Blackstone Inc. · NYSE:BX
Blackstone — Blackstone Loan Financing — Q1 2021 Earnings Presentation
68 slides from Blackstone's earnings presentation, Mar 31, 2021
Slide 1: Blackstone Loan Financing Limited
Blackstone Loan Financing Limited AS OF 31 MARCH 2021
Slide 2: Table of Contents
TABLE OF CONTENTS I. BGLF Overview 2 II. BCF Overview 6 III. First Quarter 2021 Results 9 IV. Performance 16 V. Portfolio Activity and Outlook 19 VI. Market Overview 31 VII. BCF Sensitivity Analysis 39 VIII. Additional Information 48 IX. Key Risk Factors 54 X. Important Disclosure Information 57 Bla
Slide 3: I. BGLF Overview
I. BGLF Overview Blackstone | 2
Slide 4: Blackstone Loan Financing Limited (BGLF)
BLACKSTONE LOAN FINANCING LIMITED (“BGLF”) Focus on senior secured corporate loans with a goal of providing compelling income and stable NAV Strategy Overview BGLF € NAV Total Returns Components(1) 25.0% ▪ Leveraged exposure to European and US floating rate 20.7% senior secured loans and bonds, both
Slide 5: Investment Opportunity Overview
INVESTMENT OPPORTUNITY OVERVIEW ▪ Provides access to a market-leading loan and CLO management platform, including CLO warehouse investment opportunities(1) Blackstone Credit’s CLO ▪ Cost effective levered exposure to senior secured loans through term financing on balance sheet and Platform through C
Slide 6: Ways to Invest
WAYS TO INVEST Public Shares Private Units Ticker / Share Class BGLF LN BGLP LN Class A Class C Fund Name Blackstone Loan Financing Ltd. Blackstone Corporate Funding EUR Fund Description Ordinary Shares QIAIF Units Fund Jurisdiction Jersey Ireland (1) Total NAV €405.1 million €656.4 million €17.9 mi
Slide 7: II. BCF Overview
II. BCF Overview Blackstone | 6
Slide 8: BCF: 1Q '21 Summary Performance
BCF: 1Q ’21 SUMMARY PERFORMANCE 10.92% 10.95% €2M €1,078M 1Q ROI ann.(1) LTM ROI(2) 1Q ’21 BCF change in BCF net assets net assets 1.87% 7.4x €405M €674M NIM(3) debt-to-equity(4) BGLF net assets BCF EUR net assets Net Assets as of 31 March 2021. (1) 1Q BCF Return on Investment (“ROI”) annualised: ca
Slide 9: Blackstone Corporate Funding (BCF) Structure
BLACKSTONE CORPORATE FUNDING (“BCF”) STRUCTURE Public Shareholders Private Unitholders 477 million shares: ▪ €822 million committed capital ▪ 91% third parties (434 million) ▪ €0 million undrawn capital ▪ 9% Blackstone (43 million) BGLF was awarded Best closed-end CLO Fund by BGLF BCF EUR Creditflux
Slide 10: III. First Quarter 2021 Results
III. First Quarter 2021 Results Blackstone | 9
Slide 11: First Quarter 2021 Results
FIRST QUARTER 2021 RESULTS ▪ BGLF Distribution yield of 9.99%, as of 31 March 2021. The Board has adopted a revised Dividend Policy BGLF Earnings targeting a total annual dividend of between €0.07 and €0.08 for 2021 (1) & Distributions ▪ BGLF’s net distributable earnings exceeded its declared divide
Slide 12: BCF Capitalisation
BCF CAPITALISATION ▪ All capital has been called and invested(1) ▪ Debt-to-equity ratio of 7.4x through financing structures(2) Balance Sheet(1) (€ in millions) Assets Liabilities Directly Held Assets €312 Credit Facility (Directly Held Assets) €104 Indirect Assets 12,202 Indirect Liabilities 10,919
Slide 13: BGLF Earnings & Distributions
BGLF EARNINGS & DISTRIBUTIONS ▪ BGLF Distribution yield of 9.99%, as of 31 March 2021(1) ▪ BGLF’s net distributable earnings exceeded its declared dividends by 42% over the last 12 months, with any retained net earnings being available for share repurchases, reinvestment, and dividends going forward
Slide 14: BCF Investment Activity
BCF INVESTMENT ACTIVITY ▪ Aimed to position the portfolio for the re-opening of economies ▪ In the first quarter, €3.2 billion of assets purchased and €0.8bn of assets sold, including underlying CLO and warehouse portfolios(1) 1Q ’21 Portfolio Activity Highlights(2) 1Q ’21 Portfolio Activity(1) (€ i
Slide 15: BCF Portfolio Composition
BCF PORTFOLIO COMPOSITION ▪ Diversified portfolio of 693 issuers invested across multiple sectors, geographies, and vintages ▪ Portfolio of primarily senior secured and floating rate assets ▪ Ratings profile marginally declined consistent with rotation into cyclical and re-opening focused issuers Co
Slide 16: BCF Investment Activity
BCF INVESTMENT ACTIVITY ▪ Average WAC on EUR CLOs declined as a result of reset and refinancing activity. We expect a similar trend in US CLOs as refinancing and reset activity feeds through into 2Q’21 portfolio metrics ▪ Remaining CLO reinvestment period average of 2.0 years provide an opportunity
Slide 17: IV. Performance
IV. Performance Blackstone | 16
Slide 18: 1Q '21 Return Analysis
1Q ’21 RETURN ANALYSIS BGLF’s total net (NAV) return for 1Q ’21 was 3.69% Contributors to Total Return Directly EUR CLO USD CLO USD CLO BCF Cash BCF BGLF Held Loans Income Notes Income Notes Warehouses & Expenses 5% 3.95% 1.97% 0.28% 0.34% 1.57% 0.03% 0.03% 3.69% 4% 0.00% -0.40% -0.17% -0.27% 3% 1.8
Slide 19: BGLF Total Returns Since Inception
BGLF TOTAL RETURNS SINCE INCEPTION 55.75% NAV and 39.76% share price cumulative total return since inception Versus 24.61% and 30.03% for European loans and US loans, respectively Annualised Net Total Return 70% 67.0% 60% 50% 40% 30% 20.7% 21.1% 20.8% 20% 12.3% 8.4% 7.1% 8.2% 6.8% 10% 5.3% 5.1% 3.7%
Slide 20: V. Portfolio Activity and Outlook
V. Portfolio Activity and Outlook Blackstone | 19
Slide 21: First Quarter 2021 Portfolio Activity and Outlook
FIRST QUARTER 2021 PORTFOLIO ACTIVITY AND OUTLOOK Portfolio trading activity during 1Q ’21 continued to focus on capital preservation and rotation ▪ Within our broader CLO portfolio, we opportunistically exited tail risk names with an emphasis on par loss mitigation. We also selectively added reopen
Slide 22: First Quarter 2021 Portfolio Activity and Outlook (Cont'd)
FIRST QUARTER 2021 PORTFOLIO ACTIVITY AND OUTLOOK (CONT’D) As discussed last quarter, the arbitrage for CLOs has reverted from both price and spread arbitrage in 2020 to a pure spread arbitrage in 2021, given the rally experienced in both loan prices and CLO liability spreads ▪ With a full recovery
Slide 23: New Securitisations, Resets, and Refinancings – Q1 '21
NEW SECURITISATIONS, RESETS, AND REFINANCINGS – Q1 ’21 New securitisations ▪ The addition of new CLOs to the BCF portfolio improves diversification across vintage and allows for additional refinancing and reset opportunities in aggregate, to take advantage of favourable market conditions as they ari
Slide 24: Subsequent Events – BCF Portfolio Activity
SUBSEQUENT EVENTS – BCF PORTFOLIO ACTIVITY CLO New Issue ▪ In April 2021, BCF invested in a vertical retention position in the $410mm Tallman Park CLO, having originally opened the warehouse in December 2019. The deal has a five year reinvestment and two year non-call period, with the spread on the
Slide 25: Summary of Investment Portfolio: BCF Portfolio
SUMMARY OF INVESTMENT PORTFOLIO: BCF PORTFOLIO ▪ Portfolio positioning to US CLOs was reduced in the final quarter compared to 4Q ’20 as BCF fully sold two CLO equity positions at favourable levels ▪ Remaining reinvestment periods increased slightly since last quarter due refinancings, resets, and n
Slide 26: BCF Historical Default and Recovery
BCF HISTORICAL DEFAULT AND RECOVERY 1Q ’21 Default Loss Rate Since Inception Default Loss Rate 0.7% 1.0% 0.88% 0.6% 0.50% 0.8% 0.5% 0.4% 0.6% 0.39% 0.3% 0.4% 0.2% 0.10% 0.2% 0.1% 0.07% 0.00% 0.0% 0.0% BCF EUR Loans US Loans BCF EUR Loans US Loans Annual Default and Recovery Rates 2014 2015 2016 2017
Slide 27: Summary of Investment Portfolio
SUMMARY OF INVESTMENT PORTFOLIO BCF Look-through Portfolio 2Q '20 3Q '20 4Q '20 1Q’21 QoQ Trend(2) # Issuers / Facilities 674 / 902 677 / 937 682 / 952 693/979 Total Gross Par Exposure (€M) 20,458 20,544 20,064 19,799 WA Spread 3.46% 3.47% 3.46% 3.45% WA Base Rate 0.31% 0.24% 0.27% 0.25% WA Coupon (
Slide 28: BCF Look Through Portfolio Details
BCF LOOK THROUGH PORTFOLIO DETAILS 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) Issuer 1 7 189 5,941 Retail (Global Petrol Stations) United Kingdom B
Slide 29: Euro CLO Securitisation Investment Details
EURO CLO SECURITISATION INVESTMENT DETAILS ▪ Defaulted asset balances are currently low within the portfolio Refi / Highest of Reset Remaining BCF Position Valuation Ann. Cum. Interest Caa / CCC / Defaulted Closing Date RI Period Deal Size Position BCF Cost as % of as % of BCF Cash-on- Cash-on- WA C
Slide 30: US CLO Securitisation Investment Details
US CLO SECURITISATION INVESTMENT DETAILS ▪ Defaulted asset balances are currently low within the portfolio Refi / Highest of Reset Remaining BCF Position Valuation Ann. Cum. Interest Caa / CCC / Defaulted Closing Date RI Period Deal Size Position BCF Cost as % of as % of BCF Cash-on- Cash-on- WA Cos
Slide 31: CLO Securitisation Performance by Vintage
CLO SECURITISATION PERFORMANCE BY VINTAGE CLO securitisations continue to generate positive cashflow. The 1Q ’21 distribution slightly declined compared to the previous quarter due to principal re-designated as interest in a number of our CLOs in 4Q ’20, amortising deals, general spread compression,
Slide 32: VI. Market Overview
VI. Market Overview Blackstone | 31
Slide 33: Market Overview
MARKET OVERVIEW The rollout of vaccination programmes combined with monetary and fiscal stimulus globally provided more impetus to the global recovery trade throughout 1Q’ 21, culminating in yet another solid quarter for leveraged loans. Once again, lower quality assets outperformed their higher qua
Slide 34: Market Overview
MARKET OVERVIEW 1Q ’21 flows into US leveraged loans have reversed the outflow trend experienced in 2020, given the improvement in corporate fundamentals and relative attractiveness of the asset class in a rising rate environment. Retail leveraged loan inflows totaled $12.7 billion in 1Q ’21, compar
Slide 35: Global Credit Spreads and Prices Have Continued Their Recovery
GLOBAL CREDIT SPREADS AND PRICES HAVE CONTINUED THEIR RECOVERY Spread to Maturity Yield to Maturity (L+ / E+) 1,000 11% 800 9% 600 7% E+459 400 5% 4.39% L+414 4.04% 200 3% Mar-18 Nov-18 Jun-19 Jan-20 Aug-20 Mar-21 Mar-18 Nov-18 Jun-19 Jan-20 Aug-20 Mar-21 S&P LL Index S&P Euro LL Index S&P LL Index
Slide 36: Global Loan Return by Quality
GLOBAL LOAN RETURN BY QUALITY CCC-rated loans have outperformed, particularly in Europe US Loan Returns by Quality European Loan Returns by Quality 70% 70% 61.72% 60% 60% 50% 50% 43.80% 40% 40% 30% 30% 21.84% 20.97% 20% 20% 12.11% 11.82% 10% 10% 0% 0% Jan-21 Aug-20 Apr-20 Jun-20 Jul-20 Oct-20 Nov-20
Slide 37: Global Loan Defaults
GLOBAL LOAN DEFAULTS COVID-19-related restrictions have led to elevated default rates, however we this to trend downwards as economies reopen and the recovery takes shape Trailing 12-month Issuer Default Rate 9.3% 7.7% 6.8% 4.6% 4.7% 4.4% 4.1% 3.3% 3.4% 3.1% 1.9% 1.8%1.7% 1.5% 1.6% 1.6% 1.4% 1.3% 1.
Slide 38: Global CLO Issuance
GLOBAL CLO ISSUANCE Global CLO issuance advanced the prior quarter by 20% Quarterly issuance totalled $48.6 billion in 1Q ’21 versus $40.6 billion in 4Q ’20 CLO New Issuance ($ in billions) $161 $152 $143 $142 32 19 33 24 $118 $114 15 25 $92 $91 10 19 124 129 $54 118 118 $49 99 93 83 9 72 54 $14 39
Slide 39: Global CLO Arbitrage
GLOBAL CLO ARBITRAGE The average quarterly arb continued to improve in 1Q ’21 as new issue CLO tranche spreads tightened and loan spreads remained stable US WA Spread and Cost of Capital European WA Spread and Cost of Capital (bp) (bp) 450 450 400 400 350 350 300 300 250 250 200 200 150 150 100 100
Slide 40: VII. BCF Sensitivity Analysis
VII. BCF Sensitivity Analysis Blackstone | 39
Slide 41: Changes to Assumptions Since End 2019
CHANGES TO ASSUMPTIONS SINCE END 2019 ▪ Assumptions herein represents current views of Blackstone Credit LCS Investment Team and is largely consistent with the scenario run by our 3rd party valuation provider for NAV purposes, with a few differences, namely the prepayment rate [20%], recovery rate [
Slide 42: Scenario Assumptions
SCENARIO ASSUMPTIONS Current (31-Mar-21) Global Financial Crisis ("GFC") Stress - Market GFC Stress - Blackstone Credit Assumption EUR US EUR US EUR US Default and recovery assumptions aim to track CS Default and recovery assumptions aim to track BXC The assumptions below reflect the current (Wester
Slide 43: Projected Equity Distributions
PROJECTED EQUITY DISTRIBUTIONS Projected Equity Distributions (€ millions) 80 70 60 50 40 30 20 10 0 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Current (31-Mar-21) GFC Stress (Market) GFC Stress (Blackstone Credit) Source: Blackstone Credit, Intex. As of 28 February 2021. Note that
Slide 44: Projected Interest Diversion Cushions
PROJECTED INTEREST DIVERSION CUSHIONS Average Interest Diversion Cushions (%) 5.0 3.0 1.0 -1.0 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Current (31-Mar-21) GFC Stress (Market) GFC Stress (Blackstone Credit) Interest Diversion Failure Forecast Total # Deals: 46 Current (31-Mar 2021
Slide 45: US and European Default and CCC Projections
US AND EUROPEAN DEFAULT AND CCC PROJECTIONS US Projected CCCs European Projected CCCs (%) (%) 14.0 14.0 12.0 12.0 10.0 10.0 8.0 8.0 6.0 6.0 4.0 4.0 2.0 2.0 0.0 0.0 Current (31-Mar-21) GFC Stress (Market) GFC Stress (Blackstone Credit) Current (31-Mar-21) GFC Stress (Market) GFC Stress (Blackstone Cr
Slide 46: Assumptions for "Current" Scenario in Sensitivity Analysis
ASSUMPTIONS FOR “CURRENT” SCENARIO IN SENSITIVITY ANALYSIS Model Assumptions: ▪ The CLO Equity positions are dependent on various assumptions influencing the net returns, which are projected in Intex ▪ Blackstone Credit’s liquid credit analysts updated their near-term (3, 6, and 12 month) views on t
Slide 47: Case Study: 2007 USD CLO – Inwood Park CLO
Sample – For Illustrative Purposes Only. Not a BCF Investment CASE STUDY: 2007 USD CLO – INWOOD PARK CLO CLO Income Notes Have Been Resilient Even Through the Great Financial Crisis As They Continued to Make Distributions Without Significant Loss to the Par of Underlying Assets Capital Structure Ass
Slide 48: Case Study: 2007 EUR CLO – Harbourmaster CLO 7
Sample – For Illustrative Purposes Only. Not a BCF Investment CASE STUDY: 2007 EUR CLO – HARBOURMASTER CLO 7 CLO Income Notes Have Been Resilient Even Through the Great Financial Crisis As They Continued to Make Distributions Without Significant Loss to the Par of Underlying Assets Capital Structure
Slide 49: VIII. Additional Information
VIII.Additional Information Blackstone | 48
Slide 50: BGLF Monthly € NAV Total Return Performance
BGLF MONTHLY € NAV TOTAL RETURN PERFORMANCE Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 2021 BGLF € NAV 2.79% 0.67% 0.20% 3.69% European Loans 0.91% 0.81% 0.00% 1.73% US Loans 1.27% 0.67% 0.06% 2.01% 2020 BGLF € NAV 0.61% -1.10% -13.84% 3.91% -0.77% 5.51% 1.54% 0.81% -1.63% 1.60% 3.58% 0.96%
Slide 51: BGLF Monthly € NAV Total Return Performance
BGLF MONTHLY € NAV TOTAL RETURN PERFORMANCE 31/03/2016 – 31/03/2017 – 31/03/2018 – 31/03/2019 – 31/03/2020 – 31/03/2017 31/03/2018 31/03/2019 31/03/2020 31/03/2021 Discrete Performance BGLF € NAV 10.41% 0.07% 12.45% -6.02% 20.67% European Loans 6.94% 3.01% 1.66% -11.49% 21.13% US Loans 9.74% 4.64% 3
Slide 52: What Is a CLO?
WHAT IS A CLO? 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 ▪ It distributes the cash flows from i
Slide 53: How Do Loan Downgrades Affect CLOs?
HOW DO LOAN DOWNGRADES AFFECT CLO S? 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 (lower of market value and liability b
Slide 54: ESG Diligence
ESG DILIGENCE LCS analysts monitor for material ESG and climate related events with a focus on themes specific to each issuer ▪ Environmental regulation that adversely impacts an issuer’s business model Environmental ▪ Negative environmental events as a result of company activities ▪ Carbon emission
Slide 55: IX. Key Risk Factors
IX. Key Risk Factors Blackstone | 54
Slide 56: Key Risk Factors
KEY RISK FACTORS AS DETERMINED BY THE ENTITIES DISTRIBUTING THIS COMMUNICATION 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 that BGLF will achieve comparable r
Slide 57: Key Risk Factors
KEY RISK FACTORS AS DETERMINED BY THE ENTITIES DISTRIBUTING THIS COMMUNICATION 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, without limitation, the allocation o
Slide 58: X. Important Disclosure Information
X. Important Disclosure Information Blackstone | 57
Slide 59: Important Disclosure Information
IMPORTANT DISCLOSURE INFORMATION 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 any investment activity and is for th
Slide 60: Important Disclosure Information
IMPORTANT DISCLOSURE INFORMATION 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 reliable for the purpose used here
Slide 61: Important Disclosure Information (Cont'd)
IMPORTANT DISCLOSURE INFORMATION (CONT’D) 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 estimates are necessarily speculat
Slide 62: Important Disclosure Information (Cont'd)
IMPORTANT DISCLOSURE INFORMATION (CONT’D) 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 affiliates will encounter potential c
Slide 63: Important Disclosure Information (Cont'd)
IMPORTANT DISCLOSURE INFORMATION (CONT’D) 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 manage, or specific investments made
Slide 64: Important Disclosure Information (Cont'd)
IMPORTANT DISCLOSURE INFORMATION (CONT’D) 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 products of any kind. Any such offer or in
Slide 65: Important Disclosure Information (Cont'd)
IMPORTANT DISCLOSURE INFORMATION (CONT’D) 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 any province or territory thereof.
Slide 66: Important Disclosure Information (Cont'd)
IMPORTANT DISCLOSURE INFORMATION (CONT’D) 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 (2011/61/EU)) (the “AIFMD”), this do
Slide 67: Important Disclosure Information (Cont'd)
IMPORTANT DISCLOSURE INFORMATION (CONT’D) 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 (INCLUDING ANY AMENDMENTS OR SUCCESSOR LAWS
Slide 68: Important Disclosure Information (Cont'd)
IMPORTANT DISCLOSURE INFORMATION (CONT’D) 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 People’s Republic of China (for the purp
Blackstone Loan Financing — Q1 2021 Earnings Presentation on 6ix