Blackstone Secured Lending Fund(US:BXSL)2023-05-10 18:24Financial Data and Key Metrics Changes - Net investment income (NII) increased 3% quarter-over-quarter to $0.93 per share, representing a 14% annualized return on equity and the highest NII per quarter since inception, driven by rising interest rates that increased the average yield on debt investments from 10.7% to 11.4% [28][71] - Net asset value (NAV) per share increased 0.7% to $26.10 from $25.93 in the previous quarter, reflecting portfolio stability [33][77] - The current dividend was increased by 17% to $0.70 per share, representing a 10.7% annualized yield based on the higher first quarter NAV [34][67] Business Line Data and Key Metrics Changes - First quarter sales and repayments were $109 million, matched by $108 million in new investment commitments, indicating a seasonally slow period for new deal activity [29][76] - The portfolio composition remains strong with 98% in senior secured first lien loans and a weighted average loan-to-value of 45% [33][52] Market Data and Key Metrics Changes - The company reported a significant increase in market activity, particularly in public-to-private transactions and sponsor-to-sponsor activity, indicating a potential for increased origination and repayment volume [108][109] - The average spread on the company's revolver is SOFR plus 175, with a focus on maintaining a stable income picture despite lower origination and repayment activity [112][80] Company Strategy and Development Direction - The company aims to maintain a stable and steady dividend while focusing on NAV growth through excess earnings [5][34] - The strategy includes a focus on larger deals, with approximately 50% of direct lending deals being $1 billion or more, which allows for better control over outcomes [40][64] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio's resilience amid a slowing economic environment, highlighting that 90% of the portfolio is performing in line or exceeding expectations [116][127] - The management noted that sectors such as software, healthcare, and professional services are expected to continue performing well despite potential market headwinds [123][116] Other Important Information - The company has $1.2 billion in liquidity from cash and undrawn lending lines, positioning it well for both defense and growth [36][78] - Unrealized markdowns of approximately $15 million in the quarter were the primary driver of a $2 million capital gains incentive fee reversal [82] Q&A Session Summary Question: What is the potential for your portfolio being large, first lien while performing? - Management indicated that larger assets outperforming could lead to more turnover in the portfolio, with call protection on those assets [99] Question: Have all resets flowed through the portfolio? - Management noted that there is still potential for additional earnings from base rates, estimating an extra $0.04 of earnings potential from current rates [103] Question: Where is the market activity coming from? - Activity is seen in public-to-private transactions, add-on financings, and corporate carve-outs, with a busy deal funnel independent of broader market conditions [108][109] Question: How is the dividend coverage expected to trend? - Management emphasized the importance of a steady and stable dividend profile, with a focus on increasing NAV over time [110] Question: Are there any industries outperforming or underperforming? - Management highlighted that software and healthcare sectors are outperforming expectations, while some doctor practice offices are facing challenges [124][116]