10-Q: North Haven Private Income Fund Q3 2025 Update

North Haven Private Income Fund reports increased investment income and portfolio size for Q3 2025, alongside net unrealized depreciation and realized losses.

Summary

• Total investment income increased to $167,085 thousand for the three months ended September 30, 2025, up from $164,216 thousand in the prior year, and to $492,936 thousand for the nine months, up from $391,237 thousand.
• Net expenses for the three months ended September 30, 2025 were $87,350 thousand, compared to $85,782 thousand in the prior year, and $257,406 thousand for the nine months, up from $186,687 thousand.
• Net investment income before taxes for the three months was $79,735 thousand, compared to $78,434 thousand, and $235,530 thousand for the nine months, up from $204,550 thousand.
• The company recorded net realized losses of $7,526 thousand for the three months and $13,337 thousand for the nine months ended September 30, 2025.
• Net change in unrealized depreciation on investments was $4,836 thousand for the three months and $34,248 thousand for the nine months ended September 30, 2025.
• Net increase in members' capital resulting from operations was $67,373 thousand for the three months and $187,945 thousand for the nine months ended September 30, 2025.
• Net asset value per unit decreased to $18.70 as of September 30, 2025, from $18.96 at the beginning of the period.
• The investment portfolio at cost grew to $6,714,594 thousand as of September 30, 2025, from $5,721,153 thousand as of September 30, 2024.
• The weighted average yield on debt and income-producing investments at cost decreased to 9.5% at September 30, 2025, from 10.8% at September 30, 2024.
• The company acquired SL Investment Corp. (SLIC) on July 15, 2024, adding $1,101,382 thousand in investments and assuming $95,460 thousand in unfunded loan commitments.

Sentiment

Score: 4

Explanation: While investment income increased, significant net unrealized depreciation and a decrease in NAV per unit indicate underlying challenges. The increase in non-accrual investments also points to deteriorating credit quality in some areas. The overall financial performance for the period, particularly the unrealized losses, suggests a cautious outlook despite growth in the portfolio.

Positives

• Total investment income increased for both the three-month ($167,085 thousand vs. $164,216 thousand) and nine-month ($492,936 thousand vs. $391,237 thousand) periods year-over-year.
• Net investment income before taxes increased for both the three-month ($79,735 thousand vs. $78,434 thousand) and nine-month ($235,530 thousand vs. $204,550 thousand) periods year-over-year.
• The investment portfolio at cost expanded significantly to $6,714,594 thousand as of September 30, 2025, from $5,721,153 thousand in the prior year, indicating successful capital deployment.
• The company maintained strong asset coverage ratio of 208.00% as of September 30, 2025, well above the 150% regulatory requirement.
• The company was in compliance with all covenants and other requirements of its credit facilities and unsecured notes as of September 30, 2025.
• Approximately 99.9% of debt investments are at floating rates, which can benefit from rising interest rates, although recent trends show a decrease in base rates.

Negatives

• Net asset value per unit decreased to $18.70 as of September 30, 2025, from $18.96 at the beginning of the period.
• The company experienced a net change in unrealized depreciation of $4,836 thousand for the three months and $34,248 thousand for the nine months ended September 30, 2025, primarily due to changes in secondary market spreads and financial performance of certain portfolio companies.
• Net realized losses were $7,526 thousand for the three months and $13,337 thousand for the nine months ended September 30, 2025, mainly from sales/repayments and restructurings.
• The weighted average yield on debt and income-producing investments at cost decreased to 9.5% at September 30, 2025, from 10.8% at September 30, 2024, driven by reductions in base rates and repricing.
• Non-recurring interest income decreased to $1,823 thousand for the three months and $4,612 thousand for the nine months ended September 30, 2025, from $2,845 thousand and $5,109 thousand respectively, due to decreased prepayments.
• The amortized cost of non-accrual investments increased to $71,436 thousand (1.1% of total) as of September 30, 2025, from $29,237 thousand (0.5% of total) as of December 31, 2024, indicating increased credit risk in some positions.

Risks

• Valuation risk exists due to investments primarily in illiquid debt and equity securities, with most not having readily available market prices, requiring significant management judgment.
• Market risk from rapid and unpredictable fluctuations in security values, affecting single issuers, industries, or the market as a whole, exacerbated by interconnected global economies.
• Interest rate risk due to funding a portion of investments with borrowings, making net investment income sensitive to the difference between investment rates and borrowing rates.
• Operating in a period of capital markets volatility and economic uncertainty, which has materially and adversely affected debt and equity capital markets in the United States.
• Potential adverse effects on portfolio companies and operations from health crises, natural disasters, war, civil disturbance, acts of terrorism, international conflicts, trade policies, government shutdowns, power outages, and other unforeseeable external events.
• The company may not recoup its initial cost basis and may realize substantial losses on Risk Rating 4 investments, where borrowers are performing substantially below expectations and debt covenants are out of compliance.

Future Outlook

The company expects its general and administrative expenses to be relatively stable or to decline as a percentage of total assets during periods of asset growth and to increase during periods of asset declines. It anticipates having sufficient financial resources from unrestricted cash, cash equivalents, short-term investments, and available credit facilities to cover investing activities and operations in the near term, including unfunded portfolio company commitments.

Management Comments

• I have reviewed this quarterly report on Form 10-Q of NORTH HAVEN PRIVATE INCOME FUND LLC.
• Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
• Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
• The company's disclosure controls and procedures are effective in timely alerting management of material information.

Industry Context

The company operates in the middle-market lending sector, which is currently experiencing capital markets volatility and economic uncertainty. Its strategy of investing primarily in directly originated senior secured term loans to U.S. middle-market companies with private equity sponsors aligns with a focus on stable income generation in this environment. The use of floating rate loans positions the company to benefit from potential future interest rate increases, although recent base rate reductions have impacted yields.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or results to global benchmarks. However, the company's asset coverage ratio of 208.00% as of September 30, 2025, exceeds the regulatory minimum of 150%, indicating a strong capital position relative to industry requirements for BDCs.

Corporate Governance

Legal Proceedings

• The company, the Investment Adviser, and the Administrator are not currently subject to any material legal proceedings, nor is any material legal proceeding threatened against the company.

Related Party Transactions

• The company pays the Investment Adviser a base management fee (1.25% of average net asset value) and an incentive fee (income-based and capital gains-based).
• The Administrator (an indirect, wholly owned subsidiary of Morgan Stanley) provides administrative services and receives reimbursements for costs and allocable overhead.
• Morgan Stanley Distribution Inc. and Morgan Stanley Smith Barney LLC (affiliates) act as placement agents for the company's private offering, with servicing fees paid to MSDI.
• An Expense Support and Conditional Reimbursement Agreement with the Investment Adviser allows for expense payments, with potential future recoupment by the Adviser.
• MS Credit Partners Holdings, Inc. (an indirect wholly owned subsidiary of Morgan Stanley and an affiliate of the Investment Adviser) made an aggregate capital contribution of $25,000 thousand in exchange for 1,256,051 Units.
• Morgan Stanley & Co. LLC (an indirect, wholly owned subsidiary of Morgan Stanley and an affiliate of the Investment Adviser) served as co-agent and initial purchaser for various note issuances, receiving fees.

Stakeholder Impact

• Shareholders: Experienced a decrease in net asset value per unit, but received regular and special distributions, and had opportunities to participate in the unit repurchase program.
• Employees: Management and administrative personnel (including CEO, CFO, CCO) are compensated through fees and reimbursements to the Investment Adviser and Administrator.
• Portfolio Companies: Continue to receive funding through debt investments and unfunded commitments, with the company actively managing its portfolio and assessing risk ratings.
• Creditors: The company maintains compliance with all debt covenants and has substantial unused credit facility capacity, indicating ability to meet obligations.
• Investment Adviser: Earns base management fees and incentive fees, which are impacted by the company's net asset value and investment performance.

Next Steps

• The company will continue its continuous private offering of units.
• A regular distribution of $0.1250 per unit is payable on or around November 5, 2025, to unitholders of record as of October 31, 2025.
• The newly formed North Haven Keystone LLC joint venture is expected to commence investment activities, with the company and its JV Partner each contributing capital up to $500,000 thousand and $75,000 thousand, respectively.

Key Dates

Recommendation

The company shows growth in its investment portfolio and increased investment income, which are positive indicators. However, the decline in net asset value per unit, significant net unrealized depreciation, and an increase in non-accrual investments suggest underlying pressures and potential risks. The decrease in weighted average yield also points to a challenging interest rate environment. While the company maintains strong asset coverage and liquidity, the mixed financial performance warrants a 'hold' recommendation, advising investors to monitor future trends in asset valuations and credit quality before making further investment decisions.

Keywords

BDC, Business Development Company, Private Credit, Middle-Market Lending, Senior Secured Loans, First Lien Debt, Second Lien Debt, Equity Investments, Investment Portfolio, Net Asset Value, Interest Rate Risk, Valuation Risk, SEC Filing, 10-Q, Financial Results, Investment Income, Unrealized Depreciation, Realized Losses, SLIC Acquisition, Debt Obligations, Floating Rate Loans, Capital Markets Volatility