Blackstone Inc. · NYSE:BX
Blackstone — Blackstone / GSO Loan Financing — Q2 2020 Earnings Presentation
49 slides from Blackstone's earnings presentation, Jun 30, 2020
Slide 1: Blackstone / GSO Loan Financing Limited
HIGHLY CONFIDENTIAL & TRADE SECRET Blackstone / GSO Loan Financing Limited AS OF 30 JUNE 2020 Blackstone / GSO Loan Financing Limited
Slide 2: Table of Contents
TABLE OF CONTENTS HIGHLY CONFIDENTIAL & TRADE SECRET I. BGLF Overview 2 II. BGCF Overview 6 III. Second Quarter 2020 Results 9 IV. Fund Overview 16 V. Performance 27 VI. Market Overview 33 VII. Additional Information 39 VIII. Important Disclosure Information 42 Blackstone / GSO Loan Financing Limite
Slide 3: I. BGLF Overview
HIGHLY CONFIDENTIAL & TRADE SECRET I. BGLF Overview Blackstone / GSO Loan Financing Limited Blackstone | 2
Slide 4: Focus on senior secured corporate loans providing stable and growing income returns
BLACKSTONE / GSO LOAN FINANCING LIMITED (“BGLF”) HIGHLY CONFIDENTIAL & TRADE SECRET Focus on senior secured corporate loans with a goal of providing stable and growing income returns Strategy Overview BGLF € NAV Total Returns 15% ▪ Exposure to European and US floating rate senior secured loans and b
Slide 5: Investment Opportunity Overview
INVESTMENT OPPORTUNITY OVERVIEW HIGHLY CONFIDENTIAL & TRADE SECRET ▪ Provides access to a market-leading loan and CLO management platform, including CLO warehouse investment opportunities(1) Benefits of GSO ▪ Cost effective levered exposure to senior secured loans through term financing on balance s
Slide 6: Ways to Invest
WAYS TO INVEST HIGHLY CONFIDENTIAL & TRADE SECRET Public Shares Private Units Ticker / Share Class BGLF LN BGLP LN Class A Class C Fund Name Blackstone / GSO Loan Financing Ltd. Blackstone / GSO Corporate Funding EUR Fund Description Ordinary Shares QIAIF Units Fund Jurisdiction Jersey Ireland Total
Slide 7: II. BGCF Overview
HIGHLY CONFIDENTIAL & TRADE SECRET II. BGCF Overview Blackstone / GSO Loan Financing Limited Blackstone | 6
Slide 8: BGCF: 2Q '20 Summary Performance
BGCF: 2Q ‘2O SUMMARY PERFORMANCE HIGHLY CONFIDENTIAL & TRADE SECRET 9.42% 9.74% +€78M €1,072M ROI(1) ROA(2) 2Q ’20 BGCF change in BGCF net assets net assets 1.63% 8.0x €393M €667M NIM(3) debt-to-equity(4) BGLF net assets BGCF EUR net assets Net Assets as of 30 June 2020. (1) BGCF Return on Investmen
Slide 9: BGCF Structure
BGCF STRUCTURE HIGHLY CONFIDENTIAL & TRADE SECRET Public Shareholders Private Unitholders 481 million shares: ▪ €822 million committed capital ▪ 91% third parties (438 million) ▪ €0 million undrawn capital ▪ 9% Blackstone (43 million) BGLF was recently awarded Best closed-end CLO BGLF BGCF EUR €393.
Slide 10: III. Second Quarter 2020 Results
HIGHLY CONFIDENTIAL & TRADE SECRET III. Second Quarter 2020 Results Blackstone / GSO Loan Financing Limited Blackstone | 9
Slide 11: Second Quarter 2020 Results
SECOND QUARTER 2020 RESULTS HIGHLY CONFIDENTIAL & TRADE SECRET ▪ BGLF Distribution yield of 9.0%, as of 30 June 2020(1) BGLF Earnings ▪ BGLF’s net distributable earnings exceeded its declared dividends by 61% over the last twelve & Distributions months, with any retained net earnings being available
Slide 12: BGLF Earnings & Distributions
BGLF EARNINGS & DISTRIBUTIONS HIGHLY CONFIDENTIAL & TRADE SECRET ▪ BGLF Distribution yield of 9.0%, as of 31 March 2020(1) ▪ BGLF’s net distributable earnings exceeded its declared dividends by 61% over the last 12 months, with any retained net earnings being available for smoothing dividends going
Slide 13: BGCF Investment Activity
BGCF INVESTMENT ACTIVITY HIGHLY CONFIDENTIAL & TRADE SECRET ▪ Focused on maintaining the overall quality of the portfolio, reducing risk and declining primary issues where we view documentation to be weak ▪ In the second quarter, €1.5 billion of assets purchased, €0.2 billion net portfolio investmen
Slide 14: BGCF Portfolio Composition
BGCF PORTFOLIO COMPOSITION HIGHLY CONFIDENTIAL & TRADE SECRET ▪ Diversified portfolio of 674 issuers invested across multiple sectors, geographies, and vintages ▪ Portfolio of 99.5% senior secured and 97.8% floating rate assets Country Allocations Moody’s Rating Distribution Others 5.8% 15.0% >Ba2 3
Slide 15: BGCF Capitalisation
BGCF CAPITALISATION HIGHLY CONFIDENTIAL & TRADE SECRET ▪ €25.0 million of capital called and invested (BGCF EUR) in 2Q ’20 ▪ Debt-to-equity ratio of 8.0x through financing structures(1) Balance Sheet(1) (€ in millions) Assets Liabilities Directly Held Assets €418 Credit Facility (Directly Held Asset
Slide 16: BGCF Investment Activity
BGCF INVESTMENT ACTIVITY HIGHLY CONFIDENTIAL & TRADE SECRET ▪ Average WAC on US CLOs and US CLO warehouses declined due to falling Libor ▪ Remaining CLO reinvestment period average of 2.3 years provide an opportunity to continue optimising the portfolio and to improve weighted average spread (“WAS”)
Slide 17: IV. Fund Overview
HIGHLY CONFIDENTIAL & TRADE SECRET IV. Fund Overview Blackstone / GSO Loan Financing Limited Blackstone | 16
Slide 18: Second Quarter 2020 Portfolio Activity
SECOND QUARTER 2020 PORTFOLIO ACTIVITY HIGHLY CONFIDENTIAL & TRADE SECRET Portfolio trading activity during 2Q ’20 continued to focus on risk mitigation and rotation, with an emphasis on collateral coverage ratios ▪ The global loan market rebounded strongly over the course of the quarter, with index
Slide 19: Second Quarter 2020 Portfolio Activity (Cont'd)
SECOND QUARTER 2020 PORTFOLIO ACTIVITY (CONT’D) HIGHLY CONFIDENTIAL & TRADE SECRET Maintaining investment flexibility to participate in the primary loan market and the ability to take advantage of secondary loan market dislocations is a key focus for BGCF’s adviser. As such, an important part of the
Slide 20: Summary of Investment Portfolio: BGCF Portfolio
SUMMARY OF INVESTMENT PORTFOLIO: BGCF PORTFOLIO HIGHLY CONFIDENTIAL & TRADE SECRET ▪ Portfolio positioning between EUR and USD exposure remains largely unchanged versus 1Q ’20 ▪ Remaining reinvestment periods decrease slightly since last quarter due to a measured investment pace, though vintage dive
Slide 21: Summary of Investment Portfolio
SUMMARY OF INVESTMENT PORTFOLIO HIGHLY CONFIDENTIAL & TRADE SECRET BGCF Look-through Portfolio Q1 ’19 Q2 ’19 Q3 ‘19 Q4 ‘19 Q1 '20 Q2 '20 # Issuers / Facilities 687 / 903 705 / 933 699 / 917 687 / 900 685 / 907 674 / 899 Total Gross Par Exposure (€M) 16,991 17,521 18,584 18,995 20,181 20,435 WA Sprea
Slide 22: BGCF Look Through Portfolio Details
BGCF LOOK THROUGH PORTFOLIO DETAILS HIGHLY CONFIDENTIAL & TRADE SECRET Portfolio Total Par Moody’s Moody’s WA Coupon WA # Par Outstanding Corporate Facility WA WA (All-In Maturity Facilities (€M) (€M) Moody’s Industry Country Rating Rating Price Spread Rate) (Years) Banking, Finance, Insurance and R
Slide 23: Securitisations Detail: 2Q '20 Activity Details
SECURITISATIONS DETAIL: 2Q ’20 ACTIVITY DETAILS HIGHLY CONFIDENTIAL & TRADE SECRET ▪ Invested €23.8 million ($29.2 million) into Harriman Park CLO (USD) and €17.4 million into Avondale Park CLO(1) ▪ No additional investments made into Tallman Park Warehouse, an existing USD CLO warehouse investment
Slide 24: Euro CLO Securitisations Detail
EURO CLO SECURITISATIONS DETAIL HIGHLY CONFIDENTIAL & TRADE SECRET ▪ Defaulted asset balances are currently low within the portfolio Refi / Valuation Highest of Defaulted Reset Remaining BGCF BGCF Position as % of Ann. Cum. WA Cost Interest Caa / CCC / Assets % Closing Date RI Period Deal Position C
Slide 25: US CLO Securitisations Detail
US CLO SECURITISATIONS DETAIL HIGHLY CONFIDENTIAL & TRADE SECRET ▪ Defaulted asset balances are currently low within the portfolio Refi / Valuation Highest of Defaulted Reset Remaining BGCF BGCF Position as % of Ann. Cum. WA Cost Interest Caa / CCC / Assets % Closing Date RI Period Deal Position Cos
Slide 26: BGCF Historical Default and Recovery
BGCF HISTORICAL DEFAULT AND RECOVERY HIGHLY CONFIDENTIAL & TRADE SECRET 2Q ’20 Default Loss Rate Since Inception Default Loss Rate 1.6% 1.6% 1.4% 1.4% 1.2% 1.2% 1.0% 1.0% 0.76% 0.8% 0.8% 0.6% 0.54% 0.6% 0.39% 0.4% 0.4% 0.2% 0.06% 0.2% 0.06% 0.03% 0.0% 0.0% BGCF EUR Loans US Loans BGCF EUR Loans US L
Slide 27: Market and Portfolio Outlook
MARKET AND PORTFOLIO OUTLOOK HIGHLY CONFIDENTIAL & TRADE SECRET Global credit markets rebounded from March lows, buoyed by the effects of continued stimulus from central banks and governments despite a bout of volatility toward the end of the month as investors reacted to a spike in COVID-19 cases i
Slide 28: V. Performance
HIGHLY CONFIDENTIAL & TRADE SECRET V. Performance Blackstone / GSO Loan Financing Limited Blackstone | 27
Slide 29: 2Q '20 Return Analysis
2Q ’20 RETURN ANALYSIS HIGHLY CONFIDENTIAL & TRADE SECRET BGLF’s total net (NAV) return for 2Q ’20 was 8.79% Contributors to Total Return Directly EUR CLO USD CLO USD CLO BGCF Cash BGCF BGLF Held Loans Income Notes Income Notes Warehouses & Expenses 10% 0.07% 0.26% 9.42% 0.48% 2.68% 0.07% 2.19% 8.79
Slide 30: YTD 2020 Return Analysis
YTD 2020 RETURN ANALYSIS HIGHLY CONFIDENTIAL & TRADE SECRET BGLF’s YTD total net (NAV) return was -6.73% Contributors to Total Return Directly EUR CLO USD CLO USD CLO BGCF Cash BGCF BGLF Held Loans Income Notes Income Notes Warehouses & Expenses 2% 3.77% 1% 0.91% 4.96% -0.34% 0% -1% -2% -2.84% -2.27
Slide 31: BGLF Total Returns Since Inception
BGLF TOTAL RETURNS SINCE INCEPTION HIGHLY CONFIDENTIAL & TRADE SECRET 40.4% NAV and 18.7% share price cumulative total return since inception Versus 15.1% and 18.1% for European loans and US loans, respectively Annualised Net Total Return 50% 41.9% 40% 30% 20% 11.9% 8.8% 9.7% 10% 5.9% 4.2% 2.9% 2.8%
Slide 32: 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 2020 BGLF € NAV 0.61% -1.10% -13.84% 3.91% -0.77% 5.51% -6.73% European Loans 0.51% -1.03% -13.57% 6.66% 3.28% 1.57% -3.80% US Loans 0.53% -1.35% -12.46% 4.29% 3.80% 1.3
Slide 33: CLO Securitisation Performance by Vintage
CLO SECURITISATION PERFORMANCE BY VINTAGE HIGHLY CONFIDENTIAL & TRADE SECRET CLO securitisations continue to generate positive cashflow WA Annualised Cash on Cash Distribution Rates European CLO Income Notes US CLO Income Notes Global 2Q ’20 Average 2Q ’20 Average 2Q ’20 1Q ’20 Par # of Annualised A
Slide 34: VI. Market Overview
HIGHLY CONFIDENTIAL & TRADE SECRET VI. Market Overview Blackstone / GSO Loan Financing Limited Blackstone | 33
Slide 35: Global Credit Spreads and Prices Began to Recover in 2Q 2020
GLOBAL CREDIT SPREADS AND PRICES BEGAN TO RECOVER IN 2Q 2020 HIGHLY CONFIDENTIAL & TRADE SECRET Spread to Maturity Yield to Maturity (L+ / E+) 1,000 11% 800 E+579 9% 6.79% L+578 600 7% 400 5% 5.35% 200 3% Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-
Slide 36: Loan Returns by Quality
LOAN RETURNS BY QUALITY HIGHLY CONFIDENTIAL & TRADE SECRET Higher quality loans outperformed lower quality loans in the recent recovery(1) Loan performance experienced a dispersion by rating that continued to favour higher-quality loans in 2Q US Loan Returns by Quality European Loan Returns by Quali
Slide 37: Global Loan Defaults
GLOBAL LOAN DEFAULTS HIGHLY CONFIDENTIAL & TRADE SECRET Social distancing measures and the oil-price war have led to elevated defaults in US loans, particularly in the energy and retail sectors Trailing 12-month Issuer Default Rate 9.3% 7.7% 6.8% 4.6% 4.1% 4.1% 3.3% 3.4% 3.1% 1.9% 1.8% 1.7% 1.5% 1.6
Slide 38: Global CLO Issuance
GLOBAL CLO ISSUANCE HIGHLY CONFIDENTIAL & TRADE SECRET Global CLO issuance lagged the prior quarter by 6% Quarterly issuance totaled $22.5 billion in 2Q ’20 versus $23.8 billion in 1Q ’20 CLO New Issuance ($ in billions) $161 $152 $143 $142 32 19 33 24 $114 15 $92 $91 10 19 124 129 $54 118 118 $51 9
Slide 39: Global CLO Arbitrage
GLOBAL CLO ARBITRAGE HIGHLY CONFIDENTIAL & TRADE SECRET The average quarterly arb for 2Q is well below historical levels as new issue CLO tranche spreads have widened US WA Spread and Cost of Capital European WA Spread and Cost of Capital (bp) (bp) 450 450 400 400 350 350 300 300 250 250 200 200 150
Slide 40: VII. Additional Information
HIGHLY CONFIDENTIAL & TRADE SECRET VII. Additional Information Blackstone / GSO Loan Financing Limited Blackstone | 39
Slide 41: CLOs are securitisations backed by a diversified pool of senior secured loans
TITLE PLACEHOLDER HIGHLY CONFIDENTIAL & TRADE SECRET CLOs are securitisations backed by a diversified pool of Senior Secured Loans Payments ▪ A CLO is a special purpose company that issues debt and equity and uses the proceeds to invest in a diversified portfolio of senior secured loans Liabilities
Slide 42: How Do Loan Downgrades Affect CLOs?
HOW DO LOAN DOWNGRADES AFFECT CLO S ? HIGHLY CONFIDENTIAL & TRADE SECRET CLO Coverage Tests Notable Haircuts to OC and ID Tests Overcollateralisation Test (“OC Test”) ▪ CCC exposure > 7.5% (market value; example below) ▪ A ratio of asset par (with Haircuts) divided by ▪ Defaulted/deferring assets (l
Slide 43: VIII. Important Disclosure Information
HIGHLY CONFIDENTIAL & TRADE SECRET VIII.Important Disclosure Information Blackstone / GSO Loan Financing Limited Blackstone | 42
Slide 44: Important Disclosure Information
IMPORTANT DISCLOSURE INFORMATION HIGHLY CONFIDENTIAL & TRADE SECRET BGLF has engaged Blackstone / GSO Debt Funds Management Europe Limited to produce this report and BGLF (including its directors) has not been involved in the production of the report or verified the accuracy of its contents and ther
Slide 45: Important Disclosure Information (Cont'd)
IMPORTANT DISCLOSURE INFORMATION (CONT’D) HIGHLY CONFIDENTIAL & TRADE SECRET Any comparisons herein of the investment performance of a referenced fund(s) to a benchmark or an index are qualified as follows: (i) the volatility of such benchmark or index may be materially different from that of the re
Slide 46: Important Disclosure Information (Cont'd)
IMPORTANT DISCLOSURE INFORMATION (CONT’D) HIGHLY CONFIDENTIAL & TRADE SECRET BGCF Loan Default Track Record BGCF’s track record includes the US middle market loans, European floating rate notes, and broadly syndicated loans held on a look-through basis by BGCF, including through European and US CLOs
Slide 47: 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 48: Important Disclosure Information (Cont'd)
IMPORTANT DISCLOSURE INFORMATION (CONT’D) HIGHLY CONFIDENTIAL & TRADE SECRET GERMANY The units are neither registered for public distribution with the German Federal Financial Services Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) according to the German Investment
Slide 49: Important Disclosure Information (Cont'd)
IMPORTANT DISCLOSURE INFORMATION (CONT’D) HIGHLY CONFIDENTIAL & TRADE SECRET NETHERLANDS Attention. This investment falls outside AFM supervision. No licence is required for this activity. The participations may not be offered, sold, transferred or delivered, directly or indirectly, in the Netherlan
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