T Series Loan Fund Sees Profit Dip Amid Rising Unrealized Losses

TL;DR

**T Series Middle Market Loan Fund is bleeding unrealized losses, signaling potential trouble ahead despite a slight debt reduction.**

AI Summary

T Series Middle Market Loan Fund LLC reported a net increase in members' capital from operations of $64.654 million for the nine months ended September 30, 2025, a decrease from $82.682 million in the same period of 2024. Total investment income for the nine months ended September 30, 2025, was $161.566 million, down from $168.133 million in 2024. Net investment income after taxes decreased slightly to $89.868 million from $90.204 million year-over-year. The fund experienced a significant increase in net realized and unrealized loss on investment transactions, reaching $25.214 million for the nine months ended September 30, 2025, compared to a loss of $7.522 million in the prior year. Debt decreased to $982.959 million as of September 30, 2025, from $1,013.941 million at December 31, 2024. Common units outstanding increased to 59,974,447 as of September 30, 2025, from 55,022,961 at December 31, 2024, while Net Asset Value per unit declined to $18.48 from $18.94. The company's investment portfolio is heavily concentrated in first lien debt across various industries, with significant holdings in Aerospace & Defense, Air Freight & Logistics, Automobile Components, and Commercial Services & Supplies.

Why It Matters

This 10-Q reveals a challenging period for T Series Middle Market Loan Fund LLC, with declining investment income and a substantial increase in unrealized losses. For investors, the drop in Net Asset Value per unit from $18.94 to $18.48 signals potential erosion of capital. The competitive landscape for middle market lending remains intense, and these results suggest the fund may be struggling to maintain its yield and asset quality in a dynamic market. Employees and customers might see this as a sign of tightening financial conditions, potentially impacting future growth or lending capacity. The broader market will watch if these trends reflect wider stress in the middle market debt sector.

Risk Assessment

Risk Level: high — The fund's net realized and unrealized loss on investment transactions surged to $25.214 million for the nine months ended September 30, 2025, a significant increase from $7.522 million in the prior year. This substantial increase in losses, coupled with a decline in Net Asset Value per unit from $18.94 to $18.48, indicates heightened risk in its investment portfolio.

Analyst Insight

Investors should scrutinize the underlying assets contributing to the $25.214 million in net realized and unrealized losses. Consider reducing exposure if the trend of increasing unrealized losses persists, as it suggests potential asset quality deterioration in the middle market loan portfolio.

Financial Highlights

debt To Equity

1.05

revenue

$161.566M

operating Margin

55.6%

total Debt

$982.959M

net Income

$89.868M

eps

$1.50

revenue Growth

-3.9%

Key Numbers

• $64.654M — Net increase in members' capital from operations (Decreased from $82.682M in 2024 for the nine months ended Sep 30)
• $161.566M — Total investment income (Decreased from $168.133M in 2024 for the nine months ended Sep 30)
• $25.214M — Net realized and unrealized loss on investment transactions (Increased significantly from $7.522M in 2024 for the nine months ended Sep 30)
• $982.959M — Debt (Decreased from $1,013.941M at Dec 31, 2024)
• 59,974,447 — Common units outstanding (Increased from 55,022,961 at Dec 31, 2024)
• $18.48 — Net asset value per unit (Decreased from $18.94 at Dec 31, 2024)
• $89.868M — Net investment income after taxes (Slightly decreased from $90.204M in 2024 for the nine months ended Sep 30)
• $10.932M — Net realized loss (Decreased from $12.650M in 2024 for the nine months ended Sep 30)
• $14.282M — Net change in unrealized depreciation (Increased from $5.128M in unrealized appreciation in 2024 for the nine months ended Sep 30)
• $30.587M — Distribution payable (Decreased from $33.014M at Dec 31, 2024)

Key Players & Entities

• T Series Middle Market Loan Fund LLC (company) — registrant
• Securities and Exchange Commission (regulator) — filing oversight
• $64.654 million (dollar_amount) — net increase in members' capital from operations for nine months ended Sep 30, 2025
• $82.682 million (dollar_amount) — net increase in members' capital from operations for nine months ended Sep 30, 2024
• $161.566 million (dollar_amount) — total investment income for nine months ended Sep 30, 2025
• $168.133 million (dollar_amount) — total investment income for nine months ended Sep 30, 2024
• $25.214 million (dollar_amount) — net realized and unrealized loss on investment transactions for nine months ended Sep 30, 2025
• $7.522 million (dollar_amount) — net realized and unrealized loss on investment transactions for nine months ended Sep 30, 2024
• $982.959 million (dollar_amount) — debt as of September 30, 2025
• $18.48 (dollar_amount) — Net asset value per unit as of September 30, 2025

FAQ

Risk Factors

• Investment Portfolio Performance [high — financial]: The fund experienced a significant increase in net realized and unrealized loss on investment transactions, reaching $25.214 million for the nine months ended September 30, 2025, compared to a loss of $7.522 million in the prior year. This deterioration is driven by a $14.282 million net change in unrealized depreciation, a substantial increase from $5.128 million in unrealized appreciation in the prior year.
• Declining Net Asset Value Per Unit [medium — financial]: The Net Asset Value per unit declined to $18.48 as of September 30, 2025, from $18.94 at December 31, 2024. This decrease, coupled with an increase in common units outstanding to 59,974,447 from 55,022,961, suggests dilution and underperformance relative to capital inflows.
• Concentrated Industry Holdings [medium — market]: The investment portfolio is heavily concentrated in first lien debt across specific industries, including Aerospace & Defense, Air Freight & Logistics, Automobile Components, and Commercial Services & Supplies. This concentration exposes the fund to sector-specific downturns and limits diversification benefits.
• Reduced Capital Growth from Operations [medium — financial]: The net increase in members' capital from operations for the nine months ended September 30, 2025, was $64.654 million, a decrease from $82.682 million in the same period of 2024. This 21.8% reduction indicates a slowdown in the fund's ability to generate capital through its core activities.
• Decreasing Investment Income [low — financial]: Total investment income for the nine months ended September 30, 2025, was $161.566 million, down from $168.133 million in 2024. While net investment income after taxes saw a slight decrease to $89.868 million from $90.204 million, the overall trend in income generation is negative.

Industry Context

The middle market loan fund operates in a competitive landscape characterized by increasing demand for private credit solutions. However, rising interest rates and economic uncertainty are creating headwinds, leading to increased credit risk and potential for higher defaults among borrowers. The fund's focus on first lien debt in specific sectors like Aerospace & Defense and Automobile Components exposes it to sector-specific cyclicality and technological disruption.

Regulatory Implications

As a financial entity, T Series Middle Market Loan Fund LLC is subject to various financial regulations, including those related to capital adequacy, risk management, and investor protection. Changes in monetary policy and regulatory oversight of non-bank lenders could impact the fund's cost of capital and operational flexibility.

What Investors Should Do

1. Monitor investment performance closely, particularly the trend in realized and unrealized losses.
2. Evaluate the impact of increased common units outstanding on NAV per unit.
3. Assess the concentration risk within the portfolio's key industries.
4. Analyze the drivers behind the decrease in total investment income.

Glossary

Net Asset Value per unit

The value of a fund's assets minus its liabilities, divided by the number of outstanding units. It represents the per-unit market value of the fund's holdings. (A declining NAV per unit indicates that the fund's investments are losing value or that liabilities are increasing relative to assets, impacting investor returns.)

Net realized and unrealized loss on investment transactions

This includes losses from selling investments (realized) and the decrease in the market value of investments still held (unrealized). (A significant increase in this figure, as seen in the 2025 period, directly erodes the fund's capital and indicates poor investment performance.)

First lien debt

Debt that has the highest priority in claiming assets in case of a borrower's default. Lenders of first lien debt are the first to be repaid. (The fund's concentration in first lien debt suggests a focus on lower-risk, lower-return debt instruments, but also highlights the risk associated with the performance of these specific borrowers.)

Net investment income after taxes

The income generated from the fund's investments after deducting operating expenses and taxes. (This is a key measure of the fund's profitability from its core lending activities. A slight decrease suggests pressure on earnings.)

Common units outstanding

The total number of ownership units issued by the fund that are held by investors. (An increase in units outstanding, especially when NAV per unit is declining, can indicate new capital inflows that are not being effectively deployed or are being diluted by poor performance.)

Year-Over-Year Comparison

For the nine months ended September 30, 2025, T Series Middle Market Loan Fund LLC reported a decrease in net increase in members' capital from operations to $64.654 million from $82.682 million in the prior year, reflecting a challenging operating environment. Total investment income also declined to $161.566 million from $168.133 million. A significant concern is the sharp rise in net realized and unrealized losses on investments, which grew to $25.214 million from $7.522 million year-over-year, contributing to a decrease in Net Asset Value per unit from $18.94 to $18.48.

Filing Documents

• ck0001885968-20250930.htm (10-Q) — 22171KB
• ck0001885968-ex31_1.htm (EX-31.1) — 14KB
• ck0001885968-ex31_2.htm (EX-31.2) — 14KB
• ck0001885968-ex32_1.htm (EX-32.1) — 8KB
• ck0001885968-ex32_2.htm (EX-32.2) — 7KB
• 0001193125-25-277734.txt ( ) — 50655KB
• ck0001885968-20250930.xsd (EX-101.SCH) — 1203KB
• ck0001885968-20250930_htm.xml (XML) — 15987KB

Financial Information

Part I. Financial Information Item 1. Consolidated Financial Statements (Unaudited) Consolidated Statements of Financial Condition 3 Consolidated Statements of Operations 4 Consolidated Statements of Changes in Members' Capital 5 Consolidated Statements of Cash Flows 6 Consolidated Schedules of Investments 7 Notes to the Consolidated Financial Statements 51 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 67 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 77 Item 4.

Controls and Procedures

Controls and Procedures 78

Other Information

Part II. Other Information Item 1.

Legal Proceedings

Legal Proceedings 79 Item 1A.

Risk Factors

Risk Factors 79 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 79 Item 3. Defaults Upon Senior Securities 79 Item 4. Mine Safety Disclosures 79 Item 5. Other Information 79 Item 6. Exhibits 80

SIGNATURES

SIGNATURES 81 2 Table of Contents T Series Middle Market Loan Fund LLC Cons olidated Statements of Financial Condition (In thousands, except unit and per unit amounts) As of September 30, 2025 December 31, 2024 (Unaudited) (Audited) Assets Non-controlled/non-affiliated investments, at fair value (amortized cost of $ 2,076,211 and $ 2,048,601 ) $ 2,044,505 $ 2,029,756 Non-controlled/affiliated investments, at fair value (amortized cost of $ 14,559 and $ — ) 14,045 — Total investments, at fair value (cost of $ 2,090,770 and $ 2,048,601 ) 2,058,550 2,029,756 Cash and cash equivalents 40,741 40,638 Investments in unaffiliated money market fund (cost of $ 11,105 and $ 7,952 ) 11,105 7,952 Deferred financing costs 14,020 14,750 Interest and dividend receivable from non-controlled/non-affiliated investments 12,365 15,083 Interest and dividend receivable from non-controlled/affiliated investments 132 — Receivable for investments sold/repaid 210 315 Other assets 3,507 327 Total assets 2,140,630 2,108,821 Liabilities Debt 982,959 1,013,941 Payable to affiliates (Note 3) 2 127 Distribution payable 30,587 33,014 Management fees payable 1,056 1,025 Income based incentive fees payable 2,791 2,889 Interest and other financing costs payable 12,410 12,996 Accrued expenses and other liabilities 2,252 2,864 Total liabilities 1,032,057 1,066,856 Commitments and contingencies (Note 7) Members' Capital Common units ( 59,974,447 and 55,022,961 common units issued and outstanding) $ 60 $ 55 Paid-in capital in excess of par value 1,159,721 1,066,763 Distributable earnings (loss) ( 51,208 ) ( 24,853 ) Total members' capital $ 1,108,573 $ 1,041,965 Total liabilities and members' capital $ 2,140,630 $ 2,108,821 Net asset value per unit $ 18.48 $ 18.94 The accompanying notes are an integral p

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