Q4 2024 Blackstone Secured Lending Fund Earnings Call
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Speaker Change: Good day, and welcome to the Blackstone secured lending fourth quarter and full year 'twenty 'twenty four investor call. Today's call is being recorded at this time all participants are in a listen only mode.
Speaker Change: If you require operator assistance at any time. Please press star Zero, if you would 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'd like to turn the conference over to Justin <unk>.
Justin: Principal for Blackstone credit and insurance. Please go ahead.
Speaker Change: Thank you good morning, and welcome to Blackstone secured lending funds fourth quarter Conference call. Joining me today are Brad Marshall Co Chief Executive Officer, Jonathan Bock Co Chief Executive Officer, Carlos Whitaker President <unk>.
Justin: <unk>, Chief Financial Officer, and other members of the management team.
Justin: Earlier today, we issued a press release with a presentation of our results and filed our 10-K, both of which are available on the shareholder resources section of our website www dot be access L Dot com.
Justin: We will be referring to that presentation throughout today's call.
Justin: I'd like to remind you that this call may include forward looking statements, which are uncertain and 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 Form 10-K.
Justin: Filed earlier today. This audiocast is copyrighted material Blackstone and may not be duplicated without consent with that I'll turn the call over to Brad Marshall.
Brad Marshall: Thank you Justin and good morning, everyone. Thanks for joining our call.
Brad Marshall: Before we dive into details with John Carlos and Petty I will begin with a few high level comments on the fourth quarter results and our view on the current market environment.
Brad Marshall: Turning to slide four <unk> reported another strong quarter highlighted by its record total investment income increased net asset value newly issued liabilities at market tight levels compared to our traded BDC peers continued solid credit performance and active deployment looking.
Brad Marshall: Looking at each of these in detail our net investment income or NII of <unk> 84 per share. This quarter represented a 12, 3% annualized return on equity.
Brad Marshall: It is made up overwhelmingly from contractual income rather than one time fees or dividend income.
Brad Marshall: Net asset value per share increased for the ninth consecutive quarter by 12 to $27 39.
Brad Marshall: With regard to our liabilities, we issued nearly $1 $2 billion of new debt through close at a weighted average spread of 154 basis points over sofa and.
Brad Marshall: Bonds, which we swapped into a weighted average spread of 154 basis points over silver all at market tight spreads compared to traded BDC peers.
Brad Marshall: Well also upsizing, our revolving lines of credit by an aggregate amount of 850 million a portion of which had a reduced spread.
Brad Marshall: Our liability stack continues to be diverse with floating rate component, allowing us to be held help offset reduce base rates on the asset side this quarter.
Brad Marshall: On expenses the excess al has among the lowest management fee lowest G&A costs as a percentage of NAV across our traded BDC peers.
Brad Marshall: Which allows us to focus on high quality assets and.
Brad Marshall: And lastly, credit quality remains strong with 0.3% of investments on non accrual at cost and 0.2% at fair market value well below the average of our traded BDC peers of two 6% and one 2% respectively in the third quarter.
Brad Marshall: All of these are related one our low cost structure and low cost of capital relative to the traded BDC peers.
Brad Marshall: How's us to bias our portfolio towards what we believe are higher quality better borrowers while still delivering what we believe is an attractive return on equity with a leading regular dividend compared to our traded BDC peers.
Brad Marshall: To our high quality focus has delivered NAV stability and strong credit performance since inception.
Brad Marshall: And three attractive performance above our cost of capital leads to a premium valuation, which further lowers our cost of capital.
Brad Marshall: As we discussed last quarter, we positioned <unk> for an anticipated ramp up in deal activity throughout 2024, and we saw that quarter over quarter.
Brad Marshall: In the fourth quarter, we had $1 2 billion of investment and commitment our fifth consecutive quarter of 1 billion plus and commitments. We also had nearly $1 4 billion in new investment fundings, most active quarter since 2021.
Brad Marshall: And we continue to lend to what we believe are high quality bores as demonstrated in the fourth quarter at an average loan to value near the mid thirties at yields ranging between 8% to 10% and at a three year all in spread above.
Brad Marshall: 520 basis points.
Brad Marshall: This is the hallmark of <unk> cel company that taps into the scale Blackstone's resources relationships and.
Brad Marshall: And reach to deliver a diverse portfolio of assets for our investors at competitive returns compared to our traded BDC peers at times, we may elect to invest in larger credits at tighter spreads and at other times, we may see attractive deals in the historically good neighborhoods with greatest spread to LTV ratios in the middle market.
Brad Marshall: Our scale allows us to play up and down market, which we believe makes us a valuable counterparties the client and portfolio companies we serve.
Speaker Change: Looking forward for <unk> cel.
Speaker Change: The M&A outlook is positive and suggest a recovering from historical lows as the cost of capital improves in the U S administration adopt policies that are potentially pro growth and pro deregulation.
Speaker Change: Private credit market as a major tailwind tied to a significant dry powder that exists with private equity sponsors.
Speaker Change: And while spreads have tightened both the quality of companies in the capital structure is financed by private credit today continue to improve.
Speaker Change: We believe this lays the foundation for an active 2025 and.
Speaker Change: And we are excited to see what is to come for our fund and for our investors this year.
Speaker Change: With that I will pass over to my colleague John.
John Carlos: Thank you, Brad and let's turn to slide six we ended the quarter with $13 $1 billion in investments at fair value over a 9% increase from the $12 billion in Q3, and that's why we're adding 28, new borrowers to our portfolio now totaling over 276 companies.
Speaker Change: Ending leverage and average leverage ticked up slightly compared to our prior quarter at $1, One seven times and 1.15 times, respectively remaining towards the middle of our target range of one to one five times, we increased our liquidity position to two $4 billion comprised of cash and available borrowing capacity across our revolve.
Speaker Change: The credit facilities, including ABL and Thats to lead into an expanded pipeline now for context last quarter, our liquidity position stood at $1 1 billion. Another testament to our deal flow expectations for 2025.
Speaker Change: Our weighted average yield on performing debt investments at fair value was 10, 4% this quarter and compared to 11, 2% last quarter the yields on new debt investment fundings in asset sold and repaid during the quarter averaged nine 6% and 11, 1% respectively.
Speaker Change: Take a look at the portfolio on slide seven.
Speaker Change: 98% of <unk> 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 structure as demonstrated by an average loan to value of 46%.
Speaker Change: Our portfolio also has what we believe to be a strong LTM EBITDA base, averaging $198 million, increasing over 3% from last year.
Speaker Change: Three times larger than that of the companies in the Lincoln International private market database now, although we evaluated opportunities across the size spectrum as evidenced by our investments. This year. We've seen continued strength in performance have come from larger companies, let's say bed rock of our portfolio relative to smaller EBITA counter.
Speaker Change: Parts in terms of higher growth and lower defaults.
Speaker Change: <unk> portfolio company to see growth rates in line or higher with the broader private credit market database as measured by Lincoln and over 20% more profitability on the LTM EBITDA margin basis.
Speaker Change: Speaking to the portfolio performance, it's not only strengths that matters, but consistency.
Speaker Change: Our funds' performance and portfolio company selection, both speak volumes to the consistency of our investment process and the talent of our people. Most importantly, we believe we have demonstrated a commitment to our foundational disciplined strategy. When we launched <unk> in 2018, our focus on <unk>.
Speaker Change: First lien senior secured debt and lowered default rate industries is what we view as a very defensive place our investors and this is further evidenced by our low non accrual rate of 0.3% at cost compared to our traded BDC peer average of two 6% from last quarter, we continue to emphasize the.
Speaker Change: Importance of interest coverage.
Speaker Change: <unk> EBITDA coverage based on average LTM EBITDA for BSL portfolio companies over the last 12 months was one seven times in Q4, which again.
Speaker Change: Compares favorably to the Lincoln database for the broader private credit market at one five times average coverage in Q4 looking at the share of the portfolio below one times interest coverage, excluding revenue recurring revenue loans <unk> is at 9% of fair value versus the Lincoln private credit market.
Speaker Change: At 15%.
Speaker Change: Turning to new investments, 93% of the new private debt investments during the quarter were first lien senior secured positions with average ltvs below 40%, meaning there are significant amounts of junior capital beneath our launch and I'll conclude with some points on our documents and recent amendment activity as a reminder, when we knew.
Speaker Change: She and her credit agreements, especially as the leading lender we remain highly focused on control and lender protections.
Speaker Change: Amendment activity this quarter was down 19% quarter over quarter by count with 39 of Bx yourselves private borrowers amending documents in Q4, nearly all of these amendments by position side were associated with add on M&A <unk> extension immaterial technical matters or changes to terms besides.
Speaker Change: These amendments only one amendment accounting for fewer than 30 basis points of the portfolio was associated with an underperforming investments marked below 90 and featured additional document tightening.
Speaker Change: Long with incremental economics, and with that I'd like to turn it to my colleague Carlos.
Carlos Whitaker: Thanks, John turning to slide nine.
<unk> maintained its dividend distribution of <unk> 77 per share.
Carlos Whitaker: You can see we remain focused on delivering high quality yield to shareholders through steady well covered regular dividends and we expect this approach to continue.
Carlos Whitaker: As mentioned last quarter, we continue to be optimistic about future potential M&A volumes and the deployment picture for 2025.
Carlos Whitaker: Earlier, we detailed the scale of our credit platform demonstrated our level of new investment fundings in Q4.
Carlos Whitaker: We can be selective with our borrowers and provide solutions, which we believe few managers are capable of offering.
Carlos Whitaker: Example, <unk>.
Speaker Change: Cai, let a $2 billion debt financing for Dropbox, a publicly traded leading content management and collaboration platform.
Speaker Change: Business has a sticky and large customer base and generate significant free cash flow characteristics.
Speaker Change: Characteristics, we seek in our lending prospects, we closed the transaction with an implied loan to value ratio of under 30%, providing us with sizable equity cushion.
Speaker Change: Given dropbox as large market capitalization and access to broad ranges of financing options. We believe the company chose to partner with Blackstone because of our ability to provide a large scale customized financing solution with price certainty.
Speaker Change: Speed.
That said, we also see opportunities across the middle market to large cap segments of the market due to our broad reach of our platform and investment team.
Speaker Change: For instance, we let a financing for our consumer services business with $100 million of EBITDA.
Speaker Change: Owned by a middle market sponsor.
Speaker Change: The company is seeing sustained growth in a fragmented market and benefit from a premium customer base and recurring services attributes, we generally look for and services focused business models.
Speaker Change: The deeper the median EBITDA of our new investments was $138 million.
Speaker Change: Compared to the $198 million weighted.
Speaker Change: Weighted average EBITDA for companies in the private portfolio.
Speaker Change: Again, we look for investment opportunities and what we believe are high quality transactions at lower loan to values and attractive risk adjusted returns across the size spectrum with our broad reach across the middle market to large cap space and with that I'll turn it over.
Carlos Whitaker: Thanks Carlos.
Carlos Whitaker: I'll start with our operating results on slide 10.
Carlos Whitaker: In the fourth quarter <unk> net investment income was $183 million or <unk> 84 per share in dollar terms up over 6% year over year and the second highest dollar amount and since inception.
Carlos Whitaker: Total investment income for the quarter a record for the fund was up $49 million or 16% year over year driven by increased interest income as a reminder, we amortized 100% of OID earned over the life of each loan versus taking fees upfront, which we believe provides for greater stability over the longer term.
Carlos Whitaker: Income excluding payment in kind fees and dividends represented over 94% of total investment income in the quarter.
Carlos Whitaker: Moving to our balance sheet on slide 11, we ended the quarter with over $13 billion of total portfolio investments at fair value nearly $7 1 billion of outstanding debt and over 6 billion of total net asset value noted total net assets.
Carlos Whitaker: NAV per share increased to $27 39 up.
Carlos Whitaker: 0.4% up from $27 27 last quarter, driven primarily by stable fundamentals across the majority of our portfolio excess earnings and share issuance above NAV.
Carlos Whitaker: Moving to slide 12. In addition, we saw the most active quarter since 2021 on a deployment basis as Brian outlined Bx is self funding approximately $1 4 billion in the quarter committing over $1 2 billion and an estimated additional $162 million committed by Bx Gi and earmarked for.
Carlos Whitaker: <unk> as of December 31.
Carlos Whitaker: Net funded investment activity in the quarter was approximately $1 2 billion up over 230% year over year.
Carlos Whitaker: Notably, we saw a $198 million of repayments in the quarter with a 2020 for repayment rate of 6% of the portfolio at fair value compared to 10% for 2023 and as we look forward, we expect portfolio turnover to increase with M&A volumes and a more active capital markets environment.
Carlos Whitaker: Next slide 13 outlines our attractive and diverse liability profile, which includes 39% of drawn debt and unsecured bonds that are not swaps. These unsecured bonds have a weighted average fixed coupon of less than 3%, which we view as a key advantage in an elevated rate environment and contributed to an overall weighted.
Carlos Whitaker: Average interest rate on our borrowings of $5, 107% down from 545% last quarter.
Carlos Whitaker: This also compares to a weighted average yield at fair value on our performing debt investments of 10, 4%.
Carlos Whitaker: While we've maintained our three investment grade corporate credit ratings. This quarter. It is important to remember we earned a full notch upgrades from both Moody's and Fitch in 2024.
Carlos Whitaker: In Q4, we also became one of three Bdcs with a <unk> rating two of which are managed by Blackstone, providing a testament to our disciplined approach to portfolio construction defensive positioning and conservative liability structure.
Carlos Whitaker: We have no maturities on our funded liabilities until 2026, and our debt and funding facilities have an overall weighted average maturity of three seven years.
Carlos Whitaker: Further we continued to optimize our cost of capital.
Carlos Whitaker: In October we issued a $400 million three three and a half year bond, which priced at a 535% coupon or 163 basis points over the relevant benchmark treasury rates.
Carlos Whitaker: With strong demand post issuance, we were able to tap the market again in December growing the quantum by 300 million at 125 basis points over the relevant benchmark Treasury rates. This was the tightest spread BDC bond issued in 2024.
Carlos Whitaker: Additionally, <unk> inaugural $458 million CLO priced in November at Sofa, plus $1 54 through 61% loan to value, including the senior notes portion pricing. It so for plus 155, the tightest spread on senior most notes of any middle market private credit.
Carlos Whitaker: So among the 200 plus plus issued since 2021.
Carlos Whitaker: To conclude total liquidity at quarter end was $2 4 billion in cash and undrawn debt available to borrow while ending leverage as of December 31 was one one turns slightly up from $1. One two turns in the third quarter near the midpoint of our target range of one to one and a quarter times.
We believe we have positioned our balance sheet with significant capacity to support increasing activity through end of the year should M&A volumes continue to rebound.
Carlos Whitaker: And with that I'll ask the operator to open it up for questions. Thank you.
Carlos Whitaker: Thank you as a reminder, please press star one to ask a question.
Speaker Change: We ask that you limit yourself to one question and one follow up to allow as many callers to join the queue as possible.
Speaker Change: Take our first question from Casey Alexander with Compass point.
Casey Alexander: Hi, good morning.
Speaker Change: Just kind of curious I mean, such a strong.
Speaker Change: Quarter for new originations.
Speaker Change: And what we've been hearing from other platforms is that the deal activity Hasnt really picked up yet so I'm kind of curious out of the.
Speaker Change: One 4 billion in new originations kind of how would you characterize what percentage of that is sort of incumbent or is born out of the existing Blackstone universe, our ecosystem as compared to <unk>.
Speaker Change: Sort of new merchandise that came in the door.
Casey Alexander: Thanks, Casey good question.
Casey Alexander: So what I would say and I'm glad you asked the question because I think this is.
Casey Alexander: Our superpower.
Casey Alexander: If we had one which is our ability to originate.
Casey Alexander: During market.
Casey Alexander: During periods when the market is slow from new M&A standpoint.
Casey Alexander: And where we go find those deals.
Casey Alexander: Is really kind of having the team play the role of banker with a balance sheet. They go and created the idea they approached the company.
Casey Alexander: <unk> approached the sponsor.
Casey Alexander: And and because we can show up with $1 billion $2 $3.500 billion.
Casey Alexander: We can go and create deal flow when the market doesn't provide it.
Casey Alexander: To answer your question over half our deals in the fourth quarter.
Casey Alexander: Fell into that category, where.
We were in a situation, where we had some incumbency where the deal team noticed something in the market.
Casey Alexander: And approached company proactively typically this will be in our power alleys, which isn't tack in software healthcare and life science and business services.
Casey Alexander: But it does kind of showcase.
Casey Alexander: The power of the platform and where scale can be a true advantage, where you can originate and slower periods.
Casey Alexander: I will say.
Casey Alexander: The start of the year is off to the the slowest start that we've seen since 2003, just from a new M&A standpoint.
Casey Alexander: So youll, probably hear next quarter from a lot of managers that.
Casey Alexander: Deployment is pretty slow.
Casey Alexander: And we continue to be aware of that and find opportunities where we can.
Casey Alexander: Alright. Thank you that's my only question I appreciate it.
Okay.
Speaker Change: We will take our next question from Melissa Wedel with JP Morgan.
Melissa Wedel: Good morning, Thanks for taking my questions.
Kevin: Kevin the usually high level of activity.
Speaker Change: Let's say you maybe on mute.
Speaker Change: So operator, maybe we'll just go to the next question and then come back to Melissa.
Operator: We'll go next to Kenneth Lee with RBC capital markets.
Hey, good morning, Thanks for taking my question.
Operator: Just one on <unk>.
Operator: I think of his prepared remarks.
Speaker Change: You alluded to the new investments having.
Speaker Change: The portfolio company, having lower average ebitdas than the rest of the portfolio and I think there is also discussion about looking more towards the core middle markets.
Speaker Change: Just curious whether going forward.
Speaker Change: You could see a little bit more of a lean towards the core middle market segment, there and if so could you just remind us broadly of the capabilities of the blocks of credit platform.
Speaker Change: That's available to pursue such opportunities. Thanks.
Speaker Change: Yes, Im happy to take that thanks Curt.
Speaker Change: So just starting on some of the facts so our media media EBITDA in the quarter for for new deals funded was about $138 million.
Speaker Change: I think what Youre seeing is really the benefit of our nor are enormous origination effort. We have over 280 investment thresholds in our sub <unk> business, we have portfolio companies that we financed in the quarter ranging from 20 $25 million of EBITDA to $1 billion on the high end.
Speaker Change: So we're really seeing the full the full market landscape.
Speaker Change: As the as the syndicated market has come back we have seen a little bit better relative value in that core middle market. We have significant presence there and we've been able to take advantage of that in the last quarter, where spreads were a little bit better.
Speaker Change: Got you. Thank you very much there and then just one quick follow up if I may just want to.
Speaker Change: To see if you could probably a little bit more color in terms of what youre seeing across new investment spreads.
Speaker Change: Whether you're seeing a little bit more stabilization, there and then any kind of outlook.
Speaker Change: Going forward. Thanks.
Speaker Change: Yes, maybe I'll start and Terry can backfill so spreads over the course of last year It came down.
Speaker Change: Clearly driven by the just the broader market spread tightening across all fixed income.
Speaker Change: As you know we are a big public loan investor and.
Speaker Change: And we saw actually the AAA liability in Cielo has tightened by.
Speaker Change: Over 100 basis points from their peak in that that really drove it.
Speaker Change: Leveraged loan asset spreads tighter in combination with the market outlook is still quite positive.
Speaker Change: Fault rates are modest.
Speaker Change: And then supply and demand is a little bit light so spread tightening across the board private credit wasn't spared from that I would say the good news and then I'll answer your question the good news.
Speaker Change: Is that liabilities actually came in probably more than in the assets.
Speaker Change: So the net interest.
Speaker Change: Between the assets and liabilities actually pretty steady from the fourth quarter of 2024 and fourth quarter of 2023. So that's interesting that was about 300, and just shy of 350 basis points.
Speaker Change: And then obviously our cost of capital a lot lower than others, which helps but.
Speaker Change: But I would expect spreads.
Speaker Change: To be stable from here.
Speaker Change: With a chance that in the near near term they could tighten and then the medium term actually think they widened.
Speaker Change: I still think we're going to see a pretty meaningful pickup in M&A activity.
Speaker Change: Starting towards the end of the second quarter I think right now we're in a little bit of a lull.
Speaker Change: Because there is a lot of market uncertainty around tariffs and policy changes and that's pushed out some of the expected M&A activity, but it is coming and it's going to come.
Speaker Change: <unk>.
Speaker Change: I think very actively through.
Speaker Change: Through the balance of the year.
Speaker Change: Yes, the only thing I would mention there is if you look at our investment activity.
Speaker Change: We funded $1 2 billion, our weighted average spread on deals funded was sofa plus 510 with a point upfront OID.
Speaker Change: The three year implied spread on that discount margin is isn't that so for $5 50 context. If you look at the variance there were.
Speaker Change: Yes, a couple of deals in the four hundreds, but but the variance is really sort of $4 50 for the highest quality of up to $5 50.
Speaker Change: Wider range.
Speaker Change: Great very helpful. There. Thanks again.
Speaker Change: Thank you we'll go next to Sean Paul Adams with Raymond James.
Speaker Change: Hey, guys good morning.
Speaker Change: Obviously, you guys have a stellar credit track record however, while the industry portfolio is largely defensive or unaffected by potential tariff impacts with an overweight being in software.
Speaker Change: Has there been any portfolio review to examine PX yourselves.
Speaker Change: <unk> portfolio exposure to upcoming tariffs impacts.
Speaker Change: Yes, Thanks, Sean I'm happy to take that this is study we've done a ton of work on this I.
Speaker Change: I think overall our view is continues to be a moving target right very hard to pin down, but as we take a step back the exporting of digital and physical goods into the U S. Not just into the U S. Not a significant part of our portfolio, we looked at areas, where cogs and input costs and volumes could both be under pressure from higher tariffs.
Speaker Change: From key regions in particular, Mexico, China, and Canada overall, I think if we're going to put numbers doing it's kind of mid single digits type exposure, but very hard to indicate sort of.
Speaker Change: Handicap, what the impacts would be.
Speaker Change: So something we are still watching very focused on it it certainly comes in up.
Speaker Change: Regularly in new investment committees on assets for instance, <unk>.
Speaker Change: History is like consumer goods, where we were already deemphasizing exposure I think we're even more cautious today.
Speaker Change: Excellent answer thank you.
Speaker Change: Thank you as a reminder, star one for questions well go next to Finian O'shea with Wells Fargo Securities.
Speaker Change: Yes.
Speaker Change: Hey, everyone. Good morning.
Speaker Change: I wanted to ask about the.
Speaker Change: Marked on medallion.
Speaker Change: Sort of just.
Speaker Change: Mid ninety's, but inching down.
Speaker Change: I'm trying to get a feel of what that implies if we should expect that to.
Speaker Change: <unk>.
Speaker Change: Continue to play out to the extent, it's on on trailing performance.
Speaker Change: If youre able to provide color like sort of what that.
Speaker Change: Often we will hear at 90 fives means something like 30% under EBITDA trajectory performance. If you could give us color on that handle that'd be great. Thank you.
Speaker Change: Yeah.
Speaker Change: Thanks, Ken.
Speaker Change: Yes, I'll give you a little bit of insight that we unfortunately don't comment a lot on specific assets because they're there.
Speaker Change: There are private companies, but we clearly understand.
Speaker Change: The sensitivity for investors, given what happened with thermal sight.
Speaker Change: So what I would say with with medallion.
Speaker Change: Around 30% comment the company is actually growing EBITDA.
Speaker Change: EBITDA has tripled.
Speaker Change: Since we made the investment, but it is just being a little bit slower to grow into its capital structure than we would like so that the mark reflects.
Speaker Change: That that challenge.
Speaker Change: But the product is still very high quality wood, you're seeing a little bit of pricing.
Speaker Change: Pressure, which is slowing.
Speaker Change: Yes.
Speaker Change: Our expected kind of growth.
Speaker Change: But again its EBITDA.
Speaker Change: <unk> grown meaningfully since we did the deal.
Speaker Change: I will say what this deal.
Speaker Change: Glad you brought it up because it highlights a couple of things one.
Speaker Change: Being in control of the dialogue with the sponsor when a company is.
Speaker Change: And in this situation is really important.
Speaker Change: And why it's why we like to lead our deals and control them.
Speaker Change: Focusing on dock quality is paramount for us as you know.
Speaker Change: Where I think some of the other situations that have gotten in trouble may have had issues with their docs.
Speaker Change: 100% of our deals are nearly a 100% of asset stripping protection. So these are things that we spend a lot of time on.
Speaker Change: For these exact reasons.
Speaker Change: And then lastly.
Speaker Change: And this again as I said, we had a superpower before maybe this or other superpower.
Speaker Change: But we are able to play a more active role with companies.
Speaker Change: And with medallion, we're figuring out how to cross sell their products across the Blackstone.
Ecosystem, which hopefully can drive some value as.
Speaker Change: As the company continues to accelerate growth so.
Speaker Change: I threw a lot out there.
Speaker Change: I think the Mark reflects kind of.
Speaker Change: A little bit of that.
Speaker Change: The growth is below our plan, but EBITDA is growing nicely.
Speaker Change: Okay.
Speaker Change: Super helpful really appreciate that.
Speaker Change: It's just a small follow up.
Speaker Change: I wanted to revisit.
Speaker Change: The prior question on spread related headwinds.
Speaker Change:
Speaker Change: I think you said the academy.
Speaker Change: The new spreads are in the fives low fives.
Speaker Change: Average that looks like this quarter.
Speaker Change: Just to verify that did you indicate that that.
Speaker Change: Just understanding this quarters.
Speaker Change: Paper was one two quarters ago, so committed originated.
Speaker Change:
Speaker Change: Is that consistent with what youre doing today.
Speaker Change: Or should one quarter spreads skew more toward that.
Speaker Change: The low end of the range the sort of $4 50.
Speaker Change: I think youre asking on a go forward basis I think spreads are.
Speaker Change: In range with historical.
Speaker Change: Our last quarter I think to answer your question.
Speaker Change: It's always a hard question to answer, though Ben because everyone always asks about spreads and no one ever talks about risk.
Speaker Change: For example, Dropbox that we just did was less than 30% loan to value and I think the spread on that is $4 90.
Speaker Change: Close to close to 500.
Speaker Change: So you really got to put spread risk in context spread.
Speaker Change: Implore, everyone to focus on this the market Super efficient. So I think the winners as it relates to the BDC model are those that can minimize.
Speaker Change: Credit issues.
Speaker Change: Those that can drive down their cost of capital across all fronts, whether that's their fees, whether it's leverage facilities.
Speaker Change: And maintain kind of NAV stability.
Speaker Change: In a market where.
Speaker Change: In the moment spreads are a little bit tighter. So I think it's really important to focus on risk when we talk about spreads.
Speaker Change: And just I guess.
Speaker Change: A follow up there on.
Speaker Change: On the market like Theres a lot were.
Speaker Change: Being raised out there.
Speaker Change: Other like like lower fee formats, the non traded Bdcs.
Speaker Change:
Speaker Change: Maybe institutional.
Speaker Change: Certainly industry wide, there's a lot still coming in like the direct lending premium sort of gets washed out in the public BDC.
Speaker Change: But a lot of this stuff could be very attractive and say a non traded and all these non traded or are way under levered, they're raising a lot of money every day.
Speaker Change: Sure.
Speaker Change: What's your sort of feel of maybe when when the dam breaks.
Speaker Change: The new money sort of floor goes.
Speaker Change: So for 400 or 375 or.
Speaker Change: How long can it be before we get there.
Speaker Change: If you have any.
Speaker Change: Crystal ball view on that thanks.
Speaker Change: Yeah.
Speaker Change: I don't have a crystal ball I will say cents.
Speaker Change: Market.
Speaker Change: In leveraged finance and the U S is a six trillion dollar market private credit is probably about.
Speaker Change: Two trillion.
Speaker Change: The real economy is probably something closer to 30 trillion, so the white space for private credit.
Speaker Change: Is enormous which is why.
Speaker Change: As more capital being raised for the space. The reason performance has been strong which is why there's investors that are attracted to it. So I don't have a crystal ball and where spreads go I guess, if the public markets went to a.
Speaker Change: So for a plus 100.
Speaker Change: Spread environment, and yes, you could see spreads in private credit.
Speaker Change: Heightened in line with the public markets, but I do think one thing is for certain.
Speaker Change: Which is.
Speaker Change: The spread to the public markets will continue.
Speaker Change: To be attractive for investors that has not changed.
Speaker Change: Other thing I think is important getting into my previous comment is the question you're asking is really for a lot of the other bdcs because bx SL.
Speaker Change: Is one of the lowest cost bdcs in the market and we've done that intentionally so we can focus on higher quality assets and not reach for risk is a market becomes more efficient.
Speaker Change: So I don't know where spreads are going I do know that in the context of driving returns for our investors. It's what I said earlier you need very good credit performance you need NAV stability.
Speaker Change: And you wanted to deliver a dividend higher than what's available in the public markets and you want to do that on a consistent basis.
Speaker Change: Thank you we'll go next to Maxwell Fritcher with tourist Securities.
Maxwell Fritcher: Yes. Good morning, Thank you.
Speaker Change: One for Mark Hughes.
Speaker Change: We've kind of just hit on the last question the new capital being raised so going off that can you comment on competition Youre seeing in the upper end of the market may be.
Speaker Change: Whether that would be.
Speaker Change: <unk>.
Speaker Change: Other direct lenders has there been any changes recently or has that been relatively stable.
Speaker Change: It might be a question for Melissa when we get her back on on the call from JP Morgan.
Speaker Change: But I would say the public markets have definitely come Roaring back.
Speaker Change: This year I think it's a back a little bit to my opening comments around the.
Speaker Change: The outlook is quite positive in the U S. Not a lot of new deals of supply and demand.
Speaker Change: Imbalance.
Speaker Change: And the cost of liabilities have tightened such as asset spreads and followed.
Speaker Change: So the banks.
Speaker Change: We have been a little bit more.
Speaker Change: Active as they underwrite loans for the broadly syndicated markets and Thats, resulting in a few repayments of some of our larger deals which for investors is I guess it <unk>.
Speaker Change: Immediate positive because they get the call protection and the accelerated OID as a result of those.
Speaker Change: Repayments.
Speaker Change: But definitely kind of more activity on the public side.
Speaker Change: With the Kennedys earlier points, which is why we are.
Speaker Change: We skewed a little bit more to the kind of upper end of the middle market.
Speaker Change: More recently, because we just saw better opportunities there, where we can use our scale. We can use our brand we can use our value add program to.
Speaker Change: To differentiate our kind of proposals from the from the public markets in terms of new private credit managers.
Speaker Change: There is a lot of new private credit managers coming into the space.
Speaker Change: But these are usually with 123.
Speaker Change: $4 billion fund.
Speaker Change: Which if you think about building a fund.
Speaker Change: Our portfolio for a fund that size Youre, you are committing not really more than a 100 or $200 million in a deal.
Speaker Change: So there that competition has gotten maybe a little bit more heated in the small end and the and the lower middle market.
Speaker Change: And so it's really kind of this more pure middle market.
Speaker Change: Had a little bit more of a premium.
Speaker Change: Europe.
Speaker Change: Folks, there's a lot in Europe, but Europe continues to have a spread premium as well.
Speaker Change: As well as some of these sectors that are a little bit more constrained and specialized.
Speaker Change: Constrained from a supply and demand standpoint, and specialized from a from a sector standpoint. So it takes a life science for example, where there was a $170 billion R&D funding gap that can has largely be funded by the equity markets, but that is now turning to the debt market and you can't do.
Speaker Change: That funding through <unk>.
Speaker Change: <unk>.
Speaker Change: That alternative so there are certainly some white spaces that.
Speaker Change: That we're kind of moving into to help drive differentiated returns for our investors.
Speaker Change: Thank you.
Melissa Wedel: Thank you, we'll take our last question from Melissa Wedel with JP Morgan.
Speaker Change: Good morning, let's try this one more time can you hear me.
Speaker Change: Yes.
Speaker Change: Okay, great. Thank you.
Speaker Change: I was surprised a little bit, especially given the strength of the originations activity in <unk> I was surprised by the what seemed like pretty minimal repayments and exits I guess I was curious if you were surprised by that as well and if you expect a pickup in that.
Speaker Change: <unk>.
Speaker Change: Into 25, thank you.
Speaker Change: Thanks, Melissa this is Teddy I'm happy to take that so I think we would agree with your repayments were relatively light in the quarter right around 6% actually sort of right on top of 6% for the full year.
Speaker Change:
Speaker Change: Where we saw activity to Brad's point was whereas where we had quite a bit of incumbency over the last over half of our deals closed were either existing portfolio of companies, where we had some level of incumbency. So that wouldn't necessarily drive repayments I do think our view is if as the M&A market comes back this year that is in <unk>.
Speaker Change: Syed potential lever to returns we generated 94% of our income in the quarter from just interest income very low accelerated OID very low fee income and not a lot of not a lot of pick so as repayments pick up.
Speaker Change: This year, we're as the M&A market, except thats potential upside driver of returns.
Speaker Change: Thank you.
Justin: That will conclude our question and answer session. At this time I would like to turn the call back over to Justin for city for any additional or closing remarks.
Justin: Thank you and thanks to all of you for joining today's call. We look forward to a follow up discussions and we will reconvene again next quarter.
Justin: Thank you that will conclude today's call. We appreciate your participation.
Justin: [music].