Good day and welcome to the Morgan Stanley Direct Lending Third Quarter 2026 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the prepared remarks. As a reminder, this conference call is being recorded. At this time, I'd like to turn the conference over to Sanna Johnson, Head of Investor Relations. Please go ahead.

Good morning and welcome to Morgan Stanley Direct Lending Fund's third quarter 2026 earnings call. I am joined this morning by Michael Occi, Chief Executive Officer, Jeff Day, Co-President, David Pessah, Chief Financial Officer, and Rebecca Shaul, Head of Portfolio Management. Morgan Stanley Direct Lending Fund's third quarter 2026 financial results were released yesterday after market close and can be accessed on the investor relations section of our website at www.mscl.com. We have arranged for a replay of today's events that will be accessible from the Morgan Stanley Direct Lending Fund website. During this call, I want to remind you that we may make forward-looking statements based on current expectations. The statements on this call that are not purely historical are forward-looking statements. These forward-looking statements are not a guarantee of future performance and are subject to uncertainties and other factors that could cause actual results to differ materially from those expressed in the forward-looking statements, including and without limitation market conditions, uncertainties surrounding interest rates, and other factors we have identified in our filings with the SEC. Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions can prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions can be incorrect. You should not place under-reliance on these forward-looking statements. The forward-looking statements contained on this call are made as of the date hereof, and we assume no obligation to update the forward-looking statements or subsequent events. To obtain copies of SEC-related filings, please visit our website. With that, I will now turn the call over to Michael Occi.

Good morning, and thank you for joining us. I'll begin with an overview of the meaningful step we've taken to strengthen MSDL's value proposition for shareholders before turning to our third quarter performance. Jeff will then cover the market environment and deployment activity, and David will review our financial results in greater detail. We'll then open the call for Q&A. We are pleased to announce that the Board has approved a decisive action in our ongoing effort to create value for shareholders. Effective January 1, 2027, we are reducing MSDL's management fee from 100 basis points on assets to 75 basis points on assets and its incentive fee from 17.5% to 15%. We believe these reductions will strengthen MSDL's baseline return profile. Combined with our existing incentive fee cap, We believe this makes us a leader on fee structure in the sector. More importantly, this action further strengthens our alignment with shareholders. The fee reduction serves as another proactive step to strengthen MSDL's return profile and help offset the yield normalization that the industry has experienced over the last several years. We previously established the capstone joint venture, increased the size of our share repurchase program, maintained a competitive operating expense profile, and optimized our debt stack. The fee reduction is another way to improve shareholder returns while maintaining our disciplined investment mandate. We have applied this philosophy consistently across our platform, most recently taking a similar action on fees with our non-traded BDC offering. The specifics of the improved fee framework were grounded in our objective to deliver shareholder value by earning our cost of capital. This move advances that goal. as we believe the per share fee reduction can provide meaningful return accretion. As illustrated in the earnings presentation, on a pro forma basis over the last 12 months, the reduced advisory fees would have increased NII return on NAB by approximately 64 basis points or approximately 3 cents of quarterly NII per share. The specific earnings benefit from the lower incentive fee rate will depend on whether the incentive fee cap is in effect in any given period. This reduction also reinforces our confidence in the durability of the distribution. In addition to declaring the 45 cent regular for the fourth quarter, the Board has declared a quarterly supplemental dividend, which is equivalent to 50% of excess NII per share above the regular dividend. This will be paid during the fourth quarter period, resulting in an incremental penny and a half per share for a total distribution yield on NAV of 9.9% based on September 30, 2026 NAV per share. Transitioning now to our third quarter operating results, we generated net investment income of $0.48 per share, compared with $0.45 per share in the prior quarter. Credit indicators were mixed quarter over quarter, with the non-accrual rate increasing modestly and PIC to income declining relative to the second quarter. We did experience mark-to-market activity, including as a result of one realization, which led to a decline in NAV in a quarter. Jeff will elaborate on this in more detail. Nguyen. Discipline capital allocation remained a priority in the third quarter as we navigated the more dynamic market, continuing our approach from the first half of the year. We prioritized ramping the JV and utilizing the buyback, and we successfully ended the quarter at what we believed to be near optimal leverage. During the quarter, we continued to scale the capstone JV, including an equity contribution from MSDL of $25 million. Because this occurred late in September, this The specific step did not meaningfully increase net investment income for the period. However, with this investment, the JV is now approximately 65% utilized, and we remain on track to complete the ramp by mid-2027. In our view, there remains a disconnect between the direct lending fundamentals and investor sentiment, although that gap appears to be gradually narrowing. To this point, the third quarter saw declining redemption rates at non-traded BDCs, including our own. Separating the signal from the noise is admittedly challenging given the two distinct realities at play right now in the direct lending market. First, a constructive deployment environment supported by improved spreads and other lending terms and an upward bias in base rates. And second, pockets of credit softness across the broader market and within MSDL's portfolio. While credit events and dispersion are likely to remain market realities, We believe that the relative value and diversification that this asset class offers for client portfolios remain attractive, particularly amidst the rate volatility that has challenged public fixed income performance. We believe this value proposition is enhanced in a wrapper constructed and executed as thoughtfully as MSDL. Our commitment to transparency and alignment with investors is reflected in our actions, including the fee reductions we have outlined today. Leveraging the strength of the Morgan Stanley franchise, we believe MSDL remains well positioned to navigate evolving market conditions and deliver long-term shareholder value. With that, I'll turn the call over to Jeff Day.

Thank you, Michael, and good morning. Beginning with the broader direct lending market, we continue to see a favorable environment for disciplined lenders with pricing, documentation, and structural protections remaining meaningfully more attractive than in mid to late 2025. These improvements have proven durable through the third quarter despite continued competition for high-quality assets. Our median spread on new deals for the quarter was 538 basis points, up from 475 basis points in the prior two quarters. Importantly, we are seeing more conservative leverage levels and increased sponsor equity contributions, allowing us to originate loans with more attractive risk-adjusted returns and greater structural protections and we are seeing several quarters ago. From an activity perspective, the market remains somewhat at a crossroads. While overall direct lending volumes remain subdued during the quarter, we've begun to see encouraging signs of renewed M&A interest including within the software sector where one of our existing commitments was taken out as part of a sponsor to sponsor sale process. Private equity sponsors continue to prioritize investment monetization and return of capital to limited partners which we believe should ultimately support increased transaction activity. At the same time, the Fed's September rate increase and more hawkish outlook introduced an additional headwind for sponsors evaluating new investments and exits. We believe this dynamic will continue to favor lenders with strong origination relationships, flexible capital, and the ability to execute with speed and credibility. Competition remains particularly strong for high quality businesses with durable cash flows while lenders are demonstrating greater selectivity towards companies facing operational challenges or potential secular disruption. In software specifically, we believe the conversation around AI has become more balanced with increasing recognition that the impact will vary meaningfully by business model. Overall, we remain constructive on the credit fundamentals of our software portfolio while recognizing that the evolving economics of AI reinforce the importance of discipline underwriting active portfolio monitoring, and investing in market-leading businesses with durable competitive positions. Turning to third quarter activity, MSDL closed 12 investments, including six new platforms. In addition, the JV balance sheet grew by $132 million, which helped further diversify its portfolio and increase earnings. One investment to highlight this quarter was Concertus, a global engineering and project advisory platform Serving aviation, water, utilities, and technology end markets. We initially evaluated the company when RTC partners acquired it last year, but passed given its smaller size. Following a year of strong performance and customer diversification, we were pleased to provide financing for incremental M&A activity. Our underwriting benefited from our team's deep sector experience, complemented by differentiated insights from Morgan Stanley's private equity and research teams. The investment was priced at SOFR plus 575 basis points with lender-friendly documentation representing an attractive risk-adjusted return opportunity for MSDL. Turning to credit, our focus remains on the underlying cash generation and liquidity of our borrowers. While evaluation pressure earlier in the year largely reflected broader market concerns around AI disruption and geopolitical uncertainty, recent declines have been driven more by fundamental credit challenges for a limited number of portfolio companies. We believe this softness is not indicative of a deep cycle, but rather we have seen weakness for certain borrowers that reflects idiosyncratic execution challenges rather than macroeconomic factors such as higher oil prices, weaker consumer demand, or rising base rates. In particular, we have seen operational and execution challenges at certain highly acquisitive businesses Where integration delays, cost overruns, and slower-than-expected synergies have pressured cash flow generation. While these situations warrant close attention, we continue to see stable fundamentals across the broader portfolio without evidence of thematic industry challenges. Against this backdrop and with the potential for higher rates for longer, we remain focused on free cash flow, covenant headroom, near-term maturities, and PIC utilization. We ended the quarter with 5.4% PIC income as a percentage of total income, down slightly from the prior quarter, and remaining well below the levels observed across our publicly traded BDC peers. During the quarter, we completed the restructuring of AMCP Pet Holdings, which goes by Bright Pet, a manufacturer of premium pet food and treats. Following a deterioration in operating performance driven by company-specific operational and execution challenges, ownership of the business was consensually transferred from the sponsor to the lender group. As part of the restructuring, the existing debt was reorganized and the resulting realized loss, while partially offset by the reversal of previously recognized unrealized losses, was the largest contributor to the decline in NAD during the quarter. While the outcome is disappointing, we believe the challenges of Bright Pet are isolated and we are working closely with the management and board to maximize the value of our position over time. In addition to BrightPet, we placed three additional investments on non-accrual during the quarter, representing a total of $17.2 million at cost. Any Hour and LogRhythm have experienced company-specific underperformance for an extended period, while FPG Intermediate Holdco, our afterlife services portfolio company that previously underwent restructuring, continues to face operational headwinds. Our approach to challenge credits is active and situation-specific, We remain actively engaged in restructuring discussions for several of our non-equal investments and expect to make further progress towards resolutions over the coming quarters. Importantly, despite these isolated challenges, 93.4% of the portfolio remains in risk-graded one or two assets as a quarter end underscoring the overall stability of the portfolio. Turning to software, the debate around AI-related disruption has become more rational. The discussion is increasingly moving away from broad sector-wide assumptions and toward the fundamental of individual companies. Across our own software portfolio, operating performance remains generally healthy, supported by continued revenue growth and the detailed company-level assessments we have conducted to evaluate potential AI-related risks. Many software businesses are accelerating investments in AI enabled functionality to defend and enhance their competitive positions. Over the near term, we anticipate that this investment, along with rising cloud infrastructure and hosting costs, could pressure margin profiles. However, AI driven efficiencies and software development could ultimately help offset some of these incremental expenses. Through the third quarter, we updated our proprietary AI scorecard, which continues to show that only a low single-digit percentage of our portfolio is in the category we deem to be at high risk of AI disruption. More broadly, we remain attentive to macroeconomic and geopolitical risks and their potential impact on borrower demand, input costs, and liquidity. We continue to stay in close contact with management teams and assess these exposures at individual company level rather than rely on broad sector assumptions. In summary, we continue to see attractive lending opportunities supported by favorable pricing and stronger lender protections, even as the operating environment remains challenging for certain borrowers. Our focus remains on disciplined origination, active portfolio management, and preserving shareholder capital while delivering attractive risk-adjusted returns. With that, I will turn the call over to David Pessah.

Thank you. Turn into our balance sheet. Our portfolio totaled $3.43 billion at fair value as of quarter end. Our continued focus is at the top of the capital structure with the portfolio being comprised of approximately 96% investments in first lien debt or the JV entity and the remainder in second lien, equity, and other investments as of September 30th. Inclusive of new investment commitments, total investment fundings amounted to about $75.1 million during the quarter, offset by $140.9 million in repayments. We believe the portfolio remains well diversified, with 233 portfolio companies across 37 industries and an average borrower exposure of approximately $14.7 million. In addition to some of the credit metrics that Jeff provided, the weighted average loan-to-value across our portfolio was approximately 42.4%. and Median EBITDA remain relatively unchanged at $91.4 million. To provide some additional detail about our JV, the vehicle has total equity commitments of up to $250 million of which $200 million is committed by MSDL. To date, approximately 65% of the total equity commitments have been called supporting approximately $557 million of investment commitments across portfolio companies in 29 industries. The weighted average yield on debt and income-producing investments is 9.1% at cost. On a lever basis, the dividend yield on MSDL's investments in the JV equated to approximately 12.9%. Moving to our operating results for the quarter, net investment income was $40.3 million or $0.48 per share, which increased from $38.2 million or $0.45 per share. Total investment income decreased to $86.1 million from $88.8 million. The decrease was a function of the impact of positions placed on non-accrual and lower non-recurrent revenue. Total expenses decreased to $45.1 million from $49.8 million in the previous quarter, primarily reflecting lower incentive fees earned, which was subject to our incentive fee cap from the restructuring of Bright Pet, partially offset by higher The net change in unrealized depreciation and realized losses for the third quarter was $67.6 million. Unrealized losses were driven by underperformance in a handful of portfolio companies, which includes the aforementioned positions that were placed on non-approval. Net realized losses during the period were related to the restructuring of BrightPen. As of September 30th, our total assets were $3.59 billion, and total net assets were $1.57 billion. Our end in NAPR share for the third quarter was $18.76 compared to $19.50 in the prior period. The gross debt to equity ratio closed the quarter at 1.25 times, modestly above the 1.21 times multiple from the previous quarter. Additionally, in the third quarter, we proactively refinanced the upcoming February 2027 maturity with a five-year $350 million unsecured note issuance. While the transaction creates some incremental near-term interest expense, it enabled us to secure funding ahead of the recent widening in credit spreads and avoid potentially higher borrowing costs had we waited. Overall, we remain confident in the strength and positioning of our debt portfolio through the remainder of 2026 and into 2027. During a period, we repurchased approximately $12.8 million of our shares at prices below NAV, which was $0.04 accretion to NAV per share. We have approximately $71 million of capacity remaining on the $100 million share repurchase program we refreshed earlier this year. Regarding distributions, we declared a $0.45 regular distribution for the third quarter. Our Board of Directors declared a $0.45 per share regular distribution for the fourth quarter Payable to Shareholders of Record as of December 31st, 2026, and 1.5 cents per share supplemental distribution payable to shareholders of record as of November 30th, 2026. Our spillover income was approximately 85 cents per share. With that, operator, please open the line for questions.

Thank you. If you would like to signal with questions, please press star 1 on your touchtone telephone. If you're joining us today using a speakerphone, please make sure mute function is turned off to allow your signal to reach our equipment. Again, that is star 1 if you would like to signal with questions. And the first question will come from Finian O'Shea with Wells Fargo Securities.

Hi, everyone. Good morning. So you start with the big changes on the fee structure. Can you talk about sort of why now? Was this a long time coming and sort of why these new levels?

Yeah. Hi, Finn. As I alluded to, it really comes down to the reduction of fees, proactive steps, We're looking to enhance shareholder economics, improve the earnings power in isolation. We're constantly looking for ways to improve returns. We believe the new structure aligns our economics with shareholders. It provides meaningful uplift to the why now. As I alluded to, we've seen a maturity in this sector in these product suites, including the non-traded. Bridge to Double Digits, if you look at the LTM math we provided. Optically, these happen to be the net levels associated with the post-IPO waivers. So we've been there before. They weren't completely random. But that's kind of a little bit on the why now. I would just reinforce the point that shareholder alignment has always been critical. We've decided to take Harnest this moment really across the platform to even more powerfully align ourselves with shareholders and it allows us to do that improve returns without violating what's core to us from an investment strategy perspective and that's critical. At the end of the day that's the mission is to deliver best-in-class risk adjusted returns through that credit box but It's really important to us to get everything else right. All the big stuff, all the small stuff, from a structure perspective, and this is us doing that.

I appreciate that. And a second question, you flagged a software exit, sounded like a good outcome. Can you, now that we've kind of seen a few more of those with you and across the space, Can you give some color on sort of what you learned on the characteristics that a sort of movable software name needs and then maybe provide some dimension on amongst the sort of haves and have nots of software credits to I guess help us you know, determine how many of these will move and how many will be longer term sort of workouts.

Yeah, hey Finn, it's Jeff. I think, you know, obviously we were, we're happy to see that there is and it remains a market for these software assets and obviously seeing sponsor to sponsor trades I think is a positive thing to see. I think, you know, from our perspective You know, obviously, there's been a whole lot of press, you know, on AI and, and the potential impacts that exist. I think there's a lot of as we've talked in the past, there's a lot of software businesses out there, particularly those that we've, you know, focused on lending to that have not experienced that, you know, impact and disruption from AI. These are businesses that, you know, own and house data. And so they've had that in remote from from software. I think we continue to see strong revenue and EBITDA growth across our software portfolio. I think strong retention rates, gross and net retention is a key tenant to the success of software businesses. And so I think as we look across our portfolio, we continue to see those continued drivers that continue to create value in the companies that we've lent to.

Good morning.

Thanks for the question. What are you seeing in terms of the spreads which assets are repaying at versus where you are currently deploying capital? And where do these spreads go from here?

Kelly, thanks for the question. I would just acknowledge up front and you can see it in the deck. We did see a downtick in repays in the third quarter. This had been tracking pretty reliably at call it 5%, if not more, by quarter relative to the total portfolio. Probably a little bit muted given volatility in the BSL market. Probably a bit of a moment in time, slowdown in M&A activity. and some of it has to do with private to private refinancings slowing down a little bit given how much had been done in 24, 25. But over the LTM period it's still north of 20%, wouldn't make too much about the specific outcome in the third quarter. What came off versus what went on is a little bit noisy just given the makeup of what we did from an origination perspective when you consider the fact that the JV was a piece of that. But by and large, we've seen a widening in spread for new deployment relative to the legacy book and specifically where we were back in the third quarter 2025. We think that's healthy. And if we're being honest, probably a little bit surprised by the staying power of that deep into 2026. Attribute maybe some of that to The volatility in the public markets.

Got it. Thanks for the caller. And on that, what should we expect going forward in terms of repayments and originations, not just for the remainder of the year, but also into 2027? Especially because 2026 has just been pretty stagnant activity-wise. So what near-term catalyst do you think could drive activity?

Yeah, so a couple of things. If you look a layer deeper into the makeup of the true repayments in the quarter, you see the 140 million, roughly 45 of that was dropped down into JV associated with what we alluded to earlier. So the true 90 of repayments was lower than in prior quarters, but pretty diversified and mixed. So you had a strategic takeout, you had one sale to a financial buyer, and then something that was a refinancing. So you're still seeing good mix. Going forward, I would expect to see some level of ongoing portfolio turnover, although it's tough to predict timing and magnitude with precision. To your point, just on the trajectory of asset balances, as we think about originations on the other side, we're in optimization mode. based on where valuations have been from a stock price perspective. We leverage has more or less dictated the capital that we have to consume in any given period. As we talked about, we continue to prioritize the buyback that was 13 million bucks. You couple that with the valuation move in the quarter and that effectively dictated that we wanted to shrink the book 65 or so million net to keep within the leverage target. And so the JV was One component of that, that was a net negative, even though there's a $25 million contribution. And so with the 90 or so of true repayments away from that, we had the ability to go and deploy 50 million or so. So we're going to continue to be in the mode of optimizing those levers to maximize returns. I think it's constructive to see that the deployment environment and the terms that Jeff alluded to continue to be really constructive. This fund, even if it's, you know, range bound from a total size perspective, continues to benefit from being part of a bigger platform from an allocation point of view. And the diversification benefits even in quarters like these benefit are significant given that dynamic.

Got it. I appreciate the detail.

and we'll take a question from Paul Johnson with KBW.

Hey, good morning. Thanks for taking my question. I applaud the fee changes, fairly meaningful as you have in your slide here, 64 basis points in incremental ROE, certainly very significant in this environment. In terms of the fee change, again, very positive. But we also expect those shareholders probably need to also see, I guess, the confidence alongside that, you know, that credit can improve from here. So I guess I just ask, you know, where do you think you are in that process, you know, as we continue to see kind of normalization broadly across the space? You know, how close do you think We are here in terms of kind of hitting a peak and of, you know, not accruals and restructurings and such.

Yeah, yeah, Paul, thanks for the question and the acknowledgment on the on the step that we've taken on the profitability profile on credit. And Jeff covered some of this, but I would characterize the outcome in the third quarter and to a certain extent, the year to date period as being just a function of a small pocket of the portfolio where we had seen identifiable weakness taking a leg or so lower. At the same time, if you look at the portfolio at large, we continue to see pretty good resilient operating performance. A couple other points I would make just to make that come to life. First, as David alluded to, it's concentrated. And so if you look at the five biggest movers, it accounted for more than 70% of the unrealized mark to market in the quarter. The second point I would make is in terms of what's driving it, it's generally not macro, generally not industry themes, it's more management, sponsor execution missteps and while that's still unfortunate and sometimes even more unpredictable, it's better in our view than something that is more levered to let's say consumer weakness or higher prices at large, which can metastasize is our belief more quickly if you see a big market shock. So while the trends are probably symptomatic of a portfolio that's seasoned to a certain extent, the asset base broadly continues to demonstrate pretty good health. And I wish I could tell you with precision what happens over the next quarter or two, but we are sticking to our knitting. The basics of the investment strategy continue to be on track. The first lean orientation, the non-cyclical orientation, we're actively working through the small group of problem children that have underperformed vis-a-vis restructurings. One's already happened in the course of the 4Q to date period. We're maximizing recoveries, and we believe at large the portfolio continues to be very well positioned from a market perspective.

I appreciate all that color and apologize. I dialed in late, so I missed David's comments. But once again, thanks for the answer. Appreciate that. It's all for me. Thanks.

Thanks, Paul. And the next question comes from Melissa Waddell with UBS.

Good morning. Thanks for taking my questions. Quick follow-up on the one you just mentioned. The restructuring or recovery that has occurred so far in 4Q to date, Is there any color you can add there? Anything we should be thinking about in terms of a resolution that was different from Fair Value Market 3Q?

Yeah, Melissa, hi. Not much color I can provide. The name of the business restructure is not yet public, so we look forward to updating you on that. The only other thing I would say is with respect to the 930 marks which is a function of our rigorous valuation system taking into account as part of the policy all the best information that we have at the time we think is an appropriate reflection of fair value.

Okay, appreciate that. You also mentioned a couple of the new companies that were added to the non-equal status during the quarter. They're ones that have been having some weakness leading up to that addition to non accrual status. So trying to reconcile that comment with what you mentioned earlier about some of the challenge credits in the portfolio have been ones where they've been acquisitive and integration has taken longer than expected. Are those companies on non accrual status right now? And if so, do you view those differently in terms of the potential recovery or return to accrual status then? perhaps somebody who's got a more challenged capital structure or top line. Edwin?

Yeah, hey Melissa, it's Rebecca. I would say it's a bit of a mix in terms of what we see with the non-accrual assets as it relates to the drivers. There are certain investments that do have that characteristic that is driven under performance, but as Jeff and Michael alluded to, we are seeing Very company-specific issues that have driven the underperformance in the non-accrual bucket. And it's really companies that span different industries and end markets and have experienced different challenges that have led to some of the financial deterioration. So in certain cases, that has been one of the issues in this category. But it is company-specific, and some of the challenges that M&A or execution issues have driven do do range in terms of severity of the impact to the borrower as to whether it moves into the non-accrual category or not.

Thank you.

Once again, if you would like to signal with questions, please press star 1. Again, star 1 if you would like to ask questions. The next question will come from Kenneth Lee with RBC Capital Markets.

Hey, good morning. Thanks for taking my question. Appreciate the new supplemental dividend framework there. Curious whether you have any updated thoughts in terms of dividend coverage. I think previously you had said that the current base dividend was appropriate over the medium term there. Thanks.

Yeah. Hi, Ken. Thanks for the question. We continue to feel good about the regular. Thanks for calling out the supplemental Maybe it's cleanest just to break down a little bit what we saw from an NII perspective in comparison to the second quarter in the 45 cents. We call it a clean NII in the low to mid 40s for this quarter. You had relative to 2Q about six cents of help from the look back relative to the benefit you saw in the prior quarter. Other income was a penny light. Income from the JV was flat to the point that it didn't see the benefit of the chunky drop down near the end of the quarter. Debt expense was a little bit of a drag, but that's more or less here to stay, just as you think about that line item relative to the second quarter. On the go forward, which is more responsive to your question, there's going to be, in our view, incremental upside from the JV. At full ramp relative to where we were, the 65% or below that earlier in the quarter, it's probably another four-ish cents when you're at that 100% period. So it's going to happen gradually. It's not going to be a straight line, as David alluded to. In addition to that, the Fed's obviously a variable. The September hike, yet to see a benefit in terms of the impact. Not going to be massive, but you'll see a lot of that impact in the fourth quarter. And then, of course, the fee reduction. We've quantified the baseline potential upside from that that will kick in, obviously, beginning with the first quarter. Credits, as a variable, a little bit tougher to gauge. So you boil that all together, and the core earnings power, we think it puts us in a comfortable position as it relates to having confidence on the 45. The supplemental, just on top of that, we look at as an effective means to return some excess earnings to shareholders in a formulaic way as some of these things come online. Of course, there's no guarantees on a magnitude, but we think it's a nice structure to augment what we're doing with the regular.

Great. Very helpful call there. And then just one follow-up, if I may. I wonder if you could just at a higher level remind us again of MSDL's workout and restructuring capabilities and perhaps potential access to the broader MSPC private credit platform for additional resources there. Thanks.

Sure. Hey, Ken. It's Jeff. We have a really robust infrastructure here, not only on our team, but we leverage the broader Morgan Stanley ecosystem as well. So specifically as it relates to our team, we do have a dedicated workout team. We've got several individuals on our team who are complementary to our deal teams in terms of working through underperforming credits. We pull in additional resources. as needed, including Rebecca and David Kulikovsky, who's our head of underwriting, who has significant workout experience. But we're able to leverage additional resources as well. We sit within what's the broader private credit and equity solutions business within Morgan Stanley. So we're able to leverage some of the operating partners that exist on our private equity franchise as needed. And then the broader restructuring capabilities of Morgan Stanley We feel like we've got a really robust infrastructure to help work through underperforming credits.

Great. Very helpful there. Thanks again.

Thank you. At this time, I'd like to turn the call back to Michael Occi for closing remarks.

On behalf of our team, thanks for your time today and your continued support of Morgan Stanley Direct Lending Fund. Today's fee reductions put our commitment to shareholder alignment in action and advance our objective of delivering long term value for investors. We remain confident in our portfolio's resilience and our ability to execute a differentiated investment strategy supported by the scale, sourcing capabilities and institutional infrastructure that Morgan Stanley brings to our private credit platform. We look forward to sharing our fourth quarter results on our earnings call in February.

Thank you.

And that does conclude today's conference. We do thank you for your participation.

Have an excellent day.