Blackstone Secured Lending Fund(BXSL) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - BXSL reported net investment income (NII) of $0.77 per share, representing an 11.2% annualized return on equity, primarily from interest income [9][26] - Net asset value (NAV) per share decreased slightly to $27.33 from $27.39 in the previous quarter [27] - The distribution of $0.77 per share was fully covered by NII, yielding an annualized distribution yield of 11.3% [9][20] Business Line Data and Key Metrics Changes - BXSL's total portfolio investments at fair value increased to $13.3 billion, a 17% year-over-year increase from $11.3 billion [15][27] - The weighted average yield on performing debt investments remained stable at 10.2% [16][28] - 98% of investments are in first lien senior secured loans, with an average loan-to-value (LTV) of 46.9% [16][18] Market Data and Key Metrics Changes - The company experienced a nearly 50% increase in new Blackstone credit insurance (BXCI) global private credit deal screenings compared to the fourth quarter of the previous year [8] - The repayment activity in Q2 was significantly lower, with an annualized repayment rate of 5%, down from nearly 30% in the prior quarter [26][57] Company Strategy and Development Direction - BXSL is preparing for a period of heightened deal activity, focusing on both existing portfolio companies and new assets [11][12] - The company aims to maintain a disciplined approach to investment quality while leveraging lower fees compared to peers [12][18] - BXCI's scale and expertise are seen as key differentiators in the competitive private credit market [21][24] Management's Comments on Operating Environment and Future Outlook - Management noted a positive shift in market conditions, with equities reaching all-time highs and inflation remaining muted [7][8] - There is a cautious optimism regarding the economic outlook, with expectations of increased deal activity in the second half of the year [12][51] - The management emphasized the importance of maintaining high-quality investments despite a more favorable economic environment [12][42] Other Important Information - Credit quality remains strong, with only 0.3% of investments on non-accrual at cost [10][11] - The company has a robust liquidity position with nearly $3 billion in cash and undrawn debt available [30] Q&A Session Summary Question: Sustainability of the dividend - Management indicated that the dividend is regularly assessed and is currently about 15% higher than the average BDC, with long-term signals being a key factor in any adjustments [33][36] Question: Types of deals being seen - The company is seeing a mix of M&A activity and refinancing, with a focus on existing portfolio companies and a growing pipeline of new opportunities [47][50] Question: Repayment activity expectations - Management expects repayment activity to normalize higher as M&A activity picks up, following a low base in Q2 [56][58] Question: Concerns about net investment losses - Management reassured that the marks reflect a robust valuation process and that realized gains have historically exceeded losses [75][76] Question: Status of the largest loan, Medallia - The company acknowledged the underperformance of Medallia, which has led to a markdown, but emphasized ongoing support and focus on the asset [78][79]