Q2 2024 Blackstone Secured Lending Fund Earnings Call

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Unknown Executive: on Secured Lending second quarter 2024 Investor Call. Today's conference 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'd like to ask a question, please signal by pressing star one.

Speaker Change: Good day and welcome to the Blackstone Secured Lending Second Quarter 2024 Investor Call. Today's conference is being recorded.

Speaker Change: At this time, all participants are in a listen-only mode. If you require operator assistance, please press star zero. If you'd like to ask a question, please signal by pressing star one. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.

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Stacy Wang: At this time, I'd like to turn the conference over to Stacy Wang, head-up stakeholder relations. Please go ahead.

Operator: At this time, I'd like to turn the conference over to Stacy Wang, Head of Stakeholder Relations. Please go ahead.

Speaker Change: At this time, I'd like to turn the conference over to Stacy Wang, Head of Stakeholder Relations. Please go ahead.

Unknown Executive: Thank you, Jennifer.

Stacy Wang: Good morning and welcome to Blackstone Secured Lending Fund second quarter conference call. Joining me today are Brad Marshall, Jonathan Bock, co-Chief Executive Officers, Carlos Whitaker, President, and Teddy Desloge, Chief Financial Officer. Earlier this morning, we issued a press release and slides 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, Jennifer.

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 shareholder section of our website www.bxsl.com.

Unknown Executive: 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 that are uncertain and outside of the firm's control and may differ materially from actual results.

Stacy Wang: I'd like to remind you that today's call may include forward-looking statements, which are uncertain and out 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 factor section of our most recent annual report on Form 10-K.

Stacy Wang: 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 audio casts copyright material of Blackstone and may not be duplicated without consent. With that, I'd like to turn the call over to Brad Marshall.

Unknown Executive: The Zodial Cases copyright material Blackstone may not be duplicated without consent.

Brad Marshall: With that, I'd like to turn the call over to Brad Marshall. Thank you, Stacy, and good morning, everyone. Thanks for joining our call this morning.

Brad Marshall: Thank you Stacy and good morning everyone. Thanks for joining our call this morning. Turning to the agenda, I'll start with some high-level thoughts before turning over to John , Carlos, and Teddy to go into details of our portfolio and second quarter results.

Brad Marshall: Turning to the agenda, I'll start with some high-level thoughts before turning over to John, Carlos, and Teddy to go into details of our portfolio and second-quarter results. Turning to slide four of the presentation. In my view, these results reflect the strength of our platform, leveraging the advantages of Blackstone's scale across our $1.1 trillion ecosystem and putting it to work for our investors. We're pleased that BXSL reported the best quarter of earnings on a dollar basis and the highest net asset value per share since our IPO, as well as increases in net investment income per share and net income per share compared to last quarter.

Stacy Wang: Turning to slide four of the presentation.

Brad Marshall: In my view, these results reflect the strength of our platform, leveraging the advantages of Blackstone's scale across our $1.1 trillion ecosystem and putting it to work for our investors.

Brad Marshall: We're pleased that BXSL reported the best quarter of earnings on a dollar basis and the highest net asset value per share since our IPO, as well as increases in net investment income per share and net income per share compared to last quarter. Furthermore, net asset value per share increased by $0.32, or 1.2%.

Speaker Change: We're pleased that BXSL reported the best quarter of earnings on a dollar basis and the highest net asset value per share since our IPO, as well as increases in net investment income per share and net income per share compared to last quarter.

Brad Marshall: Our NAI of $0.89 per share, representing a 13.2% annualized return on equity, is up from $0.87 per share in the prior quarter, and net income of $1.01 per share is up from $0.96 per share in the prior quarter. Further, net asset value per share increased by 32 cents or 1.2 percent to $27.19 from $26.87 per share last quarter. Our dividend of 70 cents per share is well covered at 116 per cent and represents an 11.3% annualized dividend yield, one of the highest among our traded BDC peers, with as much of their portfolio invested in first lean senior security assets, with BXSL at 98.6%.

Speaker Change: Our NAI of $0.89 per share, representing a 13.2% annualized return on equity, is up from $0.87 per share in the prior quarter, and net income of $1.01 per share is up from $0.96 per share in the prior quarter.

Brad Marshall: Further, net asset value per share increased by $0.32, or 1.2%, to $27.19 from $26.87 per share last quarter.

Speaker Change: Our dividend of $0.70 per share is well covered at 116% and represents an 11.3% annualized dividend yield. One of the highest.

Brad Marshall: Return drivers remain strong. As a quarter end, BXSL had an 11.6% weighted average yield on debt investments with less than 1.3% investment, a non-curial at cost. and we were able to amend our corporate revolver post-quarter end, leveraging the tighter market environment, as you will hear later from Teddy.

Brad Marshall: Moving to slide five, the second quarter was our most active quarter for originations for both committed and funded investments since 2021, with $1.3 billion in new commitments and $891 million in funding. As a result of our broad coverage model and Blackstone's global reach, we get to see a broad range of deals that come to market. Large, medium, small, and we seek to offer investors exposure to what we believe are compelling risk-adjusted opportunities at any given point in time. In this quarter, we funded more middle-market companies compared to recent quarters. In what we believe were high-quality transactions at lower LTVs and attractive spreads.

Brad Marshall: Moving to slide five.

Speaker Change: The second quarter was our most active quarter for originations for both committed and funded investments since 2021.

Brad Marshall: With $1.3 billion in new commitments and $891 million in funding, this also marks the third consecutive quarter of over $1 billion in commitments. As a result of our broad coverage model and Blackstone's global reach, we get to see a broad range of deals that come to market, large, medium, and small. And we seek to offer investors exposure to what we believe are compelling risk-adjusted opportunities at any given point in time. This quarter, we funded more middle market companies compared to recent. We continue to see strong earnings as measured by income and NAB.

Speaker Change: With $1.3 billion in new commitments and $891 million in funding, this also marks the third consecutive quarter of over $1 billion in commitments.

Speaker Change: and what we believe were high-quality transactions at lower LTVs and attractive spreads.

Brad Marshall: Overall, our new fundings into new portfolio companies for the quarter were nearly 100% first-lane senior secure debt, with an average, weighted average spread of approximately 524 basis points, an average OID of 1.3%, in nearly 1.5 years of call protection. And an average LTM EVDA of $119 million. Importantly, these assets had an average LTV of 37.9%, well below that of the portfolio in prior years. So, while we have seen some spread compression in the private markets, these new deals funded in the quarter had a greater spread to LTV ratio of what we would call spread per unit of risk.

Speaker Change: These assets had an average LTV of 37.9%, well below that of the portfolio in prior years.

Brad Marshall: And while we have a large team focus on our assets, we also strive to minimize the company's expenses. We start with a lower headline for fee structure compared to the average of our traded BDC peer set, which we believe investors recognize. We then further aim to minimize other expenses and the cost of our liabilities. Teddy will talk about our liabilities a bit later, but since quarter end, we negotiate lowering the spread of our nearly 2.1 billion dollar revolving credit facility to the lowest among our traded BDC peers. At the same time, we further diversified our lender base by adding additional banks to the revolver group, with now over 15 participants.

Brad Marshall: Finally, with recent market volatility, we believe private capital solutions will remain attractive to scale borers given the uncertainty of execution by private lenders. I'm very pleased with this course for our growth in every regard. We had robust origination at what we view overall as attractive spread per unit of risk. We continue to see strong earnings as measured by income and NABS. And we have reprised our cost of our capital after quarter end to position BXSL to operate in an environment where rates are likely to come in. For us, it's about seeking to maximize results in every area of BXSL for the benefit of our shareholders.

Brad Marshall: And we have repriced our cost of capital after quarter end to position BXSL to operate in an environment where rates are likely to come in. For us, it's about seeking to maximize results in every area of BXSL for the benefit of our shareholders. With that, I will pass over to my colleague, Jonathan.

Speaker Change: And we have repriced our cost of our capital after quarter end to position VXSL to operate in an environment where rates are likely to come in.

Speaker Change: For us, it's about seeking to maximize results in every area of BXSL for the benefit of our shareholders. With that, I will pass over to my colleague, Jonathan.

Jonathan Bock: With that, I will pass over to my colleague, John. Thank you, Brad, and let's jump to slide six. We ended the quarter with $11.3 billion of investments, over an 8% increase from a 10.4 billion in Q1 across 231 portfolio companies. This resulted in an increase in ending leverage to 1.13 times and average leverage of 1.09 times, given the timing of some of our investment fundings, moving up to the middle of our target range of 1 to 1.25 times that's equity. We maintain our strong liquidity position at 1.2 billion dollars, and that's comprised of cash, available borrowing capacity across our revolving credit facilities, and that's included ABL's to lean into that expanded pipeline.

Jonathan Bock: Thank you, Brad, and let's jump to slide six. Approximately 99% of BXSL investments are in first lien, senior secured loans, and 99% of those loans are to companies owned by financial sponsors, who generally have significant equity value in these capital structures, demonstrated by an average loan-to-value of 47.4%. It's worth noting the average single sponsor concentration in our portfolio is approximately 1% of fair value. Our portfolio also has what we believe is a strong LTM EBITDA base, that's averaging $206 million, and it's a 13% increase from last year.

Jonathan: We ended the quarter with $11.3 billion of investments, over an 8% increase from the $10.4 billion in Q1, across 231 portfolio companies.

Jonathan: This resulted in an increase in ending leverage to 1.13 times.

Jonathan Bock: Now our weighted average yield on debt investments at fair value held steady at 11.6 percent this quarter compared to 11.8 percent last quarter. The yields on new debt investment fundings and assets sold and repaid during the quarter average 10.9 percent and 11.7 percent, respectively.

Jonathan: The yields on new debt investment fundings and assets sold and repaid during the quarter averaged 10.9% and 11.7% respectively. Now let's take a look at the portfolio and turn to slide 7.

Jonathan Bock: Now let's take a look at the portfolio and turn to slide seven. Approximately 99 percent of BXSL investments are in first lien senior secured loans, and 99 percent of those loans are the companies owned by financial sponsors who generally have significant equity value in these capital structures demonstrated by an average loan to value of 47.4 percent. That's worth noting the average single sponsor concentration in our portfolio is approximately 1 percent of fair value. Now our portfolio also has what we believe is a strong LTM EBITDA base that's averaging 206 million dollars, and it's a 13 percent increase from last year.

Jonathan Bock: This is more than two times larger than the private credit market, where we also see continued strength and performance from larger companies, the bedrock of our portfolio relative to their smaller EBITDA counterparts on both growth and default. However, as Brad mentioned, we continue to see a broad range of deals, as we invested more this past quarter across the EBITDA spectrum, with that $119 million weighted average LTM EBITDA.

Jonathan Bock: This is more than two times larger than the private credit market where we also see continued strength and performance from larger companies, the bedrock of our portfolio relative to their smaller EBITDA counterparts on both growth and default. But however, Brad mentioned this, we continue to see a broad range of deals as we invested more this past quarter across the EBITDA spectrum with that 119 million dollar weighted average LTM EBITDA. Now BXSL's portfolio companies have seen growth rates in line with the broader private credit market as measured by the Lincoln International Private Market Database and over 15 percent more profitability on an LTM EBITDA margin basis.

Jonathan: where we also see continued strength and performance from larger companies.

Speaker Change: to their smaller ibex counterparts on both growth and default but however

Brad Marshall: Brad mentioned this, we continue to see a broad range of deals as we invested more this past quarter across the EBITDA spectrum with that $119 million weighted average LTM EBITDA.

Jonathan Bock: Now BXSL's portfolio companies have seen growth rates in line with the broader private credit market, as measured by the Lincoln International Private Markets database, and over 15% more profitability on an LTM EBITDA margin base. Now, looking at the share of our private credit portfolio below one times interest coverage, excluding recurring revenue loans. BXSL is at 5% of fair value versus the Lincoln Private Credit Market Index being over three times larger at nearly 18.

Speaker Change: Now, BXSL's portfolio companies have seen growth rates in line with the broader private credit market, as measured by the Lincoln International Private Markets Database, and over 15% more profitability on an LTM EBITDA margin basis.

Jonathan Bock: Now, since BXSL's inception, we believe we've been disciplined in building our portfolio to focus on first-linked used secured debt and do so in lower default rate industries, as we believe that's a defensive place for investors, especially in an elevated or uncertain interest rate environment. Now, despite a slight uptick this quarter, none of the pools were at 0.3 percent at cost, and they remained minimal compared to our traded BDC peer average of nearly 3 percent, and that's compared to last quarter. Now we can continue to emphasize the importance of interest coverage. The LTM EBITDA coverage based on average LTM EBITDA for BXSL portfolio companies over the last 12 months was 1.7 times in the second quarter, which again compares favorably to the Lincoln Database for the broader private credit market at 1.4 times average coverage in the second quarter.

Speaker Change: Now, since BXSL's inception, we believe we've been disciplined in building our portfolio to focus on firstly to secure debt, and do so in lower default rate industries, as we believe that's a defensive place for investors, especially.

Speaker Change: The LTM EBITDA coverage based on average LTM EBITDA for BXSL portfolio companies over the last 12 months was

Speaker Change: 1.7 times in the second quarter, which again compares favorably to the Lincoln database for the broader private credit market at 1.4 times average coverage in the second quarter.

Jonathan Bock: Now looking at the share of those private credit portfolio of our private credit portfolio below one times interest coverage, including recurring revenue loans, BXSL is at 5 percent of fair value versus the Lincoln Private Credit Market index being over 3 times larger at nearly 18. We've seen some increase in this figure for BXSL quarter over quarter; that's because growth is slow for some portfolio companies, and additional companies' interest coverage has come in just below one times. However, interest coverage is only one screen that we use to identify credit. with which to be proactive. Our interest coverage analysis helps us to identify companies that we believe could benefit from, for instance, an early discussion with the sponsor or an introduction to the operations focus professionals on our BXDI value creation team.

Speaker Change: Now looking at the share of those private credit portfolio of our private credit portfolio below one times interest coverage excluding recurring revenue loans

Speaker Change: The XSL is at 5%.

Speaker Change: of Fair Value versus the Lincoln Private Credit Market Index being over three times larger at nearly 18.

Jonathan Bock: And we've seen some increase in this figure for BXSL quarter over quarter. And that's because growth has slowed for some portfolio companies, and additional companies' interest coverage has come in just below one times. However, interest coverage is only one screen that we use to identify credit with which to be proactive.

Speaker Change: And we've seen some increase in this figure for BXSL quarter over quarter, and that's because growth has slowed for some portfolio companies, and additional companies' interest coverage has come in just below one-times. However, interest coverage is only one screen that we use to identify credits.

Jonathan Bock: Our interest coverage analysis helps us to identify companies that we believe could benefit from, for instance, an early discussion with the sponsor or an introduction to the operations-focused professionals on our BXCI value creation team. And so when we think about stress in our portfolio, it is, in our view, better represented by those assets that are marked below 80, which constitute less than 1% of the book at cost. Now, looking at how we're growing the portfolio and designing it top-down, slide eight focuses on our industry exposure.

Speaker Change: with which to be proactive.

Speaker Change: Our interest coverage analysis helps us to identify companies that we believe could benefit from, for instance, an early discussion with the sponsor or an introduction to the operations-focused professionals on our BXCI value creation team.

Jonathan Bock: And so we think about stress in our portfolio instead, in our view, better represented by those assets that are marked below 80, which constitute less than 1% of the book could cost.

Speaker Change: And so when we think about stress in our portfolio, it's instead, in our view, better represented by those assets that are marked below 80, which constitute less than 1% of the book at cost.

Jonathan Bock: Now, looking now at how we're growing the portfolio and designing it top down, slide 8 focuses on our industry exposure. And as I mentioned earlier, in the second quarter, the number of portfolio companies in BXDI increased to 231, while we maintained nearly 90% of our exposure to historically lower default rate industries. And this is similarly reflected in our investment activity this quarter, as Brad mentioned, with 70% of our new funded portfolio companies being in historically lower default rate industries such as software, healthcare providers, and services, et cetera.

Speaker Change: Now looking now at how we're growing the portfolio and designing it top down, slide eight focuses on our industry exposure.

Jonathan Bock: And as I mentioned earlier, in the second quarter, the number of portfolio companies in BXSL increased to 231, while we maintained nearly 90% of our exposure to historically lower default rate industries. And this is similarly reflected in our investment activity this quarter, as Brad mentioned, with 70% of our new funded portfolio companies being in historically lower default rate industries, such as software, healthcare providers, and services, et cetera. Now, I'll conclude with a point on amendment activity.

Speaker Change: And as I mentioned earlier, in the second quarter, the number of portfolio companies in BXSL increased to 231, while we maintained nearly 90% of our exposure to historically lower default rate industries.

Speaker Change: And this is similarly reflected in our investment activity this quarter, as Brad mentioned, with 70% of our new funded portfolio companies being in historically lower default rate industries, such as software, healthcare providers and services, etc. Now I'll conclude with a point on amendment activity.

Jonathan Bock: Now, I'll conclude with a point on amendment activity. Amendment activity continues to be relatively benign as the performance of the portfolio remains strong. And the second quarter, amendments affected roughly 65 private borrowers. Over 95% of which were associated with add-ons, M&A, DDTL extensions, and immaterial technique of matters on changes to terms. Now, three issuers that saw amendments related to portfolio, we had it curve with three portfolio companies, all of which were marked below 80. And in total, represent less than 80 basis points of the portfolio at cost.

Jonathan Bock: Amendment activity continues to be relatively benign, as performance of the portfolio remains strong. In the second quarter, amendments affected roughly 65 private borrowers, over 95% of which were associated with add-ons, M&A, DDTL extension, and immaterial technical matters on changes. Now, three issuers that saw amendments related to the portfolio we had occurred with three portfolio companies, all of which were marked below 80 and, in total, represented less than 80 basis points of the portfolio at cost. And with that, I'd like to turn it over to my colleague, Carlos. Thanks.

Speaker Change: Amendment activity continues to be relatively benign, as performance of the portfolio remains strong. In the second quarter, amendments affected roughly 65 private borrowers.

Speaker Change: Over 95% of which were associated with add-ons, M&A, DDTL extensions, and immaterial technical matters on changes to terms.

Carlos: Now, three issuers that saw amendments related to the portfolio, we had it occurred with three portfolio companies, all of which were marked below 80, and in total represent less than 80 basis points of the portfolio at cost. And with that, I'd like to turn it over to my colleague, Carlos.

Carlos Whitaker: And with that, I'd like to turn over to my colleague, Carlos. Thanks, Sharon. Sharon, to slide nine. BXSL maintained its dividend distribution of 77 cents per share. As you can see, we have continued to focus on delivering yield to shareholders, building a level of confidence through steady, regular dividends, while also growing in AV per share. We expect this approach to continue, as we believe we are heading into a heightened period for deal activity. For instance, helping to meet this quarter's portfolio growth, we issued $190 million of additional equity under our ATM or at-the-market program discordr at a premium to NAV.

Carlos Whitaker: Thanks, John. Turn to slide nine.

Carlos: Thanks, John . Turn to slide 9.

Carlos: The XSL maintained its dividend distribution of 77 cents per share. As you can see, we have continued to focus on delivering yield to shareholders, building a level of confidence through steady, regular dividends, while also growing NAV per share.

Carlos: We expect this approach to continue as we believe we are heading into a heightened period for deal activity.

Carlos: For instance, helping to meet this quarter's portfolio growth, we issued $190 million of additional equity under our ATM or at-the-market program this quarter at a premium to NAV.

Carlos Whitaker: And we raised a $400 million bond that was swapped to SOFR plus 138, which we observed was well inside the price of new secured debt capacity. As we often discuss, after we make investments, we aim to add value by driving operational improvements and revenue-generating opportunities for our portfolio companies. We have outlined our BXEI value creation program on prior calls. And we believe a partnership with BXEI is valued by private equity sponsors. And with increased competition in the private credit market, we seek to distinguish ourselves by providing more than just capital to our portfolio companies. For instance, Park Place, a name we have discussed in the past, won two new clients through our BXEI's preferred program in the second quarter, resulting in the borrower increasing annual recurring revenue by $1.1 million.

Carlos: And, we raised a $400 million bond that was swapped to SOFR plus 138, which we observed was well inside the price of new secured debt capacity.

Carlos Whitaker: The XSL maintained its dividend distribution of $0.77 per share. As you can see, we have continued to focus on delivering yield to shareholders, building a level of confidence through steady, regular dividends, while also growing NAV per share, as we often discuss after we make investments. We aim to add value by driving operational improvements and revenue-generating opportunities for our portfolio companies. We have outlined our BXVI value creation program on prior calls.

Carlos: As we often discuss after we make investments.

Carlos: We aim to add value by driving operational improvements and revenue generating opportunities for our portfolio companies.

Carlos: We have outlined our BXVI value creation program on prior calls.

Carlos Whitaker: And with increased competition in the private credit market, we seek to distinguish ourselves by providing more than just capital to our portfolio, resulting in the borrower increasing its annual recurring revenue by $1.1 million, which provides borrowers with revenue-generating opportunities. Cost Savings Procurement, and Capabilities, including Cybersecurity and Data Science, all at no additional cost because we understand the potential benefit to both BXCL's and BXSL's investment portfolio and shareholder returns.

Carlos: And we believe a partnership with BXCI is valued by private equity sponsors. And with increased competition in the private credit market, we seek to distinguish ourselves by providing more than just capital to our portfolio companies.

Carlos: For instance, Park Place, a name we have discussed in the past, won two new clients through our BX Preferred program in the second quarter, resulting in the borrower increasing its annual recurring revenue by $1.1 million.

Carlos Whitaker: We also continue to work with Parkplaces business development team on additional opportunities with Blackstone invested companies that have meaningful spend on data centers. As a reminder, BXSL borrowers are offered full access to BXCI's value creation program, which provides borrowers with revenue generating opportunities, cost savings procurement, and capabilities, including cybersecurity and data science, all at no additional cost because we understand the potential benefit to both BXCOs, BXSL's investment portfolio, and shareholder returns.

Speaker Change: We also continue to work with Park Place's business development team on additional opportunities with Blackstone-invested companies that have meaningful spend on data centers.

Speaker Change: As a reminder,

Speaker Change: BXSL borrowers are offered full access to BXCI's value creation program.

Speaker Change: which provides borrowers with revenue-generating opportunities.

Speaker Change: Cost Savings Procurement, and Capabilities, including Cybersecurity and Data Science. All at no additional cost because we understand the potential benefit to both BXCL's, BXSL's investment portfolio and shareholder returns.

Teddy Desloge: And with that, I'll turn it over to Teddy. Thanks, Carlos. I'll start with our operating results on slide 10. In the second quarter, BXSL's net investment income was $173 million, or $0.89 per share. BXSL recorded its highly quarterly gap net income on a dollar basis, and tied its highly quarterly earnings per share since IPO at $196 million and $1.01 per share, respectively, up 12% from a year ago. Total investment income for the quarter was up $37 million or 11% year-rear, driven by increased interest income on primarily due to higher interest rates. As a reminder, we amortize 100% of OID earned over the life of each loan versus taking fees upfront, which we believe leads to greater stability over the long term.

Speaker Change: And with that, I'll turn it over to Teddy.

Teddy: Thanks Carlos. I'll start with our operating results on slide 10.

Teddy: In the second quarter, BXSL's net investment income was $173 million, or $0.89 per share.

Speaker Change: The XSL recorded its highly quarterly GAP net income on a dollar basis and tied its highly quarterly earnings per share since IPO at $196,001.01 per share, respectively, up 12% from a year ago.

Speaker Change: Total investment income for the quarter was up $37 million, or 11% year-over-year, driven by increased interest income primarily due to higher interest rates.

Carlos Whitaker: As a reminder, we amortize 100% of OID earned over the life of each loan versus taking fees upfront, which we believe leads to greater stability over the long term. Interest income, excluding PIC, fees, and dividends, represented nearly 93% of our total investment income in the quarter.

Speaker Change: As a reminder, we amortize 100% of OID earned over the life of each loan versus taking fees up front, which we believe leads to greater stability over the long term. Interest income, excluding PIC, fees, and dividends, represented nearly 93% of our total investment income in the quarter.

Teddy Desloge: Interest income excluding pick fees and dividends represented nearly 93% of our total investment income in the quarter. Turning to our balance sheet on slide 11, we ended the quarter with $11.3 billion of total portfolio investments at fair value, $6.1 billion of outstanding debt, and $5.4 billion of total net assets. Nav per share increased to $27.19, up 1.2% from $26.87 last quarter, driven by excess earnings, stable portfolio fundamentals, and share issuance above nav. This represents the seventh consecutive quarter of NAV per share growth. Moving to slide 12, in addition, we saw the fifth consecutive quarter of commitment growth, as Brad outlined, with BXSL committing to approximately 1.3 billion in the quarter, funding nearly 900 million, and an estimated additional 261 million committed by BXCI and earmarked for BXSL as of June 30.

Carlos Whitaker: Turning to our balance sheet on slide 11, we ended the quarter with $11.3 billion of total portfolio investments at fair value, $6.1 billion of outstanding debt, and $5.4 billion of total net assets. This compares to a weighted average yield at fair value on our debt investments of 11 points. To that end, on the heels of a full-notch upgrade by Fitch to BBB flat in the first quarter, we issued a new $400 million, 3.5-year bond in the second quarter, which priced at 140 basis points over Treasuries and swapped to 138 basis points over SOFR.

Speaker Change: Turning to our balance sheet on slide 11, we ended the quarter with $11.3 billion of total portfolio investments at fair value, $6.1 billion of outstanding debt, and $5.4 billion of total net assets.

Speaker Change: NAV per share increased to $27.19, up 1.2%, up from $26.87 last quarter, driven by excess earnings, stable portfolio fundamentals, and share issuance above NAV.

Speaker Change: This represents the seventh consecutive quarter of NAV4Share growth.

Speaker Change: Moving to slide 12. In addition, we saw the fifth consecutive quarter of commitment growth, as Brad outlined, with BXSL committing to approximately $1.3 billion in the quarter.

Brad Marshall: Funding, nearly $900 million, and an estimated additional $261 million committed by BXCI and earmarked for BXSL as of June 30th. Net funded investment activity in the quarter was $800 million, up over 50% sequentially over the first quarter.

Teddy Desloge: Net funded investment activity in the quarter was 800 million, up over 50% sequentially over the first quarter. Further, despite the spread tightening cycle across fixed income markets so far this year, and an increase in broadly syndicated activity, we continue to experience muted repayment activities Brad outlined. In the second quarter, we saw 89 million of repayments, or 3% annualized repayment rate, bringing our year-to-date repayment rate to 4%, which compares to 10% for all of 2023. In fact, we did not have any exposure refinanced out by the syndicated market in the second quarter. It is also worth noting that in the declining rate environment, one may naturally expect an increase in portfolio turnover, but our portfolio had few realizations in the quarter.

Brad Marshall: Further, despite the spread tightening cycle across fixed income markets so far this year, and an increase in broadly syndicated activity, we continue to experience muted repayment activity as Brad outlined.

Brad Marshall: In the second quarter, we saw $89 million of repayments, or a 3% annualized repayment rate, bringing our year-to-date repayment rate to 4%, which compares to 10% for all of 2023.

Brad Marshall: In fact, we did not have any exposure refinanced out by the syndicated market in the second quarter.

Brad Marshall: It is also worth noting that in a declining rate environment, one may naturally expect an increase in portfolio turnover, but our portfolio had few realizations in the quarter.

Teddy Desloge: Next, slide 13 outlines what we believe to be an attractive and diverse liability profile, which includes 46% of Doron debt in unsecured fixed bonds that are not swapped. Our unsecured fixed rate bonds have a weighted average fixed coupon of just under 3%, which we view as a key advantage in this elevated rate environment and contributed to an overall weighted average interest rate on our borrowings of 5.26%. This compares to a weighted average yield at fair value on our debt investments of 11.6%. As a reminder, we have a 16-person team within our CAO office that focuses on our liabilities and has access to diverse financing sources.

Brad Marshall: Next, slide 13 outlines what we believe to be an attractive and diverse liability profile, which includes 46% of drawn debt in unsecured fixed bonds that are not swapped.

Brad Marshall: Our unsecured fixed rate bonds have a weighted average fixed coupon of just under 3%, which we view as a key advantage in this elevated rate environment, and contributed to an overall weighted average interest rate on our borrowings of 5.26%.

Brad Marshall: This compares to a weighted average yield at fair value on our debt investments of 11.6%.

Brad Marshall: As a reminder, we have a 16-person team within our CIO office that focuses on our liabilities and has access to diverse financing sources. As spreads have tightened across secured and unsecured markets, our team has been focused on driving down financing costs and further improving our balance sheet.

Teddy Desloge: As spreads have tightened across secured and unsecured markets, our team has been focused on driving down financing costs and further improving our balance sheet. To that end, on the heels of a full notch upgrade by Fitch to BBB flat in the first quarter, we issued a new 400 million 3.5-year bond in the second quarter, which priced at 140 basis points over Treasuries and swapped to 138 basis points over SOFA. In addition, post-Q2, we upsized our corporate revolver by 300 million and simultaneously dropped the drawn spread by 22.5 basis points to 152.5 basis points while bringing in our unused fee rate as well.

Speaker Change: To that end, on the heels of a full-notch upgrade by Fitch to BBB flat in the first quarter,

Brad Marshall: We issued a new $400 million, 3.5-year bond in the second quarter.

Brad Marshall: which priced at 140 basis points over Treasuries and swapped to 138 basis points over SOFR.

Carlos Whitaker: In addition, post Q2, we upsized our corporate revolver by 300 million and simultaneously dropped the drawn spread by 22 and a half basis points to 152.5 basis points, while bringing in our unused fee rate as well. We have no maturities on our funded liabilities until 2026. And our debt and funded facilities have an overall weighted average maturity of 2.9. We have positioned our balance sheet with significant excess capacity to support continued pipeline momentum we see through year-end, as rates may begin to fall.

Brad Marshall: In addition, post Q2, we upsized our corporate revolver by $300 million and simultaneously dropped the drawn spread by 22.5 basis points to 152.5 basis points while bringing in our unused fee rate as well.

Teddy Desloge: We have no maturities on our funded liabilities until 2026, and our debt and funded facilities have an overall weighted average maturity of 2.9 years. We continue to explore means of further optimizing our cost capital. Total liquidity at quarter end was 1.2 billion in cash and under on debt available to borrow. And ending leverage as of June 30 was 1.13 turns, up sequentially from 1.03 turns in the first quarter, near the midpoint of our target range of 1 to 1 and a quarter times. We have positioned our balance sheet with significant access capacity to support continued pipeline momentum we see through your end as rates may begin to fall.

Brad Marshall: We have no maturities on our funded liabilities until 2026, and our debt and funded facilities have an overall weighted average maturity of 2.9 years.

Brad Marshall: We continue to explore means of further optimizing our cost of capital.

Brad Marshall: Total liquidity at quarter end was 1.2 billion in cash and undrawn debt available to borrow and ending leverage as of June 30th was 1.13 turns.

Brad Marshall: up sequentially from 1.03 turns in the first quarter, near the midpoint of our target range of 1 to 1.25 times.

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

Carlos Whitaker: In closing, we are moving forward from what we believe is a position of strength, with underlying earnings power, credit performance, and liabilities that distinguish 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 it up for questions. Thank you. Thank you, as are my

Unknown Executive: With that, I'll ask the operator to open it up for questions. Thank you. As a reminder, please press star 1 to ask a question.

Operator: Thank you. As a reminder, please press star 1 to ask a question. We ask that you limit yourself to one question and one follow-up question to allow as many callers to join the queue as possible. We will pause for just a moment to give everyone an opportunity to signal for more questions.

Speaker Change: With that, I'll ask the operator to open it up for questions. Thank you.

Unknown Executive: We ask that you limit yourself to one question and one follow-up question to allow as many callers to join the QS possible. We will pause for just a moment to give everyone an opportunity to signal for questions.

Cindy O'Shae: We'll go first to Cindy and O'Shae with Wells Fargo Securities. Hi, everyone. Good morning.

Brad Marshall: So first question in the wake of the plural site restructuring for a lot of BDCs. I know you're not in there, but we're trying to get a picture of issuers or portfolio companies that would be below interest coverage, but where you have the sponsor putting in money. So, is that, would that be included in your, your below one interest coverage provided metric, or, or otherwise, how prevalent is that set up in the portfolio?

Speaker Change: So first, a question in the...

Speaker Change: So, is that, would that be included in your below one interest coverage provided metric or otherwise, how prevalent is that set up in the portfolio?

Brad Marshall: Hey, fan, it's Brad. So, I'll just give a, I love a comment. Teddy can give the statistics on the portfolio. So, Pluralsight, you're right; we're not in it, so we're not super close to that asset. I will make that comment, though, on the positive, which is, you know, the handover of Pluralsight to its lenders was actually quite orderly, which is one of the advantages of private credit. But if this was in the public markets, I think it would have languished; it would have been stuck in bankruptcy. So it was nice to see kind of the private markets, you know, working fairly well.

Speaker Change: Hey Fan, it's Brad. So I'll just give a high-level comment. Teddy can give the statistics on the portfolio. So plural site, you're right, we're not in it, so we're not.

Speaker Change: super close to that asset. I will make the comment though on the positive, which is, you know, the handover of Pluralsight to its lenders was was actually quite orderly, which is

Teddy Desloge: In terms of kind of overall, you know, credit and coverage, maybe Teddy, you can hit on the kind of what's kind of captured in our statistics. Yeah, I think your question's been directly is percentage exposure below one times coverage, and then specifically what we're seeing in terms of equity investments. You know, Bach went through it, but we had 65 amendments, 95% benign or positive. We had three issuers that had material amendments; those three represented less than 1% of the overall portfolio. You know, generally speaking, in situations that are underperforming, that is our first response: to work, essentially, with the company to see equity come into the structure.

Unknown Executive: Uh, you know credit and coverage. Maybe Teddy, you can hit on the kind of what's kind of captured in our in our statistics. Yeah, I think you're

Teddy: In terms of kind of overall...

Teddy: you know, credit and coverage. Maybe, Teddy, you can hit on the kind of what's kind of captured in our in our statistics. Yeah, I think your question, Finn, directly is a percentage of exposure below one times coverage and then specifically what we're seeing in terms of equity.

Teddy: Investments. You know, Bock went through it, but we had 65 amendments, 95% benign or positive.

Speaker Change: We had three issuers that had material amendments. Those three represented less than 1% of the overall portfolio.

Speaker Change: You know, generally speaking, in situations that are underperforming, that is our

Speaker Change: Our first response is to work consensually with the company to see equity come into the structure. I can't speak specifically to those three companies, but it is something that we do ask in those types of situations.

Teddy Desloge: I can't speak specifically to those three companies, but it is something that we do ask in those types of situations.

Cindy O'Shae: Okay, that's helpful. Thanks.

Brad Marshall: And as a follow-up with the WHCG, it looks like you're joining the partial accrual movement. Can you talk about your policy there and if this will be commonplace going forward? Yeah, I'm happy to start. You know, can't, again, can't speak to that situation specifically, generally speaking. And I think, as you've probably noticed historically, you know, we have input assets on partial non-accrual, unless there's a very clear potential, potential restructuring that reflects that in facts. You know, more to come on that situation in the next quarter. But also say if you're going to make it kind of the reference of, you know, how we think about both non-accruals, et cetera, and, you know, if you start to see assets that have traded clearly below 80 or in some discounted marked territory, you can see that as an indicator of stress, and we outline it.

Speaker Change: Okay that's helpful thanks and as a as a follow-up with

WHCG: WHCG, it looks like you're joining the partial accrual movement. Can you talk about your policy there and if this will be commonplace going forward?

Speaker Change: Yeah, I'm happy to start.

Speaker Change: You know can't again can't speak to that situation specifically Generally speaking and I think as you've probably noticed historically, you know, we haven't put assets on partial non accrual Unless there's a very clear potential potential restructuring that reflects that in facts

Speaker Change: You know, more to come on that situation in the next quarter.

Speaker Change: I'd also say if you're going to make kind of the reference of, you know, how we think about both non-accruals, etc.

Unknown Executive: You know, if you start to see assets that have traded clearly below 80 or in some discounted mark territory, you can see that as an indicator of stress, and we outline that. Maybe perhaps what you don't see here is an asset that is marked close to par that goes on not accruing the next quarter. So I'd say that you'll see the page turn, but also, in terms of that movement, you kind of have to reflect that if we have operating knowledge to have that mark and see where that mark is post-restructuring, that could give you some indication of how we think about it not. So just to put those two comments together.

Speaker Change: You know, if you start to see assets that have traded clearly below 80 or in some discounted mark territory, you can see that as an indicator of stress and we outline it. Maybe perhaps what you don't see here is an asset that is marked close to par that goes on not accrual the next quarter.

Brad Marshall: Maybe perhaps what you don't see here is an asset that is marked close to par that goes on not a cool the next quarter. So I'd say that you'll see the page turn, but also in terms of that movement, you kind of have to reflect that if we have operating knowledge to have that mark and see where that mark is post restructuring that could give you some indication of how we think about non accruals. So just to put those two comments together, Finn, so equity will always trying to negotiate equity come into the businesses. I think in most of our restructuring that has happened. Secondly, marks you'll see a steady decline, and that's probably what analyst and investor should focus on is kind of what marks are, as John said below 80, because that indicates that, you know, there's real headwinds in the business and those will improve or get worse.

Speaker Change: So I'd say that you'll see the page turn, but also in terms of that movement, you kind of have to reflect that if we have operating knowledge to have that mark and see where that mark is post restructuring, that could give you some indication of how we think about nonaccruals.

Speaker Change: So just to put those two comments together, Finn, so equity, we'll always try and negotiate equity to come into the businesses, I think.

Speaker Change: and most of our restructuring that that has happened.

John: Secondly, marks, you'll see a steady decline, and that's probably what analysts and investors should focus on, is kind of what marks are, as John said, below 80, because that indicates that there's real headwinds in the business, and those will improve or get worse.

Brad Marshall: Between quarters and but what's most important is we are if an asset is in that zip code, we are absolutely in front of the sponsor asking for equity. We have a CIO team of 80 people, which I think is bigger than most investment platforms, and all they do is spend time on making sure that we can improve the value of our investment, whether it's to the value added program, which Carlos went to. And through or by being early and proactive in any sort of.

Speaker Change: Between quarters and and but what's most important

Speaker Change: is we are, it's an asset is in that zip code. We are absolutely in front of the sponsor asking for equity.

Speaker Change: We have a CIO team of 80 people, which I think is bigger than most investment platforms. And all they do is spend time on making sure that we can improve the

Speaker Change: The value of our investment, whether it's through the value-added program, which Carlos went through, or by being early and proactive in any sort of restructuring.

Unknown Executive: Henry Stratron.

Robert Dodd: Thanks, everybody. Well, the next two for Dodd with Raymond James. Hi guys, hopefully you can hit on first on the size that you did do. You know, you mentioned you did more market company for smaller companies, $100 million in EBITDA. Didn't used to be no market, no market, anything. But can you give us any color on when you're looking at a smaller "air quotes" company like that? What industries are you more focused on doing that? Because you've talked about bigger is better on size, but also neighborhoods matter, which industries, etc. So you can give us a color on like what industry would you do for say a $250 million EBITDA company, but you wouldn't do for a $100 million EBITDA company?

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

Speaker Change: Thanks, everybody.

Robert Dodd: Hi guys, Hopefully, you can hear me.

Speaker Change: Hold on, next to Robert Dodd with Raymond James.

Robert Dodd: Hi guys, hopefully you can hear. First, on the size that you did do, you know, you mentioned you did more middle market companies or smaller companies.

Robert Dodd: First, on size, you mentioned you did more middle-market companies or smaller companies. A hundred million dollars in EBITDA didn't used to be middle-market or anything. But can you give us any color on when you're looking at a smaller, air quotes, company like that? What industries are you more focused on doing there? Because you've talked about bigger is better in terms of size, but also neighborhoods matter, which industries, et cetera. So can you give us some color on what industry you would do for, say, a $250 million EBITDA company, but you wouldn't do for a $100 million EBITDA company? Any color on how that shifts by size in industry appeal?

Robert Dodd: 100 million dollars in EBITDA didn't used to be normal market, but can you give us any color on when you're looking at a smaller, air quotes, company like that?

Speaker Change: What industries are you more focused on on doing that? Because you've talked about bigger is better on size, but also neighborhoods matter, which industries, etc.

Speaker Change: So you can give us a color on, like, what industry would you do for, say, a $250 million EBITDA company, which you wouldn't do for a $100 million EBITDA company? Any color on, like, how that shifts by size in industry appeal?

Jonathan Bock: Any color on like how that shifts my size in industry appeal? Yeah, thanks, Robert.

Brad Marshall: Yeah, thanks, Robert. Brad, I'll take that one.

Jonathan Bock: Brad, I'll take that one. And again, it's not just sector, but obviously it's capital structure. When we're looking at any deal, it is looking at the senior part of the capital structure, as you're aware. We're looking at the quality of the business, which is, you know, we historically highlight that larger companies tend to be better. Businesses, and then of course we're looking at your pointing out which sectors, which neighborhoods, and we're going maybe it may be a layer deeper than that. We're trying to be in the best blocks and in the best neighborhoods. And so I would say in looking at these 100 million type EBITDA businesses, they're going to be in three primary sectors, where we have our sector teams built out: technology and software.

Brad Marshall: And again, it's not just the sector, but obviously, it's the capital structure. When we're looking at any deal, it is looking at the senior part of the capital structure, as you're aware. We're looking at the quality of the business, which is, you know, we've historically highlighted that larger companies tend to be better businesses, and then, of course, we're looking at, you're pointing out which sectors, which neighborhoods, and we're going maybe a layer deeper than that.

Speaker Change: Yeah, thanks Robert. Brad, I'll take that one. And again, it's not just...

Speaker Change: It's not just sector, but obviously it's capital structure.

Speaker Change: When we're looking at any deal, it is...

Speaker Change: looking at the senior part of the capital structure as you're aware.

Speaker Change: We're looking at the quality of the business, which is, you know, we've historically highlighted that larger companies tend to be better businesses.

Speaker Change: And then, of course, we're looking at, as you're pointing out, which sectors, which neighborhoods.

Brad Marshall: We're trying to be in the best blocks and in the best neighborhoods, and so I would say, in looking at these 100 million-type EBTA businesses, they're going to be in three primary sectors where we have our sector teams built out technology and software, healthcare and life science, and business services. In those areas, we characterize those neighborhoods as being historically low-default sectors. They're good cash flow generators. They tend to outgrow the economy, which in this environment is quite important, so that's what I would say about the kind of where we're investing, and I wouldn't say they're small.

Speaker Change: and we're going maybe a layer deeper than that. We're trying to be in the best blocks and in the best neighborhoods. And so I would say in looking at these hundred million type EVTA businesses, they're going to be in three primary sectors.

Speaker Change: where we have our sector teams built out technology and software, healthcare and life science.

Jonathan Bock: Healthcare and life science and business services. And in those areas, we characterize those neighborhoods as being historically low default sectors; they're good cash flow generators. They tend to grow outgrow the economy, which in this environment is quite important. So that's what I would say about kind of where we're investing, and I wouldn't say they're small; I would say the upper end of the middle market. And then on my last point around capital structure, as we said in our prepared marks, the investments we made in the quarter at 37.9% loaned a value. So the risk profile that where we're setting these companies up is quite low relative to where we invested in some of these larger businesses, which has been more in the mid 40s.

Speaker Change: and Business Services.

Speaker Change: And in those areas, we characterize those neighborhoods as being historically low default sectors, they're good cash flow generators, they tend to

Speaker Change: grow, outgrow the economy, which in this environment is quite important.

Speaker Change: So that's what I would say about kind of where we're investing. And I wouldn't say they're small. I would say the upper end of the middle market.

Brad Marshall: I would say the upper end of the middle market, and then on my last point around capital structure, as we said in our prepared marks, the investments we made in the quarter were at 37.9% loan to value, so the risk profile where we're setting these companies up is quite low relative to where we've invested in some of these larger businesses, which has been more in the mid-40s.

Speaker Change: And then on my last point around capital structure, as we said in our prepared marks,

Speaker Change: The investments we made in the quarter were at 37.9% loan-to-value.

Speaker Change: So, the risk profile where we're setting these companies up is quite low relative to where we've invested in some of these larger businesses, which has been more in the mid-40s.

Robert Dodd: Got it. Thank you. Follow-up. Pluralsight already came up. Finn brought it up. You're not involved. It originated in the second quarter of 21, and you guys were seven billion at AUM back then, and 21 was a really active year.

Robert Dodd: Got it. Thank you.

Robert Dodd: You follow up. You, you, you; it was already came up.

Speaker Change: Got it. Thank you.

Brad Marshall: Finn, Finn brought it up. You're not involved. It was originated in the second quarter of 21, and you guys were 7 billion at EUM back then when 21 was a really active year. So I'm going to, I'm going to assume, and we know what assuming means, that you had the opportunity to, to participate in policy. So can you, can you correct me if I'm wrong? Did you not feel the deal, or did you see the deal and decline to participate? And if you did decline? Any recollection of what the reason was back then? It wasn't that long ago.

Speaker Change: You're not involved. It was originated in the second quarter of 21 and you guys were 7 billion at AUM back then and 21 was a really active year.

Robert Dodd: So I'm going to assume, and we know what assuming means, that you had the opportunity to participate in Pluralsight. So can you correct me if I'm wrong, did you not seal the deal, or did you see the deal and decline to participate? And if you did decline... Any recollection of what the reason was back then? It wasn't that hard.

Speaker Change: I'm going to assume, and we know what assuming means, that you had the opportunity to participate in Pluralsight. So, can you correct me if I'm wrong, did you not feel the deal, or did you see the deal and decline to participate? And if you did decline...

Speaker Change: Any recollection of what the reason was back then? It wasn't that long ago.

Brad Marshall: Yeah, well, we've seen it twice actually, and we passed both times based on, you know, just our own view of the credit was maybe different than others. One of the nice things about our platform is we have 900 technologists across kind of the Blackstone, you know, platform that we can kind of tap into and get very good insights into these, you know, technology businesses, and we do that in every single deal that we're invested in, as well as we use the 50 data scientists that are part of the platform as well. So, and this will happen in many instances where we, you know, we just take a different view than in the market.

Brad Marshall: Yeah, well, we've seen it twice, actually, and we passed both times based on, you know, our own view of the credit.

Speaker Change: Yeah, well, we've seen it twice, actually, and we passed both times based on, you know, just our own view of the credit was

Speaker Change: was maybe different than others.

Speaker Change: One of the nice things about our platform is we have

Speaker Change: 900 technologists across kind of the Blackstone, you know, platform that we can kind of tap into and get very good insights into these, you know, technology businesses. And we do that in every single deal.

Speaker Change: that were invested in, as well as we use the 50 data scientists that are part of the platform as well. So, and this will happen in many instances where, you know, we just take a different view than

Brad Marshall: I'd rather not get into the specific reasons and why we passed on it, but nonetheless, we did see it twice and pass both times.

Speaker Change: in the market. I'd rather not get into the specific reasons and why we passed on it. But nonetheless, we did see it twice and pass both times.

Robert Dodd: Robert, thank you.

Speaker Change: Got it. Thank you.

Paul Johnson: And at this time, we will go next to Paul Johnson, KBW. Yeah, good morning. Thanks for taking my questions here. Just wanted to squeeze in. I just wanted to know about a specific credit in the portfolio and just kind of give your thoughts on, you know, performance, but maybe a little bit of an explanation of what company is. Newbie Bidco, large loan on the portfolio. I believe it's on full pick at this point, but seems to be marked, marked fairly well. Just wondering to get some, you know, ideas on how that company is performing and, and, and that's all.

Speaker Change: And at this time, we will go next to Paul Johnson, KBW.

Paul Johnson: Yeah, good morning. Thanks for taking my questions here. Just wanted to squeeze in.

Paul Johnson: I just wanted to know about a specific credit in the portfolio and just kind of get your thoughts on, you know, performance, but.

Speaker Change: Maybe a little bit of an explanation of what the company is, Snoopy, Bidco.

Speaker Change: Large loan in the portfolio. I believe it's on full pick at this point, but seems to be marked fairly well.

Speaker Change: I'm just wondering to get some, you know, ideas on how that company is performing and and

Brad Marshall: And that's all.

Brad Marshall: Yeah, so, unfortunately, the private company, so we can't say much about the business. The business is a vet care business. We can talk about the mark, which is around 97 and a quarter across the securities, which would reflect that it's. You know, performing, you know, in line with expectations. I think when we did the deal, we were through the senior debt, which were at our investment. We were through 32% loaned of values, so a lot of equity kind of beneath us. And, and the sponsors continue to kind of support that business, and it's generally performing, performing fun.

Brad Marshall: Yeah, so unfortunately, it's a private company, so we can't say much about the business. The business is a vet care business.

Speaker Change: And that's all.

Speaker Change: Yeah, so unfortunately the private company, so we can't say much about the business. The business is a vet care business.

Brad Marshall: We can talk about the mark, which is around 97 and a quarter across the securities, which would reflect that it is performing, you know, in line with expectations. I think when we did the deal, we were through the senior debt, which was, that was our investment; we were through 32% loan to value. So a lot of equity kind of beneath us. And, and the sponsors continue to kind of support that business, and, and, and it's generally performing.

Speaker Change: We can talk about the mark, which is around 97 and a quarter across the securities, which would reflect that it's

Speaker Change: You know, performing, you know, in line with with expectations. I think when we did the deal.

Speaker Change: We were, through the senior debt, which were, that's our investment, we were through 32% loan to value, so a lot of equity kind of beneath us, and the sponsors continue to

Speaker Change: kind of support that business and and it's generally performing performing fine.

Teddy Desloge: Got it.

Brad Marshall: Got it. And would you say is that the majority of pick income in

Teddy Desloge: And would you say is that the majority of the pick income in the portfolio or, you know, are there other. Yeah, I'm happy to take that no real change quarter recorder in terms of pick income. It represents 7% of income. You know 80% of our pick is from the top five assets similar to last quarter. Those, as Brad said, are all performing, all marked above 97, and there were no new pick amendments in the quarter.

Speaker Change: are there other units in the line with that?

Speaker Change: Yeah.

Speaker Change: I'm happy to take that. No real change quarter over quarter in terms of peak income.

Speaker Change: It represents 7% of income, you know, 80%.

Speaker Change: Our pick is from the top five assets, similar to last quarter. Those, as Brad said, are all performing, all marked above 97, and there were no new pick amendments in the quarter.

Paul Johnson: Scott, I appreciate it, and congrats on the good quarter. Thanks, guys.

Robert Dodd: Got it. Appreciate it, and congrats on a good quarter. Thanks guys.

Speaker Change: Got it. Appreciate it, and congrats on the good quarter. Thanks, guys.

Unknown Executive: Thanks, Paul.

Mark Hughes: We'll be next to Mark Hughes with Truist. Yeah, thank you. Good morning. Sorry if I missed this. I joined ladies, but the repayments were pretty low this quarter. Is that just an idiosyncratic quarter? Or is there some broader theme, something about your portfolio? And kind of give any expectations you can share regarding how you expect that to play out?

Brad Marshall: Yeah, thank you. Good morning.

Speaker Change: We'll go next to Mark Hughes with Truist.

Mark Hughes: Yeah, thank you. Good morning.

Mark Hughes: Sorry if I missed this, I joined late, but the repayments were pretty low this quarter. Is that just an idiosyncratic quarter or is there some broader theme, something about your portfolio, and kind of do you have any expectations you can share regarding?

Unknown Executive: How do you expect that to play out?

Teddy Desloge: Yeah, I'm happy to take that. You're right; the annualized repayment rate was 3%, I think lower than we would expect in sort of a normalized M&A environment. I think a couple of things driving that number one, you know, M&A volumes overall have, well, have increased, have are still relatively muted. So we've been driving; we've been driving deployment really through, through a competency around half of what we're deploying or are in the assets where we do have a competency. You know, I think it is possible that we see repayments pick up over time as M&A picks up and as rates come down. But, but for now, you're right, they've remained relatively low.

Speaker Change: How do you expect that to play out?

Speaker Change: Yeah, I'm happy to take that. You're right, annualized repayment rate was 3%, I think lower than we would expect in sort of a normalized M&A.

Speaker Change: environment. I think a couple things driving that, number one

Speaker Change: M&A volumes overall have increased, are still relatively muted, so we've been driving deployment really through incumbency. Around half of what we're deploying are into assets where we do have incumbency.

Speaker Change: I think it is possible that we see repayments pick up over time as M&A picks up and as rates come down, but for now, you're right, they've remained relatively low.

Brad Marshall: Mark and just that that's also a function of an item we mentioned last quarter, which is a proactive view on effective defense. So here in the quarter, we had repricing activity where what we have is a company that's effectively coming close to moving off call protection. And you have the ability to work with a company that you know and do so at a market price, it's well above your current cost capital and end up earning or extending the life of that loan and it's current, and it's current benefit to ROE. So if you look across the board, give or take our focus there in those active defenses, also what will keep assets on the books for longer, allowing us to grow creatively as we all show issue equity and book cost that.

Mark Hughes: Mark, that's also a function of an item we mentioned last quarter, which is a proactive view on effective defense.

Unknown Executive: So here in the quarter, we had repricing activity, where what we have is a company that's effectively coming close to moving off call protection, and you have the ability to work with a company that you know, and do so at a market price that's well above your current cost of capital, and end up earning or extending the life of that loan and its current benefit to ROE. So if you look across the board, give or take, our focus there on those active defenses is also what will keep assets on the books for longer, allowing us to grow accretively as we also issue equity and low-cost debt.

Mark Hughes: So here in the quarter we had repricing activity where what we have is a company that's

Mark Hughes: effectively coming close to moving off call protection, and you have the ability to work with a company that you know, and do so at a market price that's well above your current cost of capital.

Mark Hughes: and end up earning or extending the life of that loan and its current benefit to ROE. So if you look across the

Speaker Change: The board, give or take, our focus there in those active defense is also what will keep assets on the books for longer, allowing us to grow accretively as we also issue equity and low-cost debt.

Brad Marshall: Is that a process becoming a little more competitive, the repricing, is there a more negotiation around spreads as others maybe as the company's maybe checking the current market dynamic. It's all a market dynamic, right? And clearly, in an environment where you have a good amount of capital looking at a finite amount of deals, that's simply a market. And I know phenomenon overall, it's around, if you look at some of the reprises, this course about 70-ish basis points of, we'll call it tightening, if you will, which is in line with where we started to see kind of market trends move overall.

Speaker Change: Is that process becoming a little more competitive, the repricing? Is there more negotiation around spreads, as the companies may be checking the current market dynamic?

Speaker Change: 70-ish basis points of, we'll call it tightening if you will, which is in line with where we started to see kind of market trends move to move overall. But I'd say...

Brad Marshall: But I'd say and clear to my colleagues here, but it does find itself kind of just natural as it relates to where the probably syndicated loan market is today, and that perhaps can change with current volatility. Mark, we have call protection in these deals, so it gives us a lot of leverage. And certainly, as repayments, as the market gets more active, you'll probably see more repayments, and that will either give us the opportunity to stay with you. The credit or take our call protection and accelerated see income to help drive earnings. So for us, it's a little bit of a win-win. Investors either in a more active environment will get more fee income, or we get to kind of hold on to our better assets.

Unknown Executive: So, Mark, we have call protection in these deals, so it gives us a lot of leverage, and certainly as repayment... As the market gets more active, you'll probably see more repayments, and that will either give us the opportunity to stay with the credit or take our call protection and accelerated fee income to help drive earnings. So for us, it's a little bit of a win-win. Investors either in a more active environment will get more fee income, or we get to kind of hold on to our better assets at market prices.

Unknown Executive: Fred.

Unknown Executive: I'm good. Thank you.

Kenneth Lee: We'll go next to Kenneth Lee with RBC Capital Markets. Hey, good morning. Thanks for taking my question. And I just been jumping around from call to call. So Paul, just if this was covered already, but could you go over some of the key drivers for the unrealized games that were reported in the quarter? Thanks.

Unknown Executive: We'll go next to Kenneth Lee with RBC Capital Markets.

Kenneth Lee: I will go over some of the key drivers for the unrealized gains that were reported in the quarter.

Speaker Change: Could you go over some of the key drivers for the unrealized gains that we're reporting in the quarter? Thanks.

Paul Johnson: Yeah, I'm happy to take that. We did have, we did have unrealized gains of 23 million in the quarter. You know, I wouldn't a few few markups and a couple markdowns. I wouldn't necessarily say there's anything notable. We did see spreads come in a little bit in the quarter, which helps drive marks overall, given what we're seeing in the markup in the market. But nothing really to call out here. Gotcha.

Speaker Change: Yeah, I'm happy to take that. We did have we did have unrealized gains.

Teddy Desloge: And then one fault, but if I made in terms of recent deal activity, you talked about some of the spreads that you're seeing, but just wondering in terms of terms and documentation, what are you seeing in terms of some of the more recent activity, any timing or changes to that? Thanks. Yeah, I would say no specific trends. There's, I would say, on the back of Claral site, you know, the provision in the documents that allowed the sponsor to move around kind of assets. That's actually being tightened up. So, you know, lenders have pointed at as a weakness in documents and for new deals have tightened up that, you know, that loophole.

Speaker Change: Gotcha. And then one follow-up, if I may, in terms of recent deal activity, you talked about some of the spreads that you're seeing, but just wondering, in terms of terms and documentation,

Kenneth Lee: What are you seeing in terms of some of the more recent activity? Any tightening or changes there? Thanks.

Unknown Executive: Yeah, I would say no specific trends. There's, I would say on the back of Pluralsight, you know, the loophole. I would say in the, you know, the middle market, documents tend to be a little bit tighter than the large end of the market, which competes with the, you know, the syndicated market. And so, for us, during the quarter, documents are actually pretty good. But, you know, anytime you see a very active liquid market, you tend to see, you know, some provisions get tested in the market.

Speaker Change: move around kind of assets, that's actually been tightened up. So, you know, lenders have pointed to that as a weakness in documents and for new deals have tightened up that.

Teddy Desloge: I would say in the, you know, the middle market, documents tend to be a little bit tighter than the large end of the market, which competes with the, you know, the syndicated market. And so, you know, for us during the quarter, you know, documents are actually pretty good. But, you know, anytime you see a very active liquid market, you tend to see, you know, some provisions get tested in the market. And you saw some of that earlier on the quarter. Now, the liquid markets are showing a little bit of volatility right now. So, that is kind of, you know, that's changing a little bit right now.

Speaker Change: you know that loophole.

Speaker Change: I would say, in the middle market,

Speaker Change: Documents tend to be a little bit tighter than the large end of the market which competes with the

Speaker Change: You know, the syndicated market, and so, you know, for us during the quarter, you know, documents are actually pretty good, but, you know, anytime you see a very active liquid market, you tend to see, you know, some provisions get tested.

Unknown Executive: And you saw some of that earlier in the quarter. Now, the liquid markets are showing a little bit of volatility right now. So that is kind of, you know, that's changing a little bit right now, but we'll see how it develops over the course of the year.

Kenneth Lee: But we'll see how it develops over the course of the year. Gotcha. Very helpful there. Thanks again.

Stacy Wang: And at this time, I'll turn the call back to Stacy Wang for closing comments. Thank you, everyone, for joining our call today. We look forward to speak to you next quarter. Thanks, everyone. Goodbye.

Ken: Thanks, Ken.

Ken: And at this time, I'll turn the call back to Stacy Wang for closing comments.