Sixth Street Specialty Lending(US:TSLX)2025-11-04 21:02Investment Portfolio - As of September 30, 2025, the company has originated approximately $51.8 billion in aggregate principal amount of investments, retaining about $11.6 billion on its balance sheet[205] - The core portfolio companies had a weighted average annual revenue of $375.9 million and a weighted average annual EBITDA of $113.3 million, with 87.8% of total investments based on fair value[206] - Approximately 90.1% of the portfolio was invested in secured debt, including 89.2% in first-lien debt investments as of September 30, 2025[213] - As of September 30, 2025, the portfolio consisted of 89.2% first-lien debt investments, 0.9% second-lien debt investments, 1.8% mezzanine debt investments, 5.2% equity investments, and 2.9% structured credit investments[241] - The average investment size in each portfolio company was approximately $23.3 million based on fair value, increasing to $30.3 million when excluding structured credit investments[209] - The largest single investment based on fair value represented 2.3% of the total investment portfolio as of September 30, 2025[208] - The company had investments in 145 portfolio companies with an aggregate fair value of $3,376.3 million as of September 30, 2025, compared to 116 portfolio companies valued at $3,518.4 million as of December 31, 2024[243] Investment Income and Expenses - Total investment income for the three months ended September 30, 2025 was $109.4 million, a decrease from $119.2 million in the same period of 2024, while for the nine months, it was $340.8 million compared to $358.8 million[252] - Net investment income for the three months ended September 30, 2025 was $50.7 million, down from $54.9 million in 2024, and for the nine months, it was $159.5 million compared to $162.4 million[252] - Interest from investments decreased from $105.8 million for the three months ended September 30, 2024 to $94.9 million for the same period in 2025, primarily due to lower reference rates[256] - Total net expenses for the three months ended September 30, 2025 were $57.4 million, down from $63.6 million in 2024, and for the nine months, they were $177.3 million compared to $193.6 million[258] - Management fees (net of waivers) increased from $12.7 million for the three months ended September 30, 2024 to $12.8 million for the same period in 2025, reflecting an increase in average assets[261] - Professional fees increased from $1.9 million for the three months ended September 30, 2024 to $2.0 million for the same period in 2025 due to higher legal and audit-related fees[265] Debt and Financing - As of September 30, 2025, total debt amounted to $1,858.7 million, with a carrying value of $1,834.3 million[326] - The company issued a total of 4,600,000 shares of common stock at $20.52 per share in March and April 2024, receiving total cash proceeds of $93.4 million[295] - The company issued $300.0 million of unsecured notes in August 2023, maturing on August 14, 2028, with an interest rate of 6.95% per year[319] - The net proceeds from the 2029 Notes issuance were $341.6 million, used to repay outstanding indebtedness under the Revolving Credit Facility[321] - The company had approximately $1.0 billion of availability on its Revolving Credit Facility as of September 30, 2025[291] - Total contractual obligations are $1,858.7 million, with $300 million due within one year and $1,258.7 million due after five years[340] Market Conditions and Outlook - Market trends indicate a favorable environment for middle-market lending due to limited capital availability from traditional lenders and strong demand for debt capital[236] - The company anticipates that the large amount of uninvested capital held by private equity firms will continue to drive deal activity, creating additional demand for debt capital[237] - The company focuses on direct origination of loans to middle-market companies, with investment activity varying based on market conditions[225] Risk Management - The company is subject to financial market risks, including valuation risk, interest rate risk, and currency risk[350] - The company may hedge against interest rate fluctuations using instruments such as interest rate swaps and options[357] - The company may employ hedging techniques to minimize currency risk associated with foreign investments[358] Tax and Compliance - The company intends to maintain its status as a RIC by distributing at least 90% of its investment company taxable income to stockholders[267] - The company accrued excise tax on estimated excess taxable income when current year annual taxable income exceeds current year dividend distributions[268] - The company recorded a net expense of $1.4 million for U.S. federal excise tax for the three months ended September 30, 2025, compared to $0.7 million for the same period in 2024[269] Performance Metrics - The weighted average total yield of debt and income-producing securities at fair value was 11.4% as of September 30, 2025, down from 12.3% as of December 31, 2024[242] - As of September 30, 2025, 90.8% of investments were rated 1, totaling $3,062.8 million, compared to 95.1% rated 1, totaling $3,345.8 million as of December 31, 2024[251] - A hypothetical increase of 300 basis points in interest rates would result in an increase of $36.5 million in net interest income[356] - The average realized gross internal rate of return on exited investments since 2011 is 17.1%, based on total capital invested of $8.8 billion and total proceeds of $11.4 billion[280]