Business Context and Reporting Period
Blackstone Secured Lending Fund filed a Current Report on Form 8-K dated October 18, 2021. The filing reports material agreements, a trustee appointment, governance amendments, and preliminary estimates for the quarter ended September 30, 2021.
Key Financial Metrics
- Net asset value: $26.15 per share; total net asset value approximately $4.1 billion as of September 30, 2021.
- Total return: Estimated quarterly total return of 2.8% for the three months ended September 30, 2021; annualized total return since inception of 10.0% and annualized year-to-date total return of 9.9%.
- Investments: Estimated fair value of investments of approximately $8.2 billion, up 12% from approximately $7.4 billion at June 30, 2021.
- Debt and leverage: Estimated total debt outstanding of approximately $4.5 billion and debt-to-equity ratio of 1.09 times.
- Cost of leverage: Estimated at 2.9% for the quarter, including unused fees, deferred financing costs, and accretion of net discounts on unsecured debt.
- Liquidity: Approximately $1.745 billion of excess borrowing capacity and approximately $260 million of available cash at September 30, 2021.
- Net investment income: Estimated at $0.61 to $0.63 per share, or $0.63 to $0.65 per share excluding approximately $0.02 per share of uncrystallized capital gains incentive fee accruals. The estimates use 147,932,846 weighted-average shares.
Material Changes and Corporate Actions
- The Company entered into an amended and restated investment advisory agreement with Blackstone Credit BDC Advisors LLC. Following an Exchange Listing, the incentive fee on income will use a 12-quarter lookback and a 1.50% quarterly hurdle, with an incentive fee cap based on cumulative net returns.
- A waiver agreement will preserve the existing fee rates for two years after an Exchange Listing: a 0.75% base management fee and a 15.0% incentive fee, instead of increases to 1.00% and 17.5%, respectively.
- Vikrant Sawhney was appointed to the Board of Trustees, increasing the Board to seven trustees, four of whom are not interested persons of the Company. He will not receive compensation as a trustee.
- The Board adopted an amended and restated declaration of trust and amended and restated bylaws, which will become effective upon an Exchange Listing. The declaration provides for three staggered trustee classes and heightened approval requirements for specified transactions, including certain mergers, conversions, and share exchanges.
Outlook, Risks, and Unusual Items
No formal financial guidance was provided. The September 30, 2021 financial information is preliminary, unaudited, and not subject to review or other procedures by Deloitte & Touche LLP. Management stated that actual results may differ materially because of closing procedures, final adjustments, and other developments.
The net investment income measure excluding uncrystallized capital gains incentive fees is a non-GAAP measure and is not a substitute for GAAP net investment income. The Exchange Listing is a key condition for the effectiveness of the revised fee structure, declaration of trust, and bylaws.
Investor Verification Items
- Confirm final audited or finalized September 30, 2021 results against the preliminary NAV, total return, net investment income, debt, and liquidity estimates.
- Verify whether and when an Exchange Listing occurred and the resulting effectiveness of the amended fee arrangements and governance documents.
- Review the amended advisory agreement and waiver agreement for the detailed incentive fee calculations, lookback provisions, and fee cap.
- Assess leverage, borrowing capacity, and the 2.9% estimated cost of leverage in light of portfolio growth and financing conditions.
- Review the declaration of trust and bylaws for the practical effect of staggered trustee terms, shareholder nomination deadlines, and heightened transaction approval thresholds.