain (loss) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Net change in unrealized appreciation (depreciation): |
|
|
|
|
|
|
|
|
|
|||
Net change in unrealized appreciation (depreciation) on non-controlled/non-affiliated investments |
|
|
( |
) |
|
|
|
|
|
|
||
Net change in unrealized appreciation (depreciation) on non-controlled/affiliated investments |
|
|
( |
) |
|
|
|
|
|
|
||
Translation of assets and liabilities in foreign currencies |
|
|
|
|
|
( |
) |
|
|
|
||
Net unrealized appreciation (depreciation) |
|
|
( |
) |
|
|
|
|
|
|
||
Net realized and unrealized gain (loss) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Net increase (decrease) in net assets resulting from operations |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Earnings per share (basic and diluted) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Weighted average shares outstanding (basic and diluted) |
|
|
|
|
|
|
|
|
|
|||
The accompanying notes are an integral part of these audited consolidated financial statements
88
Table of Contents
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, 2025 |
|
|
December 31, 2024 |
|
|
December 31, 2023 |
|
|||
Net assets at the beginning of period |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Increase (decrease) in net assets resulting from operations: |
|
|
|
|
|
|
|
|
|
|||
Net investment income (loss) |
|
|
|
|
|
|
|
|
|
|||
Net realized gain (loss) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Net change in unrealized appreciation (depreciation) |
|
|
( |
) |
|
|
|
|
|
|
||
Net increase (decrease) in net assets resulting from operations |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Distributions to stockholders from: |
|
|
|
|
|
|
|
|
|
|||
Distributable earnings |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total distributions to stockholders |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|||
Capital transactions: |
|
|
|
|
|
|
|
|
|
|||
Issuance of common stock, net of underwriting and offering costs(1) |
|
|
( |
) |
|
|
|
|
|
|
||
Reinvestment of dividends |
|
|
|
|
|
|
|
|
|
|||
Repurchase of common stock |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Net increase (decrease) in net assets resulting from capital transactions |
|
|
( |
) |
|
|
|
|
|
|
||
Total increase (decrease) in net assets |
|
|
( |
) |
|
|
|
|
|
|
||
Net assets at end of period |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Dividends per share |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The accompanying notes are an integral part of these audited consolidated financial statements
89
Table of Contents
Morgan Stanley Direct Lending Fund
Consolidated Statements of Cash Flows
(In thousands)
|
|
For the Year Ended |
|
|||||||||
|
|
December 31, 2025 |
|
|
December 31, 2024 |
|
|
December 31, 2023 |
|
|||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|||
Net increase (decrease) in net assets resulting from operations |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Adjustments to reconcile net increase (decrease) in net assets resulting from |
|
|
|
|
|
|
|
|
|
|||
Net unrealized (appreciation) depreciation on investments |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net unrealized (appreciation) depreciation on translation of assets and |
|
|
( |
) |
|
|
|
|
|
|
||
Net unrealized (appreciation) depreciation on interest rate swap attributed to |
|
|
|
|
|
|
|
|
|
|||
Net realized (gain) loss on investments |
|
|
|
|
|
|
|
|
( |
) |
||
Net realized (gain) loss on foreign currency and other transactions |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Investments in unaffiliated money market fund, net |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Net accretion of discount and amortization of premium on investments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Payment-in-kind interest and dividend capitalized |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Amortization of deferred financing costs |
|
|
|
|
|
|
|
|
|
|||
Amortization of debt issuance costs and original issuance discount on |
|
|
|
|
|
|
|
|
|
|||
Purchases of investments and change in payable for investments purchased |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Proceeds from sale of investments and principal repayments and change in |
|
|
|
|
|
|
|
|
|
|||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|||
(Increase) decrease in interest and dividend receivable from non- |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
(Increase) decrease in interest and dividend receivable from non- |
|
|
( |
) |
|
|
|
|
|
|
||
(Increase) decrease in prepaid expenses and other assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
(Decrease) increase in payable to affiliates |
|
|
|
|
|
( |
) |
|
|
|
||
(Decrease) increase in management fees payable |
|
|
|
|
|
|
|
|
|
|||
(Decrease) increase in incentive fees payable |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
(Decrease) increase in interest payable |
|
|
( |
) |
|
|
|
|
|
|
||
(Decrease) increase in accrued expenses and other liabilities |
|
|
( |
) |
|
|
|
|
|
|
||
Net cash provided by (used in) operating activities |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|||
Borrowings on debt |
|
|
|
|
|
|
|
|
|
|||
Repayments on debt |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Deferred financing costs paid |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Debt issuance costs paid |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Dividends paid in cash |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Proceeds from issuance of common stock, net of underwriting & offering costs |
|
|
( |
) |
|
|
|
|
|
|
||
Repurchases of common stock |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
( |
) |
|
|
|
|
|
|
||
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Effect of foreign exchange rate changes on cash |
|
|
|
|
|
|
|
|
|
|||
Cash, cash equivalents and restricted cash, beginning of period |
|
|
|
|
|
|
|
|
|
|||
Cash, cash equivalents and restricted cash, end of period |
|
$ |
|
|
$ |
|
|
$ |
|
|||
90
Table of Contents
|
|
For the Year Ended |
|
|||||||||
|
|
December 31, 2025 |
|
|
December 31, 2024 |
|
|
December 31, 2023 |
|
|||
Supplemental information and non-cash activities: |
|
|
|
|
|
|
|
|
|
|||
Excise tax paid |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Interest expense paid |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Reinvestment of dividends |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Dividends payable |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Non-cash purchases of investments |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
Non-cash sales of investments |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Subscriptions receivable |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The accompanying notes are an integral part of these audited consolidated financial statements
91
Table of Contents
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments
December 31, 2025
(In thousands, except share amounts)
Investments (1) (2) |
|
Footnotes |
|
Investment |
|
Reference Rate and Spread |
|
Interest |
|
Maturity |
|
Par Amount/ |
|
|
Cost(5) |
|
|
Fair Value |
|
|
Percentage of |
|
||||||
Debt Investments - non-controlled/non-affiliated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Aerospace & Defense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
GB Eagle Buyer, Inc. |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
% |
||||||||
GB Eagle Buyer, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||||||
GB Eagle Buyer, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||||||
Jonathan Acquisition Company |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Jonathan Acquisition Company |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||||||
ManTech International CP |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
ManTech International CP |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
ManTech International CP |
|
(6) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Two Six Labs, LLC |
|
(6) (7) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Two Six Labs, LLC |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Two Six Labs, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Air Freight & Logistics |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
AGI-CFI Holdings, Inc. |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
RoadOne IntermodaLogistics |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
RoadOne IntermodaLogistics |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
RoadOne IntermodaLogistics |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Automobile Components |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Continental Battery Company |
|
(6) (8) (11) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
OEConnection, LLC |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
OEConnection, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
OEConnection, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
PAI Holdco, Inc. |
|
(6) (8) |
|
Second Lien Debt |
|
|
|
|
|
|
|
|
|
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||||||||
Randy's Holdings, Inc. |
|
(6) (7) (8) (18) |
|
First Lien Debt |
|
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||||||||
Randy's Holdings, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
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|
||||||||
Randy's Holdings, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
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|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Sonny's Enterprises, LLC |
|
(6) (7) (8) |
|
First Lien Debt |
|
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|
||||||||
Sonny's Enterprises, LLC |
|
(6) (8) |
|
First Lien Debt |
|
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|
||||||||
Spectrum Automotive Holdings Corp. |
|
(6) (7) (9) (18) |
|
First Lien Debt |
|
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|
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|
|
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|
||||||||
Spectrum Automotive Holdings Corp. |
|
(6) (9) (16) |
|
First Lien Debt |
|
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|
|
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|
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|
|
||||||||
Spectrum Automotive Holdings Corp. |
|
(6) (9) (16) |
|
First Lien Debt |
|
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|
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( |
) |
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|||||||
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||||
Automobiles |
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|
||||
COP Collisionright Parent, LLC |
|
(6) (7) (8) (18) |
|
First Lien Debt |
|
|
|
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|
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|
||||||||
COP Collisionright Parent, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
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|
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|
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|
||||||||
COP Collisionright Parent, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
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|
||||||||
Drivecentric Holdings, LLC |
|
(6) (9) |
|
First Lien Debt |
|
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|
||||||||
Drivecentric Holdings, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
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|
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|
( |
) |
|
|
|
|
|
|
|||||||
Drivecentric Holdings, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
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|
( |
) |
|
|
|
|
|
|
|||||||
Table of Contents
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2025
(In thousands, except share amounts)
Investments (1) (2) |
|
Footnotes |
|
Investment |
|
Reference Rate and Spread |
|
Interest |
|
Maturity |
|
Par Amount/ |
|
|
Cost(5) |
|
|
Fair Value |
|
|
Percentage of |
|
||||||
LeadVenture, Inc. |
|
(6) (7) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
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|
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|
||||||||
LeadVenture, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
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|
|
|
|
||||||||
LeadVenture, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Turbo Buyer, Inc. |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Turbo Buyer, Inc. |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Vehlo Purchaser, LLC |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Vehlo Purchaser, LLC |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Vehlo Purchaser, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
|
|
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|
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|
|
|
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|
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|
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|
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|
|
|
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|
||||
Banks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Computer Services, Inc. |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Computer Services, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
||||
Beverages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Vamos Bidco, Inc. |
|
(6) (10) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Vamos Bidco, Inc. |
|
(6) (10) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Vamos Bidco, Inc. |
|
(6) (10) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Building Products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Project Potter Buyer, LLC |
|
(6) (8) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Project Potter Buyer, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Chemicals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Tank Holding Corp. |
|
(7) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Tank Holding Corp. |
|
(9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Tank Holding Corp. |
|
(9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
V Global Holdings, LLC |
|
(6) (7) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
V Global Holdings, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial Services & Supplies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
365 Retail Markets, LLC |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
365 Retail Markets, LLC |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Astra Service Partners, LLC |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Astra Service Partners, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Atlas US Finco, Inc. |
|
(6) (8) (12) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Atlas US Finco, Inc. |
|
(6) (8) (12) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Atlas US Finco, Inc. |
|
(6) (8) (12) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
BPG Holdings IV Corp. |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Consor Intermediate II, LLC |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Consor Intermediate II, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Consor Intermediate II, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
93
Table of Contents
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2025
(In thousands, except share amounts)
Investments (1) (2) |
|
Footnotes |
|
Investment |
|
Reference Rate and Spread |
|
Interest |
|
Maturity |
|
Par Amount/ |
|
|
Cost(5) |
|
|
Fair Value |
|
|
Percentage of |
|
||||||
CRCI Longhorn Holdings, Inc. |
|
(6) (7) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
CRCI Longhorn Holdings, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
CRCI Longhorn Holdings, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
Energy Labs Holdings Corp. |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Energy Labs Holdings Corp. |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Energy Labs Holdings Corp. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Firebird Acquisition Corp, Inc. |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Firebird Acquisition Corp, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Firebird Acquisition Corp, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
FLS Holding, Inc. |
|
(6) (8) (12) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
FLS Holding, Inc. |
|
(6) (8) (12) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
FLS Holding, Inc. |
|
(6) (8) (12) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Hercules Borrower, LLC |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Hercules Borrower, LLC |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
C$ |
|
|
|
|
|
|
|
|
|
|
||||||||
HSI Halo Acquisition, Inc. |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
HSI Halo Acquisition, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
HSI Halo Acquisition, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Iris Buyer, LLC |
|
(6) (8) (12) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Iris Buyer, LLC |
|
(6) (8) (12) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Iris Buyer, LLC |
|
(6) (8) (12) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Procure Acquireco, Inc. (Procure Analytics) |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Procure Acquireco, Inc. (Procure Analytics) |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Procure Acquireco, Inc. (Procure Analytics) |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
Railpros Parent, LLC |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Railpros Parent, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Railpros Parent, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Routeware, Inc. |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Routeware, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Routeware, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Sherlock Buyer Corp. |
|
(6) (8) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Sherlock Buyer Corp. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Surewerx Purchaser III, Inc. |
|
(6) (9) (12) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Surewerx Purchaser III, Inc. |
|
(6) (9) (12) |
|
First Lien Debt |
|
|
|
|
|
C$ |
|
|
|
|
|
|
|
|
|
|
||||||||
Surewerx Purchaser III, Inc. |
|
(6) (9) (12) (16) |
|
First Lien Debt |
|
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|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
94
Table of Contents
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2025
(In thousands, except share amounts)
Investments (1) (2) |
|
Footnotes |
|
Investment |
|
Reference Rate and Spread |
|
Interest |
|
Maturity |
|
Par Amount/ |
|
|
Cost(5) |
|
|
Fair Value |
|
|
Percentage of |
|
||||||
Surewerx Purchaser III, Inc. |
|
(6) (9) (12) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Sweep Midco, LLC |
|
(6) (15) |
|
Second Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Sweep Midco, LLC |
|
(6) (15) |
|
Second Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Sweep Purchaser, LLC |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Sweep Purchaser, LLC |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Sweep Purchaser, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Tamarack Intermediate, LLC |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Tamarack Intermediate, LLC |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Tamarack Intermediate, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Transit Technologies, LLC |
|
(6) (7) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Transit Technologies, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Transit Technologies, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
US Infra Svcs Buyer, LLC |
|
(6) (7) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
US Infra Svcs Buyer, LLC |
|
(6) (7) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
US Infra Svcs Buyer, LLC |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Vensure Employer Services, Inc. |
|
(6) (10) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Vensure Employer Services, Inc. |
|
(6) (10) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
VRC Companies, LLC |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
VRC Companies, LLC |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
VRC Companies, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Construction & Engineering |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Arcoro Holdings Corp. |
|
(6) (8) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Arcoro Holdings Corp. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
KPSKY Acquisition, Inc. |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
KPSKY Acquisition, Inc. |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
LJ Avalon Holdings, LLC |
|
(6) (7) (8) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
LJ Avalon Holdings, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
LJ Avalon Holdings, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
Superman Holdings, LLC |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Superman Holdings, LLC |
|
(6) (7) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Superman Holdings, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Consumer Staples Distribution & Retail |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
PDI TA Holdings, Inc. |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
PDI TA Holdings, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Containers & Packaging |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
BP Purchaser, LLC |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
FORTIS Solutions Group, LLC |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
FORTIS Solutions Group, LLC |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
FORTIS Solutions Group, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
95
Table of Contents
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2025
(In thousands, except share amounts)
Investments (1) (2) |
|
Footnotes |
|
Investment |
|
Reference Rate and Spread |
|
Interest |
|
Maturity |
|
Par Amount/ |
|
|
Cost(5) |
|
|
Fair Value |
|
|
Percentage of |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Distributors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
48Forty Solutions, LLC |
|
(6) (11) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
48Forty Solutions, LLC |
|
(6) (11) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
ABB Concise Optical Group, LLC |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
PT Intermediate Holdings III, LLC |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
PT Intermediate Holdings III, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diversified Consumer Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Any Hour, LLC |
|
(6) (7) (10) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Any Hour, LLC |
|
(6) (10) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Any Hour, LLC |
|
(6) (10) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Any Hour, LLC |
|
(6) (10) |
|
Other Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Apex Service Partners, LLC |
|
(6) (7) (8) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Apex Service Partners, LLC |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Apex Service Partners, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Assembly Intermediate, LLC |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Assembly Intermediate, LLC |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Assembly Intermediate, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
DA Blocker Corp. |
|
(6) (9) (12) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
DA Blocker Corp. |
|
(6) (9) (12) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
DA Blocker Corp. |
|
(6) (9) (12) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Eclipse Buyer, Inc. |
|
(6) (10) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Eclipse Buyer, Inc. |
|
(6) (10) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
Eclipse Buyer, Inc. |
|
(6) (10) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
Essential Services Holding Corporation |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Essential Services Holding Corporation |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Essential Services Holding Corporation |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
EVDR Purchaser, Inc. |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
EVDR Purchaser, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
EVDR Purchaser, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Express Wash Acquisition Company, LLC |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Express Wash Acquisition Company, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
FPG Intermediate Holdco, LLC |
|
(6) (8) (13) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
FPG Intermediate Holdco, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
FPG Intermediate Holdco, LLC |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
GarageCo Intermediate II, LLC |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
GarageCo Intermediate II, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
GarageCo Intermediate II, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Heartland Home Services |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
96
Table of Contents
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2025
(In thousands, except share amounts)
Investments (1) (2) |
|
Footnotes |
|
Investment |
|
Reference Rate and Spread |
|
Interest |
|
Maturity |
|
Par Amount/ |
|
|
Cost(5) |
|
|
Fair Value |
|
|
Percentage of |
|
||||||
Kodiak Buyer, LLC |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Kodiak Buyer, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
Kodiak Buyer, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
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( |
) |
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LHS Borrower, LLC |
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(6) (7) (9) |
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First Lien Debt |
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LHS Borrower, LLC |
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(6) (9) (16) |
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First Lien Debt |
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Lightspeed Solution, LLC |
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(6) (9) |
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First Lien Debt |
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Lightspeed Solution, LLC |
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(6) (9) |
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First Lien Debt |
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Project Accelerate Parent, LLC |
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(6) (9) |
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First Lien Debt |
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Project Accelerate Parent, LLC |
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(6) (9) (16) |
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First Lien Debt |
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( |
) |
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Vertex Service Partners, LLC |
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(6) (7) (9) |
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First Lien Debt |
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Vertex Service Partners, LLC |
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(6) (9) (16) |
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First Lien Debt |
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Vertex Service Partners, LLC |
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(6) (9) (16) |
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First Lien Debt |
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Electrical Equipment |
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Accel International Holdings, Inc. |
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(6) (7) (10) |
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First Lien Debt |
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Accel International Holdings, Inc. |
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(6) (10) (16) |
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First Lien Debt |
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( |
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Spark Buyer, LLC |
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(6) (9) |
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First Lien Debt |
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Spark Buyer, LLC |
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(6) (9) (16) |
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First Lien Debt |
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( |
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( |
) |
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Spark Buyer, LLC |
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(6) (9) (16) |
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First Lien Debt |
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Electronic Equipment, Instruments & Components |
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Abracon Group Holdings, LLC |
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(6) (9) |
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First Lien Debt |
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Abracon Group Holdings, LLC |
|
(6) (9) |
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First Lien Debt |
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Dwyer Instruments, Inc. |
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(6) (9) (18) |
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First Lien Debt |
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Dwyer Instruments, Inc. |
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(6) (9) |
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First Lien Debt |
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Dwyer Instruments, Inc. |
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(6) (9) (16) |
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First Lien Debt |
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Infinite Bidco, LLC |
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(6) (10) |
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First Lien Debt |
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Infinite Bidco, LLC |
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(10) |
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Second Lien Debt |
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Magneto Components Buyco, LLC |
|
(6) (7) (9) |
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First Lien Debt |
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Magneto Components Buyco, LLC |
|
(6) (9) (16) |
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First Lien Debt |
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( |
) |
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|||||||
NDT Global Holding, Inc. |
|
(6) (10) (12) |
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First Lien Debt |
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||||||||
NDT Global Holding, Inc. |
|
(6) (10) (12) (16) |
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First Lien Debt |
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||||||||
NDT Global Holding, Inc. |
|
(6) (10) (12) (16) |
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First Lien Debt |
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( |
) |
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( |
) |
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|||||||
NSI Holdings, Inc. |
|
(6) (9) (18) |
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First Lien Debt |
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||||||||
NSI Holdings, Inc. |
|
(6) (9) (16) |
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First Lien Debt |
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( |
) |
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|||||||
NSI Holdings, Inc. |
|
(6) (16) |
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First Lien Debt |
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( |
) |
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|||||||
Pamlico Avant Holdings, LP |
|
(6) (7) (9) |
|
First Lien Debt |
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||||||||
Pamlico Avant Holdings, LP |
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(6) (9) (16) |
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First Lien Debt |
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||||||||
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||||
97
Table of Contents
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2025
(In thousands, except share amounts)
Investments (1) (2) |
|
Footnotes |
|
Investment |
|
Reference Rate and Spread |
|
Interest |
|
Maturity |
|
Par Amount/ |
|
|
Cost(5) |
|
|
Fair Value |
|
|
Percentage of |
|
||||||
Financial Services |
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||||
Applitools, Inc. |
|
(6) (9) (12) |
|
First Lien Debt |
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||||||||
Applitools, Inc. |
|
(6) (9) (12) (16) |
|
First Lien Debt |
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( |
) |
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( |
) |
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|||||||
BCTO Bluebill Midco, Inc. |
|
(6) (9) |
|
First Lien Debt |
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||||||||
BCTO Bluebill Midco, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
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( |
) |
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( |
) |
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|
|||||||
Cerity Partners, LLC |
|
(6) (9) (18) |
|
First Lien Debt |
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|
||||||||
Cerity Partners, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
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( |
) |
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( |
) |
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|
|||||||
Cerity Partners, LLC |
|
(6) (9) |
|
First Lien Debt |
|
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|
||||||||
Cliffwater, LLC |
|
(6) (7) (9) |
|
First Lien Debt |
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|
||||||||
Cliffwater, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
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( |
) |
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( |
) |
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|
|||||||
GC Waves Holdings, Inc. |
|
(6) (9) (18) |
|
First Lien Debt |
|
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|
||||||||
GC Waves Holdings, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
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|
||||||||
GC Waves Holdings, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
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( |
) |
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|
|||||||
MAI Capital Management Intermediate, LLC |
|
(6) (7) (9) (18) |
|
First Lien Debt |
|
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|
||||||||
MAI Capital Management Intermediate, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
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|
||||||||
MAI Capital Management Intermediate, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
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|
||||||||
PMA Parent Holdings, LLC |
|
(6) (7) (9) (18) |
|
First Lien Debt |
|
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|
||||||||
PMA Parent Holdings, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
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( |
) |
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|
( |
) |
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|
|||||||
SitusAMC Holdings Corporation |
|
(6) (9) (18) |
|
First Lien Debt |
|
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|
||||||||
Smarsh, Inc. |
|
(6) (9) (18) |
|
First Lien Debt |
|
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|
||||||||
Smarsh, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
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|
( |
) |
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|
|||||||
Smarsh, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
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|
||||||||
Trintech, Inc. |
|
(6) (7) (8) |
|
First Lien Debt |
|
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|
||||||||
Trintech, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
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|
||||||||
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|
||||
Food Products |
|
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|
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|
||||
AMCP Pet Holdings, Inc. (Brightpet) |
|
(6) (8) |
|
First Lien Debt |
|
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|
|
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|
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|
|
|
|
|
|
||||||||
AMCP Pet Holdings, Inc. (Brightpet) |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
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|
|
|
|
|
|
|
||||||||
Familia Intermediate Holdings I Corp. (Teasdale Latin Foods) |
|
(6) (11) |
|
Other Debt |
|
|
|
|
|
|
|
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|
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|
|||||||
Teasdale Foods, Inc. (Teasdale Latin Foods) |
|
(6) (8) (11) |
|
First Lien Debt |
|
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|
||||||||
|
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|
||||
Ground Transportation |
|
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|
|
|
|
|
|
||||
eShipping, LLC |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
eShipping, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
eShipping, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
SV Newco 2, Inc. |
|
(6) (9) (12) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
SV Newco 2, Inc. |
|
(6) (9) (12) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
98
Table of Contents
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2025
(In thousands, except share amounts)
Investments (1) (2) |
|
Footnotes |
|
Investment |
|
Reference Rate and Spread |
|
Interest |
|
Maturity |
|
Par Amount/ |
|
|
Cost(5) |
|
|
Fair Value |
|
|
Percentage of |
|
||||||
SV Newco 2, Inc. |
|
(6) (9) (12) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Health Care Equipment & Supplies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
PerkinElmer U.S., LLC |
|
(6) (7) (8) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
PerkinElmer U.S., LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Tidi Legacy Products, Inc. |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Tidi Legacy Products, Inc. |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Tidi Legacy Products, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
YI, LLC |
|
(6) (7) (8) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
YI, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Health Care Providers & Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Advarra Holdings, Inc. |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Advarra Holdings, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
DCA Investment Holdings, LLC |
|
(6) (9) (11) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
DCA Investment Holdings, LLC |
|
(6) (9) (11) |
|
First Lien Debt |
|
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||||||||
Gateway US Holdings, Inc. |
|
(6) (9) (12) |
|
First Lien Debt |
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||||||||
Gateway US Holdings, Inc. |
|
(6) (9) (12) |
|
First Lien Debt |
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||||||||
Gateway US Holdings, Inc. |
|
(6) (9) (12) (16) |
|
First Lien Debt |
|
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||||||||
Heartland Veterinary Partners, LLC |
|
(6) (8) |
|
First Lien Debt |
|
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||||||||
Heartland Veterinary Partners, LLC |
|
(6) (8) |
|
Second Lien Debt |
|
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|||||||
Heartland Veterinary Partners, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
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||||||||
Heartland Veterinary Partners, LLC |
|
(6) (8) |
|
Second Lien Debt |
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|||||||
Heartland Veterinary Partners, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
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( |
) |
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|||||||
iCIMS, Inc. |
|
(6) (9) |
|
First Lien Debt |
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||||||||
iCIMS, Inc. |
|
(6) (9) (16) |
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First Lien Debt |
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||||||||
Imagine 360, LLC |
|
(6) (9) (18) |
|
First Lien Debt |
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||||||||
Imagine 360, LLC |
|
(6) (9) (16) |
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First Lien Debt |
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( |
) |
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|||||||
Imagine 360, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
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( |
) |
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|||||||
Intelerad Medical Systems Incorporated |
|
(6) (8) (12) |
|
First Lien Debt |
|
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||||||||
Intelerad Medical Systems Incorporated |
|
(6) (8) (12) |
|
First Lien Debt |
|
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||||||||
Invictus Buyer, LLC |
|
(6) (9) (18) |
|
First Lien Debt |
|
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||||||||
Invictus Buyer, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
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( |
) |
|
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|||||||
Invictus Buyer, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
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( |
) |
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|||||||
Merative, LP |
|
(6) (7) (9) |
|
First Lien Debt |
|
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||||||||
Merative, LP |
|
(6) (9) (16) |
|
First Lien Debt |
|
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( |
) |
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( |
) |
|
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|||||||
Merative, LP |
|
(6) (9) (16) |
|
First Lien Debt |
|
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( |
) |
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( |
) |
|
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|||||||
mPulse Mobile, Inc. |
|
(6) (7) (9) |
|
First Lien Debt |
|
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|
||||||||
mPulse Mobile, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
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( |
) |
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( |
) |
|
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|
|||||||
mPulse Mobile, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
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|
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( |
) |
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|
( |
) |
|
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|
|||||||
Pareto Health Intermediate Holdings, Inc. |
|
(6) (8) (18) |
|
First Lien Debt |
|
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|
||||||||
Pareto Health Intermediate Holdings, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
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( |
) |
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|
|||||||
99
Table of Contents
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2025
(In thousands, except share amounts)
Investments (1) (2) |
|
Footnotes |
|
Investment |
|
Reference Rate and Spread |
|
Interest |
|
Maturity |
|
Par Amount/ |
|
|
Cost(5) |
|
|
Fair Value |
|
|
Percentage of |
|
||||||
Pareto Health Intermediate Holdings, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
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|
( |
) |
|
|
|
|
|
|
|||||||
PPV Intermediate Holdings, LLC |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
PPV Intermediate Holdings, LLC |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Promptcare Infusion Buyer, Inc. |
|
(6) (8) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
||||||||
Promptcare Infusion Buyer, Inc. |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Stepping Stones Healthcare Services, LLC |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Stepping Stones Healthcare Services, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Stepping Stones Healthcare Services, LLC |
|
(6) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Suveto Buyer, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Suveto Buyer, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
TA Polaris Buyer, Inc. |
|
(6) (7) (10) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
TA Polaris Buyer, Inc. |
|
(6) (10) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
TA Polaris Buyer, Inc. |
|
(6) (10) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Tivity Health, Inc. |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Vardiman Black Holdings, LLC |
|
(6) (10) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Vardiman Black Holdings, LLC |
|
(6) (10) (13) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Health Care Technology |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Hyland Software, Inc. |
|
(6) (7) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Hyland Software, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
Lightspeed Buyer, Inc. |
|
(6) (7) (8) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Lightspeed Buyer, Inc. |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Lightspeed Buyer, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Industrial Conglomerates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Aptean, Inc. |
|
(6) (7) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Aptean, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Aptean, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Excelitas Technologies Corp. |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Excelitas Technologies Corp. |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
€ |
|
|
|
|
|
|
|
|
|
|
||||||||
Excelitas Technologies Corp. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Excelitas Technologies Corp. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Raptor Merger Sub Debt, LLC |
|
(6) (7) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Raptor Merger Sub Debt, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Insurance Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amerilife Holdings, LLC |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Amerilife Holdings, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Amerilife Holdings, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fetch Insurance Services, LLC |
|
(6) (8) |
|
Other Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Foundation Risk Partners Corp. |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Foundation Risk Partners Corp. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Foundation Risk Partners Corp. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
100
Table of Contents
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2025
(In thousands, except share amounts)
Investments (1) (2) |
|
Footnotes |
|
Investment |
|
Reference Rate and Spread |
|
Interest |
|
Maturity |
|
Par Amount/ |
|
|
Cost(5) |
|
|
Fair Value |
|
|
Percentage of |
|
||||||
Galway Borrower, LLC |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Galway Borrower, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Galway Borrower, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Higginbotham Insurance Agency, Inc. |
|
(6) (7) (8) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Higginbotham Insurance Agency, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
High Street Buyer, Inc. |
|
(6) (7) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
High Street Buyer, Inc. |
|
(6) (7) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
High Street Buyer, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Inszone Mid, LLC |
|
(6) (8) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Inszone Mid, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Inszone Mid, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Integrity Marketing Acquisition, LLC |
|
(6) (7) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Integrity Marketing Acquisition, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Iris Specialty Acquisiton, LLC |
|
(6) (10) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Iris Specialty Acquisiton, LLC |
|
(6) (10) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Iris Specialty Acquisiton, LLC |
|
(6) (10) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Long Term Care Group, Inc. |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Majesco, Inc. |
|
(6) (7) (8) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
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||||||||
Majesco, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
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( |
) |
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|||||||
One, Inc. Software Corporation |
|
(6) (7) (9) |
|
First Lien Debt |
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||||||||
One, Inc. Software Corporation |
|
(6) (9) (16) |
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First Lien Debt |
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( |
) |
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( |
) |
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|||||||
One, Inc. Software Corporation |
|
(6) (9) (16) |
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First Lien Debt |
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( |
) |
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( |
) |
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|||||||
Patriot Growth Insurance Services, LLC |
|
(6) (7) (9) (18) |
|
First Lien Debt |
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||||||||
Patriot Growth Insurance Services, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
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( |
) |
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|||||||
World Insurance Associates, LLC |
|
(6) (7) (8) (18) |
|
First Lien Debt |
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||||||||
World Insurance Associates, LLC |
|
(6) (8) (16) |
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First Lien Debt |
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( |
) |
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||||
Interactive Media & Services |
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||||
FMG Suite Holdings, LLC |
|
(6) (9) (18) |
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First Lien Debt |
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||||||||
FMG Suite Holdings, LLC |
|
(6) (16) |
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First Lien Debt |
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( |
) |
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( |
) |
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|||||||
FMG Suite Holdings, LLC |
|
(6) (16) |
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First Lien Debt |
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( |
) |
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( |
) |
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|||||||
Spectrio, LLC |
|
(6) (7) (8) |
|
First Lien Debt |
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||||||||
Spectrio, LLC |
|
(6) (8) |
|
First Lien Debt |
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||||||||
Spectrio, LLC |
|
(6) (8) |
|
First Lien Debt |
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||||||||
Triple Lift, Inc. |
|
(6) (7) (9) |
|
First Lien Debt |
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||||||||
Triple Lift, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
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( |
) |
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( |
) |
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- |
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||||||
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||||
IT Services |
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||||
Apollo Acquisition, Inc. |
|
(6) (9) (18) |
|
First Lien Debt |
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||||||||
Apollo Acquisition, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
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||||||||
Apollo Acquisition, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
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( |
) |
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|||||||
Catalis Intermediate, Inc. |
|
(6) (7) (9) |
|
First Lien Debt |
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||||||||
Catalis Intermediate, Inc. |
|
(6) (9) |
|
First Lien Debt |
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||||||||
Catalis Intermediate, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
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||||||||
Cyber US Bidco, LLC |
|
(6) (7) (9) |
|
First Lien Debt |
|
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|
||||||||
101
Table of Contents
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2025
(In thousands, except share amounts)
Investments (1) (2) |
|
Footnotes |
|
Investment |
|
Reference Rate and Spread |
|
Interest |
|
Maturity |
|
Par Amount/ |
|
|
Cost(5) |
|
|
Fair Value |
|
|
Percentage of |
|
||||||
Cyber US Bidco, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Cyber US Bidco, LLC |
|
(6) (9) (12) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
GI DI Cornfield Acquisition, LLC |
|
(6) (18) |
|
First Lien Debt |
|
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|
||||||||
GI DI Cornfield Acquisition, LLC |
|
(6) (7) |
|
First Lien Debt |
|
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|
||||||||
Help/Systems Holdings, Inc. |
|
(6) (9) |
|
Second Lien Debt |
|
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|
|
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|
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|
||||||||
Idera, Inc. |
|
(6) (9) |
|
Second Lien Debt |
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
||||||||
Recovery Point Systems, Inc. |
|
(6) (7) (8) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Recovery Point Systems, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
Redwood Services Group, LLC |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Redwood Services Group, LLC |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Ridge Trail US Bidco, Inc. |
|
(6) (9) (12) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Ridge Trail US Bidco, Inc. |
|
(6) (9) (12) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
Ridge Trail US Bidco, Inc. |
|
(6) (9) (12) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Syntax Systems, Ltd. |
|
(6) (9) (12) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Thrive Buyer, Inc. (Thrive Networks) |
|
(6) (7) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Thrive Buyer, Inc. (Thrive Networks) |
|
(6) (7) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Thrive Buyer, Inc. (Thrive Networks) |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
UpStack, Inc. |
|
(6) (7) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
UpStack, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
UpStack, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Victors Purchaser, LLC |
|
(6) (10) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Victors Purchaser, LLC |
|
(6) (10) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
Victors Purchaser, LLC |
|
(6) (10) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Life Sciences Tools & Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Model N, Inc. |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Model N, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
Model N, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
|
|
|
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|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
||||
Machinery |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Answer Acquisition, LLC |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Answer Acquisition, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Chase Intermediate, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Chase Intermediate, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
MHE Intermediate Holdings, LLC |
|
(6) (7) (8) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
MHE Intermediate Holdings, LLC |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
MHE Intermediate Holdings, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Multi-Utilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
AWP Group Holdings, Inc. |
|
(6) (7) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
AWP Group Holdings, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
102
Table of Contents
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2025
(In thousands, except share amounts)
Investments (1) (2) |
|
Footnotes |
|
Investment |
|
Reference Rate and Spread |
|
Interest |
|
Maturity |
|
Par Amount/ |
|
|
Cost(5) |
|
|
Fair Value |
|
|
Percentage of |
|
||||||
AWP Group Holdings, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Vessco Midco Holdings, LLC |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Vessco Midco Holdings, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Vessco Midco Holdings, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pharmaceuticals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Caerus US 1, Inc. |
|
(6) (9) (12) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Caerus US 1, Inc. |
|
(6) (9) (12) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Caerus US 1, Inc. |
|
(6) (9) (12) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Real Chemistry Intermediate III, Inc. |
|
(6) (10) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Real Chemistry Intermediate III, Inc. |
|
(6) (10) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Real Chemistry Intermediate III, Inc. |
|
(6) (10) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Specialty Pharma III, Inc. |
|
(6) (7) (10) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Specialty Pharma III, Inc. |
|
(6) (10) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Professional Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Abacus Data Holdings, Inc. (AbacusNext) |
|
(6) (8) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Abacus Data Holdings, Inc. (AbacusNext) |
|
(6) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
Accordion Partners, LLC |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Accordion Partners, LLC |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Accordion Partners, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
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|
( |
) |
|
|
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|
|||||||
Aprio Advisory Group, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Aprio Advisory Group, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Ascend Partner Services, LLC |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
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|
|
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|
||||||||
Ascend Partner Services, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
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|
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|
|
|
|
|
|
|
|
||||||||
Ascend Partner Services, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
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( |
) |
|
|
|
|||||||
Bridgepointe Technologies, LLC |
|
(6) (8) (18) |
|
First Lien Debt |
|
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|
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|
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|
||||||||
Bridgepointe Technologies, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
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|
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|
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|
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|
||||||||
Bullhorn, Inc. |
|
(6) (8) (18) |
|
First Lien Debt |
|
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|
||||||||
Bullhorn, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
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|
||||||||
Bullhorn, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
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|
||||||||
Carr, Riggs and Ingram Capital, LLC |
|
(6) (10) (18) |
|
First Lien Debt |
|
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|
||||||||
Carr, Riggs and Ingram Capital, LLC |
|
(6) (10) (16) |
|
First Lien Debt |
|
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|
||||||||
Carr, Riggs and Ingram Capital, LLC |
|
(6) (10) (16) |
|
First Lien Debt |
|
|
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( |
) |
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( |
) |
|
|
|
|||||||
ComPsych Investment Corp. |
|
(6) (9) |
|
First Lien Debt |
|
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|
||||||||
ComPsych Investment Corp. |
|
(6) (9) (16) |
|
First Lien Debt |
|
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( |
) |
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|
|||||||
Deerfield Dakota Holding, LLC |
|
(6) (7) (9) |
|
First Lien Debt |
|
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|
||||||||
Deerfield Dakota Holding, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
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( |
) |
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( |
) |
|
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|
|||||||
GPS Merger Sub, LLC |
|
(6) (8) (18) |
|
First Lien Debt |
|
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|
||||||||
GPS Merger Sub, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
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|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
GPS Merger Sub, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
GPS Merger Sub, LLC |
|
(6) (7) (8) |
|
First Lien Debt |
|
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|
||||||||
IG Investment Holdings, LLC |
|
(6) (9) (18) |
|
First Lien Debt |
|
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|
||||||||
103
Table of Contents
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2025
(In thousands, except share amounts)
Investments (1) (2) |
|
Footnotes |
|
Investment |
|
Reference Rate and Spread |
|
Interest |
|
Maturity |
|
Par Amount/ |
|
|
Cost(5) |
|
|
Fair Value |
|
|
Percentage of |
|
||||||
IG Investment Holdings, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
IQN Holding Corp. |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
IQN Holding Corp. |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
||||||||
IQN Holding Corp. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
KENG Acquisition, Inc. |
|
(6) (8) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
||||||||
KENG Acquisition, Inc. |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
KENG Acquisition, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
UHY Advisors, Inc. |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
UHY Advisors, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
UHY Advisors, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Verdantas, LLC |
|
(6) (8) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Verdantas, LLC |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Verdantas, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
WIPFLI Advisory, LLC |
|
(6) (7) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
WIPFLI Advisory, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
WIPFLI Advisory, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Real Estate Management & Development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Associations, Inc. |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Associations, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Associations, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Inhabitiq, Inc. |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Inhabitiq, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
Inhabitiq, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
MRI Software, LLC |
|
(6) (7) (8) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
MRI Software, LLC |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
MRI Software, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pritchard Industries, LLC |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pritchard Industries, LLC |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Zarya Intermediate, LLC |
|
(6) (8) (12) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Zarya Intermediate, LLC |
|
(6) (8) (12) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Software |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Alert Media, Inc. |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Alert Media, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Anaplan, Inc. |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Appfire Technologies, LLC |
|
(6) (8) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Appfire Technologies, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
104
Table of Contents
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2025
(In thousands, except share amounts)
Investments (1) (2) |
|
Footnotes |
|
Investment |
|
Reference Rate and Spread |
|
Interest |
|
Maturity |
|
Par Amount/ |
|
|
Cost(5) |
|
|
Fair Value |
|
|
Percentage of |
|
||||||
Appfire Technologies, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Apryse Software Corp. |
|
(6) (7) (10) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Apryse Software Corp. |
|
(6) (10) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Archduke Buyer, Inc. |
|
(6) (10) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Archduke Buyer, Inc. |
|
(6) (10) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Artifact Bidco, Inc. |
|
(6) (10) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Artifact Bidco, Inc. |
|
(6) (10) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
Artifact Bidco, Inc. |
|
(6) (10) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
AuditBoard, Inc. |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
AuditBoard, Inc. |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
AuditBoard, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Banyan Software Holdings, LLC |
|
(6) (8) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Banyan Software Holdings, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Banyan Software Holdings, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
Bottomline Technologies, Inc. |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Bottomline Technologies, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
CLEO Communications Holding, LLC |
|
(6) (7) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
CLEO Communications Holding, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
Coupa Holdings, LLC |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Coupa Holdings, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
Coupa Holdings, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
Cyara AcquisitionCo, LLC |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cyara AcquisitionCo, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
Diligent Corporation |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Diligent Corporation |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Diligent Corporation |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
E-Discovery AcquireCo, LLC |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
E-Discovery AcquireCo, LLC |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Emburse, Inc. |
|
(6) (7) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Emburse, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Emburse, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Espresso Bidco, Inc. |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Espresso Bidco, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Espresso Bidco, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Everbridge Holdings, LLC |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Everbridge Holdings, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Everbridge Holdings, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
Formstack Acquisition, Co. |
|
(6) (8) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Formstack Acquisition, Co. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Formstack Acquisition, Co. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fullsteam Operations, LLC |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fullsteam Operations, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
105
Table of Contents
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2025
(In thousands, except share amounts)
Investments (1) (2) |
|
Footnotes |
|
Investment |
|
Reference Rate and Spread |
|
Interest |
|
Maturity |
|
Par Amount/ |
|
|
Cost(5) |
|
|
Fair Value |
|
|
Percentage of |
|
||||||
Fullsteam Operations, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Granicus, Inc. |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Granicus, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Granicus, Inc. |
|
(6) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
GS AcquisitionCo, Inc. |
|
(6) (7) (8) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
GS AcquisitionCo, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
GS AcquisitionCo, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Hootsuite, Inc. |
|
(6) (12) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Hootsuite, Inc. |
|
(6) (12) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Icefall Parent, Inc. |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Icefall Parent, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
LegitScript, LLC |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
LegitScript, LLC |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
LegitScript, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
LogRhythm, Inc. |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
LogRhythm, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Montana Buyer, Inc. |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Montana Buyer, Inc. |
|
(6) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
Nasuni Corporation |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Nasuni Corporation |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
Netwrix Corporation And Concept Searching, Inc. |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Netwrix Corporation And Concept Searching, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Oak Purchaser, Inc. |
|
(6) (7) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Oak Purchaser, Inc. |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Oak Purchaser, Inc. |
|
(6) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Onit, Inc. |
|
(6) (7) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Onit, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
Onit, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
Optimizely North America, Inc. |
|
(6) (9) (12) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Optimizely North America, Inc. |
|
(6) (9) (12) |
|
First Lien Debt |
|
|
|
|
|
€ |
|
|
|
|
|
|
|
|
|
|
||||||||
Optimizely North America, Inc. |
|
(6) (9) (12) |
|
First Lien Debt |
|
|
|
|
|
£ |
|
|
|
|
|
|
|
|
|
|
||||||||
Optimizely North America, Inc. |
|
(6) (9) (12) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Pound Bidco, Inc. |
|
(6) (7) (8) (12) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pound Bidco, Inc. |
|
(6) (8) (12) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pound Bidco, Inc. |
|
(6) (7) (8) (12) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Project Leopard Holdings, Inc. |
|
(10) (12) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Revalize, Inc. |
|
(6) (8) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
106
Table of Contents
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2025
(In thousands, except share amounts)
Investments (1) (2) |
|
Footnotes |
|
Investment |
|
Reference Rate and Spread |
|
Interest |
|
Maturity |
|
Par Amount/ |
|
|
Cost(5) |
|
|
Fair Value |
|
|
Percentage of |
|
||||||
Revalize, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Riskonnect Parent, LLC |
|
(6) (9) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Riskonnect Parent, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Riskonnect Parent, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Runway Bidco, LLC |
|
(6) (10) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Runway Bidco, LLC |
|
(6) (10) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Runway Bidco, LLC |
|
(6) (10) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Saturn Borrower, Inc. |
|
(6) (8) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Saturn Borrower, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
Saturn Borrower, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Securonix, Inc. |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Securonix, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
||||||
Trunk Acquisition, Inc. |
|
(6) (8) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Trunk Acquisition, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Trunk Acquisition, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
User Zoom Technologies, Inc. |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Vanco Payment Solutions, LLC |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Vanco Payment Solutions, LLC |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Transportation Infrastructure |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Jeppesen Holdings, LLC |
|
(6) (10) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Jeppesen Holdings, LLC |
|
(6) (10) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Wireless Telecommunication Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
CCI Buyer, Inc. |
|
(6) (9) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
CCI Buyer, Inc. |
|
(6) (9) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||
Mobile Communications America, Inc. |
|
(6) (7) (8) (18) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Mobile Communications America, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Mobile Communications America, Inc. |
|
(6) (8) (16) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Debt Investments - non-controlled/non-affiliated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
% |
||||
Debt Investments - non-controlled/affiliated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Professional Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
KWOR Acquisition, Inc. |
|
(6) (8) (17) |
|
Second Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
KWOR Acquisition, Inc. |
|
(6) (8) (16) (17) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
KWOR Acquisition, Inc. |
|
(6) (8) (16) (17) |
|
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
KWOR Acquisition, Inc. |
|
(6) (17) |
|
Other Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
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||||
107
Table of Contents
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2025
(In thousands, except share amounts)
Investments (1) (2) |
|
Footnotes |
|
Investment |
|
Reference Rate and Spread |
|
Interest |
|
Maturity |
|
Par Amount/ |
|
|
Cost(5) |
|
|
Fair Value |
|
|
Percentage of |
|
|||||
Total Debt Investments - non-controlled/affiliated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
% |
|||
Total Debt Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
% |
|||
Investments(1) (2) |
|
Footnotes |
|
Investment |
|
Reference Rate and Spread |
|
Acquisition Date |
|
Par Amount/ |
|
|
Cost(5) |
|
|
Fair Value |
|
|
Percentage of Net Assets |
|
||||||
Equity Investments - non-controlled/non-affiliated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Aerospace & Defense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
AASC Holdings, LP |
|
(6) (14) (15) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
% |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Automobile Components |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Continental Battery Company |
|
(6) (14) (15) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Shelby Co-invest, LP (Spectrum Automotive) |
|
(6) (14) (15) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial Services & Supplies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Firebird Acquisition Corp, Inc. |
|
(6) (14) (15) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Procure Acquiom Financial, LLC (Procure Analytics) |
|
(6) (14) (15) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Surewerx Topco, LP |
|
(6) (12) (14) (15) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Containers & Packaging |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
BP Purchaser, LLC |
|
(6) (14) (15) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
BP Purchaser, LLC Rights |
|
(6) (14) (15) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
FORTIS Solutions Group, LLC |
|
(6) (14) |
|
Preferred Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Distributors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
48Forty Solutions, LLC |
|
(6) (14) (15) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Diversified Consumer Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Eclipse Topco, Inc. |
|
(6) (14) |
|
Preferred Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
FPG Parent, LLC |
|
(6) (14) (15) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Leaf Home, LLC |
|
(6) (14) |
|
Preferred Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
LUV Car Wash |
|
(6) (14) (15) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Electrical Equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sparkstone Electrical Group |
|
(6) (14) (15) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Financial Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Applitools, Inc. |
|
(6) (12) (14) (15) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Food Products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pet Holdings, Inc. (Brightpet) |
|
(6) (14) (15) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Health Care Providers & Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
108
Table of Contents
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2025
(In thousands, except share amounts)
Investments(1) (2) |
|
Footnotes |
|
Investment |
|
Reference Rate and Spread |
|
Acquisition Date |
|
Par Amount/ |
|
|
Cost(5) |
|
|
Fair Value |
|
|
Percentage of Net Assets |
|
||||||||
mPulse Mobile, Inc. |
|
(6) (14) (15) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
SDB Holdco, LLC |
|
(6) (14) (15) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Suveto Buyer, LLC |
|
(6) (12) (14) (15) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Vardiman Black Holdings, LLC |
|
(6) (14) |
|
Preferred Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Insurance Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Amerilife Holdings, LLC |
|
(6) (14) (15) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Frisbee Holdings, LP (Fetch) |
|
(6) (14) (15) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Integrity Marketing Acquisition, LLC |
|
(6) (14) |
|
Preferred Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interactive Media & Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
FMG Suite Holdings, LLC |
|
(6) (14) (15) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
FMG Suite Holdings, LLC |
|
(6) (14) |
|
Preferred Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
IT Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Help HP SCF Investor, LP (Help/Systems) |
|
(12) (14) (15) |
|
Preferred Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Recovery Point Systems, Inc. |
|
(6) (14) (15) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Professional Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Abacus Data Holdings, Inc. (AbacusNext) |
|
(6) (14) (15) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Verdantas, LLC |
|
(6) (14) (15) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Verdantas, LLC |
|
(6) (14) |
|
Preferred Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Real Estate Management & Development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Pritchard Industries, LLC |
|
(6) (14) (15) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Software |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Diligent Corporation |
|
(6) (14) |
|
Preferred Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fullsteam Operations, LLC |
|
(6) (14) (15) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Knockout Intermediate Holdings I, Inc. |
|
(6) (14) |
|
Preferred Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Revalize, Inc. |
|
(6) (14) |
|
Preferred Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Reveal Data Solutions |
|
(6) (14) (15) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
RSK Holdings, Inc. (Riskonnect) |
|
(6) (14) |
|
Preferred Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total Equity Investments - non-controlled/non-affiliated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
% |
||||||
Equity Investments - non-controlled/affiliated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Professional Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
KWOR Intermediate I, Inc. |
|
(6) (14) (15) (17) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|||||||
KWOR Intermediate I, Inc. |
|
(6) (14) (17) |
|
Preferred Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
109
Table of Contents
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2025
(In thousands, except share amounts)
Investments(1) (2) |
|
Footnotes |
|
Investment |
|
Reference Rate and Spread |
|
Acquisition Date |
|
Par Amount/ |
|
|
Cost(5) |
|
|
Fair Value |
|
|
Percentage of Net Assets |
|
|||||
Total Equity Investments - non-controlled/affiliated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
% |
|||
Total Equity Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
% |
|||
Total Portfolio Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
% |
|||
Investments(1) (2) |
|
Footnotes |
|
Investment |
|
Reference Rate and Spread |
|
Acquisition Date |
|
Par Amount/ |
|
Cost(5) |
|
|
Fair Value |
|
|
Percentage of Net Assets |
|
|||||
Cash and Cash Equivalents and Short Term Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
J.P. Morgan US Government Money Market Fund - Institutional Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total Cash and Cash Equivalents and Short Term Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
% |
|||
Total Portfolio Investments, Cash and Cash Equivalents and Short Term Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
% |
|||
110
Table of Contents
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2025
(In thousands, except share amounts)
Investments |
|
Commitment Type |
|
Commitment Expiration Date |
|
Unfunded Commitment |
|
|
Fair Value |
|
||
First Lien Debt — non-controlled/non-affiliated |
|
|
|
|
|
|
|
|
|
|
||
48Forty Solutions, LLC |
|
Revolver |
|
|
$ |
|
|
$ |
( |
) |
||
AWP Group Holdings, Inc. |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|||
AWP Group Holdings, Inc. |
|
Revolver |
|
|
|
|
|
|
|
|||
Abacus Data Holdings, Inc. (AbacusNext) |
|
Revolver |
|
|
|
|
|
|
|
|||
Accel International Holdings, Inc. |
|
Revolver |
|
|
|
|
|
|
|
|||
Accordion Partners, LLC |
|
Revolver |
|
|
|
|
|
|
|
|||
Advarra Holdings, Inc. |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|||
Alert Media, Inc. |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Amerilife Holdings, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
Amerilife Holdings, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
Amerilife Holdings, LLC |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Answer Acquisition, LLC |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Any Hour, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
Any Hour, LLC |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Apex Service Partners, LLC |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Apollo Acquisition, Inc. |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|||
Apollo Acquisition, Inc. |
|
Revolver |
|
|
|
|
|
|
|
|||
Appfire Technologies, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|||
Appfire Technologies, LLC |
|
Revolver |
|
|
|
|
|
|
|
|||
Applitools, Inc. |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Aprio Advisory Group, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
Aprio Advisory Group, LLC |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Apryse Software Corp. |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Aptean, Inc. |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
Aptean, Inc. |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Archduke Buyer, Inc. |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Arcoro Holdings Corp. |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Artifact Bidco, Inc. |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|||
Artifact Bidco, Inc. |
|
Revolver |
|
|
|
|
|
|
|
|||
Ascend Partner Services, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
Ascend Partner Services, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
Ascend Partner Services, LLC |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Assembly Intermediate, LLC |
|
Revolver |
|
|
|
|
|
|
|
|||
Associations, Inc. |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|||
Associations, Inc. |
|
Revolver |
|
|
|
|
|
|
|
|||
Astra Service Partners, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
Atlas US Finco, Inc. |
|
Revolver |
|
|
|
|
|
|
|
|||
AuditBoard, Inc. |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
BCTO Bluebill Midco, Inc. |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Banyan Software Holdings, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
Banyan Software Holdings, LLC |
|
Revolver |
|
|
|
|
|
|
|
|||
Bottomline Technologies, Inc. |
|
Revolver |
|
|
|
|
|
|
|
|||
Bridgepointe Technologies, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|||
111
Table of Contents
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2025
(In thousands, except share amounts)
Investments |
|
Commitment Type |
|
Commitment Expiration Date |
|
Unfunded Commitment |
|
|
Fair Value |
|
||
Bullhorn, Inc. |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|||
Bullhorn, Inc. |
|
Revolver |
|
|
|
|
|
|
|
|||
CCI Buyer, Inc. |
|
Revolver |
|
|
|
|
|
|
|
|||
CLEO Communications Holding, LLC |
|
Revolver |
|
|
|
|
|
|
|
|||
COP Collisionright Parent, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
COP Collisionright Parent, LLC |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
CRCI Longhorn Holdings, Inc. |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|||
CRCI Longhorn Holdings, Inc. |
|
Revolver |
|
|
|
|
|
|
|
|||
Caerus US 1, Inc. |
|
Revolver |
|
|
|
|
|
|
|
|||
Carr, Riggs and Ingram Capital, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
Carr, Riggs and Ingram Capital, LLC |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Catalis Intermediate, Inc. |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Cerity Partners, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
Cerity Partners, LLC |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Chase Intermediate, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
Chase Intermediate, LLC |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Cliffwater, LLC |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
ComPsych Investment Corp. |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|||
Computer Services, Inc. |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
Consor Intermediate II, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
Consor Intermediate II, LLC |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Coupa Holdings, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|||
Coupa Holdings, LLC |
|
Revolver |
|
|
|
|
|
|
|
|||
Cyara AcquisitionCo, LLC |
|
Revolver |
|
|
|
|
|
|
|
|||
Cyber US Bidco, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
Cyber US Bidco, LLC |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
DA Blocker Corp. |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
DA Blocker Corp. |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Deerfield Dakota Holding, LLC |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Diligent Corporation |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
Diligent Corporation |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Drivecentric Holdings, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|||
Drivecentric Holdings, LLC |
|
Revolver |
|
|
|
|
|
|
|
|||
Dwyer Instruments, Inc. |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
E-Discovery AcquireCo, LLC |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
EVDR Purchaser, Inc. |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
EVDR Purchaser, Inc. |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Eclipse Buyer, Inc. |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|||
Eclipse Buyer, Inc. |
|
Revolver |
|
|
|
|
|
|
|
|||
Emburse, Inc. |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
Emburse, Inc. |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Energy Labs Holdings Corp. |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
Energy Labs Holdings Corp. |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Espresso Bidco, Inc. |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
Espresso Bidco, Inc. |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
112
Table of Contents
Morgan Stanley Direct Lending Fund
Consolidated Schedule of Investments (continued)
December 31, 2025
(In thousands, except share amounts)
Investments |
|
Commitment Type |
|
Commitment Expiration Date |
|
Unfunded Commitment |
|
|
Fair Value |
|
||
Essential Services Holding Corporation |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
Essential Services Holding Corporation |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Everbridge Holdings, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|||
Everbridge Holdings, LLC |
|
Revolver |
|
|
|
|
|
|
|
|||
Excelitas Technologies Corp. |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
Excelitas Technologies Corp. |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Express Wash Acquisition Company, LLC |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
FLS Holding, Inc. |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
FMG Suite Holdings, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
FMG Suite Holdings, LLC |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
FORTIS Solutions Group, LLC |
|
Revolver |
|
|
|
|
|
|
|
|||
FPG Intermediate Holdco, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|||
Firebird Acquisition Corp, Inc. |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|||
Firebird Acquisition Corp, Inc. |
|
Revolver |
|
|
|
|
|
|
|
|||
Formstack Acquisition, Co. |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
Formstack Acquisition, Co. |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
Foundation Risk Partners Corp. |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|||
Foundation Risk Partners Corp. |
|
Revolver |
|
|
|
|
|
|
|
|||
Fullsteam Operations, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
Fullsteam Operations, LLC |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
GB Eagle Buyer, Inc. |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
( |
) |
||
GB Eagle Buyer, Inc. |
|
Revolver |
|
|
|
|
|
|
( |
) |
||
GC Waves Holdings, Inc. |
|
|||||||||||