10-Q: North Haven Income Fund Reports Lower Q3 Income, Increased Unrealized Losses

North Haven Private Income Fund LLC's Q3 2026 results show a decrease in investment income and a rise in unrealized losses, though liquidity remains robust.

Summary

• North Haven Private Income Fund LLC reported a decrease in total investment income to $142.5 million for Q3 2026 from $167.1 million in Q3 2025, and from $446.7 million to $419.4 million for the nine months ended September 30, 2026 compared to the prior year.
• Net investment income after taxes also decreased to $63.0 million for Q3 2026 from $79.7 million in Q3 2025, and from $199.4 million to $179.4 million for the nine months ended September 30, 2026 compared to the prior year.
• The company experienced a net realized loss of $5.0 million for Q3 2026 and $77.2 million for the nine months ended September 30, 2026.
• Net change in unrealized depreciation on investments was $40.2 million for Q3 2026 and $82.6 million for the nine months ended September 30, 2026.
• Total assets decreased from $6.97 billion as of December 31, 2025 to $6.05 billion as of September 30, 2026.
• Total liabilities decreased from $3.59 billion as of December 31, 2025 to $3.10 billion as of September 30, 2026.
• Members' capital decreased from $3.38 billion as of December 31, 2025 to $2.95 billion as of September 30, 2026.
• The net asset value per unit decreased to $17.64 as of September 30, 2026, from $18.57 as of December 31, 2025.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a neutral to slightly negative sentiment due to a decrease in investment income and net investment income compared to the prior year, alongside a significant increase in unrealized depreciation on investments. However, the company maintains a strong asset coverage ratio and has a substantial amount of liquidity.

Positives

• The company maintains a strong asset coverage ratio of 203.00% as of September 30, 2026, exceeding the regulatory requirement of 150%.
• Unrestricted cash, cash equivalents, and short-term investments totaled approximately $162.4 million as of September 30, 2026.
• Significant availability exists under credit facilities: $1.33 billion under ING Facility, $532.8 million under Wells Funding Facility, $150.0 million under CBNA Funding Facility, and $396.9 million under JPM Funding Facility (subject to borrowing base availability).
• The company believes it has adequate financial resources to satisfy unfunded portfolio company commitments of $610.1 million as of September 30, 2026.
• Dividend income increased significantly, primarily due to income from the NH Keystone joint venture.

Negatives

• Total investment income decreased by approximately $24.6 million for Q3 2026 compared to Q3 2025, and by approximately $46.2 million for the nine months ended September 30, 2026 compared to the prior year, primarily due to declining base rates and repricings.
• Net investment income after taxes decreased by approximately $16.7 million for Q3 2026 compared to Q3 2025, and by approximately $36.1 million for the nine months ended September 30, 2026 compared to the prior year.
• The company recorded net realized losses of $5.0 million for Q3 2026 and $77.2 million for the nine months ended September 30, 2026.
• Net change in unrealized depreciation on investments was $40.2 million for Q3 2026 and $82.6 million for the nine months ended September 30, 2026.
• Total assets decreased by approximately $0.92 billion from December 31, 2025, to September 30, 2026.
• Members' capital decreased by approximately $0.43 billion from December 31, 2025, to September 30, 2026.
• Net asset value per unit decreased to $17.64 as of September 30, 2026, from $18.57 as of December 31, 2025.

Risks

• The company is subject to financial market risks, including valuation risk, market risk, and interest rate risk.
• Fluctuations in interest rates can affect net investment income, particularly given the company's use of borrowings.
• Investments in illiquid debt and equity securities of portfolio companies carry valuation risk, and forced liquidation could result in amounts different from fair value.
• Global economic and political instability, health crises, and other unforeseen events can adversely affect investments and increase market volatility.
• The company's business prospects are tied to the general economy and the industries in which it invests.
• The company's future success depends on its ability to locate suitable investments and monitor its portfolio companies.
• The company's qualification as a BDC and RIC is subject to ongoing compliance with regulatory requirements.

Future Outlook

The company expects to continue its continuous private offering of Class S Units. A merger with North Haven Private Income Fund A LLC is expected to close in December 2026, subject to regulatory approvals and closing conditions. The base management fee rate is expected to decrease from 1.25% to 1.00% effective January 1, 2027, subject to the closing of the merger.

Management Comments

• The decrease in total investment income was primarily driven by declining base rates and repricings on our existing portfolio, which impacted our weighted average yield.
• Total dividend income increased primarily attributable to dividend income earned from our investment in the joint venture at NH Keystone.
• The decrease in interest and other financing expenses was primarily driven by a lower average interest rate and the redemption of our Series B 2026 Notes.
• The decrease in pre-incentive fee net investment income was primarily due to a decrease in pre-incentive fee net investment income.

Industry Context

StockSavvy.ai notes that the decrease in investment income and increase in unrealized losses are consistent with broader trends in the middle-market lending sector, which has been impacted by rising interest rates and a more challenging economic environment affecting portfolio company performance. The company's focus on senior secured term loans provides some downside protection, but the overall market conditions are creating headwinds.

Comparison to Industry Standards

• The weighted average yield on debt and income producing investments at fair value is 9.5% as of September 30, 2026, which is competitive within the BDC sector focused on middle-market lending.
• The company's asset coverage ratio of 203.00% is strong and well above the industry standard for BDCs, which is typically 150% after borrowings.
• The portfolio turnover rate of 7.63% for the nine months ended September 30, 2026 is lower than the prior year's 13.50%, suggesting a more stable, longer-term investment strategy, which is common for income-focused BDCs.
• The average position size of investments at fair value ($19.8 million as of September 30, 2026) indicates a diversified approach within the middle-market lending space, mitigating concentration risk compared to smaller funds.

Legal Proceedings

• The Company, the Investment Adviser, and the Administrator may become party to certain lawsuits in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies.
• The Company is not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against the Company.

Related Party Transactions

• Investment Advisory Agreement with MS Capital Partners Adviser Inc. (Adviser) for base management fees and incentive fees.
• Administration Agreement with MS Private Credit Administrative Services LLC (Administrator) for administrative services.
• Placement Agent Agreement with Morgan Stanley Distribution Inc. and Morgan Stanley Smith Barney LLC for assistance in unit placement.
• MSDI Agreement with Morgan Stanley Distribution Inc. for placement of Units.
• Expense Support and Conditional Reimbursement Agreement with the Investment Adviser.
• Morgan Stanley & Co. LLC served as co-agent and initial purchaser in connection with various note issuances and received fees.

Stakeholder Impact

• Shareholders (Unitholders) will experience a decrease in net asset value per unit and a reduction in net investment income compared to prior periods.
• The decrease in investment income and increase in unrealized losses may impact future distributions.
• The proposed merger with North Haven Private Income Fund A LLC could lead to changes in the structure and potentially the NAV per unit for Class I unitholders.
• The reduction in the base management fee rate effective January 1, 2027, may positively impact future net investment income for unitholders.

Next Steps

• The company expects to close a merger with North Haven Private Income Fund A LLC in December 2026, subject to approvals.
• The base management fee rate will be reduced from 1.25% to 1.00% effective January 1, 2027, subject to the closing of the merger.
• The company will continue its continuous private offering of Class S Units.
• The company will continue to monitor its investment portfolio and risk ratings.

Key Dates

Recommendation

The company's strong asset coverage and liquidity provide a cushion, but the decrease in investment income, increase in unrealized losses, and net realized losses suggest a cautious approach. The ongoing merger and fee reduction are positive developments, but the current market environment and performance trends warrant a hold rating until a clearer recovery or stabilization is evident.

Keywords

North Haven Private Income Fund, BDC, Middle Market Lending, Senior Secured Loans, Investment Portfolio, Fair Value, Interest Income, Unrealized Losses