Morgan Stanley Direct Lending Fund adds $401M term leverage via new CLO

Rhea-AI Filing Summary

On 6 Aug 2025 Morgan Stanley Direct Lending Fund (NYSE: MSDL) filed an 8-K announcing that its wholly-owned subsidiary, North Haven Private Credit CLO 1 LLC, has priced a $401.2 million collateralised loan obligation scheduled to close on or about 17 Sep 2025.

The capital stack comprises:

• $182 m Class A-1 senior secured notes & loans at 3-m SOFR + 1.54%
• $16 m Class A-2 senior secured notes at SOFR + 1.70%
• $24 m Class B senior secured notes at SOFR + 1.90%
• $32 m Class C deferrable notes at SOFR + 2.40%
• $24 m Class D deferrable notes at SOFR + 3.55%

MSDL will retain the entire $73.2 m subordinated (equity) tranche and serve as collateral servicer.

The deal provides term, floating-rate funding that will be consolidated onto MSDL’s balance sheet and counted in its Investment Company Act asset-coverage test. Management characterises the transaction as secured financing; no offer to sell the notes is being made in the filing.

Positive

• Obtains $401.2 m of long-term, matched-funded leverage at competitive SOFR spreads, potentially enhancing return on equity.
• Full retention of $73.2 m equity tranche aligns management and shareholder interests with CLO performance.

Negative

• Increases consolidated leverage and pressures the fund’s 150% asset-coverage cushion.
• Floating-rate coupons tied to SOFR expose the fund to rising interest-expense risk.

Insights

Financial Analyst

TL;DR: CLO adds $401 m of term leverage at moderate spreads, potentially boosting ROE but raising asset-coverage leverage.

Locking in SOFR+1.54–3.55% funding is attractive relative to historic BDC borrowing costs and extends maturities to 2037, improving asset/liability matching. Retaining 100% of the equity tranche aligns incentives and offers upside if underlying loans perform. Consolidation means leverage ratios will rise; investors should assess pro-forma asset coverage and interest-rate sensitivity as the notes float with SOFR. Overall neutral-to-positive for earnings power if credit quality holds.

Risk Analyst

TL;DR: Transaction heightens structural leverage and subordinates common shareholders to $328 m senior debt.

The CLO embeds long-dated debt that ranks senior to fund equity and introduces extension risk through 2037. Rising SOFR could lift coupon costs, squeezing net interest margin. Full retention of equity tranche concentrates first-loss exposure at MSDL level. While secured financing preserves liquidity, adverse credit migration in the loan pool would rapidly erode over-collateralisation tests, triggering diversion of cash to noteholders. Leverage risk moderately up; monitor compliance with 1940-Act 150% asset-coverage rule.

8-K Event Classification

Item 7.01 — Regulation FD Disclosure

1 item

Item 7.01 Regulation FD Disclosure Disclosure

Material non-public information disclosed under Regulation Fair Disclosure, often investor presentations or guidance.

Understanding 8-K Material Events →

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 6, 2025

Morgan Stanley Direct Lending Fund

(Exact name of registrant as specified in its charter)

Delaware		814-01332		84-2009506
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification Number)

1585 Broadway
New York, NY		10036
(Address of principal executive offices)		(Zip Code)

1 (212) 761-4000

(Registrant’s telephone number, including area code)

Not Applicable

(Former Name or Former Address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001 per share		MSDL		The New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

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. ☐

Item 7.01. Regulation FD Disclosure.

On August 6, 2025, North Haven Private Credit CLO 1 LLC (the “Issuer”), a direct subsidiary of Morgan Stanley Direct Lending Fund (the “Company”), established pricing terms for a collateralized loan obligation (“CLO”) transaction and the notes to be issued by the Issuer.

The Issuer expects to issue approximately $401,200,000 in aggregate principal amount of notes collateralized by the assets held by the Issuer, consisting of $182,000,000 in Class A-1 Senior Secured Floating Rate Notes due 2037 and $50,000,000 in Class A-1 Senior Secured Floating Rate Loans due 2037, which will bear interest at a rate of three-month SOFR + 1.54%, $16,000,000 in Class A-2 Senior Secured Floating Rate Notes due 2037, which will bear interest at a rate of three-month SOFR + 1.70%, $24,000,000 in Class B Senior Secured Floating Rate Notes due 2037, which will bear interest at a rate of three-month SOFR + 1.90%, $32,000,000 in Class C Secured Deferrable Floating Rate Notes due 2037, which will bear interest at a rate of three-month SOFR + 2.40%, and $24,000,000 in Class D Secured Deferrable Floating Rate Notes due 2037, which will bear interest at a rate of three-month SOFR + 3.55%. The Company will retain approximately $73,200,000 in Subordinated Notes due 2125 to be issued by the Issuer, which represent all of the Subordinated Notes of the Issuer, and will serve as Collateral Servicer to the Issuer. The CLO transaction is a form of secured financing incurred by the Company and is consolidated by the Company and subject to its overall asset coverage requirement under the Investment Company Act of 1940, as amended. The CLO transaction is anticipated to close on or about September 17, 2025. This disclosure does not constitute an offer to sell or a solicitation of an offer to buy any of the notes in the CLO transaction described above, nor shall there be any offer, solicitation or sale in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: August 6, 2025				MORGAN STANLEY DIRECT LENDING FUND
				By:		/s/ Orit Mizrachi
						Orit Mizrachi
						Co- President and Chief Operating Officer

FAQ

What did Morgan Stanley Direct Lending Fund disclose in its 8-K?

MSDL announced pricing of a $401.2 m CLO via subsidiary North Haven Private Credit CLO 1 LLC.

How big is the new CLO financing for MSDL?

$401.2 million in aggregate principal amount of notes are expected to be issued.

When is the CLO expected to close?

The transaction is anticipated to close on or about 17 September 2025.

What interest rate will the Class A-1 notes bear?

Class A-1 instruments will pay three-month SOFR + 1.54% until maturity in 2037.

How much of the subordinated (equity) tranche will MSDL retain?

MSDL will keep 100 % of the $73.2 m subordinated notes due 2125.

Will the CLO affect MSDL’s leverage tests?

Yes. The secured financing will be consolidated and counted in the Investment Company Act asset-coverage calculation.