Morgan Stanley Direct Lending Fund’s shares tick down in market debut

(Reuters) – Shares of Morgan Stanley Direct Lending Fund (MSDL) dipped 1% in their market debut on Wednesday, as investor appetite for new issues continues to remain muted.

The fund chiefly invests in riskier bonds, like those issued by middle-market companies or by private equity firms looking to finance their acquisitions. Such bonds typically fetch higher interest than top-rated corporate debt.

The lukewarm debut comes days after a tepid reception to Kazakhstan-based banking and fintech giant, and underscores that investors continue to be cautious around new listings.

MSDL’s stock began trading at $20.45 apiece compared with the IPO price of $20.67 each, at which it sold 5 million shares to raise $103.35 million in its initial public offering.

U.S. commercial and regional banks have been adopting a more risk-averse approach due to heightened regulation and economic uncertainty. Their retreat from risky market segments has allowed alternative lenders to cash in.

The MSDL fund is managed by a unit of Wall Street giant Morgan Stanley. The fund intends to use proceeds from the IPO to pay down some of its debt.

MSDL had an investment portfolio of $3.1 billion measured by fair value and a net asset value of $1.5 billion, as of Sept. 30, 2023. Its primary source of income is from investments it holds and capital gains on the sale of loans or securities.

Morgan Stanley, J.P. Morgan, and Wells Fargo Securities are acting as lead joint book-running managers for the offering.

(Reporting by Niket Nishant and Manya Saini in Bengaluru; Editing by Shailesh Kuber)