Blackstone Inc. · NYSE:BX
Blackstone — Blackstone Loan Financing — Q2 2022 Earnings Presentation
57 slides from Blackstone's earnings presentation, Jun 30, 2022
Slide 1: Blackstone Loan Financing Limited
HIGHLY CONFIDENTIAL & TRADE SECRET This is a marketing communication. Please refer to the Prospectus of the Company before making a final investment decision. Blackstone Loan Financing Limited AS OF 30 JUNE 2022 FOR PROFESSIONAL INVESTORS ONLY. NOT FOR DISTRIBUTION TO RETAIL INVESTORS.
Slide 2: Table of Contents
TABLE OF CONTENTS HIGHLY CONFIDENTIAL & TRADE SECRET I. Overview 2 II. Second Quarter 2022 Results 7 III. Performance 14 IV. Portfolio Activity 17 V. Market Themes 21 VI. Portfolio and Market Outlook 28 VII. Appendix 30 VIII. Key Risk Factors 42 IX. Important Disclosure Information 45 Blackstone | 1
Slide 3: I. Overview
HIGHLY CONFIDENTIAL & TRADE SECRET I. Overview Blackstone | 2
Slide 4: Focus on senior secured corporate loans providing income and stable NAV
BLACKSTONE LOAN FINANCING LIMITED (“BGLF”) HIGHLY CONFIDENTIAL & TRADE SECRET Focus on senior secured corporate loans with a goal of providing compelling income and stable NAV Strategy Overview BGLF € NAV Total Returns Components(1) 15.0% ▪ Leveraged exposure to European and US floating rate 12.1% 9
Slide 5: BGLF and BCF Highlights
BGLF AND BCF HIGHLIGHTS HIGHLY CONFIDENTIAL & TRADE SECRET 47 9 -€78.3M -€23.1M BCF change in BGLF change in net CLO positions, all CLO vintage years net assets(6) assets(6) actively managed by -3.3% 10.5% BXC(1) >700 0.05% BGLF 2Q’22 NAV BGLF LTM dividend total return(7) yield(8) underlying loan si
Slide 6: Blackstone Corporate Funding (BCF) Structure
BLACKSTONE CORPORATE FUNDING (“BCF”) STRUCTURE HIGHLY CONFIDENTIAL & TRADE SECRET Private Unitholders Public Shareholders ▪ €912 million committed capital 459 million shares: ▪ €0 million undrawn capital ▪ 91% third parties (416 million) ▪ 9% Blackstone (43 million) BCF EUR BGLF €775.6 million NAV €
Slide 7: Investment Opportunity Overview
INVESTMENT OPPORTUNITY OVERVIEW HIGHLY CONFIDENTIAL & TRADE SECRET Access to Blackstone ▪ Strategic partnership to the well-recognised Blackstone Credit CLO platform Credit’s CLO Platform ▪ Over 20 years of experience investing across multiple cycles(1) ▪ Low-cost levered exposure to portfolio of se
Slide 8: II. Second Quarter 2022 Results
HIGHLY CONFIDENTIAL & TRADE SECRET II. Second Quarter 2022 Results Blackstone | 7
Slide 9: Second Quarter 2022 Results
SECOND QUARTER 2022 RESULTS HIGHLY CONFIDENTIAL & TRADE SECRET ▪ 2Q’22 total return of -3.3% and 12.1% LTM. BGLF declared a dividend of 1.75c in 2Q’22, resulting in a BGLF Earnings LTM dividend yield of 10.49%. The target annual dividend for 2022 is €0.07-€0.08 per share(1) & Distributions ▪ BGLF’s
Slide 10: BGLF Earnings & Distributions
BGLF EARNINGS & DISTRIBUTIONS HIGHLY CONFIDENTIAL & TRADE SECRET ▪ BGLF LTM distribution yield of 10.49%(1), supported by uninterrupted cash flows from each CLO since inception ▪ The Board declared a 2Q’22 dividend of 1.75c, the second of three flat payments before a final variable payment to be det
Slide 11: BCF – Loan Portfolio Activity
BCF – LOAN PORTFOLIO ACTIVITY HIGHLY CONFIDENTIAL & TRADE SECRET 2Q ’22 Portfolio Activity Highlights(1) 2Q ’22 Underlying Loan Portfolio Activity(2) (€ in billions) Added 11 new issuers, sold 26 issuers Gross 1.5 WA spread flat at 3.57% purchases B2 average facility rating Gross Diversification amo
Slide 12: BCF Portfolio Composition
BCF PORTFOLIO COMPOSITION HIGHLY CONFIDENTIAL & TRADE SECRET ▪ Diversified portfolio of 717 issuers invested across multiple sectors, geographies, and vintages ▪ Portfolio of primarily senior secured and floating rate assets Country Allocations Moody’s Rating Distribution Others >Ba2 4.3% 13.1% 4.1%
Slide 13: Diversified CLO Liabilities
DIVERSIFIED CLO LIABILITIES HIGHLY CONFIDENTIAL & TRADE SECRET ▪ Diversified portfolio of 47(1) CLOs spanning 9 vintage years ▪ The portfolio has continued to benefit from refinancing activity in 2021 and early 2022, where nearly 40% of CLOs reduced their cost of debt and/or extended reinvestment pe
Slide 14: BCF Investment Activity
BCF INVESTMENT ACTIVITY HIGHLY CONFIDENTIAL & TRADE SECRET ▪ EUR CLOs WAC flat quarter on quarter despite rising rates. This is due to European base rates still being negative at quarter end, and therefore below 0% Euribor floors ▪ US CLO WAC increased quarter on quarter predominantly due to a) high
Slide 15: III. Performance
HIGHLY CONFIDENTIAL & TRADE SECRET III. Performance Blackstone | 14
Slide 16: 2Q'22 BGLF Return Analysis
2Q’22 BGLF RETURN ANALYSIS HIGHLY CONFIDENTIAL & TRADE SECRET BGLF’s 2Q’22 NAV total return was -3.32% ▪ The discount rate used to calculate modelled CLO marks was adjusted upwards in recognition of the prolonged market volatility, contributing to the negative mark to model CLO equity return. The Co
Slide 17: BGLF Monthly € NAV Total Return Performance
BGLF MONTHLY € NAV TOTAL RETURN PERFORMANCE HIGHLY CONFIDENTIAL & TRADE SECRET Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 2022 BGLF € NAV 1.22% 0.45% 3.51% 0.44% -1.66% -2.11% 1.76% European Loans 0.29% -0.90% 0.09% -0.13% -2.44% -3.80% -6.78% US Loans 0.36% -0.50% 0.04% 0.17% -2.51% -2.06%
Slide 18: IV. Portfolio Activity
HIGHLY CONFIDENTIAL & TRADE SECRET IV. Portfolio Activity Blackstone | 17
Slide 19: New Securitisations, Resets, and Refinancings – 2Q'22
NEW SECURITISATIONS, RESETS, AND REFINANCINGS – 2Q ’22 HIGHLY CONFIDENTIAL & TRADE SECRET New CLO Securitisations ▪ 2Q’22 was a quiet quarter for financing activity given less favourable environment for CLO creation, such as high cost of CLO debt and risk-off sentiment Investing Entity Size (€/$) Pr
Slide 20: Subsequent Events – BCF Portfolio Activity
SUBSEQUENT EVENTS – BCF PORTFOLIO ACTIVITY HIGHLY CONFIDENTIAL & TRADE SECRET New CLO Securitisations ▪ In July 2022, BCF invested in Clonmore Park CLO was priced, marking BCF’s 27th European CLO equity position and second in 2022. The €341 million deal has a 4.5 year reinvestment period and 1.5 yea
Slide 21: Summary of BCF Investment Portfolio
SUMMARY OF BCF INVESTMENT PORTFOLIO HIGHLY CONFIDENTIAL & TRADE SECRET ▪ Increase in CLO portfolio weighting due to addition of one US CLO new issue ▪ 8bp decrease in WA portfolio NIM mainly driven by higher US CLO financing cost (increase in base rates and CLO cost of capital). Partially offset by
Slide 22: V. Market Themes
HIGHLY CONFIDENTIAL & TRADE SECRET V. Market Themes Blackstone | 21
Slide 23: Global Credit Spreads and Prices
GLOBAL CREDIT SPREADS AND PRICES HIGHLY CONFIDENTIAL & TRADE SECRET Spread to Maturity Yield to Maturity (L+ / E+) 1,000 11% 800 9% E+687 6.77% 600 7% 6.67% L+554 400 5% 200 3% Mar-18 Feb-19 Dec-19 Oct-20 Aug-21 Jun-22 Mar-18 Feb-19 Dec-19 Oct-20 Aug-21 Jun-22 S&P LL Index S&P Euro LL Index S&P LL I
Slide 24: Global Loan Return by Quality
GLOBAL LOAN RETURN BY QUALITY HIGHLY CONFIDENTIAL & TRADE SECRET Higher rates loans are outperforming year to date European Loan Returns by Quality US Loan Returns by Quality BB B CCC BB B CCC 0.00% 0.00% -2.00% -2.00% -4.00% -4.49% -3.12% -6.00% -4.00% -8.00% -7.31% -4.65% -6.00% -10.00% -12.00% -8
Slide 25: Default Rates
DEFAULT RATES HIGHLY CONFIDENTIAL & TRADE SECRET Defaults have been relatively benign year to date Loan Historical Default Rates 16% Blackstone Credit US Loan 2021 Default Rate: 0.0% 12% Blackstone Credit EUR Loan 2021 Default Rate: 0.0% 8% 4% 0% Dec-06 Dec-17 Dec-03 Dec-04 Dec-05 Dec-07 Dec-08 Dec-
Slide 26: Global CLO Arbitrage
GLOBAL CLO ARBITRAGE HIGHLY CONFIDENTIAL & TRADE SECRET The average quarterly arb declined in 2Q ’22 as the risk off sentiment contributed to higher CLO weighted average cost of capital US WA Spread and Cost of Capital European WA Spread and Cost of Capital (bp) (bp) 450 450 400 400 350 350 300 300
Slide 27: Credit Market Supply
CREDIT MARKET SUPPLY HIGHLY CONFIDENTIAL & TRADE SECRET Primary loan issuance remains subdued U.S. and European Loan Gross Issuance ($/€ in billions) 120 99 100 93 90 81 83 81 78 80 71 68 67 58 60 49 50 45 44 46 41 40 40 32 33 31 34 34 26 28 22 19 22 22 21 17 17 19 20 15 13 12 9 13 10 13 11 13 9 8 8
Slide 28: CLO Issuance
CLO ISSUANCE HIGHLY CONFIDENTIAL & TRADE SECRET CLO new issuance is slightly lagging YTD versus 2022, however activity has recently picked up U.S. and European CLO New Issue Volume ($/€ in billions) 200 $187 180 160 140 $129 $119 $119 120 100 $93 $83 80 $73 60 € 39 40 € 27 € 30 € 21 € 22 20 € 15 € 1
Slide 29: VI. Portfolio and Market Outlook
HIGHLY CONFIDENTIAL & TRADE SECRET VI. Portfolio and Market Outlook Blackstone | 28
Slide 30: Portfolio and Market Outlook
PORTFOLIO AND MARKET OUTLOOK HIGHLY CONFIDENTIAL & TRADE SECRET Portfolio and Market Outlook ▪ As markets round off a turbulent period that saw a sell off in risk assets amid persisting inflation and coordinated central bank tightening, sentiment has changed in July and August with a sustained rally
Slide 31: VII. Appendix
HIGHLY CONFIDENTIAL & TRADE SECRET VII. Appendix Blackstone | 30
Slide 32: BCF Look Through Portfolio Details
BCF LOOK THROUGH PORTFOLIO DETAILS HIGHLY CONFIDENTIAL & TRADE SECRET Portfolio Total Par Moody’s Moody’s WA Coupon WA # WA WA Par Outstanding Moody’s Industry Country Corporate Facility (All-In Maturity Facilities Price Spread (€M) (€M) Rating Rating Rate) (Years) Issuer 1 5 251 7,972 Media Broadca
Slide 33: European Horizontal CLO Risk Retention Investments
EUROPEAN HORIZONTAL CLO RISK RETENTION INVESTMENTS HIGHLY CONFIDENTIAL & TRADE SECRET Highest of Refi / Remaining BCF Position Valuation Ann. Cum. Interest Defaulted Closing Non-Call Deal Size BCF Cost WA Cost Gross Caa / CCC / Reset Date RI Period Position as % of as % of BCF Cash-on- Cash-on- NIM
Slide 34: US Horizontal CLO Risk Retention Investments
US HORIZONTAL CLO RISK RETENTION INVESTMENTS HIGHLY CONFIDENTIAL & TRADE SECRET Highest of Refi / Remaining BCF Position Valuation Ann. Cum. Interest Defaulted Closing Non-Call Deal Size BCF Cost WA Cost Gross Caa / CCC / Reset Date RI Period Position as % of as % of Cash-on- Cash-on- NIM Diversion
Slide 35: US Vertical CLO Risk Retention Investments
US VERTICAL CLO RISK RETENTION INVESTMENTS HIGHLY CONFIDENTIAL & TRADE SECRET Refi / Highest of Remaining BCF Position Valuation as Ann. Cum. Interest Defaulted Closing Reset Non-Call Deal Size BCF Cost WA Cost Gross Caa / CCC / RI Period Position as % of % of BCF Cash-on- Cash-on- NIM Diversion Ass
Slide 36: Redeemed or Fully Sold CLOs
REDEEMED OR FULLY SOLD CLOs HIGHLY CONFIDENTIAL & TRADE SECRET Sale/Redemption BCF Position Current Valuation as Realised IRR To WA Ann. Distribution Region Vintage Exit Method Date Prior To Exit (m) % of BCF NAV(1) Date(2) Through Last Payment(3) Myers Park U.S. 2018 Sale Mar-21 $26.4 N/A 11.1%* 16
Slide 37: CLO Securitisation Performance by Vintage – Current Portfolio
CLO SECURITISATION PERFORMANCE BY VINTAGE – CURRENT PORTFOLIO HIGHLY CONFIDENTIAL & TRADE SECRET ▪ CLO securitisations continued to generate robust, uninterrupted cashflows ▪ EU CLO 2Q’22 ann. cash on cash distributions were broadly flat quarter on quarter, however continue to perform in line with e
Slide 38: BGLF Monthly € NAV Total Return Performance
BGLF MONTHLY € NAV TOTAL RETURN PERFORMANCE HIGHLY CONFIDENTIAL & TRADE SECRET Trailing 12 months ending: June ’18 June ‘19 June ‘20 June ‘21 June ‘22 Discrete Performance BGLF € NAV 0.45% 14.18% -1.27% 18.31% 12.09% European Loans 2.12% 2.75% -2.01% 9.52% -5.21% US Loans 4.67% 4.15% -2.27% 11.67% -
Slide 39: BGLF Total Returns Since Inception
BGLF TOTAL RETURNS SINCE INCEPTION HIGHLY CONFIDENTIAL & TRADE SECRET BGLF has delivered strong excess returns versus the loan market across multiple time periods Annualised Net Total Return 15% 12.1% 10% 9.4% 8.4% 8.5% 8.1% 6.9% 6.6% 5.0% 5% 2.7% 3.0% 3.2% 2.0% 2.3% 0.6% 1.3% 0% -2.7% -5% -3.3% -4.
Slide 40: Year to Date 2022 BGLF Return Analysis
YEAR TO DATE 2022 BGLF RETURN ANALYSIS HIGHLY CONFIDENTIAL & TRADE SECRET BGLF’s year to date NAV total return was 1.76% Contributors to Total Return Directly EUR CLO US CLO US CLO BCF Cash BCF BGLF Held Loans Equity Equity Warehouses & Expenses 3% 3.91% 0.51% 2% 0.09% 1.90% 1.76% 0.21% 0.21% 2.70%
Slide 41: Summary Term Sheet
SUMMARY TERM SHEET HIGHLY CONFIDENTIAL & TRADE SECRET Blackstone Corporate Funding DAC (“BCF”) Blackstone Credit(1) is generally rebating 20% of the CLO management fees to BCF pro rata to the value of BCF’s CLO equity position. After costs allocated by Blackstone Credit to BCF in respect of the rele
Slide 42: Blackstone Corporate Funding (BCF) Investment Process
BLACKSTONE CORPORATE FUNDING (“BCF”) INVESTMENT PROCESS HIGHLY CONFIDENTIAL & TRADE SECRET Warehouse Opportunities CLO Creation ▪ First loss US CLO warehouse investments provide exposure to ▪ Aim to construct relatively lower risk loan portfolios with a loan portfolio financed at relatively favourab
Slide 43: VIII. Key Risk Factors
HIGHLY CONFIDENTIAL & TRADE SECRET VIII.Key Risk Factors Blackstone | 42
Slide 44: Key Risk Factors
KEY RISK FACTORS AS DETERMINED BY THE ENTITIES DISTRIBUTING THIS COMMUNICATION HIGHLY CONFIDENTIAL & TRADE SECRET All investments are subject to risk, including the loss of the principal amount invested. Past performance is not necessarily indicative of future results, and there can be no assurance
Slide 45: Key Risk Factors
KEY RISK FACTORS AS DETERMINED BY THE ENTITIES DISTRIBUTING THIS COMMUNICATION HIGHLY CONFIDENTIAL & TRADE SECRET Conflicts of Interest. There may be occasions when the Company and their affiliates will encounter potential conflicts of interest in connection with Blackstone’s activities including, w
Slide 46: IX. Important Disclosure Information
HIGHLY CONFIDENTIAL & TRADE SECRET IX. Important Disclosure Information Blackstone | 45
Slide 47: Notes to 'BGLF and BCF Highlights'
NOTES TO ‘BGLF AND BCF HIGHLIGHTS’ HIGHLY CONFIDENTIAL & TRADE SECRET 1) As of 30 June 2022. Excludes CLOs in the process of being redeemed. 2) Data as of end 30 June 2022 using internal Blackstone Credit data calculated on 20 July 2022. Reflects directly held loans and look through holdings of CLOs
Slide 48: Important Disclosure Information
IMPORTANT DISCLOSURE INFORMATION HIGHLY CONFIDENTIAL & TRADE SECRET Important notice in relation to Blackstone Loan Financing Limited (“The Company” or "BGLF") This document has been issued by Blackstone Loan Financing Limited (the “Company”), and should not be taken as an inducement to engage in an
Slide 49: Important Disclosure Information
IMPORTANT DISCLOSURE INFORMATION HIGHLY CONFIDENTIAL & TRADE SECRET Certain information contained herein has been obtained from published and non-published sources prepared by other parties, which in certain cases has not been updated through the date hereof. While such information is believed to be
Slide 50: Important Disclosure Information (Cont'd)
IMPORTANT DISCLOSURE INFORMATION (CONT’D) HIGHLY CONFIDENTIAL & TRADE SECRET Any targets, forecasts, estimates, or similar returns set forth herein are based on Blackstone Credit’s belief about the returns that may be achievable on investments that the Fund intends to pursue. Targets, forecasts, and
Slide 51: Important Disclosure Information (Cont'd)
IMPORTANT DISCLOSURE INFORMATION (CONT’D) HIGHLY CONFIDENTIAL & TRADE SECRET Prospective investors should be aware that an investment in the Fund involves a high degree of risk. There may be occasions when the management company of the Fund, the principals, Blackstone Credit, Blackstone and their af
Slide 52: Important Disclosure Information (Cont'd)
IMPORTANT DISCLOSURE INFORMATION (CONT’D) HIGHLY CONFIDENTIAL & TRADE SECRET Blackstone Ireland Limited and Blackstone Ireland Fund Management Limited are authorised and regulated by the Central Bank of Ireland. Blackstone Ireland Limited, Blackstone Ireland Fund Management Limited, the funds they m
Slide 53: Important Disclosure Information (Cont'd)
IMPORTANT DISCLOSURE INFORMATION (CONT’D) HIGHLY CONFIDENTIAL & TRADE SECRET AUSTRALIA The provision of this document to any person does not constitute an offer of securities or financial products of any kind to that person or an invitation to that person to apply for securities or financial product
Slide 54: Important Disclosure Information (Cont'd)
IMPORTANT DISCLOSURE INFORMATION (CONT’D) HIGHLY CONFIDENTIAL & TRADE SECRET CANADA These materials and the information contained herein are not, and under no circumstances are to be construed as, a prospectus, an offering memorandum, an advertisement or a public offering of securities in Canada or
Slide 55: Important Disclosure Information (Cont'd)
IMPORTANT DISCLOSURE INFORMATION (CONT’D) HIGHLY CONFIDENTIAL & TRADE SECRET SPECIAL NOTICE TO PROSPECTIVE INVESTORS IN THE EUROPEAN ECONOMIC AREA In relation to each member state of the EEA (each a “Member State”) which has implemented the Alternative Investment Fund Managers Directive (Directive (
Slide 56: Important Disclosure Information (Cont'd)
IMPORTANT DISCLOSURE INFORMATION (CONT’D) HIGHLY CONFIDENTIAL & TRADE SECRET JAPAN THE SHARES OF THE COMPANY MAY NOT BE OFFERED FOR A PUBLIC OFFERING IN JAPAN UNLESS A SECURITIES REGISTRATION STATEMENT PURSUANT TO ARTICLE 4, PARAGRAPH 1 OF THE FINANCIAL INSTRUMENTS AND EXCHANGE ACT OF JAPAN (INCLUDI
Slide 57: Important Disclosure Information (Cont'd)
IMPORTANT DISCLOSURE INFORMATION (CONT’D) HIGHLY CONFIDENTIAL & TRADE SECRET PEOPLE’S REPUBLIC OF CHINA This document and the related documents do not and are not intended to constitute a sale, an offer to sell or a solicitation of an offer to buy, directly or indirectly, any securities in the Peopl
Blackstone Loan Financing — Q2 2022 Earnings Presentation on 6ix