Blackstone Secured Lending Fund(US:BXSL)2023-11-08 21:47Financial Data and Key Metrics Changes - The company reported a net investment income of $161 million or $0.95 per share, representing a 25% year-over-year increase in total investment income driven by higher interest rates [38][46] - GAAP net income for the quarter was $171 million or $1.01 per share, up from $0.58 per share a year ago, aided by $21 million of net unrealized appreciation [38][46] - The net asset value (NAV) per share increased to $26.54 from $26.30 in the previous quarter, indicating portfolio stability [47][62] Business Line Data and Key Metrics Changes - The company ended the quarter with $656 million in new investment commitments and $390 million in investment funding, compared to $144 million and $117 million in the previous quarter [24] - Over 98% of the portfolio is invested in first lien senior secured loans, with an average loan-to-value of 46.9% [16][47] - The weighted average yield on debt investments at fair value increased to 11.9% from 11.8% in the previous quarter, primarily due to higher base rates [27][62] Market Data and Key Metrics Changes - The investment pipeline doubled since the first quarter, with a resurgence in transactions valued over $1 billion [13] - The company noted a minimal non-accrual rate below 0.1% at both amortized cost and fair market value, with approximately 1% of debt investments marked below 90% of fair value [47] - The average EBITDA of portfolio companies increased to $185 million from $162 million year-over-year, reflecting a focus on larger, more resilient businesses [50] Company Strategy and Development Direction - The company is optimistic about new investment opportunities driven by a more active M&A environment and the integration of corporate credit, asset-based finance, and insurance groups into a single unit [25] - The focus remains on building a healthy and defensive portfolio, emphasizing investments in historically lower default rate sectors [28] - The integration of the Blackstone credit and insurance platform is expected to enhance capabilities and create a more seamless experience for clients and borrowers [25][71] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the portfolio and the ability to maintain earnings in excess of dividends despite macroeconomic headwinds [64] - The company anticipates that higher interest rates will remain for an extended period, which may lead to a more favorable environment for returns [75] - There is an expectation of increased dispersion in the market, with potential default rates rising in certain sectors such as healthcare and industrial manufacturing [94] Other Important Information - The company distributed an increased dividend of $0.70 per share, representing an 11.6% annualized distribution, covered by earnings at a ratio of 123% [23][56] - The company maintained its investment-grade corporate credit ratings and ended the quarter with approximately $1.5 billion in liquidity [39][62] Q&A Session All Questions and Answers Question: Did the fee waiver lapse pursuant to the 2-year anniversary last week? - Yes, the fee waiver ended on October 28, 2023 [5] Question: Do you expect to see some structural changes in the deals getting done with rates being elevated? - Yes, companies are being set up with less leverage to service their debt appropriately, leading to lower loan-to-value ratios [84] Question: How do you think about potential changes in the portfolio mix or originations over time based on the integration? - The integration provides a larger team with more exposure to sponsors and corporates, enhancing the relevance of the company in the market [71] Question: What are your thoughts on the evolution of AI and its impact on the software sector? - The company has been integrating AI into its investment process and does not foresee significant issues for its selected portfolio in this space [104]