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DATE

Thursday, May 7, 2026 at 9:30 a.m. ET

CALL PARTICIPANTS

  • Co-CEO of Blackstone Credit & Insurance — Brad Marshall
  • Chief Financial Officer — Teddy Desloge
  • Head of Investor Relations — Stacy Wang

TAKEAWAYS

  • Net Investment Income (NII) -- Blackstone Secured Lending Fund (BXSL 0.77%) reported $0.77 per share, fully covering the $0.77 per share dividend for the period.
  • Total Net Return -- Over 70 basis points for the quarter, achieved despite negative sentiment and volatility across loan and equity markets.
  • Net Asset Value (NAV) per Share -- $26.26, representing a 2.5% decline quarter over quarter, primarily due to unrealized losses of $0.67 per share.
  • Portfolio Mark -- 96.2% as of fiscal quarter-end (March 31, 2026), down from 97.3% sequentially, reflecting both spread widening and company-specific asset marks.
  • Non-Accruals -- 3.1% at fair value and 4.7% at cost, with three new additions: Medallia (marked at 60.3), Affordable Care (marked at 69.8), and Paramount Global Services (marked at 65); these positions account for over 88% of the total non-accrual balance by fair value.
  • Repayment Activity -- $450 million in repayments occurred, with visibility to over $600 million in additional repayments over the next three to four months.
  • New Investments -- $325 million of capital deployed, with the largest new commitment to Firmus Technologies, part of a $10 billion GPU-backed debt financing led by Blackstone Secured Lending Fund.
  • Undistributed Net Investment Income -- $1.80 per share, totaling over $410 million, maintained as retained earnings and available to support future distributions.
  • Balance Sheet Metrics -- $13.9 billion in total portfolio investments at fair value, $8.1 billion of outstanding debt, and $6.1 billion of total net assets.
  • Cost of Debt -- All-in weighted average of 4.9%, improved from 5.09% the prior year.
  • Leverage -- Net leverage at 1.27x and gross leverage at 1.32x, with a long-term management target range of 1.0x to 1.25x turns.
  • PIK Income -- Made up less than 7% of total income, down 21% quarter over quarter from over 8%.
  • Share Repurchase Authorization -- Up to $250 million may be repurchased, subject to continued pricing below NAV and available capacity from repayments.
  • Dividend Yield -- Annualized distribution of 11.7% as of the quarter, among the highest within the peer set.
  • Structural Protections -- Nearly 98% of the portfolio was first lien at fiscal quarter-end, with about 50% junior capital or equity below Blackstone Secured Lending Fund in its average capital structure.
  • Interest Coverage Ratio -- Portfolio weighted average coverage at 2.0x, representing a 17% improvement over two years.
  • Amendment Activity -- 30 amendments processed, down 25% from fiscal Q4 (period ended Dec. 31, 2025), with more than 95% classified as add-ons, DDTL extensions, or immaterial technical changes.

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RISKS

  • NAV per share decreased by 2.5% quarter over quarter, driven mainly by $0.67 of unrealized losses on the portfolio.
  • Software names in the portfolio were marked down by 270 basis points due primarily to AI concerns.
  • Three new non-accruals—Medallia, Affordable Care, and Paramount Global Services—comprise the vast majority of non-accrual assets, highlighting potential concentration risk in underperforming positions.
  • Bottom 10% of the portfolio marked at 73, reflecting persistent underperformance in a subset of investments and requiring potential sponsor capital or restructuring.

SUMMARY

Management confirmed that robust repayment activity is providing flexibility for capital allocation between share repurchases and new investments, supported by $600 million in anticipated near-term repayments. Shareholder returns were underpinned by a fully covered dividend, visible earnings retention, and active redeployment of capital into senior secured, high-spread opportunities, including a large-scale GPU-backed financing. The balance sheet showed improved funding costs and sustained liquidity, while structural protections remained a core investment feature. The call detailed that mark-to-market pressures, largely from spread widening and AI sector headwinds, weighed on both NAV and select software assets.

  • The portfolio’s new amendments have largely been technical or growth-oriented, with a marked reduction in material credit-driven changes compared to prior quarters.
  • CFO Teddy Desloge said, "reaffirming BXSL’s quarterly dividend of $0.77 per share, which we anticipate will be covered by a combination of prior undistributed earnings and current earnings," indicating a potential temporary reliance on retained earnings to support the payout as market rates reset.
  • Direct negotiation in BXCI-led credit agreements provided enhanced asset-stripping and collateral-release protections, which management argued offers superior recovery prospects versus traditional syndicated loans.
  • According to management, over 80% of fiscal Q1 leveraged buyout financings involved private lenders, underscoring enduring demand for direct-lending solutions amid volatile public markets.
  • Management stated, "about half the markdowns that we saw were related to the positions we put on non-accrual. That made up about 48% of the markdowns, and then the remaining 52% was spread very broadly across the portfolio," illustrating dispersion in credit volatility rather than isolated single-name risk.
  • Current repayment activity also monetizes call protection and unamortized OID, which management noted could incrementally enhance income upon realization.

INDUSTRY GLOSSARY

  • Non-Accrual: Loan status in which interest income is no longer recognized, typically due to borrower financial distress.
  • PIK (Payment-in-Kind): Interest or dividends paid in additional securities rather than cash, often indicating higher credit risk or sponsor-driven amendments.
  • OID (Original Issue Discount): A form of loan pricing where the borrower issues debt below its face value, enhancing yield to the lender upon repayment at par.
  • First Lien Loan: Debt secured by a senior claim on collateral, senior to other forms of debt in the event of default or restructuring.
  • DDTL (Delayed Draw Term Loan): A loan allowing the borrower to draw funds in tranches under predetermined conditions, often supporting growth or M&A.

Full Conference Call Transcript

Brad Marshall: Thank you, and good morning. Before turning to the quarter’s results, I want to take a step back and address the broader market environment. The first quarter unfolded against an uncertain backdrop across asset classes, with the S&P 500, investment grade, high yield, and broadly syndicated loan markets all posting negative returns amidst geopolitical developments, concerns around AI’s impact on software businesses, and overall wider spreads. Looking at the leveraged loan index, spreads widened roughly 50 basis points and returns were down 55 basis points during the quarter. Investor sentiment was clearly negative during the quarter.

Despite private credit generally outperforming the broadly syndicated loan and public equity markets, capital flows into several non-traded BDCs declined, and public BDCs traded down meaningfully. Amidst the volatility and broader market pressure, the private credit markets continued to be well capitalized and in high demand by private and public companies. Through Q1, over 80% of borrowers chose private lenders for LBO financings. The direct-to-borrower model is often a better solution to our corporate partners, while seeking to provide investors with risk mitigation through senior positioning, covenant protections, and contractual income-generated returns. We believe these attributes have contributed to positive returns in direct lending for Blackstone Credit and Insurance, or BXCI, since starting nearly 20 years ago.

In fact, over the past 20 years, over $160 billion has been invested in BXCI’s North American direct lending strategy with less than 10 basis points of realized annual losses, as described in our materials. More broadly, while we expect continued normalization of default activity across public and private sub-investment grade markets from historically low levels, the private credit model is built for that environment. In our view, performance in our portfolio will continue to be underpinned by high embedded current income, disciplined asset marks, and highly negotiated structural protections, and we expect that long-term outperformance to continue relative to liquid markets.

For BXSL specifically, first and foremost, we have nearly 98% first lien exposure with substantial cushion of nearly 50% junior capital or equity below our capital structures on average. Second, our credit agreements are heavily reviewed with key provisions we negotiate during periods of underperformance and include strong collateral protection. Third, nearly 80% of BXCI’s historical exposure is with either a sole or lead lender role, typically providing a position of influence. We are positioned in capital structures to enforce our rights, and we believe we have unmatched resources, experience, and infrastructure as part of Blackstone to help drive positive outcomes.

Furthermore, in BXSL, as we enter our eighth year, we have had a total of eight restructurings that incurred realized losses. Two of which have now been fully realized. In those two deals, inclusive of interest received, we achieved a realized multiple on invested capital of 0.98x, reflecting nearly a full recovery of our loan base. Turning to performance this quarter, we generated net investment income, or NII, of $0.77 per share, fully covering our dividend, and our total net return was over 70 basis points for the quarter despite a volatile market backdrop. We deployed $325 million of new capital and saw nearly $450 million of repayments, consistent with our messaging that repayment volumes remain healthy.

As we sit here today, we see visibility to over $600 million of repayments in the next three to four months, which we expect to use for a combination of new investments and share buybacks. NAV per share as of Q1 was $26.26, down approximately 2.5% quarter-over-quarter, reflecting changes to both public and private loan market spreads and company fundamentals. While these marks reduced NAV in the quarter, we believe they are an important part of the private credit model that reflect current information and market conditions, and every line item is publicly reported versus investment cost and fair value. Non-accruals for the quarter were 3.1% at fair value and 4.7% at cost.

We added three new positions to non-accrual, including Medallia, now marked at 60.3; Affordable Care, now marked at 69.8; and Paramount Global Services, now marked at 65. Of the 316 portfolio companies in BXSL, these three names make up over 88% of our non-accruals based on fair market value. It is worth highlighting that we believe the overall portfolio remains resilient if you look at averages across our book: stable, high single-digit EBITDA growth over the last 12 months; consistent portfolio company EBITDA margins; interest coverage at 2.0x, which is a 17% increase over the last two years; and an average mark of 96.2, which is generally in line with the broadly syndicated loan market.

Moreover, the bottom 10% of the portfolio is marked at 73, with valuations reflecting underperformance on a handful of names. Certain borrowers may continue to see challenges and require sponsor capital or capital structure improvements. We believe we are very well-positioned to drive this process as senior secured lenders. On the names we added to non-accrual this quarter, the largest is Medallia, representing 1.7% of BXSL’s fair market value. While the company paid its full quarterly interest in cash in March, we have begun working towards a restructuring. As part of this restructuring, we, together with the other lenders, plan to invest new capital into the business and meaningfully delever the balance sheet.

This will allow the company to, one, better serve its customers, and two, invest in new products and AI features. As we mentioned previously, Medallia is highly profitable today, and we expect it will greatly benefit from a delevered capital structure, which we expect to finalize over the next few months. Affordable Care, representing 0.73% of BXSL’s fair market value, operates in the dental service space, where demand trends have weakened and the business carries a relatively elevated cost structure. Importantly, we are first lien lenders in a capital structure with multiple layers of junior capital below our exposure and strong lender documentation.

We plan to enforce our rights as senior lenders, and we are actively engaged with the sponsor, management team, junior capital providers, and lender base to improve the capital structure. Finally, Paramount Global Services, which represents 0.26% of fair market value and remains current on its coupon payments, was also added to non-accrual. The business is a building products distributor within the trading companies and distribution industry, and has seen softening demand consistent with the broader industry, which has impacted performance. In our view, the sponsor has been supportive to date and believes the challenges to be more cyclical in nature.

The consistent theme across these three names is that we sit at the top of the capital structure where we have both strong documentation and lender protections. We use these to help improve the outcomes for our investors and the companies. On the new deal front, our largest new commitment was to Firmus Technologies during the quarter, an emerging GPU cloud service provider. Blackstone led a $10 billion GPU-backed debt financing to support the company’s cloud buildout serving large investment grade counterparties, including major hyperscalers and enterprise cloud customers. The loan is senior secured, denominated in U.S. dollars, with lenders having a first lien on GPUs.

To date, Blackstone has led or anchored nearly $25 billion of GPU financings and is the largest owner of data centers globally. We leverage the insights gained from our experience investing across the digital infrastructure ecosystem to identify investments that benefit from the continued tailwinds we see from the buildout and demand for AI infrastructure. In this case, proprietary origination and structuring complexity help create attractive relative value for our investors. At BXCI, we continue to see attractive opportunities within the digital infrastructure, life science, and infrastructure services areas of the market—three higher conviction themes with secular tailwinds where we can leverage Blackstone’s specialized expertise. We said last quarter that repayments would create additional balance sheet capacity if they materialize.

We emphasize this because repayments give us room to be patient, stay disciplined, and make capital allocation decisions between paying down debt, investing in new deals as spreads may widen, and potentially buying back shares. Natural turnover can pull assets back to par upon realization. In other words, when a credit is marked below par, due to market volatility or temporary performance pressure, but the underlying business retains meaningful equity value, repayments at par convert that discount into a positive realization for shareholders. A few recent instances: SelectQuote was previously marked as low as 88.4 and Colony Hardware at 91.75. Both were repaid at par during Q1.

Alliance Ground’s loan was marked at 96.75 previously and was taken out at par, while our equity position returned 2.0x invested capital. And lastly, and probably most notably, AVEX Aerospace, which went public in April. The business underperformed early in our BXSL investment. We held the position at a low mark of 82.5, yet we were taken out at par in Q2 following a very successful IPO. These four examples represent over $300 million of total repayments at par since Q4, despite a previous combined average mark in the 80s.

These are also examples of what we have stated in past quarters: we believe realized performance is what ultimately matters, and a more active deal market leading to more repayments can be a helpful longer-term return driver. This is also why we view interim marks and embedded income together. Current income can provide a significant return cushion, while repayment activity can convert below-par marks into par realizations. Finally, on software and AI, we continue to see public market bifurcation between business models that are more resilient and more insulated versus those at greater risk of potential disruption.

For public loans in the leveraged loan index, companies growing earnings greater than 10% in more protected end markets have seen modest spread widening and are trading on average north of 95. In public equities, companies with a similar profile trade at a median of nearly 14x EBITDA. BXSL’s software portfolio has continued to perform well, with low double-digit percent LTM EBITDA growth and a large portion of our exposure in historically resilient sub-verticals such as data management, ERP, and security. Across approximately 70 software companies in the portfolio, weighted average LTM EBITDA is over $280 million and weighted average revenue exceeds $750 million. On average, these companies also maintain interest coverage of 2.0x.

As the sole or lead lender for the majority of transactions, BXCI can be more proactive and influence change versus acting as a passive investor. In many cases, BXCI’s AI team has been working directly with some of these companies. We believe Blackstone has a differentiated perspective on AI. Across the firm, we have deep technology verticals that support and inform investment activity, including hundreds of technologists helping Blackstone’s expansive portfolio on software procurement, technology implementations, and AI adoption. We also benefit from senior AI experts and technology leaders across the platform. Additionally, Rodney Zemmel, former global leader of McKinsey Digital, is helping us advance AI-enabled underwriting, risk analytics, and portfolio activities to support BXCI’s investment process.

At large, the firm is in constant dialogue with AI market leaders across the digital infrastructure ecosystem. You may have seen the announcement this week that Blackstone is helping create a new AI services firm with Anthropic to bridge the gap between the technology and actual business applications. Once built, we expect that BXSL portfolio companies could engage the new firm and benefit from these services. Stepping back, our message this quarter is that while defaults may continue to normalize off historically low levels in the sub-investment grade market, this activity is not new and is built into the long-term return model across diversified portfolios of senior secured assets.

The important point is that performance is underpinned by high embedded interest income, disciplined marks that create cushion for future outcomes, and the structural protections we negotiate as first lien lenders. Said differently, this is a model designed to produce a range of positive performance over time, even as individual credits experience volatility. We believe the market is functioning, our portfolio remains broadly healthy, our underwriting and senior positioning matter, and our active asset management is designed to drive positive performance where companies see turbulence. At Blackstone, as the world’s largest alternative asset manager, we have the scale, operating resources, and experience through cycles to lean into situations that require operational support.

That matters, because even when defaults occur, we believe there is no better platform than Blackstone to manage them. BXSL has delivered a nearly 11% inception-to-date return, which represents 550 basis points of excess return to broadly syndicated loans. We have done this through a simple formula that remains in place today and continues to support outperformance: senior positioning in BXCI-originated assets in defensive areas of the market, high current income, low expense ratios, strong structural protections, disciplined marks, and active asset management. Taken together, these elements give us confidence in BXSL’s ability to outperform for our shareholders across cycles. With that, I will turn it over to Teddy.

Teddy Desloge: Thanks, Brad. First, on performance. BXSL’s net investment income for the quarter was $179 million, or $0.77 per share, representing 100% coverage of our dividend on a per-share basis. Payment-in-kind income represents less than 7% of total income, which is down 21% on a quarter-over-quarter basis from over 8% of total investment income. Interest income, excluding payment-in-kind, fees, and dividends, represented over 92% of total investment income in the quarter. Looking back, BXSL has out-earned its dividend every quarter since inception. More recently, since the beginning of 2023, BXSL’s annualized earnings exceeded its distribution yield by 160 basis points on a weighted average basis.

Over this period, undistributed earnings were retained in net asset value, which represents approximately $1.80 per share as of the first quarter, or over $410 million. This capital has been reinvested into new deals and has been accretive to NII by approximately $0.07 per share after accounting for annual excise tax on undistributed amounts. We outlined last quarter that should BXSL stock trade at a discount to net asset value, we would consider returning a portion of undistributed earnings to investors. We are doing so by reaffirming BXSL’s quarterly dividend of $0.77 per share, which we anticipate will be covered by a combination of prior undistributed earnings and current earnings.

This provides a temporary bridge as we realign our dividend with the longer-term earnings profile as rates have reset on our predominantly floating rate portfolio. As always, we will continue to evaluate the dividend with our Board every quarter. It is worth noting we manage BXSL with a long-term orientation. That means remaining patient through periods of market volatility, continuing to focus on income generation and positive realizations, and making capital allocation decisions based on long-term shareholder value rather than short-term sentiment. Moving to the balance sheet, we ended the quarter with $13.9 billion of total portfolio investments at fair value, $8.1 billion of outstanding debt, and $6.1 billion of total net assets.

Net asset value per share at quarter end was $26.26, down from $26.92 in the fourth quarter, or 2.5%, which was impacted primarily by $0.67 of unrealized losses in the portfolio, partially offset by $0.01 of net realized gains. The portfolio was marked at 96.2% as of the first quarter, down from 97.3% last quarter, reflecting a combination of broader spread widening across the public and private credit markets and company-specific fundamentals. Importantly, we have delivered net cumulative realized gains overall on investments since inception.

As Brad highlighted, we saw healthy fundamentals on average across our portfolio companies, demonstrated by consistent high single-digit percent EBITDA growth and increasing interest coverage ratios of 2.0x, which are up 5% from a year ago and 17% in the last two years. Earlier, Brad mentioned some of the advantages of senior private lending, and documentation is an important part of that defensive positioning. When we lead a transaction, we are able to negotiate directly with our borrowers and sponsors, and we place significant emphasis on lender protections from the outset. We conducted a bottoms-up review of Blackstone credit agreements across key covenant protections relative to broadly syndicated loans.

In BXCI-led transactions, nearly 100% included enhanced protection against asset stripping and collateral release, as well as caps on EBITDA add-backs. Only 40% of broadly syndicated loan documents contain similar protective provisions. We believe that discipline is critical and will support recoveries in the private market through cycles, and this reinforces the value of directly negotiated documents which can lead to benefits for senior secured private credit portfolios. Further, we did not see an increase in material amendments or performance-driven PIK amendments in the first quarter. In fact, both PIK income and amendment activity dropped this quarter.

We had 30 amendments in the quarter across our portfolio, down 25% over Q4, with over 95% related to add-ons, DDTL extensions, and immaterial technical matters. Turning to activity, as Brad mentioned, BXSL funded over $325 million at a weighted average spread of nearly 530 basis points above the reference rate. Net funded investment activity was negative $126 million after nearly $450 million of repayments. This represented an annualized repayment rate of 13% of the portfolio at fair value, compared to 15% for the prior quarter and 28% for the same quarter in the prior year.

As a reminder, BXSL’s Board of Directors approved a discretionary share repurchase plan last quarter under which BXSL may repurchase up to $250 million in the aggregate of its outstanding common shares in the open market at prices below its net asset value per share. As we see repayment activity creating additional capacity through year end, we expect to evaluate share repurchases so long as trading levels persist at similar discounts to NAV as seen in the first and second quarter thus far. That said, capital allocation for share repurchases will be weighed against both new deployment opportunities and repayment volume as we manage to our stated long-term leverage range of 1.0x to 1.25x.

Our liability profile remains diverse across multiple financing markets, including $10.2 billion of committed debt capacity and $8.1 billion of funded debt as of the end of the first quarter. We have relationships across diverse lending counterparties and a balanced mix of unsecured and secured funding, with approximately 56% of funded debt unsecured and 44% secured. This diversity of funding sources, combined with our scale and longstanding lender relationships, supports financial flexibility and a cost of capital that remains attractive relative to our traded BDC peers. We remained active in the quarter on liabilities while reducing our cost of capital.

We have $1.7 billion drawn on our asset-based facilities with multiple banks, which had a weighted average drawn spread of SOFR plus 184, down 8 basis points since Q1 2025. We successfully closed an upsizing for the BXSL revolver, increasing the facility by $100 million to a total size of $2.5 billion. BXSL to date continues to have the most competitively priced revolvers across our traded BDC peers. In addition, we have over $450 million of CLO debt outstanding at a weighted average coupon of SOFR plus 154, and $4.5 billion of unsecured bonds outstanding as of March, which is not swapped and has a weighted average coupon of 2.58%.

This includes a $400 million three-and-a-half-year bond we issued in February priced 200 basis points above the benchmark Treasury rate, or a 5.25% coupon. Taking all of this together, our all-in cost of debt for the first quarter was 4.9%, down from 5.09% in 2025. Total liquidity at the end of the first quarter was $2.3 billion, including unrestricted cash and undrawn debt available to borrow, while ending leverage as of March 31 was 1.27x on a net-of-cash basis and 1.32x on a gross basis. We expect repayment volumes to continue, and with that, we can manage to the high end of our range of 1.0x to 1.25x turns.

With that, I will ask the operator to open the call for questions.

Operator: We will now open the call for questions. To join the queue, please signal as prompted. We will take our first question from Rich Shane with JPMorgan.

Rich Shane: Hey, guys. Thanks for taking my question. The framework that we have been asking most of the BDCs this quarter is really trying to understand where you think we are in the continuum both in terms of return profile and also where we are in terms of deal structure. I am curious, particularly on the ROE side, if you can frame what you think the opportunity is now and put it in the context of what we have seen historically. Realizing, of course, you guys are asset-sensitive, so if you want to think about it as an ROE as a SOFR-plus, that is a great way to do it.

Brad Marshall: Sure. Thanks, Rich. As we mentioned on the call, we have seen spreads move a little bit wider and we have seen the cost of our leverage decline. That is a net positive. The other positive is that as we see continued turnover, you should expect some of those assets that were marked below par to gravitate to their repayment price of par or better. Those are two positive drivers of return, offset by mark-to-market volatility in our assets driven by what we are seeing in the market backdrop and, if there is interim underperformance on assets.

What we have tried to do on our calls is identify that last bucket—the bottom 10% of our portfolio—which we have marked at $0.73 on the dollar, and say that as those perform in future quarters, we will either take those marks up or down, or sponsors may contribute more capital. That is where you will see most of the volatility from a mark-to-market standpoint. The good news there is historically, recovery rates have been higher than that. And even if they are lower than that and all of those assets default, the downside from a realized NAV standpoint is actually pretty limited.

If you assume a 50% recovery rate on those bottom 10% of assets, that implies roughly a 2.3% asset movement from here. So, to frame the answer, you have very high income across our vehicle and other BDCs that helps offset any potential losses in an asset class that historically has had moderate default rates and very strong recovery rates. BXSL is uniquely positioned because we are 98% senior secured. So when we do see non-accruals—three of which we talked about on this call—we are in control. We can reset the capital structure, work to improve the business, and capture the upside to the extent we are successful.

We have a long history doing that, with less than 10 basis points annually in realized losses because of that seniority and the high income we generate. From here, you have a couple of positive potential drivers of return. We will see what happens with rates. And then you have a couple of interim points of volatility based on market conditions and certain assets’ interim performance.

Rich Shane: I appreciate it. I think somewhere along the line we have written, we should not assume that everything going forward will be unprecedented. But I am hoping at some point soon we will be right on that.

Brad Marshall: Thanks, Rich. I am with you. Thanks, guys.

Operator: We will take our next question from Analyst with UBS.

Analyst: Hi. I was wondering if you could maybe size how much of the losses that you saw this quarter were a result of credit issues versus AI concerns versus spread widening that we have seen in the market?

Brad Marshall: I will take a stab at that. Your line was a little bit muffled, but I think I heard it. If you look at this quarter, about half the markdowns that we saw were related to the positions we put on non-accrual. That made up about 48% of the markdowns, and then the remaining 52% was spread very broadly across the portfolio. More specifically, our software names we took down 270 basis points during the quarter, based for the most part on AI concerns.

Analyst: Got it. Thank you.

Operator: We will take our next question from Kenneth Lee with RBC Capital Markets.

Kenneth Lee: Hey, good morning, and thanks for taking my question. Just on the prepayments activity, the visibility that you are seeing there—what is driving some of the healthiness that you are seeing in terms of prepayment activity even despite a potentially wider spread kind of environment there? Thanks.

Teddy Desloge: I am happy to take that. Thanks, Ken. We are tracking a number of repayments, and as you look at the list, it is really a mix of a few things: sales to strategics, we did have one company go public in the quarter as Brad mentioned, sponsor-to-sponsor M&A—although that has been a little bit softer—and also refinancing. So it is a mix. We highlighted last quarter we had visibility to over $550 million of repayments near term. We saw that conversion. In the first quarter we saw $450 million, and as we sit here at the end of the first quarter, we have visibility to another $600 million in Q2. So that turnover continues at a healthy pace.

As it relates to the full portfolio and the potential return impact, we do have about two points of call protection and unamortized OID across the portfolio. As those repayments continue, there is potential monetization of that call protection and unamortized OID in income. And I would expect that repayment activity picks up towards the end of the year. We have had a healthy start, we have good visibility, and I think that continues to pick up as we see more deal activity flow through the system.

Kenneth Lee: Gotcha. Very helpful there. And then one if I may, just in terms of the common dividend. Sounds like there is some supplementing from the undistributed distributable earnings. How many additional quarters could you see that, and how would you frame out some of the potential return there? Thanks.

Teddy Desloge: Thanks, Ken. To summarize, we have covered our dividend every quarter since inception, most recently out-earning by over 150 basis points. We are paying out an 11.7% distribution, among the highest across the peers, and as a result of that we are sitting with about $1.80 of undistributed NII, and that capital has been reinvested in the portfolio. We also mentioned previously that we would consider distributions from undistributed NII if trading below NAV, which we had been over the last couple quarters. To facilitate that, we are reaffirming our dividend for the second quarter. We expect that to be covered by a combination of previous undistributed and current earnings. This should be viewed as a temporary bridge.

We recognize that rates have come down, and we continuously evaluate the longer-term dividend to align with the earnings generation of the portfolio. We will continue to evaluate that with our Board each quarter.

Kenneth Lee: Gotcha. Very helpful there. Thanks again.

Operator: We will take our next question from Finian O’Shea with Wells Fargo Securities.

Finian O'Shea: Hey, everyone. Good morning. Brad, a bit of a crystal ball question on credit. I think the industry is rolling through a bit of a tough vintage right now. I know there is spread widening on top of that, but sticking to credit—new non-accruals—what inning do you think we are in, in dealing with underperforming assets? How long should we expect new non-accruals to continue to roll in?

Brad Marshall: Thanks, Fin. I would expect that in levered credit there is always going to be some level of non-accruals flowing through everyone’s portfolios. We generate a double-digit dividend for our investors, and along the way we take some risk in doing so. I think default rates will normalize off what has been very low levels, and you are seeing that flow through most people’s earnings over the course of the year. But I do not think it is elevated, and I do not think it will be much more elevated from here.

As we look at our portfolio, most of the issues we are seeing, one, we think are already marked into the portfolio; two, are fairly identifiable—meaning we know what the issues are. They are not broad-based. They may be a bad acquisition, some operating issues, or a customer loss. So I think it is manageable. That does not mean there will not be more defaults in our portfolio and others. What really matters as you think about the outcome of any future defaults, or assets that go on non-accrual, is: are you first lien in the capital structure; can you control the outcomes of those non-accruals; and are you in a position to enforce your rights as first lien lenders?

If you are, then over a long history at Blackstone—20-plus years—the outcomes are pretty good. Loss rates are fairly low. You are able to reset the capital structure, which gives the company more flexibility to grow their business and invest versus cutting costs to service their debt. Put it in perspective: we are coming off a low default-rate environment, and where you sit in the capital structure matters.

Finian O'Shea: Appreciate that. A small follow-up to that thread. If today’s non-accrual rate in the industry is more of a normalization than a flare-up, do you think the 400 to 500 spread frame is just way too low and the industry needs to reprice risk in a more attractive way?

Brad Marshall: I think the spread environment will be dictated by the quality of deals you do and how the broader market, including the public loan market, is pricing risk. What we have seen over the past number of years is the public markets continue to price risk tighter and tighter, reflecting the default environment. What I think will happen over the course of this year, if deal activity accelerates, is that you could see a widening of spreads in order to get those deals done in the private markets. For us, our true north is to deliver a premium over those public markets.

You know this better than anyone, but last year we generated a 360 basis point premium to the public markets despite some markdowns on certain assets. In the first quarter, that premium was over 100 basis points. So I think the asset class—and BXSL—continues to deliver what it set out to do, which is deliver that premium to the public markets and drive an attractive return for investors.

Finian O'Shea: Great. Thank you, Brad.

Operator: We will take our next question from Arren Saul Cyganovich with Truist Securities.

Arren Saul Cyganovich: Thanks. I was hoping we could discuss some of the AI infrastructure investments that you were referencing—the GPU-backed debt financing. How are these structured? What kind of rate do you get on these loans, and are they backed by the borrower or are they nonrecourse? Just trying to understand the risks and rewards of the giant investment that is going on in the industry.

Brad Marshall: Thanks, Arren. In terms of where we are investing across AI, let me start with perspective. Blackstone has become the largest investor in AI-related infrastructure in the world. We have a unique vantage in this ecosystem that continues to grow, and we have developed in-house capabilities, which I mentioned. I know your question is around investing, but it is also worth highlighting that these capabilities and viewpoints help us manage our AI exposure and implement AI strategies in our portfolio companies—we are currently working with Medallia, more specifically. It is a unique asset to have within Blackstone because it is a 24/7 resource. We announced the partnership with Anthropic as an addition to that.

This entire buildout of the AI infrastructure is something that we will continue to stay very active in, and BXSL will benefit from that. Our investments in the space will continue to be first lien, senior secured, backed by collateral and backed by contracts. That is what you saw in our announcement with Firmus. That deal was a commitment last quarter that will start to fund this quarter. We will disclose the terms of that loan next quarter.

Arren Saul Cyganovich: Okay. That is helpful. Understanding that you have a strong history with credit and recoveries, the near-term impact of these new non-accruals is going to weigh on your earnings power. How can you get some of that earnings power back, and what is the investment appetite right now given the environment? Are you continuing to see good opportunities, and when would you expect to start to see some of that investment activity occur?

Brad Marshall: On the non-accruals, they are clearly not accruing any income. As we work through the restructuring, we will reset the debt lower such that the debt we reinstate will be accruing income. So there is earnings upside from those non-accrual names going forward. In terms of the opportunity set, it will be defined by how much repayment activity we see that allows us to reinvest into the market backdrop. Repayment activity does two things: it helps drive a little bit of extra earnings because of fee acceleration that we get, and it does help with NAV.

Lastly, those repayments we will use either to buy back shares or to reinvest into a market backdrop that in this moment feels a little bit wider, albeit there is not a ton of activity we have seen very recently.

Arren Saul Cyganovich: Okay. Thank you.

Operator: We will take our next question from Ethan Kaye with Lucid Capital Markets.

Ethan Kaye: Hey, guys. You mentioned balancing the allocation of repayment activity between share buybacks and new investments. Given some of the commentary we have heard about improving economics and terms on new deals, how do you see those two competing uses of capital stacking up currently? Is there a clearly more favorable use in the current environment?

Teddy Desloge: Thanks, Ethan. A few things. Number one, we want to see clear repayment volume continuing. We mentioned $600 million in the near term. As that happens, there are competing allocations of capital. First, we want to manage our leverage ratio to the 1.0x to 1.25x longer-term target. We are at 1.27x net, so we are not far off that. Second, as we said last quarter and continue to see, buying back shares is accretive at similar discounts that we have seen in the first and second quarter. If those continue, we will certainly evaluate that as a real option in the back half of the year.

Third, as repayments hit, we see a potential return benefit from unamortized OID and call protection, and then we can redeploy potentially at wider spreads. We saw spreads marginally wider in the first quarter, and what is getting done in the market today continues to move a little bit wider. So we may have capital to take advantage of that, tied to repayments.

Ethan Kaye: Okay. That is helpful. And then one other on Medallia. You talked about the confidence you have in that underlying business going forward. How much of the challenges would you categorize as capital-structure-related versus more fundamental pressure or competition from AI?

Brad Marshall: Great, thanks, Ethan. Most of their challenges have been around their capital structure, and it has prevented them from fully investing into the company for growth because their debt levels were higher than what their cash flow supported. As we go forward, our job is to reset the capital structure in a way that will position them to reinvest in the business and grow. After we finish the restructuring, they will be less levered than their competitors and therefore potentially better capitalized to continue to expand. They will most definitively need to invest into AI to continue to improve their product offering for their clients, but the company has already started this journey.

We are supporting them with more capital and our AI resources, and as I mentioned on the call, the company today is highly profitable. With the new capital structure, we are very optimistic.

Ethan Kaye: Appreciate it. Thanks, guys.

Operator: With no additional questions in queue, I would like to turn the call back over to Stacy Wang for any additional or closing remarks.

Stacy Wang: Thank you again for your time and continued interest in BXSL and for all your questions today. We look forward to updating you next quarter. Have a great day.