S I X T H S T R E E T S P E C I A L T Y L E N D I N G Quarter Ended June 30, 2023 EARNINGS PRESENTATION DISCLAIMER AND FORWARD-LOOKING STATEMENT References in this presentation ("Presentation") to "TSLX," "we," "us," "our" and "the Company" refer to Sixth Street Specialty Lending, Inc. This Presentation includes forward-looking statements about TSLX that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estim ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission File Number 001-36364 Sixth Street Specialty Lending, Inc. (Exact name of registrant as specified in its charter) Delaware 27-3380000 (State or o ...

Sixth Street Specialty Lending, Inc. (NYSE:TSLX) Q1 2023 Earnings Conference Call May 9, 2023 8:30 AM ET Company Participants Cami VanHorn - Head, Investor Relations Joshua Easterly - Chief Executive Officer Bo Stanley - President Ian Simmonds - Chief Financial Officer Conference Call Participants Kevin Fultz - JMP Securities Mark Hughes - Truist Securities Jordan Wathen - Wells Fargo Securities LLC Erik Zwick - from Hovde Group Robert Dodd - Raymond James Ryan Lynch - KBW Melissa Wedel - JPMorgan Operator ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The company's unaudited consolidated financial statements for the period ended March 31, 2023 are presented [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20March%2031%2C%202023%20(Unaudited)%20and%20December%2031%2C%202022) Consolidated Balance Sheet Highlights (Amounts in thousands) | Metric | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Investments at Fair Value | $2,918,584 | $2,787,925 | | Total Assets | $2,972,680 | $2,836,947 | | Total Liabilities | $1,616,675 | $1,495,378 | | Total Net Assets | $1,356,005 | $1,341,569 | | Net Asset Value Per Share | $16.59 | $16.48 | - Total investments at fair value increased by **$130.66 million** from December 31, 2022, to March 31, 2023, reflecting growth in the investment portfolio[15](index=15&type=chunk) - Net Asset Value Per Share increased from **$16.48** at December 31, 2022, to **$16.59** at March 31, 2023[15](index=15&type=chunk) [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20for%20the%20three%20months%20ended%20March%2031%2C%202023%20and%202022%20(Unaudited)) Consolidated Statements of Operations Highlights (Amounts in thousands, except per share) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Total Investment Income | $96,505 | $67,429 | | Total Expenses | $53,411 | $31,367 | | Net Investment Income | $42,937 | $35,712 | | Total Net Unrealized and Realized Gains (Losses) | $10,015 | $5,173 | | Increase in Net Assets Resulting from Operations | $52,952 | $40,885 | | Earnings per common share—basic | $0.65 | $0.54 | - Total Investment Income increased by **43.1%** year-over-year, driven by higher interest from investments[18](index=18&type=chunk) - Net Investment Income increased by **20.2%** year-over-year, despite a significant increase in total expenses, primarily due to higher interest expenses[18](index=18&type=chunk) [Consolidated Schedules of Investments](index=6&type=section&id=Consolidated%20Schedules%20of%20Investments%20as%20of%20March%2031%2C%202023%20(Unaudited)%20and%20December%2031%2C%202022) Investment Portfolio Composition by Type (Fair Value, Amounts in thousands) | Investment Type | March 31, 2023 | Percentage of Total | December 31, 2022 | Percentage of Total | | :--- | :--- | :--- | :--- | :--- | | First-lien debt investments | $2,651,509 | 90.8% | $2,517,894 | 90.3% | | Second-lien debt investments | $44,805 | 1.6% | $40,762 | 1.5% | | Mezzanine debt investments | $11,093 | 0.4% | $10,158 | 0.4% | | Equity and other investments | $157,507 | 5.4% | $167,685 | 6.0% | | Structured credit investments | $53,670 | 1.8% | $51,426 | 1.8% | | Total Investments | $2,918,584 | 100.0% | $2,787,925 | 100.0% | Investment Portfolio Composition by Industry (Fair Value) | Industry | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Internet Services | 15.0% | 13.9% | | Business Services | 12.7% | 14.4% | | Financial Services | 12.2% | 12.8% | | Human Resource Support Services | 11.5% | 11.9% | | Retail and Consumer Products | 11.8% | 11.4% | | Healthcare | 10.1% | 9.9% | | Oil, Gas and Consumable Fuels | 4.9% | 3.9% | | Education | 5.6% | 5.8% | | Hotel, Gaming and Leisure | 4.2% | 4.5% | | Communications | 3.3% | 2.7% | | Manufacturing | 1.3% | 1.3% | | Transportation | 1.2% | 1.2% | | Automotive | 1.1% | 1.2% | | Other | 3.2% | 3.3% | | Chemicals | 0.7% | 0.7% | | Office Products | 0.6% | 0.7% | | Marketing Services | 0.4% | 0.4% | | Insurance | 0.2% | — | | Pharmaceuticals | 0.0% | 0.0% | - The portfolio remains heavily concentrated in first-lien debt investments, accounting for **90.8%** of the total fair value as of March 31, 2023[113](index=113&type=chunk) [Consolidated Statements of Changes in Net Assets](index=25&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets%20for%20the%20three%20months%20ended%20March%2031%2C%202023%20and%202022%20(Unaudited)) Changes in Net Assets (Amounts in thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Balance at December 31 | $1,341,569 | $1,275,848 | | Net investment income | $42,937 | $35,712 | | Net change in unrealized gains (losses) | $4,777 | $(8,495) | | Net realized gains (losses) | $5,238 | $13,668 | | Dividends declared from distributable earnings | $(44,764) | $(39,522) | | Balance at March 31 | $1,356,005 | $1,283,985 | - Net assets increased by **$14.44 million** during the three months ended March 31, 2023, primarily due to net investment income and positive net realized and unrealized gains, partially offset by dividends[49](index=49&type=chunk) [Consolidated Statements of Cash Flows](index=26&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20three%20months%20ended%20March%2031%2C%202023%20and%202022%20(Unaudited)) Consolidated Statements of Cash Flows Highlights (Amounts in thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net Cash Provided by (Used in) Operating Activities | $(73,504) | $81,150 | | Net Cash Provided by (Used in) Financing Activities | $73,594 | $(73,623) | | Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | $90 | $7,527 | | Cash, Cash Equivalents, and Restricted Cash, End of Period | $25,737 | $23,494 | - Operating activities used **$73.50 million** in cash for the three months ended March 31, 2023, a significant shift from providing $81.15 million in the prior year, primarily due to increased purchases of investments[52](index=52&type=chunk) - Financing activities provided **$73.59 million** in cash, mainly from net borrowings on debt, offsetting the cash used in operations[52](index=52&type=chunk) [Notes to Consolidated Financial Statements](index=27&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) [1. Organization and Basis of Presentation](index=27&type=section&id=1.%20Organization%20and%20Basis%20of%20Presentation) - Sixth Street Specialty Lending, Inc is a Delaware corporation, formed on July 21, 2010, primarily to lend to and invest in middle-market companies in the United States[54](index=54&type=chunk) - The Company has elected to be regulated as a Business Development Company (BDC) under the 1940 Act and as a Regulated Investment Company (RIC) under the Internal Revenue Code[54](index=54&type=chunk) - The Company's shares began trading on the NYSE under the symbol 'TSLX' following its IPO on March 21, 2014[55](index=55&type=chunk) [2. Significant Accounting Policies](index=27&type=section&id=2.%20Significant%20Accounting%20Policies) - Investments without readily available market prices are valued at fair value as determined in good faith by the Board of Directors, based on input from the Adviser, Audit Committee, and independent third-party valuation firms[62](index=62&type=chunk)[65](index=65&type=chunk)[66](index=66&type=chunk) - The Company applies ASC Topic 820, Fair Value Measurement, categorizing valuations into Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[66](index=66&type=chunk)[67](index=67&type=chunk) - Derivative instruments, including interest rate swaps, are recognized at fair value, with changes in fair value for hedging instruments recorded as components of interest expense[71](index=71&type=chunk) - Loans are generally placed on non-accrual status when payments are 30 days or more past due or collectability is doubtful, with accrued and unpaid interest typically reversed[82](index=82&type=chunk) [3. Agreements and Related Party Transactions](index=32&type=section&id=3.%20Agreements%20and%20Related%20Party%20Transactions) - The Company has an Administration Agreement with its Adviser, Sixth Street Specialty Lending Advisers, LLC, for administrative services, with expenses of **$0.6 million** incurred for both the three months ended March 31, 2023 and 2022[97](index=97&type=chunk)[101](index=101&type=chunk) - Under the Investment Advisory Agreement, the Company pays a Management Fee (**1.5% annual rate** on gross assets) and Incentive Fees (**100%** of pre-Incentive Fee net investment income above a 1.5% quarterly hurdle rate, and **17.5%** of cumulative realized capital gains)[102](index=102&type=chunk)[103](index=103&type=chunk)[106](index=106&type=chunk) Management and Incentive Fees (Amounts in millions) | Fee Type | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Management Fees (gross of waivers) | $10.7 | $9.3 | | Management Fees waived | $0.3 | $0.0 | | Incentive Fees (total) | $11.2 | $9.3 | | Incentive Fees (realized and payable) | $9.5 | $7.9 | | Incentive Fees (accrued for Capital Gains) | $1.8 | $1.4 | [4. Investments at Fair Value](index=34&type=section&id=4.%20Investments%20at%20Fair%20Value) Investments at Fair Value by Type (Amounts in thousands) | Investment Type | March 31, 2023 Fair Value | March 31, 2023 Amortized Cost | December 31, 2022 Fair Value | December 31, 2022 Amortized Cost | | :--- | :--- | :--- | :--- | :--- | | First-lien debt investments | $2,651,509 | $2,646,516 | $2,517,894 | $2,529,317 | | Second-lien debt investments | $44,805 | $47,613 | $40,762 | $42,743 | | Mezzanine debt investments | $11,093 | $8,276 | $10,158 | $7,497 | | Equity and other investments | $157,507 | $142,708 | $167,685 | $142,103 | | Structured credit investments | $53,670 | $54,722 | $51,426 | $53,066 | | Total Investments | $2,918,584 | $2,899,835 | $2,787,925 | $2,774,726 | Net Unrealized Gain (Loss) on Investments (Amounts in thousands) | Investment Type | March 31, 2023 Net Unrealized Gain (Loss) | December 31, 2022 Net Unrealized Gain (Loss) | | :--- | :--- | :--- | | First-lien debt investments | $4,993 | $(11,423) | | Second-lien debt investments | $(2,808) | $(1,981) | | Mezzanine debt investments | $2,817 | $2,661 | | Equity and other investments | $14,799 | $25,582 | | Structured credit investments | $(1,052) | $(1,640) | | Total Investments | $18,749 | $13,199 | - Non-qualifying assets under the 1940 Act represented **10.3%** of total assets as of March 31, 2023, compared to 9.7% as of December 31, 2022[30](index=30&type=chunk)[45](index=45&type=chunk) [5. Derivatives](index=36&type=section&id=5.%20Derivatives) - The Company uses interest rate swaps to hedge fixed rate debt obligations and certain fixed rate debt investments, with all swaps centrally cleared through a registered commodities exchange[116](index=116&type=chunk) Net Payments on Interest Rate Swaps (Amounts in thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Total Paid | $(11,726) | $(6,330) | | Total Received | $5,718 | $9,246 | | Net | $(6,008) | $2,916 | - For the three months ended March 31, 2023, the Company recognized **$0.2 million** in net unrealized gains on interest rate swaps not designated as hedging instruments, and **$7.3 million** in unrealized losses on swaps designated as hedging instruments[120](index=120&type=chunk) - As of March 31, 2023, **$16.2 million** in cash was pledged as collateral for derivative agreements, included in restricted cash[123](index=123&type=chunk) [6. Fair Value of Financial Instruments](index=38&type=section&id=6.%20Fair%20Value%20of%20Financial%20Instruments) Fair Value Hierarchy of Investments (Amounts in thousands) | Investment Type | March 31, 2023 Level 1 | March 31, 2023 Level 2 | March 31, 2023 Level 3 | March 31, 2023 Total | | :--- | :--- | :--- | :--- | :--- | | First-lien debt investments | $— | $22,660 | $2,628,849 | $2,651,509 | | Second-lien debt investments | $— | $— | $44,805 | $44,805 | | Mezzanine debt investments | $— | $— | $11,093 | $11,093 | | Equity and other investments | $9,539 | $11,199 | $136,769 | $157,507 | | Structured credit investments | $— | $53,670 | $— | $53,670 | | Total investments at fair value | $9,539 | $87,529 | $2,821,516 | $2,918,584 | - A significant majority of investments (**96.7%** at March 31, 2023) are classified as Level 3, indicating valuations based on unobservable inputs[125](index=125&type=chunk) Key Unobservable Inputs for Level 3 Debt Investments (March 31, 2023) | Investment Type | Valuation Technique | Unobservable Input | Range (Weighted Average) | Impact to Valuation from an Increase to Input | | :--- | :--- | :--- | :--- | :--- | | First-lien debt investments | Income approach | Discount rate | 9.9% — 18.0% (14.8%) | Decrease | | Second-lien debt investments | Income approach | Discount rate | 15.3% — 22.6% (21.8%) | Decrease | | Mezzanine debt investments | Income approach | Discount rate | 13.9% — 18.0% (16.0%) | Decrease | [7. Debt](index=41&type=section&id=7.%20Debt) - The Revolving Credit Facility commitments increased to **$1.585 billion** as of April 25, 2022, with an uncommitted accordion feature allowing an increase up to $2.0 billion[137](index=137&type=chunk) - The 2023 Notes (**$150.0 million** principal amount) matured on January 22, 2023, and were fully repaid in cash[149](index=149&type=chunk) Debt Obligations (Amounts in thousands) | Debt Type | March 31, 2023 Outstanding Principal | March 31, 2023 Carrying Value | December 31, 2022 Outstanding Principal | December 31, 2022 Carrying Value | | :--- | :--- | :--- | :--- | :--- | | Revolving Credit Facility | $981,889 | $969,469 | $719,328 | $706,156 | | 2024 Notes | $347,500 | $328,969 | $347,500 | $325,492 | | 2026 Notes | $300,000 | $264,598 | $300,000 | $260,188 | | Total Debt | $1,629,389 | $1,563,036 | $1,516,828 | $1,441,796 | Interest Expense and Weighted Average Interest Rate | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Total Interest Expense | $28,486 | $9,602 | | Average debt outstanding (in millions) | $1,569.4 | $1,211.0 | | Weighted average interest rate | 6.7% | 2.3% | - The Company's asset coverage ratio was **183.3%** as of March 31, 2023, and 188.6% as of December 31, 2022, remaining in compliance with the 1940 Act's 150% requirement[160](index=160&type=chunk) [8. Commitments and Contingencies](index=45&type=section&id=8.%20Commitments%20and%20Contingencies) Portfolio Company Commitments (Amounts in thousands) | Commitment Type | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Portfolio Company Commitments | $330,354 | $338,043 | - The Company had **$330.35 million** in commitments to fund investments in current portfolio companies as of March 31, 2023[166](index=166&type=chunk) - No material pending or threatened litigation was identified as of March 31, 2023[168](index=168&type=chunk) [9. Net Assets](index=47&type=section&id=9.%20Net%20Assets) - In August 2022, the Company issued **4,360,125 shares** of common stock ($77.6 million) to settle $79.2 million principal amount of 2022 Convertible Notes[170](index=170&type=chunk) Shares Issued via Dividend Reinvestment Plan | Period | Shares Issued | | :--- | :--- | | Q1 2023 | 362,578 | | Q1 2022 | 299,138 | - The Board authorized a stock repurchase program of up to **$50 million**, most recently refreshed on May 8, 2023, but no shares were repurchased during the three months ended March 31, 2023 and 2022[174](index=174&type=chunk)[175](index=175&type=chunk) [10. Earnings per share](index=48&type=section&id=10.%20Earnings%20per%20share) Earnings Per Common Share | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Earnings per common share—basic | $0.65 | $0.54 | | Earnings per common share—diluted | $0.65 | $0.51 | - Basic and diluted EPS increased year-over-year, reflecting higher net assets resulting from operations[176](index=176&type=chunk) [11. Dividends](index=48&type=section&id=11.%20Dividends) Dividends Declared Per Share | Dividend Type | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Supplemental | $0.09 | $0.11 | | Base | $0.46 | $0.41 | | Total Dividends Declared | $0.55 | $0.52 | - Total dividends declared per share increased from **$0.52** in Q1 2022 to **$0.55** in Q1 2023, with an increase in the base dividend and a slight decrease in the supplemental dividend[179](index=179&type=chunk) [12. Income Taxes](index=49&type=section&id=12.%20Income%20Taxes) - The Company maintains its RIC status by distributing at least **90%** of its investment company taxable income, generally relieving it from corporate-level U.S. federal income taxes[89](index=89&type=chunk) Taxable Income (Amounts in thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Taxable Income (estimate) | $52,891 | $52,180 | - A net expense of **$0.4 million** was recorded for U.S. federal excise tax for both the three months ended March 31, 2023 and 2022[92](index=92&type=chunk)[188](index=188&type=chunk) [13. Financial Highlights](index=51&type=section&id=13.%20Financial%20Highlights) Per Share Data and Ratios | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net asset value, beginning of period | $16.48 | $16.84 | | Net investment income | $0.53 | $0.47 | | Total from operations | $0.65 | $0.54 | | Dividends declared from net investment income | $(0.55) | $(0.52) | | Net Asset Value, End of Period | $16.59 | $16.88 | | Total return based on market value with reinvestment of dividends | 6.11% | 1.83% | | Ratio of net expenses to average net assets | 15.89% | 9.91% | | Ratio of net investment income to average net assets | 12.73% | 11.16% | | Portfolio turnover | 8.81% | 13.55% | - Total return based on market value with reinvestment of dividends significantly increased to **6.11%** in Q1 2023 from 1.83% in Q1 2022[190](index=190&type=chunk) - The ratio of net expenses to average net assets increased to **15.89%** in Q1 2023 from 9.91% in Q1 2022, partly due to the absence of Management Fee waivers in the prior year[190](index=190&type=chunk)[193](index=193&type=chunk) [14. Subsequent Events](index=52&type=section&id=14.%20Subsequent%20Events) - No subsequent events requiring disclosure or recognition in the consolidated financial statements occurred through the date of issuance of the report, except as already disclosed[192](index=192&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=53&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, operational results, and liquidity for Q1 2023 [Overview](index=53&type=section&id=Overview) - Sixth Street Specialty Lending, Inc is a Delaware corporation regulated as a BDC and RIC, focused on lending to U.S. middle-market companies[195](index=195&type=chunk)[196](index=196&type=chunk) - Since July 2011, the Company has originated over **$26.0 billion** in investments, retaining approximately $9.4 billion on its balance sheet[196](index=196&type=chunk) - Core portfolio companies (**91.4%** of total investments by fair value) had weighted average annual revenue of **$165.5 million** and EBITDA of **$53.8 million** as of March 31, 2023[197](index=197&type=chunk) [Investment Framework](index=53&type=section&id=Investment%20Framework) - The Company focuses on companies with enterprise values between **$50 million** and **$1 billion**, seeking high marginal cash flow, recurring revenue, and sustainable competitive advantages[201](index=201&type=chunk) - As of March 31, 2023, **92.4%** of the portfolio was invested in secured debt, with **90.8%** in first-lien debt, emphasizing top-of-capital-structure investing[204](index=204&type=chunk) - Risk mitigation strategies include call protection on **80.8%** of debt investments and floating interest rates on **99.2%** of debt investments, with **100.0%** of these subject to interest rate floors[206](index=206&type=chunk) [Relationship with our Adviser and Sixth Street](index=54&type=section&id=Relationship%20with%20our%20Adviser%20and%20Sixth%20Street) - Sixth Street, a global investment business with over **$65 billion** in AUM, provides extensive investment resources and expertise to the Company through its Adviser[207](index=207&type=chunk) - The SEC granted an exemptive order allowing the Company to co-invest with Sixth Street affiliates in middle-market loan originations, particularly for larger capital commitments[210](index=210&type=chunk)[211](index=211&type=chunk) [Key Components of Our Results of Operations](index=55&type=section&id=Key%20Components%20of%20Our%20Results%20of%20Operations) - Revenues are primarily generated from interest income on debt investments, with **99.2%** of debt investments bearing floating rates and **100.0%** of these subject to interest rate floors as of March 31, 2023[217](index=217&type=chunk) - For the three months ended March 31, 2023, **3.1%** of total investment income was comprised of PIK interest[217](index=217&type=chunk) - Primary operating expenses include fees to the Adviser (Management and Incentive Fees), Administration Agreement reimbursements, and interest expense on outstanding debt[224](index=224&type=chunk) - The Company uses leverage to increase investment capacity, limited by the 1940 Act's **150%** asset coverage ratio requirement[226](index=226&type=chunk) [Market Trends](index=57&type=section&id=Market%20Trends) - Regulatory changes (e.g, Basel III, Volcker Rule) have reduced traditional lenders' capacity in the middle-market, creating favorable opportunities for direct originations by BDCs[228](index=228&type=chunk) - High demand for debt capital from private equity-backed companies and the labor-intensive nature of middle-market lending further expand opportunities for specialized private lenders[228](index=228&type=chunk)[229](index=229&type=chunk) [Portfolio and Investment Activity](index=57&type=section&id=Portfolio%20and%20Investment%20Activity) Portfolio Composition and Yields | Metric | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | First-lien debt investments | 90.8% | 90.3% | | Second-lien debt investments | 1.6% | 1.5% | | Mezzanine debt investments | 0.4% | 0.4% | | Equity and other investments | 5.4% | 6.0% | | Structured credit investments | 1.8% | 1.8% | | Weighted average total yield of debt and income producing securities at fair value | 13.9% | 13.5% | | Weighted average interest rate of debt and income producing securities | 13.4% | 13.1% | Investment Activity (Amounts in millions) | Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Gross originations | $1,079.4 | $304.5 | | Syndications/sell downs | $903.3 | $225.2 | | Total new investment commitments | $176.1 | $79.3 | | Principal amount of investments funded | $138.9 | $52.8 | | Principal amount of investments sold or repaid | $50.8 | $144.4 | | Number of new investment commitments in new portfolio companies | 7 | 2 | | Weighted average interest rate of new investment commitments | 12.4% | 9.5% | Investment Performance Rating (Fair Value, Amounts in millions) | Rating | March 31, 2023 Fair Value | March 31, 2023 Percentage | December 31, 2022 Fair Value | December 31, 2022 Percentage | | :--- | :--- | :--- | :--- | :--- | | 1 | $2,507.9 | 85.9% | $2,472.8 | 88.7% | | 2 | $390.9 | 13.4% | $293.6 | 10.5% | | 3 | $— | — | $21.3 | 0.8% | | 5 | $19.8 | 0.7% | $0.2 | 0.0% | [Results of Operations](index=61&type=section&id=Results%20of%20Operations) Operating Results (Amounts in millions) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Total investment income | $96.5 | $67.4 | | Net expenses | $53.2 | $31.4 | | Net investment income | $42.9 | $35.7 | | Net realized gains (losses) | $5.2 | $13.7 | | Net change in unrealized gains (losses) | $4.8 | $(8.5) | | Net increase in net assets resulting from operations | $52.9 | $40.9 | - Interest from investments increased to **$93.1 million** in Q1 2023 from $65.4 million in Q1 2022, primarily due to higher reference rates[244](index=244&type=chunk) - Interest expense significantly increased to **$28.5 million** in Q1 2023 from $9.6 million in Q1 2022, driven by higher average interest rates (**6.7% vs 2.3%**) and increased average debt outstanding (**$1,569.4 million vs $1,211.0 million**)[246](index=246&type=chunk) - Net realized gains decreased to **$4.8 million** in Q1 2023 from $13.7 million in Q1 2022, while net change in unrealized gains shifted from a loss of **$(8.5) million** to a gain of **$4.8 million**[254](index=254&type=chunk) - Exited investments since 2011 generated an average realized gross internal rate of return of **17.7%** (weighted by capital invested)[258](index=258&type=chunk) [Financial Condition, Liquidity and Capital Resources](index=64&type=section&id=Financial%20Condition%2C%20Liquidity%20and%20Capital%20Resources) - Liquidity is primarily derived from equity issuances, credit facility advances, and cash flows from operations, with primary uses for investments, operating costs, debt service, and dividends[266](index=266&type=chunk) - As of March 31, 2023, the Company had **$25.7 million** in cash and cash equivalents (including $16.2 million restricted cash) and approximately **$0.5 billion** of availability on its Revolving Credit Facility[268](index=268&type=chunk)[269](index=269&type=chunk) - The asset coverage ratio was **183.3%** as of March 31, 2023, maintaining compliance with the 1940 Act's 150% requirement[267](index=267&type=chunk) [Off-Balance Sheet Arrangements](index=68&type=section&id=Off-Balance%20Sheet%20Arrangements) Portfolio Company Commitments (Amounts in millions) | Commitment Type | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Portfolio Company Commitments | $330.4 | $338.0 | - The Company had **$330.4 million** in commitments to fund investments in current portfolio companies as of March 31, 2023[301](index=301&type=chunk) [Contractual Obligations](index=70&type=section&id=Contractual%20Obligations) Contractual Payment Obligations (Amounts in millions) | Obligation | Total | Less than 1 year | 1-3 years | 3-5 years | After 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Revolving Credit Facility | $981.9 | $— | $— | $981.9 | $— | | 2024 Notes | $347.5 | $— | $347.5 | $— | $— | | 2026 Notes | $300.0 | $— | $— | $300.0 | $— | | Total Contractual Obligations | $1,629.4 | $— | $347.5 | $1,281.9 | $— | [Distributions](index=70&type=section&id=Distributions) - To maintain RIC status, the Company must distribute at least **90%** of its investment company taxable income and net tax-exempt income annually[307](index=307&type=chunk) - To avoid a **4%** U.S. federal excise tax, the Company must distribute at least **98%** of net ordinary income and **98.2%** of capital gain net income annually[309](index=309&type=chunk)[310](index=310&type=chunk) - The Company has an 'opt out' dividend reinvestment plan, where stockholders' cash dividends are automatically reinvested in additional shares unless they elect to receive cash[314](index=314&type=chunk) [Related-Party Transactions](index=71&type=section&id=Related-Party%20Transactions) - The Company has business relationships with affiliated parties, including the Investment Advisory Agreement, the Administration Agreement, and an agreement with an affiliate of TPG Global, LLC regarding trademarks[315](index=315&type=chunk)[318](index=318&type=chunk) [Critical Accounting Policies](index=71&type=section&id=Critical%20Accounting%20Policies) - Critical accounting policies, including investment portfolio valuation, are detailed in the Annual Report on Form 10-K for the year ended December 31, 2022[315](index=315&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=71&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's exposure to valuation, interest rate, and currency risks are outlined [Valuation Risk](index=71&type=section&id=Valuation%20Risk) - The Company primarily invests in illiquid debt and equity securities of private companies, which lack readily available market prices and are valued at fair value by the Board, introducing judgment and potential for significant differences upon liquidation[317](index=317&type=chunk) [Interest Rate Risk](index=71&type=section&id=Interest%20Rate%20Risk) - As of March 31, 2023, **99.2%** of debt investments bore floating rates (all with interest rate floors), and credit facilities also bear floating rates, with interest rate swaps hedging fixed-rate notes to align with the floating-rate portfolio[320](index=320&type=chunk) Annualized Impact of Hypothetical Base Rate Changes (Amounts in millions) | Basis Point Change | Interest Income | Interest Expense | Net Interest Income | | :--- | :--- | :--- | :--- | | Up 300 basis points | $83.1 | $48.9 | $34.2 | | Up 200 basis points | $56.0 | $32.6 | $23.4 | | Up 100 basis points | $28.0 | $16.3 | $11.7 | | Down 25 basis points | $(7.0) | $(4.1) | $(2.9) | | Down 50 basis points | $(14.0) | $(8.1) | $(5.9) | [Currency Risk](index=72&type=section&id=Currency%20Risk) - Investments denominated in foreign currencies expose the Company to foreign exchange rate movements, which may be hedged using instruments like forward contracts or by borrowing in the local currency under the Revolving Credit Facility[323](index=323&type=chunk) [Item 4. Controls and Procedures](index=72&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2023 - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of March 31, 2023[324](index=324&type=chunk) - No material changes in internal control over financial reporting occurred during the most recently completed fiscal quarter[325](index=325&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=73&type=section&id=Item%201.%20Legal%20Proceedings) The Company is not currently subject to any material legal proceedings as of March 31, 2023 - As of March 31, 2023, the Company is not aware of any material pending or threatened litigation[326](index=326&type=chunk) [Item 1A. Risk Factors](index=73&type=section&id=Item%201A.%20Risk%20Factors) Key risks include increased leverage, regulatory impacts, and potential conflicts of interest - Stockholders approved a reduced minimum asset coverage ratio from 200% to **150%** on October 8, 2018, allowing the Company to potentially increase its maximum debt-to-equity ratio from one-to-one to two-to-one, which magnifies potential for gain or loss[329](index=329&type=chunk)[330](index=330&type=chunk)[339](index=339&type=chunk) - Regulations governing BDCs, such as the **70%** qualifying asset requirement, affect the Company's ability to raise additional capital and may limit investment opportunities[331](index=331&type=chunk)[333](index=333&type=chunk) - The Management Fee and Incentive Fee structure may create an incentive for the Adviser to use leverage or make riskier, more speculative investments, potentially increasing investment losses, especially during economic downturns[346](index=346&type=chunk)[347](index=347&type=chunk)[348](index=348&type=chunk)[350](index=350&type=chunk) Effects of Leverage on Stockholder Returns (as of March 31, 2023) | Assumed Return on Our Portfolio (net of expenses) | Corresponding return to stockholder | | :--- | :--- | | -10% | -24.0% | | -5% | -13.0% | | 0% | -2.0% | | 5% | 8.9% | | 10% | 19.9% | [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=76&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report - Not applicable[351](index=351&type=chunk) [Item 3. Defaults Upon Senior Securities](index=76&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report for the period - Not applicable[352](index=352&type=chunk) [Item 4. Mine Safety Disclosures](index=76&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) There were no mine safety disclosures to report for the period - Not applicable[353](index=353&type=chunk) [Item 5. Other Information](index=76&type=section&id=Item%205.%20Other%20Information) There is no other information to report for the period - Not applicable[354](index=354&type=chunk) [Item 6. Exhibits](index=77&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q - The exhibits include certifications from the CEO and CFO (31.1, 31.2, 32) and various Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[357](index=357&type=chunk)

Sixth Street Specialty Lending, Inc. (NYSE:TSLX) Q4 2022 Earnings Conference Call February 17, 2023 8:30 AM ET Company Participants Cami VanHorn - Head-IR Joshua Easterly - CEO Bo Stanley - President Ian Simmonds - CFO Conference Call Participants Mark Hughes - Truist Finian O'Shea - Wells Fargo Mickey Schleien - Ladenburg Kevin Fultz - JMP Securities Kenneth Lee - RBC Capital Markets Erik Zwick - Hovde Group Melissa Wedel - JPMorgan Ryan Lynch - KBW Robert Dodd - Raymond James Operator Good morning, and we ...

PART I [ITEM 1. Business](index=4&type=section&id=ITEM%201.%20Business) TSLX is a BDC and RIC specializing in direct senior secured lending to U.S. middle-market companies, leveraging its Adviser's platform for investment sourcing and co-investment opportunities - TSLX is a specialty finance company focused on direct originations of senior secured loans to U.S.-domiciled middle-market companies, defined as having annual EBITDA of **$10 million to $250 million**[18](index=18&type=chunk) - As of December 31, 2022, **98.9% of debt investments bore floating interest rates**, with **100.0% subject to interest rate floors**, acting as a hedge against inflation[20](index=20&type=chunk) - The company operates as an externally managed BDC and has elected RIC status for U.S. federal income tax purposes, requiring distribution of at least **90% of investment company taxable income**[22](index=22&type=chunk)[63](index=63&type=chunk)[143](index=143&type=chunk) - TSLX's Adviser, Sixth Street Specialty Lending Advisers, LLC, and its affiliate Sixth Street, provide significant scale, resources, market expertise, and a dedicated team of **44 personnel (34 investment professionals)** for investment sourcing, management, and due diligence[25](index=25&type=chunk)[71](index=71&type=chunk) - The company has an SEC exemptive order allowing co-investment with Sixth Street affiliates in U.S. middle-market loan originations and certain follow-on investments, which is particularly useful for larger capital commitments[27](index=27&type=chunk)[28](index=28&type=chunk) Investment Portfolio Composition (as of December 31, 2022) | Investment Type | Percentage of Fair Value | | :---------------- | :----------------------- | | First-lien debt | 90.3% | | Second-lien debt | 1.5% | | Mezzanine | 0.4% | | Equity & other | 6.0% | | Structured credit | 1.8% | Investment Portfolio by Industry (as of December 31, 2022) | Industry | Percentage of Fair Value | | :----------------------- | :----------------------- | | Business Services | 14.4% | | Internet Services | 13.9% | | Financial Services | 12.8% | | Human Resource Support Services | 11.9% | | Retail and Consumer Products | 11.4% | | Healthcare | 9.9% | | Education | 5.8% | | Hotel, Gaming and Leisure | 4.5% | | Oil, Gas and Consumable Fuels | 3.9% | | Other | 3.3% | | Communications | 2.7% | | Manufacturing | 1.3% | | Automotive | 1.2% | | Transportation | 1.2% | | Chemicals | 0.7% | | Office Products | 0.7% | | Marketing Services | 0.4% | | Pharmaceuticals | 0.0% | | **Total** | **100.0%** | Total Investments (Fair Value) (2022 vs. 2021) | Year | Fair Value ($ millions) | Number of Portfolio Companies | | :------------- | :---------------------- | :---------------------------- | | Dec 31, 2022 | $2,787.9 | 121 | | Dec 31, 2021 | $2,521.6 | 72 | Debt Obligations (as of December 31, 2022) | Debt Type | Aggregate Principal Committed ($ millions) | Outstanding Principal ($ millions) | Amount Available ($ millions) | Carrying Value ($ millions) | | :---------------------- | :--------------------------------------- | :------------------------------- | :---------------------------- | :-------------------------- | | Revolving Credit Facility | $1,585.0 | $719.3 | $865.7 | $706.2 | | 2023 Notes | $150.0 | $150.0 | — | $149.9 | | 2024 Notes | $347.5 | $347.5 | — | $325.5 | | 2026 Notes | $300.0 | $300.0 | — | $260.2 | | **Total Debt** | **$2,382.5** | **$1,516.8** | **$865.7** | **$1,441.8** | Interest Expense Components (Years Ended December 31) | ($ in millions) | 2022 | 2021 | 2020 | | :------------------------ | :---- | :---- | :---- | | Interest expense | $49.9 | $39.7 | $36.5 | | Commitment fees | $4.1 | $4.4 | $3.7 | | Amortization of deferred financing costs | $5.7 | $6.1 | $5.1 | | Accretion of original issue discount | $0.8 | $0.7 | $0.5 | | Swap settlement | $2.5 | $(12.1) | $(6.4) | | **Total Interest Expense** | **$63.0** | **$38.8** | **$39.4** | | Average debt outstanding | $1,342.0 | $1,223.4 | $1,001.6 | | Weighted average interest rate | 3.9% | 2.3% | 3.0% | Management and Incentive Fees (Years Ended December 31) | Fee Type ($ in millions) | 2022 | 2021 | 2020 | | :----------------------- | :---- | :---- | :---- | | Management Fees (gross of waivers) | $39.9 | $37.1 | $32.1 | | Management Fees waived (Leverage Waiver) | $0.4 | $0.2 | — | | Incentive Fees (total) | $24.5 | $46.6 | $32.9 | | Incentive Fees (realized & payable) | $33.4 | $33.1 | $31.5 | | Incentive Fees (accrued related to Capital Gains) | $(8.9) | $13.5 | $1.4 | [ITEM 1A. Risk Factors](index=30&type=section&id=ITEM%201A.%20Risk%20Factors) The company faces significant risks including dependence on its Adviser, BDC regulatory constraints, leverage, market competition, economic downturns, illiquid investments, interest rate fluctuations, and cybersecurity threats - Key risks include dependence on the Adviser's management personnel, regulatory constraints as a BDC (e.g., **70% qualifying asset rule**, **150% asset coverage ratio** for borrowings), and the magnifying effect of leverage on gains and losses[159](index=159&type=chunk)[161](index=161&type=chunk)[163](index=163&type=chunk)[168](index=168&type=chunk) - The company operates in a highly competitive market for investment opportunities, facing larger competitors with greater resources and fewer regulatory restrictions[179](index=179&type=chunk)[180](index=180&type=chunk) - Conflicts of interest may arise due to the Adviser managing other investment funds with overlapping objectives and allocating investment opportunities[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) - Economic downturns, including the COVID-19 pandemic and the Russia-Ukraine conflict, can impair portfolio companies' operations, increase defaults, and negatively impact financial performance[15](index=15&type=chunk)[231](index=231&type=chunk)[236](index=236&type=chunk)[241](index=241&type=chunk) - Investments are highly risky and speculative, primarily in unrated, below-investment-grade debt of highly leveraged middle-market companies, with values determined by the Board and subject to inherent subjectivity and illiquidity[243](index=243&type=chunk)[249](index=249&type=chunk)[252](index=252&type=chunk) - The majority of debt investments are floating-rate, exposing the company to interest rate risk, where increases can raise borrowing costs and borrower repayment obligations, while decreases can reduce net interest income[191](index=191&type=chunk)[259](index=259&type=chunk) - Changes in tax laws (e.g., Tax Cuts and Jobs Act, Inflation Reduction Act) could increase the tax burden on portfolio assets, affecting their ability to service debt[229](index=229&type=chunk)[230](index=230&type=chunk) - Cybersecurity risks and system failures could disrupt business operations, compromise confidential information, and damage business relationships, leading to significant losses and reputational harm[218](index=218&type=chunk) [ITEM 1B. Unresolved Staff Comments](index=59&type=section&id=ITEM%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC [ITEM 2. Properties](index=59&type=section&id=ITEM%202.%20Properties) The company's principal executive office is in Dallas, Texas, and it does not own any real estate - The company's principal executive office is located at **2100 McKinney Avenue, Suite 1500, Dallas, TX 75201**[322](index=322&type=chunk) - The company does not own any real estate[322](index=322&type=chunk) [ITEM 3. Legal Proceedings](index=59&type=section&id=ITEM%203.%20Legal%20Proceedings) No material pending or threatened legal proceedings requiring disclosure are currently known to the company - As of December 31, 2022, management is not aware of any material pending or threatened litigation that would require accounting recognition or financial statement disclosure[323](index=323&type=chunk) [ITEM 4. Mine Safety Disclosures](index=59&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company PART II [ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=60&type=section&id=ITEM%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) TSLX common stock trades on the NYSE, with 3 holders of record as of February 2023, and the company repurchased 187,664 shares in October 2022 under its $50 million program - The company's common stock is traded on the NYSE under the symbol '**TSLX**'[326](index=326&type=chunk) - As of February 16, 2023, there were approximately **3 holders of record** of the company's common stock[327](index=327&type=chunk) - The Board authorized a stock repurchase program of up to **$50 million**, most recently renewed as of November 1, 2022[329](index=329&type=chunk) Issuer Purchases of Equity Securities (Three Months Ended December 31, 2022) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs ($ in thousands) | | :------------ | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------------------ | | October 2022 | 187,664 | $16.88 | $43,833 | | November 2022 | — | — | $50,000 | | December 2022 | — | — | $50,000 | | **Total** | **187,664** | **$16.88** | | Senior Securities Outstanding (as of December 31, 2022 and 2021) | Class and Year/Period | Total Amount Outstanding Exclusive of Treasury Securities ($ in millions) | Asset Coverage Per Unit ($ per $1,000 of indebtedness) | | :-------------------- | :-------------------------------------------------------------------- | :----------------------------------------------------- | | **December 31, 2022** | | | | Revolving Credit Facilities | $719.3 | $1,885.7 | | 2023 Notes | $150.0 | $1,885.7 | | 2024 Notes | $346.8 | $1,885.7 | | 2026 Notes | $298.5 | $1,885.7 | | **December 31, 2021** | | | | Revolving Credit Facilities | $316.4 | $2,053.6 | | 2022 Convertible Notes | $100.0 | $2,053.6 | | 2023 Notes | $150.0 | $2,053.6 | | 2024 Notes | $347.5 | $2,053.6 | | 2026 Notes | $300.0 | $2,053.6 | [ITEM 6. Selected Financial Data](index=63&type=section&id=ITEM%206.%20Selected%20Financial%20Data) This item is not applicable, with selected financial data presented elsewhere in the report [ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=64&type=section&id=ITEM%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes the company's business, investment framework, and financial performance, detailing investment income, expenses, leverage, portfolio activity, liquidity, and critical accounting policies, noting increased net investment income in 2022 despite unrealized losses - TSLX is a specialty finance company focused on lending to U.S. middle-market companies, with an investment framework emphasizing business and sector selection, investment structuring (primarily senior secured debt), direct deal origination, and risk mitigation (e.g., call protection, floating rates with floors)[341](index=341&type=chunk)[346](index=346&type=chunk)[349](index=349&type=chunk)[350](index=350&type=chunk)[351](index=351&type=chunk) - The company's primary revenues are interest income from investments, supplemented by dividends and various loan origination and other fees, with net investment income influenced by the spread between investment returns and funding costs, as well as prepayment fees[362](index=362&type=chunk)[363](index=363&type=chunk)[364](index=364&type=chunk)[365](index=365&type=chunk) - Interest income increased from **$266.7 million** in 2021 to **$297.6 million** in 2022, primarily due to higher interest rates and increased total assets outstanding, with other income also increasing due to higher amendment and miscellaneous fees[394](index=394&type=chunk) - Total interest expense increased from **$38.8 million** in 2021 to **$63.0 million** in 2022, driven by an increase in the average interest rate on debt outstanding (from **2.3% to 3.9%**) and higher average debt outstanding[398](index=398&type=chunk) - Net change in unrealized gains (losses) shifted from a gain of **$40.5 million** in 2021 to a loss of **$74.9 million** in 2022, primarily due to negative credit-related adjustments and changes in credit spreads[392](index=392&type=chunk)[410](index=410&type=chunk) - The company's liquidity is primarily derived from equity issuances, credit facilities, and cash flows from operations, with **$865.7 million** available on its Revolving Credit Facility as of December 31, 2022[426](index=426&type=chunk)[427](index=427&type=chunk) - The company maintains RIC status by distributing at least **90% of its investment company taxable income** and tax-exempt income, and aims to minimize excise tax exposure[474](index=474&type=chunk)[476](index=476&type=chunk) Investment Activity (Years Ended December 31) | ($ in millions) | 2022 | 2021 | 2020 | | :---------------------------------- | :-------- | :-------- | :-------- | | Gross originations | $4,240.9 | $4,269.9 | $3,296.8 | | Less: Syndications/sell downs | $3,156.7 | $3,152.5 | $2,112.1 | | **Total new investment commitments** | **$1,084.2** | **$1,117.4** | **$1,184.7** | | Principal amount of investments funded | $864.0 | $1,117.4 | $939.0 | | Principal amount of investments sold or repaid | $653.8 | $1,004.5 | $941.3 | | Number of new investment commitments in new portfolio companies | 65 | 25 | 31 | | Weighted average interest rate of new investment commitments | 11.9% | 9.2% | 10.2% | Portfolio Composition and Yields (as of December 31) | Metric | 2022 | 2021 | | :----------------------------------------- | :------ | :------ | | First-lien debt investments (% of fair value) | 90.3% | 91.2% | | Second-lien debt investments (% of fair value) | 1.5% | 1.7% | | Mezzanine investments (% of fair value) | 0.4% | 0.7% | | Equity and other investments (% of fair value) | 6.0% | 6.0% | | Structured credit investments (% of fair value) | 1.8% | 1.8% | | Weighted average total yield of debt and income producing securities at fair value | 13.5% | 10.0% | | Weighted average interest rate of debt and income producing securities | 13.1% | 9.5% | | Weighted average spread over LIBOR of all floating rate investments | 8.7% | 9.4% | Operating Results (Years Ended December 31) | ($ in millions) | 2022 | 2021 | 2020 | | :-------------------------------------------- | :------ | :------ | :------ | | Total investment income | $309.3 | $278.6 | $270.0 | | Net expenses | $140.4 | $135.8 | $117.3 | | Net investment income before income taxes | $168.9 | $142.8 | $152.7 | | Income taxes, including excise taxes | $2.6 | $0.4 | $5.7 | | **Net investment income** | **$166.3** | **$142.4** | **$147.0** | | Net realized gains (losses) | $16.7 | $28.9 | $(2.6) | | Net change in unrealized gains (losses) | $(74.9) | $40.5 | $33.7 | | **Net increase in net assets resulting from operations** | **$108.1** | **$211.8** | **$178.1** | Contractual Obligations (as of December 31, 2022) | ($ in millions) | Total | Less than 1 year | 1-3 years | 3-5 years | After 5 years | | :------------------------ | :-------- | :--------------- | :-------- | :-------- | :------------ | | Revolving Credit Facility | $719.3 | — | — | $719.3 | — | | 2023 Notes | $150.0 | $150.0 | — | — | — | | 2024 Notes | $347.5 | — | $347.5 | — | — | | 2026 Notes | $300.0 | — | — | $300.0 | — | | **Total Contractual Obligations** | **$1,516.8** | **$150.0** | **$347.5** | **$1,019.3** | **—** | [ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk](index=90&type=section&id=ITEM%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's exposure to valuation, interest rate, and currency risks, outlining management strategies such as floating-rate investments with floors and hedging instruments - The company is subject to valuation risk due to its primary investments in illiquid debt and equity securities of private companies, which are valued at fair value determined in good faith by the Board, involving subjective judgment[501](index=501&type=chunk) - Interest rate risk is a significant concern, as **98.9% of debt investments bear floating rates with floors**, and credit facilities also have floating rates, with interest rate swaps used to align fixed-rate debt liabilities with the floating-rate investment portfolio[504](index=504&type=chunk) - Currency risk arises from foreign currency-denominated investments, which are translated into U.S. dollars, and may be mitigated through hedging techniques such as forward contracts or borrowing in local currencies under the Revolving Credit Facility[508](index=508&type=chunk) Annualized Impact of Hypothetical Base Rate Changes on Net Income (as of December 31, 2022) | Basis Point Change | Interest Income ($ millions) | Interest Expense ($ millions) | Net Income ($ millions) | | :----------------- | :--------------------------- | :---------------------------- | :---------------------- | | Up 300 basis points | $83.0 | $45.5 | $37.5 | | Up 200 basis points | $55.3 | $30.3 | $25.0 | | Up 100 basis points | $27.7 | $15.2 | $12.5 | | Down 25 basis points | $(6.9) | $(3.8) | $(3.1) | [ITEM 8. Consolidated Financial Statements and Supplementary Data](index=92&type=section&id=ITEM%208.%20Consolidated%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements, including balance sheets, statements of operations, schedules of investments, statements of changes in net assets, and cash flows, along with KPMG LLP's report and detailed notes on accounting policies and financial instruments [Report of Independent Registered Public Accounting Firm](index=93&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) KPMG LLP issued an unqualified opinion on the financial statements and internal controls, highlighting the subjective fair value assessment of Level 3 investments as a critical audit matter - KPMG LLP issued an unqualified opinion on the consolidated financial statements for the years ended December 31, 2022 and 2021, and on the effectiveness of internal control over financial reporting as of December 31, 2022[515](index=515&type=chunk) - The critical audit matter identified was the assessment of the fair value of Level 3 debt and equity investments, which involved a high degree of subjective auditor judgment due to assumptions related to market yields, comparable financial performance multiples, and expected lives[522](index=522&type=chunk)[523](index=523&type=chunk) [Consolidated Balance Sheets](index=95&type=section&id=Consolidated%20Balance%20Sheets) The balance sheets show total investments at fair value increased to **$2,787.9 million** in 2022, with total assets reaching **$2,836.9 million** and net assets growing to **$1,341.6 million** - Investments at fair value increased by approximately **$266.3 million** from 2021 to 2022[528](index=528&type=chunk) - Total debt (net of deferred financing costs) increased by approximately **$255.8 million** from 2021 to 2022[528](index=528&type=chunk) Consolidated Balance Sheet Highlights (as of December 31) | ($ in thousands) | 2022 | 2021 | | :---------------------------- | :---------- | :---------- | | Investments at fair value | $2,787,925 | $2,521,593 | | Cash and cash equivalents | $25,647 | $15,967 | | Total Assets | $2,836,947 | $2,551,857 | | Debt (net) | $1,441,796 | $1,185,964 | | Total Liabilities | $1,495,378 | $1,276,009 | | Total Net Assets | $1,341,569 | $1,275,848 | | Net Asset Value Per Share | $16.48 | $16.84 | [Consolidated Statements of Operations](index=96&type=section&id=Consolidated%20Statements%20of%20Operations) Total investment income increased to **$309.3 million** in 2022, driving net investment income to **$166.3 million**, though a **$75.0 million** net unrealized loss reduced the net increase in assets from operations to **$108.1 million** - Net investment income increased by **$23.968 million** from 2021 to 2022, primarily due to higher interest income[531](index=531&type=chunk) - The net change in unrealized gains (losses) shifted from a gain of **$40.546 million** in 2021 to a loss of **$74.969 million** in 2022, significantly impacting the overall increase in net assets[531](index=531&type=chunk) Consolidated Statements of Operations Highlights (Years Ended December 31) | ($ in thousands) | 2022 | 2021 | 2020 | | :-------------------------------------------- | :---------- | :---------- | :---------- | | Total Investment Income | $309,305 | $278,593 | $270,037 | | Net Expenses | $140,356 | $135,850 | $117,273 | | Net Investment Income Before Income Taxes | $168,949 | $142,743 | $152,764 | | Income taxes, including excise taxes | $2,622 | $384 | $5,760 | | **Net Investment Income** | **$166,327** | **$142,359** | **$147,004** | | Total net change in unrealized gains (losses) | $(74,969) | $40,546 | $33,695 | | Total net realized gains (losses) | $16,695 | $28,875 | $(2,591) | | **Increase (decrease) in Net Assets Resulting from Operations** | **$108,053** | **$211,780** | **$178,108** | | Earnings per common share—basic | $1.38 | $2.93 | $2.65 | | Earnings per common share—diluted | $1.38 | $2.79 | $2.65 | [Consolidated Schedules of Investments](index=97&type=section&id=Consolidated%20Schedules%20of%20Investments) The schedules detail the investment portfolio by type, industry, and valuation, predominantly comprising variable-rate first-lien debt with interest rate floors, and identify non-qualifying, affiliated, and controlled investments - As of December 31, 2022, the largest industry concentrations in the debt portfolio were Business Services (**28.5%**), Financial Services (**25.8%**), and Internet Services (**27.5%**)[97](index=97&type=chunk)[98](index=98&type=chunk) - Many debt investments feature variable rate structures, often referenced to SOFR or LIBOR, with interest rate floors[97](index=97&type=chunk)[102](index=102&type=chunk) - Non-qualifying assets under the 1940 Act represented **9.7% of total assets** as of December 31, 2022[102](index=102&type=chunk) - As of December 31, 2022, the estimated cost basis of investments for U.S. federal tax purposes was **$2,787,005 thousand**, with estimated gross unrealized gains of **$109,609 thousand** and losses of **$105,786 thousand**[103](index=103&type=chunk) Investment Portfolio by Type (as of December 31, 2022) | Investment Type | Amortized Cost ($ thousands) | Fair Value ($ thousands) | Percentage of Net Assets | | :------------------------ | :--------------------------- | :----------------------- | :----------------------- | | Debt Investments | $2,579,557 | $2,568,814 | 188.1% | | Equity and Other Investments | $195,169 | $219,111 | 16.8% | | Structured Credit | $53,066 | $51,426 | 4.4% | | **Total Investments** | **$2,774,726** | **$2,787,925** | **204.9%** | [Consolidated Statements of Changes in Net Assets](index=111&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets) Net assets increased by **$108.1 million** from operations in 2022, influenced by **$77.6 million** in stock issuances for convertible notes, **$30.5 million** from dividend reinvestment, **$6.2 million** in repurchases, and **$144.3 million** in declared dividends - The company issued **4,360,125 shares of common stock** in 2022 for **$77.6 million** to settle convertible notes, and **1,625,826 shares** for **$30.5 million** through its dividend reinvestment plan[564](index=564&type=chunk) - The company repurchased **368,206 shares of common stock** for **$6.2 million** in 2022[564](index=564&type=chunk) Changes in Net Assets (Years Ended December 31) | ($ in thousands) | 2022 | 2021 | 2020 | | :-------------------------------------------- | :---------- | :---------- | :---------- | | Balance, beginning of period | $1,275,848 | $1,161,315 | $1,119,297 | | Net investment income | $166,327 | $142,359 | $147,004 | | Net change in unrealized gains (losses) on investments and foreign currency translation | $(74,969) | $40,546 | $33,695 | | Net realized gain (loss) on investments and foreign currency transactions | $16,695 | $28,875 | $(2,591) | | Common stock issued in settlement of convertible notes | $77,642 | $42,273 | — | | Purchases of treasury stock | $(6,168) | — | $(2,932) | | Stock issued in connection with dividend reinvestment plan | $30,516 | $36,351 | $22,306 | | Dividends declared from distributable earnings | $(144,322) | $(261,490) | $(154,554) | | **Balance, End of Period** | **$1,341,569** | **$1,275,848** | **$1,161,315** | [Consolidated Statements of Cash Flows](index=112&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash used in operating activities was **$224.5 million** in 2022, offset by **$234.2 million** from financing activities, resulting in a **$9.7 million** net increase in cash, bringing the year-end total to **$25.6 million** - In 2022, cash used in operating activities was primarily driven by **$995.6 million** in funding for portfolio investments, partially offset by **$699.3 million** from repayments and proceeds from investments[428](index=428&type=chunk)[567](index=567&type=chunk) - Financing activities in 2022 included **$1,329.9 million** in borrowings and **$77.6 million** from common stock issuance for convertible note settlement, offset by **$918.1 million** in Revolving Credit Facility paydowns and **$144.3 million** in dividends paid[428](index=428&type=chunk)[567](index=567&type=chunk) Consolidated Statements of Cash Flows Highlights (Years Ended December 31) | ($ in thousands) | 2022 | 2021 | 2020 | | :-------------------------------------------- | :---------- | :---------- | :---------- | | Net Cash Provided by (Used) in Operating Activities | $(224,532) | $2,452 | $145,066 | | Net Cash Provided by (Used) in Financing Activities | $234,212 | $241 | $(145,935) | | Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | $9,680 | $2,693 | $(869) | | Cash, Cash Equivalents, and Restricted Cash, End of Period | $25,647 | $15,967 | $13,274 | [Notes to Consolidated Financial Statements](index=114&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, including Level 3 fair value measurement, income recognition, RIC tax treatment, related party transactions, derivatives, debt obligations, and financial highlights, providing context for the financial statements - The company applies ASC Topic 946, Financial Services – Investment Companies, and prepares financial statements in accordance with U.S. GAAP[572](index=572&type=chunk) - Investments are valued at fair value, with substantially all investments being non-publicly traded and classified as **Level 3** in the fair value hierarchy, requiring significant unobservable inputs and Board determination[577](index=577&type=chunk)[582](index=582&type=chunk) - Interest income is accrued, including amortization of discounts and premiums, and loans are generally placed on non-accrual status when payments are **30 days past due** or collectability is doubtful[594](index=594&type=chunk)[596](index=596&type=chunk) - The company uses interest rate swaps to hedge fixed-rate debt obligations and certain fixed-rate investments, with changes in fair value for effective hedges recognized as components of interest expense[586](index=586&type=chunk)[630](index=630&type=chunk) - The company's asset coverage ratio was **188.6%** as of December 31, 2022, in compliance with the 1940 Act's **150% requirement**[650](index=650&type=chunk) - The 2022 Convertible Notes matured on August 1, 2022, with **$79.2 million** principal settled via common stock issuance and the remaining balance with cash[674](index=674&type=chunk)[675](index=675&type=chunk) Fair Value Hierarchy of Investments (as of December 31, 2022) | Investment Type | Level 1 ($ thousands) | Level 2 ($ thousands) | Level 3 ($ thousands) | Total ($ thousands) | | :------------------------ | :-------------------- | :-------------------- | :-------------------- | :------------------ | | First-lien debt investments | — | $21,935 | $2,495,959 | $2,517,894 | | Second-lien debt investments | — | — | $40,762 | $40,762 | | Mezzanine debt investments | — | — | $10,158 | $10,158 | | Equity and other investments | $7,498 | $13,128 | $147,059 | $167,685 | | Structured credit investments | — | $51,426 | — | $51,426 | | **Total investments at fair value** | **$7,498** | **$86,489** | **$2,693,938** | **$2,787,925** | Debt Obligations Carrying Value (as of December 31, 2022) | Debt Type | Principal Amount ($ thousands) | Carrying Value ($ thousands) | | :---------------------- | :----------------------------- | :--------------------------- | | Revolving Credit Facility | $719,328 | $706,156 | | 2023 Notes | $150,000 | $149,960 | | 2024 Notes | $347,500 | $325,492 | | 2026 Notes | $300,000 | $260,188 | | **Total Debt** | **$1,516,828** | **$1,441,796** | Dividends Declared per Share (Years Ended December 31) | Dividend Type | 2022 | 2021 | 2020 | | :------------ | :---- | :---- | :---- | | Supplemental | $0.15 | $0.20 | $0.16 | | Base | $1.65 | $1.64 | $1.64 | | Special | — | $1.75 | $0.50 | | **Total** | **$1.84** | **$3.59** | **$2.30** | Financial Highlights (Per Share Data, Years Ended December 31) | Metric | 2022 | 2021 | 2020 | | :------------------------------------ | :------ | :------ | :------ | | Net asset value, beginning of period | $16.84 | $17.16 | $16.83 | | Net investment income | $2.13 | $1.97 | $2.19 | | Net realized and unrealized gains (losses) | $(0.75) | $0.96 | $0.46 | | Total from operations | $1.38 | $2.93 | $2.65 | | Dividends declared | $(1.84) | $(3.59) | $(2.30) |\ | Net Asset Value, End of Period | $16.48 | $16.84 | $17.16 | | Total return based on market value with reinvestment of dividends | (15.78)% | 32.80% | 11.24% | | Ratio of net expenses to average net assets | 11.05% | 11.17% | 11.10% | PART III [ITEM 10. Directors, Executive Officers and Corporate Governance](index=142&type=section&id=ITEM%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance, including the SOX Code of Business Conduct and Ethics, is incorporated by reference from the 2023 proxy statement - Information for this item is incorporated by reference from the company's proxy statement for the 2023 annual meeting of stockholders[736](index=736&type=chunk) - The SOX Code of Business Conduct and Ethics is available on the company's website and any substantive amendments or waivers will be disclosed there or via Form 8-K[737](index=737&type=chunk) [ITEM 11. Executive Compensation](index=142&type=section&id=ITEM%2011.%20Executive%20Compensation) Executive compensation information is incorporated by reference from the 2023 annual meeting proxy statement - Information for this item is incorporated by reference from the company's proxy statement for the 2023 annual meeting of stockholders[738](index=738&type=chunk) [ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=142&type=section&id=ITEM%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership details for beneficial owners and management are incorporated by reference from the 2023 annual meeting proxy statement - Information for this item is incorporated by reference from the company's proxy statement for the 2023 annual meeting of stockholders[739](index=739&type=chunk) [ITEM 13. Certain Relationships and Related Transactions, and Director Independence](index=142&type=section&id=ITEM%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related transactions and director independence is incorporated by reference from the 2023 annual meeting proxy statement - Information for this item is incorporated by reference from the company's proxy statement for the 2023 annual meeting of stockholders[740](index=740&type=chunk) [ITEM 14. Principal Accountant Fees and Services](index=142&type=section&id=ITEM%2014.%20Principal%20Accountant%20Fees%20and%20Services) Principal accountant fees and services information is incorporated by reference from the 2023 annual meeting proxy statement - Information for this item is incorporated by reference from the company's proxy statement for the 2023 annual meeting of stockholders[741](index=741&type=chunk) PART IV [ITEM 15. Exhibits and Financial Statement Schedules](index=143&type=section&id=ITEM%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all exhibits filed with the Form 10-K, including corporate governance documents, debt agreements, and regulatory certifications - The section includes a comprehensive list of exhibits, such as the Restated Certificate of Incorporation, Amended and Restated Bylaws, various Indentures for Convertible Senior Notes and other Notes (2023, 2024, 2026), and multiple amendments to the Second Amended and Restated Senior Secured Revolving Credit Agreement[744](index=744&type=chunk)[746](index=746&type=chunk)[747](index=747&type=chunk) - Other exhibits include the Dividend Reinvestment Plan, Custodian Agreement, and certifications from the Chief Executive Officer and Chief Financial Officer (31.1, 31.2, 32)[746](index=746&type=chunk)[747](index=747&type=chunk) [ITEM 16. Form 10-K Summary](index=146&type=section&id=ITEM%2016.%20Form%2010-K%20Summary) This item indicates that a Form 10-K Summary is not applicable for this report

Financial Data and Key Metrics Changes - Adjusted net investment income per share for Q3 2022 was $0.47, with an annualized return on equity of 11.5% [11][54] - Adjusted net income per share was $0.43, corresponding to an annualized return on equity of 10.6% [11][54] - The quarterly base dividend was increased by approximately 7.1% to $0.45 per share, with a booked dividend yield rising to 11% from 10.3% [12][18] - Total investments reached $2.8 billion, up from $2.5 billion in the prior quarter [54] - Weighted average yield on debt and income-producing securities at amortized cost increased to 12.2% from 10.9% quarter-over-quarter [49] Business Line Data and Key Metrics Changes - The company had $385 million of commitments and $274 million of fundings across seven new investments during the quarter [39] - Portfolio composition remained strong, with 78% of the portfolio in software and business services sectors [45] - The performance rating of the portfolio improved to a weighted average rating of 1.12 from 1.13 in the previous quarter [51] Market Data and Key Metrics Changes - New issued leveraged loan volumes were down 86% in Q3 relative to the same period last year, indicating a shift towards private credit [32] - LCD first lien and second lien spreads widened by 10 and 152 basis points, respectively, during Q3 [34] - The company noted a lender-friendly environment with higher overall yields and issuers willing to pay higher fees [34] Company Strategy and Development Direction - The company aims to leverage its strong balance sheet to be a valuable partner in a tightening credit market, focusing on private credit solutions [35][75] - The strategy includes maintaining a conservative approach to credit selection and active portfolio management to drive returns [28][75] - The company is positioned to navigate economic uncertainty and capitalize on opportunities arising from market dislocation [29][75] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio's health, with no material amendment activity reported [98] - The operating environment is characterized by rising interest rates and inflation, which may lead to demand disruption [22][25] - The company anticipates continued strong performance in the private credit sector, driven by its ability to avoid credit losses [76] Other Important Information - The company has a robust liquidity position with $846 million of unfunded revolver capacity at quarter end [56] - The Board renewed the stock repurchase program with a total size reset to $50 million [61] - The company experienced unrealized losses due to wider market spreads, impacting net asset value [21][62] Q&A Session Summary Question: Insights on LeanTaaS and deal structuring - Management noted that the transaction was earlier in the pipeline and preferred to hold less unfunded commitments to drive economics in the current environment [82] Question: Investment landscape and deal pricing - Management indicated that underwriting standards have tightened, with higher spreads and lower leverage compared to previous periods [90] Question: Amendment activity in the portfolio - Management reported no material amendment activity, indicating a strong portfolio quality [98] Question: Future paydown activity - Management explained that paydowns typically drive activity-based income and are influenced by credit spread environments [102] Question: Supply side in private credit - Management highlighted that the supply of private credit has decreased, leading to wider spreads and tighter underwriting standards [112] Question: ABL strategy in a higher inflationary environment - Management emphasized the importance of evaluating collateral value dynamically in the current environment [114] Question: Structure of loans in the portfolio - Management expects a significant increase in highly structured loans as credit availability tightens [124]

S I X T H S T R E E T S P E C I A L T Y L E N D I N G Quarter Ended September 30, 2022 EARNINGS PRESENTATION DISCLAIMER AND FORWARD-LOOKING STATEMENT References in this presentation ("Presentation") to "TSLX," "we," "us," "our" and "the Company" refer to Sixth Street Specialty Lending, Inc. This Presentation includes forward-looking statements about TSLX that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, ...

S I X T H S T R E E T S P E C I A L T Y L E N D I N G Quarter Ended June 30, 2022 EARNINGS PRESENTATION DISCLAIMER AND FORWARD-LOOKING STATEMENT References in this presentation ("Presentation") to "TSLX," "we," "us," "our" and "the Company" refer to Sixth Street Specialty Lending, Inc. This Presentation includes forward-looking statements about TSLX that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estim ...

Financial Data and Key Metrics Changes - Adjusted net investment income per share for Q2 2022 was $0.42, with an annualized return on equity of 9.9% [10] - Adjusted net loss per share was $0.30, primarily due to unrealized losses from wider market spreads [11] - Net asset value per share decreased by approximately 3.4% from $16.84 to $16.27, driven by unrealized losses of $0.66 per share [17][60] - Total investments at quarter-end were $2.5 billion, slightly up from the previous quarter [53] Business Line Data and Key Metrics Changes - 93% of total investment income was generated through interest and dividend income, compared to 85% in 2021 and 79% in 2020 [14] - The weighted average yield on debt and income-producing securities at amortized cost increased to 10.9% from 10.3% quarter-over-quarter [47] - The company had $379 million of commitments and $325 million of fundings across 8 new investments and upsizes during the quarter [36] Market Data and Key Metrics Changes - The company noted a pause in repayments in the latter half of the quarter, with $212 million of paydowns across 6 full and 1 partial investment realization [42] - The repayment activity was in line with historical averages, with 65% occurring in April [44] Company Strategy and Development Direction - The company is focused on maintaining a defensive portfolio, with 90% of its investments in first lien loans [30] - The strategy includes a differentiated approach to underwriting, emphasizing businesses with variable cost structures and strong recurring revenue [28] - The company anticipates increased deal flow in the second half of 2022 while remaining selective in investment opportunities [35] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the potential for rising rates to lead to a default cycle, particularly in a stagflationary environment [92] - The overall health of borrowers remains strong, despite rising costs and inflationary pressures [23] - The company expects to exceed the top end of its target return on equity for the full year 2022 due to positive asset sensitivity [68] Other Important Information - The Board approved a third quarter base dividend of $0.42 per share, an increase of $0.01 from the previous quarter [24] - The company has significant liquidity, with $1.2 billion of undrawn capacity on its revolving credit facility [56] Q&A Session Summary Question: About the new BDC Sixth Street has on file - Management indicated that the new BDC has a completely different investment strategy than Sixth Street Specialty Lending, with limited overlap [74][75] Question: Thoughts on a peer lowering its base fee - Management noted that the peer has a history of performance issues and that their yield is lower compared to Sixth Street's [76][82] Question: Fee income expectations in a rising rate environment - Management clarified that their portfolio is spread-sensitive rather than rate-sensitive, and they expect M&A activity to increase over time [85][90] Question: Expectations for defaults in the current environment - Management acknowledged that defaults are likely to increase but expressed confidence in the defensive positioning of their portfolio [92][96] Question: Risks in certain verticals - Management highlighted low-margin businesses with commodity inputs as more at risk in the current environment [106] Question: CLO investments compared to traditional debt investments - Management explained that CLO investments offer greater loss-taking ability and are a more efficient use of capital compared to private loans [111] Question: Impact of valuation changes - Management stated that the majority of valuation changes were driven by spread movements rather than performance-based markdowns [113][115]