On December 16, 2024, KBRA assigned issuer and senior unsecured debt ratings of BBB to the Morgan Stanley Direct Lending Fund (NYSE: MSDL), with a stable outlook. This rating reflects MSDL's strong ties to approximately $1.5 trillion in assets under management from Morgan Stanley Asset Management, which provides the fund with significant backing from investment banking and capital markets [1e9f26f5].
MSDL's portfolio is valued at $3.6 billion, with a substantial 96% allocated to senior secured first lien loans across 200 companies. The fund's median EBITDA stands at $84.7 million, with its top sectors including Software (17.7%), Insurance (12.6%), and Commercial Services (10.5%) [1e9f26f5]. The fund maintains a gross leverage ratio of 0.99x, which is within its target range, and its liquidity position is bolstered by $1.1 billion in bank credit and $88.4 million in cash [1e9f26f5].
However, the fund faces risks due to its limited operating history since its commencement in January 2020 and the prevailing economic uncertainties. Despite these challenges, KBRA's rating upgrade for MSDL is unlikely in the medium term, although a potential downgrade could occur if the fund engages in riskier investments or if there is an economic downturn [1e9f26f5].
This development comes amidst a broader landscape of investment opportunities and financial activities, including various securities and funds offered by major financial institutions such as BofA Finance LLC, Citigroup Inc., and Morgan Stanley Finance LLC. Investors are encouraged to stay informed about the risks and opportunities associated with these investments, as the financial world continues to evolve [012de2c7].
In addition to the ratings assigned to MSDL, Medalist Partners' structured credit mutual funds have also shown impressive performance, ranking in the top decile for the 1-year period ended November 30, 2023. These funds focus on low correlation to core fixed income and limiting downside volatility through investments primarily in mortgage-backed securities and investment-grade structured credit [012de2c7].
As the financial landscape shifts, both established and emerging funds like MSDL are navigating the complexities of market conditions, offering investors a range of options to consider for their portfolios.