Blackstone Secured Lending Fund signals continued deal acceleration with 90% increase in quarterly deployment amid stable credit quality

Earnings Call Insights: Blackstone Secured Lending Fund (BXSL) Q3 2025

MANAGEMENT VIEW

* Brad Marshall, Co-Chief Executive Officer, reported that BXSL saw deal activity accelerate, with leverage ending at 1.22x and new deals at an average spread of 544 basis points over the base rate. Marshall stated, “Non-accruals dropped to 0.1% of costs remaining the lowest among our traded BDC peers.” He emphasized that the portfolio's fundamentals remained stable and marked higher in the quarter, and the majority of assets were first lien.
* Marshall highlighted, “M&A activity is picking up. In fact, as of the third quarter, it is up 63% year-over-year,” reinforcing BXSL’s view that deal flow would improve throughout 2025.
* Jonathan Bock, Co-Chief Executive Officer, noted, “We ended the quarter with $13.8 billion of investments at fair value, over a 15% increase year-over-year from $12 billion,” and added that ending leverage “kicked up compared to prior quarter at 1.22x.” Bock also pointed out that nearly 98% of investments are in first lien senior secured loans.
* Carlos Whitaker, President, stated that the company maintained its dividend distribution of $0.77 per share and that Q3 marked the “most active quarter in 2025 from a funding perspective with net deployment up 65% and gross deployment up 90% quarter-over-quarter.”
* Teddy Desloge, Chief Financial Officer, reported, “In the third quarter, BXSL's net investment income was $189 million or $0.82 per share, representing a 106% coverage to our dividend on a per share basis.” Desloge also noted, “NAV per share at quarter end was $27.15, down from $27.33 at the second quarter.”

OUTLOOK

* Management expects deal activity to remain active, asset turnover to pick up, and spreads to stay attractive relative to traditional fixed income. Marshall indicated, “We expect to see deal activity staying active, asset turnover picking up, spreads remaining attractive when compared to traditional fixed income and credit quality remaining fairly steady across the portfolio.”
* Bock noted that the plan is to monitor base dividend levels in light of rates and earnings to ensure competitiveness and sustainability, especially as rate cuts are expected to impact earnings.

FINANCIAL RESULTS

* BXSL reported net investment income of $189 million or $0.82 per share. Total investment income for the quarter was up $14 million or 4.7% year-over-year, primarily from increased interest income.
* NAV per share was $27.15, a decrease of $0.18 from the previous quarter, with the reduction primarily linked to realized and unrealized losses on a small number of positions.
* Deployment for the quarter surpassed $1 billion, up 90% compared to the second quarter, with net funded investment activity over $500 million and repayments at $433 million, representing an annualized repayment rate of 13% of the portfolio at fair value.
* The weighted average yield on performing debt investments was 10%, down from 10.2% last quarter. The cost of debt was 5.04%, and total liquidity stood at $2.5 billion.

Q&A

* Finian O'Shea, Wells Fargo Securities: Asked about holding junior allocations and expected spread trends. Teddy Desloge responded that spreads on new deals marginally increased quarter-over-quarter and “overall, spreads have been pretty flat over the last 3 to 4 quarters.”
* O'Shea also questioned private credit demand amid negative headlines. Marshall stated, “There continues to be strong demand across all different types of investor bases for private credit.”
* Casey Alexander, Compass Point: Queried about the Medallia markdown and loan-to-value trends. Marshall replied, “No real update from last quarter on Medallia, and we believe it's marked appropriately,” and explained that the slight LTV increase was due to marginal adjustments in enterprise values.
* Douglas Harter, UBS: Asked about dividend outlook as base rates decline. Bock answered, “The plan is to keep looking at the base dividend in light of where rates and earnings are headed and still make sure it stays competitive and sustainable.”
* Kenneth Lee, RBC: Inquired about AI-related opportunities. Marshall said, “Everything in and around the AI ecosystem is looking attractive… you’ll continue to see us play in the picks and shovels around AI.”
* Ethan Kaye, Lucid Capital Markets: Asked about deployment to incumbents versus new borrowers. Desloge noted “over 80% of activity was to incumbent borrowers and over 70%… were sole leads.”
* Robert Dodd, Raymond James: Questioned the rise in loan-to-value and spread premiums. Marshall clarified LTV changes are “not an event that concerns us just given the subordination that remains below our debt positions,” and stated, “I strongly believe that, that premium will be maintained.”

SENTIMENT ANALYSIS

* Analysts were slightly cautious, probing on loan-to-value increases, dividend sustainability as rates fall, and markdowns on larger loans such as Medallia, but acknowledged positive portfolio performance and strong demand for private credit.
* Management maintained a confident tone in both prepared remarks and Q&A, emphasizing portfolio quality, disciplined approach, and readiness to navigate changing markets. Marshall stated, “We believe we are well resourced to understand and underwrite the fast paced change that AI is driving.”
* Relative to the previous quarter, management’s tone was more optimistic, reinforced by higher deployment, increased deal activity, and stable credit quality, while analysts remained focused on sustainability and risk factors.

QUARTER-OVER-QUARTER COMPARISON

* Deployment surged, with net and gross funding activity up sharply compared to Q2.
* Leverage increased from 1.13x in Q2 to 1.22x in Q3, moving to the higher end of the target range.
* Non-accruals decreased from 0.3% at cost to 0.1%.
* EBITDA growth in the portfolio moderated slightly from 11% to 9% year-over-year.
* Loan-to-value ratios edged up from 46.9% to just under 50%, attributed to enterprise value adjustments.
* Management’s tone shifted from caution in Q2, amid macro volatility, to increased optimism and a focus on capitalizing on heightened deal activity.
* Analysts maintained scrutiny over dividend coverage and credit quality, similar to the prior quarter.

RISKS AND CONCERNS

* Management cited “external narratives around bubbles and rising default across the credit markets,” but emphasized that defaults are declining and their portfolio is insulated by first lien senior secured loans.
* AI presents both risks and opportunities; BXSL aims to avoid sectors vulnerable to disruption and cyclical industries, maintaining a focus on larger, well-capitalized companies.
* Analysts questioned the sustainability of current dividend levels and the impact of declining base rates on earnings.
* Markdowns in a small number of positions, including Medallia, contributed to a decline in NAV per share.

FINAL TAKEAWAY

BXSL’s management highlighted a robust quarter of accelerated deal activity and strong credit fundamentals, underpinned by disciplined underwriting, high-quality first lien exposure, and active portfolio management. The leadership team signaled confidence in navigating market shifts, maintaining a covered dividend, and leveraging Blackstone’s platform and insights to deliver resilient income and potential growth for shareholders.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/bxsl/earnings/transcripts]

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