Yahoo Finance Blackstone Secured Lending Fund (BXSL) Q1 2024 Earnings Call Transcript Highlights: Strong ...
Net Investment Income (NII) Per Share: $0.87, reflecting a 13.1% annualized return on equity.
Net Income Per Share: $0.96, with a NAV per share increase to $26.87.
Distribution Per Share: $0.77, covered at 113%, representing an 11.5% annualized distribution yield.
Total Portfolio Investments: Increased to $10.4 billion from $9.9 billion in the previous quarter.
Liquidity: $1.4 billion, comprised of cash and available borrowing capacity.
Weighted Average Yield on Debt Investments: 11.8% this quarter.
New Investment Commitments: Nearly $1.2 billion at par, with $719 million funded.
Non-Accrual Rate: Minimal at 0.1% at cost.
Loan to Value (LTV) Average: 44.5% on new fundings.
Interest Coverage Ratio: 1.6 times for BXSL portfolio companies over the last 12 months.
Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Reported a strong quarter with net investment income of $0.87 per share, representing a 13.1% annualized return on equity.
Net income of $0.96 per share resulted in a NAV per share increase to $26.87, marking the sixth consecutive quarter of NAV per share growth.
Distributions are well covered at 113%, with an annualized distribution yield of 11.5%, one of the highest among peers.
Robust deal activity with $1.2 billion in new investment commitments, the most active quarter since 2021, predominantly in first-lien senior secured debt.
Maintained a strong liquidity position with $1.4 billion comprised of cash and available borrowing capacity, supporting future growth.
Negative Points
Experienced a decrease in net investment income on a dollar basis due to the full quarter impact of the fee waiver expiration and accrued capital gains-based incentive fees.
Observed some spread compression in the market, which could impact future earnings if it continues.
Repayment activity remains relatively muted at $181 million, indicating potential lower turnover in the market.
Despite strong performance, the portfolio's exposure to cyclical industries like electrical and energy equipment could pose risks if these sectors face downturns.
The weighted average yield on debt investments slightly decreased to 11.8% this quarter from 12% last quarter, reflecting some market pressures.
Q & A Highlights
Q: Good morning. Thanks for taking my questions today. Definitely take your point about the higher volume level of activity in the first quarter and that you're looking for that to continue into the second quarter a point of clarification on that or is that on a gross basis or are you also expecting net originations to remain elevated as certainly noting that repayment activity was particularly low it seems in relation to gross originations in the first quarter. A: And Melissa, it's Brad. I'll take that question. When we talk about origination, obviously we're talking about both on a gross basis, but really what grows the portfolio's net as you point out on a net basis. And we continue to expect that the portfolio will grow on a net basis and on deals that are repaying and that feels somewhat muted or we're kind of extending our exposure. There's a little bit less turnover in the market right now. And on the gross basis, we're just seeing more and more capital solutions that we're able to provide for issuers right now.
Q: Okay. Appreciate that. And following up on the level of activity during the quarter, I'm wondering if there was anything in terms of a timing impact that we should think about whether originations were skewed towards the end of the quarter, or it was more evenly distributed versus timing of repayments? Thanks so much. A: Yes, no, you hit the nail on that. It was definitely skewed to the end of the quarter, which is why you saw leverage on it at quarter end higher than what the average leverage was and some of the commitments spilled over into the second quarter.
Q: Got it. Is there any -- have you quantified for us the estimate on what the impact to NII might have been from that timing during the quarter? A: No, we haven't quantified it.
Q: Yes, thank you very much. You talked about those spreads being compressed a bit. I wonder if you could quantify that at all on of the kind of your typical spread in Q1 versus what you might anticipate on the deals that are in the pipeline now? A: Yes, I would say on spread, you've seen some spread compression in some areas and you've seen no spread compression. And other areas really depends on the type of deal, whether it's clubbed up or whether it's a proprietary deal that's kind of driving the spread. And so if you look at the fourth quarter, we're about 11.7% on new deals. This quarter we were 11.4%. And by the way, if you look at that on a more of a yield to three year basis, it gets closer to 12%. And if you look at kind of the assets that we did during the quarter, they ranged from 11% to 13%.
Q: Thank you for that. And then you'd mentioned that more of your existing portfolio companies are doing M&A, that is that part of the strong pipeline that even existing companies are borrowing increasing borrowing for M&A purposes, is that is that part of this? A: Or is that just kind of an ongoing dynamic I think what you're seeing is sponsors are holding that onto their assets for longer. And so you seeing less sale processes. So they're looking at their existing assets and trying to find ways to grow them either operationally or through acquisition. So we've seen more companies and you'll look for growth capital in order to and or to grow their businesses. So I expect that to continue for the balance of the year. And but the other part of kind of what we're trying to do is look across our broader portfolio and see where private capital solutions are better, a better solution for the Company versus the public debt that they may have some trading in the market today. So that was the example.
Q: Yes, good morning. Thanks for taking the questions of your last quarter of calendar last question here. But last quarter, you kind of talked about another 100 deals or so that you'd identify in the market. You know, there were two potential repricing opportunities here kind of away from syndicated Arcus, you know, sounds like you've capitalized on some of those. How many of those deals do you think you could have executed on this quarter and do you still feel you have a number of those opportunities? A: Yes. Hey, Paul, this is Bob. So I would say if we're if we're thinking about the tighter spread environment and you recall comments from the prior call. This is essentially where we're using incumbency to our advantage, right? And the goal is to retain the assets that are more susceptible to repayments as a result of the tightening spread environment. And those are loans that have either been above market spreads, they've outperformed and it's where we have call protection generally, that's rolled off now in those situations will often agree to new terms for an existing portfolio company and that includes market or above current liquid market spreads and also receive extended call protection among a few other improvements. And so to get to the question, this quarter is about less than 4% of the portfolio had some spread tightening as a result of that at around 50 to 60 basis points on average, and we received an additional 1.5 years of call protection. So still well within the range of new unitranche financings on companies that we know and like. And I would say that that was rather muted. And more importantly, as we continue to drive additional flows throughout our broad origination framework, it's a nice complement to ensure that we're retaining attractive assets at the same time to Brad's comment growing into new portfolio companies as well and maybe just stuck with the pipeline.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
