Blackstone Inc. · NYSE:BX
Blackstone — Blackstone Loan Financing — Q3 2022 Earnings Presentation
57 slides from Blackstone's earnings presentation, Sep 30, 2022
Slide 1: Blackstone Loan Financing Limited
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 SEPTEMBER 2022 FOR PROFESSIONAL INVESTORS/QUALIFIED INVESTORS USE ONLY. NOT FOR DISTRIBUTION TO RETAIL OR UNQUALIFIED INVESTORS.
Slide 2: Table of Contents
TABLE OF CONTENTS I Overview 2 II Third Quarter 2022 Results 8 III Performance 15 IV Portfolio Activity 18 V Market Themes 22 VI Portfolio and Market Outlook 29 VII Appendix 31 VIII Key Risk Factors 43 IX Important Disclosure Information 46 Blackstone | 1
Slide 3: I. Overview
I. Overview Blackstone | 2
Slide 4: BGLF has provided investors with compelling income and total NAV returns since inception
BLACKSTONE LOAN FINANCING LIMITED (“BGLF”) BGLF has provided investors with compelling income and total NAV returns since inception BGLF € NAV Total Return Components(1) Total Return(1): BGLF € NAV European Loans US Loans 12.0% 3 Months 1.5% 0.8% 1.2% 10.0% 10.0% 9.1% 9.2% 8.8% 1 Year 7.5% -5.4% -2.
Slide 5: BGLF and BCF Highlights
BGLF AND BCF HIGHLIGHTS 48 9 -€27.5M -€7.5M BCF change in BGLF change in net CLO positions, all CLO vintage years net assets(6) assets(6) actively managed by 1.5% 11.7% BXC(1) ~700 0.07% BGLF 3Q’22 NAV BGLF LTM dividend total return(7) yield(8) underlying loan since inception issuers(2) default loss
Slide 6: Blackstone Corporate Funding (BCF) Structure
BLACKSTONE CORPORATE FUNDING (“BCF”) STRUCTURE Private Unitholders Public Shareholders ▪ €912 million committed capital 452 million shares: ▪ €0 million undrawn capital ▪ 90.5% third parties (409 million) ▪ 9.5% Blackstone (43 million) BCF EUR BGLF €757.5 million NAV(1) €411.1 million NAV 65.6% 34.4
Slide 7: Investment Opportunity Overview
INVESTMENT OPPORTUNITY OVERVIEW 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 secured loans with diversified fundin
Slide 8: II. Third Quarter 2022 Results
II. Third Quarter 2022 Results Blackstone | 7
Slide 9: Third Quarter 2022 Results
THIRD QUARTER 2022 RESULTS ▪ 3Q’22 total return of 1.5% and 7.5% LTM. BGLF declared a dividend of 1.75c in 3Q’22, resulting in a LTM BGLF Earnings dividend yield of 11.68%. The target annual dividend for 2022 is €0.07-€0.08 per share(1) & Distributions ▪ BGLF’s net distributable earnings exceeded it
Slide 10: BGLF Earnings & Distributions
BGLF EARNINGS & DISTRIBUTIONS ▪ BGLF LTM distribution yield of 11.68%(1), supported by uninterrupted cash flows from each CLO since inception ▪ The Board declared a 3Q’22 dividend of 1.75c, the third and final of three flat payments before a final variable payment to be determined in 4Q’22. The BGLF
Slide 11: BCF – Loan Portfolio Activity
BCF – LOAN PORTFOLIO ACTIVITY 3Q ’22 Portfolio Activity Highlights(1) 3Q ’22 Underlying Loan Portfolio Activity(2) (€ in billions) Added 4 new issuers, sold 25 issuers Gross 1.2 WA spread marginally up purchases to 3.58% B2 average facility rating Gross 1.0 Diversification among issuers, sales secto
Slide 12: BCF Portfolio Composition
BCF PORTFOLIO COMPOSITION ▪ Diversified portfolio of 696 issuers invested across multiple sectors, geographies, and vintages ▪ Portfolio of primarily senior secured and floating rate assets Country Allocations Moody’s Rating Distribution 4.1% Others >Ba2 4.2% 12.2% Ba2 3.3% 3.6% Luxembourg 7.5% Ba3
Slide 13: Diversified CLO Liabilities
DIVERSIFIED CLO LIABILITIES ▪ Diversified portfolio of 48(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 periods. This leaves the portfolio we
Slide 14: BCF Investment Activity
BCF INVESTMENT ACTIVITY ▪ Globally, CLO WAC increased quarter on quarter predominantly due to rising European and US reference rates and for Europe, higher CLO cost of capital for a new deal, driven by broader market sentiment Portfolio Financing Cost CLO Net Interest Margins (“NIM”) (rolling 3 mont
Slide 15: III. Performance
III. Performance Blackstone | 14
Slide 16: 2022 BGLF 3Q'22 Return Analysis
2022 BGLF 3Q’22 RETURN ANALYSIS BGLF’s 3Q’22 NAV total return was 1.52% Contributors to Total Return 2.0% Directly EUR CLO US CLO CLO BCF Cash BCF BGLF Held Loans Income Notes Income Notes Warehouses & Expenses 0.18% 1.52% 1.5% 0.30% 0.15% 1.34% 1.94% 1.79% 1.76% 0.06% 0.06% 1.0% -0.18% 0.62% -0.03%
Slide 17: 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 2022 BGLF € NAV 1.22% 0.45% 3.51% 0.44% -1.66% -2.11% 1.89% 1.44% -1.77% 3.31% European Loans 0.29% -0.90% 0.09% -0.13% -2.44% -3.80% 2.37% 1.91% -3.39% -6.78% US Loans 0.36% -0.50% 0.04% 0.17% -2.51% -2.
Slide 18: IV. Portfolio Activity
IV. Portfolio Activity Blackstone | 17
Slide 19: New Securitisations, Resets, and Refinancings – 3Q '22
NEW SECURITISATIONS, RESETS, AND REFINANCINGS – 3Q ’22 New CLO Securitisations ▪ In July 2022, BCF made an investment in the new Clonmore Park CLO, marking the Fund’s 27th European CLO equity position, 48th position overall, and fourth 2022 vintage CLO. The €341 million deal has a 4.5 year reinvestm
Slide 20: Summary of BCF Investment Portfolio
SUMMARY OF BCF INVESTMENT PORTFOLIO ▪ Increase in CLO portfolio weighting due to addition of one European CLO new issue ▪ 3bp increase in WA portfolio NIM mainly driven by higher all-in rates for loans, which were able to offset higher net CLO financing costs (increase in base rates and CLO cost of
Slide 21: V. Market Themes
V. Market Themes Blackstone | 20
Slide 22: Global Credit Spreads and Prices
GLOBAL CREDIT SPREADS AND PRICES Spread to Maturity Yield to Maturity (L+ / E+) 1,000 11% 800 9% 8.47% E+687 8.03% 600 7% 400 L+569 5% 200 3% Mar-18 Feb-19 Jan-20 Dec-20 Nov-21 Sep-22 Mar-18 Feb-19 Jan-20 Dec-20 Nov-21 Sep-22 S&P LL Index S&P Euro LL Index S&P LL Index S&P Euro LL Index Average Bid
Slide 23: Global Loan Return by Quality
GLOBAL LOAN RETURN BY QUALITY Higher quality 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% -0.90% -2.00% -4.00% -3.31% -6.00% -4.00% -3.65% -6.45% -8.00% -10.00% -6.00% -12.00% -8.00% -14.00% -16.00% -10.00% -18.
Slide 24: 2022 Default Forecasts
2022 DEFAULT FORECASTS 2022 default rates have recently increased in line with greater market volatility 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% September Forecast 2022 2023 2.00% 3.00% 4% 1.10% 2.7
Slide 25: Global CLO Arbitrage
GLOBAL CLO ARBITRAGE Average quarterly arb was squeezed in 3Q ’22 driven by higher CLO weighted average cost of capital US WA Spread and Cost of Capital European WA Spread and Cost of Capital (bp) (bp) 450 450 400 400 350 350 300 300 250 250 200 200 150 150 100 100 50 50 0 0 WA Loan Spread WA Cost o
Slide 26: Credit Market Supply
CREDIT MARKET SUPPLY Loan issuance for 2022 is down significantly compared to 2021 U.S. and European Loan Gross Issuance ($/€ in billions) 120 99 100 94 89 81 83 81 78 80 71 68 68 60 58 49 50 45 44 43 41 40 40 38 32 33 34 31 26 25 27 22 22 22 23 24 23 23 19 19 17 20 15 14 15 15 13 15 15 10 12 10 9 8
Slide 27: CLO Issuance
CLO ISSUANCE YTD CLO new issuance lags record breaking 2021 in both Europe and the US U.S. and European CLO New Issue Volume ($/€ in billions) 200 $187 180 160 $144 140 $129 $119 $119 120 $111 100 $93 80 60 € 39 € 34 40 € 27 € 30 € 21 € 22 € 22 20 0 2017 2018 2019 2020 2021 2021 2022 2017 2018 2019
Slide 28: VI. Portfolio and Market Outlook
VI. Portfolio and Market Outlook Blackstone | 27
Slide 29: Portfolio and Market Outlook
PORTFOLIO AND MARKET OUTLOOK Portfolio and Market Outlook ▪ Looking ahead, we expect global markets to remain cautious for the rest of the year and into early 2023. The US, UK and Continental Europe are in a similar situation from a cyclical perspective and while headline inflation may have peaked i
Slide 30: VII. Appendix
VII. Appendix Blackstone | 29
Slide 31: BCF Look Through Portfolio Details
BCF LOOK THROUGH PORTFOLIO DETAILS Portfolio Total Par Moody’s Moody’s # WA WA Coupon WA Maturity Par Outstanding Moody’s Industry Country Corporate Facility WA Spread Facilities Price (All-In Rate) (Years) (€M) (€M) Rating Rating Issuer 1 5 270 8,296 Media Broadcasting and Subscription Netherlands
Slide 32: European Horizontal CLO Risk Retention Investments
EUROPEAN HORIZONTAL CLO RISK RETENTION INVESTMENTS Highest of Refi / Remaining BCF Position Valuation Ann. Cum. Interest Defaulted Closing Non-Call Deal Size BCF Cost WA Cost Gross Caa / CCC / Reset Date RI Period Position as % of as % of BCF Cash-on- Cash-on- NIM Diversion Assets % of Date End (€m)
Slide 33: US Horizontal CLO Risk Retention Investments
US HORIZONTAL CLO RISK RETENTION INVESTMENTS Highest of Refi / Remaining BCF BCF Position as Valuation Ann. Cum. Interest Defaulted Closing Non-Call Deal Size WA Cost Gross Caa / CCC / Reset Date RI Period Position Cost % of as % of Cash-on- Cash-on- NIM Diversion Assets % of Date End ($m) of Debt(2
Slide 34: US Vertical CLO Risk Retention Investments
US VERTICAL CLO RISK RETENTION INVESTMENTS 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 Assets % of Date Date End ($m) ($m) of
Slide 35: Redeemed or Fully Sold CLOs
REDEEMED OR FULLY SOLD CLOs 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%* 16.40% Greenwood Park U.S. 2018 Sale
Slide 36: CLO Securitisation Performance by Vintage – Current Portfolio
CLO SECURITISATION PERFORMANCE BY VINTAGE – CURRENT PORTFOLIO ▪ CLO securitisations continued to generate robust, uninterrupted cashflows ▪ EU CLO 3Q’22 ann. cash on cash distributions were slightly higher quarter on quarter, driven by the impact of semi- annual payments in addition to par flushes a
Slide 37: BGLF Monthly € NAV Total Return Performance
BGLF MONTHLY € NAV TOTAL RETURN PERFORMANCE Trailing 12 months ending: September ’18 September ‘19 September ‘20 September ‘21 September ‘22 Discrete Performance BGLF € NAV 6.36% 11.04% (2.88%) 24.38% 7.51% European Loans 2.78% 2.34% (0.33%) 7.58% (5.38%) US Loans 5.58% 3.11% 0.84% 8.46% (2.62%) LTM
Slide 38: BGLF Total Returns Since Inception
BGLF TOTAL RETURNS SINCE INCEPTION BGLF has delivered strong excess returns versus the loan market across multiple time periods Annualised Net Total Return 15% 10% 9.1% 8.9% 7.5% 8.1% 6.2% 5.3% 5% 3.2% 3.00% 3.24% 2.12% 2.3% 1.5% 1.2% 1.3% 0.8% 0.5% 0% -2.62% -5% -5.4% -6.5% -8.0% -10% 3Q'22 (non an
Slide 39: Year to Date 2022 BGLF Return Analysis
YEAR TO DATE 2022 BGLF RETURN ANALYSIS BGLF’s year to date NAV total return was 3.31% Contributors to Total Return Directly EUR CLO US CLO CLO BCF Cash BCF BGLF Held Loans Equity Equity Warehouses & Expenses 5.0% 4.0% 5.75% 0.81% 0.24% 3.27% 0.04% 3.31% 3.0% 0.27% 0.27% 4.49% 5.13% -0.52% 2.0% 1.69%
Slide 40: Summary Term Sheet
SUMMARY TERM SHEET 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 relevant CLO, the net rebate on certain
Slide 41: Blackstone Corporate Funding (BCF) Investment Process
BLACKSTONE CORPORATE FUNDING (“BCF”) INVESTMENT PROCESS Warehouse Opportunities CLO Creation ▪ First loss CLO warehouse investments provide exposure to a ▪ Aim to construct relatively lower risk loan portfolios with loan portfolio financed at relatively favourable terms sustainable distributions ▪ A
Slide 42: VIII. Key Risk Factors
VIII.Key Risk Factors Blackstone | 41
Slide 43: 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 44: 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 45: IX. Important Disclosure Information
IX. Important Disclosure Information Blackstone | 44
Slide 46: Notes to 'BGLF and BCF Highlights'
NOTES TO ‘BGLF AND BCF HIGHLIGHTS’ Portfolio stats and performance is reflective of the continuing BCF Fund, unless stated otherwise. 1) As of 30 September 2022. Excludes CLOs in the process of being redeemed. 2) Data as of 30 September 2022 using internal Blackstone Credit data calculated on 20 Jul
Slide 47: 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 48: 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 49: 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 50: 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 51: 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 52: 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 53: 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 54: Important Disclosure Information (Cont'd)
IMPORTANT DISCLOSURE INFORMATION (CONT’D) CERTAIN EEA COUNTRIES AND THE UK In the UK, Belgium, Denmark, Finland, The Republic Of Ireland, Italy, Lichtenstein and Norway, this communication issued by The Blackstone Group International Partners LLP ("BGIP") of 40 Berkeley Square, London, W1J 5AL (regi
Slide 55: 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 56: 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 57: 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
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