10-Q: North Haven Income Fund Reports Q1 2026 Results

North Haven Private Income Fund LLC reported a net decrease in members' capital of $10.2 million for the first quarter of 2026, primarily driven by net realized and unrealized losses on investments.

Summary

• North Haven Private Income Fund LLC reported a net decrease in members' capital of $10.2 million for the three months ended March 31, 2026, compared to a net increase of $50.0 million for the same period in 2025.
• Total investment income decreased to $152.3 million from $161.5 million, primarily due to declining interest rates on the portfolio.
• Net expenses increased to $86.6 million from $83.4 million, mainly due to lower management and incentive fee waivers in the current period.
• The company experienced a net realized and unrealized loss of $75.8 million on its investments, a significant increase from the $28.1 million loss in the prior year's quarter.
• The net asset value per unit decreased to $18.12 as of March 31, 2026, from $18.57 as of December 31, 2025.
• The company completed the acquisition of SL Investment Corp. (SLIC) on July 15, 2024, accounted for as an asset acquisition.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as negative due to the significant increase in investment losses and the decrease in net investment income, despite the company's ongoing capital raises and liquidity.

Positives

• Total dividend income increased to $5.1 million from $1.1 million, primarily due to dividend income from the NH Keystone joint venture.
• The company's debt portfolio remains heavily weighted towards floating rate investments (99.9% as of March 31, 2026), which could benefit from potential future interest rate decreases.
• The company had approximately $196.9 million in unrestricted cash and cash equivalents and short-term investments as of March 31, 2026.
• The company had significant availability under its credit facilities, totaling approximately $2.1 billion in unused portions, providing ample liquidity.

Negatives

• Total investment income decreased by $9.2 million year-over-year, primarily due to lower interest income from portfolio repricing and declining base rates.
• Net expenses increased by $3.1 million year-over-year, mainly due to reduced fee waivers.
• The company reported a significant net realized and unrealized loss of $75.8 million on investments for the quarter, a substantial deterioration from the prior year's loss of $28.1 million.
• Net asset value per unit decreased by $0.45, or 2.4%, from December 31, 2025, to March 31, 2026.
• The company repurchased $164.9 million of its units in the quarter, indicating a potential lack of confidence or a need for liquidity among unitholders.

Risks

• The company's investments are primarily in illiquid debt and equity securities, which are subject to valuation risk.
• The company is subject to interest rate risk, as its net investment income is affected by the difference between investment yields and borrowing costs.
• A significant portion of the company's investments are valued using Level 3 inputs, which involve significant management judgment and estimation.
• The company's portfolio companies may be subject to industry-specific regulations, particularly in the insurance services sector, which could impact their profitability and growth.
• The company's business, financial condition, and results of operations could be adversely affected by general economic, political, and industry trends, including inflationary pressures and supply chain disruptions.

Future Outlook

The company expects its financial resources, including unrestricted cash, cash equivalents, short-term investments, and availability under its credit facilities, to be sufficient for its investing activities and operations in the near term. The company also believes it has adequate financial resources to satisfy its unfunded portfolio company commitments.

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.
• The increase in base management fees was primarily due to an increase in capital contributions as well as a lower waiver amount in the current period.
• The increase in income-based incentive fees was primarily due to a lower waiver amount in the current period offset by a decrease in pre-incentive fee net investment income.
• The company's debt investments generally have a stated term of five to eight years and typically bear interest at a floating rate usually determined on the basis of a benchmark such as SOFR.
• The company believes its current disclosure controls and procedures are effective in timely alerting management of material information.

Industry Context

StockSavvy.ai notes that North Haven Private Income Fund LLC, as a BDC focused on middle-market lending, is operating in a sector sensitive to interest rate fluctuations. The reported decrease in investment income due to lower base rates aligns with broader market trends of declining interest rates impacting floating-rate debt portfolios. The company's significant unfunded commitments and substantial debt facilities indicate an active origination and deployment strategy, common in the private credit market.

Comparison to Industry Standards

• The company's weighted average yield on debt and income producing investments at fair value of 9.1% as of March 31, 2026, is competitive within the middle-market lending sector, though specific industry benchmarks vary.
• The company's asset coverage ratio of 200.00% as of March 31, 2026, exceeds the 150% minimum requirement for BDCs, indicating a conservative leverage profile.
• The portfolio turnover rate of 2.36% for the quarter is relatively low, suggesting a strategy focused on longer-term debt investments rather than active trading.
• The company's investment in NH Keystone, a joint venture with a large North American insurance company, is a common strategy for BDCs to access capital and diversify investment sourcing.
• The company's reliance on SOFR as a benchmark for its floating-rate loans is standard practice in the current market environment.

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.
• No material legal proceedings are currently threatened against the company.

Related Party Transactions

• The Company pays MS Capital Partners Adviser Inc. (the Adviser) a base management fee and an incentive fee.
• Base management fees for the three months ended March 31, 2026 were $8.996 million, net of waiver.
• Income-based incentive fees for the three months ended March 31, 2026 were $8.557 million, net of waiver.
• MS Private Credit Administrative Services LLC acts as the administrator, providing services and receiving reimbursements for costs and overhead.
• Morgan Stanley Distribution Inc. (MSDI) assists in the placement of Units and receives servicing fees.
• Morgan Stanley & Co. LLC served as a co-agent and initial purchaser for various note issuances, receiving fees.

Stakeholder Impact

• Unitholders experienced a decrease in net asset value per unit and a negative total return for the quarter.
• The company's ability to generate current income and capital appreciation is crucial for unitholder returns.
• The significant investment losses may impact future distributions and the overall value of unitholder investments.
• The ongoing unit repurchase program provides some liquidity for unitholders, though it was oversubscribed in the current quarter.
• The company's reliance on debt financing means that changes in interest rates and borrowing costs can impact profitability and distributions to unitholders.

Next Steps

• Continue to invest in directly originated senior secured term loans issued by U.S. middle-market companies.
• Monitor portfolio company performance and risk profiles.
• Manage debt facilities and explore potential new credit facilities or debt issuances.
• Continue the continuous private offering of Class S Units.
• Evaluate the impact of recent accounting pronouncements on financial statement disclosures.

Key Dates

Recommendation

While the company continues to deploy capital and has significant liquidity, the substantial increase in investment losses and the decrease in net investment income for the quarter are concerning. The negative sentiment indicated by the decrease in NAV per unit and the oversubscribed unit repurchase program suggest a cautious approach is warranted. The company's strategy of investing in floating-rate debt could be beneficial if interest rates decline, but the current environment and recent performance warrant a 'hold' rating until a clearer positive trend emerges.

Keywords

North Haven Private Income Fund, SEC Filing, 10-Q, Quarterly Report, BDC, RIC, Middle Market Lending, Senior Secured Loans, Investment Portfolio, Net Asset Value, Interest Income, Management Fees, Incentive Fees, Debt Investments, Equity Investments, Morgan Stanley, SLIC Acquisition