Blackstone Secured Lending Fund Sees Deal “Escape Velocity,” Stays Disciplined on Leverage and AI Risk

Key Points

• Blackstone says the deal environment is improving toward what it calls "escape velocity," with direct lending activity up over 50% quarter‑over‑quarter and defaults down roughly 30% in 2025, supporting a healthier origination backdrop.
• The fund is maintaining disciplined capital management with average leverage around 1.15x–1.2x, about $2.5 billion of liquidity, no plans for dilutive equity raises, and dividend policy tied to long‑term NAV preservation and earnings power.
• On AI risk, Blackstone highlights roughly $4.5 billion of software enterprise value at ~37% loan‑to‑value at origination (about 50% even after haircuts), arguing strong subordination, broad diversification, and moat‑focused underwriting mitigate disruption threats.

Jonathan Bock, co-CEO of Blackstone Secured Lending Fund NYSE: BXSL and co-CEO of the non-traded BDC Blackstone Private Credit Fund (BCRED), said he is seeing an improving deal backdrop alongside what he characterized as a “fairly healthy” macro environment, while also emphasizing disciplined capital management and underwriting—particularly in software—amid investor concerns around falling rates, spread pressure, and AI-related disruption.

Macro conditions and origination activity

Bock said that, at a high level, the broader economy “is looking pretty good,” pointing to resilient corporate earnings and consumer spending, as well as declining rates as “a bit of a tailwind.” He also cited accelerating third-quarter GDP growth and noted that, for credit-focused investors, default rates “declined in 2025, down roughly 30%.”

He added that fourth-quarter data show volume beginning to recover, saying direct lending activity was up “over 50% quarter-over-quarter.” Bock also relayed a view from Blackstone leadership that the deal environment is reaching “escape velocity” after a difficult period, while acknowledging “there’s certainly more to do” in coming quarters.

Funding new investments and leverage posture

Asked how the firm plans to fund new opportunities when leverage is toward the upper end of its target range and shares trade below NAV, Bock pointed to what he described as a strong growth history, including “over nine consecutive quarters of $500 million or more” in commitments.

He said the platform’s average leverage is “roughly 1.15x,” with ending leverage around “1.2x,” and cited “roughly $2.5 billion of liquidity.” In discussing potential sources of additional funding, he highlighted several themes:

• Capacity for “a little bit more leverage”
• Repayments that tend to rise as deal activity accelerates
• Industry use of joint ventures and other structures, which he said can provide diversification over time

Bock also said that “you don’t ever…consider a level of dilutive equity capital raise,” and characterized the likely path as “remarkably boring,” centered on incremental leverage and expected repayment activity.

Dividend alignment with earnings power

With investors watching rate and spread headwinds and potential dividend resets in the BDC sector, Bock framed dividend policy as a reflection of long-term NAV preservation. He argued that if a dividend “is heavily exceeding the earnings power to produce it,” it can either erode NAV or incentivize managers to “stretch to take risk” to maintain payouts.

He said the firm is mindful of falling rates and noted potential offsets such as higher leverage and “normalized repayments.” While he did not rule out future adjustments, he said the current objective is to keep the “cost of capital” aligned with the firm’s ability to generate attractive investments and preserve NAV, adding that they have focused on “continued earnings stability.”

Software exposure and AI disruption risk

Bock addressed heightened investor scrutiny of software portfolios amid concerns about AI disruption, describing the platform’s focus as lending to “large, well-entrenched businesses” with “significant sponsor equity.” He said software exposure represents approximately “$4.5 billion of enterprise value” and cited a “37% loan-to-value at setup,” which he described as implying meaningful subordination beneath Blackstone’s debt position.

He said that even if public-market software stock declines were applied to those positions, the portfolio would still be “close to a 50% loan-to-value,” which he presented as a buffer against valuation declines. He also emphasized diversification, referencing “over 12 underlying subsegments” and “over 100 individual positions.”

On how AI changes the risk profile of earlier vintages, Bock said it is difficult to generalize and outlined three broad categories:

• Businesses where large language models could lower industry profitability or pressure margins
• Companies positioned to create “agentic opportunities” that can be sold into existing customer bases
• Businesses with data moats and protection (including regulatory considerations), and deeply embedded, mission-critical software

He added that many “moat” characteristics were already central to underwriting in 2021. He also highlighted Blackstone’s internal resources and cross-platform data, citing AI integration efforts led by Rodney Zemmel and referencing Blackstone’s scale across “nearly $1.2 trillion” in assets, as well as credit-specific resources such as “over 125 individuals” in its Office of the CIO.

Valuations, non-traded flows, spreads, and other investor risks

On BDC valuations, Bock said the group is at a point where price-to-book multiples remain depressed, citing a median near “0.8.” Based on his experience across cycles, he argued that such levels have historically implied a “high probability” of attractive future returns, with catalysts including time, deployment, and market adjustment to “cost-to-capital resets.”

Addressing headlines around elevated redemptions in the non-traded BDC market, Bock said traded and non-traded BDCs are “different galaxies.” He also said that in the fourth quarter the non-traded space saw “net growth,” describing redemptions rising from roughly “$3.5 billion” to “$8 billion,” while inflows were “over $12 billion” for BDCs of $3 billion or more. He cited approximately “$70 billion” of available liquidity across cash, revolvers, and broadly syndicated loans, and said redemptions and liquidity appear “intact” and manageable.

On spreads, Bock said tighter spreads have persisted, with private credit spreads typically in the “500 to 600” basis point range for first-lien loans and currently at the “tighter end.” He said spreads could widen in pockets if fear rises—tied to macro slowdown or sector-specific concerns such as software multiple compression—but he is “not seeing widespread or wholesale widening.” He emphasized that in a tight-spread environment, “every basis point matters,” highlighting the importance of discipline, low debt costs, low G&A, and aligned fee structures.

Bock also briefly discussed the AFFE issue, saying it is “working its way through Congress,” and argued that broader institutional participation would be beneficial due to the transparency of BDC financial disclosures. He said he is optimistic on long-term prospects but cautioned that BDC-related legislation tends to be measured “in decades.”

About Blackstone Secured Lending Fund NYSE: BXSL

Blackstone Secured Lending Fund NYSE: BXSL is a closed-end management investment company sponsored by Blackstone Credit, the credit-oriented business of Blackstone Inc Launched in May 2020, BXSL seeks to deliver attractive risk-adjusted returns primarily through current income and, to a lesser extent, capital appreciation. The fund raises capital from institutional and retail investors and deploys it into a diversified portfolio of senior secured loans and other credit instruments.

The fund’s principal investment focus is on first-lien senior secured loans and unitranche debt extended to middle-market companies across North America.

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