Blackstone Secured Lending Fund (BXSL) 7 Aug 242024 Q2 Earnings call transcript

Good day, and welcome to the Blackstone Secured Lending Second Quarter 2024 Investor Call. Today's conference is being recorded. [Operator Instructions] At this time, I'd like to turn the conference over to Stacy Wang, Head of Stakeholder Relations. Please go ahead.

Thank you, Jennifer. to Lending welcome conference second and call. morning, Blackstone Fund's Secure quarter Good

are Bock, Officer. Marshall; Carlos me Brad Joining today Jonathan and Desloge, Whitaker, Teddy Co-Chief Chief Financial President; Officer; Executive

issued a and on results XX-Q, the Earlier this section our morning, press and our of filed are slide which of of release both shareholders our presentation available www.bxsl.com. we website,

presentation referring be call. today's will throughout to that We

today's the I'd uncertain call control remind like that may are materially of you statements, any duty differ We and forward-looking may statements. to outside results. update do firm's undertake include and which actual these to from not

cast For some Blackstone and copyright not the most to see of turn material be of please may our With over consent. call duplicated to the Brad audio risks recent like annual affect Marshall. Form that, is results, Factors the on I'd section could of Risk report without that This XX-K.

call you, Stacy, good Thanks morning, everyone. Thank joining and this morning. our for

the to portfolio and to go our some of agenda. before Teddy details quarter into thoughts Turning results. Carlos with and John, second turning to over I'll start high-level

Turning of to presentation. Slide the X

$X.X net as it advantages We're In per quarter. results in highest value income per platform, asset ecosystem to the increases last net strength across BXSL reflect income reported share and on of that the IPO, quarter and earnings our as basis compared pleased to putting trillion of our well Blackstone's dollar a per share of my since net investment share leveraging and work for scale investors. our the these view, our best the

share last up from $X.XX per increased net of annualized the share share quarter. and net $X.XX return per per up of $XX.XX in per and a prior NII share, the per prior quarter X.X% on Further, equity $XX.XX to per asset is $X.XX quarter. $X.XX $X.XX share XX.X% value is by from from Our or and share income in representing

yield, the Our represents per among their of secured as remain traded XX.X%. one in senior drivers our covered is XXX% first lien of annualized share $X.XX with of strong. well with at at highest Return BXSL much and invested portfolio peers dividend dividend an XX.X% assets BDC

end, you our XX.X% And weighted average quarter X.X% corporate quarter investments post had with the debt nonaccrual were cost. BXSL will less of from revolver later investments As able tighter on hear Teddy. an on amend to yield end, environment, at we as market leveraging than

Slide to X. Moving

both and second over XXXX, of our in in committed The was quarter quarter third the since new commitments. and billion commitments $X funded with also $X.X investments most billion fundings, quarter originations for in consecutive million for active marks this $XXX

coverage and to deals range a we our large, small, Blackstone's come model time. of and a what believe, As medium, compelling result that our at we we see opportunities of investors given in global broad point to to seek any offer risk-adjusted get broad to, reach, market, exposure

quarters, This quarter, were compared believe middle attractive more at in high-quality lower recent what and market to we funded companies transactions spreads. LTVs we

for a and companies in X.X% OID million. nearly lien debt X.X portfolio spread EBITDA secured the senior weighted of nearly new XXX% into fundings call years with average $XXX average of quarter XXX new approximately our Overall, an points, of protection, of LTM were basis average first an

that of prior years. an the had portfolio of in assets XX.X%, these average Importantly, LTV below well

would we what compression deals per have markets, set, believe with lowering will the we liabilities some of company's Teddy about expenses to other our investors private further average our nearly our of which our a lowest strive a to BDC the We for to the also traded start peers. At the our cost minimize the we We revolving large our LTV ratio traded our facility unit lender these of spread while expenses. further of liabilities. focused call we greater end, to And to since talk $X.X among funded over with spread have or had compared fee the we negotiated banks quarter and same a by on our seen aim the now time, diversified a in bit risk. then recognize. the later, headline revolver spread a participants. peer additional spread to in So group quarter BDC while XX new team credit we lower billion structure adding base assets, we minimize but

remain I'm solutions robust very every had given of per origination scale volatility, by view we market with pleased of as will what Finally, we private recent borrowers this execution believe regard. We spread certainty attractive unit at to with overall quarter's in risk. attractive lenders. capital private progress

an come We to strong continue of to measured cost environment to are rates repriced our after by our end income we to have NAV, in in. see position BXSL earnings likely as where and and quarter operate capital

For us, of in results every benefit colleague, I pass to of shareholders. that, BXSL over the to for Jonathan. it's seeking area will my about With maximize our

We equity. lean ABLs fundings, of that's of that's at cash, expanded and investment pipeline. revolving our strong up range given ending Thank But to position and billion, $XX.X billion borrowing that of to an average to of debt with QX our portfolio liquidity XXX the jump available over increase billion X.XXx resulted Xx the facilities the the middle capacity our you, And of comprised across in Brad. to into X.XXx $X.X some leverage investments, let's and of an this in timing moving X% We to including from companies. target X.XXx $XX.X to maintained ended across Slide X. leverage of increase quarter credit in our

steady quarter. yield The averaged compared and weighted XX.X%, quarter average assets investments at our fundings Now and last quarter this debt sold on repaid on fair during and value held debt to yields XX.X% new at investment XX.X% the respectively. XX.X%

turn X. and Slide to the portfolio at look a take Let's

loan-to-value those companies owned first to of XX.X%. lien Approximately an investments by loans XX% are of who sponsors, are value in of financial equity structures demonstrated and have significant average XX% BXSL in generally loans capital by secured these senior

average it's single noting, in of our fair approximately X% value. portfolio Now is the concentration worth sponsor

Now growth strong $XXX with weighted our relative million our LTM what XX% increase EBITDA. this averaging million, the across last This believe invested that's and a more past the than a $XXX larger a also from of bedrock EBITDA broad from strength on more base where market, this, portfolio also larger however, is as range the continued EBITDA has see performance LTM and year. continue private portfolio default. But counterparts it's to is credit we and we both Xx companies, than we deals quarter average smaller mentioned Brad of their to that EBITDA spectrum, we see

have XX% on rates margin market LTM broader in companies portfolio and more as Now an the Lincoln by database, growth line the EBITDA basis. BXSL's private profitability Markets with measured over International seen credit Private

investors, over emphasize X%, coverage BXSL uncertain minimal LTM quarter, Now The uptick disciplined and for continue since in we've based lower so LTM especially believe that's default importance for last this BXSL's an rate to the which months first industries inception, slight compared the the average cost, in XX peer database at average for market in believe rate interest they in quarter. Despite at the was were environment. traded to favorably quarter, again last to broader portfolio we private a senior second the EBITDA second we coverage remain credit interest place defensive X.Xx compares Lincoln EBITDA portfolio nearly X.Xx secured the of BDC of compared nonaccruals our quarter. elevated and average on as our that's at and coverage. X.X% And or building in to companies debt been on to do lien focus a we

at X% at the of of -- Credit Index Private of interest loans, just portfolio those portfolio BXSL excluding interest revenue Xx in looking below credit portfolio is and for share this because quarter-over-quarter, Now XX%. growth company's the fair seen coverage has versus and over increase value Market BXSL private And additional recurring for our Lincoln coverage larger figure has slowed below Xx. being credit companies that's Xx some private come at in nearly we've some

credits interest be to to only However, we which is that identify coverage one use proactive. screen with

identify Our believe in we on an for our value BXCI the us team. to sponsor early analysis operations-focused companies interest instance, discussion or could that creation benefit from, with helps introduction professionals coverage to the

X% And stress marked of better cost. so that than think view, book the in which in when about we our [indiscernible] our at assets portfolio, represented less below constitute XX, those instead, are by

nearly XX% in in to Looking now mentioned X focuses Slide our activity designing to in this number and of portfolio this XXX, historically lower our and I industries, companies in is rate mentioned, at such lower companies default And default et portfolio portfolio funded the providers historically it similarly investment new the exposure. top we're increased services, second quarter, quarter, healthcare Brad maintain the as we on And as cetera. XX% rate while down, with reflected exposure BXSL earlier, industry growing of how being software, industries. as of our our

amendment activity with affected of changes terms. strong. In the quarter, and immaterial benign with to portfolio matters of as associated extension the Now M&A, conclude I'll remains performance second XX% to activity. technical a which roughly point Over private amendments borrowers. Amendment XX on DDTL continues add-ons, relatively be were on

over all we of had to like with it points Now were the marked turn which and X that, colleague, total below I'd issuers companies, to occur that with of in it than cost. Carlos. related represent saw portfolio portfolio, at XX, X portfolio XX my basis amendments less And to the

Jon. Thanks,

distribution BXSL dividend X. maintained of Slide to Turning $X.XX share. its per

can delivering shareholders, confidence a regular growing share. As of dividends per building continued steady yield NAV you also while focus have see, to on level through to we

we heading period deal as continue we to activity. a are approach heightened for this expect We believe into

portfolio we this or at inside debt was to additional new premium to observed ATM For $XXX million XXX, our a price issued swapped secured bond growth, plus at-the-market SOFR of capacity. was a $XXX instance, quarter's program raised which well the equity NAV, and million meet helping that to we this under we of quarter

aim As for value make portfolio our revenue-generating companies. by we and opportunities operational investments, often driving we discuss, we add after improvements to

We to than by prior credit competition equity our And portfolio by in have we the increased seek just sponsors. calls. with private outlined more partnership is our on to valued providing creation And companies. private we program value BXCI ourselves distinguish capital market, a with BXCI believe

we For second won Preferred discussed resulting quarter, the instance, Park a annual Program in its million. increasing borrower recurring the through by our clients $X.X name in X BX past, the have in Place, new revenue

We business on Park development additional that to with Blackstone data with have on invested meaningful Place's team companies centers. also spend work continue opportunities

all program, at to BXSL and portfolio And creation BXCI's generating it Teddy. to with provides reminder, borrowers savings borrowers the cost both returns. capabilities, additional value shareholder are that, which investment science, procurement because no with and I'll a including cybersecurity As BXSL's benefit access revenue offered potential turn over to cost data full understand we opportunities, and

Thanks, GAAP on net on per Carlos. investment per interest per second Total to ago. its earnings and rates. the interest up share, net was start operating and investment XX. share dollar up higher year results highly was share. respectively, $X.XX Slide million its XX% due BXSL IPO increased quarterly In at with quarter, highly primarily year-over-year, million $XXX driven quarter recorded since income or I'll $XXX by BXSL's XX% our million for $XX from income, $X.XX basis a quarterly tied or income income a the

taking the leads total life versus and a stability excluding in we investment As we over Interest over nearly of each of XXX% long income reminder, term. earned greater upfront, the believe XX% income dividends quarter. the loan amortized fees PIK OID represented to fees our of which

$XX.XX $XX.XX, by quarter from of to quarter, per stable total last at sheet share driven XX. the represents balance up share NAV share quarter consecutive the seventh earnings, ended and excess portfolio $X.X Slide increased portfolio assets. per growth. total NAV. outstanding X.X%, investments on fundamentals debt This issuance above $X.X our value, net NAV up billion of billion to billion with and We of Turning $XX.X fair of

XX. Moving to Slide

commitment BXSL of funding quarter, BXSL for growth, nearly June $XXX approximately addition, in saw the Brad million by committing committed an estimated outlined, additional fifth with earmarked million $X.X billion XX. the and as In quarter of as we $XXX BXCI consecutive to and

broadly over first all Further, cycle an investment over fixed the across million, we sequentially the Net in this tightening syndicated despite up funded so far year, $XXX markets quarter activity income the in quarter. spread activity, and X%, increase Brad was In XX% of XX% muted XXXX. we X% to which year-to-date continue second quarter, of the repayment to for compares repayments $XX rate rate experience to repayment saw activity outlined. repayment or million bringing as our annualized a

rate It not that in portfolio an the may out quarter. in In the quarter. is in worth fact, our increase any market realizations turnover, one few refinanced syndicated a second have declining portfolio in we did also exposure but expect noting by naturally the environment, had

outlines what be drawn of an and bonds XX% XX includes Slide swapped. unsecured we Next, to fixed which attractive that are diverse not believe debt profile, liability and

which Our a in of elevated unsecured fixed debt weighted this contributed fixed on average X.XX%. This key a value interest average weighted on X%, a just overall as fair and of under yield at we bonds have an average advantage to to compares rate investments rate XX.X%. our coupon weighted of environment view borrowings rate our

focuses XX-person our we reminder, diverse a As office have liabilities that a on has access to sources. within our and financing CIO team

Fitch that to costs we team improving sheet. To flat $XXX by on at the full been basis which and million financing the our markets, unsecured priced over first basis points heels over to bond on quarter, in points and XXX down and second SOFR. new of swapped notch secured upgrade across XXX tightened a have the in driving issued BBB balance has further quarter X.X-year treasuries focused end, our spreads a As

by rate corporate addition, basis unused by the as XXX.X while dropped we fee million our spread $XXX simultaneously in to bringing well. and revolver upsized post basis In our points points drawn QX, XX.X

our have of debt facilities We on an maturity liabilities and maturities average XXXX, no years. weighted and overall our have X.X funded funded until

cost in of target our and end at sequentially and XX quarter, We near of from undrawn June continue ending to leverage available further to cash liquidity quarter debt billion our of the capital. Total was range $X.X borrow means was of as in Xx to X.XXx, optimizing explore X.XXx. up of the first midpoint X.XXx

we position to of momentum as the positioned have that balance year-end We continued strength credit moving we we pipeline see with believe to earnings underlying significant what begin excess closing, liabilities in forward through performance and fall. may our a from are sheet support us with rates power, capacity In distinguish market. is

on and for open remain the strive that, to laser-focused questions. ask protecting I'll it will delivering to capital. up We returns With investors' operator

to O'Shea [Operator Fargo with Instructions] We'll go first Wells Securities. Finian

companies I Pluralsight of interest in know in would that the in a but not question be lot trying restructuring of the have portfolio the First a you're wake or there, for below where to coverage, we're get money. BDCs. but picture putting of issuers you sponsor

interest that So how coverage in be included prevalent or in below set provided metric is otherwise, X would your up that the portfolio?

Fin, it's Brad.

the give just on Teddy the comment, high-level So I'll a can give statistics portfolio.

Pluralsight, right, not it. So in you're we're

credit. have actually not So to of we're public positive, orderly, that and it in in one which lenders the would languished, the the I of the was bankruptcy. asset. close though, comment on is, the super think Pluralsight of is to I quite advantages was its been which handover private stuck This make markets, have would will --

well. markets kind was working fairly see private of it nice the So to

kind our Teddy, can maybe, in statistics. overall of credit terms you what on is hit of captured In coverage, and

Yes.

work to types to structure. in are response those the Generally question to portfolio. speak Buck overall the of something below is we and terms XX of then we're can't in think that come coverage is percentage exposure through directly into consensually represented had is X less had our amendments. it, your of in X that it Fin, ask went but or equity first than of underperforming, equity positive. Those see had companies, seeing company the benign amendments, a what XX% situations. We material specifically speaking, situations do those Xx that but issuers X% specifically with X I investments. we I

it your with joining Can follow-up talk you're accrual partial movement. WHCG, a this like looks there as And about and helpful. if forward? policy going the That's will you commonplace Okay. be

a potential situation more Yes. that come in I specifically. to on start. speaking, you've unless think noticed, to on Again, we nonaccrual happy I'm that, very reflects in can't assets situation haven't there's historically, fact, probably that quarter. next clear to speak that Fin, partial the Generally restructuring as put

of mark think And traded of in both below an that an you perhaps cetera, discounted you're we that to Fin, and if or that of assets start can territory, going non-accruals, marked to clearly has we here don't it. you reference see as that have about also some you the kind asset outline Maybe if stress indicator see to the par see nonaccrual is what how make on close next quarter. see et XX goes

that have page that and that restructuring, that could the have if mark say mark knowledge to post some see give see also of of non-accruals. of we that we kind I'd turn, in indication reflect that is you So have about movement, but to how think you'll you where operating terms

to Fin, just negotiate that we'll most I always So so equity come and has happened. try equity, into restructuring in businesses, together, comments those put the X our think, of

steady the quarters. asking code, most get asset and or John marks analysts of But business. the is XX ZIP equity. that you'll marks, should is indicates what's decline, worse if of we what in absolutely real improve below Secondly, that's is kind and headwinds for those as front investors on between said, focus see are, will in in what there's that And because sponsor that are important probably a an

the early which went it's all time they We I program, in have platforms, think through value we sort restructuring. do any our value-added of the whether a CIO that investment of by making of being sure team improve Carlos proactive than spend is through, or is and most on investment, people, XX bigger and can which

We'll go next Raymond to James. with Robert Dodd

can you Hopefully, hear.

smaller mentioned you us you to use any be -- you smaller million low in more companies did at you're anything. But color like that, market industries, cetera. companies that what are about 'company' better $XXX talked et you or size is also give a didn't matter, or size can but on neighborhoods looking First, market EBITDA industries Because focused on the more bigger which doing that? on when middle you've on

on say, for Any shifts $XXX you how a what industry us you million give company. and appeal? would that for, color industry $XXX a on size color like EBITDA company like So do you do million a can by EBITDA but wouldn't

deal, that but at it We've business. historically we're Yes. highlighted the businesses. Thanks, we're better looking aware. And We're the we're -- take of at in blocks, just And neighborhoods. deeper the I'll When looking companies structure, be to larger Brad. than looking any looking It's at in not capital that the sector, pointing again, capital quality is it's you're out best at of as Robert. part senior sectors, obviously, to it's of one. layer structure. maybe going tend then, which neighborhoods, you're trying the course, that. We're which a best be and the

type million would looking I so technology built to they are X and life $XXX our at And where we sectors healthcare in flow primary those say cash businesses, services. going EBITDA software, important. areas, low science out, They when have be generators. as They're these teams And this in and good and default sectors. environment outgrow characterize quite business is historically neighborhoods those which the economy, being we tend to in sector

investments say small, said we're structure, would my I quarter loan-to-value. investing. of say we market. in would point what were the remarks, our at about then And as the last that's around we of on So where capital middle in upper made the I end they're I say, the XX.X% prepared And kind wouldn't

some we're these invested to profile of in the So setting has low which quite is been the that companies businesses, these up larger in where relative we've more where mid-XXs. risk

came up, Got already Fin it. it up. Pluralsight brought Follow-up.

and in then $X involved. AUM active the billion were not 'XX back You're at year. originated was quarter 'XX, guys and really of second was you It

opportunity I'm the going we assume, that assuming what know So means, to in to participate and Pluralsight. you had

decline So you the participate? decline, not you that correct long was the did or It And if of to any then? what reason recollection can wasn't you did did you deal me deal ago? I'm if see the and back wrong, seal

own we passed maybe view it Yes. actually, different -- of credit based seen than both Well, on twice the and times just we've was our others.

XX kind our every the technology into about of get as across single good use well. are well technologists the tap that data and we nice into these insights is One things Blackstone of and in have platform we platform that platform of in XXX of as kind can the we scientists deal as do part that invested businesses, that we're we the very

just take than happen rather in did passed will But nonetheless, we in view get we the it why both specific the a market. on this we see it. And times. not many I'd into instances passed different reasons twice where

time, Paul And this to KBW. Johnson, at next we go will

on the but to I credit but in, Bidco, squeeze well. it Just about pick of of wanted in performance, what and specific of an large a little just wanted know your explanation a portfolio. is company seems just portfolio loan to bit to believe be the full this marked fairly maybe kind the Snoopy in on at point, get thoughts it's

is Just performing? how that company ideas wondering on all. to that's get And some

Yes.

So the we vet can the business would company, expectations. much mark, that can't say XX.XX private The which business. across business. line performing a talk in around the reflect the about is care with which so securities, about it's is We unfortunately,

the we debt, through were value. did -- which XX% senior deal, I we We're loan were through the our when think to investment. that's

of of and beneath it's lot that us kind business to well. So of a sponsors and the support equity continue performing kind generally

of would income there in PIK the say Or is portfolio? majority And [indiscernible]. it. Got the that are the you other

said, is in No PIK take PIK quarter-over-quarter all PIK Those, I'm income. marked in happy our were all X of are of to top the X% Yes, quarter. and there the above XX, new assets, XX% no as income. that. of represents last Brad performing, similar It terms from to quarter. amendments real change

to go Truist. Hughes Mark next We'll with

there and but expectations how give regarding quarter. Or I low your that any to were out? late, you missed you some expect broader about can I this, theme, play this share Sorry repayments pretty something jointed kind is if portfolio, quarter? Is that of the idiosyncratic just

Yes, that. to take I'm happy

was in a X%, environment. think, repayment right, You're of rate I M&A lower than we would sort normalized annualized expect

while couple a M&A Number have think muted. one, are relatively overall, increased, still I of volumes things that. driving

So driving where assets through around we're have really we've are incumbency, we into do what half deploying been deployment of incumbency.

M&A possible that up is it come repayments rates up right, for think and relatively we picks as But now, down. pick time as see I they've over remained you're low.

I'd of also add, we effective which a proactive last view just is defense. function Mark, an that's mentioned item on quarter, a

So know you had current of and with coming do price capital at here extending repricing loan earning to where so activity life or what you to the the of end close and well we have we in company benefit and have quarter, current the market its that up work ROE. your is moving a ability that a protection. effectively that's above company And that's cost a call off to

on So also for you the we what the in those to keep books board, look take, us as low-cost across allowing if grow defense, give assets is and will issue longer, also our active or equity accretively debt. focus there,

Is little as that the a maybe becoming competitive, checking companies market the dynamic? repricing? there negotiation more more spreads the around Is process current

we'll It's around look this have tightening, looking if call capital that's at a volatility. it's kind it loan all finite perhaps but started move an of I'd is good does see points current market it, market clearly which deals, clear of of, the right? where XX-ish you with Overall, you my where relates if natural it amount change overall. dynamic, it's But kind amount say, with find simply quarter, it's environment of reprices in can today, phenomenon. the market at is some to a of a market about itself colleagues to basis in as just trends will, where that you and the of line here, broadly syndicated to we've And

stay us opportunity have earnings. Mark, the probably leverage. call these the gets us income help more give either market call more And to protection as repayments accelerated active, take will you'll -- it of So with gives so our see or in certainly, and the protection as that drive to repayments a and lot fee credit deals, we

So or will either, more bit we at assets to income our for market get us, Investors environment, kind it's of a active on to more spreads. little win-win. a hold in better of fee a get

to Markets. next Kenneth Capital RBC go with We'll Lee

key I'd And some the could reported unrealized apologies but drivers for covered were been in jumping you this over if was just gains call, call around that the so from go the quarter? to already, of

take did necessarily We Yes, have notable. which quarter in A I overall what out spreads seeing of in couple the but helped markups and a marks bit to there's We I'm wouldn't that. in unrealized come happy did really given the little to see gains markdowns. markup $XX nothing a drive anything few say call we're market, the in million quarter. of in here.

Got you. And then one follow-up, if I may.

of are of seeing, recent more the spreads in activity, recent wondering, some of or of terms the what documentation, you that terms timing In of but terms and deal just activity, there? terms changes you some in about talked any you're seeing

assets, provision the that that's up. say, I I trends. actually allowed in of on the specific Yes. to around no sponsor the back tightened would would say of been kind the Pluralsight, move document

competes pointed middle [indiscernible], So that. tighter documents the I weakness have say, end that to lenders which syndicated would of in for and with as little market, market, to have tightened a be bit market. new a the than up the documents in large deals the tend

get in to are on tend And during provisions saw market, very see active the you liquid some a documents in market, actually of some that you so tested earlier for quarter, pretty the and see good. But you time any quarter. us, the

now. of showing the volatility a right little Now bit markets liquid are

of a bit over changing the now, develops that's how course but it little right So see year. we'll the

turn call for And closing Wang at the Stacy comments. this back time, I'll to

today. Thank you, quarter. Thanks, you for Goodbye. forward to to look next speak joining everyone, everyone. We our call