Q1 2024 Blackstone Secured Lending Fund Earnings Call

Operator: Good day, and welcome to the Blackstone Secured Lending First Quarter 2024 Investor Call. This conference is being recorded.

Good day and welcome to the Blackstone secured lending first quarter 'twenty 'twenty four investor call Today's conference is being recorded.

Operator: 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 Stacy Wang, Head of Shareholder Relations. Please go ahead.

Operator: At this time all participants are in a listen only mode. If you require operator assistance at any time, Please press star zero.

Stacy Wang: If you'd like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. At this time I would like to turn the conference over to Staci Wang head of shareholder Relations. Please go ahead.

Stacy Wang: 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 Desloge, 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.bxsl.com. We will be referring to that presentation throughout today's call.

Stacy Wang: Thank you Katie good morning, and welcome to Blackstone secured lending funds first quarter conference call.

Stacy Wang: Joining me today are Brad Marshall and Jonathan Bock Co Chief Executive Officer, Carlos Whitaker, President and Chief.

Stacy Wang: Chief Financial Officer.

Stacy Wang: 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 shareholders section of our website at www dot the XFL dot com.

Stacy Wang: 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.

Stacy Wang: I'd like to remind you that today's call may include forward-looking statements that are uncertain 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 cast is copyright material of Blackstone and may not be duplicated without permission. With that, I'd like to turn over the call to Brad Marshall.

Brad Marshall: Outside of the firm's control and may differ materially from actual results. We do not undertake any duty to update. These statements are some of the risks that could affect results. Please see the risk factors section of our most recent annual report on Form 10-K.

Stacy Wang: <unk> is copyrighted material of Blackstone and may not be duplicated without that with that I'd like to turn over the call to Brad Marshall.

Brad Marshall: Thank you, Stacy, 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 $0.87 per share, representing a 13.1% annualized return on equity. Our NAII per share was impacted by $0.02 per share from accrued capital gains incentives.

Brad Marshall: Thank you Stacey and good morning, everyone.

Speaker Change: Thank you for joining our call this morning.

Brad Marshall: So turning to this morning's agenda I'm going to start with some high level thoughts before John Carlos and Petty go into some more details around our portfolio and.

Brad Marshall: This quarter's results.

Brad Marshall: <unk> reported another strong quarter of results, including net investment income or NII of <unk> 87 per share representing a 13, 1% annualized return on equity.

Brad Marshall: And then I per share was impacted by <unk> <unk> per share from.

Brad Marshall: From accrued capital gains incentive fees.

Brad Marshall: 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 $0.96 per share, which resulted in a NAV per share increase to $26.87. Our distribution of $0.77 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.

Brad Marshall: 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.

Brad Marshall: 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 an NAV per share increased to $26 87.

Brad Marshall: Our distribution of 77 cents per share as well covered at 113% and represented 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 <unk> at 98, 5%.

Brad Marshall: <unk>.

Brad Marshall: Moving to slide five.

Brad Marshall: 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. Additionally, we had $719 million of funding, 98% of which was into first lane senior secured debt and overall had an average LTV of 44 and a half.

Brad Marshall: As we discussed last quarter, we've been positioning <unk> for an anticipated ramp up in deal activity.

Brad Marshall: We saw the start of that cycle in the fourth quarter, which has continued into the fourth quarter of this year.

Brad Marshall: Had nearly $1 $2 billion in new investment commitments at par.

Brad Marshall: Which was the most active quarter since 2021 further we had $719 million in fundings, 98% of which were into first lien senior secured debt and overall had an average LTV of 44, 5%.

Brad Marshall: 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.

Brad Marshall: This reflects our continued focus on first lien debt investments in high quality companies.

Brad Marshall: With what we believe are better risk adjusted returns.

Brad Marshall: Additionally, new transactions for the quarter had a weighted average spread of approximately 570 basis points with an average OID of 174 basis points in over two years of call protection, representing approximately 11, 4% all in yield to maturity.

Brad Marshall: Our commitment activity during the quarter aligns with the focus on our high conviction investment. We leverage BXCI's incumbent relationships to originate opportunities and attractive industries. For example, IT services and software, benefiting from a wide network of internal sources, including a public portfolio of over 2700 credits and from our existing portfolio in VXSL 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.

Brad Marshall: Our commitment activity during the quarter aligns with our focus on our high conviction investment themes, we leveraged <unk> incumbent relationships to originate opportunities in attractive industries for example, it services and software.

Brad Marshall: Benefiting from our wide network of an internal source.

Brad Marshall: Horses, including a public portfolio of over 2700 credits.

Brad Marshall: And from our existing portfolio and be excess out of over 250 private companies.

Brad Marshall: And our repayment activity was partially in industries that may experience, more cyclicality, including electrical equipment and energy equipment and services.

Brad Marshall: Our portfolio rotation that we believe supports ongoing quality.

Brad Marshall: 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 its global platform, including its 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 by four primary factors. First, XSL 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,

Brad Marshall: 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 SPX EI utilizes our global platform, including the exercise expanded European credit platform.

Brad Marshall: And seeks to create what we believe to be quality deal flow for our investors.

Brad Marshall: And despite a period of slower M&A activity, we see our continued deal flow being driven from four primary factors first the.

Brad Marshall: <unk> 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.

Brad Marshall: <unk>.

Brad Marshall: BXC Xi'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 BXAI.

Brad Marshall: With be exercise incumbency across over 4500 issuers globally.

Brad Marshall: We believe our scale in existing relationships helped to drive deal flow in fact, approximately 65% of Dx yourselves Q1 fundings were to incumbent borrowers.

Brad Marshall: <unk>.

Brad Marshall: 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.

Brad Marshall: We have deepened our focus on specialization across sectors that we believe have long term tailwind 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 Bremen will expand.

Brad Marshall: Band our presence.

Brad Marshall: This is an area that is highly specialized and in great need of knowledgeable expertise.

Brad Marshall: Finally, we continue to hear from companies that seek services offered by <unk> value creation program during a period of heightened inflation.

Brad Marshall: 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'm particularly excited about the overall quality of our earnings, 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.

Brad Marshall: While the services, we provide are not a silver bullet it can be quite additive and as such we believe our partnership with Blackstone is valued by sponsors in the market.

Jonathan: You'll hear more from the team, but I'm, particularly excited about the overall quality of our earnings the continued improvement in NAV.

Jonathan: And our ability to lean into pipeline to drive income for our investors.

Jonathan: With that I'll pass it over to my colleague John.

Jonathan Gerald Bock: Thank you, Brad, and let's jump to slide six. We ended the quarter with $10.4 billion in investments, an increase from $9.9 billion in Q4. This resulted in a modest increase in ending leverage of 1.03 times and an average leverage of approximately 0.98 times, given the timing of some of our investment funding. We maintain our strong liquidity position at $1.4 billion, comprised of cash and available borrowing capacity across our revolving credit facilities, including ABLs, to lean into that expanded pipeline that Brad mentioned.

Jonathan: Thank you, Brad and let's jump to slide six and we ended the quarter with $10 4 billion of investments an increase from $9 9 billion in Q4 and this resulted in a modest increase in ending leverage of one three times and an average leverage of approximately <unk> 98 times, given the timing of some of our investment funding.

Jonathan Gerald Bock: We maintain our strong liquidity position at $1 4 billion comprised of cash and available borrowing capacity across our revolving credit facilities, including ABL to lean into that expanded pipeline that Brad mentioned.

Jonathan Gerald Bock: The weighted average base rates over the quarter expanded to approximately 50 bps on our nearly 99% floating rate debt portfolio compared to Q1 last year as rates remained elevated. While spreads have modestly compressed, the weighted average all-in yield on debt investments. That fair value remains attractive at 11.8% this quarter compared to 12% last. New investments continue to be accretive to our net investment income. The yield on new debt investment funding and assets sold and repaid during the quarter averaged 11.4% and 11.9%, respectively. Now, let's take a look at the portfolio. Jump to slide seven.

Jonathan Gerald Bock: The weighted average base rates over the quarter extended approximately 50 bps on our nearly 99% floating rate debt portfolio compared to Q1 last year as rates remained elevated.

Jonathan Gerald Bock: Spreads have modestly compressed weighted average all in yield on debt investments at fair value remains attractive at 11, 8% this quarter compared.

Jonathan Gerald Bock: Compared to 12% last quarter, new investments continue to be accretive to our net investment income the yield on new debt investment fundings in asset sold and repaid during the quarter averaged 11, 4% 11, 9%, respectively. Now lets take a look at the portfolio jumped to slide seven.

Jonathan Gerald Bock: Approximately 99% of BXSL investments are in First Link Senior Secured Loans, and 99% of those loans are to companies owned by financial sponsors who have significant equity value in these capital structures, demonstrated by an average loan-to-value of 47.8%. And, as Brad noted, our nonaccruals are still at only 0.1% at cost. Our portfolio also starts from a strong LTM EBITDA base, averaging $193 million, a 6% increase from last year. This is more than two times larger than the private credit market, where we also see continued strength of performance from larger companies, the bedrock of our portfolio, relevant to their smaller EBITDA counterparts on both growth and default.

Jonathan Gerald Bock: Approximately 99% of <unk> investments are in first lien senior secured loans and 99% of those loans are the companies owned by financial sponsors who have significant equity value in these capital structure as demonstrated by an average loan to value of 47, 8% and as Brad noted our non accruals are still at.

Jonathan Gerald Bock: Only 0.1% at cost.

Jonathan Gerald Bock: Our portfolio also starts from a strong LTM EBITDA base, averaging $193 million, a 6% increase from last year. This is more than two times larger than the private credit market, where we also see continued strength of performance from larger companies the bedrock of our portfolio relative to theirs.

Jonathan Gerald Bock: Mauler EBIT counterparts on both growth and defaults.

Jonathan Gerald Bock: BXSL's portfolio, as compared to the broader private credit market measured by the Lincoln International Private Markets Database, has seen growth rates in line with the broader market and over 15% more profitability on an LTM EBITDA margin basis. Now, we continue to stress the importance of interest coverage. The LTM EBITDA coverage, based on average LTM EBITDA for BXSL portfolio companies over the last 12 months, was 1.6 times in Q1, which again compares favorably to the Lincoln database for the broader private credit market at 1.4 times average coverage in Q1.

Jonathan Gerald Bock: <unk> portfolio as compared to the broader private credit market measured by the Lincoln International private markets database has seen growth rates in line with the broader market and over 15% more profitability on an LTM EBITDA margin basis that we continue to stress the importance of interest coverage.

Jonathan Gerald Bock: The LTM EBITDA coverage based on average LTM EBITDA for Bx yourself portfolio companies over the last 12 months that was one six times in Q1, which again compares favorably to the Lincoln database for the broader private credit market at one four times average coverage in Q1 on an LTM basis.

Jonathan Gerald Bock: Only two 4% of the portfolio has interest coverage below one times versus 16% for the broader private credit market of which 75% of this population represents companies with EBITDA less than $50 million.

Jonathan Gerald Bock: On an LTM basis, only 2.4% of the portfolio has interest coverage below one times, versus 16% for the broader private credit market, of which 75% of this population represents companies with EBITDA less than $50 million. Now further, slide eight; this focuses on our industry exposure. In Q1, the number of portfolio companies in BXSL increased to 210, while we maintained nearly 90% of exposure to historically lower default rate industries, including nearly 40% of funded deals to new portfolio companies in software and IT services, our top conviction areas as we continue to build out expertise, as Brad mentioned.

Jonathan Gerald Bock: Further slide eight this focuses on our industry exposure in Q1, the number of portfolio companies in <unk> increased to 210, while we maintained nearly 90% of exposure to historically lower default rate industries, including nearly 40% of funded deals to new portfolio companies and software and it services are top.

Jonathan Gerald Bock: Conviction areas as we continue to build out expertise as Brad mentioned now ill conclude with the point on amendment activity Amendment activity continues to be relatively benign as the performance of the portfolio remains strong and in the first quarter. There were 45 amendments for DSO private investments the vast majority of which were associated with.

Jonathan Gerald Bock: Now I'll conclude with a point on amendments. Amendment activity continues to be relatively benign, as the performance of the portfolio remains strong. And in the first quarter, there were 45 amendments for BXL private investments, the vast majority of which were associated with add-ons, DDTL extensions, or other technical matters.

Jonathan Gerald Bock: Add on Dts extensions or other technical matters with that I'd like to turn it over to Carlos.

Jonathan Gerald Bock: With that, I'd like to turn it over to Carlos. Thank you.

Carlos Whitaker: John. To expand on Brad's point regarding deal activity, I'd like to take a few minutes to dive into a new deal for the quarter. A $2 billion debt financing for Park Place, a leading provider of third-party maintenance for data centers and an incumbent portfolio company that we knew well. This marked one of the largest private financings to take out syndicated debt in a quarter.

Carlos: Thanks, John to expand on Brad's point regarding deal activity I'd like to take a few minutes to dive into a new deal for the quarter.

Carlos Whitaker: A $2 billion debt financing for park place, a leading provider of third party maintenance for data centers and an encumbered portfolio company that we knew well.

Carlos Whitaker: This marked one of the largest private financings to takeout syndicated debt in the quarter.

Carlos Whitaker: BXCI not only led but also committed, along with third parties, 90% of the total financing package across the capital structure. We believe several key differentiating factors allowed BXCI to win the deal. First, Scale.

Carlos Whitaker: <unk> not only led but also committed along with third parties, 90% of the total financing package across the capital structure.

Carlos Whitaker: BXCI has the ability to commit quickly in size, taking down the vast majority of a very scaled loan package, something we believe few in the market can match. Second, incumbency. We leveraged BXCI's existing anchor position in the syndicated loan and strong relationship with the sponsor. Third, value creation. As an existing position for BXCI, Park Place has been a telling story for our value creation program. The borrower was introduced to Blackstone Portfolio Companies through CrossSell as a preferred provider and became active in a number of portfolio companies and had already experienced the benefits of our partnership approach.

Carlos Whitaker: We believe several key differentiating factors allowed <unk> to win the deal first scale.

Carlos Whitaker: Fourth, deep diligence and sector knowledge; we utilized our internal Blackstone expertise, technologists, and differentiated market insights and data centers, along with strong prior institutional knowledge of the park. In fact, Digital Infrastructure, particularly data centers, is one of our highest conviction investment themes across Blackstone, with $50 billion of data centers owned or under construction globally, which also includes QTS, the largest data center company in North America today. Finally, flexibility. BXCI offered a one-stop service with multiple tranches of debt, creating ample flexibility best suited to Park Place's needs.

Carlos Whitaker: <unk> has the ability to commit quickly and size taking down the vast majority of a very scaled loan package something we believe few in the market can match.

Carlos Whitaker: Second incumbency, we leverage <unk> existing anchor position and the syndicated loan and strong relationship with the sponsor.

Carlos Whitaker: Third value creation.

Carlos Whitaker: As an existing position for <unk> Park place has been a telling story for our value creation program.

Carlos Whitaker: Borrower was introduced the Blackstone portfolio companies through cross sell as a preferred provider and became active in a number of portfolio companies and had already experienced the benefits of our partnership approach.

Carlos Whitaker: Fourth deep diligence and sector knowledge.

Carlos Whitaker: We utilized our internal Blackstone expertise technologists and differentiated market insights and data centers, along with strong prior institutional knowledge of Barclays.

Carlos Whitaker: In fact.

Carlos Whitaker: Digital infrastructure, particularly data centers is one of our highest conviction investment themes across Blackstone.

Carlos Whitaker: With $50 billion of <unk>.

Carlos Whitaker: Ada centers owned or under construction globally, which also includes QTS the largest data center company in North America today.

Carlos Whitaker: Finally.

Carlos Whitaker: <unk> ability.

Carlos Whitaker: <unk> offered a one stop service with multiple tranches of debt, creating ample flexibility best suited for part places need.

Carlos Whitaker: In an increasingly competitive private credit market, we believe we differentiate ourselves as not just a lender but also a value-added partner helping credits grow equity value. BXSL borrowers are offered full access to BXCI's Value Creation Program through cross-sale opportunities, cost-savings procurement, and capabilities including cybersecurity and data science, all at no additional cost because we understand the end benefit to the investment portfolio.

Carlos Whitaker: In an increasingly competitive private credit market, we believe we differentiate ourselves as not just a lender, but also a value added partner, helping credits grow equity value.

Carlos Whitaker: VX SL borrowers are offered full access to <unk> value creation program through cross sell opportunities cost savings procurement and capabilities, including cyber security and data science all at no additional cost because we understand.

Speaker Change: In the end benefit to the investment portfolio and with that I'll turn it to 30.

Teddy Desloge: Thanks, Carlos. I'll start with our operating results on slide 10. In the first quarter, BXSL's net investment income was $166,087 per share. While our total investment income remains consistent with Q4, net investment income on a dollar basis decreased primarily as a result of a full quarter impact of the fee waiver, which expired near the end of October, and capital gains-based incentive fees accrued in the first quarter. VXSL recorded its highest quarterly GAAP net income and second highest in per share terms since IPO at $184,096 per share, respectively, up 12% from a year ago.

Speaker Change: Thanks Carlos.

Teddy Desloge: I'll start with our operating results on slide 10 in.

Teddy Desloge: In the first quarter <unk> net investment income was $166 million and <unk> 87 per share.

Teddy Desloge: While our total investment income remained consistent with Q4 net investment income on a dollar basis decreased primarily as a result of a full quarter impact of the fee waiver, which expire near the end of October and capital gains based incentive fees accrued in the first quarter.

Teddy Desloge: <unk> recorded its highest quarterly GAAP net income and second highest and per share terms since IPO at $184 million 96 per share respectively up 12% from a year ago.

Teddy Desloge: Total investment income for the quarter was up $39 million, or 15% year-over-year, driven by increased interest income primarily due to higher interest rates. It is important to highlight the high quality of our earnings, as interest income excluding TIC, fees, and dividends represented approximately 93% of total investment income in the quarter. Turning to the balance sheet on slide 11, we ended the quarter with $10.4 billion of total portfolio investments at fair value, $5.3 billion of outstanding debt, and approximately $5.2 billion of total net assets. With our strong earnings in excess of the distribution in the quarter, as well as Healthy Fundamentals and Tightening Spreads Supporting Asset Values, NAV per share increased to $26.87, up from $26.66 last quarter. This represented the sixth consecutive quarter of Moving to slide 12.

Teddy Desloge: Investment income for the quarter was up $39 million or 15% year over year, driven by increased interest income primarily due to higher interest rates.

Teddy Desloge: It is important to highlight the high quality of our earnings as interest income, excluding <unk> fees and dividends represented approximately 93% of total investment income in the quarter.

Teddy Desloge: Turning to the balance sheet on slide 11, we ended the quarter with $10 4 billion of total portfolio investments at fair value $5 3 billion of outstanding debt and approximately $5 2 billion of total net assets with.

Teddy Desloge: With our strong earnings in excess of the distribution in the corner.

Teddy Desloge: As well as healthy fundamentals and tightening spreads supporting asset values NAV per share increased to $26 87.

Teddy Desloge: Up from $26 66 last quarter.

Teddy Desloge: This represented the sixth consecutive quarter of NAV per share growth.

Teddy Desloge: In addition, as Brad outlined, we saw the fourth consecutive quarter of commitment growth, with BXSL committing to nearly $1.2 billion in the quarter, funding $719 million, and an estimated additional $347 million committed by BXCI and earmarks for BXSL as of March 31. We expect to see continued momentum through the second quarter and into the back half of the year. However, repayments remained relatively muted at $181 million in the quarter, or a 7% annualized repayment.

Teddy Desloge: Moving to slide 12. In addition, we saw the fourth consecutive quarter of commitment growth as Brian outlined would be xsl committing to nearly $1 2 billion in the quarter funding $719 million and an estimated additional 347 million committed by Bx Ci and earmarks for <unk>.

Teddy Desloge: S L as of March 31.

Teddy Desloge: We expect to see continued momentum through the second quarter and into the back half of the year repayments remained relatively muted at $181 million in the quarter or 7% annualized repayment rate.

Teddy Desloge: Next, slide 13 outlines what we believe to be our attractive and diverse liability profile, which includes 53% of drawn debt in unsecured bonds. Our unsecured bonds have a weighted average fixed coupon of less than 3%, which we view as a key advantage in its elevated rate environment and contributed to an overall weighted average interest rate on our borrowings of 5.1%. This compares to a weighted average yield at fair value on our debt investments of 11.8%.

Teddy Desloge: Next slide 13 outlines what we believe to be our attractive and diverse liability profile, which includes 53% of drawn debt and unsecured bonds are unsecured bonds have a weighted average fixed coupon of less than 3%, which we view as a key advantage in its elevated rate environment and contributed to an overall weighted.

Teddy Desloge: Average interest rate on our borrowings of five 1%. This compares to a weighted average yield at fair value on our debt investments of 11, 8%. Additionally, we have no maturities on our liabilities until 2026, and our debt and funding facilities have an overall weighted average maturity of three two years.

Teddy Desloge: Additionally, we have no maturities on our liabilities until 2026, and our debt and funding facilities have an overall weighted average maturity of 3.2 years. The strength of BXSL's funding profile has been recognized by rating agencies as well. We previously noted that BXSL earned an improved outlook from Moody's to BAA3 positive, and this quarter, we earned a notch upgrade from Fitch to BBB flat. We ended the quarter with $1.4 billion of liquidity in cash and undrawn debt available to borrow, providing us with significant capacity for continued portfolio growth.

Teddy Desloge: The strength of <unk> funding profile has been recognized by rating agencies as well. We previously noted the <unk> cell earned improved outlook from Moody's to <unk> three positive in this quarter, we earned notch upgrade from Fitch to Triple B flat.

Teddy Desloge: We ended the quarter with $1 4 billion of liquidity in cash and undrawn debt available to borrow providing us with significant capacity for continued portfolio growth ending leverage.

Teddy Desloge: Ending leverage at March 31st was 1.03 times, up from 1 times at year-end. We have positioned our balance sheet to have what we believe is ample capital to deploy into what we expect will be a growing opportunity set in the U.S. In closing, we are moving forward from what we believe is a position of strength with underlying earnings power, credit performance, and investment capabilities, and an optimized balance sheet that differentiates us in the market. We will strive to remain laser-focused on delivering returns and protecting investors' capital. With that, I'll ask the operator to open up for questions. Thank you.

Teddy Desloge: March 31 was 1.03 times up from one times at year end.

Teddy Desloge: We have positioned our balance sheet to have what we believe is ample capital to deploy into what we expect will be a growing opportunity set through year end <unk>.

Teddy Desloge: In closing we are moving forward from what we believe is a position of strength with underlying earnings power of credit performance and investment capabilities and an optimized balance sheet that distinguish us distinguish us in the market. We will strive to remain laser focused on delivering returns and protecting investors' capital.

Teddy Desloge: With that I'll ask the operator to open up for questions. Thank you.

Operator: Thank you. As a reminder, please press star 1 on your telephone to ask a question. We ask you to limit yourself to one question and one follow-up to allow as many questions as possible. We'll go first to Melissa Wedel on behalf of J.P. Morgan.

Speaker Change: Thank you as a reminder, please press star one on your telephone to ask a question. We ask you limit yourself to one question and one follow up to allow as many questions as possible.

Operator: We'll go first to Melissa Wedel with JP Morgan.

Melissa Wedel: Good morning. Thanks for taking my questions today.

Melissa Wedel: Good morning, Thanks for taking my questions today.

Melissa Wedel: Definitely take your point about the the higher volume and level of activity in the first quarter and that you are looking for that to continue into the second quarter.

Brad Marshall: It definitely took your point about the higher volume and 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, is that on a growth basis, or are you also expecting net originations to remain elevated? Certainly noting that repayment activity was particularly low, it seems, in relation to gross originations in the first quarter.

Melissa Wedel: A point of clarification on that or is that on a gross basis.

Brad Marshall: Are you also expecting net origination to remain elevated certainly, noting that repayment activity was particularly low.

Brad Marshall: In relation to gross originations in the first quarter.

Brad Marshall: Hi 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 is, as you point out, on a net basis. And we continue to expect that the portfolio will grow on a net basis. On deals that are repaying, they feel somewhat muted, or we're kind of extending our exposure; there's a little bit less turnover in the market right now. And, you know, on a gross basis, we're just seeing more and more capital solutions that we're able to provide for issuers right now.

Brad Marshall: And Melissa it's Brad I'll take that question.

Brad Marshall: When we talk about origination obviously, we're talking about both on.

Brad Marshall: On a gross basis, but really what grows the portfolios.

Brad Marshall: You pointed out on a net basis and we continue to expect that the portfolio will grow on a net basis.

Brad Marshall: On deals that are repaying.

Brad Marshall: Feel somewhat muted or we're kind of extending our exposure there is a little bit less turnover in the market right now.

Brad Marshall: And on the gross basis, we're just seeing more and more capital solutions that we're able to provide for issuers right now.

Brad Marshall: Okay, appreciate that. 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 they were more evenly distributed versus the timing of repayments. Thanks so much.

Speaker Change: Okay I appreciate that.

Brad Marshall: Following up on the level of activity during the quarter I am wondering if there was anything in terms of a timing impact that we should think about.

Brad Marshall: Whether originations were skewed towards the end of the quarter.

Brad Marshall: Or it was more evenly distributed versus timing of repayment. Thanks, so much.

Brad Marshall: Yeah, no, you hit the nail on the head. It was definitely skewed to the end of the quarter, which is, you know, why you saw leverage at the quarter end higher than what the average leverage was. And some of the commitments spilled over into the second quarter.

Speaker Change: Yes, no you hit the nail on the head it was definitely skewed to the end of the quarter, which is why you saw leverage at quarter end higher than what the average leverage was.

Brad Marshall: And some of the commitments spilled over into the second quarter.

Brad Marshall: Got it. Is there any? Have you quantified a rough estimate on what the impact to NII might have been from that timing during the quarter? No, we haven't quite quantified it yet.

Speaker Change: Got it.

Brad Marshall: Is there any.

Brad Marshall: Have you quantified a rough estimate on.

Brad Marshall: What the impact to NII it might have been from that timing during the quarter.

Brad Marshall: No, we haven't quantified it yet.

Brad Marshall: No we haven't quantified it.

Speaker Change: Okay. Thank you.

Operator: Thank you. We'll go next to Mark Hughes with Truist.

Brad Marshall: Thank you we'll go next to Mark Hughes with tourists.

Mark Douglas Hughes: Yeah, thank you very much. You talked about the spreads being compressed a bit. I wonder if you could quantify that at all, the kind of your typical spread in Q1 versus what you might anticipate on the deals that are in the pipeline now.

Mark Douglas Hughes: Yes. Thank you very much you talked about those spreads being compressed a bit I wonder if you could.

Mark Douglas Hughes: Quantify that at all.

Mark Douglas Hughes: Kind of your typical spread in Q1 versus what you might anticipate on the deals that are in the pipeline now.

Jonathan Gerald Bock: Yeah, so I would say, you know, spread, you've seen some spread compression in some areas, and you've seen no spread compression in other areas. It really depends on the type of deal, whether it's, you know, clubbed up, or whether it's a proprietary deal. That's kind of driving, you know, the spread. So, if you look at the fourth quarter, we were about 11.7% on new deals. This quarter, we were 11.4%.

Mark Douglas Hughes: Yes, so I would say.

Jonathan Gerald Bock: Spread <unk> seen some spread compression in some areas and you've seen.

Jonathan Gerald Bock: Spread compression in other areas.

Jonathan Gerald Bock: Really depends on the type of deal.

Jonathan Gerald Bock: Whether it's.

Jonathan Gerald Bock: Clubbed up or whether it's a proprietary deal that's kind of driving.

Jonathan Gerald Bock: The spreads.

Jonathan Gerald Bock: So if you look at the fourth quarter were about 11, 7% on new deals.

Jonathan Gerald Bock: This quarter, we were 11, 4%.

Jonathan Gerald Bock: 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 the kind of assets that we did during the quarter, they range from 11% to 13%. Speaking to my point earlier, it really depends on the type of deal.

Jonathan Gerald Bock: By the way if you look at that on a more of a yield to three year basis, it gets closer to 12%.

Jonathan Gerald Bock: And if you look at kind of the assets that we did during the quarter. They range from 11% to 13% speaking to my point earlier really depends on the type of deal.

Jonathan Gerald Bock: The one thing that, you know, we don't kind of, you know, highlight, and we should probably do a better job of this, but the spread per unit of risk has actually come down, if you look at it on a comparative basis to, let's say, 2021. So companies, just because rates are higher, are taking a little bit less leverage. Deals are set up with a lower loan-to-value, so the spread per unit of risk is fairly constant.

Jonathan Gerald Bock: The one thing that we don't kind of highlight and we should probably do a better job of this but the.

Jonathan Gerald Bock: The spread for unit of risk.

Jonathan Gerald Bock: Actually come down if you look at it on a comparative basis to let's say 2021. So companies just because rates are higher companies are taking a little bit less leverage.

Jonathan Gerald Bock: Our deals are setup with lower loan to value so spread per unit of risk is fairly constant.

Jonathan Gerald Bock: And then in terms of on a go-forward basis, you'll continue to see this range. You'll see deals that are closer to 11%, and you'll see deals that are kind of north of 12%. But overall, I would say the market, putting us aside, has seen something like 50 to 75 basis points of spread compression since the start of the year.

Jonathan Gerald Bock:

Jonathan Gerald Bock: And then in terms of on a go forward basis Youll continue to see this range, you'll see deals that.

Jonathan Gerald Bock: We'll be closer to 11% and Youll see deals that kind of are north of 12%.

Jonathan Gerald Bock: But overall I would say the market putting us aside the market has seen something like 50% to 75 basis points of spread compression since.

Jonathan Gerald Bock: Since the start of the year.

Jonathan Gerald Bock: Thank you for that. And then you mentioned that more of your existing portfolio companies are doing M&A. Is that part of the strong pipeline that even existing companies are increasing borrowing for M&A purposes? Is that part of this, or is that just kind of an ongoing dynamic? I think what you're seeing...

Speaker Change: Thank you for that and then you had mentioned that the.

Jonathan Gerald Bock: More of your existing portfolio companies doing M&A.

Jonathan Gerald Bock: Is that part of the.

Jonathan Gerald Bock: The strong pipeline that.

Jonathan Gerald Bock: Even existing companies are borrowing increase in borrowing for M&A purposes.

Jonathan Gerald Bock: Is that part of this or is that just kind of an ongoing dine.

Jonathan Gerald Bock: Dynamic.

Brad Marshall: I think what you're seeing is sponsors are holding onto their assets for longer. So you're seeing fewer 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... you'll look for growth capital in order to grow their businesses. So I expect that to continue for the balance of the year. But the other part of kind of what we're trying to do is you'll look across our broader portfolio and see where private capital solutions are a better solution for the company versus the public debt that they may have in the market today.

Jonathan Gerald Bock: I think what Youre seeing is sponsors are holding onto their assets for longer.

Brad Marshall: So you're seeing less sale.

Brad Marshall: Sale processes, so they're looking at their existing assets and trying to find ways to grow them.

Brad Marshall: Either operationally or through acquisition.

Brad Marshall: So we've seen more companies.

Brad Marshall: You'll look for growth capital in order to in order to grow their businesses. So I expect that to continue for the balance of the year.

Brad Marshall: But the other part of kind of what we're trying to do is you look across our broader portfolio and see where private capital solutions are better.

Brad Marshall: A better solution for the company versus the public debt that they may have.

Brad Marshall: Trading in the market today. So that was the example, Carlos went through with Park place. We just came up with a better.

Brad Marshall: So that was the example Carlos went through with Park Place. We just came up with a better mousetrap and a better capital structure for their long-term growth objectives, and that's kind of where that's driving a lot of our deal flow, this ability to use our scale, go into the market, and create deals. So while maybe others are seeing more muted deal activity, our deal activity is really starting to accelerate.

Brad Marshall: Strap and better capital structure for the long term.

Brad Marshall: Both objectives, and that's kind of where that's what's driving a lot of our deal flow. This ability to use our scale go into the market create deals. So while maybe others are seeing more muted deal activity. Our deal activity is really starting to accelerate.

Speaker Change: I appreciate that thank you.

Operator: Thank you. We'll go next to Paul Johnson with KBW.

Brad Marshall: Thank you we'll go next to Paul Johnson with K B W.

Paul Conrad Johnson: Yeah, good morning. Thanks for taking the time to ask that question. Last quarter, kind of on your last question here, but... You know, last quarter, you kind of talked about, you know, the hundred deals or so that you had identified in the market that were potential repricing opportunities, you know, kind of away from syndicated markets. You know, it sounds like you've capitalized on some of those. How many, you know, of those deals do you think you kind of executed on this quarter? And, you know, do you still think, you know, you have a number of those opportunities left to do?

Paul Conrad Johnson: Yes. Good morning, Thanks for taking my questions.

Paul Conrad Johnson: Last quarter.

Paul Conrad Johnson: Your last question here, but.

Paul Conrad Johnson: Last quarter, you kind of talk about other deals or so that you had identified of the market.

Paul Conrad Johnson: Central repricing opportunities, you're kind of away from syndicated market.

Paul Conrad Johnson: It sounds like the capitalize on some of those how many of those deals.

Paul Conrad Johnson: Executed this.

Paul Conrad Johnson: This quarter in D C.

Paul Conrad Johnson: Still you have a number of those opportunities left of that.

Jonathan Gerald Bock: Hi Paul, this is Bock. So I would say if we're thinking about, you know, 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 an above-market spread, they've outperformed, and it's where we have call protection, generally, that's rolled off.

Paul Conrad Johnson: 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 repay.

Jonathan Gerald Bock: As a result of the tightening spread environment and those are loans that have either.

Jonathan Gerald Bock: Market spreads they've outperformed and it's where we have call protection generally.

Jonathan Gerald Bock: Rolled off now in those situations, we will often agreed 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, it's about less than 4% of the portfolio.

Jonathan Gerald Bock: Now, in those situations, we'll often agree to new terms for an existing portfolio company that includes market or above current, you know, liquid market spreads, and they also receive extended call protection, among a few other improvements. And so to get to the question this quarter, 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 one and a half years of call protection.

Jonathan Gerald Bock: Had some spread tightening as a result of that at around 50 to 60 basis points on average and we received an additional one and a half 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.

Jonathan Gerald Bock: So still well within the range of new Unitron financing 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 flow throughout our broad origination framework, it's a nice compliment to ensure that we're retaining attractive assets at the same time, as Brad mentioned, growing into new portfolio companies as well.

Jonathan Gerald Bock: Importantly, as we continue to drive additional flu.

Jonathan Gerald Bock: Low 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.

Jonathan Gerald Bock: Growing into new portfolio companies as well and maybe just talk about the pipeline. So.

Jonathan Gerald Bock: And maybe just to talk about the pipeline, so we go through this exercise of trying to identify deals like Park Place. Maybe it's in our public portfolio. Maybe it's somewhere else, our private portfolio, and we create those what we call a reverse kind of origination, so ideas that we're reversing into the sponsor or the company. At the start of the year, we had 98 of those that we were working through, and we're still chipping our way through that list. Not all of them will resonate, not all of them will work out like Park Place did, but there's a

Jonathan Gerald Bock: So we go through this exercise.

Jonathan Gerald Bock: Of trying to identify deals like park place.

Jonathan Gerald Bock: Maybe it is in our public portfolio, maybe it's somewhere else in our private portfolio.

Jonathan Gerald Bock: And create those what we call reverse kind of origination so ideas that we're reversing into the sponsor of the company.

Jonathan Gerald Bock: At the start of the year, we had 98 of those that we're working through.

Jonathan Gerald Bock: And we're still shipping.

Jonathan Gerald Bock: Chipping our way through that list.

Jonathan Gerald Bock: Not all of them will resonate not all of them will.

Jonathan Gerald Bock: Work out like park place did.

Jonathan Gerald Bock: But there's a pretty healthy kind of bad.

Jonathan Gerald Bock: Backlog of those deals that we're doing diligence on in and negotiating with private equity sponsors.

Speaker Change: That's very helpful.

Jonathan Gerald Bock: Thank you, that's very helpful. And then the last one for me is just, you know, you know, I guess kind of a general outlook on, you know, net leverage for the year. You know, equity is obviously hard to predict, and it takes a lot of capacity for growth. But, you know, kind of given the environment, you know, do you... Do I have any preferences in terms of where you're sort of operating in terms of your leverage range? Thanks.

Jonathan Gerald Bock: And then last one for me as you know.

Jonathan Gerald Bock: I guess kind of general outlook.

Jonathan Gerald Bock: Net leverage.

Jonathan Gerald Bock: For the year.

Jonathan Gerald Bock: Activities, obviously hard to predict.

Jonathan Gerald Bock: There's a lot of capacity.

Jonathan Gerald Bock: Great.

Jonathan Gerald Bock: Yeah.

Jonathan Gerald Bock: The environment.

Speaker Change: Do you.

Speaker Change: I don't have any preferences in terms of where you're sort of operating at in terms of your <unk>.

Speaker Change: Great. Thanks.

Jonathan Gerald Bock: Yeah, so we ended the quarter right above one turn, so near the low end of the range. I would say we've taken some intentional steps here to build capacity to deploy in what we see as a growing opportunity set, both from a volume standpoint and the fact that, at 11.4% new investment yield, that's very attractive to our dividend. So we have quite a bit of capacity to deploy. I don't think there's any change in message in terms of the leverage target, sort of one-to-one-and-a-quarter is what we've said historically, and I'd expect that we're in that range through the backup.

Speaker Change: Yes. So we ended the corner right above one turns in near the low end of the range.

Jonathan Gerald Bock: I would say we've taken some intentional steps here to build capacity to deploy and what we see is growing is growing opportunity set.

Jonathan Gerald Bock: Both from a volume standpoint, and the fact that at 11, 4% new investment yield that's very accretive to our dividend. So we have quite a bit of capacity to deploy.

Jonathan Gerald Bock: I don't think Theres any any change in message in terms of in terms of leverage target sort of one to one and a quarter is is what we've said historically.

Jonathan Gerald Bock: Expect that we're in that range for the back half of the year.

Operator: Thank you. We'll go next to Kenton Lee with RBC.

Jonathan Gerald Bock: Thank you we'll go next to Ken Lee with RBC.

Kenneth S. Lee: Hey, good morning. Thanks for taking my question. Just one on the liability side, how do you think about the outlook for the potential funding mix on the liability side, especially given the rate outlook? You know, I just wanted to see some of the thoughts there.

Kenneth S. Lee: Hey, good morning, Thanks for taking my question.

Kenneth S. Lee: Just one on the liability side, how do you think about the outlook for the potential funding mix on the liability side, especially given the rates outlook.

Kenneth S. Lee: Wanted to see some of the thoughts there. Thanks.

Teddy Desloge: Yeah, we have a lot of optionality today. Bock mentioned it, 1.4 billion of liquidity, you know, no maturities this year. You know, we have 53% of our exposure today that's in unsecured bonds. We have seen quite a bit of tightening in the market. For example, our five-year bond is at $160 over Treasury today. That's 65 bps, you know, versus the BDC index of closer to $215. So, you know, that relative to even secured liabilities is, you know, historically kind of near, you know, all-time tights just from a spread perspective.

Speaker Change: Yes, we have a lot of optionality today.

Teddy Desloge: Bob mentioned at $1 4 billion of liquidity.

Teddy Desloge: No no maturities this year.

Teddy Desloge: We have 53% of our our exposure today, that's an unsecured bonds, we have seen quite a bit of tightening.

Teddy Desloge: In the market.

Teddy Desloge: For example, our five year bonds.

Teddy Desloge: Is that sort of 160 over treasury today, that's in 65 bps.

Teddy Desloge: The BDC index of <unk>.

Teddy Desloge: Closer to two <unk>, so that is relative to even secure liabilities.

Teddy Desloge: As you know historically kind of near all time tights, just from a spread perspective so.

Teddy Desloge: So significant optionality. We'll be optimistic with it. We do have liabilities that were put in place a couple of years ago at an average cost of capital of sub SOFR plus $200. So we have that to grow into as well.

Teddy Desloge: Significant optionality, we will be opportunistic with it we do have liabilities that were put in place.

Teddy Desloge: A couple of years ago at an average cost of capital of sub Sofa, plus 200, so we've got to grow into as well.

Kenneth S. Lee: Gotcha, great. And just one follow-up question, in terms of the pipeline and what you're seeing broadly across the BXCI platform, I'm wondering if I could just get a little bit more color around that activity. Is it fair to say that most of it is around growth capital, or is it just that you're seeing a lot of refi activity? I just want to get a little bit more granularity around that

Speaker Change: Got you great and just one follow up on in terms of the pipeline and what you are seeing broadly across the <unk> platform.

Kenneth S. Lee: Wonder if I can just get a little bit more color around the activity is it fair to say that most of it is around growth capital or is it just youre seeing a lot of refi.

Kenneth S. Lee: <unk>.

Kenneth S. Lee: I just wanted to get a little bit more granularity around that thanks.

Brad Marshall: Sure, Ken. Yeah, it's a mix of public to private, add-on activity in existing portfolio companies, some refinancings out of the public market, and some refinancing out of the private markets. I would say it's a pretty healthy balance between all of those. I would say what's lagging is just the regular way of sponsoring M&A activity. But even that, we saw an inflection point probably about three weeks ago in terms of that volume starting to pick up. But you won't see it. It takes a while for these deals to happen for another quarter or so, but that activity is really starting to pick up as well.

Speaker Change: Sure Ken.

Kenneth S. Lee: It's a mix of.

Brad Marshall: Public to privates.

Brad Marshall: Add on activity and existing portfolio companies.

Brad Marshall: Some refinancings out of the public markets.

Brad Marshall: Some refinancing out of the.

Brad Marshall: The private markets.

Brad Marshall: I would say, it's a pretty healthy balance between all of those I would say what's lagging.

Brad Marshall: Is just regular way sponsor to sponsor <unk>.

Brad Marshall: Activity.

Brad Marshall: But even that we have seen an inflection point, probably about three weeks ago in terms of.

Brad Marshall: That volume starting to pick up you won't see it because it takes a while for these deals to happen for another quarter or so.

Brad Marshall: But that activity is really starting to pick up as well.

Brad Marshall: Gotcha. Very helpful there. Thanks again.

Ken: Got you very helpful. There. Thanks again.

Operator: We'll go next to Robert Dodd with Raymond James.

Brad Marshall: We'll go next to Robert Dodd with Raymond James.

Robert James Dodd: Hi guys, good morning. I've got a question about PIC, right? So PIC this quarter stepped up again. It's about a little more than six and a half percent. Total investment income is roughly slightly less than double where it was a year ago. Can you give us any color on the drivers there? I mean, how much of that is structured as PIC versus modified PIC. Obviously, Benefit Street was modified, but that was a while ago. So can you give us any color on the drivers for that direction?

Robert James Dodd: Hi, guys. Good morning on I've got a question on Pik correct. So pick this quarter step up again.

Robert James Dodd: Little more than six 5% of.

Robert James Dodd: Total investment income roughly.

Robert James Dodd: Slightly less than double a year ago can you give us any color on the drivers how much of that is structured as pik.

Robert James Dodd: As a modified policy benefits this motor parts of it that was a while ago.

Robert James Dodd: So any color on the drivers for that direction.

Teddy Desloge: Yep, you're right. 6.9% of income in Q1 was PICC. That was up modestly over last quarter. Nearly all of that was driven by one issuer that previously did have PICC's flexibility through Q3. That was part of the original deal. We did agree to extend that beginning in Q1. That company, by the way, has almost tripled EBITDA since we closed.

Speaker Change: Yes, Youre right six 9% of income Q1 was picked those up modestly over last quarter nearly all of that was driven by one issuer that previously did have takes flexibility through Q3 and that was that was part of the original deal. We did agree to extend that beginning in Q1 that.

Teddy Desloge: That company by the way has has almost tripled EBITDA since since we closed.

Teddy Desloge: If you look at our peak concentration.

Teddy Desloge: If you look at our PICC concentration, you know, five companies represent about 85% of our PICC exposure. All of those were originally set up with partial PICC flexibility, and we would characterize them as performing. They're all marked sort of in the high 90s, above 97. So I think it's a tool in certain cases that we will use to differentiate versus the syndicated market. That can come in a couple different forms, but overall, our PICC activity was fairly concentrated on performing at.

Teddy Desloge: Five companies represent about 85% of <unk> exposure all of those were originally set up with partial pik flexibility.

Teddy Desloge: And we would characterize as performing they're all March sort of high ninety's above above 97, and so I think it's a tool in certain cases that we will use to.

Teddy Desloge: To differentiate versus the syndicated market.

Teddy Desloge: That can come in in a couple of different forms.

Teddy Desloge: Overall, our pick activity was was it was fairly concentrated to performing assets.

Teddy Desloge: And Robert, those companies that are picking... They're not 100% TIC, so if their coupon is, you know, 12%... 80% of that is being paid in cash, and more like 20% is.

Speaker Change: And thank you Robert.

Teddy Desloge: Robert those companies that are picking.

Teddy Desloge: They are not 100% tech.

Teddy Desloge: If their coupon is 12%.

Teddy Desloge: 80% of that is being paid in cash in and more like 20% is ticking.

Robert: Got it. Thank you all since you brought up <unk>.

Speaker Change: So it's $2 billion facility three years ago, obviously, they've made acquisitions since but could you walk us through it in terms of volume.

Robert James Dodd: facility now. I mean, three years ago, obviously, they've made acquisitions since, but could you walk us through it in terms of, like, three years ago, it was first and second lien billion dollars with a blended spread at, like, $575. Now it's $2 billion with a dividend taken out and a blended spread at, I think, $525. So could you give us, you know? I don't think the leverage is any higher, but what's the thought process for you and for when you were in the second lien before? What's the thought process of going to a unit ranch for that particular structure?

Robert James Dodd: Oh it was.

Robert James Dodd: Firstly, and secondly, $1 billion with a blended spread at like $5 75, now it's $2 billion with a dividend taken out with a blended spread out I think 525, so could you give us.

Robert James Dodd: I don't think that Leverages anyhow, but.

Robert James Dodd: What's the thought process for you and put you in the second lien before.

Robert James Dodd: What's the thought process of going to a unit tranche for that particular structure I mean to them more for you I mean honestly they.

Brad Marshall: I mean, for them or for you? I mean, honestly, they choose in terms of that because it's gone to all uni, with a dividend taken out, with a lower spread, and less OID, I presume, as well. So is it just that much better a business today than it was three years ago? Yeah, that's not exact.

Brad Marshall: They choose.

Brad Marshall: In terms of that because it's gone through all all uni with a dividend taken out with the lowest spread and less so I presume as well so.

Brad Marshall: Is it just that.

Brad Marshall: Instead of a business today than it was three years ago.

Brad Marshall: Yeah, that's not exactly accurate, Robert. So it's actually a first lien and PREF capital structure. So what you had was an all cash pay for a second lien capital structure. The company continues to grow and wants growth capital. So we approached the company and said, "Why don't we do a first lien security and put a big PREF that's 100% PIC?"

Speaker Change: Yes, that's not exactly accurate Robert so it's actually a first lien and press.

Brad Marshall: Capital structure. So what you had was an all cash pay.

Brad Marshall: First second lien capital structure.

Brad Marshall: The company continues to grow.

Brad Marshall: <unk> growth capital so we.

Brad Marshall: Approached the company and said why don't we do a first lien security and put a big press.

Brad Marshall: It's 100% Pik behind that free up.

Brad Marshall: Behind that, they'll free up your cash flow in order to continue to grow. We'll give you some additional growth capital to do some acquisitions. So it was highly strategic for them on two fronts. One, it gave them a more flexible capital structure. Two, it freed up a lot of cash flow.

Brad Marshall: Your cash flow in order to continue to grow we'll give you some additional growth capital.

Brad Marshall: To do some acquisitions.

Brad Marshall: It was highly strategic to them on two fronts, one gain more flexible capital structure to freed up a lot of cash flow and the junior part of that capital structure sits in kind of higher risk oriented.

Brad Marshall: And the junior part of that capital structure sits in kind of higher risk-oriented funds, and the first lien sits in our lower risk strategy. So I would not characterize that as a Unitron.

Brad Marshall: Oriental funds in the first lien.

Brad Marshall: Sits in our lower risk.

Brad Marshall: Strategy, So I would not care.

Brad Marshall: <unk> that is a unit tranche.

Brad Marshall: It's a first lien plus PIC PREF. And by the way, the momentum in data centers is an incredible opportunity, and Carlos hit on this, but Blackstone, across QTS and digital realty, owns something like $100 billion in equity and data centers. So we are highly strategic to assets like Park Place, and we think the long-term tailwinds in this sector are enormous. It's one of Blackstone's key investment DCCs. If you've kind of listened to John Gray kind of highlight this on previous earnings calls, but it is something that we're very bullish on.

Brad Marshall: First lien plus Pik press.

Speaker Change: Got it and by the way the momentum I'll, just add that the momentum in data.

Brad Marshall: Centers.

Brad Marshall: Is an incredible opportunity and Carlos hit on this but you know Blackstone across QTS and digital Realty owns.

Brad Marshall: Something like $100 billion in an equity in data centers. So we are highly strategic to assets like park place.

Brad Marshall: And we think the long term tailwind in this sector are enormous it's one of Blackstone's key investment theses, if you've kind of listened to.

Brad Marshall: Jon Gray kind of highlight this on previous earnings calls, but it is something that we're very bullish on.

Speaker Change: Thank you.

Operator: Thank you. We'll take our final question from Casey Alexander with CompassPoint.

Brad Marshall: Thank you we'll take our final question from Casey Alexander with Compass point.

Casey Jay Alexander: Yeah, good morning. Thanks for taking my questions.

Casey Jay Alexander: Yeah. Good morning. Thanks for taking my question. This is just more of a curiosity.

Casey Jay Alexander: Over the last couple of years there.

Casey Jay Alexander: When the deal activity was more prevalent.

Casey Jay Alexander: You guys were expanding in software there was a lot of software around the market I'm just curious if the composition industry wise of deals being introduced.

Casey Jay Alexander: This is just more of a curiosity, you know, over the last couple years when deal activity was more prevalent. You guys were expanding into software; there was a lot of software around the market. I'm just curious if the composition, industry wise, of deals being introduced has changed, and if so, what kind of industries are you guys seeing opportunities in, and what kind of industries does it look like private equity seems to be centered on if we're kind of starting a new cycle of deal flow here?

Casey Jay Alexander: Has changed.

Casey Jay Alexander: And if so what kind of industries are you guys seeing opportunities in it and what kind of industries does it look like private equity.

Casey Jay Alexander: Seems to be centered on if we're kind of starting a new cycle of deal flow here.

Brad Marshall: Yeah, I think I wouldn't say there's any material change over the last couple of years as far as where we're focused. What you see is more of an intentional focus on quality, right?

Speaker Change: Yeah, I think I wouldn't say, there's any material change over the last couple of years is where we're focused what you see is is more of an intentional focus on.

Brad Marshall: Quality larger companies.

Brad Marshall: Larger companies in the right parts of the market. You know, we're in this period where inflation has abated a little bit, but we are seeing a deceleration of growth across the economy. If you look at default rates, for instance, in direct lending, you see some of the cyclical, more capital-intensive businesses at the higher end of the range, north of 4% default rates, whereas services and software are less than 2%. I think that's where the majority of the capital is going, both from a credit perspective and in equity.

Brad Marshall: In the right parts parts of the market. We're in this period, where we've seen inflation abate a little bit, but we are seeing seeing accelerated deceleration of growth.

Casey Jay Alexander: Okay, that's my only question. Thank you.

Casey Jay Alexander: Really across the economy.

Casey Jay Alexander: If you look at default rates for instance in direct lending you see some of the cyclical more capital intensive businesses at the higher end of the ranch north of 4% default rates, whereas services and software are less than 2% I think that's where the majority of the capital is going both from a credit perspective, and an equity perspective.

Casey Jay Alexander: Yes.

Speaker Change: Okay. That's my only question. Thank you.

Operator: With no additional questions in queue at this time, I'd like to turn the call back over to Ms. Wang for any additional or closing remarks.

Casey Jay Alexander: With no additional questions in queue at this time I would like to turn the call back over to MS. Wang for any additional or closing remarks.

Stacy Wang: That would be all. Thank you all for joining us this quarter. We look forward to speaking to you next quarter. Thanks, everyone.

Stacy Wang: And that would be all thank you all for joining us this quarter.

Stacy Wang: Look forward to speaking to you next quarter. Thanks, everyone.

Stacy Wang: Yeah.

Stacy Wang: Goodbye.

Stacy Wang: Yeah.

Stacy Wang: [music].