Blackstone Inc. · NYSE:BX
Blackstone — Blackstone / GSO Loan Financing — Q3 2020 Earnings Presentation
51 slides from Blackstone's earnings presentation, Sep 30, 2020
Slide 1: Blackstone / GSO Loan Financing Limited
Blackstone / GSO Loan Financing Limited AS OF 30 SEPTEMBER 2020 Blackstone / GSO Loan Financing Limited
Slide 2: Table of Contents
TABLE OF CONTENTS I. BGLF Overview 2 II. BGCF Overview 6 III. Third Quarter 2020 Results 9 IV. Fund Overview 16 V. Performance 28 VI. Market Overview 34 VII. Additional Information 40 VIII. Important Disclosure Information 44 Blackstone / GSO Loan Financing Limited Blackstone | 1
Slide 3: I. BGLF Overview
I. BGLF Overview Blackstone / GSO Loan Financing Limited Blackstone | 2
Slide 4: Focus on senior secured corporate loans providing income and stable NAV
BLACKSTONE / GSO 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(1) 8% Exposure to European and US floating rate senior secured loans and bonds, both directly and indirectly
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) GSO’s CLO Platform Cost effective levered exposure to senior secured loans through term financing on balance sheet and through CLOs Deep and
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 / GSO Loan Financing Ltd. Blackstone / GSO Corporate Funding EUR Fund Description Ordinary Shares QIAIF Units Fund Jurisdiction Jersey Ireland Total NAV(1) €388.2 million €636.1 milli
Slide 7: II. BGCF Overview
II. BGCF Overview Blackstone / GSO Loan Financing Limited Blackstone | 6
Slide 8: BGCF: 3Q '20 Summary Performance
BGCF: 3Q ‘2O SUMMARY PERFORMANCE 0.77% 1.08% -€31M €1,040M ROI(1) ROA(2) 3Q ’20 BGCF change in BGCF net assets net assets 1.95% 7.8x €388M €654M NIM(3) debt-to-equity(4) BGLF net assets BGCF EUR net assets Net Assets as of 30 September 2020. (1) BGCF Return on Investment (“ROI”): calculated as the B
Slide 9: BGCF Structure
BGCF STRUCTURE Public Shareholders Private Unitholders 480 million shares: €822 million committed capital 91% third parties (437 million) €0 million undrawn capital 9% Blackstone (43 million) BGLF was awarded Best closed-end CLO Fund by BGLF BGCF EUR €388.2 million NAV €653.5 million NAV Cre
Slide 10: III. Third Quarter 2020 Results
III. Third Quarter 2020 Results Blackstone / GSO Loan Financing Limited Blackstone | 9
Slide 11: Third Quarter 2020 Results
THIRD QUARTER 2020 RESULTS BGLF Distribution yield of 10.2%, as of 30 September 2020(1) BGLF Earnings BGLF’s net distributable earnings exceeded its declared dividends by 62% over the last 12 months, & Distributions with any retained net earnings being available for share repurchases, reinvestme
Slide 12: BGLF Earnings & Distributions
BGLF EARNINGS & DISTRIBUTIONS BGLF Distribution yield of 10.2%, as of 30 September 2020(1) BGLF’s net distributable earnings exceeded its declared dividends by 62% over the last 12 months, with any retained net earnings being available for share repurchases, reinvestment, and dividends going for
Slide 13: BGCF Investment Activity
BGCF INVESTMENT ACTIVITY Focused on risk mitigation and ratings migration in order to maintain the overall quality of the portfolio(1) In the third quarter, €1.3 billion of assets purchased, €0.4 billion net portfolio investments, including underlying CLO and warehouse portfolios(2) 3Q ’20 Portf
Slide 14: BGCF Portfolio Composition
BGCF PORTFOLIO COMPOSITION Diversified portfolio of 677 issuers invested across multiple sectors, geographies, and vintages Portfolio comprised of 99.6% senior secured and 97.8% floating rate assets Country Allocations Moody’s Rating Distribution Others >Ba2 5.9% 15.2% 3.0% Ba2 5.9% 4.2% Germany
Slide 15: BGCF Capitalisation
BGCF CAPITALISATION All capital has been called and invested Debt-to-equity ratio of 7.8x through financing structures(1) Balance Sheet(1) (€ in millions) Assets Liabilities Directly Held Assets €218 Credit Facility (Directly Held Assets) €60 Indirect Assets 12,615 Indirect Liabilities 11,310 EU
Slide 16: BGCF Investment Activity: Financing Cost and NIM
BGCF INVESTMENT ACTIVITY Average WAC on US CLOs and US CLO warehouses declined due to falling Libor Remaining CLO reinvestment period average of 2.1 years provide an opportunity to continue optimising the portfolio and to improve weighted average spread (“WAS”) Portfolio Financing Cost CLO Net I
Slide 17: IV. Fund Overview
IV. Fund Overview Blackstone / GSO Loan Financing Limited Blackstone | 16
Slide 18: Third Quarter 2020 Portfolio Activity
THIRD QUARTER 2020 PORTFOLIO ACTIVITY Portfolio trading activity during 3Q ’20 continued to focus on risk mitigation and rotation, with an emphasis on ratings migration and maintaining our up-in-quality bias Higher quality loans in both US and Europe experienced a less severe fall at the onset of
Slide 19: Third Quarter 2020 Portfolio Activity (Cont'd)
THIRD QUARTER 2020 PORTFOLIO ACTIVITY (CONT’D) Maintaining investment capability remains a key focus. As such, we have looked to extend the remaining reinvestment periods when accretive to do so either through primary CLO issuance or resetting and extending existing CLOs The remaining reinvestment
Slide 20: Summary of Investment Portfolio: BGCF Portfolio
SUMMARY OF INVESTMENT PORTFOLIO: BGCF PORTFOLIO Portfolio positioning between EUR and USD exposure remains largely unchanged versus 2Q ’20 Remaining reinvestment periods decrease slightly since last quarter due to a measured investment pace, though vintage diversification continues to be a focus
Slide 21: Summary of Investment Portfolio
SUMMARY OF INVESTMENT PORTFOLIO BGCF Look-through Portfolio 4Q ’19 1Q '20 2Q '20 3Q '20 QoQ Trend # Issuers / Facilities 687 / 900 685 / 907 674 / 902 677 / 937 Total Gross Par Exposure (€M) 18,995 20,181 20,458 20,544 WA Spread 3.55% 3.49% 3.46% 3.47% WA Base Rate 1.09% 0.67% 0.31% 0.24% WA Coupon
Slide 22: BGCF Look Through Portfolio Details
BGCF 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 4 218 2,750 Banking, Finance, Insurance and Real Estate Uni
Slide 23: Securitisations Detail: 3Q '20 Activity Details
SECURITISATIONS DETAIL: 3Q ’20 ACTIVITY DETAILS Invested €34.9 million ($41.5 million) into Cayuga Park CLO and Stratus 2020-2 CLO (USD) and €25.6 million into Deer Park CLO (EUR) Invested $20.9 million from the Tallman Park Warehouse into Stratus 20202-2 warehouse, which closed in September New
Slide 24: Euro CLO Securitisations Detail
EURO CLO SECURITISATIONS DETAIL Defaulted asset balances are currently low within the portfolio Refi / Highest of Defaulted Reset Remaining BGCF Position V aluation Ann. Cum. Interest Caa / CCC / Assets % Closing Date RI Period Deal Size Position BGCF Cost as % of as % of Cash-on- Cash-on- W A Cos
Slide 25: US CLO Securitisations Detail
US CLO SECURITISATIONS DETAIL Defaulted asset balances are currently low within the portfolio Refi / Highest of Defaulted Reset Remaining BGCF Position V aluation Ann. Cum. Interest Caa / CCC / Assets % Closing Date RI Period Deal Size Position BGCF Cost as % of as % of Cash-on- Cash-on- W A Cost
Slide 26: BGCF Historical Default and Recovery
BGCF HISTORICAL DEFAULT AND RECOVERY 3Q ’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% 0.84% 0.8% 0.8% 0.59% 0.6% 0.6% 0.42% 0.4% 0.4% 0.2% 0.11% 0.2% 0.06% 0.00% 0.0% 0.0% BGCF EUR Loans US Loans BGCF EUR Loans US Loans Annual Default and Recovery Ra
Slide 27: Market and Portfolio Outlook
MARKET AND PORTFOLIO OUTLOOK Strong technicals and better-than-feared fundamentals drove strong performance in the loan and HY bond markets and the asset classes remained resilient despite headwinds and increased volatility toward the end of 3Q surrounding slimmer chances for another US stimulus pac
Slide 28: Market and Portfolio Outlook (Cont'd)
MARKET AND PORTFOLIO OUTLOOK (CONT’D) In a sign that initial default forecasts for 2020 were overly dire, many rating agencies and banks have revised downward their 2020 and 2021 default expectations(1) In the US, we expect loan defaults to maintain the current levels (4.2% LTM as of 30 September)
Slide 29: V. Performance
V. Performance Blackstone / GSO Loan Financing Limited Blackstone | 28
Slide 30: 3Q '20 Return Analysis
3Q ’20 RETURN ANALYSIS BGLF’s total net (NAV) return for 3Q ’20 was 0.69% Contributors to Total Return 3% Directly EUR CLO USD CLO USD CLO BGCF Cash BGCF BGLF Held Loans Income Notes Income Notes Warehouses & Expenses 1.26% 2% 1.18% 0.28% 0.90% -0.27% -0.18% 1% -1.38% -0.12% 0.77% 0.69% 0.01% -0.44%
Slide 31: YTD 2020 Return Analysis
YTD 2020 RETURN ANALYSIS BGLF’s YTD total net (NAV) return was -6.09% Contributors to Total Return Directly EUR CLO USD CLO USD CLO BGCF Cash BGCF BGLF 6% Held Loans Income Notes 6.87% Income Notes Warehouses & Expenses 4% 5.52% 2% 1.36% -0.54% 0% 1.00% -2% 0.21% 0.21% -2.76% -1.94% -0.64% -6.45% -0
Slide 32: BGLF Total Returns Since Inception
BGLF TOTAL RETURNS SINCE INCEPTION 41.39% NAV and 6.87% share price cumulative total return since inception Versus 18.31% and 23.00% for European loans and US loans, respectively Annualised Net Total Return 10% 5.8% 4.1% 4.7% 5% 3.2% 3.4% 2.8% 2.8% 0.7% 0.8% 1.6% 1.1% 0% -0.3% -2.9% -5% -6.4% -10% -
Slide 33: 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 2020 BGLF € NAV 0.61% -1.10% -13.84% 3.91% -0.77% 5.51% 1.54% 0.81% -1.63% -6.09% European Loans 0.51% -1.03% -13.57% 6.66% 3.28% 1.57% 0.82% 1.20% 0.74% -1.13% US Loans 0.53% -1.35% -12.46% 4.29% 3.80% 1
Slide 34: CLO Securitisation Performance by Vintage
CLO SECURITISATION PERFORMANCE BY VINTAGE CLO securitisations continue to generate positive cashflow, though distributions in 3Q were affected by the base rate mismatch of the underlying loans and CLO liabilities, and the tightening of LIBOR WA Annualised Cash on Cash Distribution Rates European CLO
Slide 35: VI. Market Overview
VI. Market Overview Blackstone / GSO Loan Financing Limited Blackstone | 34
Slide 36: Global Credit Spreads and Prices Began to Recover in 3Q 2020
GLOBAL CREDIT SPREADS AND PRICES BEGAN TO RECOVER IN 3Q 2020 Spread to Maturity Yield to Maturity (L+ / E+) 1,000 11% 800 9% 600 L+546 7% 5.73% 400 E+492 5% 4.94% 200 3% Sep-17 May-18 Dec-18 Jul-19 Feb-20 Sep-20 Sep-17 Mar-18 Sep-18 Mar-19 Sep-19 Mar-20 Sep-20 S&P LL Index S&P Euro LL Index S&P LL I
Slide 37: Loan Returns by Quality
LOAN RETURNS BY QUALITY Higher quality loans continued to outperform lower quality loans in Europe(1) Loan performance experienced a dispersion by rating that generally favoured higher-quality loans in 3Q US Loan Returns by Quality European Loan Returns by Quality 5% 5% 2.80% 0% 0% -0.05% -2.25% -5%
Slide 38: Global Loan Defaults
GLOBAL LOAN DEFAULTS 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% 4.2% 3.3% 3.4% 3.1% 1.9% 1.8% 1.7% 1.5% 1.6% 1.6% 1.4% 1.3% 1.3% 1.0% 1.1% 0.6
Slide 39: Global CLO Issuance
GLOBAL CLO ISSUANCE Global CLO issuance advanced the prior quarter by 29% Quarterly issuance totalled $30.6 billion in 3Q ’20 versus $22.5 billion in 2Q ’20 CLO New Issuance ($ in billions) $161 $152 $143 $142 32 19 33 24 $114 15 $92 $91 10 19 $76 17 124 129 $54 118 118 99 83 72 54 60 $14 $6 12 4 20
Slide 40: Global CLO Arbitrage
GLOBAL CLO ARBITRAGE The average quarterly arb for 3Q ’20 recovered slightly as new issue CLO tranche spreads have tightened 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 50 50 0 0 WA Loan Spread WA C
Slide 41: VII. Additional Information
VII. Additional Information Blackstone / GSO Loan Financing Limited Blackstone | 40
Slide 42: 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 43: 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
Slide 44: ESG Service Providers
ESG SERVICE PROVIDERS GSO is working with select service providers to enhance ESG risk management and due diligence procedures ERM A leading global provider of environmental, health, An environmental, social and corporate governance safety, sustainability and risk consulting services data analyt
Slide 45: VIII. Important Disclosure Information
VIII.Important Disclosure Information Blackstone / GSO Loan Financing Limited Blackstone | 44
Slide 46: Important Disclosure Information
IMPORTANT DISCLOSURE INFORMATION 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 therefore accepts no responsibility for
Slide 47: Important Disclosure Information (Cont'd)
IMPORTANT DISCLOSURE INFORMATION (CONT’D) 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 referenced fund(s); (ii) such benchma
Slide 48: Important Disclosure Information (Cont'd)
IMPORTANT DISCLOSURE INFORMATION (CONT’D) 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, CLO Warehouses, and directly on i
Slide 49: 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 50: Important Disclosure Information (Cont'd)
IMPORTANT DISCLOSURE INFORMATION (CONT’D) HONG KONG The foregoing document contains information about complex products and is not an offer to sell any Securities other than: (i) to "professional investors" as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong (“SFO”) and any rul
Slide 51: Important Disclosure Information (Cont'd)
IMPORTANT DISCLOSURE INFORMATION (CONT’D) SWITZERLAND The Fund has not been approved by the Swiss Financial Market Supervisory Authority as a foreign collective investment scheme pursuant to Article 120 of the Swiss Collective Investment Schemes Act of June 23, 2006 (“CISA”). Consequently, the inter
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