KBRA Assigns Rating to Morgan Stanley Direct Lending Fund's $350 Million Senior Unsecured Notes
KBRA assigns a rating of BBB to Morgan Stanley Direct Lending Fund's (NYSE: MSDL or "the company") $350 million, 6.10% senior unsecured notes due July 15, 2031. The rating Outlook is Stable.
Key Credit Considerations
The rating and Outlook are supported by MSDL's strong ties to the ~$1.9 trillion assets under management and/or supervision of Morgan Stanley Asset Management. The company benefits from investment banking, global capital markets, investment management, and wealth management within the Morgan Stanley (NYSE: MS) ecosystem in addition to MS' robust sponsor and banking relationships. As part of the MS ecosystem, MSDL leverages the broad MS private credit platform (“MSPC”), which includes $23 billion of committed capital in direct lending along with SEC exemptive relief to co-invest with certain other affiliated investment vehicles managed by the company's adviser, MS Capital Partners Inc. ("Adviser") or its affiliates. Furthermore, as of 1Q26, MSDL's $3.7 billion diversified investment portfolio at fair value (FV) comprises approximately 93.8% senior secured first lien loans spread across 227 companies in 36 industries, primarily in less cyclical sectors. The investment portfolio's median EBITDA is $91.1 million, and the top three sectors are Software (20.7%), Insurance Services (10.1%), and IT Services (9.9%). Asset quality remains solid with six portfolio companies on non-accrual, comprising only 1.0% and 1.5% of total investments at FV and cost, respectively at 1Q26. While the portfolio remains somewhat unseasoned due to its short operating history, 94.5% of the investment portfolio maintained an internal rating of 2 or higher, indicating performance at or above underwriting expectations.
