Blackstone Secured Lending Fund(US:BXSL)2023-08-08 16:00PART I - FINANCIAL INFORMATION This part presents the company's financial statements, management's discussion, and market risk disclosures Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including key financial positions, operational results, and cash flow activities Condensed Consolidated Statements of Assets and Liabilities Total assets decreased to $9.57 billion from $9.91 billion at year-end 2022, while net assets increased to $4.35 billion from $4.16 billion Condensed Consolidated Statements of Assets and Liabilities (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Total investments at fair value | $9,288,531 | $9,617,248 | | Cash and cash equivalents | $147,383 | $131,272 | | Total assets | $9,572,449 | $9,908,995 | | Liabilities | | | | Debt (net) | $4,977,981 | $5,527,715 | | Total liabilities | $5,222,178 | $5,750,029 | | Total Net Assets | $4,350,271 | $4,158,966 | Condensed Consolidated Statements of Operations For the three months ended June 30, 2023, total investment income rose to $290.4 million from $187.0 million in the prior-year period, driven by higher interest income Key Operational Data (in thousands, except per share data) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total investment income | $290,365 | $186,991 | $555,303 | $372,588 | | Net expenses | $113,901 | $81,725 | $227,042 | $163,233 | | Net investment income | $171,485 | $105,266 | $320,660 | $207,969 | | Net realized and unrealized gain (loss) | $(26,635) | $(25,675) | $(37,012) | $(21,138) | | Net increase in net assets | $144,850 | $79,591 | $283,648 | $186,831 | | Earnings per share (basic and diluted) | $0.90 | $0.47 | $1.76 | $1.10 | Condensed Consolidated Statements of Changes in Net Assets For the six months ended June 30, 2023, net assets increased from $4.16 billion to $4.35 billion, driven by operations and share issuance, partially offset by dividends Changes in Net Assets for the Six Months Ended June 30, 2023 (in thousands) | Description | Amount | | :--- | :--- | | Balance, December 31, 2022 | $4,158,966 | | Issuance of common shares, net | $124,933 | | Reinvestment of dividends | $10,571 | | Net increase from operations | $283,648 | | Dividends declared | $(228,183) | | Balance, June 30, 2023 | $4,350,271 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2023, net cash provided by operating activities significantly increased to $677.1 million, while net cash used in financing activities was $673.3 million Net Cash Flows for the Six Months Ended June 30 (in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $677,142 | $17,162 | | Net cash provided by (used in) financing activities | $(673,289) | $48,607 | | Net increase in cash and cash equivalents | $3,853 | $65,769 | Condensed Consolidated Schedules of Investments As of June 30, 2023, the total investment portfolio had a fair value of $9.29 billion, primarily concentrated in first lien senior secured debt across 180 companies Portfolio Composition by Investment Type | Investment Type | Fair Value (June 30, 2023) | % of Total | Fair Value (Dec 31, 2022) | % of Total | | :--- | :--- | :--- | :--- | :--- | | First lien debt | $9,138,278 | 98.38% | $9,419,963 | 97.95% | | Second lien debt | $40,086 | 0.43% | $46,336 | 0.48% | | Equity investments | $110,167 | 1.19% | $150,949 | 1.57% | | Total | $9,288,531 | 100.00% | $9,617,248 | 100.00% | - The portfolio consisted of investments in 180 companies as of June 30, 2023, up from 176 at year-end 2022417 - 99.9% of performing debt investments bore interest at a floating rate417306 Portfolio Composition by Geography (Fair Value) | Geography | June 30, 2023 | % of Total | | :--- | :--- | :--- | | United States | $8,755,784 | 94.26% | | Canada | $319,080 | 3.44% | | Europe | $213,667 | 2.30% | | Total | $9,288,531 | 100.00% | Notes to Condensed Consolidated Financial Statements The notes provide detailed information on the company's organization, accounting policies, investment portfolio specifics, fair value measurements, borrowings, and shareholder distributions - The company is an externally managed BDC that has elected to be treated as a RIC for tax purposes, managed by Blackstone Credit BDC Advisors LLC180148 - The Adviser voluntarily waived management and incentive fees to maintain the pre-IPO fee structure, resulting in a $6.1 million management fee waiver and a $4.9 million incentive fee waiver for Q2 2023260262246 - As of June 30, 2023, 97.8% of the investment portfolio, or $9.09 billion, was classified as Level 3 in the fair value hierarchy, indicating reliance on unobservable inputs for valuation283 - Total debt outstanding was $5.01 billion as of June 30, 2023, with an asset coverage ratio of 186.9%, well above the regulatory requirement of 150%336346 - The company had unfunded commitments of $551.3 million as of June 30, 2023340 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and results, highlighting investment strategy, portfolio activity, operational performance, liquidity, and capital resources Portfolio and Investment Activity In Q2 2023, new investment commitments decreased significantly to $118.6 million, while the weighted average yield on debt increased to 11.64% due to rising interest rates Portfolio Activity for the Three Months Ended June 30 | Metric | 2023 | 2022 | | :--- | :--- | :--- | | New investments purchased (at cost) | $116,888 | $296,343 | | Investments sold or repaid (at cost) | $(464,777) | $(214,000) | | Number of portfolio companies | 180 | N/A | | Weighted avg. yield on debt (at cost) | 11.64% | N/A | Results of Operations For the six months ended June 30, 2023, total investment income grew 49% year-over-year to $555.3 million, driven by higher interest rates, despite increased expenses and unrealized losses - Investment income for H1 2023 increased by $182.7 million (49%) year-over-year, mainly due to rising reference interest rates, with non-recurring interest income also increasing to $13.4 million from $1.4 million424 - Total interest expense for H1 2023 increased by $47.5 million (55.6%) year-over-year, as the weighted average interest rate on borrowings rose to 4.80% from 2.94%428 - Management fees for H1 2023 decreased by 5% year-over-year to $49.0 million due to a smaller asset base, with the Adviser waiving $12.2 million in management fees during this period430 - Net unrealized losses for H1 2023 were $52.0 million, driven by a 0.2% decrease in the fair value of debt investments as a percentage of principal, attributed to changes in the economic outlook490466 Liquidity and Capital Resources As of June 30, 2023, the company maintained strong liquidity with $147.4 million in cash and $1.69 billion in undrawn credit, exceeding regulatory asset coverage requirements - Primary sources of liquidity are cash flows from operations, credit facilities, and debt/equity offerings, with $147.4 million in cash and $1.69 billion in undrawn borrowing capacity as of June 30, 2023469494 - The company's asset coverage ratio was 186.9% as of June 30, 2023, exceeding the 150% requirement under the 1940 Act470 - The company declared total distributions of $1.40 per share for the six months ended June 30, 2023473344 - No shares were repurchased during the six months ended June 30, 2023, under the authorized share repurchase plans474 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is subject to valuation, interest rate, and inflation risks, with no material changes reported since the 2022 Annual Report - The company's primary market risks are valuation risk, interest rate risk, and inflation risk482 - There have been no material changes in the company's exposure to market risk since its 2022 Annual Report482 Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2023, with no material changes in internal control over financial reporting - Based on an evaluation as of the end of the period, the Co-CEOs and CFO concluded that the company's disclosure controls and procedures are effective508 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls509 PART II - OTHER INFORMATION This part covers legal proceedings, risk factors, equity sales, defaults, and other required disclosures Item 1. Legal Proceedings The company states that it is not currently subject to any material legal proceedings - As of the reporting date, the company is not a party to any material legal proceedings529 Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes have been made to the risk factors disclosed in the 2022 Form 10-K530 Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities This section details the company's share repurchase plans, including a new $250 million authorization in February 2023, with no shares repurchased during the period - In February 2023, the Board authorized a new share repurchase plan for up to $250 million of common shares at prices below NAV per share498379 - The company did not repurchase any of its shares during the six months ended June 30, 202384474 Item 3. Defaults Upon Senior Securities The company reported no defaults upon its senior securities during the period - None534 Item 5. Other Information This section includes disclosures related to Section 13(r) of the Exchange Act and confirms no Rule 10b5-1 trading arrangement changes by directors or officers - The report incorporates by reference an exhibit related to Section 13(r) of the Exchange Act concerning Iran and Syria516 - No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement during Q2 2023517 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including credit agreements, equity distribution agreements, and officer certifications - A list of exhibits filed with the report is provided, including credit agreements, certifications, and XBRL data files518