• Net Investment Income (NII): $0.91 per share, representing a 13.4% annualized return on equity, up from $0.89 per share in the prior quarter.
• Net Asset Value (NAV) per Share: Increased by $0.08 to $27.27 from $27.19 last quarter.
• Dividend: $0.77 per share, covered at 118%, representing an 11.3% annualized dividend yield.
• Weighted Average Yield on Performing Debt Investments: 11.2%.
• Investments at Fair Value: $12 billion, a 6% increase from $11.3 billion in Q2.
• New Commitments: $1.1 billion in new commitments and $956 million in fundings.
• Leverage: Ending leverage and average leverage both at 1.12 times, within the target range of 1 to 1.25 times.
• Liquidity: $1.1 billion, comprised of cash and available borrowing capacity.
• Nonaccrual Rate: 0.2% at cost.
• Credit Ratings: Upgraded by Moody's from Baa3 to Baa2.
• Total Investment Income: Up 21% year over year, driven by increased interest income.
• Outstanding Debt: $6.4 billion.
• Total Net Assets: $5.7 billion.
• Weighted Average Interest Rate on Borrowings: 5.45%.
• Cost of Financing: Revolver at SOFR plus 152.5 basis points, bonds issued at 5.35% coupon.

• Warning! GuruFocus has detected 5 Warning Sign with BXSL.

Release Date: November 12, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• BXSL reported strong quarterly results with growth in net investment income and net asset value, reflecting the power and scale of the Blackstone platform.
• The fund's net investment income of $0.91 per share represents a 13.4% annualized return on equity, up from $0.89 per share in the prior quarter.
• BXSL's dividend of $0.77 per share is well covered at 118% and represents an 11.3% annualized dividend yield, one of the highest among traded BDC peers.
• Moody's upgraded BXSL's credit rating from Baa3 to Baa2, making Blackstone the only manager with two BDCs with this distinction.
• BXSL ended the quarter with $1.1 billion in new commitments and $956 million in fundings, marking the highest quarter of fundings since 2021.

Negative Points

• The weighted average yield on performing debt investments decreased to 11.2% this quarter from 11.6% last quarter.
• BXSL's leverage was relatively flat compared to the prior quarter, which may limit potential for increased returns through leverage.
• The market environment remains competitive, with tight spreads and rising numbers of new credit funds.
• BXSL's portfolio turnover rate is currently low, with year-to-date repayment rate at 6%, compared to 10% for all of 2023.
• Despite optimism for increased deal activity, the timing and extent of this activity remain uncertain, which could impact future earnings.

Q & A Highlights

Q: Can you touch on the amount of spillover you've built up and your approach to managing it? A: Jonathan Bock, Co-Chief Executive Officer: Our spillover is about $1.82 per share, which is over two quarters' worth of dividends or around 5% of NAV. Spillover magnifies returns on the way up and can also magnify losses if nonaccruals increase. Our focus is on maintaining adequate spillover while generating attractive returns.

Q: In a normalized M&A environment, how much could increased deal activity add to earnings? A: Brad Marshall, Co-Chief Executive Officer: Increased M&A activity can drive earnings by allowing us to take leverage higher and accelerate fee income from quicker loan turnover. While I won't provide an exact figure, you can estimate based on a 20%-25% turnover in the portfolio and average fees of about two points.

Q: Why doesn't the platform operate at a higher leverage ratio given its high-quality portfolio? A: Brad Marshall, Co-Chief Executive Officer: We prioritize maintaining a strong credit rating, which benefits us through tighter bond spreads and lower financing costs. Our focus is on minimizing losses rather than chasing higher spreads, which is crucial for maximizing long-term returns.

Q: What gives you confidence in a super cycle for M&A activity in 2025? A: Brad Marshall, Co-Chief Executive Officer: The primary changes are lower rates and spreads, improving the cost of capital, and a better economic outlook. Additionally, private equity sponsors have significant dry powder, and there's a need for portfolio turnover. Conversations with bankers and sponsors confirm our positive outlook.

Q: Are you seeing any trends in terms documentation for recent originations? A: Teddy Desloge, Chief Financial Officer: We've maintained strong deployment opportunities with about 75% of activity where we were the sole or lead lender. Documentation focuses on collateral protections and EBITDA add-backs, which are crucial for maintaining recovery rates.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.