Blackstone Secured Lending Fund (NYSE:BXSL) reported second-quarter net investment income of $174 million, or $0.75 per share, below its $0.77 per-share quarterly dividend. The business development company said it will use previously retained earnings as a temporary bridge while it transitions its dividend toward a level more aligned with its longer-term earnings profile.
Net investment income represented an annualized yield of 11.4%, while the annualized distribution yield was 12.1%, according to Chief Financial Officer Teddy Desloge. The company had $1.77 per share of undistributed earnings at quarter-end, compared with $1.80 per share at the end of the first quarter.
Portfolio marks weigh on NAV
Net asset value per share declined 2.8% sequentially to $25.53 from $26.26. Desloge said the decline was primarily driven by $0.59 per share of unrealized net losses, as well as $0.12 per share of realized losses tied to two restructurings completed during the quarter.
The portfolio was marked at 95.2% of par at quarter-end, down from 96.2% in the prior quarter. Chief Executive Officer Brad Marshall said nearly half of the unrealized private-company markdowns reflected broader market spread widening during the period, while the rest were related to underperforming investments.
Marshall said the bottom 10% of the portfolio was marked at 70. However, he said the remaining 90% continued to perform well, with last-12-month EBITDA growth of 7% year over year. Portfolio interest coverage improved modestly to 2.1 times.
The non-accrual rate fell to 1.8% of portfolio fair value and 3.6% of cost, from 3.1% and 4.7%, respectively, in the first quarter. The reduction was primarily attributable to two assets removed from non-accrual status following restructurings, and no new assets were added to non-accrual during the quarter.
Marshall said Medallia accounted for 1.5% of the non-accrual rate based on fair value as of June 30 before completing a restructuring after quarter-end.
Repayments accelerate and support liquidity
BXSL received more than $700 million of repayments during the quarter, equivalent to an annualized repayment rate of 21% of portfolio fair value. That compared with 13% in the first quarter and 5% in the year-earlier period.
The average low mark on assets fully repaid during the quarter was below 94, and certain repayments included call protection, leading to realizations slightly above par on average, Marshall said. He added that repayment activity can generate capacity for reinvestment while also supporting potential pull-to-par gains for assets that are marked below par but remain fundamentally sound.
“I would expect the vast majority of the assets that are currently marked below par to migrate and be repaid at par,” Marshall said in response to an analyst question, while noting that restructurings may follow a different path.
The fund deployed more than $300 million during the quarter and added five borrowers, bringing the portfolio to 313 companies. Management said recently committed deals across Blackstone Credit & Insurance generally have lower leverage, lower loan-to-value ratios and higher spreads than transactions in earlier quarters.
Marshall said spreads on new investments and certain add-on financings were roughly 25 to 50 basis points wider than last year. Restructuring financings can range from 25 to 100 basis points wider depending on the capital structure and amount of equity support involved, he said.
Management highlights first-lien positioning and credit work
The portfolio remained nearly 97% first-lien senior secured. Payment-in-kind income represented 6.6% of total investment income, unchanged from the prior quarter and down more than 20% from the fourth quarter of 2025. Interest income excluding PIK income, fees and dividends accounted for more than 93% of total investment income.
Management highlighted the company’s efforts to work proactively with borrowers, including restructuring underperforming companies and supporting amendments for companies pursuing growth initiatives or mergers and acquisitions. BXSL completed amendments for 38 issuers during the quarter, with more than 97% of amendment activity by fair value associated with what the company characterized as benign or positive events, including add-ons, M&A activity, delayed-draw term loan extensions and technical matters.
Marshall said sponsors have contributed additional equity to roughly half of the investments in the bottom 10% of the portfolio. He described the weaker portion of the portfolio as contained and said the investments generally skew toward older vintages that did not grow out of their original capital structures.
BXSL’s software exposure represented 19% of portfolio fair value across 70 borrowers. Marshall said these companies had weighted-average last-12-month EBITDA of more than $275 million, weighted-average revenue above $780 million and average interest coverage of 2.2 times.
Capital structure and buyback considerations
At quarter-end, BXSL had $13.4 billion of investments at fair value, $7.5 billion of outstanding debt and $5.9 billion of net assets. Total liquidity, including unrestricted cash and available debt capacity, was $2.8 billion.
Net leverage was 1.25 times, below the level at the end of each of the prior two quarters. The company’s all-in cost of debt was 5.05% during the quarter. About 68% of funded debt was unsecured and 32% was secured.
Desloge said the company expects continued repayment activity to create additional balance-sheet capacity through year-end. BXSL has authorization to repurchase up to $250 million of common stock below NAV, though it had not used the program as of the call. Management said it will weigh potential repurchases against deploying capital at wider spreads while maintaining its stated long-term leverage range of one to 1.25 times.
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.
