BXSL: A Rock in Rough Waters

Dear investors,

While the markets have been doing their best impression of a rollercoaster lately (without the fun photos at the end), I've been hunting for stability in the storm. And like finding the last chocolate chip cookie in the jar, I'm pleased to share a sweet discovery: Blackstone Secured Lending Fund (BXSL).

The BDC That Keeps Its Cool When Markets Don't

BXSL has earned its place in my "Risk Averse" portfolio sleeve for good reason. It's a Rank 1 BDC for me, with a Risk Rank of 1, my safest designation. While recent market turbulence has knocked many investments off their pedestals, BXSL stands firmly on its foundation of first-lien, secured loans (an impressive 98% of its portfolio, compared to the 74% peer average).

This defensive positioning isn't just for show – it's delivered tangible results. The company boasts a 29% return on equity (ROE) over the past eight quarters, placing it in the top tier of BDC performers. Even more impressive? It's achieved this with a microscopic 0.2% non-accrual rate (compared to the 2.6% industry average).

Why BXSL Shines in Trump's Trade Tornado

President Trump's recent tariff announcements have sent markets into a tizzy, with fears of escalating trade wars creating ripple effects across sectors. But BXSL management has done their homework here.

In their own words: "We've done a ton of work on this [...] the exporting of physical goods into the U.S. is not a significant part of our portfolio. We looked at areas where COGS and input costs and volumes could both be under pressure from higher tariffs from key regions, in particular, Mexico, China, and Canada. Overall, I think if we were to put numbers to it, it's kind of mid-single digits type exposure."

Translation: While others scramble, BXSL deliberately positioned itself with minimal exposure to sectors vulnerable to trade tensions.

The Numbers That Make Investors Smile

Let's talk dividends – because who doesn't love reliable income? BXSL currently offers an 11.3% regular yield with rock-solid 116% dividend coverage. In Q4 2024, the company reaffirmed its quarterly dividend of $0.77 per share for Q1 2025.

What's particularly impressive is BXSL's resilience against interest rate cuts. Even if rates decline by 200 basis points (which would include the 100 basis points already cut plus another 100 basis points), management projects that the dividend would still be 91% covered. Talk about sleeping well at night!

The company's NAV per share increased from $27.27 to $27.39 in Q4 2024, benefiting from both overearning the dividend and accretive share issuances. With the current price hovering around $27.34, you're essentially buying at NAV (1.0x price-to-book) – down from its historical 1.2-1.3x range.

Credit Quality That Makes Risk Officers Relax

Portfolio quality is where BXSL truly shines. Beyond the stellar 0.2% non-accrual rate mentioned earlier, consider these impressive stats:

• 98% first-lien senior secured debt (vs. 74% peer average)

• 1.7x interest coverage (vs. 1.5x industry average)

• Only 9% of the portfolio is below 1x interest coverage (vs. 15% industry average)

• Portfolio companies showing 15%+ higher profitability than market averages

• 46% loan-to-value ratio (improved from 48.2%)

• Recent Moody's upgrade to Baa2 from Baa3

These aren't just numbers – they reflect a disciplined credit culture that should serve investors well if economic conditions deteriorate.

Management Walking the Walk

Actions speak louder than words, and as I noted in recent videos, I recently increased my personal position in BXSL at $26 to 28 per share in early to mid-April 2025. Nothing says confidence like putting your own money on the line.

Management has maintained a disciplined approach to portfolio construction, targeting a debt-to-equity ratio between 1.00 and 1.25 (currently at around 1.13). This prudent leverage, combined with their focus on first-lien senior secured debt, provides both yield and relative safety.

Looking forward, I am setting my price targets of:

• $30.00 (short-term) - I am happy to buy beneath this target

• $33.00 (longer-term)

This represents a potential upside of 10-20% from current levels. Add the 10+% dividend yield, and the total return potential becomes quite compelling.

Bottom Line: Sometimes Boring Is Beautiful

In times of market uncertainty, I'm drawn to investments that offer both quality and defense. BXSL fits squarely in my "sleep well at night" bucket – especially at current valuations.

Is it exciting? Not particularly. But in today's market environment, boring is beautiful. With its Top Ranking in general, risk-averse profile, and my "Strong Buy" recommendation across both short- and long-term time horizons, BXSL represents that rare combination of quality, income, and value.

That's why I recently added to my position and now have BXSL representing a more significant chunk of my portfolio (particularly after some puts I sold were exercised early). In turbulent markets, I'll take boring and reliable over exciting and volatile any day of the week!

Until next time,

Lincoln Wood.

Disclaimer: This article represents personal opinions and should not be considered as investment advice. Always conduct your own research before making investment decisions.