- Earnings call transcript Q3 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Welcome, everyone to the Blackstone Secured Lending Third Quarter 2022 Investor Call. It is hosted by Michael Needham, Head of Investor Relations. My name is Chris and I’m your event manager.

During the presentation, your lines will be on-mute. [Operator Instructions]. everyone transcription call purposes. remind for being to and replay like that is the recorded I'd And conference host, over that, to with I the Michael. will hand the Sir, ahead. please go

Michael Needham

Lending's and Thank Good welcome third quarter to you, call. morning Blackstone Chris. Secured

of today's that Joining firm's our call include I'd our and differ like Kresge, me our results to today, you issued and Interim website. statements. Officer for release both Earlier Kevin a Officer. and filed do today press the remind which update statements of materially Marshall, We uncertain which Financial duty control may the Executive are on undertake results. to Brad we forward-looking may are any not these are Chief from outside actual available Chief and presentation XX-Q, of

the may be For annual we per most our duplicated $X.XX could per Brad. cast is and of without income over of that section Please consent. On the copyrighted I'll XX-K. audio net affect investment recent call factors risk see third reported GAAP for turn the This not risks share to material some and income of the With of report Form quarter that $X.XX share. on of results. net results, Blackstone

Brad Marshall

Thank today. for morning, you, Michael, everyone, call and you joining our good and thank

a solid $X.XX mentioned, third quarter Michael record on Net performance. credit investment net and which growth we to investment income XX.X% income a annualized As reported XX% yield investment another strong excellent represented including NAV. and income increased quarter-over-quarter a quarter share,

Including quarter higher X%. represented annualized have portfolio period $X.XX dividends, by from I driven of and our short-term rates was regular year, rates. over in a past we is quarterly during below to NAV. a up NII contributed dividend first special averaged million yield this earnings the which note to September repurchased yield higher of book step that share, where in secured we raised the senior also September, all during over term loans value, another of $XXX quarter. which $X.XX XX, on X% a below expect would the from accretion our virtually near XX% based a We also the lien dividends. XX% In NII shares Stronger

to NAV addition cover of our repurchases will In more share $X.XX detail. Kevin accretion. in

BXSL investors many As publicly to private to. X% as of marked are assets To respect X% of traded best we fees we BDC, few playing with year, would and the only X/XX so know, are below our yet soon non-traded our businesses to this of And When just BXSL non-accrual, on told created a our our anniversary market we challenging practices, a defensive attractive as more put assets plan with launch. that hear we in we sector company. would of you'll in returns. we celebrated our the four-year anniversary still lend deliver could protect capital including is the how one-year out seniority lowering that of structure build conditions, of that BCRED that the and of numbers our you XX. market recently mark since lead our more selection, our Today, will we a capital it portfolio size

to will EBITDA average our metrics portfolio growth our for platform. direct than estimated strong $XX believe We have bias of more challenging U.S. a across We're months. X.Xx in companies Our quality lead coverage And similarly macroeconomic interest lending XX this last more seeing the backdrop. resiliency is billion quarter-over-quarter. healthy registered

to themes. a on spend to a Before results. turning financial it of minutes over couple to our review want Kevin few I

in powerful in investment growth driving income. Firstly, are our profile an net NII asset growth, rates advantageous higher liability

confidence have in income and outperform to and growing NII investors, to outlook, we portfolio of our and positioning. the platform, we high in believe tailwinds our positive dividends Secondly, credit, designed our positioned is And was deliver BXSL BXSL and defensive difficult well resiliency for more third, business. environments, given credit deep

So average XXX% dividend third expansion represents BXSL a earnings, rate of first, debt profile, and of at less beginning rate with asset driven a of than material XX% out earned by the our liability favorable quarter the fixed investments by X%. its floating virtually XX% an coupon

expect the NII portfolio incorporates rate increases. additional as over the more near-term growth We fully recent

of in if X.X%, on of estimate $X.XX XX% effect would been yesterday. in September we loans third in to at on X.X% With X.X% blended and X.X% X.X% quarter, quarter assets XX. Our for higher have end, loans had been the second average XX, the quarter if that based base have were LIBOR, rate or been reset would been the rate NII rate entire have quarter additional the third per September our reset XX% would the an was share. all quarter base all base

we the was we from and a credit standpoint. believe outperforming solid quarter continue performance Our credit in will

better those Over secured BXSLs the BXSLs by of large sponsors few we to with the that their with companies financial leading XX% sponsors. companies. the share and on top downside of the private eye by senior want towards the sectors so who have to portfolio. are loans, we focusing years, metrics feel capital or additional over to are first resiliency protection to capital capital I about partnering lien Seniority, investments other our past of companies you structure, picture support a four of invested access of give an loans equity equity more and XX% owned firms why in a optimistic resilient

healthcare of technology, leveraged sectors XX% as X% and invest have the has rates value XX% is more default sectors. for XX than year, an equitized, resource focus loan past portfolio on in less to is for resources rates leveraged over key over XX% that buyouts annual Credit default than with with by we our last at the its expanding XX% seen environments. below average S&P with of XX% macroeconomic low average that a that weather Sectors, difficult the portfolio loan the months. Blackstone this group. highly sectors headcount over sustainable market We more index Our from to resources data increased low companies also on estimate XXXX, of Scale, larger based have default well in since believe of is BXSLs similar below Fitch, such

larger, portfolio Our orientated million, average durable portfolio businesses. to we've XXX company and EBITDA grew the more

quarter-over-quarter X% EBITDA same-store grew index. for estimated S&P X% sales company's leveraged Our an the versus basis loan on

time. or companies interest estimate on and Our EBITDA the In case, average either remaining loans, about XX% intentionally lower the up on Xx one weighted higher. companies, by leverage are that and LTM was loans LTV market Of for basis, average approximately portfolio based we set versus had third coverage XX% quarter X.Xx for interest improving portfolio two vast S&P average which annualized with we than X.Xx Further, margin believe were of represented than coverage is are rates. X% our less the those majority larger reserve. and earnings than average profile liquidity

focused channels. to over a Blackstone's Lastly, that continue access. improving and platform broader managing saw operational over our professionals are our we've can times expenses, to operational amendment affiliated franchise investments and believe and them like to that not distinguish companies professionals team more we seen a We we platform in and with access improve post-COVID, our on operational active significant to we should BCRED XX help reduce source or XXX BXSL over revenue operational and will There across companies have is whom team large face requests. take efficiencies, or Blackstone role to new immediately Credit have beneficial having an performance pickup challenging with plus an portfolio the time. our But

outlook BXSL we've highly for horizon, focused materially the the shareholders public is headwinds we shareholder believe elected not than So on scrape bright. we on is for set to average despite manager. lower BDC, our the macroeconomic the experience, fees fees Blackstone

a performance pro over if closing buyback at you us over quarter out only and X% XX% yield liabilities the a XX% assets back have XX below and finished repurchases not share after lower portfolio for and in X/XX that lien NII is end. price. including $XXX fees XX% to portfolio XX take earnings non-accrual loan We yesterday's a assets And not positioned mechanism of forma is Earnings, our first than That this a but of portion million yield having meaningful of earning while marked on performing we result out have just for look or X% of our BXSLs value. Credit, competitors. rates XX.

[Indiscernible] the size across Even an in focus with and be BXC, the for headwinds built to I sector bodes future. platform, and on recency well as very vintage build we're Our environment mentioned our geographic management defensive. of of in operating than year, more up particular, as continue sector we to into and past verticals, over expansion, headcount the is lean resources. our XX% portfolio teams, our our out

what outcomes, think we'll access about As will multiple differentiate BXSLs defining. be next few companies functions to resources, be positioned can executives and we alongside that operating years, over truly across the

platform companies, about outlook, a with elevated best resource our are we and the a earnings net support we and we both we in credit where think lower be and ahead to as move to how quarters fees with So like will as BDCs positioned Blackstone come. metrics feel our the some expenses, winner of

Kevin. it with to So that, I'll over turn

Kevin Kresge

you of repurchase on growth, solid highlighted share by backdrop, Against Brad, you, structure, earnings structure. the excellent potential. earnings positioning growth, our capital strong driven portfolio future everyone. and rising I'll capital which the Thank And drivers macro finally, we our key and our defensive by and good on interest the delivered the earnings an outlook results challenging was quarter our of supported update by third our rates, program. through morning, walk

third the per was First, share, quarter. quarter, results. which $X.XX our XX% last income investment operating $X.XX or $XXX from net million, up In was

to material operating cash up dividend just company Nearly $XX rates. as meaning the GAAP in single with weighted a of up drove the virtually was at last interesting. zero represented losses, no the equity $XX expenses in M&A, Payment-in-kind we XX rising over our initial quarter-over-quarter, or a income continue PIK generate new $XX at net a to X% mark-to-market challenging were no to in leverage income flat quarter. declines of quarter reflects rate software continued significant of realized unrealized to And million million, investment cents of all in was companies prepayments quarter-over-quarter this quarter-over-quarter, Our ability the partially of despite net quarter, expenses portfolio of revenues XX% revenues position rate despite and performance. fixed rising million pay income. our Xx share, XX% environment company our interest realization were compared X.XX%, interest able Meanwhile, which under environment. average or This per our This from by players recurring unrealized were $XX PIK total investment. were portfolio market XX%, resulting gains for or $X.XX primarily was a largely spreads up solid from offset realized net credit despite of million, in widen. income,

previously $X.XX down a up quarter, our for regular plus additional $XX.XX included $X.XX share announced, $X.XX from quarter. quarter special in quarter last last per This the dividend NAV an of As marginally resulted versus dividends at XX% end dividend.

However, $X.XX $X.XX before been it would have about special. the

continue billion of just ended a Next, compared a rate investments, we $X.X spread approximately This yield view in capital debt floating advantage key at our rate rate BXSL. bonds rate X.X%. drawn floating mostly provides are outstanding at of which company assets the between key cost $X.X this low We we billion rising X%, with X.X% portfolio less for structure includes fixed rise. which as view additional as weighted XX% third earnings of average cost and rates growth, rate our quarter unsecured which with weighted The to the potential average in differentiator environment. debt a as material liquidity, with fixed liabilities, moving of to and XXX% than for to of a total

target our quarter, to was goal is last and around to of slightly high-end X.XXx. operate X.XXx ending which down to Our our from equity debt near-term range the close Xx to of ratio

with cash used debt, provides from us down pay pay debt, would Excluding and quarter, million significant capital flexibility share assuming we X.XXx. debt cushion. undrawn been as was leverage $XXX ended the buybacks quarter in down last instead This have from $X.X with We with to liquidity loan repayments. and up billion and net proceeds our of

next average we few of Additionally, X% low level the September have prior of maturing over just to maturities four debt XXXX maturity an nearly years. and with overall years, of commitments weighted

three our no and ratings. maintained Importantly, we corporate assets ended credit the on quarter investment non-accrual grade with

update shareholders. on an to our share accretive to Now repurchase moving been has program, which

put of share recall, was triggered place may IPO, and you million the BXSL if is As a [indiscernible]. at formulated program shares this our time into $XXX repurchase

million the $XX.XX, average to During X% bought quarter, million at for representing X a weighted nearly shares discount an $XXX back approximately we NAV. of price

shareholders. price at we a dividends reflects addition of bought which of result, in to at shares a saw for result from full our repurchased shares, now additional in back $XX of of the program. Subsequent the a buying we weighted accretion share plus As we quarter, outstanding. $X.XX an from million raising million to to average NAV And commitment and earnings, higher NII reached a approximately growing $XX.XX. driving per as $X.XX our a the back $X.XX value Overall, including end, shares have as XX fewer quarter discount, incremental result capacity

outlook, grow nearly the rate we quarters rates reach on the XXX% in to to meaningfully coming are we positioned believe investments very floating that earnings higher. well our to turning as continue Lastly,

more third And As would being basis XX we given all total, at for potential there's Fed September the point estimate share have per average rate recently would future. Brad the been increases higher, NII quarter, else mentioned, hike or and entire from level equal. if been rate announced for have $X.XX upside our here, quarter XX the the in the base $X.XX additional expectations

to the the earnings as the very capital stress from very of open questions. and potential portfolio ask that, for rising were will we remain upside with of to I third up While quarter, we pleased times given in operator about quarter we And our our defensive results, designed enter outlook, positive rates. fourth protect

Operator

Thank ahead. you. Alexander your [Operator go first from question Instructions]. And Please Casey coming Compass from Point.

Casey Alexander

share all, service] morning. me talk loved that let to to And have repurchase lip [lip of service -- [ph] programs. Yes, that BDCs good say first we the

and that which repurchase regarding reasonable your your might about and companies the entirely you program, amendment that the I the at share portfolio metrics, of completed think forward-looking, to doesn't the companies you last dollar that out that to that and about of those a ask it's the how still impressive you think preparing can reaching because help them your true to that just plan was rates math impressive I help be as how you interest it's company the tip margins to interest promise entire a be statistics And certain company. cycle? pre-IPO sure it's number aggressive through see relative small make that and gave get requests. to

Brad Marshall

the lead Well, we've those practices from for wanting been with market you thanks comments. always program. as to Blackstone to the said, core Casey, best start, has

is across with bit of interest a some earlier, the right sponsors, not challenging up said to it but be of conversations and companies interest what from portfolio As or will period we top a reaching We've more our little cash largely, XX%. coverage now. through XX%, pretty actually relates standpoint, And are on flow is rates it's working out their to a mind high. XX%, what because because challenging had

transitory. respect businesses, all support with periods. the rates into So transitory going generally, rate sponsor material so are It's this, some at interest year. Interest secular headwind is arguably issues, It's viewpoint into into Casey, the we've businesses them kind calculus investment that certainly a not and accompany need with their to consideration and impair sponsors headwinds go an as to say this experience, a rates other. not they're regulatory being problematic. other on gets really that especially which to I manage to part investors in just is it's a environment to What whether take certainly though, them of businesses. it's What they particularly rates talked looking defaults. just rates headwind, alone But next are terribly a company, will expenses. creating about alone would for drives do interest backed interest that or But their the a of problem factors through problems, from not for singular

that of So some, we not of out them us, right companies, are the list reaching a to but talking to we're some to is out now. reaching are top

Casey Alexander

one software the is, if exposure some to you as some the give investors that. follow Thank question could would comfort, of space. there's performance My space, of right. give All to a obviously, the think I on you color for it your in companies lot software

Brad Marshall

sure. Yes,

So very around average of good I those million. are profitable companies growth. businesses EBITDA in revenue top sector, sector EBITDA so software $XXX is that's we're growth far business our our And performing probably in very And quarter-over-quarter best X% largely software because line visibility, right sticky we're or now. that of X% seeing think

that value about billion-dollar businesses. think enterprise these are three So plus

we've So And of end the their XX%. are software skewed large to average margins about market. the on

top software tip and but the making cash securities, manage generating loan be at interest So more on thing they're a structure, our is, value you service view a would And what we the firstly know, through based to lot capital means that's the flow could today, say, the today. our last on we of value of Casey XX% of that free headwinds. to to as in very investment and not I in the time at are are market with what sector,

we're capital seeing of a So growth good subordination, companies equity in the place structure, from. lot large that

Casey Alexander

All right. Great. my taking questions. Thank for you

Operator

Fargo. line ahead. The go next Finian question is Please of coming from O'Shea from Wells the

Finian O'Shea

their tying Or year? where that base coverage the their of forward Good now? here EBITDA curve things into through. and on, in Hi, will sort the at of feel your making the you, portfolio on way sort What's rates settle ultimately good morning. gave next based the right glides still interest up where growth you follow together of Brad still higher everyone. appreciate Thank color a some

Brad Marshall

Fin. Thanks,

right coverage cover that where peaks forward it time. So at of Again, XX% XX% actually will doesn't And one assume grow, X.Xx. companies which alarm through based we doesn't to that's the think a now on solution of will don't now, interest companies. we necessarily curve, our expect they and be work we between will. -- below interest me, small have with the our think given And subset ability they then that

Finian O'Shea

Is follow leaning looks of That's in you. happening table, assets. I bit the a be markets And of uptick else an or like this first helpful. lien level the two inputs a valuation classifying Thank what it liquid guess might you're book. within there? indicative That Okay. on into the up

Brad Marshall

the in the I know what's not We're BXSL seeing. remember, in necessarily leaning into what you're Fin, I some markets, in liquid quarter. only odd XXX dollars million the don't driving invested But and uptick we

So private period those in fairly was light it us, investment and assets. a for all were

Finian O'Shea

so Thanks much. Okay.

Operator

is coming go question next Please KBW. Lynch The ahead. from from Ryan

Ryan Lynch

Hey, portfolio the of and portfolio stuff end of dividend. echo I sectors, versus defense in of I morning. provided your margins, appreciate think had lot a think the forward. granular quality kind want this the dividend just the guys kind The was, statistics, kind runway, the like dividend details $X.XX, to at sort obviously, going and good the above that we one looked core was really the earnings as I of portfolio you significantly helpful your quarter of XX% very on the said, of through EBITDA Yes. you of through $X.XX, of question at credit quarter, we

going the guys to thinking you forward, as current we sense it regarding dividend more above earnings earnings about, to that are Are Are how significantly this thinking be or or core supplement thinking good dividend look rate? And dividends regarding are just of policy? to to So like that guys makes sort in of supplemental variable specialty? you problem a have you with dividend. looking run regards get dividends to What curious, that kind are kind I'm to guys acceleration? just of dividend close the you

Brad Marshall

right think it way, I the you characterize Ryan.

based mentioned. we are question. broke The have now, to way. the investors. sort I we're regular you so rate you little we and all fortunate XX% the paying the do board, to that. we're as right dividend earnings all meantime, the we're our the best out to is trying but the through think come plan very in you out we I But earning. with excess with position, to income price, characterize with bit, But reasons our yes, which XX% a accelerating it we on to options right that right income up build how In think are way is math. our about way, share a we're And the that a know, pay respect helping And of into considering a we'll this on environment up longer-term of that those rest that out got return that

Ryan Lynch

can credit you don't more have of we to one have that gives advantage if maybe most, executives, what kind advantage choppier year, you mentioned sort And operating know into examples work you I any go access give then, can of those to talk situations or have kind stress? you you gives starts few platforms a environment. some out an out of of sort building help that your you of resources you the in as resources about just guys done up if that what show you potentially and in if that significant can talk of a because you the may But just a about company think are, fact. to past I

Brad Marshall

an advantage is starts It Yes. is and company well before Ryan starts early very a it enormous stressed.

And past, they we effort, at do space. that team. energy lot day We we've mentioned have are call put is If partner with we your resources portfolio companies us say, people can very can the unique let have the costs? cross operating a our establish help? into all How we five and Can we is a our an be performing lower sell that's level across why that companies. of is in we relationship important products early good and in that a credit our this Blackstone, how your every on because

to trying get back passive management, those We're that capital expecting company a to we a get know give six not to to in have or to lender and years. five get we So conversations.

end important those into So on front to it's invest very the relationships.

in And through their you through its think cost all helped in executives cross-sell company America. our and was I procurement of its our entire So in team some navigate we revenue active is the something a period. companies play buying when role the active to are that And as operating company that of lower or what to we owner. group. to largest We're But that, team more we play We And the with actually third SWAT as can can Blackstone a very time. bump go kind from as there literally give of the and company, even procurement And where it send economy our and grow how or down network. that very, through in figure team, all a SWAT their like team we a to specific a team able products company time, role. a if a a an in most their them we a navigate our something before you expenses put the or relationship we a period a did lower the XX% To to that we together, together, road, period. of a team of of well hope examples, them or tricky operating challenging executives, a them some during that power had period. procurement help or helped cross-selling across through cybersecurity help maybe out revenue we for COVID, interest just during lost short one sent is

is this, we do advantage it into, won't. benefit I is and an What So a we we're platform. time, after the unique. in this I but our differentiator I because a prepared could spend during will hour why this environment real us. competitive And very defining is investment, it for for become headed about an like But highlighted Ryan, an our of remarks for make talking

Ryan Lynch

do that. agree completely. a you detail advantage. color is really That's me. with time I the on competitive That I a from and That's helpful today. all big appreciate And

Operator

Instructions]. [Operator

coming from RBC question ahead. Markets. Please Capital go next Our Lee Kenneth

Kenneth Lee

good good the your just for think looking up in there. activity. M&A downs quarter? forward taking my the over What Hi, the debt outlook best downs sort depends, of and wondering, question. you had alluded for pick sense debt to morning, given few pay Pretty of quarters? thanks next like I But amount pay of Thanks. potentially potential the slowing it

Brad Marshall

Ken, the so appreciate I thanks, Yes, question.

we tracking are different if to our repay So six will companies them are repayments $XXX about that where debt, all about happen. of situations to of potentially get million looking

happens, environment. So depends as that's reduce processes. we're both it on new over this to And pay own that period use time But investments those leverage, into well what their downs what at. make looking we'll as

Kenneth Lee

but then of certainly pullback you're Got slowdown some in What's you're activity on just helpful funnel again, of the what And sense terms then you. seeing? Very seeing some and top want to of competitors, there. get looking the Thanks. the deal flow M&A the other from better other but side. your banks flow. sense Obviously, a of deal seeing

Brad Marshall

Yes.

in So, period because now in in a in we're more volatility, are part broken because has markets of flow, M&A environment the definitely public a financing the bit part the slowed right markets. deal little

I say deals the So into new you've XXX% seen deal less activity. the going flow private is markets. will though of for

Blackstone deal the more into slower I years a this markets say helps is at just Credit. So probably broken that an investment, deals would standpoint, is offset doing that we've environment this environment. that new But in and fact are the the best private the M&A markets XX from seen the steered to been that public we've

base are you good up little of spreads bit a more very kind wider, you it's are better, You've leverage, driving documents set you rates, returns, got have have that attractive. have

given have and given a rate investment very market you dynamics, favorable So the the environment. environment,

into we that processes been in have back next head actually see a a will on put we year, that market pickup side hold and sell of activity. So coming as expect the lot we'll start into

Kenneth Lee

there. helpful Very again. Thanks Great.

Operator

Wedel the line Please question of go comes final Melissa Our JPMorgan. from from ahead.

Melissa Wedel

been your on to have as about questions forward. you opportunistically, repurchase you're Any a have get thinking asked basis see, the something Good wanted that? But tool of regular on contemplation already. about Most very the authorization, re-upping a at to completed use just least how I my in place comments going share given that morning. having or

Brad Marshall

We're program a in Yes. have going definitely place. to

question. the appreciate Let's

the we're that with As meet And all kind another board up opportunity. into yes, you to buyback of will exact definitely program after in But leverage know, trying and place balance the and we have come with we goes specifics. calculus. the

Melissa Wedel

out of But conceptually hash details there's just talk repurchases Okay. we to lot going about Certainly maybe can there. understand a forward. share

Casey you guys made think, completed as beginning commitment full of you the to just a Would or commitment same as that one I tool authorization have going process, of with toolkit? to to of you've that, something the in completion sort at forward the repurchases view upfront, as degree the mentioned, it.

Brad Marshall

bit it's would in done been toolkit. another it, buyback, think have is where I than tool believe. the Leverage now not right our we it at little had for X.XXx higher I like a X.XXx, us we'd Melissa,

definitely the how to capital. want risk, we our use stock. with and believe we in manage along So buybacks But we

to and our is make to new capital other want leverage. many have future. the into that to have And buying. and we do balance do buying amount think deals But something to Blackstone the at been support will and our both right it manage going have I been we employees that I've of sheet balance sure that

Melissa Wedel

Understood. Thanks much. very

Operator

call now We'll remarks. Michael turn Needham closing to for over the

Michael Needham

follow Investor Thank team up our questions. joining for available additional Relations is The for call. everyone you any

Operator

Thank your That you Thank for today. you everyone. for joining. call conference concludes

Enjoy the You your rest day. may disconnect. now of

Blackstone Secured Lending Fund (BXSL) 10 Nov 222022 Q3 Earnings call transcript