KBRA assigns a BBB rating to North Haven Private Income Fund LLC's ("North Haven" or "the company") $300 million, 5.75% senior unsecured notes due in 2030. The rating Outlook is Stable. The proceeds will be used for general corporate purposes and to repay a portion of the company's secured bank debt.

Key Credit Considerations

The rating and Outlook are supported by North Haven's strong ties to the ~$1.5 trillion assets under management and/or supervision from Morgan Stanley Asset Management and access to capital through the Morgan Stanley Wealth Management Division. As part of Morgan Stanley’s (NYSE: MS) ecosystem, North Haven leverages the broad MS private credit platform (“MSPC”), which includes about $16.2 billion of committed capital in direct lending along with SEC exemptive relief to co-invest with certain other affiliated investment vehicles managed by the Adviser or its affiliates. A further benefit is the company’s 3Q24 acquisition of its affiliate BDC, SL Investment Corp. ("SLIC"). Further supporting the rating is North Haven's $4.4 billion investment portfolio at fair value ("FV") as of 2Q24, which on a pro-forma combined basis post-merger, totaled $5.5 billion. The investment portfolio’s average 12-month EBITDA was $184 million across 41 industries largely focused on less cyclical defensive sectors. The top three sectors are Software (20.9%), Insurance Services (12.7%), and Health Care Providers & Services (7.2%). The company had only one portfolio company on non-accrual comprising 0.1% and 0.5% of total investments at FV and cost, respectively, at 2Q24. While the portfolio remains unseasoned due to its short operating history, 97.8% of the portfolio maintains an internal rating of 2 or higher, indicating that the loan is performing at or above expectations at underwriting.

At 2Q24, the company maintained low leverage of 0.42x, which, on a pro-forma basis, increased to ~0.80x, still appropriate in our view and below the company’s target leverage range of 1.0x and 1.25x, which is in line with peers and within regulatory asset coverage minimum of 150%. The company maintains a diversified funding mix with a corporate revolver, SPV asset-based facilities, and senior unsecured notes. As of 2Q24, the company had a high percentage of unsecured to total debt at 69%, allowing for less encumbered collateral for the benefit of unsecured noteholders and greater financial flexibility. As a perpetual continuously offered BDC, the company has raised about $3.1 billion since inception, including $716 million of capital raised for the six months ended 2Q24 and had redemptions of only $81 million. Additionally, about $72 million of distributions were reinvested. Redemptions are limited to 5% per quarter and are at the discretion of the board of directors. The company maintains solid liquidity through available credit lines and targets more liquid broadly syndicated loans at 10% to 15% of the total portfolio to meet potential redemptions. As of 2Q24, liquidity is solid with available credit facilities of about $1.52 billion and $165.9 million cash with no near-term debt maturities and total unfunded commitments of $981 million.

Counterbalancing North Haven’s credit strengths are the company’s limited operating history offset by the long tenure of its management in private credit, the relatively illiquid investments, retained earnings constraints as a Regulated Investment Company (RIC), and an uncertain economic environment with high base rates, inflation, and geopolitical risk.

North Haven Private Income Fund LLC is a New York based, externally managed, non-diversified, private, perpetual life, closed-end investment management company regulated as a business development company under the Investment Company Act of 1940. For tax purposes, the company has elected to be treated as an RIC. North Haven commenced operations on February 1, 2022. MS Capital Partners Adviser Inc. (“MS Capital” or “the Adviser”) is North Haven’s investment adviser. MS Capital is a wholly owned subsidiary of Morgan Stanley, a leading global investment bank. North Haven is not a subsidiary nor consolidated with MS. Morgan Stanley has no obligation, contractual or otherwise, to financially support North Haven. North Haven’s obligations are neither MS’ obligations nor are they guaranteed by MS, and MS has no history of financially supporting any MS BDC even during periods of financial distress.

Rating Sensitivities

Given the Stable Outlook, a rating upgrade is not expected in the medium term. A rating downgrade and/or Outlook change to Negative could be considered if management alters its stated company strategy by increasing its focus on riskier investments coupled with higher leverage metrics. A prolonged downturn in the U.S. economy with negative impact on North Haven’s earnings performance, asset quality, and leverage or a significant change in senior management and/or risk management policies could also lead to negative rating action.

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Methodologies

• Financial Institutions: Finance Company Global Rating Methodology
• ESG Global Rating Methodology

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

Doc ID: 1005991

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