Blackstone Secured Lending Fund Q3 Earnings Call Highlights

Key Points

• BXSL will cut its quarterly dividend to $0.60 per share in Q1 2027, about 22% below the current payout. The board declared a $0.77 dividend for Q4 2026; the new rate implies an annualized yield of approximately 9.5% of Q3 NAV.
• Third-quarter net investment income fell to $0.68 per share from $0.75 in the prior quarter, while NAV declined 1.1% to $25.25 per share. The dividend exceeded quarterly income by $0.09 per share, contributing to the NAV drop.
• Nearly 96% of the $12.9 billion portfolio was in first-lien senior secured investments, and non-accruals were 2.1% of portfolio fair value. The fund had $2.6 billion of liquidity and gross leverage of 1.22 times debt to equity at quarter-end.

Blackstone Secured Lending Fund NYSE: BXSL will reduce its quarterly dividend to $0.60 per share in the first quarter of 2027, as the business development company moves its payout closer to what management described as the portfolio’s long-term earnings power.

The board declared a $0.77 per share dividend for the fourth quarter of 2026 before the reduction takes effect. The new rate is approximately 22% below the current payout and represents an annualized yield of about 9.5% on the company’s third-quarter net asset value, or NAV, of $25.25 per share.

Chief Executive Officer Brad Marshall said the existing dividend had served as a bridge to a lower level, supported by undistributed earnings accumulated over time. The company reported third-quarter net investment income of $0.68 per share, below the $0.77 dividend paid during the period.

Income and NAV Decline

Third-quarter net investment income totaled $158 million, or $0.68 per share, down from $0.75 per share in the prior quarter. Chief Financial Officer Teddy Desloge attributed the decline primarily to a smaller benefit from the company’s three-year incentive fee look-back mechanism.

NAV fell 1.1% from $25.53 per share at the end of the second quarter. Desloge said the $0.28 decline primarily reflected $0.19 per share of net realized and unrealized losses and the $0.09 per share by which the dividend exceeded quarterly net investment income.

Realized losses totaled approximately $1 per share, primarily from the realization of previously recorded unrealized losses on Medallia following its restructuring, Desloge said. The fund reported a 2.2% net return for the quarter and a 10.5% annualized net return since inception.

Undistributed earnings stood at approximately $1.68 per share at quarter-end, compared with $1.80 at the start of the year. During the question-and-answer session, Desloge said the company expects a further decline through the fourth quarter and will continue to evaluate the balance with its board.

Desloge said the reset dividend takes into account factors including the refinancing of more than $3 billion of bonds issued before interest rates rose. He said the higher refinancing costs are expected to offset potential benefits from higher rates on the predominantly floating-rate portfolio.

Portfolio Performance and Credit

The fund ended the quarter with $12.9 billion of investments at fair value, of which nearly 96% were first-lien senior secured. Marshall said portfolio companies had grown earnings before interest, taxes, depreciation and amortization by approximately 10% year over year, with average interest coverage of 2.1 times.

Loans on non-accrual represented 2.1% of the portfolio at fair value and 2.8% at cost, compared with 1.8% and 3.6%, respectively, in the prior quarter. Three investments exited non-accrual status, including Medallia, while three were added. Marshall said there were no common sector, geographic or sponsor themes among the new non-accruals.

Software accounted for 19% of the portfolio at fair value across nearly 70 borrowers. Marshall said those companies had weighted-average trailing EBITDA of more than $290 million and interest coverage of 2.3 times. Desloge said nearly all of the company’s first-lien software exposure was established with loan-to-value ratios below 40%.

Marshall also discussed recovery efforts on restructured investments. Across all such positions since inception, realized principal recoveries excluding coupons plus remaining unrealized value amounted to 0.76 times the original investment through quarter-end, he said. For positions fully or substantially realized, the recovery figure was 0.87 times, excluding coupons.

The fund recognized approximately $10.5 million of unrealized gains during the quarter on its equity position in Genuine Cable Group. Marshall said the announced sale of the business to Rexel, subject to customary closing conditions, would make it the fund’s seventh realized or substantially realized equity position.

Investment Activity and Funding Costs

Repayments and sales exceeded $650 million in the quarter, following more than $700 million in the prior period. The fund deployed approximately $250 million, with new deals and add-on investments carrying all-in spreads above 500 basis points, Marshall said.

Spreads and deal fees in Blackstone Credit and Insurance’s North American direct-lending pipeline were approximately 25 to 50 basis points wider than in the fourth quarter of 2025, according to Marshall. He said spreads had tightened from the beginning of 2026 but had not returned to year-earlier levels.

Marshall expects deal flow to accelerate in the first half of 2027, citing an increase in early financing requests from mergers and acquisitions advisers. He said the company is considering several ways to grow, including equity issuance, portfolio turnover, a potential joint venture and acquisitions, although any acquisition would need to be accretive and consistent with its investment strategy.

At quarter-end, the fund had $7.2 billion of outstanding debt, $2.6 billion of liquidity and gross leverage of 1.22 times debt to equity, down from 1.28 times in the prior quarter. The company made no repurchases under its $250 million discretionary share repurchase plan during the period, Desloge said.

About Blackstone Secured Lending Fund (NYSE:BXSL)

Blackstone Secured Lending Fund NYSE: BXSL is a business development company that invests in privately owned middle-market companies. The fund seeks to generate current income and long-term capital appreciation primarily through investments in senior secured, floating-rate loans.

BXSL's portfolio may also include second-lien loans, unsecured debt and equity investments. Its investments are generally made in companies across a range of industries, with an emphasis on businesses that have established operations and cash flows.

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