Blackstone Secured Lending Fund

Good day and welcome to the Blackstone Secured Lending First Quarter 2024 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 Wong. Head of Shareholder Relations. Please go ahead.

Thank you, Katie. Good morning and welcome to Blackstone Secure Lending Fund's first quarter conference call. Joining me today are Brad Marshall and Jonathan Bock, Co-Chief Executive Officers, Carlos Whitaker, President, and Teddy DeLoach, Chief Financial Officer. Earlier this morning, we issued a press release and slide presentation of our results and filed our 10-Q both of which are available on the shareholder section of our website, www.dxsl.com. We will be referring to that presentation throughout today's call. I'd like to remind you that today's 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 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 over the call to Brad Marshall.

Thank you, Stacey, and good morning, everyone. Thanks for joining our call this morning. So turning to this morning's agenda, I'm going to start with some high-level thoughts before John, Carlos, and Teddy go into some more details around our portfolio and this quarter's results. The XSL reported another strong quarter of results, including net investment income, or NAI, of 87 cents per share, representing a 13.1% annualized return on equity. Our NAII per share was impacted by 2 cents per share from accrued capital gains incentives. These results reflect continued strong credit performance with a minimal non-accrual rate of 0.1% at cost and a robust 11.8% weighted average yield on debt investments, benefiting from the current elevated rate environment. We also had the second best quarter since our IPO from an earnings standpoint, with net income of 96 cents per share, which resulted in a NAV per share increase to $26.87. Our distribution of 77 cents per share is well covered at 113% and represents an 11.5% annualized distribution yield, one of the highest among our traded BDC peers with as much of their portfolio invested in first lien senior secured assets with BXSL at 98.5%. Moving to slide five, as we discussed last quarter, we've been positioning BXSL for an anticipated ramp up in deal activity. We saw the start of that cycle in the fourth quarter, which has continued into the first quarter of this year. We had nearly $1.2 billion in new investments, commitments at par, which was the most active quarter since 2021. Further, we had $719 million of fundings, 98% of which were into first-lane senior secured debt, and overall had an average LTV of 44.5%. This reflects our continued focus on first lien debt investments in high-quality companies with what we believe are better risk-adjusted returns. Additionally, new transactions for the quarter had a weighted average spread of approximately 570 basis points with an average OID of 174 basis points and over two years of call protection, representing approximately 11.4% all-in yield to maturity. Our commitment activity during the quarter aligns with the focus on our high conviction investment themes. We leverage BXSL's incumbent relationships to originate opportunities in attractive industries. For example, IT services and software. Benefiting from a wide network of internal sources, including a public portfolio of over 2,700 credits, and from our existing portfolio in BXSL, of over 250 private companies. And our repayment activity was partially in industries that may experience more cyclicality, including electrical equipment and energy equipment and services, a portfolio rotation that we believe supports ongoing quality. Just looking at the past two quarters collectively, we have seen more commitment activity than the preceding seven quarters combined, and see this momentum carrying through into the second quarter. as BXEI utilizes our global platform, including BXEI's expanded European credit platform, and seeks to create what we believe to be quality deal flow for our investors. And despite a period of slower M&A activity, we see our continued deal flow being driven from four primary factors. First, BXSL benefits from having positions across 210 portfolio companies that, in the absence of being sold, may look to grow through debt and equity finance acquisitions. Second, with BXCI's incumbency across over 4,500 issuers globally, we believe our scale and existing relationships help to drive deal flow. In fact, approximately 65% of BXSL's Q1 fundings were to incumbent borrowers of BXCI. We have deepened our focus on specialization across sectors that we believe have long-term tailwinds. For example, in April, we opened a new credit office alongside our life science private equity colleagues in Cambridge, Massachusetts, where our global head of healthcare, Brad Coleman, along with colleague Jonathan Braman, will expand our presence. This is an area that is highly specialized and in great need of knowledgeable expertise. Finally, We continue to hear from companies that seek services offered by BXDI's Value Creation Program during a period of heightened inflation. While the services we provide are not a silver bullet, they can be quite additive, and as such, we believe a partnership with Blackstone is valued by sponsors in the market. You'll hear more from the team, but I am particularly excited about the overall quality of our earnings, the continued improvement in NAV, AND OUR ABILITY TO LEAN INTO PIPELINES TO DRIVE INCOME FOR OUR INVESTORS. WITH THAT, I'LL PASS IT OVER TO MY COLLEAGUE, JONATHAN.