KBRA Affirms Ratings for MSD Investment Corp.

KBRA affirms the issuer and senior unsecured debt ratings of BBB for MSD Investment Corp. ("MSD" or "the company"). The rating Outlook is Stable.

Key Credit Considerations

The ratings are supported by MSD's diversified $6.8 billion investment portfolio comprised almost entirely of senior secured first lien loans (99.3%) to 91 portfolio companies. BDT & MSD BDC Management, LLC ("Adviser"), a Delaware limited partnership, is MSD's adviser. The Adviser is an affiliate of BDT & MSD Partners ("BDT & MSD"), a merchant bank with an advisory and investment platform servicing the distinct needs of business owners. The company maintains SEC exemptive relief to co-invest with other funds managed by the Adviser and its affiliates, and BDT & MSD's $18+ billion credit platform, which includes private corporate, liquid, private real estate, and opportunistic credit as well as the BDC. The company's management team has a long track record of working within the private debt markets, with the company's senior management team having an average of 30+ years of experience investing across credit cycles, reinforced by strong alignment with employees and affiliates, and DFO Management, LLC (the family office of Michael Dell).

The diversified investment portfolio's top three sectors include Business Services (16%), Hotel, Gaming & Leisure (13%), and Services - Consumer (9%). The company focuses on portfolio companies in the upper middle market with the weighted average EBITDA of $139.5 million and median EBITDA of $102.5 million as of 1Q26. Credit quality remains sound with only one portfolio company on non-accrual status, comprising 0.1% of total investments at both cost and fair value. Furthermore, 97.7% of the investment portfolio is performing at or above underwriting expectations.

KBRA considers MSD's funding mix sound and well diversified with two SPV asset facilities, a revolving credit facility, a CLO, and senior unsecured notes. Over the past year, the company continued to enhance its funding structure to increase financial flexibility and lower asset encumbrance for the benefit of the senior unsecured noteholders by adding senior unsecured debt. Unsecured debt to total debt is solid at 40.9% at 1Q26. Additionally, the company increased its committed secured bank facilities during the year. The company's gross leverage remains adequate at 1.12x (target 0.90x to 1.10x). MSD has substantial committed uncalled capital for increased financial flexibility. At 1Q26, liquidity was solid with $589.4 million of committed uncalled capital, $127 million of cash, and $283 million of available committed credit lines set against $144 million of debt maturing within the next two years and $789.5 million of unfunded investment commitments, a portion of which is not expected to be drawn.

Counterbalancing these strengths are MSD's limited operating history, which is somewhat offset by the long tenure of its management in private credit, and the company's requirement to distribute 90% of net investment income (negating the ability to retain earnings), illiquid assets, and the potential for increased non-accrual investments with a more uncertain economic environment with high base rates, inflation, and geopolitical risk.

MSD Investment Corp. is an externally managed, private business development company operating under the Investment Company Act of 1940 and has elected to be treated as a regulated investment company ("RIC") for federal tax purposes. Formed in February 2021 as a Delaware limited liability company, MSD converted to a Maryland limited liability company, MSD Investment, LLC (January 1, 2022), and then converted to a Maryland corporation, at which time it changed to its current name, MSD Investment Corp.

Rating Sensitivities

A rating upgrade is not expected in the medium term. A rating downgrade and/or an Outlook change to Negative could be considered if there is a significant downturn in the U.S. economy with negative impact on MSD's earnings performance, asset quality, and/or leverage. A significant change in senior management and/or risk management policies could also lead to negative rating action.

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