Blackstone Secured Lending Fund

The stable outlook reflects our expectation that in the next 12-24 months--despite macroeconomic headwinds--BXSL will continue to report stable asset quality and maintain its leverage at 1.0x-1.25x. Our outlook also considers the company's modest investment concentration, diversified funding mix, and adequate cushion on its regulatory 150% asset coverage requirement. We could lower the ratings in the next 12-24 months if: Leverage rises above 1.5x on a sustained basis; Asset coverage ratio declines to 165%; Asset quality worsens; or Liquidity becomes strained due to draws on unfunded commitments. We could raise the ratings in the next 12-24 months if operating performance and asset quality are favorable relative to peer BDCs while leverage remains within our expectations. BXSL is a non-diversified closed-end

...Blackstone Secured Lending Fund's (BXSL's) asset quality remains stable, but higher-for-longer interest rates could weigh on the operating performance of select portfolio companies. Despite macroeconomic headwinds from higher-for-longer interest rates and sticky inflation, asset quality at BXSL has remained steady. Loans on nonaccruals at cost were 0.1% as of March 31, 2024, and capitalized payment-in-kind (PIK) interest was 5.0% of gross investment income for the 12 months ended March 2024 (versus 4.5% a year ago). We expect asset quality challenges will persist for rated business development companies (BDCs) because borrowers in certain sectors will have difficulty passing through higher costs to end-users. Our base-case assumes PIK income will increase for most BDCs in the next few quarters while borrowers continue to face liquidity pressures. BXSL's lack of an operating track record through credit cycle is partly offset by the broader capabilities of the Blackstone Credit & Insurance...

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