Phillip Street Fund's Income Soars Amidst Asset Growth

TL;DR

**Phillip Street is crushing it with massive income growth and asset expansion, but keep an eye on that rising debt.**

AI Summary

Phillip Street Middle Market Lending Fund LLC reported a significant increase in total investment income, reaching $19.774 million for the three months ended September 30, 2025, up from $12.702 million in the prior year period, representing a 55.6% increase. For the nine months, total investment income surged to $55.145 million from $27.038 million, a 103.9% increase. Net investment income also saw substantial growth, rising to $10.769 million for the quarter from $7.714 million, and to $30.106 million for the nine months from $15.751 million. The fund's total assets grew to $822.190 million as of September 30, 2025, from $637.726 million at December 31, 2024, primarily driven by an increase in investments at fair value to $763.243 million from $604.419 million. Debt increased to $372.100 million from $220.100 million, reflecting increased leverage. Net asset value per unit increased to $20.32 from $19.84. The company's portfolio is heavily weighted towards 1st Lien/Senior Secured Debt, comprising 162.4% of its investments, indicating a focus on secured lending in the middle market.

Why It Matters

This robust performance, marked by a 103.9% increase in nine-month investment income, signals strong demand for middle-market lending and effective portfolio management by Phillip Street. For investors, the rising NAV per unit to $20.32 and increased distributions per unit to $0.94 for the nine months indicate healthy returns and potential for continued growth. The significant increase in debt to $372.100 million, while boosting returns, also introduces higher leverage risk, which investors should monitor. In a competitive landscape, Phillip Street's ability to expand its investment portfolio to $763.243 million suggests a strong origination capability and market position in the middle-market lending sector.

Risk Assessment

Risk Level: medium — The fund's debt increased significantly to $372.100 million as of September 30, 2025, from $220.100 million at December 31, 2024, representing a 69% increase. This higher leverage, while contributing to asset growth, also amplifies interest rate risk and potential for losses if portfolio companies underperform. The portfolio's concentration in 1st Lien/Senior Secured Debt (162.4% of investments) mitigates some risk, but the overall increase in debt warrants careful monitoring.

Analyst Insight

Investors should consider Phillip Street Middle Market Lending Fund LLC for its strong income generation and asset growth, but also acknowledge the increased leverage. Monitor future debt levels and the performance of its underlying portfolio companies, particularly in a rising interest rate environment, to assess the sustainability of its returns.

Financial Highlights

debt To Equity

0.84

revenue

$55.145M

operating Margin

54.6%

total Assets

$822.190M

total Debt

$372.100M

net Income

$30.106M

eps

$1.36

gross Margin

N/A

cash Position

$36.483M

revenue Growth

+103.9%

Revenue Breakdown

Key Numbers

• $55.145M — Total Investment Income (Increased 103.9% for the nine months ended Sep 30, 2025, from $27.038M in the prior year.)
• $30.106M — Net Investment Income (Increased 91.1% for the nine months ended Sep 30, 2025, from $15.751M in the prior year.)
• $822.190M — Total Assets (Increased 28.9% from $637.726M at Dec 31, 2024.)
• $763.243M — Total Investments at Fair Value (Increased 26.3% from $604.419M at Dec 31, 2024.)
• $372.100M — Debt (Increased 69% from $220.100M at Dec 31, 2024.)
• $20.32 — Net Asset Value per Unit (Increased from $19.84 at Dec 31, 2024.)
• 22,195,859 — Common Units Outstanding (As of November 12, 2025.)
• 162.4% — 1st Lien/Senior Secured Debt (Percentage of total investments, indicating a focus on secured lending.)
• $0.94 — Distributions recorded per unit (For the nine months ended Sep 30, 2025, up from $0.78 in the prior year.)

Key Players & Entities

• Phillip Street Middle Market Lending Fund LLC (company) — Registrant
• Goldman Sachs Asset Management, L.P. (company) — Investment Adviser
• SEC (regulator) — U.S. Securities and Exchange Commission
• $19.774 million (dollar_amount) — Total investment income for Q3 2025
• $12.702 million (dollar_amount) — Total investment income for Q3 2024
• $55.145 million (dollar_amount) — Total investment income for nine months ended Sep 30, 2025
• $27.038 million (dollar_amount) — Total investment income for nine months ended Sep 30, 2024
• $822.190 million (dollar_amount) — Total assets as of Sep 30, 2025
• $637.726 million (dollar_amount) — Total assets as of Dec 31, 2024
• $372.100 million (dollar_amount) — Debt as of Sep 30, 2025

FAQ

Risk Factors

• Increased Leverage [high — financial]: The fund's debt increased by 69% from $220.1 million to $372.1 million. This substantial increase in leverage amplifies both potential returns and potential losses, making the fund more sensitive to interest rate fluctuations and credit events.
• Concentration in Senior Secured Debt [medium — market]: The portfolio is heavily weighted towards 1st Lien/Senior Secured Debt (162.4% of investments). While this offers a degree of protection, it also means the fund's performance is highly dependent on the credit quality and repayment ability of these specific borrowers.
• Fair Value Fluctuations [medium — market]: Investments are reported at fair value, which can be subjective and volatile. A 26.3% increase in total investments at fair value to $763.2 million means that any adverse market movements could significantly impact the reported net asset value.
• Management and Incentive Fees [low — operational]: As investment income and assets grow, management and incentive fees also increase. For the nine months ended September 30, 2025, management fees were $4.1 million and incentive fees were $2.5 million, representing a significant portion of expenses.
• Regulatory Compliance [low — regulatory]: As a lending fund, the company is subject to various financial regulations. Changes in regulations related to lending, capital requirements, or reporting could impact operations and profitability.

Industry Context

The middle market lending sector continues to be a dynamic area for specialized debt funds. Companies in this segment often seek flexible financing solutions not readily available from traditional banks. The industry is characterized by a focus on secured lending, with a growing emphasis on direct lending and private credit strategies to capture yield premiums.

Regulatory Implications

As a debt fund, Phillip Street Middle Market Lending Fund LLC is subject to evolving financial regulations. Increased scrutiny on non-bank lenders and potential changes in capital requirements or reporting standards could impact operational costs and investment strategies.

What Investors Should Do

1. Monitor Debt Levels and Interest Coverage
2. Analyze Portfolio Diversification and Credit Quality
3. Evaluate Management and Incentive Fee Structures
4. Assess NAV Growth Sustainability

Key Dates

• 2025-09-30: Quarterly Financial Reporting — Reported significant increases in investment income, net investment income, total assets, and net asset value per unit, alongside a substantial rise in debt.
• 2025-12-31: Previous Fiscal Year End — Provides the baseline for year-over-year growth comparisons for assets, liabilities, and investment income.
• 2025-11-12: Common Units Outstanding Recorded — Indicates the number of units outstanding as of a recent date, relevant for per-unit calculations.

Glossary

Middle Market Lending

Providing debt financing to medium-sized companies, typically those with annual revenues between $10 million and $1 billion. (This is the core business of Phillip Street Middle Market Lending Fund LLC, defining its investment strategy and target market.)

1st Lien/Senior Secured Debt

Debt that is secured by a first-priority claim on the borrower's assets. In case of default, these lenders are paid back before other creditors. (Indicates the fund's preference for lower-risk, secured loans within its portfolio, aiming for capital preservation and reliable income.)

Net Asset Value (NAV) per Unit

The total 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 key metric for investors to track the performance and underlying value of their investment in the fund.)

Leverage

The use of borrowed money to increase the potential return on an investment. In this case, the fund uses debt to finance its investments. (The fund has significantly increased its leverage, which magnifies both gains and losses, impacting overall risk and return.)

Fair Value

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. (Investments are reported at fair value, meaning their reported value can fluctuate with market conditions.)

Year-Over-Year Comparison

Phillip Street Middle Market Lending Fund LLC has demonstrated robust growth compared to the prior year. Total investment income for the nine months surged by 103.9% to $55.1 million, and net investment income grew by 91.1% to $30.1 million. This expansion is supported by a 28.9% increase in total assets to $822.2 million, driven by a 26.3% rise in investments to $763.2 million. However, this growth has been accompanied by a significant 69% increase in debt to $372.1 million, indicating a higher reliance on leverage. Net asset value per unit has also seen a modest increase from $19.84 to $20.32.

Filing Documents

• ck0001948368-20250930.htm (10-Q) — 7635KB
• ck0001948368-ex31_1.htm (EX-31.1) — 27KB
• ck0001948368-ex31_2.htm (EX-31.2) — 26KB
• ck0001948368-ex31_3.htm (EX-31.3) — 27KB
• ck0001948368-ex32_1.htm (EX-32.1) — 9KB
• ck0001948368-ex32_2.htm (EX-32.2) — 9KB
• ck0001948368-ex32_3.htm (EX-32.3) — 9KB
• 0001193125-25-277555.txt ( ) — 29287KB
• ck0001948368-20250930.xsd (EX-101.SCH) — 1502KB
• ck0001948368-20250930_htm.xml (XML) — 7584KB

Financial Statements (Unaudited)

Financial Statements (Unaudited) 4 Consolidated Statements of Financial Condition 4 Consolidated Statements of Operations 5 Consolidated Statements of Changes in Members' Capital 6 Consolidated Statements of Cash Flows 7 Consolidated Schedules of Investments 8 Notes to the Consolidated Financial Statements 20 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 38 ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 50 ITEM 4.

Controls and Procedures

Controls and Procedures 50 PART II OTHER INFORMATION 51 ITEM 1.

Legal Proceedings

Legal Proceedings 51 ITEM 1A.

Risk Factors

Risk Factors 51 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 51 ITEM 3. Defaults Upon Senior Securities 51 ITEM 4. Mine Safety Disclosures 51 ITEM 5 Other Information 51 ITEM 6. Exhibits 51

SIGNATURES

SIGNATURES 53 2 Table of Contents CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This report contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by the use of forward-looking terminology such as "may," "will," "should," "expect," "anticipate," "project," "target," "estimate," "intend," "continue" or "believe" or the negatives of, or other variations on, these terms or comparable terminology. You should read statements that contain these words carefully because they discuss our plans, strategies, prospects and expectations concerning our business, operating results, financial condition and other similar matters. We believe that it is important to communicate our future expectations to our investors. Our forward-looking statements include information in this report regarding general domestic and global economic conditions, our future financing plans, our ability to operate as a business development company ("BDC") and the expected performance of, and the yield on, our portfolio companies. There may be events in the future, however, that we are not able to predict accurately or control. The factors listed under "Risk Factors" in our annual report on Form 10-K for the year ended December 31, 2024, as well as any cautionary language in this report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. The occurrence of the events described in these risk factors and elsewhere in this report could have a material adverse effect on our business, results of operations and financial position. Any forward-looking statement made by us in this report speaks only as of the date of this report. Factors or events that could cause our actual results to differ from our forward-looking statements may emerge from time to time, and it is not possible for us to predict all of them

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS Phillip Street Middle Market Lending Fund LLC Consolidated Statements of Financial Condition (in thousands, except unit and per unit amounts) September 30, December 31, 2025 (Unaudited) 2024 Assets Investments, at fair value Non-controlled/non-affiliated investments (cost of $ 752,519 and $ 593,640 ) $ 752,356 $ 593,545 Non-controlled affiliated investments (cost of $ 11,447 and $ 10,902 ) 10,887 10,874 Total investments, at fair value (cost of $ 763,966 and $ 604,542 ) $ 763,243 $ 604,419 Investments in affiliated money market fund (cost of $ 11,077 and $ 9,229 ) 11,077 9,229 Cash 36,483 11,353 Interest and dividends receivable 5,848 4,261 Deferred financing costs 5,013 5,816 Other assets 526 2,648 Total assets $ 822,190 $ 637,726 Liabilities Debt $ 372,100 $ 220,100 Interest and other debt expenses payable 5,894 3,737 Management fees payable 1,413 1,245 Incentive fees payable 931 676 Distribution payable — 9,123 Professional fees payable 158 192 Accrued expenses and other liabilities 862 419 Total liabilities $ 381,358 $ 235,492 Commitments and contingencies (Note 7) Members' capital Preferred units ( no units issued and outstanding) $ — $ — Common units ( 21,699,483 and 20,272,339 units issued and outstanding as of September 30, 2025 and December 31, 2024) 430,548 401,831 Distributable earnings (loss) 10,284 403 Total members' capital $ 440,832 $ 402,234 Total liabilities and members' capital $ 822,190 $ 637,726 Net asset value per unit $ 20.32 $ 19.84 The accompanying notes are an integral part of these unaudited consolidated financial statements. 4 Table of Contents Phillip Street Middle Market Lending Fund LLC Consolidated Statements of Operations (in thousands, except unit and per unit amounts) (Unaudited) For the Three

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