Onex Direct Lending BDC Fund's Net Assets Plunge 19.7% Amid Unrealized Losses

TL;DR

**Onex Direct Lending BDC Fund is bleeding value, with net assets down nearly 20% and unrealized losses skyrocketing – time to re-evaluate your position.**

AI Summary

Onex Direct Lending BDC Fund reported a significant decrease in net assets and investment income for the nine months ended September 30, 2025, compared to the same period in 2024. Net assets decreased from $262,507,061 as of December 31, 2024, to $210,915,520 as of September 30, 2025, a 19.7% decline. Total investment income fell from $46,935,448 in the first nine months of 2024 to $39,227,140 in 2025, a 16.5% reduction. The company experienced a net decrease in net assets resulting from operations of $2,219,640 for the nine months ended September 30, 2025, a stark contrast to the $12,700,287 net increase in the prior year. This was largely driven by a substantial net change in unrealized depreciation on investments, which worsened from $9,820,771 in 2024 to $23,552,593 in 2025. Share redemptions also significantly impacted net assets, totaling $37,411,954 in 2025 compared to $29,506,112 in 2024. The Net Asset Value Per Share declined from $23.39 at December 31, 2024, to $21.53 at September 30, 2025.

Why It Matters

This significant decline in net assets and net investment income signals potential headwinds for Onex Direct Lending BDC Fund, impacting investor returns and potentially future dividend capacity. The substantial increase in unrealized depreciation on investments suggests a challenging market for the company's portfolio, which could reflect broader economic pressures or specific underperformance within its direct lending exposures. For employees, this could mean reduced bonuses or job insecurity if the trend continues. Customers of the BDC's portfolio companies might face tighter lending conditions. In a competitive landscape, this performance could make it harder for Onex Direct Lending BDC Fund to attract new capital compared to peers demonstrating stronger asset growth and investment returns.

Risk Assessment

Risk Level: high — The risk level is high due to a 19.7% decrease in Net Assets from $262,507,061 to $210,915,520 and a significant increase in net change in unrealized depreciation on investments from $9,820,771 in 2024 to $23,552,593 in 2025 for the nine months ended September 30. This indicates substantial erosion of portfolio value and poor operational performance.

Analyst Insight

Investors should consider reducing their exposure to Onex Direct Lending BDC Fund given the significant decline in net assets and the substantial increase in unrealized losses. A thorough review of the underlying portfolio investments and the broader direct lending market is warranted before making any new investment decisions.

Financial Highlights

revenue

$39.2M

net Income

($2.2M)

revenue Growth

-16.5%

Key Numbers

• $210.9M — Net Assets (Decreased from $262.5M at Dec 31, 2024, a 19.7% decline.)
• $39.2M — Total Investment Income (Decreased from $46.9M in 2024, a 16.5% reduction for the nine months.)
• ($2.2M) — Net Increase (Decrease) in Net Assets from Operations (Shifted from a $12.7M increase in 2024 to a $2.2M decrease in 2025.)
• ($23.6M) — Net Change in Unrealized Depreciation on Investments (Worsened from ($9.8M) in 2024, indicating significant portfolio value erosion.)
• $21.53 — Net Asset Value Per Share (Declined from $23.39 at December 31, 2024.)
• 9,797,360 — Common Shares Outstanding (Decreased from 11,221,763 at December 31, 2024, due to redemptions.)
• $37.4M — Redemption of Common Shares (Increased from $29.5M in 2024, indicating investor outflows.)

Key Players & Entities

• Onex Direct Lending BDC Fund (company) — Registrant
• SEC (regulator) — Securities and Exchange Commission
• Onex Credit Advisor, LLC (company) — Adviser to the BDC
• $262,507,061 (dollar_amount) — Net Assets as of December 31, 2024
• $210,915,520 (dollar_amount) — Net Assets as of September 30, 2025
• $46,935,448 (dollar_amount) — Total Investment Income for nine months ended September 30, 2024
• $39,227,140 (dollar_amount) — Total Investment Income for nine months ended September 30, 2025
• $12,700,287 (dollar_amount) — Net Increase in Net Assets from Operations for nine months ended September 30, 2024
• $2,219,640 (dollar_amount) — Net Decrease in Net Assets from Operations for nine months ended September 30, 2025
• $23,552,593 (dollar_amount) — Net change in unrealized depreciation on investments for nine months ended September 30, 2025

FAQ

Risk Factors

• Investment Portfolio Depreciation [high — financial]: The fund experienced a significant net change in unrealized depreciation on investments, worsening from $9.8 million in the first nine months of 2024 to $23.6 million in the same period of 2025. This indicates a substantial erosion of the portfolio's market value, directly impacting net assets.
• Shareholder Redemptions [high — financial]: Redemptions of common shares increased to $37.4 million in the first nine months of 2025, up from $29.5 million in the prior year. This outflow of capital further reduced net assets and can strain liquidity.
• Interest Rate Sensitivity [medium — market]: As a direct lending fund, the portfolio is likely sensitive to changes in interest rates. While not explicitly detailed in the provided text, fluctuations in market interest rates can impact the value of floating-rate loans and the overall investment income generated.
• BDC Regulatory Environment [medium — regulatory]: Business Development Companies (BDCs) operate under specific regulatory frameworks, including those set by the SEC. Changes in these regulations or compliance failures could impact operations and financial performance.

Industry Context

The direct lending sector, particularly within the Business Development Company (BDC) structure, typically focuses on providing debt financing to middle-market companies. This sector is sensitive to interest rate environments and credit market conditions. Recent trends may include increased competition, evolving regulatory scrutiny, and a focus on credit quality amidst economic uncertainty.

Regulatory Implications

As a BDC, Onex Direct Lending is subject to regulations governing investment companies, including asset coverage requirements and dividend distribution rules. Changes in these regulations or the fund's ability to comply could lead to operational challenges or financial penalties.

What Investors Should Do

1. Monitor the trend of unrealized depreciation closely to assess the health of the underlying investment portfolio and potential for future realized losses.
2. Evaluate the sustainability of dividend payments in light of declining investment income and increasing operational costs or redemptions.
3. Assess the fund's liquidity position given the rising trend in share redemptions and its ability to meet potential future redemption requests.
4. Compare Onex Direct Lending's performance metrics (NAV per share, investment income, depreciation) against peers in the direct lending BDC space to gauge relative performance.

Glossary

Net Assets

The total value of a company's assets minus its liabilities. For a BDC, this represents the net worth available to shareholders. (A key indicator of the fund's size and value. The decline from $262.5M to $210.9M signifies a significant reduction in the fund's overall worth.)

Investment Income

The income generated from a fund's investments, typically including interest income, dividend income, and realized gains/losses. (Represents the core earnings of the BDC. The decrease from $46.9M to $39.2M indicates a reduction in the fund's earning capacity.)

Net Change in Unrealized Depreciation on Investments

The decrease in the market value of investments that has not yet been realized through a sale. It reflects paper losses. (A significant driver of the decline in net assets, showing that the underlying investments have lost value, impacting the fund's performance.)

Net Asset Value Per Share (NAV Per Share)

The total value of a fund's assets minus its liabilities, divided by the number of outstanding shares. It represents the per-share value of the fund. (A crucial metric for investors, showing the value of their stake. The decline from $23.39 to $21.53 reflects a decrease in the value per share held by investors.)

Common Shares Outstanding

The total number of shares of common stock that a company has issued and are held by investors. (The decrease from 11.2 million to 9.8 million shares is a direct result of redemptions, impacting the per-share metrics and potentially signaling investor confidence issues.)

Redemption of Common Shares

The process by which shareholders sell their shares back to the fund, resulting in an outflow of cash from the fund. (The increase in redemptions to $37.4M indicates significant investor outflows, putting pressure on the fund's liquidity and net assets.)

Year-Over-Year Comparison

For the nine months ended September 30, 2025, Onex Direct Lending BDC Fund experienced a significant downturn compared to the same period in 2024. Total investment income decreased by 16.5% to $39.2 million, and the fund reported a net decrease in net assets from operations of $2.2 million, a stark reversal from a $12.7 million increase. This was primarily driven by a substantial increase in unrealized depreciation on investments, which more than doubled to $23.6 million, alongside increased share redemptions totaling $37.4 million.

Key Financial Figures

• $0.001 — 9 common shares of beneficial interest, $0.001 par value per share, outstanding as of

Filing Documents

• ck0001860424-20250930.htm (10-Q) — 8677KB
• ck0001860424-ex31_1.htm (EX-31.1) — 15KB
• ck0001860424-ex31_2.htm (EX-31.2) — 15KB
• ck0001860424-ex32_1.htm (EX-32.1) — 8KB
• ck0001860424-ex32_2.htm (EX-32.2) — 8KB
• 0001193125-25-271605.txt ( ) — 22432KB
• ck0001860424-20250930.xsd (EX-101.SCH) — 1335KB
• ck0001860424-20250930_htm.xml (XML) — 5094KB

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) 18 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 37 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 54 Item 4.

Controls and Procedures

Controls and Procedures 55 PART II OTHER INFORMATION 55 Item 1.

Legal Proceedings

Legal Proceedings 55 Item 1A.

Risk Factors

Risk Factors 56 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 56 Item 3. Defaults Upon Senior Securities 56 Item 4. Mine Safety Disclosures 56 Item 5. Other Information 57 Item 6. Exhibits 57

Signatures

Signatures 58 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, including the impact of a prolonged U.S. government shutdown, 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 abilit

– 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) September 30, 2025 December 31, 2024 Assets: Non-controlled/non-affiliated investments, at fair value (amortized cost of $ 444,277,465 and $ 531,319,673 , respectively) $ 407,315,316 $ 517,910,117 Cash and cash equivalents 8,578,563 23,631,682 Restricted cash 1,399,823 667,501 Interest and other receivables 42,556,579 8,289,523 Receivable for investments sold 14,372,834 7,990,278 Deferred financing costs (net of $ 530,286 and $ 131,476 in amortized expenses, respectively) 2,137,214 2,536,024 Prepaid expenses 100,886 266,057 Total Assets 476,461,215 561,291,182 Liabilities: Credit facility (Note 5) 256,000,000 249,000,000 Payable for investments purchased 4,396,115 39,386,337 Management fee payable (Note 3) 666,623 830,616 Incentive fee payable (Note 3) — 1,037,239 Administration fee payable (Note 3) 808,623 1,054,592 Interest payable 3,110,452 4,055,888 Accrued expenses and other liabilities 563,882 3,419,449 Total Liabilities 265,545,695 298,784,121 Commitments and Contingencies (Note 10) — — Net Assets $ 210,915,520 $ 262,507,061 Net Assets: Common shares, $ 0.001 par value ( unlimited shares authorized, 9,797,360 and 11,221,763 shares issued and outstanding, respectively) $ 9,797 $ 11,223 Additional paid-in capital 248,552,428 281,147,301 Accumulated distributable earnings (losses) ( 37,646,705 ) ( 18,651,463 ) Net Assets $ 210,915,520 $ 262,507,061 Net Asset Value Per Share $ 21.53 $ 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 Months Ended September 30, Nine Months Ended September 30,

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