Q4 2025 Blackstone Secured Lending Fund Earnings Call

February 25, 2026

Speaker #1: If you require operator assistance, please press star zero. If you would like to ask a question, please signal by pressing star one. If you're using the speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.

Speaker #1: At this time, I'd like to turn the call over to Stacy Wang, Head of Stakeholder Relations. Please go ahead.

Speaker #2: Katie: Good morning and welcome to Blackstone Secured Lending Fund's fourth quarter and full-year results conference call. Joining me today are Brad Marshall, co-chief executive officer, and Teddy Desloge, chief financial officer, along with other members of the management team available for Q&A, including Jonathan Bock, co-chief executive officer, and Carlos Whitaker, president.

Speaker #2: 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.bxsl.com.

Speaker #2: We will be referring to that presentation throughout today's call. I'd like to remind you that this call may include forward-looking statements, which are certain and outside of the firm's control.

Speaker #2: It 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.

Speaker #2: Please see the risk factor section of our Form 10-K filed earlier today. This audio cast is copyright material of Blackstone and may not be duplicated without consent.

Speaker #2: With that, I'll turn the call over to Brad Marshall.

Speaker #3: Thank you, and good morning, everyone. Before highlighting the results from the quarter and some key observations, I would like to take a moment to share our macroeconomic views heading into 2026.

Speaker #3: Stepping back to the broader macro environment, despite periods of volatility over the past year—including tariff uncertainty, geopolitical instability, and elevated headline risk—we continue to see a fundamentally healthy economic backdrop.

Speaker #3: Overall, corporate earnings growth has remained resilient, the consumer continues to generate strength, and fiscal and monetary conditions remain supportive. Together, these factors are contributing to sustained economic momentum.

Speaker #3: A key driver of that momentum is the ongoing technology and AI-driven investment cycle, which I will provide more details on shortly. We believe we are in the early stages of a significant capital expenditure buildout focused on AI, digital infrastructure, and related technologies, providing durable support to growth across multiple sectors—particularly when you couple that with encouraging signs on inflation.

Speaker #3: We believe this macro and investment backdrop has translated into robust capital inflows into Blackstone's private credit strategies over 2025, and particularly strong demand from the institutional channel most recently.

Speaker #3: We are coming off one of our most active quarters of investing for BXCI and have over 50, $40 billion of dry powder to invest in direct lending into a market that, in our view, remains highly receptive to direct private credit solutions.

Speaker #3: Looking ahead, we believe this combination of a constructive macro environment, improving credit fundamentals, and a defensive first lien orientation positions the BXSL portfolio well from a performance and investing standpoint.

Speaker #3: On earnings, BXSL reported another strong quarter with our net investment income, or NII, of $0.80 per share, representing an 11.8% annualized return on equity made up overwhelmingly of interest income, rather than income from PIC or dividends.

Speaker #3: Our distribution of $0.77 per share was 104% covered by our net investment income per share and represents an 11.4% annualized distribution yield on NAV.

Speaker #3: BXSL delivered a 9.6% net return for the year, outperforming the leveraged loan market by 360 basis points, with an 11.2% annualized return since inception seven years ago.

Speaker #3: BXSL at the outset was designed to have a lower-cost structure so that it could focus on what we believe is a higher-quality portfolio. And you are seeing that durability reflected in quarterly performance.

Speaker #3: A few core topics I'll discuss from the quarter include a busy quarter of deployment, recent headlines around private credit, and related concerns around software companies and the impact that AI may have on them.

Speaker #3: On deployment, the fourth quarter was our second most active quarter of funding since 2021. We increased our overall portfolio to 316 companies, including 40 industries, funding 13 new credits, which had an average LTV at underwrite of 41% and an average spread near 500 basis points.

Speaker #3: And completed 15 add-ons to incumbent names. Some of the larger fundings during the quarter were to AmTrust, an insurance managing general agent focused on specialty programs; Mankind, a public biopharma business; IEM, an electrical equipment manufacturer supplying data centers; and Sabre Power, an engineering firm that is a provider of electrical infrastructure services.

Speaker #3: BXCI led all four of these senior secure transactions and was the sole lender in three of them. Additionally, another large investment during the quarter was BXCI co-led was for a digital aviation solutions business called Jeppesen, sold by Boeing for $10.5 billion.

Speaker #3: We believe this company has a dominant market position, is performing exceptionally well post-close, and is categorized by BXCI as being well positioned from AI risk given its deep entrenchment in the aerospace industry and high cost of failure.

Speaker #3: These deals highlight how we are investing around some of our core themes at Blackstone, including life science and AI infrastructure. Despite positive trends in deal activity as outlined during last quarter's call as well, external narratives around bubbles, and the credit market continue to percolate in the news.

Speaker #3: What we are seeing on the ground and across the over 300 credits we are invested in in BXSL is broadly inconsistent with this. In fact, if you look at the top 90% of our names in the portfolio, these companies are growing EBITDA at 9% over the past 12 months and have interest coverage, over two times, and have an average mark of 99.

Speaker #3: This is consistent with my comments earlier about a healthy economic backdrop and the benefits of lower interest expenses for our portfolio companies. Meanwhile, there has been significant external focus on AI's impact on the overall economy, and on software companies specifically.

Speaker #3: It's helpful as a starting point to highlight that Blackstone has been at the forefront of AI and its impact for many years, with its deep technology vertical supporting and informing investment activity across the broader platform.

Speaker #3: This is one of the big advantages of being part of the world's largest alternative asset manager and has helped drive our focus on deeply embedded high-retention businesses.

Speaker #3: Blackstone sees the AI revolution creating generational opportunities, and we want to stay ahead of this as leaders in the space. We receive real-time insights through our firm-wide resources and use that to make us better investors.

Speaker #3: Additionally, Blackstone is one of the largest investors in the entire AI ecosystem, including the infrastructure around it. As the largest owner of data centers globally, leaders across the firm focused on AI are in active dialogue with the AI market leaders such as OpenAI, Anthropic, Google, Meta, and others.

Speaker #3: These relationships help inform our perspective on where the industry is headed, and we believe that BXCI, with the help of the broader Blackstone platform, has an incredibly well-informed view on AI.

Speaker #3: There's also important to understand that you cannot paint software with a broad brush. There are subverticals of software with proprietary systems, huge data lakes, and incumbent long-term customer relationships that may be more protected or see tailwinds from AI adoption.

Speaker #3: While other areas will be more at risk of displacement, BXCI has typically avoided the less differentiated business model. Subverticals that we believe are likely to be protected are vertical software, ERP, data infrastructure, data management, and security.

Speaker #3: These account for the majority of BXSL software exposure where we have seen 40% EBITDA growth since underwrite. And today, these businesses generate over two times interest coverage.

Speaker #3: Importantly, the public market is differentiating in a similar way. While software valuations have compressed from 18 times NTM EBITDA last September to 14 times today, these subverticals that I mentioned earlier continue to trade in the 15 to 20 times EBITDA range.

Speaker #3: Implying well over two times enterprise value coverage of BXSL's first lane exposure. We also put significant value on partnering with larger companies. With sophisticated ownership and forward-leaning management teams to drive adoption of AI technology.

Speaker #3: As a reminder, 99% of our portfolio companies are private equity owned or large public companies with market caps exceeding $5 billion. On Medallia, a name that we have discussed in previous quarters, we continue to mark the asset now at 77.75, which implies over a 70% reduction to its setup enterprise value.

Speaker #3: Due to a slower than expected turnaround. For background, BXCI led a first lane term loan through 26% LTV at underwrite, supporting the $6.4 billion take-private acquisition of Medallia by the current sponsor, Toma Bravo.

Speaker #3: Who together with its co-investors have funded over $5 billion in cash equity for this deal today. The company has been underperforming not because of anything related to AI, but due to what we believe to be execution-driven issues.

Speaker #3: Particularly in its go-to-market function. Early last year, Toma Bravo installed a new leadership team, and they are working through a turnaround plan. We also expect there to be discussions around the capital structure.

Speaker #3: If I zoom in on the rest of the bottom 10% of performers in the portfolio, a common thread is operational challenges rather than any secular concerns.

Speaker #3: As such, these companies have been marked lower to an average mark of 82. On average, these companies have been modestly down from an EBITDA growth perspective since underwrite and were set up with at underwrite with an average 42% LTV.

Speaker #3: The good news with these names is that over half of them have seen further equity and junior capital commitments by the sponsor, or are experiencing improving performance overall.

Speaker #3: In fact, we saw the watchlist decline this quarter compared to last quarter as a result of some of these trends. However, to provide some illustrative framing, if you take this bottom 10% and just punitively assume that companies all defaulted, which again, we do not, I underscore, do not expect to see this happen, and BXSL recovers 65% over the next four years in line with long-term recovery of first lane public loans, then based on where they are marked today, this would only impact the equity by approximately 100 basis points per year.

Operator: Good day, welcome to the Blackstone Secured Lending Fourth Quarter and Full Year 2025 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 0. If you would like to ask a question, please signal by pressing star 1. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. At this time, we'd like to turn the call over to Stacy Wang, Head of Stakeholder Relations. Please go ahead.

Speaker #3: I state these numbers just to reinforce what I mentioned earlier. BXSL's model was designed to be defensive by focusing on first-lien, larger, private equity-owned businesses across a portfolio with diversified industries.

Speaker #3: In reality, underperforming companies can recover. Just this quarter, for example, SelectQuote Colony and Alliance Ground were three underperformers and at their lows had a weighted average mark of 93.

Stacy Wang: Thank you, Katie. Good morning, and welcome to Blackstone Secured Lending Fund's Q4 and Full Year Results Conference Call. Joining me today are Brad Marshall, Co-Chief Executive Officer, and Teddy Desloge, Chief Financial Officer, along with other members of the management team available for Q&A, including Jonathan Bock, Co-Chief Executive Officer, and Carlos Whitaker, President. 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.bxsl.com. We will be referring to that presentation throughout today's call. I'd like to remind you that this call may include forward-looking statements which are certain and outside of the firm's control, and may differ materially from actual results. We do not undertake any duty to update these statements.

Speaker #3: All have been paid or expected to repay this quarter at par, generating nearly $100 million of liquidity. So putting it all together, we encourage by deal activity from the quarter as improved portfolio turnover and funding efficiency.

Speaker #3: Which in turn should support ongoing earnings and we remain very comfortable with the overall portfolio mix and positioning. We've seen similar market dislocations before including during COVID, and even following the post-tariff news this time last year.

Speaker #3: And in periods like this, our focus is on providing as much transparency and clear facts as possible to help investors look through the headlines and assess the facts on the ground.

Stacy Wang: For some of the risks that could affect results, please see the Risk Factors section of our Form 10-K filed earlier today. This audiocast is copyright material of Blackstone and may not be duplicated without consent. With that, I'll turn the call over to Brad Marshall.

Speaker #3: For context, this is my 21st year at Blackstone's credit business. Across multiple cycles, and periods of volatility, BXCI has invested over $155 billion in our North American direct lending strategy with an annualized loss rate of less than 10 basis points.

Brad Marshall: Thank you. Good morning, everyone. Before highlighting the results from the quarter and some key observations, I would like to take a moment to share our macroeconomic views heading into 2026. Stepping back to the broader macro environment, despite periods of volatility over the past year, including tariff uncertainty, geopolitical instability, and elevated headline risk, we continue to see a fundamentally healthy economic backdrop. Overall, corporate earnings growth has remained resilient, the consumer continues to demonstrate strength, and fiscal and monetary conditions remain supportive. Together, these factors are contributing to sustained economic momentum. Key driver of that momentum is the ongoing technology and AI-driven investment cycle, which I will provide more details on shortly.

Speaker #3: This is a result of focusing on investing defensively, as I just mentioned. But equally important is leveraging the scale and expertise, all of which we believe will continue to support excellent long-term results for our investors.

Speaker #3: With that, I'll turn it over to Teddy.

Speaker #2: Thanks, Brad. I will cover BXSL's performance portfolio fundamentals, and liability profile for the fourth quarter. First on performance, BXSL's net investment income for the quarter was $186 million, or 80 cents per share, representing 104% coverage to our dividend on a per-share basis.

Brad Marshall: We believe we are in the early stages of a significant capital expenditure build-out focused on AI, digital infrastructure, and related technologies, providing a durable support to growth across multiple sectors, particularly when you couple that with encouraging signs on inflation. We believe this macro and investment backdrop has translated into robust capital inflows into Blackstone's private credit strategies over 2025, and particularly strong demand from the institutional channel most recently. We are coming off one of our most active quarters of investing for BXCI, and have over $40 billion of dry powder to invest in direct lending into a market that, in our view, remains highly receptive to direct private credit solutions. Looking ahead, we believe this combination of a constructive macro environment, improving credit fundamentals, and a defensive first lien orientation positions the BXSL portfolio well from a performance and investing standpoint.

Speaker #2: Year over year, fourth quarter total investment income was up over $5 million, or 1.5%, and interest income excluding payment-in-kind, fees, and dividends represented over 91% of our total investment income in the quarter.

Speaker #2: BXSL continued to out-earn its dividend in the fourth quarter with a predominantly first-lien portfolio and among the lowest operating and financing costs across our traded BDC peers compared to Q3 data.

Speaker #2: We will continue to assess our dividend with our board as we do every quarter as lower base rates flow through our portfolio. As previewed on last quarter's call, we experienced increased repayment activity in the fourth quarter and with accelerating M&A and deal activity as Brad outlined earlier, we are expecting similar levels of turnover in the upcoming quarters.

Speaker #2: Moving to the balance sheet, we ended the quarter with over 14.2 billion of total portfolio investments at fair value, 8.1 billion of outstanding debt, and 6.2 billion of total net assets.

Speaker #2: Net asset value per share at quarter end was $26.92, down from $27.15 in the third quarter, which was primarily impacted by $0.27 of net unrealized losses in the portfolio, partially offset by $0.01 of net unrealized gains and $0.03 of excess net investment income generated to our dividend.

Brad Marshall: On earnings, BXSL reported another strong quarter with our net investment income, or NII, of $0.80 per share, representing an 11.8% annualized return on equity, made up overwhelmingly of interest income rather than income from PIK or dividends. Our distribution of $0.77 per share was 104% covered by our net investment income per share and represents an 11.4% annualized distribution yield on NAV. BXSL delivered a 9.6% net return for the year, outperforming the leverage loan market by 360 basis points, with an 11.2% annualized return since inception 7 years ago. BXSL, at the outset, was designed to have a lower cost structure so that it could focus on what we believe is a higher quality portfolio. You are seeing that durability reflected in quarterly performance.

Speaker #2: As Brad highlighted, we saw healthy fundamentals on average across our portfolio companies, demonstrated by high single-digit percentage EBITDA growth and stabilizing interest coverage ratios at two turns, as rate resets are improving cash flow profiles of our borrowers.

Speaker #2: Non-accruals in the fourth quarter were just 0.6% at cost and 0.5% at fair market value, up from 0.3% at cost and 0.2% at fair market value in the fourth quarter of last year, as two smaller positions were added this quarter.

Speaker #2: Further, our Q4 amendment activity by issuer was down over 25% compared to the third quarter, with over 85% of amendments associated with add-ons, M&A, DDTL extensions, or immaterial technical matters.

Brad Marshall: A few core topics I'll discuss from the quarter include: a busy quarter of deployment, recent headlines around private credit, and related concerns around software companies, and the impact that AI may have on them. On deployment, Q4 was our second-most active quarter of funding since 2021. We increased our overall portfolio to 316 companies, including 40 industries, funding 13 new credits, which had an average LTV at underwrite of 41% and an average spread near 500 basis points, and completed 15 add-ons to incumbent names. Some of the larger fundings during Q4 were to AmTrust, an insurance managing general agent focused on specialty programs, MannKind, a public biopharma business, IEM, an electrical equipment manufacturer supplying data centers, and Saber Power, an engineering firm that is a provider of electrical infrastructure services.

Speaker #2: Only four issuers experienced material amendments accounting for 0.8% of the portfolio by fair market value. Turning to activity, BXSL funded $1 billion for the second consecutive quarter, and committed over $900 million.

Speaker #2: Net funded investment activity was $400 million after $629 million of repayments and sales up nearly 45% quarter over quarter. This represented an annualized repayment rate of 15% of the portfolio at fair value, up from 13% for the prior quarter and 6% for the same quarter in the prior year.

Speaker #2: As we sit here today, we are tracking over $550 million of potential repayments for the first six months of the year, which could create additional balance sheet capacity if they materialize.

Speaker #2: Importantly, BXSL's board of directors approved a discretionary share repurchase plan under which BXSL may repurchase up to $250 million in the aggregate of its outstanding common shares in the open market at below its net asset value per share.

Brad Marshall: BXCI led all four of these six senior secured transactions and was the sole lender in three of them. Additionally, another large investment during the quarter was BXCI co-led for a digital aviation solutions business called Jeppesen, sold by Boeing for $10.5 billion. We believe this company has a dominant market position, is performing exceptionally well post-close, and is categorized by BXCI as being well-positioned from AI risk, given its deep entrenchment in the aerospace industry and high cost of failure. These deals highlight how we are investing around some of our core themes at Blackstone, including life science and AI infrastructure. Despite positive trends in deal activity, as outlined during last Q's call as well, external narratives around bubbles in the credit market continue to percolate in the news.

Speaker #2: As we see repayment activity create additional capacity, we will continuously evaluate capital allocation decisions between new opportunities and buying back shares. Our liability profile remains diverse across multiple financing markets, including $10.5 billion and $8.1 billion of committed and funded debt, respectively, as of the fourth quarter.

Speaker #2: This includes $2.4 billion committed to our corporate revolving credit facility, priced at SOFR plus 153 at its tightest levels, which we believe is the lowest priced revolver across the traded peer set.

Speaker #2: We also have $2.7 billion committed to our asset-based facilities with multiple banks, which had a weighted average drawn spread of SOFR plus 187, down 23 basis points since Q4 2024, in addition to over $450 million of CLO debt outstanding priced at SOFR plus 154.

Brad Marshall: What we are seeing on the ground and across the over 300 credits we are invested in BXSL, is broadly inconsistent with this. In fact, if you look at the top 90% of our names in the portfolio, these companies are growing EBITDA at 9% over the past 12 months and have interest coverage over 2 times and have an average mark of 99. This is consistent with my comments earlier about a healthy economic backdrop and the benefits of lower interest expenses for our portfolio companies. Meanwhile, there has been significant external focus on AI's impact on the overall economy and on software companies specifically. It's helpful as a starting point to highlight that Blackstone has been at the forefront of AI and its impact for many years, with its deep technology vertical supporting and informing investment activity across the broader platform.

Speaker #2: Lastly, we have nearly $5 billion of unsecured bonds outstanding as of the fourth quarter, $2.8 billion of which are not swapped and have an average coupon of 2.88%.

Speaker #2: This includes a $500 million five-year bond we issued in October, priced at $155 basis points above the benchmark treasury rate, or 5.125% coupon, which was subsequently swapped at SOFR plus 166.

Speaker #2: In 2025, BXSL had the tightest public bond spread issuance amongst its traded BDC peers, and taking this all together, our all-in cost of debt for the fourth quarter was $4.93%, down from 5.24% in the fourth quarter of 2024.

Brad Marshall: This is one of the big advantages of being part of the world's largest alternative asset manager, and has helped drive our focus on deeply embedded, high-retention businesses. Blackstone sees the AI revolution creating generational opportunities, and we want to stay ahead of this as leaders in the space. We receive real-time insights through our firm-wide resources and use that to make us better investors. Additionally, Blackstone is one of the largest investors in the entire AI ecosystem, including the infrastructure around it, as the largest owner of data centers globally. Leaders across the firm focused on AI are active dialogue with the AI market leaders such as OpenAI, Anthropic, Google, Meta, and others. These relationships help inform our perspective on where the industry is headed, and we believe that BXCI, with the help of the broader Blackstone platform, has incredibly well-informed view on AI.

Speaker #2: Total liquidity at the end of the fourth quarter was $2.5 billion, including unrestricted cash and undrawn debt available to borrow, while ending leverage as of December 31st was 1.3 turns on a gross basis, and one and a quarter turns on a net basis, net of cash.

Speaker #2: Our balance sheet strength, portfolio composition, and long-term operating history all help support BXSL in achieving ratings among the top three when compared to our traded BDC peers, with a BAA2 in stable outlook by Moody's, BBB minus in positive outlook by S&P, and BBB flat in stable outlook by Fitch.

Speaker #2: With that, I'll ask the operator to open it up for questions. Thank you.

Speaker #1: Thank you. As a reminder, please press star one to ask a question. We ask you to limit yourself to one question and one follow-up to allow as many callers to join the queue as possible.

Speaker #1: We will take our first question from Finney and O'Shea with Wells Fargo Securities.

Brad Marshall: It's also important to understand that you cannot paint software with a broad brush. There are subverticals of software with proprietary systems, huge data lakes, and incumbent long-term customer relationships that may be more protected or see tailwinds from AI adoption, while other areas will be more at risk of displacement. BXCI has typically avoided the less differentiated business models. Subverticals that we believe are likely to be protected are vertical software, ERP, data infrastructure, data management, and security. These account for the majority of BXSL's software exposure, where we have seen 40% EBITDA growth since underwrite. Today, these businesses generate over 2 times interest coverage. Importantly, the public market is differentiating in a similar way.

Speaker #3: Hey, everyone. Good morning. First question, big picture—we're looking at the potential scenario where the non-traded channel slows. I know you have your share of institutional capital, but that's perhaps less so than some of the other great houses of direct lending.

Speaker #3: So how do we think about the impact where, for example, you've often talked about the importance of check size, larger companies, and so forth?

Speaker #3: Should we think about should we see it as a risk that you might have to go back down market on new origination in the event there are non-traded headwinds?

Speaker #3: Thanks.

Speaker #4: Thanks, Finn. Thanks for the question. Maybe just as a starting point, just to frame the market, so the US leverage finance market is about a $5 trillion market.

Brad Marshall: While software valuations have compressed from 18x NTM EBITDA last September to 14x today, these subverticals that I mentioned earlier continue to trade in the 15x to 20x EBITDA range, implying well over 2x enterprise value coverage of BXSL's first lien exposure. We also put significant value on partnering with larger companies with sophisticated ownership and forward-leaning management teams to drive adoption of AI technology. As a reminder, 99% of our portfolio companies are private equity-owned or large public companies with market caps exceeding $5 billion. On Medallia, a name that we have discussed in previous quarters, we continue to mark the asset now at 77.75, which implies over a 70% reduction to its set up enterprise value due to a slower than expected turnaround.

Speaker #4: You look at high yield, it's about a trillion and a half, and if you look at leveraged loans, about a trillion four. Private credit in the institutional non-BDC channel is actually about a trillion and a half.

Speaker #4: The non-traded BDC is about $275 billion, and the traded BDC is about $235 billion. So it remains very much, as you point out, an institutional-driven market, and why?

Speaker #4: Because institutions see the asset class, I think, similar to how you view it, which is it's very defensive, we're driving a premium to what you can get in the public markets, and that's really important.

Speaker #4: If you look at kind of our business more broadly, to answer your question, our credit business is $520 billion. We are in every crevice of the credit markets.

Speaker #4: We're invested in, I think you've heard us mention this before, 5,000 companies around the world, which gives us incredible insights into going on with what's going on in the world and helps back up some of our investment themes.

Brad Marshall: For background, BXCI led a first lien term loan through, 26% LTV at underwrite, supporting the $6.4 billion take private acquisition of Medallia by the current sponsor, Thoma Bravo, who, together with its co-investors, have funded over $5 billion in cash equity for this deal to date. The company has been underperforming, not because of anything related to AI, but due to what we believe to be execution-driven issues, particularly in its go-to-market function. Early last year, Thoma Bravo installed a new leadership team. They are working through a turnaround plan. We also expect there to be discussions around the capital structure. If I zoom in on the rest of the bottom 10% of performers in the portfolio, a common thread is operational challenges rather than any secular concerns. As such, these companies have been marked lower to an average mark of 82.

Speaker #4: So our business is broad and deep in every channel. If I look at kind of corporate lending specifically, non-investment-grade, we have about $40 billion of dry powder.

Speaker #4: So, I expect us to remain fairly active in the remainder of 2026, similar to how active we were in the fourth quarter of 2025, which was our busiest investment quarter since 2021.

Speaker #4: So our business will remain active. We have lots of pools of capital to draw from, and it really comes back down to performance. And I think that'll continue to attract capital in this space to the managers that are performing well.

Brad Marshall: On average, these companies have been modestly down from an EBITDA growth perspective since underwrite, and were set up with, at underwrite with an average 42% LTV. The good news with these names is that over half of them have seen further equity and junior capital commitments by the sponsor or are experiencing improving performance overall. In fact, we saw the watchlist decline this quarter compared to last quarter as a result of some of these trends. However, to provide some illustrative framing, if you take this bottom 10% and just punitively assume the companies all defaulted, which again, we do not, I underscore, do not expect to see this happen, and BXSL recovers 65% over the next 4 years, in line with long-term recovery of first lien public loans.

Speaker #3: Great, appreciate that. And, follow up—and another sort of hypothetical, but also front and center question—you’re a little below book, still better than most, but we might be here for a little while.

Speaker #3: In that case, does it make sense to sit on spillover, or should we expect you to revisit that in a potential special?

Speaker #4: Great. Thanks, Finn. And I appreciate you actually pointing that out. We do have spillover income as a result of us out-earning our dividend over time, and we've taken those over-earnings and invested it back into new loans to drive income for our investors.

Speaker #4: I think as maybe answer the question a little bit differently, as we get new cash proceeds into BXSL, either because of income or repayments, we mentioned we have a series of repayments coming over the next two quarters.

Brad Marshall: Based on where they are marked today, this would only impact the equity by approximately 100 basis points per year. I state these numbers just to reinforce what I mentioned earlier. BXSL's model was designed to be defensive by focusing on first lien, larger, private equity-owned businesses across a portfolio with diversified industries. In reality, underperforming companies can recover. Just this quarter, for example, SelectQuote, Colony, and Alliance Ground were three underperformers, and at their lows, had a weighted average mark of 93. All have been paid or are expected to repay this quarter at par, generating nearly $100 million of liquidity. Putting it all together, we are encouraged by deal activity from the quarter as improved portfolio turnover and funding efficiency, which in turn should support ongoing earnings, and we remain very comfortable with the overall portfolio mix and positioning.

Speaker #4: We have options. We can reinvest in new loans. We can buy back, as you point out, discounted shares. We can delever. Those would be the core kind of options.

Speaker #4: And you're right, we could pay a supplemental dividend, but as you know, our dividend at 11.4%, being the very high end of the market, so our focus has been on these other kind of options at this point.

Speaker #4: But of course, appreciate you highlighting the fact that we are in this enviable position of having out-earned the dividend. And also appreciate the point that we're in an unusual time where we're trading below book.

Speaker #4: So we need to consider all these options but at the end of the day, it's a discussion around how do we want to use best use our cash on hand to deliver attractive options for our investors.

Brad Marshall: We've seen similar market dislocations before, including during COVID, and even following the post-tariff news this time last year. In periods like this, our focus is on providing as much transparency and clear facts as possible to help investors look through the headlines and assess the facts on the ground. For context, this is my 21st year of Blackstone's credit business. Across multiple cycles and periods of volatility, BXCI has invested over $155 billion in our North American direct lending strategy, with an annualized loss rate of less than 10 basis points. This is a result of focusing on investing defensively, as I just mentioned. Equally important is leveraging the advantage of Blackstone's scale and expertise, all of which we believe will continue to support excellent long-term results for our investors. With that, I'll turn it over to Teddy.

Speaker #4: And all options are on the table.

Speaker #3: Okay. Thanks.

Speaker #1: We will take our next question from Robert Dodd with Raymond James.

Speaker #5: Hi, guys. On kind of related, somewhat, to Finn's question—when we look at the grand scheme of things, flows in the BDC perpetuals, in my view, or the private market, aren't that significant to affecting pricing and spreads, right?

Speaker #5: To your point, it's a $5 trillion market, and all the BDCs together have half a trillion. What do you think the potential is if flows do deteriorate across the whole market for retail fundraising?

Speaker #5: What do you think the potential is that's actually going to have a discernible impact on spreads in the market? I mean, CLO formation still looks pretty healthy.

Speaker #5: A lot of the other areas of the market still look pretty healthy. The retail flows seem to be quite a small part of that.

Teddy Desloge: Thanks, Brad. I will cover BXSL's performance, portfolio fundamentals, and liability profile for Q4. First, on performance. BXSL's net investment income for Q4 was $186 million or $0.80 per share, representing 104% coverage to our dividend on a per-share basis. Year-over-year, Q4 total investment income was up over $5 million or 1.5%, and interest income excluding Payment-in-Kind, fees, and dividends represented over 91% of our total investment income in Q4. BXSL continued to outearn its dividend in Q4 with a predominantly first lien portfolio and among the lowest operating and financing costs across our traded BDC peers compared to Q3 data. We will continue to assess our dividend with our board, as we do every quarter, as lower base rates flow through our portfolio.

Speaker #5: Is there any reason why that would actually influence pricing out in the marketplace?

Speaker #4: I think it's a little early to tell. Robert, it's a good question. And I appreciate you highlighting the liquid markets because they remain actually quite strong.

Speaker #4: I think 66% of the liquid market is trading 99 or above. Spreads remain fairly tight in the liquid markets. And so the credit markets generally again, despite what we read in the headlines, are actually pretty healthy.

Speaker #4: There's capital available. And as I mentioned, if you just look at our platform with $40 billion of dry powder, we will remain active in this market.

Speaker #4: And the overall credit quality of the deals that we're seeing the credit quality of the deals that we're in are not suggesting that spreads should widen.

Teddy Desloge: As previewed on last quarter's call, we experienced increased repayment activity in Q4. With accelerating M&A and deal activity, as Brad outlined earlier, we are expecting similar levels of turnover in the upcoming quarters. Moving to the balance sheet, we ended the quarter with over $14.2 billion of total portfolio investments at fair value, $8.1 billion of outstanding debt, and $6.2 billion of total net assets. Net asset value per share at quarter end was $26.92, down from $27.15 in Q3, which was primarily impacted by $0.27 of net unrealized losses in the portfolio, partially offset by $0.01 of net unrealized gains and $0.03 of excess net investment income generated to our dividend.

Speaker #4: At this point. So we'll continue to watch the market evolve. But right now, things feel pretty stable.

Speaker #5: Got it. Got it. Thank you. That can kind of put that to software. And I appreciate all the detail you gave and the framework to think about it.

Speaker #5: I mean, do you expect if I was going to say three years from now, do you think the software mix in your portfolio would be higher or lower than it currently is, or stable?

Speaker #5: I mean, is it there is more potentially uncertainty. I mean, obviously, the different business models etc., but would you are you looking to maybe not participate in the next time something gets refinanced, or would you prefer to shrink that exposure or keep it where it is?

Teddy Desloge: As Brad highlighted, we saw healthy fundamentals on average across our portfolio companies, demonstrated by high single-digit EBITDA growth and stabilizing interest coverage ratios at 2 turns, as rate resets are improving cash flow profiles of our borrowers. Non-accruals in Q4 were just 0.6% at cost and 0.5% at fair market value, up from 0.3% at cost and 0.2% at fair market value in Q4 of last year, as 2 smaller positions were added this quarter. Our Q4 amendment activity by issuer was down over 25% compared to Q3, with over 85% of amendments associated with add-ons, M&A, DDTL extensions, or immaterial technical matters. Only 4 issuers experienced material amendments, accounting for 0.8% of the portfolio by fair market value.

Speaker #5: Or grow it?

Speaker #6: Well, the three-year crystal ball, I don't have Robert, but what I would say is we are seeing very good investment opportunities in the infrastructure around AI.

Speaker #6: And you saw that in the fourth quarter. We made an investment. IEM, we made an investment in Sabre Power. And so that is definitely on theme for us.

Speaker #6: The picks and shovels kind of around this AI buildout, which I mentioned in our prepared comments, you could see us continue to lean into those themes and those opportunities because we think they have very good tailwinds.

Speaker #5: Got it. Thank you.

Speaker #7: Thank you, Robert.

Speaker #1: Thank you. We'll take our next question from Aaron Saganovich with Truist Securities.

Teddy Desloge: Turning to activity, BXSL funded $1 billion for the Q2 and committed over $900 million. Net funded investment activity was $400 million, after $629 million of repayments and sales, up nearly 45% quarter-over-quarter. This represented an annualized repayment rate of 15% of the portfolio at fair value, up from 13% for the prior quarter and 6% for the same quarter in the prior year. As we sit here today, we are tracking over $550 million of potential repayments for the first six months of the year, which could create additional balance sheet capacity if they materialize.

Speaker #3: Thanks. Good morning. Maybe we could just talk a little bit about what the sponsor conversations have been like over the last few weeks. Clearly, the public markets are very trigger-happy.

Speaker #3: What are the sponsors thinking, given that this was supposed to be a big capital markets year in kind of reviving IPOs, etc.? Maybe just your thoughts on those conversations.

Speaker #4: Yeah, it's a little bit like last year when the tariff noise came out and there was a lot of volatility and uncertainty. Sponsors are kind of watching the markets and trying to see where they settle out before they bring assets to market.

Teddy Desloge: Importantly, BXSL's board of directors approved a discretionary share repurchase plan under which BXSL may repurchase up to $250 million in the aggregate of its outstanding common shares in the open market at below its net asset value per share. As we see repayment activity create additional capacity, we will continuously evaluate capital allocation decisions between new opportunities and buying back shares. Our liability profile remains diverse across multiple financing markets, including $10.5 billion and $8.1 billion of committed and funded debt, respectively, as of Q4. This includes $2.4 billion committed to our corporate revolving credit facility, priced at SOFR plus 153 at its tightest levels, which we believe is the lowest priced revolver across the traded peer set.

Speaker #4: So, I think like us, they're not terribly disrupted, but they are holding back right now and bringing some of these assets to market. But I do expect, for all the reasons we mentioned earlier, it will remain a fairly active year this year.

Speaker #4: Because you do see growth in the economy, you do have lower costs of capital, which is positive for M&A activity. So all those tailwinds still exist.

Speaker #4: And we just need to work through a period of heightened uncertainty and volatility. Largely around the software space.

Teddy Desloge: We also have $2.7 billion of committed to our asset-based facilities, with multiple banks, of which had a weighted average drawn spread of SOFR plus 187, down 23 basis points since Q4 2024, in addition to over $450 million of CLO debt outstanding, priced at SOFR plus 154. Lastly, we have nearly $5 billion of unsecured bonds outstanding as of the Q4, $2.8 billion of which are not swapped and have an average coupon of 2.88%. This includes a $500 million 5-year bond we issued in October, priced at 155 basis points above the benchmark treasury rate, or 5.125% coupon, which was subsequently swapped at SOFR plus 166. In 2025, BXSL had the tightest public bond spread issuance amongst its traded BDC peers.

Speaker #3: Got it. That's helpful. Thanks. And then, as a follow-up, we've seen a couple of BDCs make some asset sales. Recently, one of them had already said they were going to do this last quarter.

Speaker #3: So it wasn't necessarily a surprise. Do you have a view on that? You're trading below book but not dramatically below book. Is there any benefit to selling assets at fair value in putting that back into the stock?

Speaker #4: So what I would say to that is we are definitively long-term holders of assets. And we also have two and a half billion dollars of liquidity like we mentioned on the call.

Speaker #4: We have 550 million of near-term repayments. I suspect there's another billion or two that will occur over the balance of the year. So the fund itself naturally generates liquidity because of the term nature of the investments that we make.

Teddy Desloge: Taking this all together, our all-in cost of debt for Q4 was 4.93%, down from 5.24% in Q4 2024. Total liquidity at the end of Q4 was $2.5 billion, including unrestricted cash and undrawn debt available to borrow, while ending leverage as of 31 December was 1.3 turns on a gross basis and 1.25 turns on a net basis, net of cash. Our balance sheet strength, portfolio composition, and long-term operating history all help support BXSL in achieving ratings among the top 3 when compared to our traded BDC peers, with a Baa2 and stable outlook by Moody's, BBB- and positive outlook by S&P, and BBB flat and stable outlook by Fitch. With that, I'll ask the operator to open it up for questions. Thank you.

Speaker #4: And with those proceeds, we will look at all the options that I mentioned on in answering Finn's question. Which is we will look at buybacks.

Speaker #4: We have approval to do that. We will look at new loans that come through our system. We may look to de-lever. So all those options will be on the table.

Speaker #4: And it's probably worth just hitting on this turnover and repayment dynamic, which actually can be quite positive for BDCs and BXSL in particular. I mentioned three assets that will be repaid this quarter.

Speaker #4: Those assets had been marked down to 93 at their low. And now they're getting refinanced at par. So that sort of activity as we get those repayments will be positive to on those underperforming assets to pull NAV up.

Operator: Thank you. As a reminder, please press star one to ask a question. We ask you limit yourself to one question and one follow-up to allow as many callers to join the queue as possible. We will take our first question from Finian O'Shea with Wells Fargo Securities.

Speaker #4: And it'll be positive to generate liquidity, which we can use to do one of many things, as I just highlighted. So, lots of different options on the table for us.

Finian O'Shea: Hey, everyone. Good morning. First question, big picture, we're looking at the potential scenario where the non-traded channel slows. I know you have your share of institutional capital, but that's, you know, perhaps less so than some of the other great houses of direct lending. How do we think about the impact, where, for example, you've often talked about the importance of check size, larger companies, and so forth. Should we see it as a risk that you might have to go back down market on new origination in the event there are non-traded headwinds? Thanks.

Speaker #3: Thanks, Brad.

Speaker #1: Thank you. We'll take our next question from Kenneth Lee with RBC Capital Markets.

Speaker #3: Hey, good morning. Thanks for taking my question. I think previously you talked about operating leverage perhaps closer to the higher end of the target range there.

Speaker #3: Just given the potential opportunities to deploy into as well as the share repurchase maybe just give us some thoughts about where leverage where could it trend over the near term or where are you looking to operate near?

Speaker #3: Thanks.

Speaker #4: Yeah, thanks, Ken. This is Teddy. I'm happy to take that. So just starting with the facts, as highlighted, 1.3 gross ending leverage, 1.27 average.

Brad Marshall: Thanks, Finn. Thanks for the question. Maybe just as a starting point, just to frame the market. The US leverage finance market is about a $5 trillion market. You look at high yield, it's about $1.5 trillion. If you look at leverage loans, about $1 trillion for private credit in the institutional non-BDC channel is actually about $1.5 trillion. The non-traded BDC is about $275 billion. The traded BDC is about $235 billion. It remains very much, as you point out, an institutional-driven market. Why? Because institutions see the asset class, I think similar to how you view it, which is very defensive. We're driving a premium to what you can get in the public markets.

Speaker #4: One and a quarter times in the net basis. As Brad mentioned, we did have a very active end of the year. It was our second most active quarter on gross origination since 2021.

Speaker #4: We did have some deals, deal processes, accelerated toward the end of the year. So we ended at slightly above the one-and-a-quarter-times range.

Speaker #4: We also do have two and a half billion of immediate liquidity. 550 million of repayments near term. So really taking that all together, Ken, no change.

Speaker #4: Long-term target remains one and a quarter times. We would expect to be able to manage near the high end of that range in the near term.

Speaker #3: Gotcha. Very helpful there. And just one follow-up if I may, and this is just on the software book here and really appreciate the additional details and color around there.

Speaker #3: How do you think about, specifically, recovery rates for software companies? Just given the lack of tangible assets, how do you get confidence around the valuations and all sorts around that?

Brad Marshall: That's really important. If you look at kind of our business more broadly to answer your question, our credit business is $520 billion. We are in every crevice of the credit markets. We're invested, and I think you've heard us mention this before, 5,000 companies around the world, which gives us incredible insights into what's going on in the world, and helps back up some of our investment themes. Our business is broad and deep in every channel. If I look at kind of corporate lending, specifically non-investment grade, we have about $40 billion of dry powder.

Speaker #3: Thanks.

Speaker #4: Yeah, I can take that. I think when we look at our software businesses, we look at kind of how they're performing as a starting point.

Speaker #4: And they're performing—actually, they're the best-performing part of our business. No doubt, the public market has re-rated software companies, as I said in our remarks.

Speaker #4: Even in that instance, you take the 25% kind of markdown or rerating of public company software businesses, and we're still two times covered. So we feel very good about our coverage on our software business.

Brad Marshall: I expect us to remain fairly active in the remainder of 2026, similar to kind of how active we were in Q4 of 2025, which was our busiest investment quarter since 2021. Our business will remain active. We have lots of pools of capital to draw from, and it really comes back down to performance. I think that'll continue to attract capital in this space to the managers that are performing well.

Speaker #4: We do have a small subset—less than 5% of the portfolio—of assets that we think are more impacted by AI and some operational challenges. Those are a little bit harder to pinpoint from a value standpoint.

Speaker #4: But they're set up with a lot of equity in the business. And we suspect the sponsors will continue to support them.

Finian O'Shea: Great. Appreciate that, and follow up on another sort of hypothetical, but also front and center question. You're a little below book, still better than most, but we might be here for a little while. In that case, does it make sense to sit on spillover, or should we expect you to revisit that in a potential special? Thanks.

Speaker #3: Gotcha. Very helpful there. Thanks again.

Speaker #1: Thank you. As a reminder, if you would like to ask a question, please signal by pressing star one. We'll take our next question from Doug Harter with UBS.

Speaker #5: Oh, thanks. You mentioned weighing the share repurchase, obviously, with the new authorization. Can you just walk through the thought process, how you'll evaluate that?

Speaker #5: And kind of how we should think about actually using that versus kind of having it there for kind of in case further declines?

Brad Marshall: Great. I appreciate you actually pointing that out. We do have spillover income as a result of us outearning our dividend over time, and we've taken that those overearnings and invested it back into new loans to drive income for our investors. I think as maybe answer the question a little bit differently, as we get new cash proceeds into BXSL, either because of income or repayments, we mentioned we have a series of repayments coming over the next two quarters. We have options. We can reinvest in new loans, we can buy back, as you point out, discounted shares, we can de-lever. Those would be the core kind of options.

Speaker #4: Yeah, Doug, this is Teddy. I'm happy to take that. I think the short answer is we're going to watch it and be very opportunistic.

Speaker #4: We do have 250 million approved by the board. We also have turnover increasing in the portfolio. As Brad mentioned, historically, below a 10% discount to NAV can be quite a creative for buybacks.

Speaker #4: We've done this previously post-IPO. We announced 250 million dollar repurchase that got done in 2022. And then we announced another plan in 2023. So we'll be opportunistic with it.

Speaker #4: We'll watch it. It'll be a capital allocation decision between as Brad said, paying down debt, new deals, and share repurchases.

Speaker #5: Great. Appreciate that, Teddy. Thank you.

Speaker #1: We'll take our next question from Ethan Kay with Elusid Capital Markets.

Brad Marshall: You're right, we could pay a supplemental dividend, but as you know, our dividend at 11.4% being the very high end of the market. Our focus has been on these other kind of options at this point. Of course, appreciate you highlighting the fact that we are in this enviable position of having outearn the dividend, and also appreciate the point that we're in an unusual time where we're trading below book. We need to consider all these options. At the end of the day, it's a discussion around how do we want to use best use our cash on hand to deliver attractive options for our investors, and all options are on the table.

Speaker #6: Hey, guys. Quick question on some of the unrealized depreciation during the quarter. Maybe you might have touched on it a bit in the prepared remarks, but I guess kind of specific to this quarter, it looks like the depreciation was largely driven by maybe a handful of positions, call it 5 to 10 positions, with maybe single-digit percentage point markdowns.

Speaker #6: And I guess my first question is, is this kind of consistent with your read, or do you see it as more of a broad kind of driven by broad market movement?

Speaker #6: And then, second question, assuming it is, in fact, driven by a few names here, can you walk through any potential common denominators? I know you mentioned operational challenges, but do you see these as kind of idiosyncratic?

Finian O'Shea: Okay, thanks.

Operator: We will take our next question from Robert Dodd with Raymond James.

Speaker #6: Any, I guess, additional specificity here would be appreciated.

Robert Dodd: Hi, guys. On kind of related somewhat to Finn's question. When we look at the grand scheme of things, flows in the BDC perpetuals, in my view, or the private market, or aren't that significant to affecting pricing and spreads, right? To your point, it's a $5 trillion dollar market, and all the BDCs together have half a trillion dollars. What do you think the potential is if flows do deteriorate across the whole market for retail fundraising? What do you think the potential is that's actually gonna have a discernible impact on spreads in the market? I mean, CLO formation still looks pretty healthy. A lot of the other areas of the market still look pretty healthy. The retail flows seem to be quite a small part of that. Is that...

Speaker #4: Yeah, absolutely. Thanks, Ethan. I'll start with just the facts. So you're right. NAV per share was 26.92. That's versus 27.15 prior quarter. So down 23 cents or less than 1%, about 85 basis points.

Speaker #4: When you dig into the $0.23, we had $0.26 of unrealized losses, about a penny of gains, and $0.03 of excess earnings.

Speaker #4: And within the unrealized losses, you're right. The marks were concentrated to a small handful of positions. Two accounted for about 50% of net unrealized gains and losses in the top five.

Speaker #4: Accounted for over 60. So taking a step back, what we see on the ground is stability. Earnings growth consistently, high single digits, increasing interest coverage ratios and cash flow profiles.

Robert Dodd: Any reason why that would actually influence pricing out in the marketplace?

Speaker #4: So, while you certainly can see some movement in marks tied to both performance and spreads over time, what we're seeing is around 85% of the portfolio seeing stable or improving trends based on fundamentals.

Brad Marshall: I think it's a little early to tell. Robert, it's a good question, and appreciate you highlighting the liquid markets because they remain actually quite strong. I think 66% of the liquid market is trading 99 or above. Spreads remain, you know, fairly tight in the liquid markets. The credit markets generally, again, despite what we read in the headlines, are actually pretty healthy. There's capital available. As I mentioned, if you just look at our platform with, you know, $40 billion of dry powder, we will remain active in this market. The overall credit quality of the deals that we're seeing, the credit quality of the deals that we're in, are not suggesting that spreads should widen at this point.

Speaker #4: Yeah, and maybe just to add to that, because I mentioned this in the remarks, the number of deals on our watch list actually declined.

Speaker #4: During the quarter, if I look back over the past seven years, since we started BXSL, we've actually had zero net realized losses for investors.

Speaker #4: So it does kind of get back to we do mark the portfolio quite actively. But it is really, really designed to be defensive. That's why we're first laying in the capital structure.

Speaker #4: Why we're large businesses. Why they're largely sponsor-backed. Why we've picked some low default sectors. So I just want to highlight that. And the journeys that sometime assets take like the three I mentioned that just got repaid at par, we're all in the kind of low 90s at one point.

Brad Marshall: We'll continue to, you know, watch the market evolve, but right now, things feel pretty stable.

Robert Dodd: Got it. Got it. Thank you. If I can kind of flip that to, like, software, and I appreciate all the detail you gave and the framework to think about it. I mean, do you expect if I was gonna say, you know, three years from now, do you think the software mix in your portfolio would be higher or lower than it currently is, or stable? I mean, do you, there is more potentially uncertainty. I mean, obviously, the different business models, et cetera, but, are you looking to, you know, maybe not participate in the next time something gets refinanced, or would you prefer to shrink that exposure, or keep it where it is? Or grow it?

Speaker #4: So companies don't always go up to the right. We work through them. And I also mentioned this on the call. I've been doing this 21 years.

Speaker #4: And our direct lending business, our realized loss rate is 10 basis points a year, over that 21 years. And that's obviously through a lot of different economic cycles.

Speaker #4: So this is just ordinary kind of marking of assets. And we feel very, very good about the overall portfolio.

Speaker #5: Okay, great color. Thank you, guys. And then one quick unrelated question. You mentioned—I just want to get these numbers right—you mentioned $550 million of repayments over the first six months, kind of in the insight.

Brad Marshall: Well, the three-year crystal ball, I don't have, Robert. What I would say is, we are seeing very good investment opportunities in the infrastructure around AI. You saw that in Q4-

Speaker #5: And then, John, I think you also mentioned an additional $1 billion throughout the year. Can you just kind of flesh that out?

Speaker #4: Yeah. It's Brad's timeline, correct?

Robert Dodd: Mm-hmm.

Brad Marshall: We made an investment, IEM, we made an investment in Sabre Power. That is definitely on theme for us. The picks and shovels kind of around this AI build-out, which I mentioned in our prepared comments, you could see us continue to lean into those themes and those opportunities because we think they have very good tailwinds.

Speaker #6: Yeah, Ethan, this is Brad. So we have clear line of sight to 550 million dollars of repayments. These are committed deals that have or will be refinanced if you look at a typical repayment cycle.

Speaker #6: It's somewhere between 15 to 20 percent a year. So if you just use 20%, that's 2.8 billion dollars of repayments. This year, and that's where we give the range of an expectation that we'll have another billion or two behind that, just given the latter vintages of our portfolio.

Robert Dodd: Got it. Thank you.

Richard Shane: Thank you, Robert.

Operator: Thank you. We'll take our next question from Arren Cyganovich with Truist Securities.

Arren Cyganovich: Thanks. Good morning. Maybe you could just talk a little bit about what the sponsor conversations have been like over the last few weeks? You know, clearly, the public markets are very trigger-happy. What are the sponsors thinking? You know, given that this was supposed to be a big, you know, capital markets year in kind of reviving, you know, IPOs, et cetera. You know, maybe just your thoughts on those conversations?

Speaker #5: Excellent. Thank you, guys.

Speaker #1: Thank you. We'll take our final question from Rick Shane with JP Morgan.

Speaker #5: Hey, guys. Thanks for taking my questions, and most have been asked and answered. The outlook on leverage is very helpful. Look, you guys have announced a repurchase.

Brad Marshall: It's a little bit like last year when the tariff noise came out, and there was a lot of volatility and uncertainty. Sponsors are kind of watching the markets and trying to see where they settle out before they, you know, bring assets to market. So I think like us, they're not terribly disrupted, but they are, you know, holding back right now in bringing some of these assets to market. I do expect, for all the reasons we mentioned earlier, it will remain a fairly, you know, active year this year because you do see growth in the economy. You do have lower costs of capital, which is positive for M&A activity.

Speaker #5: We just discussed the possibility of $2 billion of repayments this year. Leverage sounds like it's going to be flat. So you're going to be making some choices in terms of how to deploy capital.

Speaker #5: With where we sit today, is your best incremental investment deploying capital into new assets, or is it buying back stock? And it helps us sort of understand how you guys are thinking about that repurchase program.

Speaker #4: Thanks, Rick. It's Brad. And it's great to have you on the call. I think we're in a little bit of new territory for us.

Speaker #4: We've been trading at a premium for so long that trading at a discount is more of a more recent issue. I think Teddy framed it well.

Brad Marshall: All those tailwinds still exist. We just need to work through a period of heightened uncertainty and volatility, largely around the software space.

Speaker #4: We have bought back shares in the past, quite a bit, actually. So we're not afraid to do so. We do have a lot of things that we need to manage: leverage levels, and making sure that we can support our existing portfolio companies.

Arren Cyganovich: Got it. That's helpful. Thanks. As a follow-up on. We've seen a couple BDCs make some asset sales recently. One of them had already said they were going to do this last quarter, it's wasn't necessarily a surprise. Do you have a view on that? You know, you're trading below book, not dramatically below book. Is there any benefit to, you know, selling assets at fair value and, you know, putting that back into the stock?

Speaker #4: But I will say that given where the stock is trading, buying back shares is a very interesting price to do so. But there are a lot of different factors that it's not as simple as that.

Speaker #4: So we've done it in the past. We think it's attractive. And there's lots of factors we'll evaluate.

Brad Marshall: What I would say to that is, we are definitively long-term holders of assets, and we also have $2.5 billion of liquidity. Like we mentioned on the call, we have $550 million of near-term repayments. I suspect there's another $1 billion or $2 billion that will occur over the balance of the year. The fund itself, you know, naturally generates liquidity because of the term nature of the investments that we make. With those proceeds, we will look at all the options, as I mentioned on in answering Finn's question, which is we will look at buybacks. We have approval to do that. We will look at new loans that come through our system. We may look to de-lever.

Speaker #5: I appreciate that. And it's helpful. And again, realizing it is a complex decision. Look, the other thing is, and it's interesting revisiting the space after all these years, look, you guys are trading at a discount to NAV, but you are trading at a relative premium to most of your peers.

Speaker #5: Historically, we have seen in those environments, particularly where peers are trading at substantial discounts, some opportunities for strategic decisions that are actually accretive despite trading at a discount to NAV.

Speaker #5: Are there pools of assets out there right now that you find attractive? Or do you feel like those opportunities are just taking on other people's problems?

Brad Marshall: All those options will be on the table. It's probably worth just hitting on this turnover and repayment dynamic, which actually can be quite positive for BDCs and BXSL in particular. I mentioned three assets that will be repaid this Q. You know, those assets had been marked down to 93 at their low, and now they're getting refinanced at par. That sort of activity as we get those repayments will be positive to on those underperforming assets to pull NAV up. It'll be positive to generate liquidity, which we can use to do one of many things, as I just highlighted. Lots of, you know, different, you know, options on the table for us.

Speaker #4: Yeah, if you're referencing buying secondary loans that are other investors are looking to sell, we've looked at portfolios. We do think that investing in new loans is the best use of capital for the XSL, the secondary credit sales, remains to be a fairly kind of active market.

Speaker #4: And we look at that across our broader platform. But for BXSL specifically, I think we want to continue making kind of new primary loans where we've had the ability to do very deep underwritings.

Speaker #4: As you know, these take months and months of detailed work. When you're buying a secondary portfolio, it's a little bit more of a tabletop analysis.

Doug Harter: Thanks, Brad.

Arren Cyganovich: Thanks, Brad.

Operator: Thank you. We'll take our next question from Kenneth Lee with RBC Capital Markets.

Speaker #4: So BXSL will focus on new loans.

Kenneth Lee: Hey, good morning. Thanks for taking my question. I think previously you talked about operating leverage perhaps closer to the higher end of the target range there. Just given the potential opportunities to deploy into as well as the share repurchase, maybe just give us some thoughts about where leverage, you know, where could you kind of trend over the near term or where you're looking to operate near? Thanks.

Speaker #5: Great. I appreciate the clarity of the answer. Thank you, guys.

Speaker #1: Thank you. That will conclude our question and answer session. At this time, I'd like to turn the call back over to Stacy Wang for any additional or closing remarks.

Speaker #7: Thank you for joining us this morning. We appreciate your engagement and ongoing support of BXSL. Don't hesitate to reach out with any follow-up questions.

Teddy Desloge: Yeah. Thanks, Kenneth Lee. This is Teddy Desloge. I'm happy to take that. Just starting with the facts, as highlighted, 1.3 gross ending leverage, 1.27 average, 1.25x on a net basis. As Brad Marshall mentioned, we did have a very active end of the year. It was our second most active quarter on gross origination since 2021. We did have some deals, deal processes accelerated toward the end of the year. We ended at slightly above the 1.25x range. We also do have $2.5 billion of immediate liquidity, $550 million of repayments near term. Really taking that all together, Kenneth Lee, no change. Long-term target remains 1.25x.

Teddy Desloge: We would expect to be able to manage near the high end of that range in the near term.

Kenneth Lee: Gotcha. Very helpful there. Just one follow-up, if I may, and this is just on the software book here, and really appreciate the additional details and color around there. How do you think about specifically recovery rates for software companies, just given lack of tangible assets, you know, how do you get confidence around the valuations and all sorts around that? Thanks.

Brad Marshall: Yeah, I can take that. I think when we look at our software business businesses, we look at kind of how they're performing as a starting point. They're performing... actually, they're the best performing part of our business. No doubt, the public market has re-rated software companies. As I said in our remarks, even in that instance, you take the 25% kind of markdown or re-rating of public company software businesses, and we're still two times covered. We feel very good about our coverage on our software business. We do have a small subset, less than 5% of the portfolio, of assets that we think are more impacted by AI and some operational challenges.

Brad Marshall: You know, those, you know, are a little bit harder to pinpoint from a value standpoint. They're set up with a lot of equity in the business, and we suspect the sponsors will continue to support them.

Kenneth Lee: Gotcha. Very helpful there. Thanks again.

Operator: Thank you. As a reminder, if you would like to ask a question, please signal by pressing star one. We'll take our next question from Doug Harter with UBS.

Doug Harter: Thanks. You mentioned weighing the share repurchase, obviously, with the new authorization. Can you just walk through, you know, the thought process, how you'll evaluate that, you know, and kind of how we should think about, you know, actually using that versus kind of having it there for, you know, kind of in case further declines?

Douglas Harter: Thanks. You mentioned weighing the share repurchase, obviously, with the new authorization. Can you just walk through, you know, the thought process, how you'll evaluate that, you know, and kind of how we should think about, you know, actually using that versus kind of having it there for, you know, kind of in case further declines?

Teddy Desloge: Yeah, Doug, this is Teddy. I'm happy to take that. I think the short answer is we're going to watch it and be very opportunistic. We do have $250 million approved by the board. We also have turnover increasing the portfolio, as Brad mentioned. Historically, below a 10% discount to NAV can be quite accretive for buybacks. We've done this previously post-IPO. We announced $250 million repurchase that got done in 2022, and then we announced another plan in 2023. We'll be opportunistic with it. We'll watch it. It'll be a capital allocation decision between, as Brad said, paying down debt, new deals, and share repurchases.

Doug Harter: Great. Appreciate that, Teddy. Thank you.

Douglas Harter: Great. Appreciate that, Teddy. Thank you.

Operator: We'll take our next question from Ethan Hecht with Lucid Capital Markets.

Doug Harter: Hey, guys. Quick question on some of the unrealized appreciation during the quarter. Maybe you might have touched on it a bit in the prepared remarks, but I guess kind of specific to, you know, this quarter, it looks like the depreciation was largely driven by maybe a handful of positions, you know, call it 5 to 10 positions with maybe single-digit percentage point markdowns. I guess my first question is this kind of consistent with your read, or do you see it as more of a broad, kind of driven by broad market movement? Second question, assuming it is, in fact, driven by, you know, a few names here, can you walk through any potential, like, common denominators? I know you mentioned operational challenges, but, you know, do you see these as, kind of idiosyncratic?

Ethan Kaye: Hey, guys. Quick question on some of the unrealized appreciation during the quarter. Maybe you might have touched on it a bit in the prepared remarks, but I guess kind of specific to, you know, this quarter, it looks like the depreciation was largely driven by maybe a handful of positions, you know, call it 5 to 10 positions with maybe single-digit percentage point markdowns. I guess my first question is this kind of consistent with your read, or do you see it as more of a broad, kind of driven by broad market movement? Second question, assuming it is, in fact, driven by, you know, a few names here, can you walk through any potential, like, common denominators? I know you mentioned operational challenges, but, you know, do you see these as, kind of idiosyncratic?

Doug Harter: I guess, additional specificity here would be appreciated.

Ethan Kaye: I guess, additional specificity here would be appreciated.

Teddy Desloge: Yeah, absolutely. Thanks, Ethan. I'll start with just the facts. You're right, NAV per share was $26.92. That's versus $27.15 prior quarter, down $0.23 or less than 1%, about 85 basis points. When you dig into the $0.23, we had $0.26 of unrealized losses, about a $0.01 of gains, and $0.03 of excess earnings. Within the unrealized losses, you're right, the marks were concentrated to a small handful of positions. Two accounted for about 50% of net unrealized gains, and losses in the top five accounted for over 60%. Taking a step back, what we see on the ground is stability, earnings growth, consistently high single digits, increasing interest coverage ratios and cash flow profiles.

Teddy Desloge: While you certainly can see some movement in marks tied to both performance and spreads over time, what we're seeing is around 85% of the portfolio seeing stable or improving trends based on fundamentals.

Brad Marshall: Yeah, maybe just to add to that, 'cause I mentioned this in the remarks. The number of deals on our watch list actually declined during the quarter. If I look back over the past 7 years, since we started BXSL, we've actually had 0 net realized losses for investors. It does kind of get back to we do mark the portfolio quite actively. You know, it is really, really designed to be defensive. That's why we're first lien in the capital structure, why we're with large businesses, why they're largely sponsor-backed, why we've picked some low default sectors.

Brad Marshall: I just wanna, you know, highlight that and the journeys that sometime assets take, like the 3 I mentioned, that just got repaid at par, you know, were all in the kind of low 90s, at one point. Companies don't always go up to the right. We work through them. I also mentioned this on the call. I've been doing this 21 years in our, you know, direct lending business. Our realized loss rate is 10 basis points a year over that 21 years, and that's obviously through a lot of different economic, you know, cycles. This is just ordinary, kind of marking of assets, and we feel very, very good about the overall portfolio.

Doug Harter: Okay, great color. Thank you, guys. One quick, you know, unrelated question. I just want to get these numbers right. You mentioned $550 million of repayments over the first six months, kind of in the, you know, in sight. John, I think you also mentioned an additional $1 billion throughout the year. Can you just kind of flesh that out?

Ethan Kaye: Okay, great color. Thank you, guys. One quick, you know, unrelated question. I just want to get these numbers right. You mentioned $550 million of repayments over the first six months, kind of in the, you know, in sight. John, I think you also mentioned an additional $1 billion throughout the year. Can you just kind of flesh that out?

Brad Marshall: Yeah.

Doug Harter: For those numbers on the line, correct?

Ethan Kaye: For those numbers on the line, correct?

Brad Marshall: Yeah, Ethan, this is Brad. We have clear line of sight to $550 million of repayments. These are committed deals that are, have or will be, refinanced. If you look at a typical repayment cycle, it's somewhere between 15% to 20% a year. If you just use 20%, that's $2.8 billion of repayments this year. That's where we give the range of an expectation that we'll have another billion or two behind that, just given the latter vintages of our portfolio.

Doug Harter: Excellent. Thank you, guys.

Ethan Kaye: Excellent. Thank you, guys.

Operator: Thank you. We'll take our final question from Richard Shane with J.P. Morgan.

Richard Shane: Hey, guys. Thanks for taking my questions. Most have been asked and answered. The outlook on leverage is very helpful. Look, you guys have announced a repurchase. We just discussed the possibility of $2 billion of repayments this year. Leverage sounds like it's going to be flat. You're going to be making some choices in terms of how to deploy capital. With where we sit today, is your best incremental investment deploying capital into new assets, or is it buying back stock? It helps us sort of understand how you guys are thinking about that repurchase program.

Brad Marshall: Thanks, Rick. It's Brad. It's great to have you on the call. I think we're in a little bit of new territory for us. We've been trading at a premium for so long that trading at a discount is, you know, more of a, you know, more recent issue. I think Teddy framed it well. We have bought back shares in the past, quite a bit actually. We're not afraid to do so. We do have a lot of, you know, things that we need to manage, leverage levels, and making sure that we can support our existing portfolio companies. I will say that given where the stock is trading, you know, buying back shares is a very interesting price to do so.

Brad Marshall: Thanks, Ric. It's Brad. It's great to have you on the call. I think we're in a little bit of new territory for us. We've been trading at a premium for so long that trading at a discount is, you know, more of a, you know, more recent issue. I think Teddy framed it well. We have bought back shares in the past, quite a bit actually. We're not afraid to do so. We do have a lot of, you know, things that we need to manage, leverage levels, and making sure that we can support our existing portfolio companies. I will say that given where the stock is trading, you know, buying back shares is a very interesting price to do so.

Brad Marshall: There are a lot of different, you know, factors that it's not as simple as that. We've done it in the past. We think it's attractive, and there's lots of factors we'll evaluate.

Richard Shane: I appreciate that, and it's helpful. Again, realizing it is a complex decision.

Brad Marshall: Yeah.

Richard Shane: Look, the other, the other thing is, you know, it's interesting revisiting the space after all these years. You know, look, you guys are trading at a discount to NAV. You are trading at a relative premium to most of your peers. Historically, we have seen in those environments, particularly where peers are trading at substantial discounts, some opportunities for strategic decisions that are actually accretive despite trading at a discount to NAV. Are there pools of assets out there right now that you find attractive, or do you feel like those opportunities are just taking on other people's problems?

Brad Marshall: Yeah, if you're referencing buying, you know, secondary loans that other investors are looking to sell, you know, we've looked at, you know, portfolios. We do think that investing in new loans is the best use of capital for BXSL. The secondary credit sales remains to be a fairly kind of active market. We look at that across our broader platform. For BXSL specifically, I think we wanna, you know, continue making kind of new primary loans where we've had the ability to do very deep underwritings. As you know, these take months and months of detailed work. When you're buying a secondary portfolio, it's a little bit more of a tabletop analysis. BXSL will focused on new loans.

Richard Shane: Great. I appreciate the clarity of the answer. Thank you, guys.

Operator: Thank you. That will conclude our question and answer session. At this time, I'd like to turn the call back over to Stacy Wang for any additional or closing remarks.

Stacy Wang: Thank you for joining us this morning. We appreciate your engagement and ongoing support of BXSL. Don't hesitate to reach out with any follow-up questions. We look forward to continuing our dialogue next quarter.

Q4 2025 Blackstone Secured Lending Fund Earnings Call

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