Morgan Stanley Direct Lending Fund Q1 FY2025 earnings call

• Strong first quarter performance with solid operating results supported by strong credit performance. Generated net investment income of $0.52 per share, exceeding the dividend. - New investment commitments were ~$233 million, with repayments of $202 million and seven portfolio companies fully repaid. - Portfolio debt to NAV increased modestly from 1.08 times to 1.11 times. - Over 70% of non-refinancing gross deployment in the first quarter was to new borrowers. - Benefited from the Morgan Stanley platform, with sponsor backed direct lending business in North America surpassing $20 billion in committed capital. - Portfolio was composed of ~96% first lien debt, 2% second lien debt, and other investments; largest industry exposures in software and insurance services. - Credit metrics of portfolio companies were strong, with low non-accruals.

The first quarter saw net investment income of $0.52 per share, exceeding the $0.50 dividend declared. New investment commitments totaled approximately $233 million, with repayments in the quarter amounting to $202 million. The portfolio had a total net fair value of $3.8 billion, composed of ~96% first lien debt, 2% second lien debt, and the remainder in equity and other debt investments. The two largest industry exposures were software (19.5% of portfolio at fair value) and insurance services (12%). The weighted average loan to value was approximately 40%, median EBITDA was ~$87 million, and the weighted average yield on debt and income producing investments was 10.2% at cost and 10.3% at fair value.

• Continues to be well positioned to source and underwrite lending opportunities offering strong risk-adjusted returns. - Defensively minded investment strategy remains in place, monitoring developments related to tariffs and economic conditions. - Expect to continue leveraging the unique origination engine to drive quality deal flow. - Aim to optimize the debt mix and consider upcoming unsecured maturity.

• Market conditions, uncertainty surrounding interest rates, and changing economic conditions could cause actual results to differ from forward-looking statements. - Tariff situation is dynamic and could have secondary/tertiary impacts on the portfolio, though MSDL portfolio is relatively insulated given sector orientation. - Slower economic growth could challenge middle market momentum, though middle market is more insulated from tariffs than larger overseas-focused companies.

Q: Melissa Wedel asked about the run rate earnings power of the portfolio and the repurchase plan.

A: David Pessah stated that most SOFR-related activity from Q4 was reflected in Q1 results, with a residual impact expected in Q2 from IPO-related waivers rolling off. Michael Occi mentioned the repurchase plan is a tool set via a 10b5-1 and is used to support the stock.

Q: Heli Sheth inquired about tariffs and M&A recovery.

A: Jeff Levin discussed the strategy of avoiding deeply cyclical sectors, the low direct exposure of the portfolio to tariffs, and that M&A volume is muted due to uncertainty, with dry powder allocation being front and center. He also noted bigger companies are coming to the private credit market for financing.

Q: Marissa Lobo asked about commitments and leverage.

A: Jeff Levin said commitments were more of the same with no notable change in sectors or deal sizes. Michael Occi mentioned they would like leverage to be higher, aiming for between 115 and 120 within the target range while sticking to credit selection.