BXSL - Earnings call transcript Q1 2024 | Blackstone Secured Lending Fund

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Operator

Good day, and welcome to the Blackstone Secured Lending First 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 Shareholder Relations. Please go ahead.

Stacy Wang

Katie. you, Thank welcome Conference and Secure Fund's Lending Good to Quarter Call. First morning, Blackstone

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

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

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

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

cast For some Blackstone and copyright not the most see of material be of please may our consent. duplicated the audio risks recent annual affect Form is results, Factors on section could of Risk report without that This XX-K.

the like Brad over With that, turn call I'd to to Marshall.

Brad Marshall

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

with agenda, details So thoughts around turning more results. morning's and Carlos this our some before to to portfolio I'm this some Teddy into Jon, quarter's high-level and go start going

another strong or return share, equity. net annualized investment a of of $X.XX BXSL reported per results, NII, representing on XX.X% quarter including income,

investments, share share a robust credit results XX.X% weighted Our by NII from and yield fees. And current cost. benefiting minimal debt X.X% the environment. at with from was accrued nonaccrual incentive $X.XX a reflect per gains per performance elevated capital strong impacted These continued rate rate on of average

resulted NAV share IPO income $X.XX standpoint net $XX.XX. had the of a from since second per which an share, also best earnings to our We quarter increase per with in

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

Moving X. Slide to

start since first which secured in on which year. of positioning saw overall deal in has As most what This into $X.X LTV focus senior Further, par, for high-quality quarter in of $XXX investments debt nearly the XX% was into had fourth ramp-up quarter, are risk-adjusted were had anticipated investment new which been better an the in quarter activity. XXXX. the this reflects of million we our of with lien we discussed an fundings, debt We that and of last We first continued active BXSL average had companies we believe first XX.X%. billion returns. lien at commitments continued quarter, cycle the we've

weighted points. Additionally, the new approximately over had OID approximately for XX.X% of average basis quarter with And XXX a transactions XXX to call of basis protection, representing years average points all-in yield X spread maturity. of an

high incumbent aligns activity themes. BXCI's conviction leveraged to our focus during attractive We commitment originate the on relationships the Our opportunities in with quarter investment industries.

services sources, of from experience more may portfolio our including portfolio benefiting X,XXX software, energy and internal a was cyclicality, equipment network that quality. believe ongoing For services, we public and private existing partially that a wide example, over in companies. equipment IT And and in electrical over of activity supports industries including an a credits repayment and our BXSL portfolio XXX from of source rotation

what quarter momentum we expanded X global BXCI's including our the to X commitment past preceding the to at and create second the flow deal quality looking combined than into we credit as platform quarters carrying Just quarters and utilizes for through believe BXCI be more seen this our collectively, activity seeks have European see investors. platform,

factors. driven continued our from primary a activity, And M&A slower deal X of despite being period see we flow

equity XXX from to and grow finance being of absence may sold that portfolio benefits companies through positions BXSL the debt First, having look across acquisitions. in

we globally, believe Second, to with issuers BXCI's deal and our over existing relationships drive helped scale incumbency flow. across X,XXX

fact, In borrowers incumbent BXSL's BXCI. to of QX were of fundings approximately XX%

we tailwinds. sectors deepened on across specialization have believe focus long-term we our Third, have that

For colleagues of example, will specialized Brad colleague, knowledgeable opened office Cambridge, in we our our that April, equity need in an great is expand Science a with Head Healthcare, This Global Where Coleman, Massachusetts. along Life new in Jonathan area is alongside expertise. credit our Brayman, and presence. highly private of

from of BXCI's by services we during heightened Finally, period inflation. companies offered continue hear a creation program to seek value that

they And we valued believe additive. is While as not we the the market. can sponsors be services with Blackstone such, bullet, a are provide a by silver partnership quite in

the our excited ability income investors. earnings, of the in from lean to continued about You'll team, I'm more our into improvement but for our the quality hear pipeline drive overall And particularly NAV. to

it pass to Jonathan. I'll colleague, that, With over my

Jonathan Bock

year let's across of Thank timing position debt investments, elevated. of billion Brad increase facilities, borrowing and compared nearly X.XXx, QX. and pipeline increase to remained cash our on our in bps XX% investment The strong Brad, given weighted quarter to over X. $XX.X mentioned. Slide and We you, fundings. approximately at average the portfolio a the capacity rates with billion leverage an We including leverage that an some of comprised jump ABLs billion ended that floating average credit X.XXx $X.X as QX expanded to the maintain quarter XX our ending resulted revolving modest available approximately $X.X base This last of from of our expanded rate rates lean into of in liquidity in

debt modestly While attractive all-in to on compressed, XX.X% compared at at fair average spreads have last this quarter remains yield value weighted investments XX% quarter.

new income. sold repaid XX.X% and our quarter assets averaged the The to during accretive and XX.X%, investment be respectively. and to continue on yield fundings investments debt investment New net

Approximately lien a and XX% at are portfolio, the take loans nonaccruals equity are loan investments in X. cost. our have noted, still demonstrated structures, loans of those to owned capital at sponsors jump value an as Now only these value who Slide And XX.X%. X.X% to at look of financial XX% in let's Brad by the of significant secured first company's BXSL by are new average

starts Xx private than companies, EBITDA smaller we This the larger Our million, portfolio strength from LTM market, continued both $XXX the where EBITDA their our also base increase last performance of bedrock larger a is also to growth defaults. relative and of counterparts portfolio strong from than X% more averaging from a see year. credit and

XX% line to BXSL's market portfolio and broader measured profitability private as markets private the the market credit International compared an growth the database LTM margin broader rates with seen EBITDA over Lincoln on has basis. more by in

basis, continue the coverage Now compares the QX, stress for broader credit for which the this months, average QX. below was represents only EBITDA of LTM market coverage. LTM companies on has The market, X.Xx Lincoln in XX XX% at private interest than again to On to coverage with population based we the an broader that X.X% $XX BXSL EBITDA of importance favorably which in companies versus X.Xx LTM the over portfolio last EBITDA interest million. of credit XX% less of for Xx average database coverage portfolio private the

of X, In increased on Now XXX. Slide further companies number this exposure. to focuses portfolio our QX, BXSL in industry the

conviction default build as and exposure maintain of XX% we deals funded top expertise, areas, to portfolio of as software nearly we services, including companies our XX% While to new rate historically continue mentioned. lower industries, out IT to and nearly Brad

strong. benign on the matters. vast or to add-on BXL extensions be were first technical quarter, in remains XX activity. other the were as the amendments for associated investments, continues point Amendment a with conclude amendment private of DTL of which performance portfolio I'll relatively the And there Now majority with activity

turn to like I'd Carlos. it that With over to

Carlos Whitaker

that debt few not financings This Thanks, to take the knew for expand leading along incumbent for the one third-party marked we deal centers new minutes led, company Brad's total a of capital activity, maintenance committed, package BXCI also deal dive regarding take largest of with in billion into an the a portfolio third but Jon. syndicated data XX% for and quarter, the to To $X the debt structure. like across out financing only provider on parties, to a Place, well. financing a private of point Park I'd quarter.

allowed to the BXCI factors differentiating win key several deal. believe We

scale. believe market can has in quickly the size, ability of scaled a down in very to BXCI few the majority loan match. the we vast something First, commit taking package,

BXCI's anchor relationship position with in sponsor. a syndicated We've and strong loan existing leveraged the incumbency. Second,

Third, value creation.

position BXCI, was the borrower Park The existing Place to and portfolio program. our became introduced number of and benefits a creation already value an our has experienced through As had for for cross-sell been a partnership active companies of telling preferred companies Blackstone provider story portfolio approach. in a as

Blackstone deep prior We and institutional knowledge. with Place. diligence utilized expertise, centers knowledge Park of technologists differentiated and Fourth, our strong along insights sector market data internal and

of billion globally, includes one is largest company investment infrastructure, under With fact, data conviction of data or $XX North Blackstone. the our digital centers, which themes highest centers today. America In across in construction particularly QTS, also center owned data

a multiple not credits offered cybersecurity BXCI we best offered partner just savings benefit capabilities, Finally, cross-sell helping value value-added opportunities, because understand the additional no through lender, one-stop we with flexibility ourselves increasingly debt, creating credit believe suited as Park a also differentiate competitive an need. Place's flexibility. private In for but ample a tranches service market, of and end science, to creation borrowers procurement BXSL access cost portfolio. program grow are investment cost, and including equity value. data we full at all BXCI's the to

turn I'll Teddy. And with that, it to

Teddy Desloge

BXSL's quarter, operating investment results XX. Slide was net and our per $XXX with start I'll $X.XX income Carlos. share. the first on million In Thanks,

fee a end quarterly a $X.XX full driven year at second or million incentive BXSL primarily XX% of While highest increased decreased the per-share consistent October primarily our up quarter. its remained income income, investment the rates. expired first Total basis from of near in interest recorded waiver, a in QX. and due investment ago. $XX to income the Net $XXX the total income and terms respectively, million a GAAP result on capital accrued year-over-year, share, since quarter for which gains-based investment and IPO highest higher with per quarter dollar up fees XX% interest impact of was income by as net

PIK, total interest dividends, the and income investment to important in XX% is earnings income, of our the fees approximately It represented of highlight high quarter. quality as excluding

in the balance billion ended strong assets. outstanding Slide total fundamentals debt $XX.XX We distribution earnings approximately values, investments billion the the the net value, in represented of as growth. at $X.X quarter last quarter, increased to sheet asset of spreads of of $XX.XX our well up fair the $XX.X quarter. With on XX. with NAV to portfolio Turning quarter share per healthy $X.X as share total and tightening sixth of consecutive per and excess supporting NAV This billion from

to XX. Moving Slide

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

expect repayment quarter million half Repayments a second see quarter continued at the momentum to the in and We remained or rate. year. X% relatively the annualized into through the $XXX back of muted

Next, Slide liability diverse of what believe XX be bonds. drawn outlines unsecured debt to our which in XX% includes attractive we and profile,

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

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

noted agencies in for capacity rating flat. X.XXx, previously from significant of liquidity BaaX a providing of improved has by at strength Xx we from We quarter $X.X and growth. positive. BBB recognized funding The this with borrow, at earned us for cash billion debt as year-end. quarter, Ending well. XX to the BXSL And was to outlook leverage Fitch with We available BXSL's continued upgrade undrawn March notch portfolio profile to Moody's up ended that been earned

We into set to have is to sheet positioned a capital opportunity balance what through our what be ample we year-end. growing believe we deploy have will expect

optimized investment in and what from us a strength. the is we position and closing, forward an sheet we earnings market. of that distinguish balance underlying power, credit are With capabilities moving performance In believe

to delivering on strive will investors' We remain returns and laser-focused protecting capital.

ask the for open I'll operator that, With questions. to up

Operator

[Operator Instructions] We'll JPMorgan. go Wedel first to with Melissa

Melissa Wedel

repayment volume second into to higher activity a that. Point activity the Is about first the on point the you on that and your Certainly, remain the took low. also It that you're for of to are basis? gross in expecting that originations quarter level quarter. elevated? originations first to of continue that particularly net in looking quarter. and clarification in relation gross noting Definitely Or was seems

Brad Marshall

about muted are provide net on out, talk on exposure. just And the less origination, question. of repaying, kind will it's basis. Melissa, for now. that we're take When And really obviously, seeing in that what turnover deals point I'll the a There's talking to on basis, they as a expect our on we grows you and basis we're on a extending that little both continue or gross issuance portfolios, gross Brad. a portfolio net we solutions about grow more right the feel to the more we're capital now. basis, able somewhat bit right we're that but market

Melissa Wedel

Okay. appreciate I that.

versus I'm think of repayment? Following we of a about, originations whether of more the quarter in wondering level up quarter. timing the if anything there should during terms towards on it or evenly were was distributed end the of was that timing activity the impact skewed

Brad Marshall

the the definitely head. commitments than of end the was second leverage nail which into is spilled at Yes. average It over end saw the quarter on No, some what leverage higher quarter, was hit and the why to you skewed of the the you quarter.

Melissa Wedel

Is what to timing it. quarter? the during any impact you from quantified on estimate might been the -- NII have that Got rough there have

Brad Marshall

No, we haven't it. quantified

Operator

to with We'll Truist. next Hughes go Mark

Mark Hughes

all a typical now? You compressed might quantify your QX in are could on I the at if of pipeline you anticipate about being you that the bit. in the what versus wonder spreads kind that deals the spread talked of

Brad Marshall

Yes.

it's type in you've really up So deal some the or driving whether spread deal that's you've spreads. areas I the a in spread no seen areas, whether proprietary compression would and clubbed it's say of on kind of spread some seen depends compression other

So look new were on quarter, fourth if we the you at about XX.X% deals.

a point And depends did earlier, the ranged look we the that By type of they to kind quarter, from are on XX%, a during of at speaking X-year that This to you quarter, yield we it XX%. of if XX.X%. to if really the look my way, it deal. gets more basis, you XX% assets at the closer to on

better let's that thing but basis one you we unit say, job risk with The should we it has comparative kind and down, come to, a look a do actually XXXX. on highlight if of at don't this, spread per probably of the

companies So companies deals little lower -- a just taking higher, because rates leverage bit with loan-to-value. are set are are up less

So spread per unit risk is fairly constant.

this a go-forward in you'll basis, to range. terms then on continue see And of

are spread deals XX%. to seen say deals us of would see You'll market, But be overall, XX%, has that XX since the you'll year. will see XX closer putting the points I and aside, that of market the start of to kind of compression north the something like basis

Mark Hughes

And then existing Is borrowing ongoing increasing doing that Is is are part more of pipeline portfolio are that of strong that part M&A. companies just that companies even Or M&A existing of you'd the -- borrowing for an your of it? purposes. mentioned kind that dynamic?

Brad Marshall

that what on for are think holding sponsors is seeing to longer. assets I you're their

So sale processes. less you're seeing

ways operationally or acquisition. grow trying at to their assets them So to through find and looking they're existing either

grow So in companies businesses. growth to more look order their we've seen capital for

continue So for year. to the balance expect I of the that

of the broader do in and to may debt other But market where what of part we're better our better, today. portfolio is capital solution for company private a see kind trading they have look the are the versus solutions the that public trying across

flow, up deals. came the mouse long-term with went of their deal to kind go and So And what's market, a scale, of we capital through use objectives. that's trap ability our structure better for Place lot where a Carlos Park that this just into -- driving example was that's with the create better our growth

accelerate. are muted is activity activity, really others So deal to our seeing starting deal while maybe more

Operator

Paul KBW. to We'll with next go Johnson

Paul Johnson

kind deals kind you Last potential of of It but still or your capitalized in quarter? last sounds market. a of were think -- about -- those you syndicated this those. some talked the do you you you have of deals you've identified from do those last many today? here, so had left like opportunities How question kind on quarter, executed And of you number quarter, repricing on XXX or of away kind that opportunities there market, on

Jonathan Bock

Paul, this is Bock.

as more result call off. are spread thinking comments that's from have rolled to And we our I protection And is the repayments outperformed, essentially say tighter that where to would is market you call, that advantage, the if right? retain susceptible environment. and it's this spreads, loans environment So we're of about to prior where a assets tightening we're using recall the the goal have the spread those generally either are above they've and incumbency

includes liquid existing improvements. often company, extended a we'll situations, to received that few market and call an new portfolio terms current also spreads agree among or those in and Now above protection market for other

to of spread at had on to some protection. the X.X this so result that And the less average. years of X% than question points it's we XX to as get a of call additional received tightening portfolio an quarter, basis about around And XX

growing the that that, unitranche additional retaining flow at the as companies to broad ensure throughout muted. we're into So nice and continue companies well. to comment attractive importantly, we framework. same say drive within was time well Brad's on that as range our I new origination know new to of would complement we financings rather a It's And portfolio more still assets like that

Brad Marshall

pipeline. the about talk just maybe And

portfolio we call origination. exercise it's maybe portfolio, like public through reverse and in those to of kind we create go else our So it's somewhere trying private maybe this identify in what of Place, deals Park our

did. way through At the we start are So of chipping that year, that we're through. of backlog of all those we're our healthy with equity sponsors. a we and list. on that out like ideas that Not we're resonate, deals negotiating reversing those will the work into kind working doing pretty of will But of the them there's had not diligence Place the all them XX sponsor Park of still company. private of And

Paul Johnson

the of leverage That's I one leverage then a lot very of at guess, sort preference for of to that kind do is kind me capacity last on you're where given just, environment, took obviously in of and operating predict, of net have range? for But for the year. terms helpful. hard And your general is Activity growth. you outlook terms any in of

Teddy Desloge

Yes.

would above intentional a range. the from to some is ended see we say volume growing quarter one end investment our yield, of capacity taken here near and new the right the we set, I XX.X% and to at what we've dividend. turn, So accretive build opportunity low to deploy so the standpoint a steps fact very that that's both

of bit sort capacity I So to message through expect of I'd target, is we terms in said a the year. X.XX historically, we've to any and of have of back there's don't what change half leverage think in the that quite deploy. in the range we're X

Operator

Lee We'll next go to with Ken RBC.

Kenneth Lee

one think funding there. How given the Just liability outlook? outlook the rates you side, the of about I for to thoughts do on mix just especially side. some see the the potential on wanted the liability

Teddy Desloge

of today. Yes, Bock year. a at we this optionality mentioned have no lot of $X.X maturities billion liquidity,

We have bonds. that's unsecured in our today exposure XX% of

seen of in have market. We tightening the pretty bit

that's BDC XXX is our index [ bps of XXX X-year sort of in XX versus For closer to treasury example, ] the at [ today, bond over ].

kind near to from of is spread secured is liabilities a just that historically tights So all-time perspective. even relative

in opportunistic that a be we place of into of liabilities We at of $XXX well. plus We'll have an were that sub million couple to as do them. for years [ with average optionality. grow significant cost ago put so capital ], So so have

Kenneth Lee

fair activity. granularity just is a it Is to could just the more wonder it pipeline more the capital? of a most Great. you're around bit to a say want seeing around -- of little lot of across you activity? seeing the BXCI it I bit around color growth get on you're one terms Just that and is just Or what that. you. little if refi platform get Got And follow-up in [indiscernible]

Brad Marshall

public markets. a an terms those. a would all regular it's activity out X way I refinancings public existing mix ago point refinancing add-on pretty Yes, some Ken. between that, lagging what's to probably healthy in I in of of starting But Sure, about it's balance is out we've of privates, the would even of say markets, just private companies, M&A that sponsor-to-sponsor some inflection seen pick volume say the of to activity. up. portfolio weeks

to it. It activity to pick for while deals well. as see happen a is that takes won't or another these starting but You so, quarter for up really

Operator

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

Robert Dodd

I've on a versus, X.X% benefits again. how of PIK, any So us color roughly north total pick there? got PIK while give of up much year little obviously stepped correct? ago. about was a where a less is quarter mean that was just modified investment It's you on slightly income, drivers modified a ago. I structured this double that the it than that, Can to this of versus PIK question

So maybe that for give us any direction. color on the drivers

Teddy Desloge

one since Yes, was tripled you're modestly by the did QX. issuer was was PIK. EBITDA That part has have of deal. income way, extend That closed. original previously company, did beginning agree quarter. we in through right. that We Nearly that flexibility driven all QX that by over up QX was the to in of almost PIK of last that X.X%

PIK XX% concentration, originally sort our with high characterize those set PIK PIK at you of all And we flexibility. look X would marked of all performing above companies they're were up partial about XX%. represent as exposure, If of XXs,

we as to That differentiate use will think in syndicated in fairly performing the of that PIK forms. tool concentrated assets. come overall, I activity our couple to a But versus a was certain market. cases different So can

Brad Marshall

PIK. Robert, those not ] that companies [ are picking they're XXX%

cash and in is like XX%, So being that if more their coupon picking. of is is XX% XX% paid

Robert Dodd

like Since with us could ago, first of made obviously, it's it mean, million. acquisitions terms Place, spread in walk So and you $X billion I Park now. was you lien a it $XXX years out facility but billion a X ago, blended since, $X they've it. like. brought through Got years second X

-- you're spread, I with dividend give with second you I $X it's you out because the fact thought leverage in process it's for particular gone you going all so need I there But to the billion structure? more the process is dividend obviously, I taken of that $XXX we I the as thought in million. blended well. in because Now the with think taken to think what's higher. you, with choose before. us for lien to less a mean lower What's ID, any and don't terms unitranche that out a Could for presume mean, a spread

So is it today it just X business that much was better than ago? years

Brad Marshall

exactly Yes. Robert. That's not accurate,

actually and first lien it's So pref capital a structure.

an So pay a had The what capital. was wants grow, company lien second continues you cash all for capital structure. growth to

first and approached a we capital PIK So lien behind to put flow and company will do in don't to your to additional a order free-up give acquisitions. grow continue some some you big that's cash why XXX% do said, a security pref that, the we growth

more give sits So fronts: capital the structure; first the a one, cash And them strategy. X up of structure funds. lien in lower-risk free that junior And two, sits lot it highly higher kind risk oriented of to on strategic flexible flow. part our was in of capital

pref. So a lien first as plus I characterize It's unitranche. not a that would PIK

data this, Carlos momentum the opportunity, Realty the I'd momentum way, centers. is Blackstone to and across Digital data like but QTS the just and equity billion $XXX something owns in by incredible and And hit on in centers that add an --

strategic Park you've this one in Jon that sector tailwinds very is DCCs bullish previous of we It's long-term like assets Place, something Gray, to we're listened are think the the Blackstone's So highly enormous. of earnings if calls, we and of key are it on but on. kind highlight kind to investment

Operator

with take We'll final Alexander Compass question Casey you. our from Point. Thank

Casey Alexander

more curiosity. This of a just is

couple the you I'm There of of what it it? -- software composition you years, changed? was private of like if last kind being look in seeing seems curious a flow if And to on if was of has the of starting there kind more just new prevalent, in we're the market. And centered of cycle deals what the industries equity here? guys activity a introduced lot does deal be of kind industry-wise were around Over expanding opportunities when guys so, deal industries are software.

Teddy Desloge

Yes.

I as Larger What I say material change think see there's focus where you more last the we're wouldn't focused. an intentional over years of market. where of right? couple -- we've on in we any is deceleration this of right companies across economy. parts period are of bit, abate seen little growth a but seeing the the inflation in We're a really quality, the

you instance, at default in end direct higher rates, default cyclical at the look of of Whereas and range, north see the businesses you of some rates. If X%. capital-intensive services more the software than X% less for lending, are

I think is capital of an going and the credit a majority the that's perspective where perspective. from equity both

Operator

questions any At in remarks. additional no With for like Wang Ms. additional or time, closing call this queue. I'd to turn the back over to

Stacy Wang

forward for Goodbye. all We speaking That quarter. joining would Thank this look you you everyone. to quarter. next to us all. Thanks, be

Blackstone Secured Lending Fund (BXSL) 8 May 242024 Q1 Earnings call transcript