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Introduction & Market Context
Blackstone (NYSE:BX) Secured Lending Fund (NYSE:BXSL) released its second quarter 2025 results on August 6, showing a decline in net investment income (NII) despite continued portfolio expansion. The business development company, which focuses on senior secured lending to middle-market companies, reported maintaining its $0.77 quarterly dividend but with tightening coverage as interest income moderated.
The stock was down 0.8% in premarket trading following the release, with shares priced at $30.91, well within its 52-week range of $25.89 to $34.64.
Quarterly Performance Highlights
BXSL reported net investment income of $176 million ($0.77 per share) for Q2 2025, down from $189 million ($0.83 per share) in the previous quarter and $173 million ($0.89 per share) in the same quarter last year. Net income totaled $155 million ($0.68 per share), slightly up from $150 million ($0.66 per share) in Q1 but down significantly from $196 million ($1.01 per share) in Q2 2024.
As shown in the following quarterly results summary:
The company’s net asset value stood at approximately $6.3 billion, or $27.33 per share at quarter-end, representing a slight decrease from $27.39 per share at the end of the previous quarter. Total (EPA:TTEF) return was 2.3% for the quarter and 11.4% annualized since inception.
The detailed financial comparison across recent quarters reveals the gradual decline in NII per share despite portfolio growth:
Portfolio Composition and Investment Activity
BXSL’s investment portfolio reached $13.3 billion at fair value by the end of Q2 2025, up from $11.3 billion a year earlier. The portfolio maintained its focus on senior secured lending with 98.2% in first-lien debt and 98.9% in floating rate investments. Credit quality remained strong with only 0.3% of investments on non-accrual status at cost.
The portfolio characteristics demonstrate the company’s continued focus on capital preservation:
The fund has diversified its investments across 295 portfolio companies, up from 231 a year ago. Portfolio companies showed improved financial health with weighted average revenue increasing to $848 million from $773 million in Q2 2024, and LTM EBITDA rising to $219 million from $206 million. The average loan-to-value ratio improved slightly to 46.9% from 47.4% a year earlier.
BXSL’s portfolio remains well-diversified across industries, with software representing the largest sector at 20%, followed by healthcare providers and services at 10%, and professional services at 9%:
Investment Activity and Funding Profile
The company reported $631 million in new investment commitments at par during the quarter, with $530 million funded. This was partially offset by $185 million in sales and repayments, resulting in net funded investment activity of $345 million.
The following chart illustrates recent origination and funding trends:
BXSL maintains a well-structured capital base with $7.1 billion in debt and $6.3 billion in equity. The company reported $3.0 billion in available liquidity, providing significant capacity for new investments. Its funding profile includes 39% fixed-rate unsecured debt with a weighted average coupon of 2.88%, contributing to a total weighted average interest rate on drawn debt of 5.03%.
The company’s funding structure is illustrated below:
Dividend Coverage and NAV Trends
BXSL declared a regular dividend of $0.77 per share for Q2 2025, representing an annualized yield of 11.3% based on NAV. However, the dividend coverage ratio has tightened to 100%, down from 108% in the previous quarter and 118% a year ago, indicating that NII is just meeting dividend obligations.
The following chart shows the dividend coverage history:
The slight decrease in NAV per share from $27.39 to $27.33 during the quarter can be attributed to several factors, as illustrated in the NAV bridge:
Forward-Looking Statements
While the presentation did not provide specific forward guidance, BXSL’s focus remains on maintaining its high-quality, first-lien senior secured loan portfolio. The company’s investment grade credit ratings (Baa2/stable from Moody’s, BBB-/positive from S&P, and BBB/stable from Fitch) reflect its solid financial position.
The tightening dividend coverage ratio suggests potential challenges ahead if NII continues to decline. However, the company’s strong liquidity position of $3.0 billion provides flexibility to pursue new investment opportunities while maintaining its conservative approach to credit risk.
In the previous quarter’s earnings call, Co-CEO Brad Marshall had emphasized the importance of maintaining high-quality assets during volatile market conditions, stating, "In market times of volatility, uncertainty, you definitely want to be shifting to higher quality assets." This strategy appears to be continuing, as evidenced by the minimal non-accrual rate and improved loan-to-value metrics.
With 98.9% of its portfolio in floating rate investments, BXSL remains positioned to benefit from the current interest rate environment, though any future rate cuts could impact investment income and further pressure dividend coverage.
Full presentation:
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