Morgan Stanley Direct Lending Fund current report, 02 March 2021

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Business Context and Reporting Period

Morgan Stanley Direct Lending Fund filed a Form 8-K reporting amendments entered into on March 2, 2021. The amendments relate to the BNP Funding Facility used by DLF Financing SPV LLC, a wholly owned subsidiary of the Company. The report was signed on March 5, 2021.

Key Financial and Financing Terms

  • Borrowing capacity increased from $300 million to $600 million.
  • Borrowing-base calculations were amended; the filing does not provide the detailed revised calculations.
  • Applicable borrowing margins were reduced to 1.95%–2.75% during the reinvestment period and 2.45%–3.25% after the reinvestment period.
  • The LIBOR dollar floor was reduced to 0.00%.
  • The filing does not provide revenue, profit, cash flow, margin, debt outstanding, liquidity balances, or utilization of the facility.

Material Changes Versus the Prior Terms

The Second Amendment increased the facility’s maximum borrowing capacity, adjusted borrowing-base mechanics, reduced applicable interest-rate margins, and eliminated the positive LIBOR floor. Other material terms were stated to remain unchanged.

Outlook, Risks, Contingencies, and Unusual Items

  • Borrowings remain subject to contractual covenants and leverage restrictions under the Investment Company Act of 1940.
  • The filing does not provide management guidance or an operating outlook.
  • The amendment creates or modifies a direct financial obligation of the registrant through its wholly owned subsidiary.
  • The filing states that the amendment documentation will be filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Investor Verification Items

  1. Review the definitive Second Amendment and supporting fee letters when filed to confirm all revised terms, fees, covenants, and borrowing-base provisions.
  2. Verify facility utilization, debt outstanding, collateral coverage, and compliance with applicable covenants and Investment Company Act leverage limits.
  3. Assess the effect of the increased borrowing capacity and reduced margins on liquidity, leverage, and financing costs.
  4. Confirm the transition and economic implications of the 0.00% LIBOR floor, including any applicable benchmark-replacement provisions.