Blackstone Secured Lending Fund

Thank you for standing by. You're on hold for the Blackstone secured lending first quarter 2026 investor call. At this time, we're gathering additional participants and should be underway shortly. We appreciate your patience and ask that you continue to hold. Good day and welcome to the Blackstone Secured Lending First Quarter 2026 Investor Call. Today's call is being recorded. At this time, all participants are in a listen-only mode. If you require operator assistance, please press star zero. If you would like to ask a question, please signal by pressing star one. 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 Stakeholder Relations. Please go ahead.

Thank you, Katie. Good morning and welcome to Blackstone Secure Lending Fund's first quarter results conference call. Joining me today are Brad Marshall, Co-Chief Executive Officer, and Teddy Laloche, Chief Financial Officer, along with other members of the management team available for Q&A, including Jonathan Bach, Co-Chief Executive Officer, and Carlos Whitaker, President. Earlier today, we issued a press release with a presentation of our results and filed our 10Qs. both of which are available on the shareholder resources section of our website, www.bxsl.com. We will be referring to that presentation throughout today's call. I'll let you 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-Q 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 Brad Marshall.

Thank you, and good morning. Before turning to the quarter's results, I want to take a step back and address the broader market environment. The first quarter unfolded against an uncertain backdrop across asset classes, with the S&P 500, investment grade, high yield, and broadly syndicated loan markets all posting negative returns amidst geopolitical developments, concerns around AI's impact on software businesses, and overall wider spreads. Simply looking at the leveraged loan index, spreads widened roughly 50 basis points, and returns were down 55 basis points during the quarter. Investor sentiment was clearly negative during the quarter, and despite private credit generally outperforming the broadly syndicated loan and public equity markets, Capital flows into several non-traded BDCs declined, and public BDCs traded down meaningfully. Amidst the volatility and broader market pressure, the private credit markets continued to be well capitalized and in high demand by private and public companies. Through Q1, over 80% of borrowers chose private lenders for LBO financing. The direct-to-borrower model, is often a better solution to our corporate partners, all while seeking to provide investors with risk mitigation through senior positioning, covenant protections, and contractual income-generated returns. We believe these attributes have contributed positive returns in direct lending for Blackstone Credit and Insurance, or BXCI, since starting nearly 20 years ago. In fact, over the past 20 years, over $160 billion has been invested in BXCI's North American Direct Lending Strategy with less than 10 basis points of realized annual losses as described in materials. More broadly, while we expect continued normalization of default activity across public and private subinvestment grade markets from historically low levels, the private credit model is built for that environment. In our view, performance in our portfolio will continue to be underpinned by high embedded current income, disciplined asset marks, and highly negotiated structural protections, and we expect that long-term outperformance to continue relative to liquid markets. For BXSL specifically, first and foremost, we have nearly 98% first lien exposure with substantial cushion of nearly 50% junior capital or equity below our capital structures on average. Our credit agreements are heavily reviewed with key provisions we negotiate during periods of underperformance and include strong collateral protections. Third, nearly 80% of BXCI's historical exposure is with either a sole or lead lender role, typically providing a position of influence. We are positioned in capital structures to enforce our rights, and we believe we have unmatched resources, experience, and infrastructure as part of Blackstone to help drive positive outcomes. Furthermore, in BXSL, as we enter our eighth year, we have had a total of eight restructurings that incurred realized losses, two of which have now been fully realized. In those two deals, inclusive interest received, we achieved a realized multiple on invested capital of 0.98 times, reflecting nearly a full recovery of our loan basis. Turning to performance this quarter, we generated net investment income, or NAI, of 77 cents per share, fully covering our dividend, and our total net return was over 70 basis points for the quarter, despite a volatile market backdrop. We deployed $325 million of new capital and we saw nearly $450 million of repayments, consistent with our messaging that repayment volumes remain healthy. As we sit here today, we see visibility to over 600 million of repayments in the next three to four months, which we expect to use for a combination of new investments and share buybacks. NAV per share as of Q1 was $26.26, down approximately 2.5% quarter over quarter. reflecting changes to both public and private loan market spreads and company fundamentals. While these marks reduce NAV in the quarter, we believe they are an important part of the private credit model that reflect current information and market conditions, and every line item is publicly reported versus investment costs and par value. Non-accruals for the quarter were 3.1% at fair value and 4.7% at cost. We added three new positions to non-accrual, including Medallia, now marked at 60.3, Affordable Care, now marked at 69.8, and Paramount Global Services, now marked at 65. Of the 316 portfolio companies in BXSL, these three names make up over 88% of our non-accrual based on fair market value. Before detailing these portfolio developments, it is worth highlighting that we believe the overall portfolio remains resilient. If you look at averages across our book, stable, high single-digit EBDA growth over the last 12 months, consistent portfolio company EBDA margins, 28%, interest coverage at two times, which is a 17% increase over the last two years, and an average mark of 96.2, which is generally in line with the broadly syndicated loan market. Moreover, the bottom 10% of the portfolio is marked at 73, with valuations reflecting underperformance on a handful of names. Certain borrowers may continue to see challenges and require sponsor capital or capital structure improvements. We believe we are very well positioned to drive this process as senior secured lenders. On the names we added to non-accrual this quarter, The largest is Medallia, which represents a 1.7% of BXSL's fair market value. While the company paid its full quarterly interest in cash in March, we have begun working towards a restructuring. As part of this restructuring, we, together with the other lenders, plan to invest new capital into the business and meaningfully de-lever the balance sheet. This will allow the company to, one, better serve its customers, and two, invest in new products and AI features. As we mentioned previously, Medallia is highly profitable today, and we expect it will greatly benefit from a delevered capital structure, which we expect to finalize over the next few months. Affordable Care, representing 0.73% of BXSL's fair market value, operates in the dental service space, where demand trends have weakened and the business carries a relatively elevated cost structure. Importantly, we are first-lane lenders in a capital structure with multiple layers of junior capital below our exposure and strong lender documentation. We plan to enforce our rights as senior lenders, and we are actively engaged with sponsor, management team, junior capital providers, and lender base to improve the capital structure. Finally, Paramount Global Services, which represents 0.26% of fair market value and remains current on its coupon payments, was also added to non-accrual. The business is a building products distributor within the trading companies and distribution industry and has seen softening demand consistent with the broader industry, which has impacted performance. In our view, The sponsor has been supportive to date and believes the challenges to be more cyclical in nature. The consistent theme across these three names is that we sit at the top of the capital structure where we have both strong documentation and lender protections. We use these to help improve the outcomes for our investors and the companies. On the New Deal front, our largest new commitment was to firm as technologies during the quarter an emerging GPU cloud service provider. Blackstone led a $10 billion GPU-backed debt financing to support the company's cloud build-out, serving large investment-grade counterparties, including major hyperscalers and enterprise cloud customers. The loan is senior secure, denominated in U.S. dollars, with lenders having a first lien on GPUs. To date, Blackstone has led or anchored nearly 25 billion of GPU financings and is the largest owner of data centers globally. We leverage the insights gained from our experience investing across the digital infrastructure ecosystem to identify investments that benefit from the continued tailwinds we see from the build out and demand for AI infrastructure. In this case, proprietary origination and structuring complexity helped create attractive relative value for our investors. At BXCI, we continue to see attractive opportunities within the digital infrastructure, life science, and infrastructure services area of the market. Three higher conviction themes with secular tailwinds where we can leverage Blackstone's specialized expertise. We said last quarter that repayments would create additional balance sheet capacity if they materialized. We emphasize this because repayments give us room to be patient, stay disciplined, and make capital allocation decisions between paying down debt, investing in new deals as spreads may widen, and potentially buying back shares. Natural turnover can pull assets back to par upon realization. In other words, when a credit is marked below par due to market volatility or temporary performance pressure, but the underlying business retains meaningful equity value, repayments at par converts that discount into a positive realization for shareholders. A few recent instances. SelectQuote was previously marked as low as 88.4 and Colony Hardware at 91.75. Both were repaid at par during Q1. Alliance Grounds Loan was marked at 96.75 previously. and was taken out at par while our equity position returned two times invested capital. And lastly, and probably most notably, Avex Aerospace, which went public in April last month. The business underperformed early in our BXSL investment. We held the position at a low mark of 82.5, and yet we were taken out at par in Q2 following a very successful IPO. These four examples represent over 300 million of total repayments at par since Q4, despite a previous combined average mark in the 80s. These are also examples of what we have stated in past quarters. We believe realized performance is what ultimately matters, and a more active deal market leading to more repayments can be a helpful longer-term return driver. This is also why we view interim marks and embedded income together. Current income, can provide a significant return cushion, while repayment activity can convert the low power marks into power realizations. Finally, on software and AI, we continue to see public market bifurcation between business models that are more resilient and more insulated versus those at greater risk of potential disruption. For public loans in the leveraged loan index, companies growing earnings greater than 10% in more protected end markets, have seen modest spread widening and are trading on average north of 95. In public equities, companies with a similar profile trade at a median of nearly 14 times EBTA. BXSL's software portfolio has continued to perform well with low double-digit percent LTM EBTA growth and a large portion of our exposure in historically resilient sub-verticals such as data management, ERP, and security. Across approximately 70 software companies in the portfolio, weighted average LTM EVTA is over $280 million, and weighted average revenue exceeds $750 million. On average, these companies also maintain interest coverage of two times. As the sole or lead lender for the majority of transactions, BXCI can be more proactive and influence change versus acting as a passive investor. In many cases, BXCI's AI team has been working directly with some of these companies. We believe Blackstone has a differentiated perspective on AI. Across the firm, we have deep technology verticals that support and inform investment activity, including hundreds of technologists helping Blackstone's expansive portfolio on software procurement, technology implementations, and AI adoption. We also benefit from senior AI experts and technology leaders across the platform. Additionally, Rodney Zemel, former global leader of McKinsey Digital, is helping us advance AI-enabled underwriting, risk analytics, and portfolio activities to support BXCI's investment process. At large, the firm is in constant dialogue with AI market leaders across the digital infrastructure ecosystem. You may have seen the announcement this week that Blackstone is helping create a new AI service firm with Anthropic to bridge the gap between the technology and actual business applications. Once built, we expect that BXSL portfolio companies could engage the new firm and benefit from these services. So stepping back, our message this quarter is that while defaults may continue to normalize off historically low levels in the sub-investment grade market, This activity is not new and is built into the long-term return model across diversified portfolios of senior secured assets. The important point is that performance is underpinned by high embedded interest income, disciplined marks that create cushion for future outcomes, and the structural protections we negotiate as first lien lenders. Said differently, this is a model designed to produce a range of positive performance over time. even as individual credit experience is volatility. We believe the market is functioning, our portfolio remains broadly healthy, our underwriting and senior positioning matter, and our active asset management is designed to drive positive performance where companies see turbulence. At Blackstone, as the world's largest alternative asset manager, we have the scale operating resources and experience through cycles to lean into situations that require operational support. That matters because even when defaults occur, we believe there is no better platform than Blackstone to manage them. The XSL has delivered a nearly 11% inception-to-date return, which represents 550 basis points of excess return to the broadly syndicated loans. We've done this through a simple formula that remains in place today, and that is continue to support outperformance. senior positioning in BXCI originated assets in defensive areas of the market, high current income, low expense ratios, strong structural protections, disciplined marks, and an active asset management. Taken together, these elements give us confidence in BXCSL's ability to outperform for shareholders across cycles. With that, I'll turn it over to Teddy.