Blackstone Secured Lending Fund (BXSL)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 delivered resilient earnings: Net investment income (NII) was $189M ($0.83 per share), covering the $0.77 dividend at 108% while NAV per share held flat at $27.39 .
• Revenue was ~$357.8M*, essentially in line with consensus ($358.4M*), while EPS modestly beat ($0.83 actual vs $0.816 consensus*) — a slight revenue miss but an EPS beat due to fee and accelerated OID from elevated repayments (about $0.06/share) .
• Credit quality remained strong with non‑accruals at 0.3% of cost (0.1% of fair value), and weighted average asset yield was 10.2%; liability costs improved to a 5.01% weighted average interest rate, reflecting continued funding advantages .
• Catalyst: Funding cost wins and tight capital markets execution (issued $500M bonds at 5.3% coupon, 147 bps over Treasuries) plus defensive first‑lien mix (98.2%) should support spread capture and dividend coverage amid base‑rate headwinds .

Note: *Values retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

• Dividend coverage and quality of earnings: “net investment income per share of $0.83, covering our dividend at 108%,” driven overwhelmingly by cash interest rather than PIK/dividends .
• Funding cost leadership and balance sheet strength: Weighted average interest rate on borrowings fell to 5.01%, supported by tight new issuance ($500M at 147 bps over Treasuries) and $3.4B of liquidity; BXSL retains investment‑grade ratings (Baa2/Moody’s; BBB‑/S&P positive outlook) .
• Defensive portfolio and credit quality: First‑lien concentration ~98% and non‑accruals at 0.3% cost / 0.1% fair value, with average LTV 47.4% — management emphasized focus on larger, sponsor‑backed borrowers in resilient sectors .

What Went Wrong

• Base‑rate headwinds pressuring run‑rate earnings: Management acknowledged rate cuts reduce earnings; without less predictable fee tailwinds, dividend coverage could tighten (“if earnings decline, then we’ll reflect that in the dividend going forward”) .
• Elevated repayments created net negative deployment and reversed unrealized gains: Repayments of ~$978–$900M drove a 28% annualized repayment rate and ~$0.06/share of fee/OID accelerations, but NAV absorbed $0.17/share unrealized losses (concentrated in a few positions) .
• Yield drift lower: Weighted average asset yield at 10.2% (from 10.4% in Q4 and 11.2% in Q3), reflecting lower base rates and mix shifts; management kept underwriting standards tight, passing on lower quality deals .

Financial Results

Actuals vs Consensus (S&P Global)

Note: *Values retrieved from S&P Global.

Profitability, Yield, and Balance Sheet

Note: Q1 total investment income and Q1 NII margin derived from S&P Global revenue actual; Values retrieved from S&P Global.

Deployment and Portfolio KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Despite recent market volatility, BXSL reported another strong quarter with net investment income per share of $0.83, covering our dividend at 108%. Credit performance remained healthy with minimal non‑accruals, underpinned by a 98.2% first lien senior secured debt portfolio with a loan‑to‑value ratio of 47.4%.” — Co‑CEOs Brad Marshall & Jonathan Bock .
• “Our liability stack continues to be diverse… total weighted average interest rate on drawn debt decreased to 5.01% in Q1.” — Brad Marshall .
• “In the first quarter, BXSL’s net investment income was $189 million or $0.83 per share… Total investment income for the quarter, a record for the fund, was up $54 million or 18% year‑over‑year.” — CFO Teddy Desloge .
• “Today, the dividend is 11.2% and if earnings decline, then we’ll reflect that in the dividend going forward as it relates to rates.” — Brad Marshall .
• “BXSL maintained its dividend distribution of $0.77 per share… we realized our equity in frontline… realized a gain of over $7 million.” — President Carlos Whitaker .

Q&A Highlights

• Dividend coverage policy: Management emphasized three levers (turnover/fees, lowering expenses/cost of capital, not increasing risk), and will adjust the dividend if earnings decline with rates; spillover has ~4% cost of capital and is used prudently to support earnings base .
• Repayments and pipeline: Elevated repayments (including strategic sales and HBS securitizations) drove near‑term negative net deployment; Q2 expected muted repayments amid volatility; deal flow shifting from liquid to private markets with spreads wider for lower‑quality assets .
• Leverage/dry powder: Net debt to equity near low end after cash timing; BXSL is well‑capitalized (5.01% financing costs; ample undrawn capacity) to lean into opportunities .
• Tariffs: Early to assess full impacts; portfolio skewed toward U.S. software, services, healthcare (~90% less impacted areas); name‑by‑name analysis suggests relatively small group potentially affected, with Blackstone value creation resources deployed to mitigate .
• Underwriting standards: Cautious stance, higher pass rate, bias up‑market in periods of uncertainty; avoid reaching for risk despite spread dynamics .

Estimates Context

• EPS beat and revenue essentially in line: Q1 EPS $0.83 vs $0.816* (+1.7%), revenue $357.8M* vs $358.4M* (−0.2%). Prior periods: Q4 EPS missed (−1.5%) but revenue beat; Q3 EPS and revenue both beat*. Near‑term estimate adjustments should account for fully‑reflected base‑rate declines (per CFO) and less predictable fee/OID from repayments .
• As rates drift lower, Street may trim forward NII assumptions; BXSL’s cost‑of‑capital leadership and first‑lien focus partially offset asset yield compression*.
  Note: *Values retrieved from S&P Global.

Key Takeaways for Investors

• Quality over risk‑taking: BXSL reiterated its defensive first‑lien, larger‑company bias and will not reach for spread in lower‑quality sectors — supporting credit quality and minimizing loss severity .
• Funding cost advantage: Continued liability optimization (5.01% weighted average rate; tight new issuance) is a durable differentiator that cushions asset yield compression .
• Dividend sustainability: Coverage at 108% this quarter; policy indicates dividend will be aligned with earnings trajectory as rates decline — watch turnover/fee tailwinds and cost reductions .
• Near‑term deployment muted: Elevated repayments produced negative net funding in Q1; expect modest activity until macro/policy clarity improves, then ramp as private markets absorb more volume .
• Credit remains strong: Non‑accruals are low (0.3% cost / 0.1% FV); portfolio marks largely stable, with concentrated unrealized losses in a few names (e.g., Medallia at 89), offset by selective equity realizations .
• Monitoring tariffs: Firm‑wide resources (procurement, e‑sourcing, consulting) actively support impacted companies — an underappreciated mitigant in today’s backdrop .
• Trading setup: EPS beats vs consensus, cost of capital tailwinds, and defensive credit posture are supportive; sensitivity remains around base‑rate path and fee-driven income variability.