Blackstone Secured Lending Fund

Good day and welcome to the Blackstone Secured Lending Third Quarter 2023 Investor Call. Today's conference is being recorded. At this time, all participants are in a listen-only mode. If you require operator assistance at any time, please press star zero. If you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. At this time, I'd like to turn the conference over to Stacey Wang, Head of Stakeholder Relations. Please go ahead.

Thank you, Katie. Good morning, and welcome to Blackstone Secure Lending's third quarter call. Earlier today, we issued a press release with a presentation of our results and filed our 10-Q, both of which are available on the shareholder section of our website, www.bxsl.com. We will be referring to that presentation throughout today's call. I'd like to remind you that this call may include forward-looking statements which are uncertain and outside of the firm's control and may differ materially from actual results. We do not undertake any duty in updating these statements. For some of the risks that could affect results, please see the risk factor section of our most recent annual report on Form 10-K. This audio cast is copyright material of Blackstone and may not be duplicated without consent. With that, I'd like to turn the call over to BXSL's Co-Chief Executive Officer, Brad Marshall.

Thank you, Stacey, and good morning, everyone. Thank you for joining our call this morning. With me today is co-CEO John Bach, our president, Carlos Whitaker, and our CFO, Teddy Deloge. Turning to this morning's agenda, I will start with some high-level thoughts before John, Carlos, and Teddy go into more detail on our portfolio and third quarter results. Looking at the presentation and turning to slide four, I want to highlight that Q4 marks the two-year anniversary since our IPO in 2021. I'm very pleased with the results that we have delivered to our shareholders, and I'm very confident in the strength of the portfolio we have built and highly optimistic about BXSL's investment opportunity set. Focusing on the third quarter, BXSL reported another strong quarter of results including growth in net asset value and net income per share, along with higher regular dividend distributions, all built on BXSL's strong credit fundamentals with a predominantly first lien portfolio invested in large, resilient businesses in historically low default sectors. Looking at the details, our 98.8% floating rate portfolio continues to benefit from sustained higher interest rates. Net income per share increased 12% to $1.01 per share in the quarter compared to second quarter and is up over 74% compared to last year at this time. Net investment income or NAI of 95 cents per share represents a 14.4% annualized return on equity. The quality of our earnings remains high with limited payment in kind. limited non-recurring and fee-driven income. Further, interest income excluding PIC, fees, and dividends represented 96% of our total investment income in the third quarter. I'll repeat that. Interest income excluding PIC, fees, and dividends represent 96% of our total investment income in the quarter. We distributed our previously declared increased dividend of 70 cents per share as well. This represents an 11.6% annualized distribution yield, one of the highest among our BDC peers, with as much of its portfolio invested in first lien senior secured assets, while covering our third quarter dividend by 123%. In a higher interest rate environment, investors may benefit from an elevated interest income yield. However, Higher interest rates place pressure on floating rate borrowers. As a result, we continue to focus on building our portfolio with the intention of protecting investors' capital. During the third quarter, more than 99% of funds invested were first-lane senior secured with an average loan-to-value of 35.9%. As of September 30th, the XSL portfolio is over 98% first-lane senior secured with 46.9% average loan-to-value. We have a minimal non-accrual rate below 0.1% at both amortized cost and fair market value, and approximately 1% of debt investments marked at fair value below 90. We believe our net asset value, which increased to $26.54 per share in the third quarter from $26.30 the previous quarter further highlights portfolio stability. Turning to page or slide five of the presentation, we saw a meaningful increase in new investments ending the quarter with $656 million at par in new investment commitments and 390 million in investment funding during the quarter, compared to 144 million new commitments and 117 million funded during the last quarter. Unfunded commitments represent commitments increased to 761 million in Q3 compared to 551 million in Q2. Proceeds from third quarter sales and repayments were 205 million. During the quarter, we also issued 210.7 million of additional common shares before underwriting an offering cost through both an underwritten public follow-on offering and our existing ATM program at accretive levels to BXSL. We have seen an uptick in our investment pipeline since the first quarter. The number of deals in the pipeline doubled as of the end of Q3 versus the end of Q1. These pipeline deals are predominantly first-lane, senior-secured exposure, and companies with historically recession-resilient sectors we know very well. Important to highlight, We're also seeing a resurgence in transactions valued in excess of a billion dollars with a number of these larger deals also increasing by two times in our pipeline during the same period. Looking forward, we are optimistic about the outlook of new investment opportunities driven by what we believe is a more active M&A environment and additional financing needs from our existing portfolio of over 3,000 150 corporate issuers across Blackstone Credit. I also wanted to highlight the firm's recently announced integration of our corporate credit, asset-based finance, and insurance groups into a single new unit, Blackstone Credit and Insurance, or BXCI. We are very excited about the integration as we believe it will further expand the capabilities and scale of our platform and create more seamless experience for both our clients and borrowers by offering a one-stop solution. As the demand for private credit continues to expand, the BXCI integration should allow us to better capture this opportunity. For BXSL specifically, the integration should allow us to lean into our core key areas of differentiation, scale, expertise, and value creation. Taking those in turn, as it relates to scale, it's not just about scale of capital, but it's about the scale of the platform. A scaled platform like Blackstone often allows us to have deeper connectivity with M&A advisors, with banks, with corporates, with sponsors, all of which we extend globally. As it relates to expertise, I don't think there is any credit platform that has as extensive a reach in certain sectors as Blackstone. We have 950 technologists that support our different platforms. We have over 100 advisors. We have 28 PhDs, MDs, doctors. All of this really helps us be smarter in certain areas of expertise like tech, software, life science, healthcare, and energy transition. As it relates to value creation, this remains a core focus of ours. We aim to add value after we make our investment in a company. And as we have highlighted in the past, over 90% of the companies we finance through Blackstone credit that are offered these programs use it. So when I put all of that together, we are the sole or lead lender in approximately 84% of the transactions in VXSL, which shows that companies seek Blackstone credit to lead their financing transactions, which allows us to better negotiate the terms that govern these loans instead of being a passive investor in the capital structure. We believe passionately in these advantages and in developing a highly defensive portfolio that is predominantly senior and investing primarily in scale businesses in historically lower default sectors. Relative to our peer set, we believe BXSL leads the market on quality of income, as I mentioned earlier, quality of the portfolio, which we just discussed, quality of our liabilities, which we'll hear about a little bit later, and the quality of our structure and alignment. So with that, I will turn it over to John Bach.