Blackstone’s BDC (BXSL.US) Q2 profits plummet by 94%, while stabilized loan quality brings a glimmer of hope

According to news from Zhishang Finance APP, the publicly traded private credit fund Blackstone Secured Lending Fund (BXSL.US) under Blackstone Group released its second-quarter financial report on Thursday, stating that net profit plunged by 94% in the second quarter due to a decline in the valuation of its portfolio assets, although loan quality performance showed signs of stabilization.

For the three months ending in June, Blackstone Secured Lending Fund reported net profit of $9 million, a sharp decrease from $155 million in the same period last year, mainly due to asset write-downs. During the period, the company recorded unrealized losses of $137 million, more than 12 times higher year-on-year; realized losses amounted to $28 million.

Despite this, the fund's net investment income was $174 million, roughly the same as the same period last year. The Business Development Company (BDC) did not add any loans to non-accrual status this quarter.

Market Pressure: Redemption Wave and the AI Shockwave

This has been a challenging year for private credit funds. Investors have withdrawn in large numbers due to concerns over loan quality and risk exposure to software companies (impacted by advances in AI technology). While there is still debate on Wall Street about whether this concern is excessive, it has already placed additional pressure on asset prices and the funds holding these assets.

The fund manages assets totaling $13.4 billion, with net asset value (NAV) per share falling from $26.26 in the first quarter to $25.53, below the average analyst estimate tracked by the market of $26.19.

The company reported that, on a cost basis, loans in non-accrual status accounted for 3.6% of the portfolio, better than the two analysts' estimate of 4.73%.

This quarter saw a decrease in Payment-in-Kind (PIK) income, and the number of assets marked below $0.85 (typically considered distress level) also declined.

Portfolio adjustments intensified in the second quarter. Repayments surged to over $700 million, while new committed investments were just over $300 million, indicating a net contraction in investment activity. During the period, the fund added five new portfolio companies and exited eight investments, leading to a streamlined portfolio overall.

In terms of industry allocation, software remains the largest investment sector, but its exposure share is being gradually optimized. Notably, in June, a Blackstone-led consortium took over heavily indebted Medallia Inc. from Thoma Bravo and injected $100 million of new capital, showing Blackstone's active involvement in the restructuring and rescue of troubled assets.

During the period, the scale of fund repayments exceeded new investments: new repayments were over $700 million, while new committed investments were just over $300 million. The fund added five new portfolio companies and exited eight investments. The software sector remains its largest investment field.