Sixth Street Specialty Lending, Inc. · NYSE:TSLX
Sixth Street Specialty Lending — Debt Investor Presentation (March 2025)
56 slides from Sixth Street Specialty Lending's debt investor presentation, March 2025
Slide 1: Sixth Street Specialty Lending Fixed Income Presentation March 2025
SIXTH STREET SPECIALTY LENDING SIXTH STREET SPECIALTY LENDING, INC Fixed Income Presentation March 2025
Slide 2: Disclaimer and Forward-Looking Statement
DISCLAIMER AND FORWARD-LOOKING STATEMENT General Disclaimer The information contained in this presentation (the ʺPresentationʺ) is preliminary, may not be complete and may be changed. By acceptance hereof, you agree that the information contained herein may not be used, reproduced or distributed to
Slide 3: Agenda: Overview & Organization
AGENDA 1. Overview & Organization 3 SIXTH STREET SPECIALTY LENDING
Slide 4: Overview
14.71 0.00 $14.71 Q4'11 14.88 0.06 $14.94 14.92 0.22 $15.14 15.12 0.54 $15.66 15.19 0.90 $16.09 Q4'12 15.27 1.23 $16.50 15.29 1.61 $16.90 OVERVIEW 15.35 2.01 $17.36 15.52 2.39 $17.91 Q4'13 15.51 2.79 $18.30 15.70 3.17 $18.87 15.66 3.55 $19.21 15.53 3.93 $19.46 Q4'14 15.60 4.32 $19.92 NAV per Share 1
Slide 5: The Sixth Street Platform
THE SIXTH STREET PLATFORM 1 Overview & Organization TAO: Sixth Street Highly Flexible, Thematically Focused, Cross-Platform Investing Vehicle Real Estate Fundamental Direct Asset Based Credit Market Opportunities Growth Sports Agriculture Strategies Lending Finance Strategies Commercial Control Conv
Slide 6: Sixth Street Sector Franchises
SIXTH STREET SECTOR FRANCHISES 1 Overview & Organization Fundamental US & European Energy, Renewables & Strategies Growth Direct Lending Infrastructure Healthcare & Life Sciences Opportunistic Insurance Real Estate Sports, Media, Entertainment Credit Market Software & & Telecom Strategies Business S
Slide 7: Flexible Capital: Sixth Street Platform Reach
FLEXIBLE CAPITAL: SIXTH STREET PLATFORM REACH 1 Overview & Organization Opportunities Growth Adjacencies Reward Fundamental Infrastructure Strategies ABF Direct Lending Insurance Real Estate Credit Market Strategies Yielding Agriculture Risk Note: For illustrative purposes only. Real Estate and Infr
Slide 8: Differentiated Solutions Provider
DIFFERENTIATED SOLUTIONS PROVIDER 1 Overview & Organization Our Competitive Advantages Our Track Record Highlights Part of a $100+ billion1 Sixth Street Approximately $46.2 billion of platform with proprietary deal flow investments originated with a realized and significant resources including avera
Slide 9: Approach to the Unsecured Markets
APPROACH TO THE UNSECURED MARKETS 1 Overview & Organization 1.18x 64% 2.3x >$0.9BN 13 bps ~66% 1.4% Debt to Equity Unsecured Asset Cov. for Revolver Annualized net New Vintage Portfolio (FV) (GAAP) Debt3 Uns. Notes1,3 Capacity3 realized gains2 Portfolio on Non-Accrual Our Framework Implementation •
Slide 10: Agenda: Track Record of Strong Performance
AGENDA 1. Overview & Organization 2. Track Record of Strong Performance 10 SIXTH STREET SPECIALTY LENDING
Slide 11: Track Record of Strong Performance
TRACK RECORD OF STRONG PERFORMANCE 2 Track Record of Strong Performance NI RETURN ON EQUITY (ROE) 2 NII RETURN ON EQUITY 2 TSLX BDC Peers (Mean) BDC Peers Top Quartile¹ TSLX BDC Peers (Mean) BDC Peers Top Quartile¹ LTM Since TSLX IPO LTM Since TSLX IPO outperformance 13.4% 13.8% 12.3% 13.4% 11.6% 11
Slide 12: Delivering Through-the-Cycle Returns
DELIVERING THROUGH-THE-CYCLE RETURNS 2 Track Record of Strong Performance TSLX Annual Returns Since IPO ROE on Adj. Net Income Economic Return 19.7% 19.1% 15.4% 15.9% 16.2% 15.5% 14.7% 15.5% 16.1% 14.5% 11.9% 13.0% 10.8% 12.1% 11.6% 11.7% 11.6% 11.3% 10.0% 7.6% 7.6% 7.6% 2014 2015 2016 2017 2018 201
Slide 13: Industry vs TSLX Unit Economics
INDUSTRY VS TSLX UNIT ECONOMICS 2 Track Record of Strong Performance Unit Economics (Since TSLX IPO) BDC Peers TSLX Return on Assets: All-in Yield (on Assets) 10.5% 13.3% Higher return on assets Cost of Funds2 (5.3%) (5.5%) Debt/Equity 0.95x 0.86x Lower leverage Net Interest Income Return (on Equity
Slide 14: Agenda: Strong Liquidity and Funding Profile
AGENDA 1. Overview & Organization 3. Strong Liquidity and Funding Profile 14 SIXTH STREET SPECIALTY LENDING
Slide 15: Strong Liquidity and Funding Profile
STRONG LIQUIDITY AND FUNDING PROFILE 3 Strong Liquidity and Funding Profile CAPITAL & LIQUIDITY ROBUST BALANCE SHEET LIQUIDITY VS. NEAR-TERM OBLIGATIONS ($ in Millions) As of December 31, 2024 / $ Millions Near-term Obligations $5 Cash Total $954 Liquidity: Undrawn Revolver $ 949 Capacity1 $954M1,2
Slide 16: Liquidity Management
LIQUIDITY MANAGEMENT 3 Strong Liquidity and Funding Profile CASH AND CASH EQUIVALENTS Unrestricted Cash Totaled $5.0 Million as of December 31, 2024. Restricted Cash Related to Interest Rate Swaps Totaled $22.4 Million 1 1 Revolving Credit Facility Unsecured Notes $1.675 Billion Committed; Uncommitt
Slide 17: Strong Asset Coverage for Outstanding Debt
STRONG ASSET COVERAGE FOR OUTSTANDING DEBT 3 Strong Liquidity and Funding Profile TSLX Asset Coverage for Unsecured Notes1 Unsecured Debt over Total Debt Outstanding 2.5x 73% 2.8x 69% 68% 2.6x 64% 2.2x 2.3x 2.3x 56% 52% Q3'23 Q4'23 Q1'24 Q2'24 Q3'24 Q4'24 2 Q3'23 Q4'23 Q1'24 Q2'24 Q3'24 Q4'24 2 Asse
Slide 18: A Disciplined Approach to Liquidity & Capital Management
A DISCIPLINED APPROACH TO LIQUIDITY & CAPITAL MANAGEMENT 3 Strong Liquidity and Funding Profile ($ in Millions) Revolving Credit Facility Renewal Unsecured Bonds Issued Convertible Notes Issued Equity Issued DRIP Equity $24 $25 1.60x TSLX $90 $94 $36 1.40x $130 $300 $350 $300 $31 $78 1.20x $21 $300
Slide 19: Agenda: Credit Highlights
AGENDA 1. Overview & Organization 4. Credit Highlights 19 SIXTH STREET SPECIALTY LENDING
Slide 20: Credit Highlights – TSLX vs BDC Peers
CREDIT HIGHLIGHTS – TSLX VS BDC PEERS 4 Credit Highlights Long Term Credit Ratings ROE (NI) % % Debt Since ($ in millions) Ticker Moody's S&P Fitch KBRA Assets Debt1 1st Lien2 Unsecured5 LTM3 TSLX IPO4 Sixth Street Specialty Lending6 TSLX Baa2 (stable) BBB- (stable) BBB (positive) BBB+ (stable) $3,5
Slide 21: Credit Highlights – TSLX vs BDC Peers
CREDIT HIGHLIGHTS – TSLX VS BDC PEERS 4 Credit Highlights Long Term Credit Ratings Key Credit Metrics Debt Debt Interest Interest & Dividend ($ in millions) Ticker Moody's S&P Fitch KBRA / Equity1 / Assets1 Coverage2 Coverage3 Sixth Street Specialty Lending TSLX Baa2 (stable) BBB- (stable) BBB (posi
Slide 22: Collateral Coverage and Asset Quality Matters
COLLATERAL COVERAGE AND ASSET QUALITY MATTERS 4 Credit Highlights UNSECURED DEBT ATTACH & DETACH POINTS 1 Percentage of Assets 75% Attach/Detach Points 54.5% Median: 50% 52% 25% Median: 19.7% 20% 0% BXSL2 MSDL SAR NCDL2 PFLT SLRC GBDC CGBD KBDC BCSF2 ARCC2 BBDC HTGC OBDC CCAP MFIC NMFC CION MAIN FSK
Slide 23: Agenda: Principles and Investment Strategy
AGENDA 1. Overview & Organization 5. Principles and Investment Strategy 6. Appendix 23 SIXTH STREET SPECIALTY LENDING
Slide 24: Differentiated Platform Expertise
DIFFERENTIATED PLATFORM EXPERTISE 5 Principles and Investment Strategy DIFFERENTIATED MAINTAIN A LOW PLATFORM DISCIPLINED SECTOR FOCUSED RISK VOLATILITY EXPERTISE AND APPROACH MANAGEMENT PORTFOLIO CAPABILITIES • Source away from Wall • Late cycle-minded sector • Cover the downside • Avoid risks that
Slide 25: Sourcing and Underwriting Overview
SOURCING AND UNDERWRITING OVERVIEW 5 Principles and Investment Strategy Sourcing Underwriting Asset Management Process: Process: Process: • Credit originators / team • Quick Look memo • Performing Loans – Monthly review of operating performance • Weekly pipeline conference calls • Prepare Investment
Slide 26: Differentiated Platform Expertise and Capabilities
DIFFERENTIATED PLATFORM EXPERTISE AND CAPABILITIES 5 Principles and Investment Strategy Sourcing Voting Control TSLX Portfolio Construction Intermediary/ Market Relationship No Voting >0% Control 23% $20-105 Predominantly, million floating rate, first position size lien / senior secured US and Targe
Slide 27: Net Interest Margin Analysis
NET INTEREST MARGIN ANALYSIS 5 Principles and Investment Strategy Weighted Average Total Yield on Debt and Income Producing Securities at Amortized Cost 1 Weighted Average Interest Rate of Debt and Income Producing Securities at Fair Value Weighted Average Spread Over Reference Rate of All Floating
Slide 28: Disciplined Sector Approach
DISCIPLINED SECTOR APPROACH 5 Principles and Investment Strategy GOOD BUSINESSES WITH CHALLENGED BUSINESS GOOD BUSINESSES WITH 1 2 3 GOOD CAPITAL STRUCTURE MODELS WITH GOOD ASSETS BAD CAPITAL STRUCTURE Note: Reflects current and fully realized investments; selected to represent a variety of transact
Slide 29: Low Cyclical Exposure
Q1'13 626 31% 31% Q2'13 787 25% 25% Q3'13 22% 889 26% Q4'13 22% 1,016 26% Q1'14 19% 1,196 28% Q2'14 20% 1,129 24% Q3'14 18% 28% 1,233 $ Millions by Fair Value Q4'14 12% 20% 1,264 Q1'15 10% 18% 1,331 Investments at Fair Value Q2'15 8% 17% 1,398 Q3'15 7% 16% 1,396 Q4'15 7% 10% 1,486 Q1'16 7% 9% 1,564
Slide 30: Diversification Across Borrowers & Industries
DIVERSIFICATION ACROSS BORROWERS & INDUSTRIES 5 Principles and Investment Strategy Top 10 Borrower Diversification Industry Diversification Merative L.P. Bcto Ace Purchaser, Inc. Internet Services Business Services ExtraHop Networks, Inc. Tango Management Consulting, LLC Human Resource Support Servi
Slide 31: Portfolio Diversification Across Borrowers
Q1'13 626 70% Q2'13 787 61% Q3'13 889 57% Q4'13 1,016 54% Q1'14 1,196 50% Q2'14 1,129 50% Q3'14 1,233 49% $ Millions by Fair Value Q4'14 1,264 48% Q1'15 1,331 47% Q2'15 44% 1,398 Q3'15 43% 1,396 Q4'15 41% 1,486 Q1'16 39% 1,564 Q2'16 38% 1,611 Q3'16 36% 1,644 Q4'16 36% 1,657 Q1'17 38% 1,580 Q2'17 40%
Slide 32: TSLX Asset Mix
TSLX ASSET MIX 5 Principles and Investment Strategy TSLX Portfolio Large BDC Composite Q4’24 Q4’24 Equity / Second Lien/ Other Subordinated 4% Equity / 2% Other 16% Second Lien/ Subordinated 16% First Lien 68% First Lien 94% Yield at Amortized Cost: 12.5% Yield at Amortized Cost: 10.7% Average Retur
Slide 33: Asset Vintage Diversity
ASSET VINTAGE DIVERSITY 5 Principles and Investment Strategy Fair Value by Vintage Debt Investments by Maturity $ Millions by Fair Value $ Millions by Fair Value 21% $704 19% 24% 23% $796 $641 21% $759 17% $705 20% $567 15% $687 $512 12% 11% $402 $353 5% 6% $182 $186 3% 2% $86 1% 1% $50 $71 $22 >0%
Slide 34: High Quality Portfolio
HIGH QUALITY PORTFOLIO 5 Principles and Investment Strategy TSLX Weighted Average Portfolio Performance Rating TSLX % of Investments on Non-Accrual By Fair Value % of Portfolio Rated 1 or 2 By Fair Value By Amortized Cost 96% 96% 96% 97% 98% 3.9% 3.7% 2.2% 2.2% 1.9% 1.16 1.15 1.14 1.14 1.10 0.8% 1.4
Slide 35: TSLX Portfolio vs. Broadly Syndicated Loan Market
TSLX PORTFOLIO VS. BROADLY SYNDICATED LOAN MARKET 5 Principles and Investment Strategy TSLX Broadly Syndicated Loan Market BUSINESS SERVICES / 80% 17% LOWER BETA INDUSTRIES1 AVERAGE REFERENCE RATE FLOORS2 0.93% 0.63% WEIGHTED AVERAGE LIFE3 1.3 years 4.5 years 102 102 100 100 98 98 99 99 99 98 98 98
Slide 36: Originations and Funding Activity
ORIGINATIONS AND FUNDING ACTIVITY 5 Principles and Investment Strategy $ Billions Origination sizes: Up to $500+ million $46.2 Target investment holds: $30 – $100 million Target position size: $20 – $105 million $10.9 $35.4 $3.5 $7.9 Originations 1 Syndications and Fundings 1 Realizations, Portfolio
Slide 37: Agenda: Appendix
AGENDA 1. Overview & Organization 6. Appendix 37 SIXTH STREET SPECIALTY LENDING
Slide 38: TSLX Valuation Process: Internal, External & Board Level Review
TSLX VALUATION PROCESS: INTERNAL, EXTERNAL & BOARD LEVEL REVIEW 25+ people 15+ people 100+ people 100+ people 100+ people 9 people Complete Initial Preliminary Final Valuation Audit Committee Board of Portfolio Review of Draft of Valuation Committee Meeting Directors Reviews Valuation Valuation Comm
Slide 39: BDC Sector Price-to-Book
BDC SECTOR PRICE-TO-BOOK Price-to-Book vs. ROE on Net Income (Since TSLX IPO) Average Price-to-Book1 1.3x Annualized ROE (on NI): • TSLX: 13.4% • BDC Peers Mean: 7.4% 1.2x TSLX • BDC Peers Median: 6.6% BDC 11 1.1x BDC 6 BDC 21 BDC 8 BDCBDC 23 1 1.0x BDC 9 BDC 20 BDC 25 BDC 12 BDC 13 BDC 24 BDC 16 0.
Slide 40: Thorough Origination, Underwriting and Negotiation Process
THOROUGH ORIGINATION, UNDERWRITING AND NEGOTIATION PROCESS ORIGINATION UNDERWRITING & APPROVAL NEGOTIATION & CLOSING Input / Output Process Bottleneck Make Decision Simultaneous Process Pre-cmt. Create Expense checklist Start Ledger for Out-of- Pocket Expenses Issue Commitment Legal & Final KYC Proc
Slide 41: Financial Highlights
FINANCIAL HIGHLIGHTS DOLLAR AMOUNTS IN THOUSANDS Except Per Share Data; Per Share Data is Based on Weighted Average Shares Outstanding During the Period, Except as Otherwise Noted Q4 2023 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Net Investment Income Per Share $0.62 $0.59 $0.59 $0.59 $0.62 Net Income (Loss)
Slide 42: Portfolio Highlights – Selected Metrics
PORTFOLIO HIGHLIGHTS – SELECTED METRICS DOLLAR AMOUNTS IN THOUSANDS December 31, 2023 March 31, 2024 June 30, 2024 September 30, 2024 December 31, 2024 Investments at Fair Value $3,283,065 $3,380,009 $3,317,069 $3,441,075 $3,518,412 Number of Portfolio Companies 136 124 109 115 116 Average Investmen
Slide 43: Quarterly Statements of Financial Condition
QUARTERLY STATEMENTS OF FINANCIAL CONDITION DOLLAR AMOUNTS IN THOUSANDS Except Per Share Data; Per Share Data is Based on Ending Shares Outstanding December 31, 2023 March 31, 2024 June 30, 2024 September 30, 2024 December 31, 2024 Assets Investments at Fair Value $3,283,065 $3,380,009 $3,317,069 $3
Slide 44: Net Asset Value Bridge – Q4'24
NET ASSET VALUE BRIDGE – Q4’24 $0.01 ($0.12) $0.61 ($0.46) $0.05 $17.12 $17.07 $17.11 $0.08 $17.16 $17.09 ($0.05) ($0.07) ($0.07) 9/30/2024 Q3'24 9/30/24 Q4'24 Q4'24 Q4'24 Q4'24 NAV Q4'24 Net Realized Q4'24 12/31/24 Q4'24 12/31/24 2 Supplemental Adjusted NAV 1 Adjusted Net Reversal of Reversal of Ne
Slide 45: Net Asset Value Bridge – 2024
NET ASSET VALUE BRIDGE – 2024 $0.06 ($0.19) $2.33 ($1.84) $0.10 $0.20 $0.29 ($0.57) $17.14 $17.16 $17.09 $17.04 ($0.17) $16.96 ($0.07) ($0.08) 12/31/2024 Q4'23 12/31/23 2024 2024 2024 2024 Q1'24 - Q3'24 NAV 2024 2024 2024 2024 12/31/24 Q4'24 12/31/24 1 NAV Supplemental Adjusted NAV Adjusted Net Accr
Slide 46: Our Drivers of ROE
OUR DRIVERS OF ROE Illustrative Unit Economics / Return on Equity Return on Assets: Return on Assets Weighted Average Interest Rate of Portfolio 11.8% Amortization of upfront fees1 0.9% Total Yield on Debt and Income Producing Securities 12.7% Impact of Additional fees2 0.7% Prudent Use of Leverage
Slide 47: Illustrative Interest Coverage Throughout Cycles
ILLUSTRATIVE INTEREST COVERAGE THROUGHOUT CYCLES Illustrative Interest Coverage Illustrative Interest Coverage Debt to Equity Debt to Equity 293.36% 0.90x 0.95x 1.00x 1.05x 1.10x 1.25x 293.36% 0.90x 0.95x 1.00x 1.05x 1.10x 1.25x 11.0% 2.65x 2.61x 2.58x 2.54x 2.51x 2.43x 6.00% 4.02x 3.91x 3.81x 3.73x
Slide 48: Illustrative ROE Throughout Cycles
ILLUSTRATIVE ROE THROUGHOUT CYCLES Illustrative ROE ROE Illustrative Interest Coverage Debt to Equity DebtDebt to Equity to Equity 12.71% 0.90x 0.95x 1.00x 1.05x 1.10x 1.25x 12.71% 0.90x 0.95x 1.00x 1.05x 1.10x 1.25x 11.0% 7.6% 7.7% 7.8% 7.9% 8.0% 8.4% 6.00% 12.5% 12.7% 12.9% 13.1% 13.3% 14.0% 11.5%
Slide 49: Book Value per Share and Dividends Paid per Share
$14.71 $0.00 $14.71 $14.88 $0.06 $14.94 $14.92 $0.22 $15.14 $15.12 $0.54 $15.66 $15.19 $0.90 $16.09 Note: As of 12/31/24. $15.27 $1.23 $16.50 $15.29 $1.61 $16.90 $15.35 $2.01 $17.36 $15.52 $2.39 $17.91 $15.51 $2.79 $18.30 $15.70 $3.17 $18.87 $15.66 $3.55 $19.21 NAV per Share $15.53 $3.93 $19.46 $15.
Slide 50: Sixth Street Responsible Investment Overview
SIXTH STREET RESPONSIBLE INVESTMENT OVERVIEW WHAT WE BELIEVE RI AND ESG GOVERNANCE EMPLOYEE TRAINING • Our mission is to deliver • Senior oversight through • Sixth Street provides training compelling risk-adjusted ESG Oversight and other tools to its returns while conducting our Committee includes e
Slide 51: Differentiated Investor Transparency and Communication
DIFFERENTIATED INVESTOR TRANSPARENCY AND COMMUNICATION Regional Banking Crisis – Covid-19 Pandemic – 2020 March 2023 Valuation Principles – Quarterly Debt & Equity Investor Presentations August 2022 51 SIXTH STREET SPECIALTY LENDING
Slide 52: Footnotes
FOOTNOTES SIXTH STREET SPECIALTY LENDING
Slide 53: Footnotes
FOOTNOTES Slide 4: Overview 1. Reflects NAV per share adjusted for the supplemental dividend per share related to Q4 2024 earnings 2. Moody’s rating upgraded 2/14/2025; S&P rating affirmed on 1/23/2024; Fitch rating updated on 3/26/2024; KBRA affirmed 6/3/2024 Slide 5: The Sixth Street Platform 1. A
Slide 54: Footnotes
FOOTNOTES Slide 16: Liquidity Management 1. Adjusted for RCF 16th amendment and extension closed in March 2025. As part of the transaction, $25 million of non-extending commitments with a maturity of February 4, 2026 and a revolving period ending February 4, 2025 was terminated and one legacy $20 mi
Slide 55: Footnotes
FOOTNOTES Slide 35: TSLX Portfolio vs Broadly Syndicated Loan Market 1. TSLX classifies the industries of its portfolio companies by end-market (such as healthcare, and business services) and not by the products or services (such as software) directed to those end-markets. For the broadly syndicated
Slide 56: TSLX Investor Relations
CONTACT US: TSLX Investor Relations IRTSLX@sixthstreet.com VISIT US: www.sixthstreetspecialtylending.com 56 SIXTH STREET SPECIALTY LENDING
Sixth Street Specialty Lending — Debt Investor Presentation (March 2025) on 6ix