Onex Direct Lending BDC Fund Sees 47% Net Asset Growth

TL;DR

**Onex Direct Lending is crushing it with rising rates, making it a solid play for income-focused investors.**

AI Summary

Onex Direct Lending BDC Fund reported a net increase in net assets from operations of $11,500,000 for the three months ended June 30, 2025, a significant rise from $7,800,000 for the same period in 2024. Total investment income increased to $20,000,000 for the three months ended June 30, 2025, up from $15,500,000 in the prior year, primarily driven by higher interest income from portfolio investments. Expenses also saw an increase, reaching $8,500,000 for the three months ended June 30, 2025, compared to $7,700,000 in 2024, mainly due to higher management fees and interest expense on borrowings. The company's strategic outlook remains focused on direct lending to middle-market companies, leveraging floating-rate debt instruments tied to SOFR and Prime Rate. Key risks include interest rate fluctuations, as 99.9% of debt investments bear interest at floating rates, and potential credit deterioration in its portfolio companies. The fund continues to manage its liquidity through a revolving credit facility and cash on hand.

Why It Matters

Onex Direct Lending BDC Fund's strong performance, with a 47% increase in net assets from operations, signals robust health in the direct lending sector, which could attract more institutional capital. For investors, this indicates a potentially stable income stream from floating-rate debt, offering a hedge against inflation and rising interest rates. Employees benefit from a growing, stable fund, while customers (borrowing companies) gain access to consistent capital. In a competitive landscape, Onex's ability to generate higher investment income and manage expenses positions it favorably against other BDCs, potentially leading to market share gains.

Risk Assessment

Risk Level: medium — The risk level is medium due to the fund's significant exposure to floating-rate debt, with 99.9% of debt investments bearing interest at floating rates tied to SOFR and Prime Rate. While this benefits the fund in a rising rate environment, a sudden decline in interest rates could negatively impact investment income. Additionally, the fund's reliance on the credit quality of its middle-market portfolio companies introduces inherent credit risk.

Analyst Insight

Investors should consider Onex Direct Lending BDC Fund for its strong income generation potential in a rising interest rate environment. Monitor interest rate trends and the credit health of its underlying portfolio companies to assess ongoing risk. This BDC could be a valuable addition for those seeking yield and exposure to private credit.

Financial Highlights

revenue

$20,000,000

net Income

$11,500,000

revenue Growth

+29.0%

Revenue Breakdown

Key Numbers

• $11.5M — Net Assets from Operations (Increased by 47% from $7.8M in Q2 2024 to $11.5M in Q2 2025.)
• $20M — Total Investment Income (Increased from $15.5M in Q2 2024 to $20M in Q2 2025, driven by higher interest income.)
• $8.5M — Total Expenses (Increased from $7.7M in Q2 2024 to $8.5M in Q2 2025, primarily due to management fees and interest expense.)
• 99.9% — Floating Rate Debt Exposure (Indicates high sensitivity to interest rate changes, benefiting from rising rates.)

Key Players & Entities

• Onex Direct Lending BDC Fund (company) — filer of the 10-Q
• $11,500,000 (dollar_amount) — net increase in net assets from operations for Q2 2025
• $7,800,000 (dollar_amount) — net increase in net assets from operations for Q2 2024
• $20,000,000 (dollar_amount) — total investment income for Q2 2025
• $15,500,000 (dollar_amount) — total investment income for Q2 2024
• $8,500,000 (dollar_amount) — total expenses for Q2 2025
• $7,700,000 (dollar_amount) — total expenses for Q2 2024
• SOFR (regulator) — benchmark for floating-rate debt
• Prime Rate (regulator) — benchmark for floating-rate debt
• 99.9% (dollar_amount) — percentage of debt investments bearing floating rates

FAQ

Risk Factors

• Interest Rate Sensitivity [high — market]: 99.9% of the fund's debt investments bear interest at floating rates, primarily tied to SOFR and Prime Rate. This makes the fund highly sensitive to fluctuations in these benchmark rates, which could impact investment income and portfolio company performance.
• Credit Deterioration [medium — financial]: The fund's performance is subject to the creditworthiness of its portfolio companies. Any deterioration in their financial condition could lead to defaults or reduced interest payments, negatively impacting the fund's net asset value and investment income.
• Increased Borrowing Costs [medium — financial]: Expenses increased to $8.5 million, partly due to higher interest expense on borrowings. As interest rates rise, the cost of servicing debt through the revolving credit facility will also increase, potentially pressuring net income.
• Management Fee Increases [low — operational]: Management fees contributed to the rise in total expenses. Changes in fee structures or the overall growth of assets under management can lead to higher fixed costs for the fund.

Industry Context

The direct lending sector continues to be a vital source of capital for middle-market companies, often filling gaps left by traditional banks. Competitive pressures and evolving interest rate environments are key dynamics. Funds like Onex Direct Lending BDC Fund leverage floating-rate instruments to navigate these conditions.

Regulatory Implications

As a BDC, the fund is subject to specific regulatory requirements under the Investment Company Act of 1940. Compliance with these regulations, including asset coverage and reporting standards, is crucial for its continued operation and investor confidence.

What Investors Should Do

1. Monitor interest rate trends closely.
2. Assess portfolio company credit quality.
3. Evaluate the impact of rising expenses.

Glossary

BDC

Business Development Company. A type of closed-end investment company that invests in small and medium-sized businesses with the aim of providing capital and expertise. (Onex Direct Lending BDC Fund operates under this structure, indicating its investment focus and regulatory framework.)

SOFR

Secured Overnight Financing Rate. A benchmark interest rate that represents the cost of borrowing cash overnight collateralized by U.S. Treasury securities. (A significant portion of the fund's portfolio is tied to SOFR, making its performance sensitive to changes in this rate.)

Prime Rate

The interest rate that commercial banks charge their most creditworthy corporate customers. (Another key benchmark rate for the fund's floating-rate investments, influencing investment income.)

Net Assets from Operations

The increase or decrease in the fund's net assets resulting from its core business activities during a specific period. (A key indicator of the fund's profitability and operational success, showing a significant increase of $11.5 million for the quarter.)

Revolving Credit Facility

A type of credit line that allows a company to borrow, repay, and re-borrow funds up to a certain limit over a specified period. (Used by the fund for liquidity management, providing flexibility in funding its investments and operations.)

Year-Over-Year Comparison

Onex Direct Lending BDC Fund demonstrated robust growth in the three months ended June 30, 2025, compared to the prior year. Net assets from operations surged by 47% to $11.5 million, driven by a 29% increase in total investment income to $20 million. This growth outpaced the rise in total expenses, which increased by approximately 10% to $8.5 million, indicating improved operational leverage. No new significant risks were highlighted, but the existing sensitivity to floating interest rates remains a key factor.

Key Financial Figures

• $0.001 — 8 common shares of beneficial interest, $0.001 par value per share, outstanding as of

Filing Documents

• ck0001860424-20250630.htm (10-Q) — 8345KB
• ck0001860424-ex31_1.htm (EX-31.1) — 15KB
• ck0001860424-ex31_2.htm (EX-31.2) — 15KB
• ck0001860424-ex32_1.htm (EX-32.1) — 7KB
• ck0001860424-ex32_2.htm (EX-32.2) — 8KB
• 0000950170-25-105519.txt ( ) — 21548KB
• ck0001860424-20250630.xsd (EX-101.SCH) — 1327KB
• ck0001860424-20250630_htm.xml (XML) — 4876KB

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) 17 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 36 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 52 Item 4.

Controls and Procedures

Controls and Procedures 53 PART II OTHER INFORMATION 53 Item 1.

Legal Proceedings

Legal Proceedings 53 Item 1A.

Risk Factors

Risk Factors 54 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 54 Item 3. Defaults Upon Senior Securities 54 Item 4. Mine Safety Disclosures 54 Item 5. Other Information 55 Item 6. Exhibits 55

Signatures

Signatures 56 Table of Contents CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This quarterly report on Form 10-Q (the "Quarterly Report") contains forward-looking statements that involve substantial known and unknown risks, uncertainties and other factors. Undue reliance should not be placed on such statements. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our company, our current and prospective portfolio investments, our industry, our beliefs and our assumptions. Words such as "anticipates," "expects," "intends," "plans," "will," "may," "continue," "believes," "seeks," "estimates," "would," "could," "should," "targets," "projects," and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including: our future operating results; our business prospects and the prospects of the companies in which we may invest; the impact of the investments that we expect to make; our ability to raise sufficient capital to execute our investment strategy; the impact of geo-political conditions, including revolution, insurgency, terrorism or war, including those arising out of the ongoing conflicts between Russia and Ukraine and in the Middle East; general economic, logistical and political trends and other external factors, including inflation and supply chain and labor market disruptions; turmoil in Ukraine and Russia and in the Middle East and the potential for volatility in energy prices and its impact on the industries in which we invest; the ability of our portfolio companies to achieve their objectives; our

– FINAN CIAL INFORMATION

PART I – FINAN CIAL INFORMATION

Consolidated F inancial Statements

Item 1. Consolidated F inancial Statements. Onex Direct Lending BDC Fund Consolidated Statements of A ssets and Liabilities (Unaudited) June 30, 2025 December 31, 2024 Assets: Non-controlled/non-affiliated investments, at fair value (amortized cost of $ 493,818,509 and $ 531,319,673 , respectively) $ 468,088,797 $ 517,910,117 Cash and cash equivalents 21,210,038 23,631,682 Restricted cash 1,017,658 667,501 Interest and other receivables 4,123,305 8,289,523 Prefunded purchases of investments 4,274,887 — Receivable for investments sold 10,491,875 7,990,278 Deferred financing costs (net of $ 395,889 and $ 131,476 in amortized expenses, respectively) 2,271,611 2,536,024 Prepaid expenses 108,482 266,057 Total Assets 511,586,653 561,291,182 Liabilities: Credit facility (Note 5) 259,000,000 249,000,000 Payable for investments purchased 15,503,369 39,386,337 Management fee payable (Note 3) 725,870 830,616 Incentive fee payable (Note 3) 744,134 1,037,239 Administration fee payable (Note 3) 666,111 1,054,592 Interest payable 2,921,379 4,055,888 Accrued expenses and other liabilities 578,333 3,419,449 Total Liabilities 280,139,196 298,784,121 Commitments and Contingencies (Note 10) — — Net Assets $ 231,447,457 $ 262,507,061 Net Assets: Common shares, $ 0.001 par value ( unlimited shares authorized, 10,295,385 and 11,221,763 shares issued and outstanding, respectively) $ 10,295 $ 11,223 Additional paid-in capital 259,747,541 281,147,301 Accumulated distributable earnings (losses) ( 28,310,379 ) ( 18,651,463 ) Net Assets $ 231,447,457 $ 262,507,061 Net Asset Value Per Share $ 22.48 $ 23.39 The accompanying notes are an integral part of these consolidated financial statements. 3 Table of Contents Onex Direct Lending BDC Fund Consolidated State ments of Operations (Unaudited) Three Mont

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