BXSL Earnings Call Transcript

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DATE

Wednesday, February 25, 2026 at 9:30 a.m. ET

CALL PARTICIPANTS

• Co-Chief Executive Officer — Brad Marshall
• Co-Chief Executive Officer — Jonathan Bock
• Chief Financial Officer — Teddy Desloge
• President — Carlos Whitaker
• Managing Director, Investor Relations — Stacy Wang

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TAKEAWAYS

• Net Investment Income (NII) -- $0.80 per share, representing an 11.8% annualized return on equity; NII covered the quarterly dividend by 104%.
• Quarterly Dividend -- $0.77 per share, equating to an 11.4% annualized distribution yield on NAV.
• Total Portfolio Investments -- $14.2 billion at fair value, with total net assets of $6.2 billion and net asset value per share at $26.92, down from $27.15 prior quarter, mainly due to $0.27 of net unrealized losses offset by $0.01 of net unrealized gains and $0.03 of excess net investment income over the dividend.
• Portfolio Markings -- Non-accruals were 0.6% at cost and 0.5% at fair market value, compared to 0.3% at cost and 0.2% at fair market value in the prior-year quarter; two additional positions entered non-accrual status.
• Deployment Activity -- $1.0 billion funded in the quarter for the second consecutive quarter, with $900 million of new commitments; net funded investment activity reached $400 million after $629 million in repayments and sales, up roughly 45% sequentially.
• Repayment Outlook -- $550 million of repayments anticipated in the first six months of the year as committed deals refinance, with management indicating a typical annualized repayment rate in the range of 15% to 20% of fair value.
• Share Repurchase Plan -- Discretionary program approved to repurchase up to $250 million of outstanding common shares at prices below NAV.
• Cost of Debt -- The weighted average all-in cost of debt for the fourth quarter was 4.93%, down from 5.24% last year, with $8.1 billion of outstanding debt and a 1.3x gross leverage ratio.
• Portfolio Fundamentals -- Top 90% of portfolio companies showed 9% EBITDA growth over the past twelve months, interest coverage above two times, and an average mark of 99.
• Amendment Activity -- Q4 amendment activity by issuer declined over 25% quarter over quarter, with over 85% relating to add-ons, M&A, DDTL extensions, or technical adjustments; only four issuers involved material amendments, totaling 0.8% of portfolio fair value.
• Dividend Coverage -- Dividend has been consistently out-earned with spillover income contributed to new loans and capital management.
• Credit Ratings -- BXSL maintained Baa2 (Moody’s, stable), BBB- (S&P, positive), and BBB (Fitch, stable) across rating agencies.
• Watch List Movement -- The watch list declined quarter over quarter, with portfolio borrowers on the list generally experiencing operational—not secular—challenges.
• Significant Transactions -- Led senior secured funding for AmTrust, MannKind, IEM, and Sabre Power; co-led $10.5 billion financing for digital aviation solutions business Jefferson.
• Software Exposure -- Majority of software portfolio concentrated in verticals with 40% EBITDA growth since underwrite and over two times interest coverage; marked Medallia at 77.75, reflecting a 70% value reduction due to execution issues, not AI.

SUMMARY

Blackstone Secured Lending Fund (NYSE:BXSL) reported $186 million in net investment income for the quarter, driven predominantly by interest income, while maintaining leverage within long-term target ranges. The Board authorized a $250 million share repurchase program as management weighs several capital allocation strategies amid trading below net asset value per share. Executives emphasized robust deal flow and anticipated portfolio repayments, projecting further liquidity to enable new investments or opportunistic buybacks. The majority of portfolio companies demonstrated high-single-digit EBITDA growth and resilient interest coverage ratios, while non-accruals remain minor in overall exposure. Management reiterated commitment to first-lien, sponsor-backed investments and characterized unrealized losses as concentrated and idiosyncratic, not indicative of broad portfolio deterioration.

• Desloge indicated unrealized portfolio depreciation was largely “concentrated to a small handful of positions,” with two positions accounting for about 50% of the net mark, and “over 60%” represented by the top five names.
• Marshall highlighted “zero net realized losses for investors” over BXSL’s seven-year history and an annualized loss rate of less than 10 basis points in the North American direct lending strategy.
• Marshall commented, look at that across our broader platform. But for BXSL specifically, I think we want to, you know, continue making kind of new primary loans where we have had the ability to do very deep underwritings. As you know, these take months and months of of detailed work. When you are buying a secondary portfolio, you are it is a little bit more of a tabletop analysis. So so BXSL will focus on on new loans.
• The company expects $1 billion to $2 billion in additional repayments beyond the $550 million already identified for the year, deriving from portfolio vintages and scheduled loan maturities.
• Desloge stated the discretionary repurchase plan will be executed “we will be opportunistic with it,” considering discount to NAV and overall capital allocation priorities.
• Marshall described spillover income above the dividend as providing multiple options: “We can reinvest in new loans. We can buy back, as you point out, discounted shares. We can delever. Those would be the the core kind of options.”
• BXSL’s non-accrual rate increased as two smaller positions were added in the quarter; no indication was given of anticipated credit stress beyond these cases.
• Marshall emphasized AI-themed investments, such as infrastructure “picks and shovels,” as ongoing themes in deployment, not signaling a substantive shift in underwriting standards.

INDUSTRY GLOSSARY

• First Lien Loan: A loan senior in the capital structure, holding a borrower’s primary claim on collateral if default occurs.
• Non-accrual: A loan on which interest income is no longer recognized due to risk of default or nonpayment.
• PIK (Payment-in-Kind) Income: Interest paid to lenders as additional securities rather than cash; often used in distressed or highly leveraged situations.
• DDTL (Delayed Draw Term Loan): A loan facility allowing the borrower to draw funds over a specified period after closing, used for add-ons or acquisitions.
• LTV (Loan-to-Value): The ratio of a loan amount to the appraised value of the asset being financed.
• Mark-to-Market: Adjusting the value of an asset or portfolio to reflect current market prices each reporting period.
• Spillover Income: Earnings generated in excess of the dividend requirement, retained for potential distribution or reinvestment later.

Full Conference Call Transcript

Stacy Wang: Thank you, 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. Earlier today, we issued a press release with the presentation of our results and filed our 10-Ks, both of which are available on the shareholder resource section of our website, www.bxsl.com. We will be referring to that presentation throughout today’s call.

I would 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 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 will turn the call over to Brad Marshall.

Brad Marshall: 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. 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, 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. 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 the significant capital expenditure buildout 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 BXSL, and have over $5,040,000,000,000 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. 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 leveraged loan market by 360 basis points with an 11.2% annualized return since inception seven 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, and you are seeing that durability reflected in quarterly performance. A few core topics I will 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, 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, 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, MannKind, 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. BXSL led all four of these senior secured transactions and was the sole lender in three of them.

Additionally, another large investment during the quarter that BXSL co-led was for a digital aviation solutions business called Jefferson, sold by Boeing for $10,500,000,000. We believe this company has a dominant market position, is performing exceptionally well post-close, and is categorized by BXSL 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 quarter’s call as well, external narratives around bubbles in the credit market continue to percolate in the news.

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 twelve months, have interest coverage over two 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 is 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. 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 firmwide 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 in 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 BXSL, with the help of the broader Blackstone platform, has an incredibly well-informed view on AI. It is also important to understand that you cannot paint software with a broad brush.

There are sub-verticals 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. BXSL has typically avoided the less differentiated business models. Sub-verticals 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, and today, these businesses generate over two times interest coverage. Importantly, the public market is differentiating in a similar way.

While software valuations have compressed from 18x NTM EBITDA last September to 14x today, these sub-verticals that I mentioned earlier continue to trade in the 15x to 20x EBITDA range, implying well over two times 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 $5,000,000,000.

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 due to a slower-than-expected turnaround. For background, BXSL led a first-lien term loan through 26% LTV at underwrite, supporting the $6,400,000,000 take-private acquisition of Medallia by the current sponsor, Thoma Bravo, who together with its co-investors have funded over $5,000,000,000 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, particularly in its go-to-market function.

Early last year, Thoma 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. 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. On average, these companies have been modestly down from an EBITDA growth perspective since underwrite, and were set up 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 watch list 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, 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-lien public loans, and 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 expected to repay this quarter at par, generating nearly $100,000,000 of liquidity. So 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. We have seen similar market dislocations before, including during COVID, and even following the post-tariff news this time last year.

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. For context, this is my twenty-first year of Blackstone’s credit business. Across multiple cycles and periods of volatility, BXSL has invested over $155,000,000,000 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. But 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 will turn it over to Teddy.

Teddy Desloge: 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 $186,000,000, or $0.80 per share, representing 104% coverage to our dividend on a per-share basis. Year-over-year fourth quarter total investment income was up over $5,000,000, or 1.5%, and interest income excluding payment-in-kind, fees, and dividends represented over 91% of our total investment income in the quarter. 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.

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. Moving to the balance sheet, we ended the quarter with over $14,200,000,000 total portfolio investments at fair value, $8,100,000,000 of outstanding debt, and $6,200,000,000 of total net assets.

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. 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.

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. 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. Only four issuers experienced material amendments, accounting for 0.8% of the portfolio by fair market value. Turning to activity, BXSL funded $1,000,000,000 for the second consecutive quarter, and committed over $900,000,000.

Net funded investment activity was $400,000,000 after $629,000,000 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 $550,000,000 of potential repayments for the first six months of the year, which could create additional balance sheet capacity if they materialize. Importantly, BXSL’s Board of Directors approved a discretionary share repurchase plan under which BXSL may repurchase up to $250,000,000 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 $10,500,000,000 and $8,100,000,000 of committed and funded debt, respectively, as of the fourth quarter. This includes $2,400,000,000 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.

We also have $2,700,000,000 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 $450,000,000 of CLO debt outstanding priced at SOFR plus 154. Lastly, we have nearly $5,000,000,000 of unsecured bonds outstanding as of the fourth quarter, $2,800,000,000 of which are not swapped and have an average coupon of 2.88%. This includes a $500,000,000 five-year bond we issued in October, priced at 155 basis points above the benchmark Treasury rate, or a 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, and taking this all together, our all-in cost of debt for the fourth quarter was 4.93%, down from 5.24% in 2024. Total liquidity at the end of the fourth quarter was $2,500,000,000, including unrestricted cash and undrawn debt available to borrow, while ending leverage as of December 31 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 three 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 and stable outlook by Fitch. With that, I will ask the operator to open it up for questions. Thank you.

Operator: Thank you. To allow as many callers to join the queue as possible, we will take our first question from Finian Patrick O’Shea with Wells Fargo Securities. We will now open for questions.

Brad Marshall: Hey, everyone. Good morning.

Finian Patrick O’Shea: First question, big picture, we are looking at the potential scenario where the non-traded channel slows, I know you have your share of institutional capital, but that is, you know, perhaps less so than some of the other great houses of direct lending. So how do you how do we think about the impact where, for example, you have often talked about the importance of check size, larger companies, and so forth. 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. Thanks.

Brad Marshall: Thanks, Fan. Thanks for the question. Maybe just as a starting point, to frame the market. So the U.S. leveraged finance market is about a $5,000,000,000,000 market. You look at high yield, it is about $1,500,000,000,000. And if you look at leveraged loans, about $1,400,000,000,000. Private credit in the institutional non-BDC channel is actually about $1,500,000,000,000. The non-traded BDCs are about $275,000,000,000 and traded BDCs are about $235,000,000,000. So it remains very much, as you point out, an institutional-driven market. And why? Because institutions see the asset class, I think, similar to how you view it, which is it is very defensive. We are driving a premium to what you can get in the public markets.

And that is really important. If you look at kind of our business more broadly to answer your question, our credit business is $520,000,000,000. We are in every crevice of the credit market. We are invested in, I think you have heard us mention this before, 5,000 companies around the world, which gives us incredible insights into going on with what is going on in the world and helps back up some of our investment themes. 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 $40,000,000,000 of dry powder.

So I expect us to remain fairly active in the remainder of 2026, similar to kind of how active we were in 2025, which was our busiest investment quarter since 2021. 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 will continue to attract capital in this space to the managers that are performing well.

Finian Patrick O’Shea: Great. Appreciate that. And I will on another sort of hypothetical, but also front and center question. You are 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.

Brad Marshall: Great. Thanks, Fan. 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 have taken those over-earnings 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 delever. Those would be the core kind of options. And you are 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 options at this point. But of course, appreciate you highlighting the fact that we are in this enviable position of having out-earned the dividend. And I also appreciate the point that we are in an unusual time where we are trading below book. So we need to consider all these options. But at the end of the day, it is a discussion on how do we want to best use our cash on hand to deliver attractive options for our investors, and all options are on the table.

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

Robert James 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, are not that significant to affecting pricing and spreads. Right? To your point, it is a $5,000,000,000,000 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? What do you think the potential is that is actually going to 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 there any reason why that would actually influence pricing out in the marketplace?

Brad Marshall: I think it is a little early to tell, Robert. It is a good question. And I appreciate you highlighting the liquid market, 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. And so the credit markets generally, again, despite what we read in the headlines, are actually pretty healthy. There is capital available. And as I mentioned, if you just look at our platform with, you know, $40,000,000,000 of dry powder, we will remain active in this market.

And the overall credit quality of the deals that we are seeing, the credit quality of the deals that we are in, are not suggesting that spreads should widen at this point. So we will continue to watch the market evolve. But right now, things feel pretty stable.

Robert James Dodd: Got it. Got it. Thank you. If I can kind of put that to, like, software, and I appreciate all the detail you gave and the framework to think about it. On, I mean, do you expect if I was going to 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 is it there is more potentially uncertainty? I mean, obviously, the different business models, etcetera.

But would you 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? We will go it. Wow.

Brad Marshall: The three-year crystal ball, I do not have, Robert. But what I would say is we are seeing very good investment opportunities in the infrastructure around AI. And you saw that in the fourth quarter. We made an investment in IEM. We made an investment in Sabre Power. And so that is definitely on theme for us. 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.

Robert James Dodd: Got it. Thank you.

Operator: Thank you, Robert. Thank you. We will take our next question from Arren Saul Cyganovich with Truist Securities.

Brad Marshall: Thanks. Good morning.

Arren Saul Cyganovich: 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, etcetera. You know, maybe just your thoughts on those conversations.

Brad Marshall: It is 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 are not terribly disrupted, but they are, you know, holding back right now, bringing some of these assets to market. And but I do expect for all the reasons we mentioned earlier, it will remain a fairly active year this year, because you do see growth in the economy. You do have lower cost of capital, which is positive for M&A activity. So all those tailwinds still exist.

And we just need to work through a period of heightened uncertainty and volatility, largely around the software space.

Arren Saul Cyganovich: Got it. That is helpful. Thanks. And then, there is a follow-up on, we have seen a couple of BDCs make some asset sales recently. One of them had already said they were going to do this last quarter, so it was not necessarily a surprise. Do you have a view on that? You know, you are you are trading below book, but not dramatically below book. Is there any benefit to selling assets at fair value and, you know, putting that back into the stock?

Brad Marshall: So what I would say to that is we are definitively long-term holders of assets. And we also have $2,500,000,000 of liquidity. Like we mentioned on the call, we have $550,000,000 of near-term repayments. I suspect there is another $1,000,000,000 or $2,000,000,000 that will occur over the balance of the year. So the fund itself, you know, naturally generates liquidity because of the term nature of the investments that we make. And with those proceeds, we will look at all the options that I mentioned 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 delever.

So all those options will be on the table. And it is 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. You know, those assets were had been marked down to 93 at their low, and now they are 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. And it will be positive to generate liquidity if which we can use to do one of many things, as I as I just highlighted.

So lots of, you know, different, you know, options on the table for us.

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

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. 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 could trend over the near term, where you are looking to operate near? Thanks.

Teddy Desloge: Yeah. Thanks, Ken. This is Teddy. I am happy to take that. So just starting with the facts, as highlighted, 1.3x gross ending leverage, 1.27x average, 1.25x on a net basis. As Brad mentioned, we did have a very active end of the year. It was our second most active quarter on gross originations since 2021. We did have some deals, deal processes accelerated toward the end of the year. So we ended at slightly above the 1.25x range. We also do have $2,500,000,000 of immediate liquidity, $550,000,000 of repayments near term. So really taking that altogether, Ken, no change. Long-term target remains 1.25x.

Would expect to be able to manage near the high end of that range in the near term.

Kenneth Lee: 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. How do you think about specifically recovery rates for software companies just given lack of tangible assets? How do you get confidence around the valuations and all sorts around that? Thanks.

Brad Marshall: Yeah. I can I can take that. I think we when we look at our software business, businesses, we look at kind of how they are performing as a starting point. And they are performing actually, they are the best performing part of our business. No doubt, the public market has rerated software companies. As I said in our remarks, even in that instance, you take the 25% kind of markdown or rerating of public company software businesses and we are still two times covered. So 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. Those are a little bit harder to pinpoint from a value standpoint. But they are 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. We will take our next question from Douglas Harter with UBS.

Brad Marshall: Thanks.

Douglas Harter: You mentioned weighing the share repurchase, obviously, with the new authorization. Can you just walk through the thought process, how you will evaluate that? You know, and kind of how we should think about 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 am I am happy to take that. I think the short answer is we are going to watch it and be very opportunistic. We do have $250,000,000 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 accretive for buybacks. We have done this previously post-IPO. Announced a $250,000,000 repurchase that got done in 2022, and then we announced another plan in 2023. So we will be opportunistic with it. We will watch it. It will be a capital allocation decision between, as Brad said, paying down debt, new deals, and share repurchases.

Douglas Harter: Great. Appreciate your time, Teddy.

Operator: Thank you. We will take our next question from Ethan Kaye with Lucid Capital Markets.

Ethan Kaye: Hey, guys. Quick question on some of the unrealized appreciation during the quarter. Maybe 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 five to 10 positions with maybe single-digit percentage point markdowns. 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?

And then, you know, 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 the operational challenges, but, you know, do you see these as a kind of idiosyncratic? Any, I guess, additional specificity here would be appreciated.

Teddy Desloge: Yeah. Absolutely. Thanks, Ethan. I will I will start with just the facts. So you are right. NAV per share was $26.92. That is versus $27.15 prior quarter, so 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 penny of gains, and $0.03 of excess earnings. And within the unrealized losses, you are right. The marks were concentrated to a small handful of positions. Two accounted for about 50% of net unrealized gains and losses, and the top five 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. While you certainly can see some movement in marks tied to both performance and spreads over time, what we are seeing is around 85% of the portfolio seeing stable or improving trends based on fundamentals.

Brad Marshall: Yeah. And maybe just add to that. Because 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 seven years, since we started BXSL, we have we have actually had zero net realized losses for investors. So it does kind of get back to, we do mark the portfolio quite actively, you know, but it is really designed to be defensive. That is why we are first lien in the capital structure, why we are at large businesses, why they are largely sponsor backed, why we have 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, you know, were all in the kind of low 90s at one point. So companies do not always go up to the right. We work through them. And I also mentioned this on the call. I have been doing this twenty-one years, and our direct lending business, our realized loss rate is 10 basis points a year over that twenty-one years, and that is obviously through a lot of different economic cycles. So this is just ordinary kind of marking of assets, and we feel very, very good about the overall portfolio.

Ethan Kaye: Okay. Great color. Thank you, guys. And then one quick, you know, unrelated question. You mentioned I just want to get these numbers right. You mentioned $550,000,000 of repayments over the first six months, kind of in the, you know, in sight. And then, John, I think you also mentioned an additional billion throughout the year. Can you just kind of flesh that out? Yeah. And those numbers for the timeline. Correct?

Brad Marshall: Yeah. Ethan, this is Brad. So we have clear line of sight to $550,000,000 of repayments. These are committed deals that are have or will be refinanced. If you look at a typical repayment cycle, it is somewhere between 15% to 20% a year. So if you just use 20%, that is $2,800,000,000 of repayments this year. And that is where we give the range of an expectation that we will have another $1,000,000,000 or $2,000,000,000 behind that, just given the latter vintages of our portfolio.

Ethan Kaye: Excellent. Thank you, guys.

Operator: Thank you. We will take our final question from Rich Shane with JPMorgan.

Brad Marshall: Hey, guys. Thanks for taking my questions.

Rich Shane: And 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 $2,000,000,000 of repayments this year. Leverage sounds like it is going to be flat. So you are 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? And it helps us sort of understand how you guys are thinking about that repurchase program.

Brad Marshall: Thanks, Rick. It is it is Brad. And it is great to have you on the call. I think we are in a little bit of new territory for us. We have 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. So we are 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.

But I will say that given where the stock is trading, you know, buying back shares is it is a very interesting price to do so. But there are a lot of different, you know, factors that it is not as simple as that. So we have done it in the past. We think it is attractive. There are lots of factors we will evaluate.

Rich Shane: I appreciate that. And it is helpful. And, again, realizing it is a complex decision, yeah. Look. The other the other thing is and, you know, it is interesting revisiting the space after all these years. You know, look. You guys are trading at a discount to NAV, but 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 are referencing buying, you know, secondary loans that other investors are looking to sell, you know, we have we have 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. And we look at that across our broader platform. But for BXSL specifically, I think we want to, you know, continue making kind of new primary loans where we have had the ability to do very deep underwritings. As you know, these take months and months of detailed work.

When you are buying a secondary portfolio, you are it is a little bit more of a tabletop analysis. So BXSL will focus on new loans.

Rich 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 would 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. Do not hesitate to reach out with any follow-up questions, and we look forward to continuing our dialogue next quarter.

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