Morgan Stanley’s North Haven BDC to Absorb $289M Sibling, Lower Management Fee

Morgan Stanley’s North Haven Private Income Fund LLC, or PIF, has agreed to absorb its smaller sibling, North Haven Private Income Fund A LLC, in a merger that will also cut the surviving fund’s base management fee to 1% of net asset value from 1.25%, the funds said Oct. 26.

Both private, nontraded business development companies are managed by MS Capital Partners Adviser Inc., an indirect, wholly owned subsidiary of Morgan Stanley. Unitholders of PIF A, as the smaller fund is known, will receive newly issued Class I units of PIF based on each fund’s NAV per unit as of the closing date. The boards of both funds, including all independent directors, approved the agreement.

The merger is expected to close in December, subject to regulatory approvals, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Unitholder votes are not required, the funds said. The transaction is intended to be tax-free to unitholders.

“We are pleased with the companies’ performance and believe the merger will create value for investors, including through a reduced management fee,” said Michael Occi, chief executive officer of both funds.

The deal is PIF’s second consolidation of a BDC managed by the same adviser. In 2024, PIF acquired SL Investment Corp., or SLIC, paying SLIC stockholders about $561.7 million in cash and assuming about $558.1 million of its credit facility debt, the fund said at the time.

Fees and Structure

The lower base fee takes effect Jan. 1, 2027. The incentive fee, 12.5% of income above a 5% annualized hurdle, is unchanged, according to the companies. The funds also project pro forma operating expenses of about 40 basis points for the combined fund, and Morgan Stanley will pay up to $1.5 million of merger expenses.

Each fund currently offers a single unit class through a single distribution channel. PIF sells Class S units, which carry a 0.85% servicing fee, while PIF A sells Class I units with no servicing fee. The combined fund will offer both classes across brokerage and advisory channels.

PIF A is about one-tenth the size of PIF. As of Sept. 30, PIF A had an estimated aggregate NAV of $288.7 million and $317.1 million of debt outstanding, compared with about $2.95 billion of NAV and $2.88 billion of debt at PIF, according to the funds’ monthly updates. On a pro forma basis as of June 30, the combined fund would hold $6.6 billion of investments across about 312 portfolio companies. About 99% of PIF A’s gross investment commitments already overlap with PIF’s, the funds said.

The combined fund would carry investment-grade ratings of BBB- from Fitch, Baa3 from Moody’s, and BBB from KBRA, the funds said. PIF A is currently unrated.

Based on Sept. 30 values, each PIF A unit would convert into about 1.11 PIF units. PIF reported NAV per unit of $17.64 at Sept. 30, down from $17.91 at June 30 and $18.57 at year-end 2025. PIF A’s NAV per unit was $19.57, compared with $19.71 at June 30 and $20.14 at year-end.

Tenders Remain Oversubscribed

The merger announcement arrived alongside final third-quarter tender results for both funds. PIF repurchased about 8.63 million units, or 5% of units outstanding as of June 30, at $17.64 per unit, for about $152.3 million. It accepted about 43.7% of units tendered on a pro rata basis.

That is little changed from the second quarter, when PIF accepted 41.6% of tendered units after requests reached about 11.6% of units outstanding, more than double its 5% quarterly cap.

PIF A, which has faced lighter redemption pressure, repurchased 758,427 units, also 5% of units outstanding, at $19.57 per unit, for about $14.8 million. It accepted about 73.1% of units tendered. In the second quarter, PIF A reported requests of about 7.2% of units and filled about 69.5%.

Both funds will run fourth-quarter tender offers on their normal schedules, with those offers concluding before the merger closes and payment expected in January 2027, Morgan Stanley said.

As of Sept. 30, PIF held investments in 291 portfolio companies with about $6.6 billion of aggregate par value, about 95.5% of it in first-lien debt. Software was its largest industry exposure at 23.3% of par. PIF A held 181 companies with about $708.1 million of par, with software at 20.6%.

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