Good day and welcome to the Blackstone Secured Lending 4th Quarter and Full Year 2025 Investor Call. Today's conference is being recorded. At this time, all participants are in a listen-only mode. If you require operator assistance, please press star zero. If you would like to ask a question, please signal by pressing star one. If you're using this speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. At this time, we'd like to turn the call over to Stacey Wang, Head of Stakeholder Relations. Please go ahead.

Thank you, Katie. Good morning, and welcome to Blackstone Secure Lending Fund's fourth quarter and full year results conference call. Joining me today are Brad Marshall, co-chief executive officer, and Teddy Deloge, chief financial officer, along with other members of the management team available for Q&A, including John Bach, co-chief executive officer, and Carlos Whitaker, president. Earlier today, we issued a press release with a presentation of our results and filed our 10K, both of which are available on the Shareholder Resources section of our website, www.bxsl.com. We will be referring to that presentation throughout today's call. I'd like to remind you that this call may include forward-looking statements which are certain and outside of the firm's control and may differ materially from actual results. We do not undertake any duty to update these statements. For some of the risks that could affect results, please see the risk factor section of our Form 10-K filed earlier today. This audio cast is copyright material of Blackstone and may not be duplicated without consent. With that, I'll turn the call over to Brad Marshall.

Thank you, and good morning, everyone. Before highlighting the results from the quarter and some key observations, I would like to take a moment to share our macroeconomic views heading into 2026. Stepping back to the broader macro environment, despite periods of volatility over the past year, including tariff uncertainty, geopolitical instability, and elevated headline risk, we continue to see a fundamentally healthy economic backdrop. Overall, corporate earnings growth has remained resilient, the consumer continues to generate strength, and fiscal and monetary conditions remain supportive. Together, these factors are contributing to sustained economic momentum. Key driver of that momentum is the ongoing technology and AI-driven investment cycle, which I will provide more details on shortly. We believe we are in the early stages of a significant capital expenditure build-out focused on AI, digital infrastructure, and related technologies, providing a durable support to growth across multiple sectors, particularly when you couple that with encouraging signs on inflation. We believe this macro and investment backdrop has translated into robust capital inflows into Blackstone's private credit strategies over 2025, and particularly strong demand from the institutional channel most recently. We are coming off one of our most active quarters of investing for BXCI and have over $40 billion of dry powder to invest in direct lending into a market that, in our view, remains highly receptive to direct private credit solutions. Looking ahead, we believe this combination of a constructive macro environment, improving credit fundamentals, and a defensive first lien orientation positions the BXSL portfolio well from a performance and investing standpoint. On earnings, BXSL reported another strong quarter with our net investment income, or NII, of $0.80 per share, representing an 11.8% annualized return on equity made up overwhelmingly of interest income rather than income from PIC or dividends. Our distribution of $0.77 per share was 104% covered by our net investment income per share and represents an 11.4% annualized distribution yield on NAV. BXSL delivered a 9.6% net return for the year, outperforming the leveraged loan market by 360 basis points, with an 11.2% annualized return since inception seven years ago. BXSL at the outset was designed to have a lower-cost structure so that it could focus on what we believe is a higher-quality portfolio, and you are seeing that durability reflected in quarterly performance. A few core topics I'll discuss from the quarter include a busy quarter of deployment, recent headlines around private credit, and related concerns around software companies and the impact that AI may have on them. On deployment, the fourth quarter was our second most active quarter of funding since 2021. We increased our overall portfolio to 316 companies, including 40 industries funding 13 new credits, which had an average LTV at underwrite of 41%, and an average spread near 500 basis points, and completed 15 add-ons to incumbent names. Some of the larger fundings during the quarter were to Amtrust, an insurance managing general agent focused on specialty programs, Mankind, a public biopharma business, IEM, an electrical equipment manufacturer supplying data centers, and Saber Power, an engineering firm that is a provider of electrical infrastructure services. BXCI led all four of these senior secure transactions and was the sole lender in three of them. Additionally, another large investment during the quarter was BXCI co-led, was for a digital aviation solutions business called Jeppesen, sold by Boeing for $10.5 billion. We believe this company has a dominant market position, is performing exceptionally well post-close, and is categorized by BXEI as being well-positioned from AI risk given its deep entrenchment in the aerospace industry and high cost of failure. These deals highlight how we are investing around some of our four themes at Blackstone, including life science and AI infrastructure. production. Despite positive trends in deal activity, as outlined during last quarter's call as well, external narratives around bubbles in the credit market continue to percolate in the news. What we are seeing on the ground and across the over 300 credits we are invested in in BXSL is broadly inconsistent with this. In fact, if you look at the top 90% of our names in the portfolio. These companies are growing EBITDA at 9% over the past 12 months and have interest coverage over two times and have an average mark of 99. This is consistent with my comments earlier about a healthy economic backdrop and the benefits of lower interest expenses for our portfolio companies. Meanwhile, there has been significant external focus on AI's impact on the overall economy and on software companies specifically. It's helpful as a starting point to highlight that Blackstone has been at the forefront of AI and its impact for many years with its deep technology vertical supporting and informing investment activity across the broader platform. This is one of the big advantages of being part of the world's largest alternative asset manager and has helped drive our focus on deeply embedded, high-retention businesses. Blackstone sees the AI revolution, creating generational opportunities, and we want to stay ahead of this as leaders in the space. We receive real-time insights through our firm-wide resources and use that to make us better investors. Additionally, Blackstone is one of the largest investors in the entire AI ecosystem, including the infrastructure around it. As the largest owner of data centers globally, leaders across the firm focus on AI are active dialogue with the AI market leaders such as Open AI, Anthropic, Google, Meta, and others. These relationships help inform our perspective on where the industry is headed, and we believe that BXCI, with the help of the broader Blackstone platform has an incredibly well-informed view on AI. It's also important to understand that you cannot paint software with a broad brush. There are sub-verticals of software with proprietary systems, huge data lakes, and incumbent long-term customer relationships that may be more protected or see tailwinds from AI adoption, while other areas will be more at risk of displacement. BXEI has typically avoided the less differentiated business models. Subverticals that we believe are likely to be protected are vertical software, ERP, data infrastructure, data management, and security. These account for the majority of BXSL software exposure, where we have seen 40% EBITDA growth since underwrite. And today, these businesses generate over two times interest coverage. Importantly, the public market is differentiating in a similar way. While software valuations have compressed from 18 times NTM EBITDA last September to 14 times today, these subverticals that I mentioned earlier continue to trade in the 15 to 20 times EBITDA range, implying well over two times enterprise value coverage of BXSL's first-lane exposure. We also put significant value on partnering with larger companies with sophisticated ownership and forward-leaning management teams to drive adoption of AI technology. As a reminder, 99% of our portfolio companies are private equity-owned or large public companies with market caps exceeding $5 billion. On Medallia, a name that we have discussed in previous quarters, we continue to mark the asset now at 77.75, which implies over a 70% reduction to its setup enterprise value due to a slower than expected turnaround. For background, BXCI led a first-lane term loan through 26% LTV at underwrite, supporting the $6.4 billion take private acquisition of Medallia by the current sponsor, Tomo Bravo, who together with its co-investors have funded over $5 billion in cash equity for this deal today. The company has been underperforming, not because of anything related to AI, but due to what we believe to be execution-driven issues, particularly in its go-to-market function. Early last year, Tomo Bravo installed a new leadership team, and they are working through a turnaround plan. We also expect there to be discussions around the capital structure. If I zoom in on the rest of the bottom 10% of performers in the portfolio, a common thread is operational challenges, rather than any secular concerns. As such, these companies have been marked lower to an average mark of 82. On average, these companies have been modestly down from an EBDA growth perspective since underwrite and were set up at underwrite with an average 42% LTV. The good news with these names is that over half of them have seen further equity and junior capital commitments by the sponsor or are experiencing improving performance overall. In fact, we saw the watch list decline this quarter compared to last quarter as a result of some of these trends. However, to provide some illustrative framing, if you take this bottom 10% and just punitively assume that companies all defaulted, which again, we do not, I underscore, do not expect to see this happen, and BXSL recovers 65% over the next four years in line with long-term recovery of first lien public loans, then based on where they are marked today, this would only impact the equity by approximately 100 basis points per year. I state these numbers just to reinforce what I mentioned earlier. BXSL's model was designed to be defensive by focusing on first lien, larger private equity-owned businesses across a portfolio with diversified industries. In reality, underperforming companies can recover. Just this quarter, for example, SelectQuote, Colony, and Alliance Ground were three underperformers and at their lows had a weighted average mark of 93. All have been paid or expected to repay this quarter at par, generating nearly $100 million of liquidity. So putting it all together, we encourage by deal activity from the quarter as improved portfolio turnover and funding efficiency, which in turn should support ongoing earnings, and we remain very comfortable with the overall portfolio mix and positioning. We've seen similar market dislocations before, including during COVID, and even following the post-tariff news this time last year. And in periods like this, our focus is on providing as much transparency and clear facts as possible to help investors look through the headlines and assess the facts on the ground. For context, this is my 21st year of Blackstone's credit business. Across multiple cycles and periods of volatility, BXCI has invested over $155 billion in our North American direct lending strategy with an annualized loss rate of less than 10 basis points. This is a result of focusing on investing defensively, as I just mentioned. But equally important is leveraging the advantage of Blackstone's scale and expertise, all of which we believe will continue to support excellent long-term results for our investors. With that, I'll turn it over to Teddy.

Thanks, Brad. I will cover BXSL's performance, portfolio fundamentals, and liability profile for the fourth quarter. First on performance, BXSL's net investment income for the quarter was $186 million, or $0.80 per share, representing 104% coverage to our dividend on a per-share basis. Year-over-year, fourth quarter total investment income was up over $5 million, or 1.5%, and interest income excluding payment in kind, fees, and dividends represented over 91% of our total investment income in the quarter. BXSL continued to out-earn its dividend in the fourth quarter with a predominantly first lien portfolio and among the lowest operating and financing costs across our traded BDC peers compared to Q3 data. We will continue to assess our dividend with our board as we do every quarter as lower base rates flow through our portfolio. As previewed on last quarter's call, we experienced increased repayment activity in the fourth quarter, and with accelerating M&A and deal activity, as Brad outlined earlier, we are expecting similar levels of turnover in the upcoming quarters. Moving to the balance sheet, we ended the quarter with over $14.2 billion of total portfolio investments at fair value, $8.1 billion of outstanding debt, and $6.2 billion of total net assets. Net asset value per share at quarter end was $26.92, down from $27.15 in the third quarter, which was primarily impacted by $0.27 of net unrealized losses in the portfolio, are partially offset by one cent of net unrealized gains and three cents of excess net investment income generated to our dividend. As Brad highlighted, we saw healthy fundamentals on average across our portfolio companies demonstrated by high single-digit percentage EBITDA growth and stabilizing interest coverage ratios at two turns as rate resets are improving cash flow profiles of our borrowers. Non-accruals in the fourth quarter were just 0.6% at cost and 0.5% at fair market value, up from 0.3% at cost and 0.2% at fair market value in the fourth quarter of last year, as two smaller positions were added this quarter. Further, our Q4 amendment activity by issuer was down over 25% compared to the third quarter, with over 85% of amendments associated with add-ons, M&A, DDTL extensions, or immaterial technical matters. Only four issuers experienced material amendments accounting for 0.8% of the portfolio by fair market value. Turning to activity, BXSL funded $1 billion for the second consecutive quarter and committed over $900 million. Net funded investment activity was $400 million after $629 million of repayments and sales up nearly 45% quarter over quarter. This represented an annualized repayment rate of 15% of the portfolio at fair value, up from 13% for the prior quarter and 6% for the same quarter in the prior year. As we sit here today, we are tracking over $550 million of potential repayments for the first six months of the year, which could create additional balance sheet capacity if they materialize. Importantly, BXSL's Board of Directors approved a discretionary share repurchase plan under which BXSL may repurchase up to $250 million in the aggregate of its outstanding common shares in the open market at below its net asset value per share. As we see repayment activity create additional capacity, we will continuously evaluate capital allocation decisions between new opportunities and buying back shares. Our liability profile remains diverse across multiple financing markets, including $10.5 billion and $8.1 billion of committed and funded debt, respectively, as of the fourth quarter. This includes $2.4 billion committed to our corporate revolving credit facility, priced at SOFR plus 153 at its tightest levels, which we believe is the lowest-priced revolver across the traded peer set. We also have $2.7 billion of committed to our asset-based facilities with multiple banks of which had a weighted average drawn spread of SOFR plus 187, down 23 basis points since Q4 2024, in addition to over $450 million of CLO debt outstanding priced at SOFR plus 154. Lastly, we have nearly $5 billion of unsecured bonds outstanding as of the fourth quarter, $2.8 billion of which are not swapped and have an average coupon of 2.88%. This includes a $500 million five-year bond we issued in October priced at 155 basis points above the benchmark treasury rate or 5.125% coupon, which was subsequently swapped at SOFR plus 166. In 2025, BXSL had the tightest public bond spread issuance amongst its traded BDC peers, and taking this all together, our all-in cost of debt for the fourth quarter was 4.93%, down from 5.24% in the fourth quarter of 2024. Total liquidity at the end of the fourth quarter was $2.5 billion, including unrestricted cash and undrawn debt available to borrow, while ending leverage as of December 31st was 1.3 turns on a gross basis and one and a quarter turns on a net basis net of cash. Our balance sheet strength, portfolio composition, and long-term operating history all help support BXSL in achieving ratings among the top three when compared to our traded BDC peers, with a BAA2 in stable outlook by Moody's, BBB minus in positive outlook by S&P, and BBB flat in stable outlook by Fitch. With that, I'll ask the operator to open it up for questions. Thank you.

Thank you. As a reminder, please press star 1 to ask a question. We ask you to limit yourself to one question and one follow-up to allow as many callers to join the queue as possible. We will take our first question from Finny Anoshay with Wells Fargo Securities.

Hey, everyone. Good morning. First question, big picture, we're looking at the potential scenario where the non-traded channel slows. I know you have your share of institutional capital, but that's perhaps less so than some of the other great houses of direct lending. So how do we think about the impact where, for example, you've often talked about the importance of check size, larger companies, and so forth? Should we see it as a risk that you might have to go back down market on new origination in the event there are non-traded headwinds? Thanks.

Thanks, Van. Thanks for the question. Maybe just as a starting point, just to frame the market. So the U.S. leverage finance market is about a $5 trillion market. You look at high yield, it's about a trillion and a half. If you look at leverage loans, about a trillion for private credit in the institutional non-BDC channel is actually about a trillion and a half. The non-traded BDC is about $275 billion and the traded BDC is about $235 billion. So it remains very much, as you point out, an institutional driven market. And why? Because institutions see the asset class, I think, similar to how you view it, which is very defensive. We're driving a premium to what you can get in the public markets. And that's really important. If you look at kind of our business more broadly, to answer your question, And our credit business is $520 billion. We are in every crevice of the credit markets. We're invested, and I think you've heard us mention this before, 5,000 companies around the world, which gives us incredible insights into what's going on in the world and helps back up some of our investment themes. So our business is broad and deep in every channel. If I look at kind of corporate lending, specifically non-investment grade, we have about $40 billion of dry powder. So I expect us to remain fairly active in the remainder of 2026, similar to kind of how active we were in the fourth quarter of 2025, which was our busiest investment quarter since 2021. So our business will remain active. We have lots of pools of capital to draw from, and it really comes back down to performance, and I think that'll continue to attract capital in this space to the managers that are performing well.

I appreciate that. And follow up on another sort of hypothetical but also front and center question. You're a little below book, still better than most, but we might be here for a little while. In that case, does it make sense to sit on spillover or should we expect you to revisit that in a potential special? Thanks.

Great. Thanks, Finn. And I appreciate you actually pointing that out. We do have spillover income as a result of us out-earning our dividend over time, and we've taken those over-earnings and invested it back into new loans to drive income for our investors. I think as maybe answer the question a little bit differently, as we get new cash proceeds into BXSL, either because of income or repayments, we mentioned we have a series of repayments coming over the next two quarters, we have options. We can reinvest in new loans. We can buy back, as you point out, discounted shares. We can delever. Those would be the core kind of options. And you're right, we could pay a supplemental dividend. But as you know, our dividend at 11.4% being the very high end of the market. So our focus has been on these other kind of options at this point. But, of course, appreciate you highlighting the fact that we are in this enviable position of having out-earned the dividend. And I also appreciate the point that we're in an unusual time where we're trading below book. So we need to consider all these options. but at the end of the day, it's a discussion around how do we want to best use our cash on hand to deliver attractive options for our investors, and all options are on the table.

Okay, thanks.

We will take our next question from Robert Dodd with Raymond James.

Hi, guys. On kind of related somewhat to Finn's question, When we look at the grand scheme of things, flows in the BDC perpetuals, in my view, or the private market, aren't that significant to affecting pricing and spread? So to your point, it's a $5 trillion market and all the BDCs together are half a trillion. What do you think the potential is if flows do deteriorate across the whole market for retail fundraising? What do you think the potential is that that's actually going to have a discernible impact on spreads in the market? I mean, CLO formation still looks pretty healthy. A lot of the other areas of the market still look pretty healthy. the retail flows seem to be quite a small part of that. Is that, does any reason why that would actually influence pricing out in the marketplace?

I think it's a little early to tell, Robert. It's a good question. And I appreciate you highlighting the liquid markets because they remain actually quite strong. I think 66% of the liquid market is trading 99 or above. Spreads remain fairly tight in the liquid markets. And so the credit markets generally, again, despite what we read in the headlines, are actually pretty healthy. There's capital available. And as I mentioned, if you just look at our platform with $40 billion of dry powder, we will remain active in this market. And the overall credit quality of the deals that we're seeing, the credit quality of the deals that we're in are not suggesting that spreads should widen at this point. So we'll continue to watch the market evolve. But right now, things feel pretty stable.

Got it. Got it. Thank you. If I can kind of put that to like software, and I appreciate all the detail you gave and the framework to think about it. I mean, do you expect, if I was going to say, you know, three years from now, do you think the software mix in your portfolio would be higher or lower than it currently is or stable? I mean, is it there is more potentially uncertainty? I mean, obviously, the different business models, et cetera. But would would you are you looking to, you know, maybe not participate in the next time something gets refinanced or would you prefer to shrink that exposure or keep it where it is or grow it?

Wow.

The three-year crystal ball, I don't have, Robert. But what I would say is we are seeing very good investment opportunities in the infrastructure around AI. And you saw that in the fourth quarter. We made an investment in IEM. We made an investment in Saber Power. And so that is definitely on theme for us, the picks and shovels kind of around this AI build-out, which I mentioned in our prepared comments. You can see us continue to lean into those themes and those opportunities because we think they have very good tailwinds. Got it.

Thank you, Robert.

We'll take our next question from Aaron Siganovich with Truist Securities.

Thanks. Um, maybe you could just talk a little bit about what the sponsor conversations have been like over the last few weeks. Um, you know, clearly the public markets are, um, are, are very trigger happy. What, what are the sponsors thinking, you know, given that this was supposed to be a big, you know, capital markets, um, year and, and, and kind of reviving, um, you know, IPOs, et cetera. Or, you know, maybe just your thoughts on those conversations.

It's a little bit like last year when the tariff noise came out and there was a lot of volatility and uncertainty. Sponsors are watching the markets and trying to see where they settle out before they bring assets to market. So I think, like us, they're not terribly disrupted, but they are holding back right now and bringing some of these assets to market. But I do expect, for all the reasons we mentioned earlier, it will remain a fairly active year this year because you do see growth in the economy. You do have lower costs of capital, which is positive for M&A activity. So all those tailwinds still exist, and we just need to work through a period of heightened uncertainty and volatility largely around the software space.

That's helpful. Thanks. And then as a follow-up on, we've seen a couple BDCs make some asset sales recently. Definitely. One of them had already said they were going to do this last quarter, so it wasn't necessarily a surprise. Do you have a view on that? You know, you're trading below book, but not dramatically below book. Is there any benefit to, you know, selling assets at fair value and, you know, putting that back into the stock?

So what I would say to that is we are definitively long term holders of assets. And we also have $2.5 billion of liquidity. Like we mentioned on the call, we have $550 million of near-term repayments. I suspect there's another $1 billion or $2 billion that will occur over the balance of the year. So the fund itself naturally generates liquidity because of the term nature of the investments that we make. And with those proceeds, we will look at all the options that I mentioned in answering Finn's question, which is we will look at buybacks. We have approval to do that. We will look at new loans that come through our system. We may look to delever. So all those options will be on the table. And it's probably worth just hitting on this turnover and repayment dynamic, which actually can be quite positive for BDCs and BXSL in particular. I mentioned three assets that will be repaid this quarter. You know, those assets had been marked down to 93 at their low, and now they're getting refinanced at par. So that sort of activity, as we get those repayments, will be positive on those underperforming assets to pull NAV up, and it will be positive to generate liquidity, which we can use to do one of many things, as I just highlighted. So lots of different options on the table for us. Thanks, Brett.

Thank you. We will take our next question from Kenneth Lee with RBC Capital Markets.

Hey, good morning. Thanks for taking my question. I think previously you talked about operating leverage perhaps closer to the higher end of the target range there. Just given the potential opportunities to deploy into as well as the share rate purchase, maybe just give us some thoughts about where leverage, you know, where could trend over the near term or where are you looking to operate near?

Yeah, thanks, Ken. And this is Teddy. I'm happy to take that. So just starting with the facts, as highlighted, 1.3 gross ending leverage, 1.27 average, 1.25 times on the net basis. As Brad mentioned, we did have a very active end of the year. It was our second most active quarter on gross origination since 2021. We did have some deals, deal processes accelerated toward the end of the year. So we ended at slightly above the 1.25 times range. We also do have $2.5 billion of immediate liquidity, $550 million of repayments near term. So really taking that all together can no change. Long-term target remains one and a quarter times we would expect to be able to manage near the high end of that range in the near term.

Gotcha. Very helpful there. And just one follow-up, if I may, and this is just on the software book here, and really appreciate the additional details and color around there. How do you think about specifically recovery rates for software companies, just given lack of tangible assets, you know, how do you get confidence around the valuations and all sorts around that? Thanks.

Yeah, I can take that. I think when we look at our software businesses, we look at kind of how they're performing as a starting point. And they're performing, actually, they're the best performing part of our business No doubt the public market has re-rated software companies. As I said in our remarks, even in that instance, you take the 25% kind of markdown or re-rating of public company software businesses, and we're still two times covered. So we feel very good about our coverage on our software business. We do have a small subset, less than 5% of the portfolio of assets that we think are more impacted by AI and some operational challenges. Those are a little bit harder to pinpoint from a value standpoint, but they're set up with a lot of equity in the business, and we suspect the sponsors will continue to support them. Gotcha.

Very helpful there. Thanks again.

Thank you. As a reminder, if you would like to ask a question, please signal by pressing star one. We'll take our next question from Doug Harder with UBS.

Thanks. You mentioned weighing the share repurchase, obviously, with the new authorization. Can you just walk through, you know, the thought process, how you'll evaluate that, you know, and kind of how we should think about, you know, actually using that versus kind of having it there for, you know, kind of in case further declines?

Yeah, Doug, this is Teddy. I'm happy to take that. I think the short answer is we're going to watch it and be very opportunistic. We do have $250 million approved by the board. We also have turnover, increasing the portfolio, as Brad mentioned. Historically, below a 10% discount to NAV can be quite accredited for buybacks. We've done this previously post-IPO, we announced $250 million repurchase that got done in 2022, and then we announced another plan in 2023. So, we'll be opportunistic with it. We'll watch it. It'll be a capital allocation decision between, as Brad said, paying down debt, new deals, and share repurchases.

Great. Appreciate it, Todd, Teddy. Thank you.

We'll take our next question from Ethan Kay with Elucid Capital Markets. hey guys um quick question on some of the unrealized depreciation during the quarter uh maybe you might have touched on it a bit in the prepared remarks but i guess kind of specific to you know this quarter it looks like the depreciation was largely driven by maybe a handful of positions you know called five to ten positions with maybe single digit percentage point markdowns. I guess my first question is, is this kind of consistent with your read or do you see it as more of a broad kind of driven by broad market movement? And then, you know, second question, assuming it is, in fact, driven by, you know, a few names here, can you walk through any potentially common denominators? I know you mentioned operational challenges, but, you know, you see these as kind of idiosyncratic. Any, I guess, additional specificity here would be appreciated.

Yeah, absolutely. Thanks, Ethan. I'll start with just the fact. So you're right, NAV per share was $26.92. That's versus $27.15 prior quarter, so down $0.23 or less than 1%, about 85 basis points. When you dig into the $0.23, we had $0.26 of unrealized losses, about a penny of gains, and three cents of excess earnings. And within the unrealized losses, you're right. The marks were concentrated to a small handful of positions. Two accounted for about 50% of net unrealized gains and losses in the top five accounted for over 60. So taking a step back, what we see on the ground is stability, earnings growth consistently, high single digits, increasing interest coverage ratios and cash flow profiles. While you certainly can see some movement in marks tied to both performance and spreads over time, what we're seeing is around 85% of the portfolio seeing stable or improving trends based on fundamentals.

Yeah, and maybe just to add to that, because I mentioned this in the remarks, the number of deals on our watch list actually declined during the quarter. If I look back over the past seven years since we started BXSL, we've actually had zero net realized losses for investors. So it does kind of get back to, we do mark the portfolio quite actively, but it is really, really designed to be defensive. That's why we're firstly in the capital structure, why we're large businesses, why they're largely sponsor-backed, why we've picked some low default sectors. So I just want to highlight that and the journeys that sometime assets take, like the three I mentioned that just got repaid at par. We're all in the kind of low 90s at one point. So companies don't always go up to the right. We work through them. And I also mentioned this on the call. I've been doing this 21 years in our direct lending business. Our realized loss rate is 10 basis points a year over that 21 years. And that's obviously through a lot of different economic cycles. So this is just ordinary kind of marking of assets. And we feel very, very good about the overall portfolio.

Okay, great color. Thank you, guys. And then one quick, you know, unrelated question. You mentioned, I just want to get these numbers right. You mentioned $550 million of repayments over the first six months, kind of in the, you know, in sight. And then, John, I think you also mentioned an additional billion throughout the year. Can you just kind of flesh that out?

Yeah, it's Brad.

Yeah, Ethan, this is Brad. So we have clear line of sight to $550 million of repayments. These are committed deals that have or will be refinanced. If you look at a typical repayment cycle, it's somewhere between 15% to 20% a year. So if you just use 20%, that's $2.8 billion of repayments this year. And that's where we give the range of an expectation that we'll have another billion or two behind that, just given the latter vintages of our portfolio.

Excellent. Thank you, guys.

Thank you. We'll take our final question from Rick Shane with J.P. Morgan.

Hey, guys. Thanks for taking my questions. And most have been asked and answered. The outlook on leverage is very helpful. Look, you guys have announced a repurchase. We just discussed the possibility of $2 billion of repayments this year. Leverage sounds like it's going to be flat. So you're going to be making some choices in terms of how to deploy capital. With where we sit today, is your best incremental investment deploying capital into new assets, or is it buying back stock? And it helps us sort of understand how you guys are thinking about that repurchase program.

Thanks, Rick. It's Brad, and it's great to have you on the call. I think we're in a little bit of new territory for us. we've been trading at a premium for so long that trading at a discount is more of a more recent issue. I think Teddy framed it well. We have bought back shares in the past, quite a bit, actually. So we're not afraid to do so. We do have a lot of things that we need to manage, leverage levels, and making sure that we can support our existing portfolio companies. but I will say that given where the stock is trading, buying back shares, it's a very interesting price to do so, but there are a lot of different factors that it's not as simple as that. We've done it in the past. We think it's attractive, and there's lots of factors we'll evaluate.

I appreciate that. And it's, it's helpful. And again, realizing it is a complex decision. Look, the other, the other thing is, and, you know, it's interesting revisiting the space after all these years. You know, look, you guys are trading at a discount to NAV, but you are trading at a relative premium to most of your peers. Historically, we have seen in those environments, particularly where peers are trading at substantial discounts, some opportunities for strategic decisions that are actually accretive despite trading at a discount to NAV. Are there pools of assets out there right now that you find attractive, Or do you feel like those opportunities are just taking on other people's problems?

Yeah, if you're referencing buying secondary loans that our other investors are looking to sell, we've looked at portfolios. We do think that investing in new loans is the best use of capital for BXSL. The secondary credit sales remains to be a fairly kind of active market, and we look at that across our broader platform. But for BXSL specifically, I think we want to continue making kind of new primary loans where we've had the ability to do very deep underwritings. As you know, these take months and months of detailed work. When you're buying a secondary portfolio, it's a little bit more of a tabletop analysis. So BXSL will focus on new loans.

Great. I appreciate the clarity of the answer. Thank you, guys.

Thank you. That will conclude our question and answer session. At this time, I'd like to turn the call back over to Stacey Wang for any additional or closing remarks.

Thank you for joining us this morning. We appreciate your engagement and ongoing support of BXSL. Don't hesitate to reach out with any follow-up questions, and we look forward to continuing our dialogue next quarter.