Blackstone Secured Lending Fund

Good day and welcome to the Blackstone Secured Lending Fourth Quarter and Full Year 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 Fund's fourth quarter and full year call. Earlier today, we issued a press release with a presentation of our results and filed our 10-K, 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 to update these statements. For some of the risks that could affect results, please see the risk factors section of our Form 10-K filed earlier today. This audio cast is copyright material of Blackstone and may not be duplicated without consent. With that, I'll turn the call over to BXSL's Co-Chief Executive Officer, Brad Marshall.

Thank you, Stacey, and good morning, everyone. Thanks for joining our call this morning. Also with me today are Co-Chief Executive Officer John Bach and our President Carlos Whitaker and our Chief Financial Officer Teddy DeLoge. Turning to this morning's agenda, I will start with some high-level thoughts before turning it over to John, Carlos, and Teddy to go into more details on our portfolio and the fourth quarter results. So just turning to the slide deck that we posted, and if we start on slide four, VXSL reported another strong quarter of results, including growth in net investment income, increased net asset value, and continued solid credit performance. Several other key highlights in the quarter include the highest weighted average asset yield on the portfolio since inception at 12%, our second best quarter of net investment income per share, and the busiest deployment period in two years. Net investment income, or NAI, per share increased 1% quarter over quarter to 96 cents per share, which represented a 14.5% annualized return on equity. It is important to note, along with strong earnings, the quality of our earnings remains high. The limited TIC payment, non-recurring and fee-driven income. In fact, interest income, excluding PIC, fees, and dividends, represented 95% of our total investment income in the fourth quarter. BXSL maintained its dividend of 77 cents per share, representing an 11.6 annualized distribution yield, one of the highest among our traded BDC peers, with as much of their portfolio in first lien senior secured assets, while covering our fourth quarter dividend by 125%. We continue to focus on our mandate of protecting investors' capital by constructing a portfolio of first-lane senior secured loans. As of December 31st, BXSL's portfolio is 98.5% first-lane senior secured debt with a 48.2% average loan-to-value. We had strong credit performance supported by a minimal non-accrual rate below 0.1%. at both amortized costs and fair market value, lowest among our traded BDC peers. And approximately one and a half percent of our debt investments as a percentage of total costs are marked below 90. Turning now to page five of the presentation deck, in the fourth quarter, BXSL saw a meaningful increase in investment activity, ending the period with over a billion dollars at par in new investment commitments and $874 million in new investment fundings. New investments funded in the quarter were over 98% first lien with a weighted average EBITDA of approximately $130 million and an average loan-to-value of 41.5%, reflecting our continued focus on what we believe are high-quality investments. In addition, the weighted average spread was approximately 580 basis points, with an average OID of 1.7% and nearly two years on average of call protection. From a market activity perspective, we see strength building as fourth quarter M&A volume increased to almost 400 billion, a 40% boost year over year. We expect M&A activity to continue to build and accelerate in 2024. This view is supported by our ongoing dialogues with the top financial sponsors, that we cover as well as the sell-side advisors with whom we partner with. M&A activity is expected to be largely driven by the buildup in record levels of private equity dry powder, large amounts of unsold assets that sponsors are sitting on in older previous vintage funds, and the impact of lower M&A activity in 2023, 54% lower than the most recent peak in 2021. This expected market activity can be sustained by the prospect of lower interest rates and continued narrowing of bid-ask spreads between buyers and sellers. In addition, the number of deals in the Blackstone credit and insurance pipeline doubled as of the end of the fourth quarter versus the end of the first quarter. These pipeline deals are predominantly first lien senior secured exposure in companies and historically, Recession resilience sectors we know very well. While we know every opportunity in BXSL's pipeline will not convert into investments, and our underwriting bar remains high, the volume gives us a sense for the scale and presence that we believe we have as an institution to drive deal flow. BXSL's origination pays benefits from the scale and platform Blackstone, or BXSI, which is one of the world's largest alternative credit managers with $319 billion in assets under management and over 500 investment professionals in 18 offices globally. Our incumbency in over 4,500 corporate issuers allows us to see more deal flow, leverage our incumbency, and select into what we believe are the most attractive risk-adjusted assets. BXSI has been the sole or lead lender in approximately 84% of BXSL's direct lending transactions since inception. This quarter alone, 12 of 17 BXSL's funded transactions were for deals Blackstone led, which allows us to be in a position to drive the negotiation of terms and documentation. During the quarter, we issued nearly 330 million of common shares through our ATM offering, With additional equity and increased capacity for our debt, which has a weighted average cost of just over 5%, we remain very well positioned to take advantage of an improving M&A environment where we believe we can deploy capital and drive earnings for shareholders. 2023 was also our best year of performance since inception with a 14.7% return on NAV basis, and a lot of that return was supported by higher rates We believe there are multiple drivers of returns that could work in our favor in 2024. These drivers include sustained elevated interest rates, despite potential cuts later this year, tightening credit spreads, which could result in asset appreciation, and refinancing in our first lien, Senior Secured Portfolio. And lastly, as I just mentioned, additional potential income driven by increased M&A activity which we are starting to see as evidenced by our fourth quarter activity. So with that, I will turn it over to John Box.