Table of Contents

As filed with the Securities and Exchange Commission on October 18, 2021

Securities Act File No. 333-259990

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-2

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933   
Pre-Effective Amendment No. 1   
Post-Effective Amendment No.   

 

 

Blackstone Secured Lending Fund

(Exact Name of Registrant as Specified in Charter)

 

 

345 Park Avenue

31st Floor

New York, NY 10154

(Address of Principal Executive Offices)

(877) 876-1121

(Registrant’s Telephone Number, including Area Code)

Marisa J. Beeney, Esq.

Blackstone Alternative Credit Advisors LP

345 Park Avenue, 31st Floor

New York, NY 10154

(Name and Address of Agent for Service)

 

 

WITH COPIES TO:

 

Rajib Chanda, Esq.     Paul D. Tropp, Esq.
Steven Grigoriou, Esq.   Benjamin Wells, Esq.   Brian D. McCabe, Esq.
Simpson Thacher & Bartlett LLP   Simpson Thacher & Bartlett LLP   Ropes & Gray LLP
900 G Street, N.W.   425 Lexington Avenue   1211 Avenue of the Americas
Washington, DC 20001   New York, NY 10017   New York, New York 10036
    (212)-596-9000

 

 

Approximate Date of Commencement of Proposed Public Offering: As soon as practicable after the effective date of this Registration Statement.

 

 

Check box if the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans.

 

Check box if any securities being registered on this Form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933 (“Securities Act”), other than securities offered in connection with a dividend reinvestment plan.

 

Check box if this Form is a registration statement pursuant to General Instruction A.2 or a post-effective amendment thereto.

 

Check box if this Form is a registration statement pursuant to General Instruction B or a post-effective amendment thereto that will become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act.

 

Check box if this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction B to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act.

It is proposed that this filing will become effective (check appropriate box):

 

 

when declared effective pursuant to Section 8(c) of the Securities Act

 

 

immediately upon filing pursuant to paragraph (b) of Rule 486.

 

 

on (date) pursuant to paragraph (b) of Rule 486.

 

 

60 days after filing pursuant to paragraph (a) of Rule 486.

 

 

on (date) pursuant to paragraph (a) of Rule 486.

If appropriate, check the following box:

 

 

This [post-effective] amendment designates a new effective date for a previously filed [post-effective amendment] [registration statement].

 

 

This Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, and the Securities Act registration statement number of the earlier effective registration statement for the same offering is: .


Table of Contents
 

This Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, and the Securities Act registration statement number of the earlier effective registration statement for the same offering is: .

 

 

This Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, and the Securities Act registration statement number of the earlier effective registration statement for the same offering is: .

Check each box that appropriately characterizes the Registrant:

 

 

 

Business Development Company (closed-end company that intends or has elected to be regulated as a business development company under the Investment Company Act).

 

 

Interval Fund (Registered Closed-End Fund or a Business Development Company that makes periodic repurchase offers under Rule 23c-3 under the Investment Company Act).

 

 

A.2 Qualified (qualified to register securities pursuant to General Instruction A.2 of this Form).

 

 

Well-Known Seasoned Issuer (as defined by Rule 405 under the Securities Act).

 

 

Emerging Growth Company (as defined by Rule 12b-2 under the Securities Exchange Act of 1934 (“Exchange Act”).

 

 

If an Emerging Growth Company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of Securities Act.

 

 

New Registrant (registered or regulated under the Investment Company Act for less than 12 calendar months preceding this filing).

 

      

No new interests in the Registrant are being registered by this filing. Registration fee was paid in connection with Registrant’s previous filings.

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

 

 

Title of Securities
Being Registered
  Amount Being
Registered
  Proposed Maximum
Offering Price Per
Unit
  Proposed
Maximum
Aggregate
Offering Price(2)
  Amount of
Registration Fee

Primary Offering

               

Common Shares of Beneficial Interest, $0.001 par value per share

  8,797,500(1)   $26.15   $230,054,625(1)   $21,326(3)

 

 

(1)

Includes the underwriters’ option to purchase up to additional common shares of beneficial interest.

(2)

Estimated pursuant to Rule 457(a) under the Securities Act of 1933 solely for the purpose of determining the registration fee.

(3)

On October 1, 2021, the Registrant paid $18,540 to register $200,000,000 of common shares. In this filing, the Registrant paid $2,786 to register the additional $30,054,625 of common shares.

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the U.S. Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


Table of Contents

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the U.S. Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED OCTOBER 18, 2021

PRELIMINARY PROSPECTUS

Blackstone Secured Lending Fund

7,650,000 Common Shares

We are a specialty finance company that invests primarily in the debt of private U.S. companies. We are managed by an affiliate of Blackstone Inc. (formerly, The Blackstone Group Inc.), which is the largest alternative asset manager in the world with deep investment expertise and leading investment businesses across asset classes and geographies. We focus on investing in privately originated senior secured loans which are generally debt instruments that pay floating interest rates and rank ahead of subordinated debt and equity, where we believe lender protections are stronger and offer superior return opportunities as compared to broadly syndicated loans and public market debt instruments. The companies we lend to are oftentimes backed by financial sponsors who can make operational improvements and provide capital. Our investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation.

Under normal market conditions, we generally invest at least 80% of our total assets (net assets plus borrowings for investment purposes) in secured debt investments. Our portfolio is composed primarily of first lien senior secured and unitranche loans. To a lesser extent, we have and may continue to also invest in second lien, third lien, unsecured or subordinated loans and other debt and equity securities. We do not currently expect to focus on investments in issuers that are distressed or in need of rescue financing.

We are an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (“1940 Act”). We are managed by our investment adviser, Blackstone Credit BDC Advisors LLC (the “Adviser”), a subsidiary of Blackstone Alternative Credit Advisors LP.

We have elected to be treated, and intend to qualify annually, as a regulated investment company (“RIC”) under the Internal Revenue Code of 1986, as amended (the “Code”) for U.S. federal income tax purposes. As a BDC and a RIC, we are required to comply with certain regulatory requirements.

This is our initial public offering of our common shares of beneficial interest (“common shares”) and all of the common shares offered by this prospectus are being sold by us.

Our board of trustees (the “Board”) has approved a share repurchase plan (the “Company 10b5-1 Plan”) to acquire up to the greater of $250 million and the net proceeds from this offering in the aggregate of our common shares over a specified period. See “Prospectus Summary—Share Repurchase Plan.” The purchase of shares pursuant to the Company 10b5-1 Plan is intended to satisfy the conditions of Rule 10b5-1 and Rule 10b-18 under the Securities Exchange Act of 1934, as amended (“Exchange Act”).

Our common shares have no history of public trading. We currently expect that the initial public offering price per share will be $26.15 per share. We have applied to list our common shares on The New York Stock Exchange under the symbol “BXSL.”

At an initial public offering price of $26.15 per share, purchasers in this offering will experience dilution of approximately $0.09 per share. See “Dilution” for more information.

Investing in our common shares involves a high degree of risk, including credit risk and the risk of the use of leverage, and is highly speculative. In addition, shares of closed-end investment companies, including BDCs, frequently trade at a discount to their net asset values. If our common shares trade at a discount to our net asset value, purchasers in this offering will face increased risk of loss. Before buying any common shares, you should read the discussion of the material risks of investing in our common shares, including the risk of leverage, in “Risk Factors” beginning on page 35 of this prospectus.

This prospectus contains important information you should know before investing in our common shares. Please read this prospectus before investing and keep it for future reference. We also file periodic and current reports, proxy statements and other information about us with the U.S. Securities and Exchange Commission (the “SEC”). This information is available free of charge by contacting us at 345 Park Avenue, 31st Floor, New York, New York 10154, calling us at (212) 503-2100 or visiting our corporate website located at www.bxsl.com. The SEC also maintains a website at http://www.sec.gov that contains this information. Information on our website and the SEC’s website is not incorporated into or a part of this prospectus.

Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

     Per Share      Total  

Public offering price

   $                    $                    

Sales load (underwriting discounts and commissions) paid by us(1)

   $        $    

Proceeds to us, before expenses(2)

   $        $    

 

(1)

See “Underwriting” for a more complete description of underwriting compensation.

(2)

We estimate that we will incur offering expenses of approximately $2.5 million, or approximately $0.33 per share for the number of shares in this offering, in connection with this offering.

We have granted the underwriters an option to purchase up to an additional 1,147,500 common shares from us, at the public offering price, less the sales load payable by us, within 30 days from the date of this prospectus. If the underwriters exercise their option in full, the total sales load will be $                million and total proceeds to us, before expenses, will be $                million.

The underwriters expect to deliver our common shares on or about                , 2021.

Joint Book Running Managers

 

BofA Securities     Citigroup     Goldman Sachs & Co. LLC       Morgan Stanley       Wells Fargo Securities  
Barclays     J.P. Morgan     RBC Capital Markets     Keefe, Bruyette & Woods       Raymond James       UBS Investment Bank  
        A Stifel Company      

Co-Managers

Blackstone Capital Markets

   BNP PARIBAS    Deutsche Bank Securities    Compass Point

Janney Montgomery Scott

   MUFG    SMBC Nikko    SOCIETE GENERALE

Academy Securities

   Blaylock Van, LLC    R. Seelaus & Co., LLC    Ramirez & Co. Inc.

The date of this prospectus is                 , 2021.

 

 


Table of Contents

TABLE OF CONTENTS

 

     Page  

PROSPECTUS SUMMARY

     1  

THE OFFERING SUMMARY

     22  

FEES AND EXPENSES

     30  

FINANCIAL HIGHLIGHTS

     33  

RISK FACTORS

     35  

POTENTIAL CONFLICTS OF INTEREST

     76  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     117  

USE OF PROCEEDS

     119  

DISTRIBUTIONS

     120  

CAPITALIZATION

     123  

DILUTION

     125  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     127  

THE COMPANY

     153  

SENIOR SECURITIES

     175  

PORTFOLIO COMPANIES

     177  

MANAGEMENT

     194  

MANAGEMENT AND OTHER AGREEMENTS

     208  

CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS

     215  

DETERMINATION OF NET ASSET VALUE

     217  

DIVIDEND REINVESTMENT PLAN

     219  

CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS

     220  

DESCRIPTION OF OUR SHARES

     226  

REGULATION

     233  

SHARES ELIGIBLE FOR FUTURE SALE

     238  

UNDERWRITING

     240  

CUSTODIAN, TRANSFER AND DIVIDEND PAYING AGENT AND REGISTRAR

     247  

BROKERAGE ALLOCATION AND OTHER PRACTICES

     247  

LEGAL MATTERS

     247  

EXPERTS

     247  

AVAILABLE INFORMATION

     247  

Statistical and market data used in this prospectus has been obtained from governmental and independent industry sources and publications. We have not independently verified the data obtained from these sources. Forward-looking information obtained from these sources is subject to the same qualifications and the additional uncertainties regarding the other forward-looking statements contained in this prospectus, for which the safe harbor provided in Section 27A of the Securities Act and Section 21E of the Exchange Act is not available.

You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer

 

i


Table of Contents

to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information in this prospectus is accurate only as of the date on the front of this prospectus. Our business, financial condition and prospects may have changed since that date. To the extent required by applicable law, we will update this prospectus during the offering period to reflect material changes to the disclosure herein.

 

ii


Table of Contents

PROSPECTUS SUMMARY

This summary highlights some of the information in this prospectus. It is not complete and may not contain all of the information that you may want to consider before investing in our common shares. You should read our entire prospectus before investing in our common shares. Throughout this prospectus we refer to Blackstone Secured Lending Fund as “we,” “us,” “our” or the “Company,” and to “Blackstone Credit BDC Advisors LLC,” our investment adviser, as the “Adviser.”

Blackstone Secured Lending Fund

We are a specialty finance company that invests primarily in the debt of private U.S. companies. We are managed by an affiliate of Blackstone Inc. (formerly, The Blackstone Group Inc.), which is the largest alternative asset manager in the world with deep investment expertise and leading investment businesses across asset classes and geographies. We focus on investing in privately originated senior secured loans which are generally debt instruments that pay floating interest rates and rank ahead of subordinated debt and equity, where we believe lender protections are stronger and offer superior return opportunities as compared to broadly syndicated loans and public market debt instruments. The companies we lend to are oftentimes backed by financial sponsors who can make operational improvements and provide capital. Our investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation.

We were formed on March 26, 2018 as a Delaware statutory trust. We are an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, for U.S. federal income tax purposes, we have elected to be treated, and intend to qualify annually, as a regulated investment company (a “RIC”) under the Internal Revenue Code of 1986, as amended (together with the rules and regulations promulgated thereunder, the “Code”).

We are externally managed by Blackstone Credit BDC Advisors LLC (the “Adviser”), which is an affiliate of Blackstone Inc. (collectively with its affiliates as the context requires, “Blackstone”). As of June 30, 2021, Blackstone managed $684 billion of investments including $163 billion in credit-oriented strategies across direct lending, leveraged loans, high yield bonds, distressed and mezzanine debt, among other areas. We believe that Blackstone’s investment platform provides us with a competitive advantage in selecting investments, and we will leverage the Adviser’s investment team’s and Blackstone’s extensive network of relationships with other sophisticated institutions to source, evaluate and, as appropriate, partner with on transactions. There are no assurances that we will achieve our investment objectives.

Under normal market conditions, we generally invest at least 80% of our total assets (net assets plus borrowings for investment purposes) in secured debt investments. Our portfolio is composed primarily of first lien senior secured and unitranche loans. To a lesser extent, we have and may continue to also invest in second lien, third lien, unsecured or subordinated loans and other debt and equity securities. We do not currently expect to focus on investments in issuers that are distressed or in need of rescue financing. Subject to the limitations of the 1940 Act, we may invest in loans or other securities, the proceeds of which may refinance or otherwise repay debt or securities of companies whose debt is owned by other Blackstone Credit funds.

As a BDC, at least 70% of our assets must be the type of “qualifying” assets listed in Section 55(a) of the 1940 Act, as described herein, which are generally privately-offered securities issued by U.S. private or thinly-traded companies. We may also invest up to 30% of our portfolio opportunistically in “non-qualifying” portfolio investments, such as investments in non-U.S. companies.

We generally intend to distribute, out of assets legally available for distribution, substantially all of our available earnings, on a quarterly basis, as determined by our Board in its sole discretion.


 

1


Table of Contents

Market Opportunity

We believe that there are and will continue to be significant investment opportunities in the targeted asset classes discussed below.

Attractive Opportunities in Senior Secured Loans

We believe that opportunities in senior secured loans are significant because of the strong defensive characteristics of this asset class. While there is inherent risk in investing in any securities, senior secured debt is on the top of the capital structure and thus has priority in payment among an issuer’s security holders (i.e. senior secured debt holders are due to receive payment before junior creditors and equity holders). Further, these investments are secured by the issuer’s assets, which may be collateralized in the event of a default, if necessary. Senior secured debt often has restrictive covenants for the purpose of additional principal protection and ensuring repayment before junior creditors (i.e. most types of unsecured bondholders, and other security holders) and preserving collateral to protect against credit deterioration.

Opportunity in U.S. Private Companies

In addition to investing in senior secured loans generally, we believe that the market for lending to private companies, which includes the middle market private companies within the United States, is underserved and presents a compelling investment opportunity. We believe that the following characteristics support our belief:

Secular Tailwinds in the Private Market, Including Private Credit. One of the important drivers of growth in the strategy is the increasing secular tailwinds in the private markets (i.e., social or economic trends positively impacting private markets), including growing demand for private credit, which has created attractive opportunities for private capital providers like Blackstone Credit. As of August 2021, private equity funds with strategies focused on leveraged buyouts in North America had approximately $581.2 billion of “dry powder” (i.e., uncalled capital commitments), which should similarly drive demand for private capital providers like Blackstone Credit.1 This shift is partially due to traditional banks continuing to face regulatory limitations and retreating from the space, creating additional opportunities for private credit to take advantage of. Further, financial sponsors and companies are becoming increasingly interested in working directly with private lenders as they are seeing the tremendous benefits versus accessing the public credit markets. The Company believes some of these benefits include faster execution and greater certainty, ability to partner with sophisticated lenders, more efficient process, and in some instances fewer regulatory requirements. As a result, Blackstone Credit benefits from increasing flow of larger scale deals that have become increasingly available to direct lending universe over traditional banks and other financing institutions.

Attractive Market Segment. We believe that the underserved nature of such a large segment of the market can at times create a significant opportunity for investment. In many environments, we believe that private companies are more likely to offer attractive economics in terms of transaction pricing, up-front and ongoing fees, prepayment penalties and security features in the form of stricter covenants and quality collateral than loans to public companies.

Limited Investment Competition. Despite the size of the overall corporate credit market, we believe that regulatory changes and other factors, some of which are discussed above, have diminished the role of traditional financial institutions and certain other capital providers in providing financing to companies. As tracked by S&P Capital IQ LCD, U.S. banks’ share of senior secured loans has declined from 33.1% in 1995 to 7.5% as of June 30, 2021. In addition, due to bank consolidation, the number of banks has also rapidly declined, furthering the lack of supply in financing to private companies. As of September 30, 2020, there were approximately 4,375 banks in the U.S., which was only one-third of the number of banks in 1984 (see Federal Reserve Economic Data as of December 2020).

 

1 

Source: Preqin, August 2021. Represents dry powder (i.e., uncalled capital commitments) for private equity buyouts in North America.


 

2


Table of Contents

We also believe that lending and originating new loans to private companies generally requires a greater dedication of the lender’s time and resources compared to lending to public companies, due in part to the size of each investment and the often fragmented nature of information available from these companies. Further, we believe that many investment firms lack the breadth and scale necessary to identify investment opportunities, particularly in regards to directly originated investments in private companies, and thus attractive investment opportunities are often overlooked.

Blackstone Credit Competitive Strengths

Blackstone Credit is one of the largest private credit investment platforms globally and a key player in the direct lending space. Blackstone Credit has experience scaling funds across its platform that invest throughout all parts of the capital structure. Blackstone Credit strives to focus on transactions where it can differentiate itself from other providers of capital, targeting large transactions and those where Blackstone Credit can bring its expertise and experience in negotiating and structuring. We believe that Blackstone Credit has the scale and platform to effectively manage a U.S. private credit investment strategy, offering investors the following potential strengths:

Ability to Provide Scale, Differentiated Capital Solutions. We believe that the breadth and scale of Blackstone Credit’s approximately $163 billion platform, as of June 30, 2021, and affiliation with Blackstone are distinct strengths when sourcing proprietary investment opportunities and provide Blackstone Credit with a differentiated capability to invest in large, complex opportunities. Blackstone Credit is invested in over 2,100 corporate issuers across its portfolios globally and has focused primarily on the non-investment grade corporate credit market since its inception in 2005.2 Blackstone Credit expects that in the current environment, in which committed capital from banks remains scarce (as tracked by S&P Capital IQ LCD, U.S. banks’ share of senior secured loans has declined from 33.1% in 1995 to 7.5% as of June 30, 2021), the ability to provide flexible, well-structured capital commitments in appropriate sizes will enable Blackstone Credit to command more favorable terms for its investments. Blackstone Credit seeks to generate investment opportunities through its direct origination channels and through syndicate and club deals (generally, investments made by a small group of investment firms). With respect to Blackstone Credit’s origination channel, we seek to leverage the global presence of Blackstone Credit to generate access to a substantial amount of directly originated transactions with attractive investment characteristics. We believe that the broad network of Blackstone Credit provides a significant pipeline of investment opportunities for us. With respect to syndicate and club deals, Blackstone Credit has built a network of relationships with commercial and investment banks, finance companies and other investment funds as a result of the long track record of its investment professionals in the leveraged finance marketplace. Blackstone Credit also has a significant trading platform, which, we believe, allows us access to the secondary market for investment opportunities.

Established Origination Platform with Strong Credit Expertise. As of June 30, 2021, Blackstone Credit had 397 employees globally, including 196 investment professionals. Blackstone Credit’s 97-person private origination investment team (excluding Dwight Scott, global head of Blackstone Credit), together with a 13-person U.S. Direct Lending Portfolio Management team, are involved with investment activities and portfolio management activities for BXSL, respectively. Blackstone Credit’s senior managing directors have on average ~24 years of industry experience. Since inception, Blackstone Credit has originated approximately $87 billion in private credit transactions and during the period beginning June 30, 2020 and ending on June 30, 2021, Blackstone Credit originated approximately $20.0 billion in private credit transactions.3 We believe that

 

2 

As of June 30, 2021. Issues across portfolios include all corporate issues covered by both the Liquid Credit Strategies and Private Credit research teams across Private Credit Funds and Liquid Credit Funds, including, but not limited to, broadly syndicated assets, middle market assets, high yield bonds, investment grade assets, and mezzanine transactions.

3 

As of June 30, 2021. Includes Blackstone Credit funds that are primarily invested in privately originated investments, including GSO Capital Opportunities Funds, GSO Capital Solutions Funds, GSO European and U.S. Direct Lending Funds, GSO Energy Select Opportunities Fund, and GSO Credit Alpha Funds.


 

3


Table of Contents

Blackstone Credit’s strong reputation and longstanding relationships with corporate boards, management teams, leveraged buyout sponsors, financial advisors, and intermediaries position Blackstone Credit as a partner and counterparty of choice and provides us with attractive sourcing capabilities. In Blackstone Credit’s experience, these relationships help drive substantial proprietary deal flow and insight into investment opportunities.

Blackstone Credit believes that having one team responsible for alternatives private origination allows us to leverage the strengths and experiences of investment professionals to deliver the leading financing solutions to our companies. The team has operated through multiple industry cycles, with deep credit expertise, providing them valuable experience and a long-term view of the market. The team is also focused on making investments in what are characterized as “good neighborhoods”, which are industries experiencing favorable tailwinds, such as life sciences, software & technology, and renewable energy. In addition, the team is able to leverage the expertise of other parts of Blackstone’s business that specialize in these fields.

Additionally, over the last several years, Blackstone Credit has also expanded its U.S. origination and sponsor coverage footprint with regional offices opened in select markets. Blackstone Credit has investment professionals across the U.S. and Europe and has developed a reputation for being a valued partner, with the ability to provide speed, creativity, and assurance of transaction execution. We believe that establishing this regional presence in the U.S. may help us more effectively source investment opportunities from mid-sized leveraged buyout sponsors as well as direction from companies, while potentially strengthening the Blackstone Credit brand.

Value-Added Capital Provider and Partner Leveraging the Blackstone Credit Advantage Program. Blackstone Credit has established a reputation for providing creative, value-added solutions to address a company’s financing requirements and believes our ability to solve a need for a company can lead to attractive investment opportunities. In addition, Blackstone Credit has access to the significant resources of the Blackstone platform, including the Blackstone Advantage Program (“Blackstone Advantage”), which refers to the active management of the Blackstone portfolio company network, including cross-selling efforts across all of Blackstone, and aims to ensure practice sharing, operational, and commercial synergies among portfolio companies, effective deployment of Blackstone resources, and communication of the program with businesses and partners, and the Blackstone Credit Advantage Program (“Blackstone Credit Advantage”), which is a global platform that provides access to a range of cost saving, revenue generating and best practice sharing opportunities. Specifically, Blackstone Credit Advantage provides (i) partnership and best practices for portfolio companies by offering invaluable access to industry and function experts both within the Blackstone organization (including the Blackstone Portfolio Operations team) and the network among portfolio companies; (ii) cross selling opportunities across Blackstone and Blackstone Credit portfolio companies; (iii) industry knowledge via leadership summits and roundtables; and (iv) quarterly reports sharing meaningful insights from CEOs on business and economic trends. Finally, one of the most important benefits of the program is Blackstone’s GPO, which is a collective purchasing platform that leverages the scale and buying power of the $5 billion of average annual spending of Blackstone’s portfolio companies with strategic partners and vendors measured over the past 10 years. Blackstone and Blackstone Credit portfolio companies have generated significant cost savings through their use of the GPO, ranging from 3% to 40%, often from existing suppliers, on maintenance, repair, operations, back office, information technology, hardware, software, telecommunications, business insurance and human resources, among others. The benefits of working with Blackstone’s GPO can include improved pricing and terms, differentiated service, and ongoing service that drops straight to the bottom line. As of July 16, 2021, Blackstone Advantage has grown revenue by over $300 million for Blackstone portfolio companies and Blackstone Credit Advantage has reduced annual costs by $167 million. The dedicated Blackstone Credit operational program provides support to portfolio companies and has created over $1.0 billion in value.4

 

4 

Value creation represents $167 million of annual savings as of July 16, 2021, representing estimated savings utilizing the Blackstone Credit Advantage program at the time cost is benchmarked with portfolio companies. Savings improved portfolio company EBITDA and created value assuming a 10x average EBITDA multiple.


 

4


Table of Contents

Blackstone Advantage has 63 internal Blackstone resources available to our portfolio companies as of July 16, 2021. As of June 30, 2021, 28 of our portfolio companies have used Blackstone Credit Advantage.

Flexible Investment Approach. Blackstone Credit believes that the ability to invest opportunistically throughout a capital structure is a meaningful strength when sourcing transactions and enables the Company to seek investments that provide the best risk/return proposition in any given transaction. Blackstone Credit’s creativity and flexibility with regard to deal-structuring distinguishes it from other financing sources, including traditional mezzanine providers, whose investment mandates are typically more restrictive. Over time, Blackstone Credit has demonstrated the ability to negotiate favorable terms for its investments by providing creative structures that add value for an issuer. Blackstone Credit will continue to seek to use this flexible investment approach to focus on principal preservation, while generating attractive returns throughout different economic and market cycles.

Long-Term Investment Horizon. Our long-term investment horizon gives us great flexibility, which we believe allows us to maximize returns on our investments. Unlike most private equity and venture capital funds, as well as many private debt funds, we will not be required to return capital to our shareholders once we exit a portfolio investment. We believe that freedom from such capital return requirements, which allows us to invest using a long-term focus, provides us with an attractive opportunity to increase total returns on invested capital.

Disciplined Investment Process and Income-Oriented Investment Philosophy. Blackstone Credit employs a rigorous investment process and defensive investment approach to evaluate all potential opportunities with a focus on long-term credit performance and principal protection. We believe Blackstone Credit has generated attractive risk-adjusted returns in its investing activities throughout many economic and credit cycles by (i) maintaining its investment discipline; (ii) performing intensive credit work; (iii) carefully structuring transactions; and (iv) actively managing its portfolios. Blackstone Credit’s investment approach involves a multi-stage selection process for each investment opportunity, as well as ongoing monitoring of each investment made, with particular emphasis on early detection of deteriorating credit conditions at portfolio companies, which would result in adverse portfolio developments. This strategy is designed to maximize current income and minimize the risk of capital loss while maintaining the potential for long-term capital appreciation. Additionally, Blackstone Credit’s senior investment professionals have dedicated their careers to the leveraged finance and private equity sectors and we believe that their experience in due diligence, credit analysis and ongoing management of investments is invaluable to the success of the U.S. direct lending investment strategy. Blackstone Credit generally targets businesses with leading market share positions, sustainable barriers to entry, high free cash flow generation, strong asset values, liquidity to withstand market cycles, favorable underlying industry trends, strong internal controls and high-quality management teams.

Strong Investment Track Record. Blackstone Credit’s track record in private debt lending and investing in below investment grade credit dates back to the inception of Blackstone Credit. Since 2005, Blackstone Credit has provided approximately $87 billion in capital in privately-originated transactions. Blackstone Credit has approximately $118 billion of investor capital currently deployed.5

Efficient Cost Structure. We believe that we have an efficient cost structure, as compared to other publicly traded BDCs, with low management fees, expenses, and financing costs. We believe our operating efficiency and senior investment strategy enable us to generate greater risk-adjusted investment returns for our investors relative to other publicly traded BDCs.

Scale. Scale allows for more resources to source, diligence and monitor investments, and enables us to move up market where there is often less competition.

 

5 

As of June 30, 2021. Investor capital currently deployed consists of fee earning AUM of $79 billion for Liquid Credit Strategies, $34 billion for Private Credit and other liquid funds (inclusive of leverage), and $5 billion for Structured Products.


 

5


Table of Contents

Investment Portfolio

As of June 30, 2021, based on fair value, our portfolio consisted of 98.06% first lien senior secured investments and unitranche loans, 0.75% second lien debt investments, 0.14% unsecured debt and 1.05% in equity instruments. As of June 30, 2021, 99.7% of our debt investments at fair value were at floating rates (89.1% of which had an interest rate floor above zero) and the weighted average yield on our income producing investments was 7.40% at fair value. As of June 30, 2021 we had investments in 111 portfolio companies, with a weighted average debt investment size in each of our portfolio companies of approximately $66.2 million based on fair value.

As of June 30, 2021, our portfolio was invested across 33 different industries. The largest industries in our portfolio as of June 30, 2021 were Health Care Providers & Services and Commercial Services & Supplies, which represented, as a percentage of our portfolio, 12.74% and 9.48%, respectively, based on fair value.

As of June 30, 2021, our weighted average total yield of the portfolio at fair value and amortized cost was 7.33% and 7.41%, respectively, and our weighted average yield of debt and income producing securities at fair value and amortized cost was 7.40% and 7.48%, respectively.

Corporate Structure

We were formed on March 26, 2018 as a Delaware statutory trust structured as a non-diversified, closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. Our classification as a non-diversified investment company within the meaning of the 1940 Act means that we are not limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer. However, we are subject to the diversification requirements that apply to RICs under U.S. federal income tax rules. We intend to comply with the requirements to maintain our status as a BDC under the 1940 Act and a RIC under the Code. See “Regulation” and “Certain U.S. Federal Income Tax Considerations” for more information on these requirements.

The following chart depicts our ownership structure:

 

LOGO


 

6


Table of Contents

(1) Assuming the underwriters do not exercise their option to purchase additional common shares.

(2) From time to time we may form wholly-owned subsidiaries to facilitate our normal course of business investing activities.

The Company is externally managed by the Adviser, a subsidiary of Blackstone Alternative Credit Advisors LP. Blackstone Alternative Credit Advisors LP (the “Administrator” and, collectively with its affiliates in the credit-focused business of Blackstone Inc., “Blackstone Credit,” which, for the avoidance of doubt, excludes Harvest Fund Advisors LLC (“Harvest”) and Blackstone Insurance Solutions (“BIS”)) provides certain administrative and other services necessary for the Company to operate pursuant to an administration agreement (the “Administration Agreement”). Blackstone Credit is part of the credit-focused platform of Blackstone and is the primary part of its credit and insurance reporting segment. As of June 30, 2021, Blackstone Credit had approximately $163 billion in assets under management across multiple strategies within the leveraged finance marketplace, including loans, high yield bonds, distressed and mezzanine debt and private equity, including hedge funds. Blackstone and its affiliates and employees have invested approximately $91 million into the Company.

We may borrow money from time to time if immediately after such borrowing, the ratio of our total assets (less total liabilities other than indebtedness represented by senior securities) to our total indebtedness represented by senior securities plus preferred shares, if any, is at or above 150%. This means that generally, we can borrow up to $2 for every $1 of investor equity.

We currently have in place a revolving credit facility (the “Revolving Credit Facility”) and three senior secured revolving credit facilities (the “Jackson Hole Funding Facility”, the “Breckenridge Funding Facility” and the “Big Sky Funding Facility”, respectively and collectively the “SPV Financing Facilities”). In addition, as of June 30, 2021, we have issued unsecured notes maturing in 2023 (the “2023 Notes”), notes maturing in 2026 (the “2026 Notes”) and new notes maturing in 2026 (the “New 2026 Notes”, together with the 2023 Notes and the 2026 Notes, the “Notes”), and may issue additional unsecured notes. We expect to use our credit facilities and other borrowings, along with proceeds from the realization of assets in our portfolio and the proceeds of the common shares issued hereby to finance our investment objectives. As of June 30, 2021, we had $3.8 billion of indebtedness outstanding under the Notes and SPV Financing Facilities. See “Regulation” for a discussion of BDC regulation and other regulatory considerations. See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Borrowings.”

On December 10, 2020, we changed our name from “Blackstone / GSO Secured Lending Fund” to “Blackstone Secured Lending Fund.”

Prior to this offering, the Company conducted a private offering (the “Private Offering”) of its common shares (i) to accredited investors, as defined in Regulation D under the Securities Act of 1933, as amended (the “1933 Act”), and (ii) in the case of shares sold outside the United States, to persons that are not “U.S. persons,” as defined in Regulation S under the 1933 Act, in reliance on exemptions from the registration requirements of the 1933 Act. At each closing of the Private Offering, each investor made a capital commitment (“Capital Commitment”) to purchase common shares pursuant to a subscription agreement entered into with the Company. Investors were required to fund drawdowns to purchase the Company’s shares up to the amount of their Capital Commitments on an as-needed basis each time the Company delivered a notice to investors.

On October 31, 2018, the Company began its initial period of closing of capital commitments (“Initial Closing Period”) which ended on October 31, 2020. The Company commenced its loan origination and investment activities on November 20, 2018, the date of receipt of the initial drawdown from investors in the Private Offering (the “Initial Drawdown Date”). As of June 30, 2021, the Company had received Capital


 

7


Table of Contents

Commitments totaling $3,926.3 million ($356.3 million remaining undrawn), of which $80.0 million ($0.0 million remaining undrawn) were from affiliates of the Adviser.

On or about September 1, 2021, we delivered a capital drawdown notice to our investors relating to the sale of 13,723,035 common shares for an aggregate offering price of approximately $356 million, our then current net asset value. The sale of these shares closed on September 8, 2021. Following this capital call, we do not have any remaining undrawn capital commitments.

We have applied to list our common shares on The New York Stock Exchange under the symbol “BXSL.” In connection with the listing of our common shares on The New York Stock Exchange, the Board has decided to eliminate any outstanding fractional common shares (the “Fractional Shares”), as permitted by Delaware law by rounding down the number of Fractional Shares held by each of our shareholders to the nearest whole share and paying each shareholder cash for such Fractional Shares.

Our corporate headquarters are located at 345 Park Avenue, 31st Floor, New York, New York 10154. We maintain a website at www.bxsl.com. Information on our website and the SEC’s website is not incorporated into or a part of this prospectus.

Blackstone Credit

Blackstone Credit is part of the credit-focused platform of Blackstone, which is the largest alternative asset manager in the world with leading investment businesses across asset classes. Blackstone’s platform provides significant competitive advantages including scale, expertise across industries and capital structures, and deep relationships with companies and financial sponsors.

Blackstone’s four business segments are real estate, private equity, hedge fund solutions and credit and insurance. Through its different investment businesses, as of June 30, 2021, Blackstone had total assets under management of approximately $684 billion. As of June 30, 2021, Blackstone Credit’s asset management operation had aggregate assets under management of approximately $163 billion across multiple strategies within the leveraged finance marketplace, including loans, high yield bonds, distressed and mezzanine debt and private equity, including hedge funds, and $174 billion with the inclusion of Harvest and BIS. Blackstone and its affiliates and employees have invested approximately $91 million into the Company. Blackstone Credit, through its affiliates, employed over 397 people headquartered in New York, with offices in London, Dublin, Houston, Baltimore, San Francisco, Toronto, Frankfurt, Madrid, Milan, Paris, Hong Kong, Tokyo and Singapore as of June 30, 2021. Blackstone Credit’s 97-person private origination investment team (excluding Dwight Scott, global head of Blackstone Credit), together with a 13-person U.S. Direct Lending Portfolio Management team, are involved with investment activities and portfolio management activities for BXSL, respectively. Blackstone Credit believes that the depth and breadth of its team provides it with a significant competitive advantage in sourcing product on a global basis, structuring transactions and actively managing investments in the portfolio.

The Adviser — Blackstone Credit BDC Advisors LLC

Our investment activities are managed by our Adviser, a subsidiary of Blackstone Alternative Credit Advisors LP, the primary investment manager for Blackstone Credit. Our Adviser is responsible for originating prospective investments, conducting research and due diligence investigations on potential investments, analyzing investment opportunities, negotiating and structuring our investments and monitoring our investments and portfolio companies on an ongoing basis.

In conducting our investment activities, we believe that we benefit from the significant scale and resources of Blackstone Credit, including our Adviser and its affiliates, subject to the policies and procedures of


 

8


Table of Contents

Blackstone Inc. regarding the management of conflicts of interest. In order to source transactions, the Adviser utilizes its significant access to transaction flow, along with its trading platform. The Adviser seeks to generate investment opportunities through direct origination channels as well as through syndicate and club deals. With respect to Blackstone Credit’s origination channel, the global presence of Blackstone Credit generates access to a substantial amount of directly originated transactions with what we believe to be attractive investment characteristics. With respect to syndicate and club deals (i.e., where a limited number of investors participate in a loan transaction), Blackstone Credit has built a network of relationships with commercial and investment banks, finance companies and other investment funds as a result of the long track record of its investment professionals in the leveraged finance marketplace. Blackstone Credit also has a significant trading platform, which, we believe, allows us access to the secondary market for investment opportunities and allows us to assess relative risk across the spectrum of investment alternatives. Blackstone Credit employs a rigorous investment process and defensive investment approach to evaluate all potential opportunities with a focus on long-term credit performance and principal protection. The investment professionals employed by Blackstone Credit have spent their careers developing the resources necessary to invest in private companies. Before undertaking an investment, the Adviser’s transaction team conducts a thorough and rigorous due diligence review of the investment opportunity to ensure the portfolio company fits our investment strategy.

Our Adviser’s investment committee (the “Investment Committee”) is responsible for reviewing and approving our investment opportunities. The Adviser’s Investment Committee review process is consensus-driven, multi-step and iterative, and occurs in parallel with the diligence and structuring of investments. Others who participate in the Investment Committee process include the team responsible for conducting due diligence, others on the investing team and other senior members of Blackstone and Blackstone Credit. There are no representatives from other business groups of Blackstone involved in the Adviser’s Investment Committee process.

In addition, we, the Adviser and certain of its affiliates have been granted exemptive relief by the SEC to co-invest with certain other persons, including certain affiliates of the Adviser and certain funds managed and controlled by the Adviser and its affiliates, subject to certain terms and conditions. Pursuant to such exemptive relief, the board of trustees of the Company (the “Board”) has established objective criteria (“Board Criteria”) clearly defining co-investment opportunities in which the Company will have the opportunity to participate with one or more listed or private Blackstone Credit-managed BDCs and other public or private Blackstone Credit funds that target similar assets. We generally are permitted to co-invest with certain of our affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transaction, including the consideration to be paid, are reasonable and fair to us and our shareholders and do not involve overreaching of us or our shareholders on the part of any person concerned, (2) the transaction is consistent with the interests of our shareholders and is consistent with our investment objectives and strategies, and (3) the investment by our affiliates would not disadvantage us, and our participation would not be on a basis different from or less advantageous than that on which our affiliates are investing. The firm-wide allocation policy incorporates the conditions of the exemptive relief. As a result of the exemptive relief, there could be significant overlap in our investment portfolio and the investment portfolio of other Blackstone Credit funds and/or other funds established by the Adviser or its affiliates that could avail themselves of the exemptive relief. See “Risk Factors — Risks Related to our Adviser and its Affiliates There may be conflicts of interest related to obligations that the Adviser’s senior management and Investment Team have to other clients”.

The Adviser or its affiliates may engage in certain origination activities and receive attendant arrangement, structuring or similar fees. These protections may lead our Adviser to act in a riskier manner when acting on our behalf than it would when acting for its own account. See “Risk Factors — Risks Related to our Adviser and its Affiliates — The Adviser and its affiliates, including our officers and some of our trustees, face conflicts of


 

9


Table of Contents

interest caused by compensation arrangements with us and our affiliates, which could result in actions that are not in the best interests of our shareholders”.

The principal executive offices of our Adviser are located at 345 Park Avenue, 31st Floor New York, NY, 10154.

Investment Advisory Agreement

On October 18, 2021, the Company entered into an amended and restated investment advisory agreement with the Adviser (the “Investment Advisory Agreement”), pursuant to which the Adviser manages the Company on a day-to-day basis. The Investment Advisory Agreement is substantially the same as the prior investment advisory agreement except, following this offering, the incentive fee on income will be subject to a twelve-quarter lookback quarterly hurdle rate of 1.50% as opposed to a single quarter measurement and will become subject to an Incentive Fee Cap (as defined below) based on the Company’s Net Cumulative Return (as defined below). The amendment to the Investment Advisory Agreement will not result in higher fees (on a cumulative basis) payable to the Adviser than the fees that would have otherwise been payable to the Adviser under the prior investment advisory agreement. Prior to October 18, 2021, the Company operated pursuant to an investment advisory agreement with the Adviser commencing from an initial two-year period from October 1, 2018, and which was last renewed and approved by the Board on May 6, 2021. The Adviser is responsible for originating prospective investments, conducting research and due diligence investigations on potential investments, analyzing investment opportunities, negotiating and structuring the Company’s investments and monitoring its investments and portfolio companies on an ongoing basis.

The Company pays the Adviser a fee for its services under the Investment Advisory Agreement consisting of two components: a management fee and an incentive fee. The cost of both the management fee and the incentive fee will ultimately be borne by the shareholders. The Investment Advisory Agreement was approved by the Board, including a majority of trustees who are not parties to the Investment Advisory Agreement or “interested persons” (as such term is defined in Section 2(a)(19) of the 1940 Act) (the “Independent Trustees”), on October 7, 2021. Unless earlier terminated, the Investment Advisory Agreement will renew automatically for successive annual periods, provided that such continuance is specifically approved at least annually by the vote of the Board and by the vote of a majority of the Independent Trustees.

As discussed in more detail below, the Adviser entered into a new investment advisory agreement to include a three-year total return lookback feature on the income based incentive fee. Beginning with the first calendar quarter in which this offering is consummated, this lookback feature provides that the Adviser’s income based incentive fee may be reduced if the Company’s portfolio experiences aggregate write-downs or net capital losses during the applicable Trailing Twelve Quarters (as defined below). The Adviser also implemented a waiver effective upon consummation of this offering to extend the Company’s current fee structure for a period of two years instead of the step up in fees under the Investment Advisory Agreement. With the waiver in place, instead of having the base management fee and each incentive fee increase to 1.00% and 17.5%, respectively, following this offering, each such fee will remain at 0.75% and 15.0% for a period of two years following this offering (the “Waiver Period”). As a result of the fee waiver, the pre-listing management fee and incentive fee rates paid by the Company to the Adviser will not increase during the Waiver Period. Amounts waived by the Adviser are not subject to recoupment by the Adviser.

Base Management Fee

Upon completion of this offering, the management fee pursuant to the Investment Advisory Agreement will be payable quarterly in arrears at an annual rate of 1.0% of the average value of the Company’s gross assets at the end of the two most recently completed calendar quarters. For purposes of the Investment Advisory


 

10


Table of Contents

Agreement, gross assets means the Company’s total assets determined on a consolidated basis in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), excluding undrawn commitments but including assets purchased with borrowed accounts. If this offering occurs on a date other than the first day of a calendar quarter, the management fee will be calculated for such calendar quarter at a weighted rate calculated based on the fee rates applicable before and after the consummation of this offering based on the number of days in such calendar quarter before and after the consummation of this offering.

Prior to the consummation of this offering, the management fee is 0.75% of the average value of the Company’s gross assets at the end of the two most recently completed calendar quarters. In order to maintain the same management fee arrangement that the Company currently has in place for a period of time following the completion of this offering, the Adviser voluntarily waived its right to receive the base management fee in excess of 0.75% of the average value of the Company’s gross assets at the end of the two most recently completed calendar quarters during the Waiver Period. Amounts waived by the Adviser are not subject to recoupment by the Adviser.

Incentive Fees

The incentive fee consists of two components that are determined independently of each other, with the result that one component may be payable even if the other is not. One component is based on income and the other component is based on capital gains, each as described below:

(i) Income based incentive fee:

The first part of the incentive fee, an income based incentive fee, is calculated and payable quarterly in arrears based on the Company’s pre-incentive fee net investment income as defined in the Investment Advisory Agreement. Pre-incentive fee net investment income means, as the context requires, either the dollar value of, or percentage rate of return on the value of the Company’s net assets at the end of the immediately preceding quarter from, interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies) accrued during the calendar quarter, minus the Company’s operating expenses accrued for the quarter (including the management fee, expenses payable under the Administration Agreement, and any interest expense or fees on any credit facilities or outstanding debt and dividends paid on any issued and outstanding preferred shares, but excluding the incentive fee. Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with pay in kind (“PIK”) interest and zero coupon securities)), accrued income that the Company has not yet received in cash. Pre-incentive fee net investment income excludes any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. The Company excludes the impact of expense support payments and recoupments from pre-incentive fee net investment income.

Pursuant to the Investment Advisory Agreement, the Company is required to pay an income based incentive fee of 15% prior to the consummation of this offering and 17.5% following the consummation of this offering, with a 1.5% hurdle and 100% catch-up. However, the Adviser has implemented a voluntary waiver with respect to the income based incentive fee. The Adviser has voluntarily waived its right to receive an income based incentive fee above 15% during the Waiver Period and amounts waived by the Adviser are not subject to recoupment by the Adviser.

Following this offering, the Company will pay its Adviser an income based incentive fee based on its aggregate pre-incentive fee net investment income, as adjusted as described above, from the calendar quarter then ending (including the quarter in which this offering is consummated) and the eleven preceding calendar quarters (including the quarters prior to the consummation of this offering) (such period, the “Trailing Twelve Quarters”).


 

11


Table of Contents

The hurdle amount for the income based incentive fee will be determined on a quarterly basis and is equal to 1.5% multiplied by the Company’s net asset value (“NAV”) at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters. The hurdle amount is calculated after making appropriate adjustments for issuances by the Company of common shares, including issuances pursuant to its dividend reinvestment plan and distributions that occurred during the relevant Trailing Twelve Quarters. The income based incentive fee for any partial period will be appropriately prorated.

For the income based incentive fee, the Company will pay the Adviser a quarterly incentive fee based on the amount by which (A) aggregate pre-incentive fee net investment income in respect of the relevant Trailing Twelve Quarters exceeds (B) the hurdle amount for such Trailing Twelve Quarters. The amount of the excess of (A) over (B) described in this paragraph for such Trailing Twelve Quarters is referred to as the “Excess Income Amount.”

The income based incentive fee for each quarter will be determined as follows:

 

   

No income based incentive fee is payable to the Adviser for any calendar quarter for which there is no Excess Income Amount.

 

   

The Adviser will be paid 100% of the pre-incentive fee net investment income in respect of the Trailing Twelve Quarters, if any, that exceeds the hurdle amount for such Trailing Twelve Quarters, but is less than or equal to an amount, which we refer to as the “Catch-up Amount,” determined as the sum of 1.76% (7.06% annualized) prior to the end of the Waiver Period, or 1.82% (7.27% annualized) following the Waiver Period, multiplied by the Company’s NAV at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters that is included in the calculation of the Incentive Fee based on income.

 

   

The Adviser will be paid 15% prior to the end of the Waiver Period, or 17.5% following the Waiver Period, of the pre-incentive fee net investment income in respect of the Trailing Twelve Quarters that exceeds the Catch-up Amount.

The amount of the income based incentive fee that will be paid to the Adviser for a particular quarter will equal the excess of (a) the income based incentive fee so calculated over (b) the aggregate income based incentive fee that was paid in respect of the first eleven calendar quarters included in the relevant Trailing Twelve Quarters subject to the Incentive Fee Cap as described below.

The income based incentive fee that will be paid to the Adviser for a particular quarter is subject to a cap (the “Incentive Fee Cap”). The Incentive Fee Cap for any quarter is an amount equal to (a) 15% prior to the end of the Waiver Period, or 17.5% following the Waiver Period, of the Cumulative Net Return (as defined below) during the relevant Trailing Twelve Quarters minus (b) the aggregate income based incentive fee that was paid in respect of the first eleven calendar quarters (or the portion thereof) included in the relevant Trailing Twelve Quarters.

“Cumulative Net Return” means (x) the pre-incentive fee net investment income in respect of the relevant Trailing Twelve Quarters minus (y) any Net Capital Loss (as defined below), if any, in respect of the relevant Trailing Twelve Quarters. If, in any quarter, the Incentive Fee Cap is zero or a negative value, the Company will pay no income based incentive fee to the Adviser for such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is a positive value but is less than the income based incentive fee that is payable to the Adviser for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, the Company will pay an income based incentive fee to the Adviser equal to the Incentive Fee Cap for such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is equal to or greater than the income based incentive fee that is payable to the Adviser for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, the Company will pay an income based incentive fee to the Adviser equal to the incentive fee calculated as described above for such quarter without regard to the Incentive Fee Cap.


 

12


Table of Contents

“Net Capital Loss” in respect of a particular period means the difference, if positive, between (i) aggregate capital losses, whether realized or unrealized, in such period and (ii) aggregate capital gains, whether realized or unrealized, in such period.

These calculations are prorated for any period of less than three months and adjusted for any share issuances or repurchases during the relevant quarter. If the consummation of this offering occurs on a date other than the first day of a calendar quarter, the income based incentive fee with respect to the Company’s pre-incentive fee net investment income shall be calculated for such calendar quarter at a weighted rate calculated based on the fee rates applicable before and after the consummation of this offering based on the number of days in such calendar quarter before and after the consummation of this offering. In no event will the amendments to the income based incentive fee to include the three year income and total return lookback features allow the Adviser to receive greater cumulative income based incentive fees under the Investment Advisory Agreement than it would have under the prior investment advisory agreement. Amounts waived by the Adviser are not subject to recoupment by the Adviser.

(ii) Capital gains based incentive fee:

Upon completion of this offering, the second part of the incentive fee, a capital gains incentive fee, will be determined and payable in arrears as of the end of each calendar year in an amount equal to 17.5% of realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees as calculated in accordance with U.S. GAAP. However, similar to the voluntary waivers referenced above, the Adviser voluntarily waived its right to receive a capital gains based incentive fee above 15% from the date of consummation of this offering through the Waiver Period. The Company will accrue, but will not pay, a capital gains incentive fee with respect to unrealized appreciation because a capital gains incentive fee would be owed to the Adviser if the Company were to sell the relevant investment and realize a capital gain. Amounts waived by the Adviser are not subject to recoupment by the Adviser.

Our Administrator

Blackstone Alternative Credit Advisors LP, a Delaware limited partnership, serves as our Administrator. The principal executive offices of our Administrator are located at 345 Park Avenue, 31st Floor, New York, New York 10154. We reimburse the Administrator for its costs, expenses and allocable overhead (including compensation of personnel performing administrative duties) in connection with administrative services performed for us. See “Management and Other AgreementsAdministration Agreement.”

Investment Selection

When identifying prospective investment opportunities, the Adviser currently intends to rely on fundamental credit analysis in order to minimize the loss of the Company’s capital. The Adviser expects to invest in companies generally possessing the following attributes, which it believes will help achieve our investment objectives:

Leading, Defensible Market Positions. The Adviser intends to invest in companies that it believes have developed strong positions within their respective markets and exhibit the potential to maintain sufficient cash flows and profitability to service their obligations in a range of economic environments. The Adviser will seek companies that it believes possess advantages in scale, scope, customer loyalty, product pricing, or product quality versus their competitors, thereby minimizing business risk and protecting profitability.

Proven Management Teams. The Adviser focuses on investments in which the target company has an experienced and high-quality management team with an established track record of success. The Adviser


 

13


Table of Contents

typically requires companies to have in place proper incentives to align management’s goals with the Company’s goals.

Private Equity Sponsorship. Often the Adviser seeks to participate in transactions sponsored by what it believes to be high-quality private equity firms. The Adviser believes that a private equity sponsor’s willingness to invest significant sums of equity capital into a company is an implicit endorsement of the quality of the investment. Further, private equity sponsors of companies with significant investments at risk generally have the ability and a strong incentive to contribute additional capital in difficult economic times should operational issues arise, which could provide additional protections for our investments.

Diversification. The Adviser seeks to invest broadly among companies and industries, thereby potentially reducing the risk of a downturn in any one company or industry having a disproportionate impact on the value of the Company’s portfolio.

Viable Exit Strategy. In addition to payments of principal and interest, we expect the primary methods for the strategy to realize returns on our investments include refinancings, sales of portfolio companies, and in some cases initial public offerings and secondary offerings. While many debt instruments in which we will invest have stated maturities of five to eight years, we expect the majority to be redeemed or sold prior to maturity. These instruments often have call protection that requires an issuer to pay a premium if it redeems in the early years of an investment. The Investment Team regularly reviews investments and related market conditions in order to determine if an opportunity exists to realize returns on a particular investment. We believe the ability to utilize the entire resources of Blackstone Credit, including the public market traders and research analysts, allows the Adviser to gain access to current market information where the opportunity may exist to sell positions into the market at attractive prices.

Operating and Regulatory Structure

We are an externally managed closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. In addition, for tax purposes we have elected to be treated, and intend to qualify each year, as a RIC under Subchapter M of the Code. See “Certain U.S. Federal Income Tax Considerations”. Our investment activities are managed by the Adviser and supervised by the Board, a majority of whom are independent of the Adviser and its affiliates. As a BDC, we will be required to comply with certain regulatory requirements. See “Regulation”.

Use of Leverage

The amount of leverage we use in any period depends on a variety of factors, including cash available for investing, the cost of financing and general economic and market conditions. Generally, pursuant to the 1940 Act, our total borrowings are limited so that we cannot incur additional borrowings if immediately after such borrowing, the ratio of our total assets (less total liabilities other than indebtedness represented by senior securities) to our total indebtedness represented by senior securities plus preferred shares, if any, is at or above 150%. This means that generally, a BDC can borrow up to $2 for every $1 of investor equity. See “Regulation — Senior Securities; Coverage Ratio”.

In any period, our interest expense will depend largely on the extent of our borrowing and we expect interest expense will increase as we increase our leverage over time subject to the limits of the 1940 Act. In addition, we may dedicate assets to financing facilities.

We currently have in place the Revolving Credit Facility and the SPV Financing Facilities and in the future may enter into additional credit facilities. In addition, we have issued the Notes. As of June 30, 2021, we had


 

14


Table of Contents

approximately $3.8 billion of debt outstanding. As of June 30, 2021 and December 31, 2020, our asset coverage ratio was 198.9% and 230.0%, respectively. Following the receipt of proceeds from the capital call drawdown notice we delivered on September 1, 2021, the issuance of $1.3 billion principal amount of unsecured notes issued after June 30, 2021 and the net proceeds from this offering and the repayment of indebtedness upon receipt of these proceeds, we expect our asset coverage ratio to be approximately 184.7% based on the value of our total assets after this offering.

See “Risk Factors — Risks Related to Debt Financing — We borrow money, which magnifies the potential for loss on amounts invested in us will be magnified and may increase the risk of investing in us. Borrowed money may also adversely affect the return on our assets, reduce cash available to service our debt or for distribution to our shareholders, and result in losses”; “Risk Factors — Risks Related to Business Development Companies — Regulations governing our operation as a BDC and RIC will affect our ability to raise, and the way in which we raise, additional capital or borrow for investment purposes, which may have a negative effect on our growth.”; “The Company — General”; and “Regulation”.

Potential Conflicts of Interest

The Adviser, Blackstone Credit, Blackstone and their respective affiliates will be subject to certain conflicts of interest with respect to the services the Adviser and the Administrator provide to us. These conflicts will arise primarily from the involvement of Blackstone Credit, Blackstone and their respective affiliates, or collectively (the “Firm”), in other activities that may conflict with our activities. You should be aware that individual conflicts will not necessarily be resolved in favor of your interest. The foregoing list of conflicts does not purport to be a complete enumeration or explanation of the actual and potential conflicts involved in an investment in the Company. See “Potential Conflicts of Interest”.

Allocation of Investment Opportunities

Blackstone Credit will share any investment and sale opportunities with such Other Blackstone Credit Clients and Blackstone Clients (each as defined herein and, collectively, “Other Clients”) and the Company in accordance with the Advisers Act, and Firm-wide allocation policies, which generally provide for sharing pro rata based on targeted acquisition size or targeted sale size.

Notwithstanding the foregoing, Blackstone Credit may also consider the following factors in making any allocation determinations, and such factors may result in a different allocation of investment and/or sale opportunities: (i) the risk-return and target return profile of the proposed investment relative to the Company’s and the Other Clients’ current risk profiles; (ii) the Company’s and/or the Other Clients’ investment guidelines, restrictions, terms and objectives, including whether such objectives are considered solely in light of the specific investment under consideration or in the context of the respective portfolios’ overall holdings; (iii) the need to re-size risk in the Company’s or the Other Clients’ portfolios (including the potential for the proposed investment to create an industry, sector or issuer imbalance in the Company’s and Other Clients’ portfolios, as applicable) and taking into account any existing non-pro rata investment positions in the portfolio of the Company and Other Clients; (iv) liquidity considerations of the Company and the Other Clients, including during a ramp-up or wind-down of one or more of the Company or such Other Clients, proximity to the end of the Company’s or Other Clients’ specified term or investment period, any redemption/withdrawal requests, anticipated future contributions and available cash; (v) legal, tax, accounting, political, national security and other consequences; (vi) regulatory or contractual restrictions or consequences (including, without limitation, requirements under the 1940 Act and any related rules, orders, guidance or other authority applicable to the Company or other registered investment companies, investment funds, client accounts and proprietary accounts that Blackstone Credit may establish (other than the Company) (collectively the “Other Blackstone Credit Clients”)); (vii) avoiding a de minimis or odd lot allocation; (viii) availability and degree of leverage and any requirements or other terms of


 

15


Table of Contents

any existing leverage facilities; (ix) the Company’s or Other Clients’ investment focus on a classification attributable to an investment or issuer of an investment, including, without limitation, investment strategy, geography, industry or business sector; (x) the nature and extent of involvement in the transaction on the part of the respective teams of investment professionals dedicated to the Company or such Other Clients; (xi) the management of any actual or potential conflict of interest; (xii) with respect to investments that are made available to Blackstone Credit by counterparties pursuant to negotiated trading platforms (e.g., ISDA contracts), the absence of such relationships which may not be available to the Company and all Other Clients; (xiii) available capital of the Company and the Other Clients, (xiv) primary and permitted investment strategies and objectives of the Company and the Other Clients, including, without limitation, with respect to Other Clients that expect to invest in or alongside other funds or across asset classes based on expected return (such as certain managed accounts with similar investment strategies and objectives), (xv) sourcing of the investment, (xvi) the specific nature (including size, type, amount, liquidity, holding period, anticipated maturity and minimum investment criteria) of the investment, (xvii) expected investment return, (xviii) expected cash characteristics (such as cash-on-cash yield, distribution rates or volatility of cash flows), (xix) capital expenditure required as part of the investment, (xx) portfolio diversification concerns (including, but not limited to, whether a particular fund already has its desired exposure to the investment, sector, industry, geographic region or markets in question), (xxi) relation to existing investments in a fund, if applicable (e.g., “follow on” to existing investment, joint venture or other partner to existing investment, or same security as existing investment), and (xxii) any other considerations deemed relevant by Blackstone Credit in good faith. See “Potential Conflicts of Interest—Allocation Methodology Considerations” for further information.

Exemptive Relief

We, the Adviser and certain of our affiliates have been granted exemptive relief by the SEC to co-invest with other funds managed by the Adviser or its affiliates in a manner consistent with our investment objectives, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors. Pursuant to such exemptive relief, we generally are permitted to co-invest with certain of our affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transaction, including the consideration to be paid, are reasonable and fair to us and our shareholders and do not involve overreaching of us or our shareholders on the part of any person concerned, (2) the transaction is consistent with the interests of our shareholders and is consistent with our investment objectives and strategies, and (3) the investment by our affiliates would not disadvantage us, and our participation would not be on a basis different from or less advantageous than that on which our affiliates are investing. The Adviser’s investment allocation policy incorporates the conditions of the exemptive relief.

Share Repurchase Plan

On October 18, 2021, our Board approved the Company 10b5-1 Plan, to acquire up to the greater of $250 million and the net proceeds from this offering in the aggregate of our common shares at prices below our net asset value per share over a specified period, in accordance with the guidelines specified in Rule 10b-18 and Rule 10b5-1 of the Exchange Act. We intend to put the Company 10b5-1 Plan in place because we believe that, in the current market conditions, if our common shares are trading below our then-current net asset value per share, it is in the best interest of our shareholders for us to reinvest in our portfolio.

The Company 10b5-1 Plan is intended to allow us to repurchase our common shares at times when we otherwise might be prevented from doing so under insider trading laws. The Company 10b5-1 Plan will require Morgan Stanley & Co. LLC, as our agent, to repurchase common shares on our behalf when the market price per share is below the most recently reported net asset value per share (including any updates, corrections or adjustments publicly announced by us to any previously announced net asset value per share). Under the Company 10b5-1 Plan, the agent will increase the volume of purchases made as the price of our common shares


 

16


Table of Contents

decline, subject to volume restrictions. The timing and amount of any share repurchases will depend on the terms and conditions of the Company 10b5-1 Plan, the market price of our common shares and trading volumes, and no assurance can be given that any particular amount of common shares will be repurchased.

The purchase of shares pursuant to the Company 10b5-1 Plan is intended to satisfy the conditions of Rule 10b5-1 and Rule 10b-18 under the Exchange Act, and will otherwise be subject to applicable law, including Regulation M, which may prohibit purchases under certain circumstances. See “The Company—Share Repurchase Plan.”

The Company 10b5-1 Plan will commence on the later of (i) 30 calendar days following the date of this prospectus and (ii) four full calendar weeks following the completion of the offering and will terminate upon the earliest to occur of (i) 12-months (tolled for periods during which the Company 10b5-1 Plan is suspended), (ii) the end of the trading day on which the aggregate purchase price for all shares purchased under the Company 10b5-1 Plan equals the greater of $250 million and the net proceeds from this offering and (iii) the occurrence of certain other events described in the Company 10b5-1 Plan.

Corporate Information

Our principal executive offices are located at 345 Park Avenue, 31st floor, New York, NY 10154 and our telephone number is (212) 503-2100. Our corporate website is located at www.bxsl.com. Information on our website and the SEC’s website is not incorporated into or a part of this prospectus.

Recent Developments

On July 23, 2021, the Company issued $650 million aggregate principal amount of 2.125% notes due in 2027 (the “2027 Notes”) pursuant to a supplemental indenture, dated as of July 23, 2021 which supplements that certain Base Indenture, dated as of July 15, 2020 (as may be further amended, supplemented or otherwise modified from time to time, the “Base Indenture” and, together with the 2027 Notes supplemental indenture, the “2027 Notes Indenture”), to the Base Indenture between the Company and the Trustee. The 2027 Notes will mature on February 15, 2027 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the 2027 Notes Indenture. The 2027 Notes bear interest at a rate of 2.125% per year payable semi-annually on February 15 and August 15 of each year, commencing on February 15, 2022. The 2027 Notes are general unsecured obligations of the Company that rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the 2027 Notes, rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank effectively junior to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries, financing vehicles or similar facilities.

On or after June 30, 2021, the Company entered into agreements to provide first lien financing to Stamps.com Inc., Inovalon Holdings, Inc., Cambium Learning Group, Inc., and Medallia Inc. The weighted average enterprise value of these portfolio companies is approximately $6 billion and the average weighted loan-to-value of these loans is approximately 40%. Certain of these transactions are pending and there can be no assurances that such transactions will close. As of June 30, 2021, we estimate that the loan-to-value of our private debt investments for which fair value is determined by our Board was approximately 44%.6

On August 4, 2021, the Board appointed Kate Rubenstein as Chief Operating Officer of the Company, effective immediately.

 

6 

Average loan-to-value represents the net ratio of loan-to-value for each portfolio company, weighted based on the fair value of total applicable private debt investments. Loan-to-value is calculated as the current total net debt through each respective loan tranche divided by the estimated enterprise value of the portfolio company as of the most recent quarter end.


 

17


Table of Contents

On August 4, 2021, the Company amended the Revolving Credit Facility to, among other things, increase the maximum commitment amount from $1.275 billion to $1.325 billion.

On or about September 1, 2021, we delivered a capital drawdown notice to our investors relating to the sale of 13,723,035 common shares for an aggregate offering price of approximately $356 million, our then current net asset value. The sale of these shares closed on September 8, 2021. Following this capital call, we do not have any remaining undrawn capital commitments.

On September 7, 2021, the Board declared a distribution of $0.3750 per share payable to shareholders of record as of September 7, 2021 and a distribution of $0.1250 per share payable to shareholders of record as of September 30, 2021, each of which will be paid on or about November 12, 2021. Shares offered in this prospectus will not be entitled to receive these distributions.

On September 9, 2021, Blackstone Credit announced that Carlos Whitaker was appointed as the President of the Company. The Board approved Mr. Whitaker’s appointment on August 4, 2021 for an annual term that commenced on September 7, 2021.

On September 30, 2021, the Company amended the Big Sky Funding Facility to, among other things, increase the maximum commitment amount from $400 million to $500 million.

On September 30, 2021, the Company issued $650,000,000 in aggregate principal amount of its 2.850% notes due 2028 (the “2028 Notes”) pursuant to a supplemental indenture, dated as of September 30, 2021 (and together with the Base Indenture, the “2028 Notes Indenture”), to the Base Indenture between the Company and the Trustee. The 2028 Notes will mature on September 30, 2028 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the 2028 Notes Indenture. The 2028 Notes bear interest at a rate of 2.850% per year payable semi-annually on March 30 and September 30 of each year, commencing on March 30, 2022. The 2028 Notes are general unsecured obligations of the Company that rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the 2028 Notes, rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank effectively junior to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries, financing vehicles or similar facilities.

On October 18, 2021, our Board increased the Company’s quarterly distribution from $0.50 per share to $0.53 per share payable to shareholders of record on December 31, 2021, which will be paid on or around January 31, 2022.

On October 18, 2021, our Board also declared the following special distributions which are only payable if this offering is consummated on or before December 31, 2021:

 

Record Date7

   Special
Distribution
Amount
(per share)
 

The later of 75 days following the consummation of this offering or January 18, 2022

   $ 0.10  

The later of 135 days following the consummation of this offering or March 16, 2022

   $ 0.15  

The later of 195 days following the consummation of this offering or May 16, 2022

   $ 0.20  

The later of 255 days following the consummation of this offering or July 16, 2022

   $ 0.20  

 

7 

If any of the record dates falls on a date that is not a business day, the record date shall be the next business day thereafter.


 

18


Table of Contents

The payable date of each of the above distributions shall be on or about 45 days after the end of the calendar quarter in which the record date occurred, or if such date is not a business day, the preceding business day. Shares sold pursuant to this prospectus will be entitled to receive these distributions.

Preliminary Estimates of Results as of September 30, 2021

On October 18, 2021, our Board approved a net asset value per share as of September 30, 2021 of $26.15 based on a total net asset value of approximately $4.1 billion.

We estimate that our quarterly total return for the three months ended September 30, 2021 was 2.8%, bringing the annualized total return since inception to 10.0% and the annualized year-to-date total return to 9.9%.

We estimate that our fair value of investments was approximately $8.2 billion as of September 30, 2021, representing a 12% quarter-over-quarter increase compared to approximately $7.4 billion of fair value of investments as of June 30, 2021.

We estimate that our total debt outstanding was approximately $4.5 billion as of September 30, 2021, representing a debt-to-equity ratio of 1.09 times. For the three months ended September 30, 2021, our estimated cost of leverage on all borrowings outstanding was 2.9% (including unused fees, deferred financing costs and accretion of net discounts on unsecured debt). As of September 30, 2021, we estimate that our excess borrowing capacity was approximately $1.745 billion and we had approximately $260 million in available cash.

We estimate our net investment income per share for the three months ended September 30, 2021 was between $0.61 per share and $0.63 per share (or $0.63 per share and $0.65 per share excluding uncrystallized capital gains incentive fee accrued), calculated using 147,932,846 weighted average shares for the three months ended September 30, 2021.

The preliminary financial estimates provided herein have been prepared by, and are the responsibility of, management. Neither Deloitte & Touche LLP, our independent registered public accounting firm, nor any other independent accountants, have audited, reviewed, compiled, or performed any procedures with respect to the accompanying preliminary financial data.

These estimates are subject to the completion of our financial closing procedures and are not a comprehensive statement of our financial results as of September 30, 2021. We advise you that our actual results may differ materially from these estimates as a result of the completion of the period and our financial closing procedures, final adjustments and other developments which may arise between now and the time that our financial results are finalized.

Our estimate of net investment income per share excluding uncrystallized capital gains incentive fees accrued, which are estimated at $0.02 per share for the three months ended September 30, 2021, is a non-GAAP measure. We have excluded the impact of uncrystallized capital gains incentive fees from GAAP net investment income on the basis that such incentive fee is not included in taxable income and because our management uses net investment income excluding uncrystallized capital gains incentive fees to assess the Company’s operating performance. This measure is not a substitute for the closest comparable GAAP financial measure, which is net investment income.


 

19


Table of Contents

Risk Factors

An investment in our common shares involves a high degree of risk and may be considered speculative. You should carefully consider the information found in “Risk Factors” before deciding to invest in our common shares. Risks involved in an investment in us include:

Risks Related to Our Business and Structure

 

   

We are a relatively new company and have limited operating history and our ability to achieve our investment objectives depends on the ability of the Adviser to manage and support our investment process largely through relationships with private equity sponsors, investment banks and commercial banks.

 

   

Our Board of Trustees (“Board”) may change our operating policies and strategies or amend our Declaration of Trust without prior notice or shareholder approval, the effects of which may be adverse to our results of operations and financial condition.

 

   

Price declines in the medium- and large-sized U.S. corporate debt market may adversely affect the fair value of our portfolio.

 

   

We may face increasing competition for investment opportunities, have difficulty sourcing investment opportunities and experience fluctuations in our quarterly results.

 

   

As required by the 1940 Act, a significant portion of our investment portfolio is and will be recorded at fair value as determined in good faith by our Board and, as a result, there is and will be uncertainty as to the value of our portfolio investments.

 

   

There is a risk that investors in our shares may not receive distributions or that our distributions may decrease over time.

 

   

Changes in laws or regulations governing our operations may adversely affect our business, and the impact of financial reform legislation on us is uncertain.

 

   

General economic conditions could adversely affect the performance of our investments.

 

   

The current outbreak of the novel coronavirus, or COVID-19, has caused severe disruptions in the U.S. and global economy and already has had and may in the future have a material adverse impact on our financial condition and results of operations.

Risks Related to Our Investments

 

   

We generally will not control our portfolio companies and our investments in prospective portfolio companies may be risky.

 

   

Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies and breach covenants or defaults on such debt.

 

   

We are exposed to risks associated with changes in interest rates.

 

   

Second priority liens on collateral securing debt investments that we make to our portfolio companies may be subject to control by senior creditors with first priority liens.

 

   

Economic recessions or downturns or restrictions on trade could impair our portfolio companies and adversely affect our operating results.

 

   

Our portfolio may be concentrated in a limited number of industries, which may subject us to specific risks.


 

20


Table of Contents

Risks Related to the Adviser and Its Affiliates

 

   

The Adviser and its affiliates, including our officers and some of our trustees, face conflicts of interest caused by compensation arrangements with us and our affiliates, which could result in actions that are not in the best interests of our shareholders.

 

   

We may be obligated to pay the Adviser incentive compensation even if we incur a net loss due to a decline in the value of our portfolio and the compensation paid to the Adviser is determined without independent assessment.

 

   

The Adviser relies on key personnel, the loss of any of whom could impair its ability to successfully manage us.

Risks Related to Business Development Companies

 

   

The requirement that we invest a sufficient portion of our assets in Qualifying Assets could preclude us from investing in accordance with our current business strategy; conversely, the failure to invest a sufficient portion of our assets in Qualifying Assets could result in our failure to maintain our status as a BDC.

 

   

Regulations governing our operation as a BDC and RIC will affect our ability to raise, and the way in which we raise, additional capital or borrow for investment purposes.

Risks Related to Debt Financing

 

   

We borrow money, which magnifies the potential for loss on amounts invested in us and may increase the risk of investing in us.

 

   

Provisions in a credit facility may limit our investment discretion.

Federal Income Tax Risks

 

   

We will be subject to corporate-level income tax if we are unable to qualify as a RIC under Subchapter M of the Code or to satisfy RIC distribution requirements.

 

   

Our portfolio investments may present special tax issues.

 

   

Legislative or regulatory tax changes could adversely affect investors.

Risks Related to an Investment in the Shares

 

   

Investors in offerings after the initial closing could receive fewer shares than anticipated.

 

   

Purchases of our common shares by us under the Company 10b5-1 Plan may result in our common shares being higher than the price might otherwise exist in the open market and may result in dilution to our NAV per share.

 

   

An investment in our shares involves a high degree of risk, our NAV may fluctuate significantly and our shares will have limited liquidity.


 

21


Table of Contents

THE OFFERING SUMMARY

 

Common Shares Offered by Us

   7,650,000 shares (or 8,797,500 shares if the underwriters exercise their option to purchase additional amounts of our common shares).

Common Shares to be Outstanding after this Offering

   166,039,951 shares (or 167,187,451 shares if the underwriters exercise their option to purchase additional amounts of common shares).

Use of Proceeds

   Our net proceeds from this offering will be approximately $185.5 million, or approximately $213.8 million if the underwriters exercise their option to purchase additional amounts of our common shares, based on an offering price of $26.15 per share.
   We intend to use the net proceeds from this offering to pay down some of our existing indebtedness, to make investments in accordance with our investment objectives and for general corporate purposes.
   See “Use of Proceeds.”

Symbol on the New York Stock Exchange

   “BXSL”

Distributions

   We intend to make quarterly distributions to our shareholders out of assets legally available for distribution. Our distributions, if any, will be determined by our Board. All future distributions will be subject to lawfully available funds therefor, and we can offer no assurance that we will be able to declare such distributions in future periods.
   On October 18, 2021, our Board increased the Company’s quarterly distribution from $0.50 per share to $0.53 per share payable to shareholders of record on December 31, 2021, which will be paid on or around January 31, 2022. Further, on October 18, 2021, our Board declared special distributions payable in 2022 in the aggregate of $0.65 per share, which are only payable if this offering is consummated on or before December 31, 2021. See “Distributions.”
   We intend to timely distribute to our shareholders substantially all of our annual taxable income for each year, except that we may retain certain net capital gains for reinvestment and, depending upon the level of taxable income earned in a year, we may choose to carry forward taxable income for distribution in the following year and pay any applicable U.S. federal excise tax. The distributions we pay to our stockholders in a year may exceed our taxable income for that year and, accordingly, a portion of such distributions may constitute a return of capital for U.S. federal income tax purposes. The specific tax characteristics of our distributions will be reported to shareholders after the end of the calendar year. See “Distributions.”

Taxation

   We have elected to be treated as a RIC for U.S. federal income tax purposes, and we intend to operate in a manner so as to continue to qualify for the tax treatment applicable to RICs. Our tax treatment as a RIC will enable us to deduct qualifying distributions to our shareholders, so that we will be subject to corporate-level U.S. federal income taxation only in respect of earnings that we retain and do not distribute.

 

22


Table of Contents
   To maintain our status as a RIC and to avoid being subject to corporate-level U.S. federal income taxation on our earnings, we must, among other things:
  

•  maintain our election under the 1940 Act to be treated as a BDC;

  

•  derive in each taxable year at least 90% of our gross income from dividends, interest, gains from the sale or other disposition of stock or securities and other specified categories of investment income; and

  

•  maintain diversified holdings.

   In addition, to receive tax treatment as a RIC, we must distribute (or be treated as distributing) in each taxable year dividends for tax purposes equal to at least 90% of the sum of our investment company taxable income (which is generally our ordinary income plus the excess, if any, of our realized net short-term capital gains over our realized net long-term capital losses) and net tax-exempt income for that taxable year.
   As a RIC, we generally will not be subject to corporate-level U.S. federal income tax on our investment company taxable income and net capital gains that we distribute to shareholders. If we fail to distribute our investment company taxable income or net capital gains on a timely basis, we will be subject to a nondeductible 4% U.S. federal excise tax. See “Distributions” and “Certain U.S. Federal Income Tax Considerations.”

Leverage

   As a BDC, we are permitted under the 1940 Act to borrow funds or issue “senior securities” to finance a portion of our investments. As a result, we are exposed to the risks of leverage, which may be considered a speculative investment technique.
   Leverage increases the potential for gain and loss on amounts invested and, as a result, increases the risks associated with investing in our securities. With certain limited exceptions, we may issue “senior securities,” including borrowing money from banks or other financial institutions only in amounts such that the ratio of our total assets (less total liabilities other than indebtedness represented by senior securities) to our total indebtedness represented by senior securities plus preferred shares, if any, is at or above 150% after such incurrence or issuance. This means that generally, we can borrow up to $2 for every $1 of investor equity. The costs associated with our borrowings, including any increase in the management fee payable to the Adviser, are borne by our shareholders. In connection with this offering, neither the Board nor our shareholders are being asked to approve a reduced asset coverage ratio. See “Regulation.”
   As of June 30, 2021, our asset coverage was 198.9%. Following the receipt of proceeds from the capital call drawdown notice we delivered

 

23


Table of Contents
   on September 1, 2021, the issuance of $1.3 billion principal amount of unsecured notes issued after June 30, 2021 and the net proceeds from this offering and the repayment of indebtedness upon receipt of these proceeds, we expect our asset coverage ratio to be approximately 184.7% based on the value of our total assets after this offering.

Dividend reinvestment plan

   We have adopted an “opt out” dividend reinvestment plan (“DRIP”) for our shareholders. As a result, if we declare a cash dividend or other distribution, each shareholder that has not “opted out” of our dividend reinvestment plan will have their dividends or distributions automatically reinvested in additional amounts of our common shares rather than receiving cash distributions. There will be no up-front selling commissions or dealer manager fees to you if you elect to participate in the dividend reinvestment plan. We will pay the plan administrator fees under the plan.
   Shareholders who receive dividends and other distributions in the form of common shares generally are subject to the same U.S. federal tax consequences as shareholders who elect to receive their distributions in cash; however, since their cash dividends will be reinvested, those shareholders will not receive cash with which to pay any applicable taxes on reinvested dividends. See “Dividend Reinvestment Plan.”

Investment Advisory Fees

   The Company pays the Adviser a fee for its services under the Investment Advisory Agreement consisting of two components: a management fee and an incentive fee. The cost of both the management fee and the incentive fee will ultimately be borne by the shareholders.
   As discussed in more detail below, the Adviser entered into a new investment advisory agreement to include a three-year total return lookback feature on the income based incentive fee. Beginning with the first calendar quarter in which this offering is consummated, this lookback feature provides that the Adviser’s income based incentive fee may be reduced if the Company’s portfolio experiences aggregate write-downs or net capital losses during the applicable Trailing Twelve Quarters. The Adviser also implemented a waiver effective upon consummation of this offering to extend the Company’s current fee structure for a period of two years instead of the step up in fees under the Investment Advisory Agreement. With the waiver in place, instead of having the base management fee and each incentive fee increase to 1.00% and 17.5%, respectively, following this offering, each such fee will remain at 0.75% and 15.0% during the Waiver Period. As a result of the fee waiver, the pre-listing management fee and incentive fee rates paid by the Company to the Adviser will not increase during the Waiver Period. Amounts waived by the Adviser are not subject to recoupment by the Adviser.
   Base Management Fee
   Upon completion of this offering, the management fee pursuant to the Investment Advisory Agreement will be payable quarterly in arrears at an annual rate of 1.0% of the average value of the Company’s gross

 

24


Table of Contents
   assets at the end of the two most recently completed calendar quarters. For purposes of the Investment Advisory Agreement, gross assets means the Company’s total assets determined on a consolidated basis in accordance with U.S. GAAP, excluding undrawn commitments but including assets purchased with borrowed accounts. If this offering occurs on a date other than the first day of a calendar quarter, the management fee will be calculated for such calendar quarter at a weighted rate calculated based on the fee rates applicable before and after the consummation of this offering based on the number of days in such calendar quarter before and after the consummation of this offering.
   Prior to the consummation of this offering, the management fee is 0.75% of the average value of the Company’s gross assets at the end of the two most recently completed calendar quarters. In order to maintain the same management fee arrangement that the Company currently has in place for a period of time following the completion of this offering, the Adviser voluntarily waived its right to receive the base management fee in excess of 0.75% of the average value of the Company’s gross assets at the end of the two most recently completed calendar quarters during the Waiver Period. Amounts waived by the Adviser are not subject to recoupment by the Adviser.
   Incentive Fees
   The incentive fee consists of two components that are determined independently of each other, with the result that one component may be payable even if the other is not. One component is based on income and the other component is based on capital gains, each as described below:
  

(i) Income based incentive fee:

   The first part of the incentive fee, an income based incentive fee, is calculated and payable quarterly in arrears based on the Company’s pre-incentive fee net investment income as defined in the Investment Advisory Agreement. Pre-incentive fee net investment income means, as the context requires, either the dollar value of, or percentage rate of return on the value of the Company’s net assets at the end of the immediately preceding quarter from, interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies) accrued during the calendar quarter, minus the Company’s operating expenses accrued for the quarter (including the management fee, expenses payable under the Administration Agreement, and any interest expense or fees on any credit facilities or outstanding debt and dividends paid on any issued and outstanding preferred shares, but excluding the incentive fee. Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with pay in kind (“PIK”) interest and zero coupon securities)), accrued income that the Company has not yet received in

 

25


Table of Contents
   cash. Pre-incentive fee net investment income excludes any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. The Company excludes the impact of expense support payments and recoupments from pre-incentive fee net investment income.
   Pursuant to the Investment Advisory Agreement, the Company is required to pay an income based incentive fee of 15% prior to the consummation of this offering and 17.5% following the consummation of this offering, with a 1.5% hurdle and 100% catch-up. However, the Adviser has implemented a voluntary waiver with respect to the income based incentive fee. The Adviser has voluntarily waived its right to receive an income based incentive fee above 15% during the Waiver Period and amounts waived by the Adviser are not subject to recoupment by the Adviser.
   Following this offering, the Company will pay its Adviser an income based incentive fee based on its aggregate pre-incentive fee net investment income, as adjusted as described above, from the calendar quarter then ending (including the quarter in which this offering is consummated) and the eleven preceding calendar quarters (including the quarters prior to the consummation of this offering) (such period, the “Trailing Twelve Quarters”).
   The hurdle amount for the income based incentive fee will be determined on a quarterly basis and is equal to 1.5% multiplied by the Company’s net asset value (“NAV”) at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters. The hurdle amount is calculated after making appropriate adjustments for issuances by the Company of common shares, including issuances pursuant to its dividend reinvestment plan and distributions that occurred during the relevant Trailing Twelve Quarters. The income based incentive fee for any partial period will be appropriately prorated.
   For the income based incentive fee, the Company will pay the Adviser a quarterly incentive fee based on the amount by which (A) aggregate pre-incentive fee net investment income in respect of the relevant Trailing Twelve Quarters exceeds (B) the hurdle amount for such Trailing Twelve Quarters. The amount of the excess of (A) over (B) described in this paragraph for such Trailing Twelve Quarters is referred to as the “Excess Income Amount.”
   The income based incentive fee for each quarter will be determined as follows:
  

•  No income based incentive fee is payable to the Adviser for any calendar quarter for which there is no Excess Income Amount.

  

•  The Adviser will be paid 100% of the pre-incentive fee net investment income in respect of the Trailing Twelve Quarters, if any, that exceeds the hurdle amount for such Trailing


 

26


Table of Contents
  

Twelve Quarters, but is less than or equal to an amount, which we refer to as the “Catch-up Amount,” determined as the sum of 1.76% (7.06% annualized) prior to the end of the Waiver Period, or 1.82% (7.27% annualized) following the Waiver Period, multiplied by the Company’s NAV at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters that is included in the calculation of the Incentive Fee based on income.

  

•  The Adviser will be paid 15% prior to the end of the Waiver Period, or 17.5% following the Waiver Period, of the pre-incentive fee net investment income in respect of the Trailing Twelve Quarters that exceeds the Catch-up Amount.

   The amount of the income based incentive fee that will be paid to the Adviser for a particular quarter will equal the excess of (a) the income based incentive fee so calculated over (b) the aggregate income based incentive fee that was paid in respect of the first eleven calendar quarters included in the relevant Trailing Twelve Quarters subject to the Incentive Fee Cap as described below.
   The income based incentive fee that will be paid to the Adviser for a particular quarter is subject to a cap (the “Incentive Fee Cap”). The Incentive Fee Cap for any quarter is an amount equal to (a) 15% prior to the end of the Waiver Period, or 17.5% following the Waiver Period, of the Cumulative Net Return (as defined below) during the relevant Trailing Twelve Quarters minus (b) the aggregate income based incentive fee that was paid in respect of the first eleven calendar quarters (or the portion thereof) included in the relevant Trailing Twelve Quarters.
   “Cumulative Net Return” means (x) the pre-incentive fee net investment income in respect of the relevant Trailing Twelve Quarters minus (y) any Net Capital Loss (as defined below), if any, in respect of the relevant Trailing Twelve Quarters. If, in any quarter, the Incentive Fee Cap is zero or a negative value, the Company will pay no income based incentive fee to the Adviser for such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is a positive value but is less than the income based incentive fee that is payable to the Adviser for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, the Company will pay an income based incentive fee to the Adviser equal to the Incentive Fee Cap for such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is equal to or greater than the income based incentive fee that is payable to the Adviser for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, the Company will pay an income based incentive fee to the Adviser equal to the incentive fee calculated as described above for such quarter without regard to the Incentive Fee Cap.
   “Net Capital Loss” in respect of a particular period means the difference, if positive, between (i) aggregate capital losses, whether realized or

 

27


Table of Contents
   unrealized, in such period and (ii) aggregate capital gains, whether realized or unrealized, in such period.
   These calculations are prorated for any period of less than three months and adjusted for any share issuances or repurchases during the relevant quarter. If the consummation of this offering occurs on a date other than the first day of a calendar quarter, the income based incentive fee with respect to the Company’s pre-incentive fee net investment income shall be calculated for such calendar quarter at a weighted rate calculated based on the fee rates applicable before and after the consummation of this offering based on the number of days in such calendar quarter before and after the consummation of this offering. In no event will the amendments to the income based incentive fee to include the three year income and total return lookback features allow the Adviser to receive greater cumulative income based incentive fees under the Investment Advisory Agreement than it would have under the prior investment advisory agreement. Amounts waived by the Adviser are not subject to recoupment by the Adviser.
  

(ii) Capital gains based incentive fee:

   Upon completion of this offering, the second part of the incentive fee, a capital gains incentive fee, will be determined and payable in arrears as of the end of each calendar year in an amount equal to 17.5% of realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees as calculated in accordance with U.S. GAAP. However, similar to the voluntary waivers referenced above, the Adviser voluntarily waived its right to receive a capital gains based incentive fee above 15% from the date of consummation of this offering through the Waiver Period. The Company will accrue, but will not pay, a capital gains incentive fee with respect to unrealized appreciation because a capital gains incentive fee would be owed to the Adviser if the Company were to sell the relevant investment and realize a capital gain. Amounts waived by the Adviser are not subject to recoupment by the Adviser.
   See “Management and Other Agreements—Investment Advisory Agreement.”

Administration Agreement

   We reimburse the Adviser under the Administration Agreement, for certain administrative services to us.
   Under the terms of the Administration Agreement, the Administrator provides, or oversees the performance of, administrative and compliance services, including, but not limited to, maintaining financial records, overseeing the calculation of NAV, compliance monitoring (including diligence and oversight of our other service providers), preparing reports to shareholders and reports filed with the SEC, preparing materials and coordinating meetings of our Board, managing the payment of expenses and the performance of administrative and professional services rendered

 

28


Table of Contents
   by others and providing office space, equipment and office services. We reimburse the Administrator for its costs, expenses and allocable portion of overhead (including compensation of personnel performing administrative duties) in connection with the services performed for us pursuant to the terms of the Administration Agreement. In addition, pursuant to the terms of the Administration Agreement, the Administrator may delegate its obligations under the Administration Agreement to an affiliate or to a third party and we will reimburse the Administrator for any services performed for us by such affiliate or third party. The Administrator has hired a sub-administrator to assist in the provision of administrative services. The sub-administrator receives compensation for its provision of sub-administrative services under a sub-administration agreement. See “Management and Other Agreements—Administration Agreement.

Trading at a Discount

   Shares of closed-end investment companies, including BDCs frequently trade at a discount to their net asset value. We are not generally able to issue and sell our common shares at a price below our net asset value per share unless we have shareholder approval. The risk that our shares may trade at a discount to our net asset value is separate and distinct from the risk that our net asset value per share may decline. We cannot predict whether our shares will trade above, at or below net asset value. See “Risk Factors.”

Custodian, Transfer and Dividend Paying Agent and Registrar

   State Street Bank and Trust Company serves as our custodian. DST Systems, Inc. acts as our transfer agent, dividend disbursing agent for our common shares. See “Custodian, Transfer and Dividend Paying Agent and Registrar.”

Available Information

   We have filed with the SEC a registration statement on Form N-2, of which this prospectus is a part, under the Securities Act. This registration statement contains additional information about us and the common shares being offered by this prospectus. We are also required to file periodic reports, current reports, proxy statements and other information with the SEC. This information is available on the SEC’s website at http://www.sec.gov.
   We maintain a website at www.bxsl.com and make all of our periodic and current reports, proxy statements and other information available, free of charge, on or through our website. Information on our website and the SEC’s website is not incorporated into or part of this prospectus. You may also obtain such information free of charge by contacting us in writing at 345 Park Avenue, 31st floor, New York, New York 10153, Attention: Blackstone Secured Lending Fund, or by phone at (212) 503-2100.

 

29


Table of Contents

FEES AND EXPENSES

The following table is intended to assist you in understanding the costs and expenses that you will bear directly or indirectly. We caution you that some of the percentages indicated in the table below are estimates and may vary. The expenses shown in the table under “Annual expenses” are based on estimated amounts for our current fiscal year and assume that we issue 7,650,000 common shares in the offering, based on an offering price of $26.15 per share. The following table should not be considered a representation of our future expenses. Actual expenses may be greater or less than shown. Except where the context suggests otherwise, whenever this prospectus contains a reference to fees or expenses paid by “us” or “the Company” or that “we” will pay fees or expenses, you will indirectly bear these fees or expenses as an investor in the Company.

 

Shareholder transaction expenses:

  

Sales load (as a percentage of offering price)

     6.00 %(1) 

Offering expenses (as a percentage of offering price)

     1.25 %(2) 

Dividend reinvestment plan expenses

     0.00 %(3) 

Total shareholder transaction expenses (as a percentage of offering price)

     7.25

Annual expenses (as a percentage of net assets attributable to common shares) (9):

  

Management Fee payable under the Investment Advisory Agreement

     2.16 %(4) 

Incentive Fee payable under the Investment Advisory Agreement

     1.94 %(5) 

Interest payments on borrowed funds

     3.51 %(6) 

Other expenses

     0.29 %(7)(8) 

Total annual expenses

     7.90 %(8) 

Management Fee Waiver

     (0.54 )%(4) 

Incentive Fee Waiver

     (0.28 )%(5) 

Total net annual expenses

     7.08 %(8) 

 

(1)

The sales load (underwriting discount and commission) with respect to the common shares sold in this offering, which is a one-time fee paid to the underwriters, is the only sales load paid in connection with this offering.

 

(2)

Amount reflects estimated offering expenses of approximately $2.5 million.

 

(3)

The expenses of the dividend reinvestment plan are included in “other expenses” in the table above. For additional information, see “Dividend Reinvestment Plan.”

 

(4)

Upon completion of this offering, the Management Fee will be 1.0% of our average gross assets (excluding undrawn commitments but including assets purchased with borrowed amounts); however, in order to maintain the same management fee arrangement that the Company currently has in place for a period of time following the completion of this offering, the Adviser voluntarily waived its right to receive the base management fee in excess of 0.75% of the average value of the Company’s gross assets at the end of the two most recently completed calendar quarters during the Waiver Period. We may from time to time decide it is appropriate to change the terms of the agreement. Under the 1940 Act, any material change to our Investment Advisory Agreement must be submitted to shareholders for approval. See “Management and Other Agreements—Investment Advisory Agreement; Administration Agreement.”

The Management Fee reflected in the table is calculated by determining the ratio that the Management Fee bears to our net assets attributable to common shares (rather than our gross assets). The estimate of our Management Fee referenced in the table assumes that our average gross assets are 2.16x our average net assets.


 

30


Table of Contents
(5)

The Incentive Fee will consist of two components that are independent of each other, with the result that one component may be payable even if the other is not. A portion of the Incentive Fee is based on our income and a portion is based on our capital gains. The table reflects each incentive fee calculated at a rate of 17.5%. Similar to the voluntary waiver referenced in footnote (4) above, the Adviser voluntarily waived its right to receive each component of the Incentive Fee above 15% during the Waiver Period.

For a more detailed discussion of the calculation of this fee, see “Management and Other Agreements—Payment of Our Expenses.

 

(6)

Interest payments on borrowed funds represents an estimate of our annualized interest expense based on borrowings under the Revolving Credit Facility, the SPV Financing Facilities and the Notes. The assumed weighted average interest rate on our total debt outstanding was 2.97%, which is the weighted average interest rate on our total debt outstanding as of June 30, 2021 and updated for our issuances of $1.3 billion principal amount of unsecured notes issued in July 2021 and September 2021 and our current borrowing under the Revolving Credit Facility and the SPV Financing Facilities as of October 15, 2021. We may borrow additional funds from time to time to make investments to the extent we determine that the economic situation is conducive to doing so. We may also issue additional debt securities or preferred shares, subject to our compliance with applicable requirements under the Investment Company Act.

 

(7)

Includes our overhead expenses, such as payments under the Administration Agreement for certain expenses incurred by the Adviser. See “Management and Other Agreements— Investment Advisory Agreement; Administration Agreement.” We based these expenses on estimated amounts for the current fiscal year.

 

(8)

Estimated.

 

(9)

Weighted average net assets employed as the denominator for expense ratio computation is $4,292 million.

The following example demonstrates the projected dollar amount of total cumulative expenses over various periods with respect to a hypothetical investment in our common shares. In calculating the following expense amounts, we have assumed that our annual operating expenses would remain at the levels set forth in the table above. Transaction expenses are included in the following example.

 

     1
year
     3
years
     5
years
     10 years  

You would pay the following expenses on a $1,000 investment, assuming a 5% annual return resulting entirely from net investment income(1)

   $ 123      $ 227      $ 335      $ 595  

You would pay the following expenses on a $1,000 investment, assuming a 5% annual return resulting entirely from net realized capital gains(2)

   $ 138      $ 270      $ 403      $ 702  

 

(1)

The income based incentive fee is subject to a 6% hurdle. Accordingly, no incentive fee would be payable in this example.

 

(2)

Assumes no unrealized capital depreciation or realized capital losses and 5% annual return on our portfolio resulting entirely from net realized capital gains (and therefore subject to the capital gains incentive fee).

While the example assumes, as required by the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%. There is no incentive compensation either on income or on capital gains under our Investment Advisory Agreement assuming a 5% annual return and therefore it is not included in the example. If we achieve sufficient returns on our investments, including through the realization of capital gains, to trigger an incentive compensation of a material amount, our distributions to our shareholders and our expenses would likely be higher. In addition, while the example assumes reinvestment of all dividends and distributions at net asset value, participants in our dividend reinvestment plan will receive a number of common shares, determined by dividing the total dollar amount of the dividend or distribution payable to a participant by the market price per common share at the close of trading on the valuation date for the dividend. See “Dividend Reinvestment Plan” for additional information regarding our dividend reinvestment plan.


 

31


Table of Contents

Except where the context suggests otherwise, whenever this prospectus contains a reference to fees or expenses paid by “you,” the “Company,” or “us,” our common shareholders will indirectly bear such fees or expenses.


 

32


Table of Contents

FINANCIAL HIGHLIGHTS

The following table of financial highlights is intended to help a prospective investor understand the Company’s financial performance for the periods shown. The financial data set forth in the following table as of and for the years ended December 31, 2020, 2019 and 2018 are derived from our consolidated financial statements, which have been audited by Deloitte & Touche LLP, an independent registered public accounting firm whose reports thereon are included in this prospectus. The financial data set forth in the following table as of and for the six months ended June 30, 2021 and 2020 have been derived from unaudited financial data, but in the opinion of our management, reflects all adjustments (consisting only of normal recurring adjustments) that are necessary to present fairly the results for such interim periods. Interim results at and for the six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. You should read these financial highlights in conjunction with our consolidated financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this prospectus.

 

     For the Six Months Ended
June 30,
    For the Years Ended December 31,  
($ in millions, except per share amounts)    2021
(Unaudited)
    2020
(Unaudited)
    2020     2019     2018  

Per Share Data

          

Net asset value, beginning of period

   $ 25.20     $ 26.02     $ 26.02     $ 24.57     $ 25.00  

Net investment income (1)

     1.12       1.16       2.51       2.18       0.17  

Net unrealized and realized gain (loss) (2)

     0.60       (2.50     (1.03     1.27       (0.60
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net assets resulting from operations

     1.72       (1.34     1.48       3.45       (0.43

Distributions declared (3)

     (1.00     (1.00     (2.30     (2.00      
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total increase (decrease) in net assets

     0.72       (2.34     (0.82     1.45       (0.43
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 25.92     $ 23.68     $ 25.20     $ 26.02     $ 24.57  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shares outstanding, end of period

     144,314,260       96,326,239       129,661,586       64,289,742       9,621,319  

Total return based on NAV (4)

     6.89     (4.95 )%      6.46     14.43     (1.72 )% 

Ratios

          

Ratio of net expenses to average net assets (5)

     6.97     6.23     6.50     8.50     8.89

Ratio of net investment income to average net assets (5)

     8.67     9.91     10.37     8.46     6.07

Portfolio turnover rate

     14.52     11.51     46.80     31.49    

Supplemental Data

          

Net assets, end of period

     3,741,102       2,281,145       3,267,809       1,673,117       236,365  

Total capital commitments, end of period

     3,926,295       3,766,197       3,926,295       3,230,641       952,234  

Ratios of total contributed capital to total committed capital, end of period

     90.93     63.67     81.83     50.55     25.13

Asset coverage ratio

     198.9     233.5     230.0     215.1     227.8

 

(1)

The per share data was derived by using the weighted average shares outstanding during the period.

(2)

For the six months ended June 30, 2021 and 2020 and for the years ended December 31, 2020, 2019 and 2018, the amount shown does not correspond with the aggregate amount for the period as, for the six


 

33


Table of Contents
  months ended June 30, 2021 and 2020, it includes a $(0.02) and $(0.42) impact, respectively, and, for the years ended December 31, 2020, 2019 and 2018, it includes a $(0.81), $0.31 and $(0.03) impact, respectively, from the effect of the timing of capital transactions.
(3)

The per share data for distributions was derived by using the actual shares outstanding at the date of the relevant transactions.

(4)

Total return is calculated as the change in NAV per share during the period, plus distributions per share (assuming dividends and distributions are reinvested in accordance with the Company’s dividend reinvestment plan) divided by the beginning NAV per share. Total return does not include sales load.

(5)

For the six months ended June 30, 2021 and 2020, amounts are annualized except for expense support amounts relating to organization costs. For those periods, the ratio of total operating expenses to average net assets was 6.97% and 6.15%, respectively, on an annualized basis, excluding the effect of expense support/(recoupment) by the Adviser which represented 0.00% and (0.08%), respectively, of average net assets. For the year ended December 31, 2018, amounts are annualized except for organizational costs and expense support amounts relating to organizational costs. For the years ended December 31, 2020, 2019 and 2018, the ratio of total operating expenses to average net assets was 6.43%, 8.47% and 14.09%, respectively, on an annualized basis, excluding the effect of expense support/(recoupment) by the Adviser which represented (0.07%), (0.03)% and 5.20%, respectively, of average net assets.


 

34


Table of Contents

RISK FACTORS

Investing in our common shares involves a number of significant risks. Before you invest in our common shares, you should be aware of various risks associated with the investment, including those described below. You should carefully consider these risk factors, together with all of the other information included in this prospectus, before you decide whether to make an investment in our common shares. The risks set out below are not the only risks we face. Additional risks and uncertainties not presently known to us or not presently deemed material by us may also impair our operations and performance. If any of the following events occur, our business, financial condition and results of operations could be materially and adversely affected. In such case, you may lose all or part of your investment.

 

A.

Risks Related to Our Business and Structure

We are a relatively new company and have limited operating history.

The Company is a non-diversified, closed-end management investment company that has elected to be regulated as a BDC with limited operating history. As a result, prospective investors have a limited track record and history on which to base their investment decision. We are subject to the business risks and uncertainties associated with recently formed businesses, including the risk that we will not achieve our investment objectives and the value of a shareholder’s investment could decline substantially or become worthless. While we believe that the past professional experiences of the Investment Team, including investment and financial experience of the Adviser’s senior management, will increase the likelihood that the Adviser will be able to manage the Company successfully, there can be no assurance that this will be the case.

Our Board may change our operating policies and strategies without prior notice or shareholder approval, the effects of which may be adverse to our results of operations and financial condition.

Our Board has the authority to modify or waive our current operating policies, investment criteria and strategies without prior notice and without shareholder approval. We cannot predict the effect any changes to our current operating policies, investment criteria and strategies would have on our business, NAV, operating results and value of our shares. However, the effects might be adverse, which could negatively impact our ability to pay shareholders distributions and cause shareholders to lose all or part of their investment. Moreover, we have significant flexibility in investing the net proceeds from our continuous offering and may use the net proceeds from our continuous offering in ways with which investors may not agree or for purposes other than those contemplated in this prospectus.

Our Board may amend our Declaration of Trust without prior shareholder approval.

Our Board may, without shareholder vote, subject to certain exceptions, amend or otherwise supplement the Declaration of Trust by making an amendment, a Declaration of Trust supplemental thereto or an amended and restated Declaration of Trust, including without limitation to classify the Board, to impose advance notice bylaw provisions for Trustee nominations or for shareholder proposals, to require super-majority approval of transactions with significant shareholders or other provisions that may be characterized as anti-takeover in nature.

Certain provisions of our Declaration of Trust could deter takeover attempts and have an adverse impact on the value of our common shares.

Our Declaration of Trust contains anti-takeover provisions that could have the effect of limiting the ability of other entities or persons to acquire control of the Company or to change the composition of our Board of Trustees. Our Board of Trustees is divided into three classes of trustees serving staggered three-year terms. This provision could delay for up to two years the replacement of a majority of our Board of Trustees. These provisions could have the effect of depriving shareholders of an opportunity to sell their common shares at a

 

35


Table of Contents

premium over prevailing market prices by discouraging a third party from seeking to obtain control over the Company. See “Description of Our SharesTerm and Election; Certain Transactions.”

Price declines in the medium- and large-sized U.S. corporate debt market may adversely affect the fair value of our portfolio, reducing our NAV through increased net unrealized depreciation.

Conditions in the medium- and large-sized U.S. corporate debt market may deteriorate, as seen during the recent financial crisis, which may cause pricing levels to similarly decline or be volatile. During the financial crisis, many institutions were forced to raise cash by selling their interests in performing assets in order to satisfy margin requirements or the equivalent of margin requirements imposed by their lenders and/or, in the case of hedge funds and other investment vehicles, to satisfy widespread redemption requests. This resulted in a forced deleveraging cycle of price declines, compulsory sales, and further price declines, with falling underlying credit values, and other constraints resulting from the credit crisis generating further selling pressure. If similar events occurred in the medium- and large-sized U.S. corporate debt market, our NAV could decline through an increase in unrealized depreciation and incurrence of realized losses in connection with the sale of our investments, which could have a material adverse impact on our business, financial condition and results of operations.

Our ability to achieve our investment objectives depends on the ability of the Adviser to manage and support our investment process. If the Adviser or Blackstone Credit were to lose any members of their respective senior management teams, our ability to achieve our investment objectives could be significantly harmed.

Since we have no employees, we depend on the investment expertise, skill and network of business contacts of the broader networks of the Adviser and its affiliates. The Adviser evaluates, negotiates, structures, executes, monitors and services our investments. Our future success depends to a significant extent on the continued service and coordination of Blackstone Credit and its senior management team. The departure of any members of Blackstone Credit’s senior management team could have a material adverse effect on our ability to achieve our investment objective.

Our ability to achieve our investment objectives depends on the Adviser’s ability to identify and analyze, and to invest in, finance and monitor companies that meet our investment criteria. The Adviser’s capabilities in structuring the investment process, providing competent, attentive and efficient services to us, and facilitating access to financing on acceptable terms depend on the employment of investment professionals in an adequate number and of adequate sophistication to match the corresponding flow of transactions. To achieve our investment objective, the Adviser may need to hire, train, supervise and manage new investment professionals to participate in our investment selection and monitoring process. The Adviser may not be able to find investment professionals in a timely manner or at all. Failure to support our investment process could have a material adverse effect on our business, financial condition and results of operations.

The Investment Advisory Agreement has been approved pursuant to Section 15 of the 1940 Act. In addition, the Investment Advisory Agreement has termination provisions that allow the parties to terminate the agreement. The Investment Advisory Agreement may be terminated at any time, without penalty, by us or by the Adviser, upon 60 days’ notice. If the Investment Advisory Agreement is terminated, it may adversely affect the quality of our investment opportunities. In addition, in the event the Investment Advisory Agreement is terminated, it may be difficult for us to replace the Adviser.

Because our business model depends to a significant extent upon relationships with private equity sponsors, investment banks and commercial banks, the inability of the Adviser to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business.

The Adviser depends on its broader organization’s relationships with private equity sponsors, investment banks and commercial banks, and we rely to a significant extent upon these relationships to provide us with

 

36


Table of Contents

potential investment opportunities. If the Adviser or its broader organization fail to maintain their existing relationships or develop new relationships with other sponsors or sources of investment opportunities, we may not be able to grow our investment portfolio. In addition, individuals with whom the Adviser or its broader organizations have relationships are not obligated to provide us with investment opportunities, and, therefore, there is no assurance that such relationships will generate investment opportunities for us.

We may face increasing competition for investment opportunities, which could delay deployment of our capital, reduce returns and result in losses.

We compete for investments with other BDCs and investment funds (including private equity funds, mezzanine funds, performing and other credit funds, and funds that invest in CLOs, structured notes, derivatives and other types of collateralized securities and structured products), as well as traditional financial services companies such as commercial banks and other sources of funding. These other BDCs and investment funds might be reasonable investment alternatives to us and may be less costly or complex with fewer and/or different risks than we have. Moreover, alternative investment vehicles, such as hedge funds, have begun to invest in areas in which they have not traditionally invested, including making investments in small to mid-sized private U.S. companies. As a result of these new entrants, competition for investment opportunities in small and middle market private U.S. companies may intensify. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of capital and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments than we have. These characteristics could allow our competitors to consider a wider variety of investments, establish more relationships and offer better pricing and more flexible structuring than we are able to do. We may lose investment opportunities if we do not match our competitors’ pricing, terms or structure. If we are forced to match our competitors’ pricing, terms or structure, we may not be able to achieve acceptable returns on our investments or may bear substantial risk of capital loss. A significant part of our competitive advantage stems from the fact that the market for investments in small and middle market private U.S. companies is underserved by traditional commercial banks and other financial sources. A significant increase in the number and/or the size of our competitors in this target market could force us to accept less attractive investment terms. Furthermore, many of our competitors have greater experience operating under, or are not subject to, the regulatory restrictions that the 1940 Act imposes on us as a BDC.

We may have difficulty sourcing investment opportunities.

We cannot assure investors that we will be able to locate a sufficient number of suitable investment opportunities to allow us to deploy all capital commitments successfully. In addition, privately-negotiated investments in loans and illiquid securities of private middle market companies require substantial due diligence and structuring, and we cannot assure investors that we will achieve our anticipated investment pace. As a result, investors will be unable to evaluate any future portfolio company investments prior to purchasing our shares. Our shareholders will have no input with respect to investment decisions. These factors increase the uncertainty, and thus the risk, of investing in our shares. To the extent we are unable to deploy all capital commitments, our investment income and, in turn, our results of operations, will likely be materially adversely affected. There is no assurance that we will be able to consummate investment transactions or that such transactions will be successful. Blackstone Credit, the Company and their affiliates may also face certain conflicts of interests in connection with any transaction, including any warehousing transaction, involving an affiliate.

As required by the 1940 Act, a significant portion of our investment portfolio is and will be recorded at fair value as determined in good faith and, as a result, there is and will be uncertainty as to the value of our portfolio investments.

Under the 1940 Act, we are required to carry our portfolio investments at market value or, if there is no readily available market value, at fair value as determined pursuant to policies adopted by, and subject to the oversight of, our Board. There is not a public market for the securities of the privately-held companies in which

 

37


Table of Contents

we invest. Many of our investments are not publicly-traded or actively traded on a secondary market. As a result, we value these securities quarterly at fair value as determined in good faith as required by the 1940 Act. In connection with striking a NAV as of a date other than quarter end for share issuances and repurchases, the Company will consider whether there has been a material change to such investments as to affect their fair value, but such analysis will be more limited than the quarter end process.

As part of our valuation process, we will take into account relevant factors in determining the fair value of the Company’s investments, without market quotations, many of which are loans, including and in combination, as relevant: (i) the estimated enterprise value of a portfolio company, (ii) the nature and realizable value of any collateral, (iii) the portfolio company’s ability to make payments based on its earnings and cash flow, (iv) the markets in which the portfolio company does business, (v) a comparison of the portfolio company’s securities to any similar publicly traded securities, and (vi) overall changes in the interest rate environment and the credit markets that may affect the price at which similar investments may be made in the future. Our determinations of fair value may differ materially from the values that would have been used if a ready market for these non-traded securities existed. Due to this uncertainty, our fair value determinations may cause our NAV on a given date to materially differ from the value that we may ultimately realize upon the sale of one or more of our investments.

There is a risk that investors in our shares may not receive distributions or that our distributions may decrease over time.

We may not achieve investment results that will allow us to make a specified or stable level of cash distributions and our distributions may decrease over time. In addition, due to the asset coverage test applicable to us as a BDC, we may be limited in our ability to make distributions.

The amount of any distributions we may make is uncertain. Our distributions may exceed our earnings, particularly during the period before we have substantially invested the net proceeds from this offering. Therefore, portions of the distributions that we make may represent a return of capital to a shareholder that will lower such shareholder’s tax basis in its shares and reduce the amount of funds we have for investment in targeted assets.

We may fund our cash distributions to shareholders from any sources of funds available to us, including offering proceeds, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets, dividends or other distributions paid to us on account of preferred and common equity investments in portfolio companies and fee and expense reimbursement waivers from the Adviser or the Administrator, if any. Our ability to pay distributions might be adversely affected by, among other things, the impact of one or more of the risk factors described in this prospectus. In addition, the inability to satisfy the asset coverage test applicable to us as a BDC may limit our ability to pay distributions. All distributions are and will be paid at the discretion of our Board and will depend on our earnings, our financial condition, maintenance of our RIC status, compliance with applicable BDC regulations and such other factors as our Board may deem relevant from time to time. We cannot assure shareholders that we will continue to pay distributions to our shareholders in the future. In the event that we encounter delays in locating suitable investment opportunities, we may pay all or a substantial portion of our distributions from the proceeds of this offering or from borrowings in anticipation of future cash flow, which may constitute a return of shareholders’ capital. A return of capital is a return of a shareholder’s investment, rather than a return of earnings or gains derived from our investment activities. A shareholder will not be subject to immediate taxation on the amount of any distribution treated as a return of capital to the extent of the shareholder’s basis in its shares; however, the shareholder’s basis in its shares will be reduced (but not below zero) by the amount of the return of capital, which will result in the shareholder recognizing additional gain (or a lower loss) when the shares are sold. To the extent that the amount of the return of capital exceeds the shareholder’s basis in its shares, such excess amount will be treated as gain from the sale of the shareholder’s shares. Distributions from the proceeds of this offering or from borrowings also could reduce the amount of capital we ultimately invest in our portfolio companies.

 

38


Table of Contents

We have not established any limit on the amount of funds we may use from available sources, such as borrowings, if any, or proceeds from this offering, to fund distributions (which may reduce the amount of capital we ultimately invest in assets).

Any distributions made from sources other than cash flow from operations or relying on fee or expense reimbursement waivers, if any, from the Adviser or the Administrator are not based on our investment performance, and can only be sustained if we achieve positive investment performance in future periods and/or the Adviser or the Administrator continues to make such expense reimbursements, if any. The extent to which we pay distributions from sources other than cash flow from operations will depend on various factors, including the level of participation in our dividend reinvestment plan, how quickly we invest the proceeds from this and any future offering and the performance of our investments. Shareholders should also understand that our future repayments to the Adviser will reduce the distributions that they would otherwise receive. There can be no assurance that we will achieve such performance in order to sustain these distributions, or be able to pay distributions at all. The Adviser and the Administrator have no obligation to waive fees or receipt of expense reimbursements, if any.

Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.

We, our portfolio companies and other counterparties are subject to regulation at the local, state and federal level. New legislation may be enacted or new interpretations, rulings or regulations could be adopted, including those governing the types of investments we are permitted to make, any of which could harm us and our shareholders, potentially with retroactive effect.

President Biden may support an enhanced regulatory agenda that imposes greater costs on all sectors and on financial services companies in particular. In addition, uncertainty regarding legislation and regulations affecting the financial services industry or taxation could also adversely impact our business or the business of our portfolio companies.

Additionally, any changes to or repeal of the laws and regulations governing our operations relating to permitted investments may cause us to alter our investment strategy to avail ourselves of new or different opportunities. Such changes could result in material differences to our strategies and plans as set forth in this prospectus and may result in our investment focus shifting from the areas of expertise of the Adviser to other types of investments in which the Adviser may have less expertise or little or no experience. Thus, any such changes, if they occur, could have a material adverse effect on our financial condition and results of operations and the value of a shareholder’s investment.

The impact of financial reform legislation on us is uncertain.

In light of recent conditions in the U.S. and global financial markets and the U.S. and global economy, legislators, the presidential administration and regulators have increased their focus on the regulation of the financial services industry. The Dodd-Frank Wall Street Reform and Consumer Protection Act, or the “Dodd-Frank Act,” institutes a wide range of reforms that will have an impact on all financial institutions. Some of the provisions of the Dodd-Frank Act have been enacted, while others have extended implementation periods and delayed effective dates and will require extensive rulemaking by regulatory authorities. Given the uncertainty associated with the manner in which the provisions of the Dodd-Frank Act will be implemented by the various regulatory agencies and through regulations, the full impact such requirements will have on our business, results of operations or financial condition is unclear. While we cannot predict what effect any changes in the laws or regulations or their interpretations would have on us as a result of the Dodd-Frank Act, these changes could be materially adverse to us and our shareholders.

We may experience fluctuations in our quarterly results.

We could experience fluctuations in our quarterly operating results due to a number of factors, including our ability or inability to make investments in companies that meet our investment criteria, the interest rate payable

 

39


Table of Contents

on the loans or other debt securities we originate or acquire, the level of our expenses (including our borrowing costs), variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, results for any previous period should not be relied upon as being indicative of performance in future periods.

Any unrealized losses we experience on our portfolio may be an indication of future realized losses, which could reduce our income available for distribution.

As a BDC, we are required to carry our investments at market value or, if no market value is ascertainable, at the fair value as determined in good faith pursuant to procedures adopted by, and under oversight of, our Board. Decreases in the market value or fair value of our investments relative to amortized cost will be recorded as unrealized depreciation. Any unrealized losses in our portfolio could be an indication of a portfolio company’s inability to meet its repayment obligations to us with respect to the affected loans. This could result in realized losses in the future and ultimately in reductions of our income available for distribution in future periods. In addition, decreases in the market value or fair value of our investments will reduce our NAV.

General economic conditions could adversely affect the performance of our investments.

We and our portfolio companies are susceptible to the effects of economic slowdowns or recessions. The global growth cycle is in a mature phase and signs of slowdown are evident in certain regions around the world, although most economists continue to expect moderate economic growth in the near term, with limited signals of an imminent recession in the U.S. as consumer and government spending remain healthy. Although the broader outlook remains constructive and progress was made on trade, including a phase one deal with China and the United States-Mexico-Canada Agreement, geopolitical instability continues to pose risk. In particular, the outbreak of the novel coronavirus and related respiratory disease (“COVID-19”) in many countries, along with more recent COVID-19 variants, has disrupted global travel and supply chains, and has adversely impacted global commercial activity and a number of industries, such as transportation, hospitality and entertainment. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19, or any future pandemics that may arise, which may have a continued adverse impact on economic and market conditions.

Any deterioration of general economic conditions may lead to significant declines in corporate earnings or loan performance, and the ability of corporate borrowers to service their debt, any of which could trigger a period of global economic slowdown, and have an adverse impact on the performance and financial results of the Company, and the value and the liquidity of the shares. In an economic downturn, we may have non-performing assets or non-performing assets may increase, and the value of our portfolio is likely to decrease during these periods. Adverse economic conditions may also decrease the value of any collateral securing our loan investments. A severe recession may further decrease the value of such collateral and result in losses of value in our portfolio and a decrease in our revenues, net income, assets and net worth. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us on favorable terms or at all. These events could prevent us from increasing investments and harm our operating results.

Terrorist attacks, acts of war or natural disasters may adversely affect our operations.

Terrorist acts, acts of war or natural disasters may disrupt our operations, as well as the operations of the businesses in which we invest. Such acts have created, and continue to create, economic and political uncertainties and have contributed to recent global economic instability. Future terrorist activities, military or security operations, or natural disasters could further weaken the domestic/global economies and create additional uncertainties, which may negatively impact the businesses in which we invest directly or indirectly and, in turn, could have a material adverse impact on our business, operating results and financial condition. Losses from terrorist attacks and natural disasters are generally uninsurable.

 

40


Table of Contents

Force Majeure events may adversely affect our operations.

We may be affected by force majeure events (e.g., acts of God, fire, flood, earthquakes, outbreaks of an infectious disease, pandemic or any other serious public health concern, war, terrorism, nationalization of industry and labor strikes). Force majeure events could adversely affect the ability of the Company or a counterparty to perform its obligations. The liability and cost arising out of a failure to perform obligations as a result of a force majeure event could be considerable and could be borne by the Company. Certain force majeure events, such as war or an outbreak of an infectious disease, could have a broader negative impact on the global or local economy, thereby affecting us. Additionally, a major governmental intervention into industry, including the nationalization of an industry or the assertion of control, could result in a loss to the Company if an investment is affected, and any compensation provided by the relevant government may not be adequate.

The current outbreak of the novel coronavirus, or COVID-19, has caused severe disruptions in the U.S. and global economy and already has had and is expected to continue to have a materially adverse impact on our financial condition and results of operations.

During the first quarter of 2020, there was a global outbreak of COVID-19, which has spread to over 200 countries and territories, including the United States, and has spread to every state in the United States. On March 11, 2020, the World Health Organization designated COVID-19 as a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. The global impact of the outbreak has been rapidly evolving, and as cases of COVID-19 have continued to be identified in additional countries, many countries have reacted by instituting quarantines, restrictions on travel, closing financial markets and/or restricting trading, and limiting hours of operations of non-essential businesses. Such actions are creating disruption in global supply chains, and adversely impacting a number of industries, including industries in which our portfolio companies operate. The outbreak of COVID-19 could have a continued adverse impact on economic and market conditions and has triggered a period of global economic slowdown.

The outbreak of COVID-19 and related effects, which continue to be unpredictable, could have a material adverse impact on our NAV, financial condition, liquidity, results of operations, and the businesses of our portfolio companies, among other factors. Negative impacts to our business as a result of the pandemic could exacerbate other risks described herein, including:

 

   

weakening financial conditions of or the bankruptcy or insolvency of portfolio companies, which may result in the inability of such portfolio companies to meet debt obligations, delays in collecting accounts receivable, defaults, or forgiveness or deferral of interest payments from such portfolio companies;

 

   

significant volatility in the markets for syndicated loans, which could cause rapid and large fluctuations in the values of such investments and adverse effects on the liquidity of any such investments;

 

   

deterioration in credit and financing market conditions, which may adversely impact our ability to access financing for our investments on favorable terms or at all;

 

   

operational impacts on our Adviser, Administrator and our other third-party advisors, service providers, vendors and counterparties, including independent valuation firms, our sub-administrator, our lenders and other providers of financing, brokers and other counterparties that we purchase and sell assets to and from, derivative counterparties, and legal and diligence professionals that we rely on for acquiring our investments;

 

   

limitations on our ability to ensure business continuity in the event our, or our third-party advisors’ and service providers’ continuity of operations plan is not effective or improperly implemented or deployed during a disruption;

 

   

the availability of key personnel of the Adviser, Administrator and our other service providers as they face changed circumstances and potential illness during the pandemic;

 

41


Table of Contents
   

difficulty in valuing our assets in light of significant changes in the financial markets, including difficulty in forecasting discount rates and making market comparisons, and circumstances affecting the Adviser’s, Administrator’s and our service providers’ personnel during the pandemic;

 

   

limitations on our ability to raise new capital;

 

   

significant changes to the valuations of pending investments; and

 

   

limitations on our ability to make distributions to our shareholders due to material adverse impacts on our cash flows from operations or liquidity.

The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on economic and market conditions, and, as a result, present material uncertainty and risk with respect to us and the performance of our investments. The full extent of the impact and effects of COVID-19 will depend on future developments, including, among other factors, the duration and spread of the outbreak, along with related travel advisories, quarantines and restrictions, the recovery time of the disrupted supply chains and industries, the impact of labor market interruptions, the impact of government interventions, the availability and use of effective vaccines, and uncertainty with respect to the duration of the global economic slowdown. COVID-19 and the current financial, economic and capital markets environment, and future developments in these and other areas present uncertainty and risk with respect to our performance, financial condition, results of operations and ability to pay distributions.

The outbreak of the epidemics/pandemics could adversely affect the performance of our investments.

Certain countries have been susceptible to epidemics/pandemics, most recently COVID-19, which has been designated as a pandemic by world health authorities. The outbreak of such epidemics/pandemics, together with any resulting restrictions on travel or quarantines imposed, has had and will continue to have a negative impact on the economy and business activity globally (including in the countries in which the Company invests), and thereby is expected to adversely affect the performance of the Company’s investments. Furthermore, the rapid development of epidemics/pandemics could preclude prediction as to their ultimate adverse impact on economic and market conditions, and, as a result, presents material uncertainty and risk with respect to the Company and the performance of its investments.

The United Kingdom’s exit from the European Union may create significant risks and uncertainty for global markets and our investments.

The United Kingdom (the “UK”) formally left the European Union (the “EU”) on January 31, 2020 (commonly known as “Brexit”), followed by an implementation period, during which EU law continued to apply in the UK and the UK maintained its EU single market access rights and EU customs union membership. The implementation period expired on December 31, 2020. Consequently, the UK has become a third country vis-à-vis the EU, without access to the single market or membership of the EU customs union.

During the implementation period, on December 30, 2020, the UK and the EU signed a trade and cooperation agreement (the “TCA”) to govern their ongoing relationship. The TCA was officially ratified by the UK Parliament on December 30, 2020, and was ratified by the EU Parliament and Council on April 27, 2021. It is anticipated that further details of the relationship between the UK and the EU will continue to be negotiated even after formal ratification of the TCA.

Over time, UK regulated firms and other UK businesses may be adversely affected by the terms of the TCA (assuming it is formally ratified by the EU), as compared with the position prior to the expiration of the implementation period on December 31, 2020. For example, the TCA introduces new customs checks, as well as new restrictions on the provision of cross-border services and on the free movement of employees. These changes have the potential to materially impair the profitability of a business, and to require it to adapt or even relocate.

 

42


Table of Contents

Although it is probable that any adverse effects flowing from the UK’s withdrawal from the EU will principally affect the UK (and those having an economic interest in, or connected to, the UK), given the size and global significance of the UK’s economy, the impact of the withdrawal is unpredictable and likely to be an ongoing source of instability, produce significant currency fluctuations, and/or have other adverse effects on international markets, international trade agreements and/or other existing cross-border cooperation arrangements (whether economic, tax, fiscal, legal, regulatory or otherwise). The withdrawal of the UK from the EU could therefore adversely affect us. In addition, although it seems less likely following the expiration of the transition period than at the time of the UK’s referendum, the withdrawal of the UK from the EU could have a further destabilizing effect if any other member states were to consider withdrawing from the EU, presenting similar and/or additional potential risks and consequences to our business and financial results.

We may face a breach of our cyber security, which could result in adverse consequences to our operations and exposure of confidential information.

Cyber security incidents and cyber-attacks have been occurring globally at a more frequent and severe level and will likely continue to increase in frequency in the future. Blackstone, Blackstone Credit and their affiliates and portfolio companies’ and service providers’ information and technology systems may be vulnerable to damage or interruption from cyber security breaches, computer viruses or other malicious code, network failures, computer and telecommunication failures, infiltration by unauthorized persons and other security breaches, or usage errors by their respective professionals or service providers. If unauthorized parties gain access to such information and technology systems, they may be able to steal, publish, delete or modify private and sensitive information, including non-public personal information related to shareholders (and their beneficial owners) and material non-public information. Although Blackstone has implemented, and portfolio companies and service providers may implement, various measures to manage risks relating to these types of events, such systems could prove to be inadequate and, if compromised, could become inoperable for extended periods of time, cease to function properly or fail to adequately secure private information. Blackstone and Blackstone Credit do not control the cyber security plans and systems put in place by third-party service providers, and such third-party service providers may have limited indemnification obligations to Blackstone, Blackstone Credit, their affiliates, the Company, the shareholders and/or a portfolio company, each of which could be negatively impacted as a result. Breaches, such as those involving covertly introduced malware, impersonation of authorized users and industrial or other espionage may not be identified even with sophisticated prevention and detection systems, potentially resulting in further harm and preventing them from being addressed appropriately. The failure of these systems and/or of disaster recovery plans for any reason could cause significant interruptions in Blackstone’s, Blackstone Credit’s, their affiliates’, the Company’s and/or a portfolio company’s operations and result in a failure to maintain the security, confidentiality or privacy of sensitive data, including personal information relating to shareholders (and their beneficial owners), material non-public information and the intellectual property and trade secrets and other sensitive information of Blackstone, Blackstone Credit and/or portfolio companies. Blackstone, Blackstone Credit, the Company and/or a portfolio company could be required to make a significant investment to remedy the effects of any such failures, harm to their reputations, legal claims that they and their respective affiliates may be subjected to, regulatory action or enforcement arising out of applicable privacy and other laws, adverse publicity, and other events that may affect their business and financial performance.

We may not be able to obtain all required state licenses.

We may be required to obtain various state licenses in order to, among other things, originate commercial loans. Applying for and obtaining required licenses can be costly and take several months. There is no assurance that we will obtain all of the licenses that we need on a timely basis. Furthermore, we will be subject to various information and other requirements in order to obtain and maintain these licenses, and there is no assurance that we will satisfy those requirements. Our failure to obtain or maintain licenses might restrict investment options and have other adverse consequences.

 

43


Table of Contents

Our Declaration of Trust includes exclusive forum and jury trial waiver provisions that could limit a shareholder’s ability to bring a claim or, if such provisions are deemed inapplicable or unenforceable by a court, may cause the Company to incur additional costs associated with such action.

Our Declaration of Trust provides that, to the fullest extent permitted by law, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a duty owed by any trustee, officer or other agent of the Company to the Company or our shareholders, (iii) any action asserting a claim arising pursuant to any provision of Title 12 of the Delaware Code, Delaware statutory or common law, our Declaration of Trust, or (iv) any action asserting a claim governed by the internal affairs doctrine (for the avoidance of doubt, including any claims brought to interpret, apply or enforce the federal securities laws of the United States, including, without limitation, the 1940 Act or the securities or antifraud laws of any international, national, state, provincial, territorial, local or other governmental or regulatory authority, including, in each case, the applicable rules and regulations promulgated thereunder) shall be the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, any other court in the State of Delaware with subject matter jurisdiction. In addition, our Declaration of Trust provides that no shareholder may maintain a derivative action on behalf of the Company unless holders of at least ten percent (10%) of the outstanding shares join in the bringing of such action. These provisions of our Declaration of Trust may make it more difficult for shareholders to bring a derivative action than a company without such provisions.

Our Declaration of Trust also includes an irrevocable waiver of the right to trial by jury in all such claims, suits, actions and proceedings. Any person purchasing or otherwise acquiring any of our Common Shares shall be deemed to have notice of and to have consented to these provisions of our Declaration of Trust. These provisions may limit a shareholder’s ability to bring a claim in a judicial forum or in a manner that it finds favorable for disputes with the Company or the Company’s trustees or officers, which may discourage such lawsuits. Alternatively, if a court were to find the exclusive forum provision or the jury trial waiver provision to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions or in other manners, which could have a material adverse effect on our business, financial condition and results of operations.

Notwithstanding any of the foregoing, neither we nor any of our investors are permitted to waive compliance with any provision of the U.S. federal securities laws and the rules and regulations promulgated thereunder.

 

B.

Risks Related to Our Investments

Our investments in prospective portfolio companies may be risky, and we could lose all or part of our investment.

Our investments in senior secured loans, senior secured bonds, subordinated debt and equity of private U.S. companies, including middle market companies, may be risky and, subject to compliance with our 80% test, there is no limit on the amount of any such investments in which we may invest.

Senior Secured Loans and Senior Secured Bonds. There is a risk that any collateral pledged by portfolio companies in which we have taken a security interest may decrease in value over time or lose its entire value, may be difficult to sell in a timely manner, may be difficult to appraise and may fluctuate in value based upon the success of the business and market conditions, including as a result of the inability of the portfolio company to raise additional capital. To the extent our debt investment is collateralized by the securities of a portfolio company’s subsidiaries, such securities may lose some or all of their value in the event of the bankruptcy or insolvency of the portfolio company. Also, in some circumstances, our security interest may be contractually or structurally subordinated to claims of other creditors. In addition, deterioration in a portfolio company’s financial condition and prospects, including its inability to raise additional capital, may be accompanied by deterioration in the value of the collateral for the debt. Secured debt that is under-collateralized involves a greater risk of loss. In addition, second lien debt is granted a second priority security interest in collateral, which means that any

 

44


Table of Contents

realization of collateral will generally be applied to pay senior secured debt in full before second lien debt is paid. Similarly, investments in “last out” pieces of unitranche loans will be similar to second lien loans in that such investments will be junior in priority to the “first out” piece of the same unitranche loan with respect to payment of principal, interest and other amounts. Consequently, the fact that debt is secured does not guarantee that we will receive principal and interest payments according to the debt’s terms, or at all, or that we will be able to collect on the debt should we be forced to enforce our remedies.

Subordinated Debt. Our subordinated debt investments will generally rank junior in priority of payment to senior debt and will generally be unsecured. This may result in a heightened level of risk and volatility or a loss of principal, which could lead to the loss of the entire investment. These investments may involve additional risks that could adversely affect our investment returns. To the extent interest payments associated with such debt are deferred, such debt may be subject to greater fluctuations in valuations, and such debt could subject us and our shareholders to non-cash income. Because we will not receive any principal repayments prior to the maturity of some of our subordinated debt investments, such investments will be of greater risk than amortizing loans.

Equity Investments. We may make select equity investments. In addition, in connection with our debt investments, we on occasion may receive equity interests such as warrants or options as additional consideration. The equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience.

Non-U.S. Securities. We may invest in non-U.S. securities, which may include securities denominated in U.S. dollars or in non-U.S. currencies, to the extent permitted by the 1940 Act. Because evidence of ownership of such securities usually is held outside the United States, we would be subject to additional risks if we invested in non-U.S. securities, which include possible adverse political and economic developments, seizure or nationalization of foreign deposits and adoption of governmental restrictions, which might adversely affect or restrict the payment of principal and interest on the non-U.S. securities to shareholders located outside the country of the issuer, whether from currency blockage or otherwise. Because non-U.S. securities may be purchased with and payable in foreign currencies, the value of these assets as measured in U.S. dollars may be affected unfavorably by changes in currency rates and exchange control regulations.

Below Investment Grade Risk. In addition, we invest in securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Below investment grade securities, which are often referred to as “junk,” have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. They may also be difficult to value and illiquid. The major risks of below investment grade securities include:

Below investment grade securities may be issued by less creditworthy issuers. Issuers of below investment grade securities may have a larger amount of outstanding debt relative to their assets than issuers of investment grade securities. In the event of an issuer’s bankruptcy, claims of other creditors may have priority over the claims of holders of below investment grade securities, leaving few or no assets available to repay holders of below investment grade securities.

Prices of below investment grade securities are subject to extreme price fluctuations. Adverse changes in an issuer’s industry and general economic conditions may have a greater impact on the prices of below investment grade securities than on other higher-rated fixed-income securities.

Issuers of below investment grade securities may be unable to meet their interest or principal payment obligations because of an economic downturn, specific issuer developments, or the unavailability of additional financing.

Below investment grade securities frequently have redemption features that permit an issuer to repurchase the security from us before it matures. If the issuer redeems below investment grade securities, we may have to invest the proceeds in securities with lower yields and may lose income.

 

45


Table of Contents

Below investment grade securities may be less liquid than higher-rated fixed-income securities, even under normal economic conditions. There are fewer dealers in the below investment grade securities market, and there may be significant differences in the prices quoted by the dealers. Judgment may play a greater role in valuing these securities and we may be unable to sell these securities at an advantageous time or price.

We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting issuer.

The credit rating of a high-yield security does not necessarily address its market value risk. Ratings and market value may change from time to time, positively or negatively, to reflect new developments regarding the issuer.

Mezzanine Loans. Our mezzanine loans generally will be subordinated to senior secured loans on a payment basis, are typically unsecured and rank pari passu with other unsecured creditors. As such, other creditors may rank senior to us in the event of insolvency. This may result in an above average amount of risk and loss of principal. Our mezzanine debt securities generally will have ratings or implied or imputed ratings below investment grade. They will be obligations of corporations, partnerships or other entities that are generally unsecured, typically are subordinated to other obligations of the obligor and generally have greater credit and liquidity risk than is typically associated with investment grade corporate obligations. Accordingly, the risks associated with mezzanine debt securities include a greater possibility that adverse changes in the financial condition of the obligor or in general economic conditions (including a sustained period of rising interest rates or an economic downturn) may adversely affect the obligor’s ability to pay principal and interest on its debt. Many obligors on mezzanine debt securities are highly leveraged, and specific developments affecting such obligors, including reduced cash flow from operations or the inability to refinance debt at maturity, may also adversely affect such obligors’ ability to meet debt service obligations. Mezzanine debt securities are often issued in connection with leveraged acquisitions or recapitalizations, in which the issuers incur a substantially higher amount of indebtedness than the level at which they had previously operated. Default rates for mezzanine debt securities have historically been higher than has been the case for investment grade securities.

Risk Retention Vehicles. We may invest in CLO debt and equity tranches and warehouse investments directly or indirectly through an investment in U.S. and/or European vehicles (“Risk Retention Vehicles”) established for the purpose of satisfying U.S. and/or E.U. regulations that require eligible risk retainers to purchase and retain specified amounts of the credit risk associated with certain CLOs, which vehicles themselves are invested in CLO securities, warehouse investments and/or senior secured obligations. Risk Retention Vehicles will be structured to satisfy the retention requirements by purchasing and retaining the percentage of CLO notes prescribed under the applicable retention requirements (the “Retention Notes”) and will include Risk Retention Vehicles with respect to CLOs managed by other collateral managers, but will not include Risk Retention Vehicles with respect to CLOs for which the Adviser or its affiliates acts as collateral manager.

Indirect investments in CLO equity securities (and in some instances more senior CLO securities) and warehouse investments through entities that have been established to satisfy the U.S. retention requirements and/or the European retention requirements may allow for better economics for us (including through fee rebate arrangements) by creating stronger negotiating positions with CLO managers and underwriting banks who are incentivized to issue CLOs and who require the participation of a Risk Retention Vehicle to enable the CLO securities to be issued. However, Retention Notes differ from other securities of the same ranking since the retention requirements prescribe that such Retention Notes must be held by the relevant risk retainer for a specified period. In the case of European Risk Retention Vehicles, the prescribed holding period is the lifetime of the CLO, and in the case of U.S. Risk Retention Vehicles it is the longer of (x) the period until the CLO has paid down its securities to 33% of their original principal amount, (y) the period until the CLO has sold down its assets to 33% of their original principal amount and (z) two years after the closing of the CLO. In addition, Retention Notes are subject to other restrictions not imposed on other securities of the same ranking; for example, Retention Notes may not be subject to credit risk mitigation, and breach of the retention requirements

 

46


Table of Contents

may result in the imposition of regulatory sanctions or, in the case of the European retention requirements, in claims being brought against the retaining party.

Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.

Our portfolio companies may have, or may be permitted to incur, other debt that ranks equally with, or senior to, the debt in which we invest. By their terms, such debt instruments may entitle the holders to receive payment of interest or principal on or before the dates on which we are entitled to receive payments with respect to the debt instruments in which we invest. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any proceeds. After repaying such senior creditors, such portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of debt ranking equally with debt instruments in which we invest, we would have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.

We may form one or more CLOs, which may subject us to certain structured financing risks.

To finance investments, we may securitize certain of our secured loans or other investments, including through the formation of one or more CLOs, while retaining all or most of the exposure to the performance of these investments. This would involve contributing a pool of assets to a special purpose entity, and selling debt interests in such entity on a non-recourse or limited-recourse basis to purchasers. Depending on how these CLOs are structured, an interest in any such CLO held by us may be considered a “non-qualifying” portfolio investment for purposes of the 1940 Act.

If we create a CLO, we will depend in part on distributions from the CLO’s assets out of its earnings and cash flows to enable us to make distributions to shareholders. The ability of a CLO to make distributions will be subject to various limitations, including the terms and covenants of the debt it issues. Also, a CLO may take actions that delay distributions in order to preserve ratings and to keep the cost of present and future financings lower or the CLO may be obligated to retain cash or other assets to satisfy over-collateralization requirements commonly provided for holders of the CLO’s debt, which could impact our ability to receive distributions from the CLO. If we do not receive cash flow from any such CLO that is necessary to satisfy the annual distribution requirement for maintaining RIC status, and we are unable to obtain cash from other sources necessary to satisfy this requirement, we may not maintain our qualification as a RIC, which would have a material adverse effect on an investment in the shares.

In addition, a decline in the credit quality of loans in a CLO due to poor operating results of the relevant borrowers, declines in the value of loan collateral or increases in defaults, among other things, may force a CLO to sell certain assets at a loss, reducing their earnings and, in turn, cash potentially available for distribution to us for distribution to shareholders. To the extent that any losses are incurred by the CLO in respect of any collateral, such losses will be borne first by us as owner of equity interests in the CLO.

The manager for a CLO that we create may be the Company, the Adviser or an affiliate, and such manager may be entitled to receive compensation for structuring and/or management services. To the extent the Adviser or an affiliate other than the Company serves as manager and the Company is obligated to compensate the Adviser or the affiliate for such services, we, the Adviser or the affiliate will implement offsetting arrangements to assure that we, and indirectly, our shareholders, pay no additional management fees to the Adviser or the affiliate in connection therewith. To the extent we serve as manager, we will waive any right to receive fees for such services from the Company (and indirectly its shareholders) or any affiliate.

 

47


Table of Contents

There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.

If one of our portfolio companies were to file for bankruptcy, depending on the facts and circumstances, including the extent to which we actually provided managerial assistance to that portfolio company, a bankruptcy court might recharacterize our debt investment and subordinate all or a portion of our claim to that of other creditors. We may also be subject to lender liability claims for actions taken by us with respect to a borrower’s business or instances where we exercise control over the borrower.

We generally do not control our portfolio companies.

We do not expect to control most of our portfolio companies, even though we may have board representation or board observation rights, and our debt agreements with such portfolio companies may contain certain restrictive covenants. As a result, we are subject to the risk that a portfolio company in which we invest may make business decisions with which we disagree and the management of such company, as representatives of the holders of the company’s common equity, may take risks or otherwise act in ways that do not serve our interests as debt investors. Due to the lack of liquidity for our investments in non-traded companies, we may not be able to dispose of our interests in our portfolio companies as readily as we would like or at an appropriate valuation. As a result, a portfolio company may make decisions that could decrease the value of our portfolio holdings.

We are exposed to risks associated with changes in interest rates.

We are subject to financial market risks, including changes in interest rates. General interest rate fluctuations may have a substantial negative impact on our investments and investment opportunities and, accordingly, have a material adverse effect on our investment objectives and our rate of return on invested capital. In addition, an increase in interest rates would make it more expensive to use debt for our financing needs.

During periods of falling interest rates, payments under the floating rate debt instruments that we hold would generally decrease, resulting in less revenue to us. Interest rates have recently been at or near historic lows. In the event of a sharply rising interest rate environment, payments under floating rate debt instruments generally would rise and there may be a significant number of issuers of such floating rate debt instruments that would be unable or unwilling to pay such increased interest costs and may otherwise be unable to repay their loans. Investments in floating rate debt instruments may also decline in value in response to rising interest rates if the interest rates of such investments do not rise as much, or as quickly, as market interest rates in general. Similarly, during periods of rising interest rates, fixed-rate debt instruments may decline in value because the fixed rates of interest paid thereunder may be below market interest rates.

A rise in the general level of interest rates can be expected to lead to higher interest rates applicable to our debt investments. Accordingly, an increase in interest rates would make it easier for us to meet or exceed the incentive fee hurdle rate and may result in a substantial increase in the amount of incentive fees payable to the Adviser with respect to pre-incentive fee net investment income.

Changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, may adversely affect our credit arrangements and our collateralized loan obligation transactions

On July 27, 2017, the Financial Conduct Authority (“FCA”) announced that it would phase out the London Interbank Offered Rate (“LIBOR”) as a benchmark by the end of 2021. It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2021. The administrator of LIBOR has announced it will consult on its intention to cease the publication of the one week and two month LIBOR settings immediately following the LIBOR publication on December 31, 2021, and the remaining USD LIBOR settings immediately following the LIBOR publication on June 30, 2023. The U.S. Federal Reserve System (“FRS”), Office of the Comptroller of the Currency, and Federal Deposit Insurance Corporation have issued guidance encouraging

 

48


Table of Contents

market participants to adopt alternatives to LIBOR in new contracts as soon as practicable and no later than December 31, 2021, and the FCA has indicated that market participants should not rely on LIBOR being available after 2021. As an alternative to LIBOR, for example, the FRS, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S.-dollar LIBOR with the Secured Overnight Financing Rate (“SOFR”), a new index calculated by short-term repurchase agreements, backed by Treasury securities. Abandonment of or modifications to LIBOR could have adverse impacts on newly issued financial instruments and our existing financial instruments which reference LIBOR. While some instruments may contemplate a scenario where LIBOR is no longer available by providing for an alternative rate setting methodology, not all instruments may have such provisions and there is significant uncertainty regarding the effectiveness of any such alternative methodologies. Abandonment of or modifications to LIBOR could lead to significant short-term and long-term uncertainty and market instability. If LIBOR ceases to exist, we and our portfolio companies may need to amend or restructure our existing LIBOR-based debt instruments and any related hedging arrangements that extend beyond December 31, 2021, or June 30, 2023, depending on the applicable LIBOR tenor and pending the outcome of the LIBOR administrator’s consultation. Such amendments and restructurings may be difficult, costly and time consuming. In addition, from time to time we invest in floating rate loans and investment securities whose interest rates are indexed to LIBOR. Uncertainty as to the nature of alternative reference rates and as to potential changes or other reforms to LIBOR, or any changes announced with respect to such reforms, may result in a sudden or prolonged increase or decrease in the reported LIBOR rates and the value of LIBOR-based loans and securities, including those of other issuers we or our funds currently own or may in the future own. It remains uncertain how such changes would be implemented and the effects such changes would have on us, issuers of instruments in which we invest and financial markets generally.

The expected discontinuation of LIBOR could have a significant impact on our business. There could be significant operational challenges for the transition away from LIBOR including, but not limited to, amending loan agreements with borrowers on investments that may have not been modified with fallback language and adding effective fallback language to new agreements in the event that LIBOR is discontinued before maturity. Beyond these challenges, we anticipate there may be additional risks to our current processes and information systems that will need to be identified and evaluated by us. Due to the uncertainty of the replacement for LIBOR, the potential effect of any such event on our cost of capital and net investment income cannot yet be determined. In addition, the cessation of LIBOR could:

 

   

Adversely impact the pricing, liquidity, value of, return on and trading for a broad array of financial products, including any LIBOR-linked securities, loans and derivatives that may be included in our assets and liabilities;

 

   

Require extensive changes to documentation that governs or references LIBOR or LIBOR-based products, including, for example, pursuant to time-consuming renegotiations of documentation to modify the terms of investments;

 

   

Result in inquiries or other actions from regulators in respect of our preparation and readiness for the replacement of LIBOR with one or more alternative reference rates;

 

   

Result in disputes, litigation or other actions with portfolio companies, or other counterparties, regarding the interpretation and enforceability of provisions in our LIBOR-based investments, such as fallback language or other related provisions, including, in the case of fallbacks to the alternative reference rates, any economic, legal, operational or other impact resulting from the fundamental differences between LIBOR and the various alternative reference rates;

 

   

Require the transition and/or development of appropriate systems and analytics to effectively transition our risk management processes from LIBOR-based products to those based on one or more alternative reference rates, which may prove challenging given the limited history of the proposed alternative reference rates; and

 

   

Cause us to incur additional costs in relation to any of the above factors.

 

49


Table of Contents

There is no guarantee that a transition from LIBOR to an alternative will not result in financial market disruptions, significant increases in benchmark rates, or borrowing costs to borrowers, any of which could have a material adverse effect on our business, result of operations, financial condition, and unit price. In addition, the transition to a successor rate could potentially cause (i) increased volatility or illiquidity in markets for instruments that currently rely on LIBOR, (ii) a reduction in the value of certain instruments held by the Company, or (iii) reduced effectiveness of related Company transactions, such as hedging. It remains uncertain how such changes would be implemented and the effects such changes would have on the Company, issuers of instruments in which the Company invests and financial markets generally.

Second priority liens on collateral securing debt investments that we make to our portfolio companies may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us.

Certain debt investments that we make to portfolio companies may be secured on a second priority basis by the same collateral securing first priority debt of such companies. The first priority liens on the collateral will secure the portfolio company’s obligations under any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by the company under the agreements governing the loans. The holders of obligations secured by the first priority liens on the collateral will generally control the liquidation of and be entitled to receive proceeds from any realization of the collateral to repay their obligations in full before us. In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from the sale or sales of all of the collateral would be sufficient to satisfy the debt obligations secured by the second priority liens after payment in full of all obligations secured by the first priority liens on the collateral. If such proceeds are not sufficient to repay amounts outstanding under the debt obligations secured by the second priority liens, then we, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against the company’s remaining assets, if any.

We may also make unsecured debt investments in portfolio companies, meaning that such investments will not benefit from any interest in collateral of such companies. Liens on such portfolio companies’ collateral, if any, will secure the portfolio company’s obligations under its outstanding secured debt and may secure certain future debt that is permitted to be incurred by the portfolio company under its secured debt agreements. The holders of obligations secured by such liens will generally control the liquidation of, and be entitled to receive proceeds from, any realization of such collateral to repay their obligations in full before we are so entitled. In addition, the value of such collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from sales of such collateral would be sufficient to satisfy its unsecured debt obligations after payment in full of all secured debt obligations. If such proceeds were not sufficient to repay the outstanding secured debt obligations, then its unsecured claims would rank equally with the unpaid portion of such secured creditors’ claims against the portfolio company’s remaining assets, if any.

The rights we may have with respect to the collateral securing the debt investments we make to our portfolio companies with senior debt outstanding may also be limited pursuant to the terms of one or more intercreditor agreements that we enter into with the holders of senior debt. Under such an intercreditor agreement, at any time that obligations that have the benefit of the first priority liens are outstanding, any of the following actions that may be taken in respect of the collateral will be at the direction of the holders of the obligations secured by the first priority liens: the ability to cause the commencement of enforcement proceedings against the collateral; the ability to control the conduct of such proceedings; the approval of amendments to collateral documents; releases of liens on the collateral; and waivers of past defaults under collateral documents. We may not have the ability to control or direct such actions, even if our rights are adversely affected.

 

50


Table of Contents

Our investments in CLOs may be riskier than a direct investment in the debt or other securities of the underlying companies.

When investing in CLOs, we may invest in any level of a CLO’s subordination chain, including subordinated (lower-rated) tranches and residual interests (the lowest tranche). CLOs are typically highly levered and therefore, the junior debt and equity tranches that we may invest in are subject to a higher risk of total loss and deferral or nonpayment of interest than the more senior tranches to which they are subordinated. In addition, we will generally have the right to receive payments only from the CLOs, and will generally not have direct rights against the underlying borrowers or entities that sponsored the CLOs. Furthermore, the investments we make in CLOs are at times thinly traded or have only a limited trading market. As a result, investments in such CLOs may be characterized as illiquid securities.

Economic recessions or downturns or restrictions on trade could impair our portfolio companies and adversely affect our operating results.

Many of our portfolio companies may be susceptible to economic recessions or downturns and may be unable to repay our debt investments during these periods. Therefore, our non-performing assets are likely to increase, and the value of our portfolio is likely to decrease during these periods. Adverse economic conditions may also decrease the value of any collateral securing our senior secured debt. A prolonged recession may further decrease the value of such collateral and result in losses of value in our portfolio and a decrease in our revenues, net income and NAV. Certain of our portfolio companies may also be impacted by tariffs or other matters affecting international trade. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us on terms we deem acceptable. These events could prevent us from increasing investments and adversely affect our operating results.

A covenant breach or other default by our portfolio companies may adversely affect our operating results.

A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, termination of its loans and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize a portfolio company’s ability to meet its obligations under the debt or equity securities that we hold. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of certain financial covenants, with a defaulting portfolio company. In addition, lenders in certain cases can be subject to lender liability claims for actions taken by them when they become too involved in the borrower’s business or exercise control over a borrower. It is possible that we could become subject to a lender’s liability claim, including as a result of actions taken if we render significant managerial assistance to the borrower. Furthermore, if one of our portfolio companies were to file for bankruptcy protection, a bankruptcy court might re-characterize our debt holding and subordinate all or a portion of our claim to claims of other creditors, even though we may have structured our investment as senior secured debt. The likelihood of such a re-characterization would depend on the facts and circumstances, including the extent to which we provided managerial assistance to that portfolio company.

Our portfolio companies may be highly leveraged.

Some of our portfolio companies may be highly leveraged, which may have adverse consequences to these companies and to us as an investor. These companies may be subject to restrictive financial and operating covenants and the leverage may impair these companies’ ability to finance their future operations and capital needs. As a result, these companies’ flexibility to respond to changing business and economic conditions and to take advantage of business opportunities may be limited. Further, a leveraged company’s income and net assets will tend to increase or decrease at a greater rate than if borrowed money were not used.

A portion of our portfolio may be invested in the life sciences industry.

Investments in the life sciences industry involve a high degree of risk that can result in substantial losses. For example, investing in these assets involves substantial risks, including, but not limited to, the following: the

 

51


Table of Contents

obsolescence of products; erosion of sales due to generic or biosimilar competition; change in government policies and governmental investigations; potential litigation alleging negligence, products liability torts, breaches of warranty, intellectual property infringement and other legal theories; extensive and evolving government regulation; disappointing results from preclinical testing in new indications; indications of safety concerns; insufficient clinical trial data in certain jurisdictions to support the safety or efficacy of the product candidate; difficulty in obtaining all necessary regulatory approvals in each additional proposed jurisdiction; inability to manufacture sufficient quantities of the product for development or commercialization in a timely or cost-effective manner; substantial commercial risk; and the fact that, even after regulatory approval has been obtained, the product and its manufacturer are subject to continual regulatory review, and any discovery of previously unknown problems with the product or the manufacturer may result in restrictions or recalls. Many of these companies may operate as a loss, or with substantial variations in operating results for a period of time after product approval. In addition, many of the companies will need substantial additional capital to support additional research and development activities and may face intense competition from biopharmaceutical companies with greater financial resources, more extensive research and development capabilities and a larger number of qualified managerial and technical personnel.

Biopharmaceutical product sales may also be lower than expected due to pricing pressures, insufficient demand, product competition, failure of clinical trials, lack of market acceptance, obsolescence, loss of patent protection, the impact of the COVID-19 global pandemic or other factors and development-stage product candidates may fail to reach the market. Unexpected side effects, safety or efficacy concerns can arise with respect to a product, leading to product recalls, withdrawals or declining sales of our life sciences portfolio companies.

Our portfolio may be concentrated in a limited number of industries, which may subject us to a risk of significant loss if there is a downturn in a particular industry in which a number of our investments are concentrated.

Our portfolio may be concentrated in a limited number of industries. A downturn in any particular industry in which we are invested could significantly impact the aggregate returns we realize.

If an industry in which we have significant investments suffers from adverse business or economic conditions, as these industries have to varying degrees, a material portion of our investment portfolio could be affected adversely, which, in turn, could adversely affect our financial position and results of operations.

Our investments in the healthcare sector face considerable uncertainties.

Our investments in the healthcare sector are subject to substantial risks. The laws and rules governing the business of healthcare companies and interpretations of those laws and rules are subject to frequent change. Broad latitude is given to the agencies administering those regulations. Existing or future laws and rules could force our portfolio companies engaged in healthcare to change how they do business, restrict revenue, increase costs, change reserve levels and change business practices.

Healthcare companies often must obtain and maintain regulatory approvals to market many of their products, change prices for certain regulated products and consummate some of their acquisitions and divestitures. Delays in obtaining or failing to obtain or maintain these approvals could reduce revenue or increase costs. Policy changes on the local, state and federal level, such as the expansion of the government’s role in the healthcare arena and alternative assessments and tax increases specific to the healthcare industry or healthcare products as part of federal health care reform initiatives, could fundamentally change the dynamics of the healthcare industry.

 

52


Table of Contents

Investing in middle market companies involves a number of significant risks, any one of which could have a material adverse effect on our operating results.

Investments in middle market companies involve the same risks that apply generally to investments in larger, more established companies. However, such investments have more pronounced risks in that middle market companies:

 

   

may have limited financial resources and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing on any guarantees we may have obtained in connection with our investment;

 

   

have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tends to render them more vulnerable to competitors’ actions and changing market conditions, as well as general economic downturns;

 

   

are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us;

 

   

generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position. In addition, our executive officers, trustees and members of the Adviser may, in the ordinary course of business, be named as defendants in litigation arising from our investments in the portfolio companies; and

 

   

may have difficulty accessing the capital markets to meet future capital needs, which may limit their ability to grow or to repay their outstanding indebtedness upon maturity.

We may not realize gains from our equity investments.

Certain investments that we may make could include warrants or other equity securities. In addition, we may make direct equity investments in portfolio companies. Our goal is ultimately to realize gains upon our disposition of such equity interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience. We also may be unable to realize any value if a portfolio company does not have a liquidity event, such as a sale of the business, recapitalization or public offering, which would allow us to sell the underlying equity interests. We intend to seek puts or similar rights to give us the right to sell our equity securities back to the portfolio company issuer. We may be unable to exercise these put rights for the consideration provided in our investment documents if the issuer is in financial distress.

An investment strategy focused primarily on privately-held companies presents certain challenges, including, but not limited to, the lack of available information about these companies.

We intend to invest primarily in privately-held companies. Investments in private companies pose significantly greater risks than investments in public companies. First, private companies have reduced access to the capital markets, resulting in diminished capital resources and the ability to withstand financial distress. Second, the depth and breadth of experience of management in private companies tends to be less than that at public companies, which makes such companies more likely to depend on the management talents and efforts of a smaller group of persons and/or persons with less depth and breadth of experience. Therefore, the decisions made by such management teams and/or the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our investments and, in turn, on us. Third, the investments themselves tend to be less liquid. As such, we may have difficulty exiting an investment promptly or at a desired price prior to maturity or outside of a normal amortization schedule. As a result, the relative

 

53


Table of Contents

lack of liquidity and the potential diminished capital resources of our target portfolio companies may affect our investment returns. Fourth, limited public information generally exists about private companies. Fifth, these companies may not have third-party debt ratings or audited financial statements. We must therefore rely on the ability of the Adviser to obtain adequate information through due diligence to evaluate the creditworthiness and potential returns from investing in these companies. The Adviser would typically assess an investment in a portfolio company based on the Adviser’s estimate of the portfolio company’s earnings and enterprise value, among other things, and these estimates may be based on limited information and may otherwise be inaccurate, causing the Adviser to make different investment decisions than it may have made with more complete information. These private companies and their financial information will not be subject to the Sarbanes-Oxley Act and other rules that govern public companies. If we are unable to uncover all material information about these companies, we may not make a fully informed investment decision, and we may lose money on our investments.

A lack of liquidity in certain of our investments may adversely affect our business.

We generally invest in companies whose securities are not publicly-traded or actively traded on the secondary market, and whose securities are subject to legal and other restrictions on resale or will otherwise be less liquid than publicly-traded securities. The illiquidity of certain of our investments may make it difficult for us to sell these investments when desired. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we had previously recorded these investments. The reduced liquidity of our investments may make it difficult for us to dispose of them at a favorable price, and, as a result, we may suffer losses.

We may not have the funds or ability to make additional investments in our portfolio companies or to fund our unfunded debt commitments.

We may not have the funds or ability to make additional investments in our portfolio companies or to fund our unfunded debt commitments. After our initial investment in a portfolio company, we may be called upon from time to time to provide additional funds to such company or have the opportunity to increase our investment through the exercise of a warrant to purchase shares. There is no assurance that we will make, or will have sufficient funds to make, follow-on investments. Any decisions not to make a follow-on investment or any inability on our part to make such an investment may have a negative impact on a portfolio company in need of such an investment, may result in a missed opportunity for us to increase our participation in a successful operation or may reduce the expected return on the investment.

Our investments may include original issue discount and payment-in-kind instruments.

To the extent that we invest in original issue discount or PIK instruments and the accretion of original issue discount or PIK interest income constitutes a portion of our income, we will be exposed to risks associated with the requirement to include such non-cash income in taxable and accounting income prior to receipt of cash, including the following:

 

   

the higher interest rates on PIK instruments reflect the payment deferral and increased credit risk associated with these instruments, and PIK instruments generally represent a significantly higher credit risk than coupon loans;

 

   

original issue discount and PIK instruments may have unreliable valuations because the accruals require judgments about collectability of the deferred payments and the value of any associated collateral;

 

   

an election to defer PIK interest payments by adding them to the principal on such instruments increases our future investment income which increases our gross assets and, as such, increases the Adviser’s future base management fees which, thus, increases the Adviser’s future income incentive fees at a compounding rate;

 

54


Table of Contents
   

market prices of PIK instruments and other zero coupon instruments are affected to a greater extent by interest rate changes, and may be more volatile than instruments that pay interest periodically in cash. While PIK instruments are usually less volatile than zero coupon debt instruments, PIK instruments are generally more volatile than cash pay securities;

 

   

the deferral of PIK interest on an instrument increases the loan-to-value ratio, which is a measure of the riskiness of a loan, with respect to such instrument;

 

   

even if the conditions for income accrual under U.S. GAAP are satisfied, a borrower could still default when actual payment is due upon the maturity of such loan;

 

   

for accounting purposes, cash distributions to investors representing original issue discount income do not come from paid-in capital, although they may be paid from the offering proceeds. Thus, although a distribution of original issue discount income may come from the cash invested by investors, the 1940 Act does not require that investors be given notice of this fact;

 

   

the required recognition of original issue discount or PIK interest for U.S. federal income tax purposes may have a negative impact on liquidity, as it represents a non-cash component of our investment company taxable income that may require cash distributions to shareholders in order to maintain our ability to be subject to tax as a RIC; and

 

   

original issue discount may create a risk of non-refundable cash payments to the Adviser based on non-cash accruals that may never be realized.

We may enter into a TRS agreement that exposes us to certain risks, including market risk, liquidity risk and other risks similar to those associated with the use of leverage.

A total return swap (“TRS”) is a contract in which one party agrees to make periodic payments to another party based on the change in the market value of the assets underlying the TRS, which may include a specified security, basket of securities or securities indices during a specified period, in return for periodic payments based on a fixed or variable interest rate. A TRS effectively adds leverage to a portfolio by providing investment exposure to a security or market without owning or taking physical custody of such security or investing directly in such market. Because of the unique structure of a TRS, a TRS often offers lower financing costs than are offered through more traditional borrowing arrangements. The Company would typically have to post collateral to cover this potential obligation. To the extent the Company segregates liquid assets with a value equal (on a daily mark-to-market basis) to its obligations under TRS transactions, enters into offsetting transactions or otherwise covers such TRS transactions in accordance with applicable SEC guidance, the leverage incurred through TRS will not be considered a borrowing for purposes of the Company’s overall leverage limitation.

A TRS is subject to market risk, liquidity risk and risk of imperfect correlation between the value of the TRS and the loans underlying the TRS. In addition, we may incur certain costs in connection with the TRS that could in the aggregate be significant. A TRS is also subject to the risk that a counterparty will default on its payment obligations thereunder or that we will not be able to meet our obligations to the counterparty.

We may enter into repurchase agreements or reverse repurchase agreements.

Subject to our investment objectives and policies, we may invest in repurchase agreements as a buyer for investment purposes. Repurchase agreements typically involve the acquisition by us of debt securities from a selling financial institution such as a bank, savings and loan association or broker-dealer. The agreement provides that we will sell the securities back to the institution at a fixed time in the future for the purchase price plus premium (which often reflects the interests). We do not bear the risk of a decline in the value of the underlying security unless the seller defaults under its repurchase obligation. In the event of the bankruptcy or other default of a seller of a repurchase agreement, we could experience both delays in liquidating the underlying securities and losses, including (1) possible decline in the value of the underlying security during the period in

 

55


Table of Contents

which we seek to enforce its rights thereto; (2) possible lack of access to income on the underlying security during this period; and (3) expenses of enforcing its rights. In addition, as described above, the value of the collateral underlying the repurchase agreement will be at least equal to the repurchase price, including any accrued interest earned on the repurchase agreement. In the event of a default or bankruptcy by a selling financial institution, we generally will seek to liquidate such collateral. However, the exercise of our right to liquidate such collateral could involve certain costs or delays and, to the extent that proceeds from any sale upon a default of the obligation to repurchase were less than the repurchase price, we could suffer a loss.

Subject to our investment objectives and policies, we invest in repurchase agreements as a seller, also knowns as a “reverse repurchase agreement.” Our use of reverse repurchase agreements involves many of the same risks involved in our use of leverage, as the proceeds from reverse repurchase agreements generally will be invested in additional portfolio investments. There is a risk that the market value of the securities acquired in the reverse repurchase agreement may decline below the price of the securities that we have sold but remains obligated to repurchase. If the buyer of securities under a reverse repurchase agreement were to file for bankruptcy or experiences insolvency, we may be adversely affected. Also, in entering into reverse repurchase agreements, we would bear the risk of loss to the extent that the proceeds of the reverse repurchase agreement are less than the value of the underlying securities. In addition, due to the interest costs associated with reverse repurchase agreements transactions, our NAV will decline, and, in some cases, we may be worse off than if we had not used such instruments.

We may enter into securities lending agreements.

We may from time to time make secured loans of our marginable securities to brokers, dealers and other financial institutions if our asset coverage, as defined in the 1940 Act, is at or above 150% immediately after each such loan. The risks in lending portfolio securities, as with other extensions of credit, consist of possible delay in recovery of the securities or possible loss of rights in the collateral should the borrower fail financially. However, such loans will be made only to brokers and other financial institutions that are believed by the Adviser to be of high credit standing. Securities loans are made to broker-dealers pursuant to agreements requiring that loans be continuously secured by collateral consisting of U.S. government securities, cash or cash equivalents (e.g., negotiable certificates of deposit, bankers’ acceptances or letters of credit) maintained on a daily mark-to-market basis in an amount at least equal at all times to the market value of the securities lent. If the Company enters into a securities lending arrangement, the Adviser, as part of its responsibilities under the Investment Advisory Agreement, will invest the Company’s cash collateral in accordance with the Company’s investment objectives and strategies. The Company will pay the borrower of the securities a fee based on the amount of the cash collateral posted in connection with the securities lending program. The borrower will pay to the Company, as the lender, an amount equal to any dividends or interest received on the securities lent.

The Company may invest the cash collateral received only in accordance with its investment objectives, subject to the Company’s agreement with the borrower of the securities. In the case of cash collateral, the Company expects to pay a rebate to the borrower. The reinvestment of cash collateral will result in a form of effective leverage for the Company.

Although voting rights or rights to consent with respect to the loaned securities pass to the borrower, the Company, as the lender, will retain the right to call the loans and obtain the return of the securities loaned at any time on reasonable notice, and it will do so in order that the securities may be voted by the Company if the holders of such securities are asked to vote upon or consent to matters materially affecting the investment. The Company may also call such loans in order to sell the securities involved. When engaged in securities lending, the Company’s performance will continue to reflect changes in the value of the securities loaned and will also reflect the receipt of interest through investment of cash collateral by the Company in permissible investments.

 

56


Table of Contents

We may from time to time enter into credit default swaps or other derivative transactions which expose us to certain risks, including credit risk, market risk, liquidity risk and other risks similar to those associated with the use of leverage.

We may from time to time enter into credit default swaps or other derivative transactions that seek to modify or replace the investment performance of a particular reference security or other asset. These transactions are typically individually negotiated, non-standardized agreements between two parties to exchange payments, with payments generally calculated by reference to a notional amount or quantity. Swap contracts and similar derivative contracts are not traded on exchanges; rather, banks and dealers act as principals in these markets. These investments may present risks in excess of those resulting from the referenced security or other asset. Because these transactions are not an acquisition of the referenced security or other asset itself, the investor has no right directly to enforce compliance with the terms of the referenced security or other asset and has no voting or other consensual rights of ownership with respect to the referenced security or other asset. In the event of insolvency of a counterparty, we will be treated as a general creditor of the counterparty and will have no claim of title with respect to the referenced security or other asset.

A credit default swap is a contract in which one party buys or sells protection against a credit event with respect to an issuer, such as an issuer’s failure to make timely payments of interest or principal on its debt obligations, bankruptcy or restructuring during a specified period. Generally, if we sell credit protection using a credit default swap, we will receive fixed payments from the swap counterparty and if a credit event occurs with respect to the applicable issuer, we will pay the swap counterparty par for the issuer’s defaulted debt securities and the swap counterparty will deliver the defaulted debt securities to us. Generally, if we buy credit protection using a credit default swap, we will make fixed payments to the counterparty and if a credit event occurs with respect to the applicable issuer, we will deliver the issuer’s defaulted securities underlying the swap to the swap counterparty and the counterparty will pay us par for the defaulted securities. Alternatively, a credit default swap may be cash settled and the buyer of protection would receive the difference between the par value and the market value of the issuer’s defaulted debt securities from the seller of protection.

Credit default swaps are subject to the credit risk of the underlying issuer. If we are selling credit protection, there is a risk that we will not properly assess the risk of the underlying issuer, a credit event will occur and we will have to pay the counterparty. If we are buying credit protection, there is a risk that we will not properly assess the risk of the underlying issuer, no credit event will occur and we will receive no benefit for the premium paid.

A derivative transaction is also subject to the risk that a counterparty will default on its payment obligations thereunder or that we will not be able to meet our obligations to the counterparty. In some cases, we may post collateral to secure our obligations to the counterparty, and we may be required to post additional collateral upon the occurrence of certain events such as a decrease in the value of the reference security or other asset. In some cases, the counterparty may not collateralize any of its obligations to us. Derivative investments effectively add leverage to a portfolio by providing investment exposure to a security or market without owning or taking physical custody of such security or investing directly in such market. In addition to the risks described above, such arrangements are subject to risks similar to those associated with the use of leverage.

Certain categories of credit default swaps are subject to mandatory clearing, and more categories may be subject to mandatory clearing in the future. The counterparty risk for cleared derivatives is generally lower than for uncleared over-the-counter derivative transactions because generally a clearing organization becomes substituted for each counterparty to a cleared derivative contract and, in effect, guarantees the parties’ performance under the contract as each party to a trade looks only to the clearing house for performance of financial obligations. However, there can be no assurance that a clearing house, or its members, will satisfy the clearing house’s obligations (including, but not limited to, financial obligations and legal obligations to segregate margins collected by the clearing house) to the Company. Counterparty risk with respect to certain exchange-traded and over-the-counter derivatives may be further complicated by recently enacted U.S. financial reform legislation. See “Risk Factors—Risks Related to Debt Financing.”

 

57


Table of Contents

We may acquire various financial instruments for purposes of “hedging” or reducing our risks, which may be costly and ineffective and could reduce our cash available for distribution to our shareholders.

We may seek to hedge against interest rate and currency exchange rate fluctuations and credit risk by using financial instruments such as futures, options, swaps and forward contracts, subject to the requirements of the 1940 Act. These financial instruments may be purchased on exchanges or may be individually negotiated and traded in over-the-counter markets. Use of such financial instruments for hedging purposes may present significant risks, including the risk of loss of the amounts invested. Defaults by the other party to a hedging transaction can result in losses in the hedging transaction. Hedging activities also involve the risk of an imperfect correlation between the hedging instrument and the asset being hedged, which could result in losses both on the hedging transaction and on the instrument being hedged. Use of hedging activities may not prevent significant losses and could increase our losses. Further, hedging transactions may reduce cash available to pay distributions to our shareholders.

Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return on equity.

We are subject to the risk that the investments we make in our portfolio companies may be repaid prior to maturity. When this occurs, we will generally reinvest these proceeds in temporary investments, pending their future investment in new portfolio companies. These temporary investments will typically have substantially lower yields than the debt being prepaid and we could experience significant delays in reinvesting these amounts. Any future investment in a new portfolio company may also be at lower yields than the debt that was repaid. As a result, our results of operations could be materially adversely affected if one or more of our portfolio companies elect to prepay amounts owed to us. Additionally, prepayments, net of prepayment fees, could negatively impact our return on equity.

Technological innovations and industry disruptions may negatively impact us.

Current trends in the market generally have been toward disrupting a traditional approach to an industry with technological innovation, and multiple young companies have been successful where this trend toward disruption in markets and market practices has been critical to their success. In this period of rapid technological and commercial innovation, new businesses and approaches may be created that will compete with the Company and/or its portfolio companies or alter the market practices the Company’s strategy has been designed to function within and depend on for investment return. Any of these new approaches could damage the Company’s investments, significantly disrupt the market in which it operates and subject it to increased competition, which could materially and adversely affect its business, financial condition and results of investments.

We may invest through various joint ventures.

From time to time, we may hold a portion of its investments through partnerships, joint ventures, securitization vehicles or other entities with third-party investors (collectively, “joint ventures”). Joint venture investments involve various risks, including the risk that we will not be able to implement investment decisions or exit strategies because of limitations on our control under applicable agreements with joint venture partners, the risk that a joint venture partner may become bankrupt or may at any time have economic or business interests or goals that are inconsistent with those of the Company, the risk that a joint venture partner may be in a position to take action contrary to the Company’s objectives, the risk of liability based upon the actions of a joint venture partner and the risk of disputes or litigation with such partner and the inability to enforce fully all rights (or the incurrence of additional risk in connection with enforcement of rights) one partner may have against the other, including in connection with foreclosure on partner loans, because of risks arising under state law. In addition, we may, in certain cases, be liable for actions of our joint venture partners. The joint ventures in which we participate may sometimes be allocated investment opportunities that might have otherwise gone entirely to the Company, which may reduce our return on equity. Additionally, our joint venture investments may be held on an unconsolidated basis and at times may be highly leveraged. Such leverage would not count toward the investment limits imposed on us by the 1940 Act.

 

58


Table of Contents

Syndication of Co-Investments

From time to time, we may make an investment with the expectation of offering a portion of its interests therein as a co-investment opportunity to third-party investors. There can be no assurance that we will be successful in syndicating any such co-investment, in whole or in part, that the closing of such co-investment will be consummated in a timely manner, that any syndication will take place on terms and conditions that will be preferable for the Company or that expenses incurred by us with respect to any such syndication will not be substantial. In the event that we are not successful in syndicating any such co-investment, in whole or in part, we may consequently hold a greater concentration and have more exposure in the related investment than initially was intended, which could make the Company more susceptible to fluctuations in value resulting from adverse economic and/or business conditions with respect thereto. Moreover, an investment by us that is not syndicated to co-investors as originally anticipated could significantly reduce our overall investment returns.

New Investment Techniques

The Adviser may employ investment techniques or invest in instruments that it believes will help achieve our investment objectives, whether or not such investment techniques or instruments are specifically defined herein, so long as such investments are consistent with our investment strategies and objectives and subject to applicable law. Such investment techniques or instruments may not be thoroughly tested in the market before being employed and may have operational or theoretical shortcomings which could result in unsuccessful investments and, ultimately, losses to us. In addition, any such investment technique or instrument may be more speculative than other investment techniques or instruments specifically described herein and may involve material and unanticipated risks. There can be no assurance that the Adviser will be successful in implementing any such investment technique. Furthermore, the diversification and type of investments may differ substantially from our prior investments.

 

C.

Risks Related to the Adviser and Its Affiliates

The Adviser and its affiliates, including our officers and some of our trustees, face conflicts of interest caused by compensation arrangements with us and our affiliates, which could result in actions that are not in the best interests of our shareholders.

The Adviser and its affiliates receive substantial fees from us in return for their services, and these fees could influence the advice provided to us. We pay to the Adviser an incentive fee that is based on the performance of our portfolio and an annual base management fee that is based on the average value of our gross assets at the end of the two most recently completed calendar quarters. Because the incentive fee is based on the performance of our portfolio, the Adviser may be incentivized to make investments on our behalf that are riskier or more speculative than would be the case in the absence of such compensation arrangement. The way in which the incentive fee is determined may also encourage the Adviser to use leverage to increase the return on our investments. In addition, because the base management fee is based on the average value of our gross assets at the end of the two most recently completed calendar quarters, which includes any borrowings for investment purposes, the Adviser may be incentivized to recommend the use of leverage or the issuance of additional equity to make additional investments and increase the average value of our gross assets at the end of the two most recently completed calendar quarters. Under certain circumstances, the use of leverage may increase the likelihood of default, which could disfavor our shareholders. Our compensation arrangements could therefore result in our making riskier or more speculative investments, or relying more on leverage to make investments, than would otherwise be the case. This could result in higher investment losses, particularly during cyclical economic downturns. See “— Potential Conflicts of Interest.”

We may be obligated to pay the Adviser incentive compensation even if we incur a net loss due to a decline in the value of our portfolio.

Our Investment Advisory Agreement entitles the Adviser to receive Pre-Incentive Fee Net Investment Income Returns regardless of any capital losses. In such case, we may be required to pay the Adviser incentive

 

59


Table of Contents

compensation for a fiscal quarter even if there is a decline in the value of our portfolio or if we incur a net loss for that quarter.

In addition, any Pre-Incentive Fee Net Investment Income Returns may be computed and paid on income that may include interest that has been accrued but not yet received. If a portfolio company defaults on a loan that is structured to provide accrued interest, it is possible that accrued interest previously included in the calculation of the incentive fee will become uncollectible. The Adviser is not under any obligation to reimburse us for any part of the incentive fee it received that was based on accrued income that we never received as a result of a default by an entity on the obligation that resulted in the accrual of such income, and such circumstances would result in our paying an incentive fee on income we never received.

The incentive fee based on income takes into account our past performance.

Upon consummation of this offering, the Incentive Fee based on income will be determined and paid quarterly in arrears at the end of each calendar quarter by reference to our aggregate net investment income, as adjusted, from the calendar quarter then ending and the Trailing Twelve Quarters. The effect of calculating the incentive fee using reference to the Trailing Twelve Quarters is that, in certain circumstances, an incentive fee based on income will be payable to the Adviser although our net income for such quarter did not exceed the hurdle rate or the incentive fee will be higher than it would have been if calculated based on our performance for the applicable quarter without taking into account the Trailing Twelve Quarters. For example, if we experience a net loss for any particular quarter, an incentive fee may still be paid to the Adviser if such net loss is less than the net loss for the most recent quarter that preceded the Trailing Twelve Quarters. In such circumstances, the Adviser would be entitled to an incentive fee whereas it would not have been entitled to an incentive fee if calculated solely on the basis of our performance for the applicable quarter.

There may be conflicts of interest related to obligations that the Adviser’s senior management and Investment Team have to other clients.

The members of the senior management and Investment Team of the Adviser serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do, or of investment funds managed by the same personnel. In serving in these multiple capacities, they may have obligations to other clients or investors in those entities, the fulfillment of which may not be in our best interests or in the best interest of our shareholders. Our investment objectives may overlap with the investment objectives of such investment funds, accounts or other investment vehicles. In particular, we will rely on the Adviser to manage our day-to-day activities and to implement our investment strategy. The Adviser and certain of its affiliates are presently, and plan in the future to continue to be, involved with activities that are unrelated to us. As a result of these activities, the Adviser, its officers and employees and certain of its affiliates will have conflicts of interest in allocating their time between us and other activities in which they are or may become involved, including the management of its affiliated equipment funds. The Adviser and its officers and employees will devote only as much of its or their time to our business as the Adviser and its officers and employees, in their judgment, determine is reasonably required, which may be substantially less than their full time.

We rely, in part, on the Adviser to assist with identifying investment opportunities and making investment recommendations to the Adviser. The Adviser and its affiliates are not restricted from forming additional investment funds, entering into other investment advisory relationships or engaging in other business activities. These activities could be viewed as creating a conflict of interest in that the time and effort of the members of the Adviser, its affiliates and their officers and employees will not be devoted exclusively to our business, but will be allocated between us and such other business activities of the Adviser and its affiliates in a manner that the Adviser deems necessary and appropriate. See “—Potential Conflicts of Interest.

 

60


Table of Contents

The time and resources that individuals employed by the Adviser devote to us may be diverted and we may face additional competition due to the fact that individuals employed by the Adviser are not prohibited from raising money for or managing other entities that make the same types of investments that we target.

The Adviser and individuals employed by the Adviser are generally not prohibited from raising capital for and managing other investment entities that make the same types of investments as those we target. As a result, the time and resources that these individuals may devote to us may be diverted. In addition, we may compete with any such investment entity for the same investors and investment opportunities. We may participate in certain transactions originated by the Adviser or its affiliates under our exemptive relief from the SEC that allows us to engage in co-investment transactions with the Adviser and its affiliates, subject to certain terms and conditions. However, while the terms of the exemptive relief require that the Adviser will be given the opportunity to cause us to participate in certain transactions originated by affiliates of the Adviser, the Adviser may determine that we not participate in those transactions and for certain other transactions (as set forth in guidelines approved by the Board) the Adviser may not have the opportunity to cause us to participate. Affiliates of the Adviser, whose primary business includes the origination of investments or investing in non-originated assets, engage in investment advisory business with accounts that compete with us. See “—Potential Conflicts of Interest.

Our shares may be purchased by the Adviser or its affiliates.

Affiliates of the Adviser have purchased and the Adviser and its affiliates in the future expect to purchase our shares. The Adviser and its affiliates will not acquire any shares with the intention to resell or re-distribute such shares. The purchase of shares by the Adviser and its affiliates could create certain risks, including, but not limited to, the following:

 

   

the Adviser and its affiliates may have an interest in disposing of our assets at an earlier date so as to recover their investment in our shares; and

 

   

substantial purchases of shares by the Adviser and its affiliates may limit the Adviser’s ability to fulfill any financial obligations that it may have to us or incurred on our behalf.

The Adviser relies on key personnel, the loss of any of whom could impair its ability to successfully manage us.

Our future success depends, to a significant extent, on the continued services of the officers and employees of the Adviser or its affiliates. The loss of services of one or more members of the Adviser’s management team, including members of the Investment Committee, could adversely affect our financial condition, business and results of operations. The Adviser does not have an employment agreement with any of these key personnel and we cannot guarantee that all, or any particular one, will remain affiliated with us and/or the Adviser. Further, we do not intend to separately maintain key person life insurance on any of these individuals.

The compensation we pay to the Adviser will be determined without independent assessment on our behalf, and these terms may be less advantageous to us than if such terms had been the subject of arm’s-length negotiations.

The Investment Advisory Agreement will not be entered into on an arm’s-length basis with an unaffiliated third party. As a result, the form and amount of compensation we pay the Adviser may be less favorable to us than they might have been had an investment advisory agreement been entered into through arm’s-length transactions with an unaffiliated third party.

The Adviser’s influence on conducting our operations gives it the ability to increase its fees, which may reduce the amount of cash flow available for distribution to our shareholders.

The Adviser is paid a base management fee calculated as a percentage of our gross assets and unrelated to net income or any other performance base or measure. The Adviser may advise us to consummate transactions or

 

61


Table of Contents

conduct our operations in a manner that, in the Adviser’s reasonable discretion, is in the best interests of our shareholders. These transactions, however, may increase the amount of fees paid to the Adviser. The Adviser’s ability to influence the base management fee paid to it by us could reduce the amount of cash flow available for distribution to our shareholders.

There may be trademark risk, as we do not own the Blackstone name.

We do not own the Blackstone name, but we are permitted to use it as part of our corporate name pursuant to the Investment Advisory Agreement. Use of the name by other parties or the termination of the Investment Advisory Agreement may harm our business.

 

D.

Risks Related to Business Development Companies

The requirement that we invest a sufficient portion of our assets in Qualifying Assets could preclude us from investing in accordance with our current business strategy; conversely, the failure to invest a sufficient portion of our assets in Qualifying Assets could result in our failure to maintain our status as a BDC.

Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in section 55(a) of the 1940 Act described as “qualifying” assets (“Qualifying Assets”), unless, at the time of and after giving effect to such acquisition, at least 70% of our total assets are Qualifying Assets. Therefore, we may be precluded from investing in what we believe are attractive investments if such investments are not Qualifying Assets. Conversely, if we fail to invest a sufficient portion of our assets in Qualifying Assets, we could lose our status as a BDC, which would have a material adverse effect on our business, financial condition and results of operations. Similarly, these rules could prevent us from making additional investments in existing portfolio companies, which could result in the dilution of our position, or could require us to dispose of investments at an inopportune time to comply with the 1940 Act. If we were forced to sell non-qualifying investments in the portfolio for compliance purposes, the proceeds from such sale could be significantly less than the current value of such investments.

Failure to maintain our status as a BDC would reduce our operating flexibility.

If we do not remain a BDC, we might be regulated as a registered closed-end investment company under the 1940 Act, which would subject us to substantially more regulatory restrictions under the 1940 Act and correspondingly decrease our operating flexibility.

Regulations governing our operation as a BDC and RIC will affect our ability to raise, and the way in which we raise, additional capital or borrow for investment purposes, which may have a negative effect on our growth.

As a result of the annual distribution requirement to qualify as a RIC, we may need to periodically access the capital markets to raise cash to fund new investments. We may issue “senior securities,” as defined under the 1940 Act, including borrowing money from banks or other financial institutions only in amounts such that our asset coverage meets the threshold set forth in the 1940 Act immediately after each such issuance. The 1940 Act currently requires an asset coverage of at least 150% (i.e., the amount of debt may not exceed two-thirds of the value of our assets). Our ability to issue different types of securities is also limited. Compliance with these requirements may unfavorably limit our investment opportunities and reduce our ability in comparison to other companies to profit from favorable spreads between the rates at which we can borrow and the rates at which we can lend. As a BDC, therefore, we intend to continuously issue equity at a rate more frequent than our privately-owned competitors, which may lead to greater shareholder dilution.

For U.S. federal income tax purposes, we are required to recognize taxable income (such as deferred interest that is accrued as original issue discount) in some circumstances in which we do not receive a corresponding

 

62


Table of Contents

payment in cash and to make distributions with respect to such income to maintain our status as a RIC. Under such circumstances, we may have difficulty meeting the annual distribution requirement necessary to maintain RIC tax treatment under the Code. This difficulty in making the required distribution may be amplified to the extent that we are required to pay an incentive fee with respect to such accrued income. As a result, we may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital, or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may not qualify for RIC tax treatment and thus we may become subject to corporate-level income tax.

We expect to borrow for investment purposes. If the value of our assets declines, we may be unable to satisfy the asset coverage test, which would prohibit us from paying distributions and could prevent us from qualifying as a RIC. If we cannot satisfy the asset coverage test, we may be required to sell a portion of our investments and, depending on the nature of our debt financing, repay a portion of our indebtedness at a time when such sales may be disadvantageous.

Under the 1940 Act, we generally are prohibited from issuing or selling our shares at a price per share, after deducting selling commissions and dealer manager fees, that is below our NAV per share, which may be a disadvantage as compared with other public companies. We may, however, sell our shares, or warrants, options or rights to acquire our shares, at a price below the current NAV of our shares if our Board, including our independent trustees, determine that such sale is in our best interests and the best interests of our shareholders, and our shareholders, as well as those shareholders that are not affiliated with us, approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our Board, closely approximates the fair value of such securities.

Our ability to enter into transactions with our affiliates is restricted.

We are prohibited under the 1940 Act from participating in certain transactions with certain of our affiliates (including portfolio companies of Other Clients) without the prior approval of a majority of the independent members of our Board and, in some cases, the SEC. Any person that owns, directly or indirectly, 5% or more of our outstanding voting securities will be our affiliate for purposes of the 1940 Act and generally we will be prohibited from buying or selling any securities from or to such affiliate, absent the prior approval of our Board. However, we may under certain circumstances purchase any such affiliate’s loans or securities in the secondary market, which could create a conflict for the Adviser between our interests and the interests of such affiliate, in that the ability of the Adviser to recommend actions in our best interest may be limited. The 1940 Act also prohibits certain “joint” transactions with certain of our affiliates, which could include investments in the same portfolio company (whether at the same or closely related times), without prior approval of our Board and, in some cases, the SEC. If a person acquires more than 25% of our voting securities, we will be prohibited from buying or selling any security from or to such person or certain of that person’s affiliates, or entering into prohibited joint transactions (including certain co-investments) with such persons, absent the prior approval of the SEC. Similar restrictions limit our ability to transact business with our officers, trustees, investment advisers, sub-advisers or their affiliates. As a result of these restrictions, we may be prohibited from buying or selling any security from or to any fund or any portfolio company of a fund managed by the Adviser, or entering into joint arrangements such as certain co-investments with these companies or funds without the prior approval of the SEC, which may limit the scope of investment opportunities that would otherwise be available to us.

We have obtained exemptive relief from the SEC that allows us to engage in co-investment transactions with the Adviser and its affiliates, subject to certain terms and conditions. However, while the terms of the exemptive relief require that the Adviser will be given the opportunity to cause us to participate in certain transactions originated by affiliates of the Adviser, the Adviser may determine that we not participate in those transactions and for certain other transactions (as set forth in guidelines approved by the Board) the Adviser may not have the opportunity to cause us to participate.

 

63


Table of Contents

We are uncertain of our sources for funding our future capital needs; if we cannot obtain debt or equity financing on acceptable terms, our ability to acquire investments and to expand our operations will be adversely affected.

The net proceeds from the sale of shares will be used for our investment opportunities, operating expenses and for payment of various fees and expenses such as base management fees, incentive fees and other expenses. Any working capital reserves we maintain may not be sufficient for investment purposes, and we may require debt or equity financing to operate. Accordingly, in the event that we develop a need for additional capital in the future for investments or for any other reason, these sources of funding may not be available to us. Consequently, if we cannot obtain debt or equity financing on acceptable terms, our ability to acquire investments and to expand our operations will be adversely affected. As a result, we would be less able to create and maintain a broad portfolio of investments and achieve our investment objectives, which may negatively impact our results of operations and reduce our ability to make distributions to our shareholders.

We are a non-diversified investment company within the meaning of the 1940 Act, and therefore we are not limited with respect to the proportion of our assets that may be invested in securities of a single issuer.

We are classified as a non-diversified investment company within the meaning of the 1940 Act, which means that we are not limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer. Under the 1940 Act, a “diversified” investment company is required to invest at least 75% of the value of its total assets in cash and cash items, government securities, securities of other investment companies and other securities limited in respect of any one issuer to an amount not greater than 5% of the value of the total assets of such company and no more than 10% of the outstanding voting securities of such issuer. As a non-diversified investment company, we are not subject to this requirement. To the extent that we assume large positions in the securities of a small number of issuers, or within a particular industry, our NAV may fluctuate to a greater extent than that of a diversified investment company as a result of changes in the financial condition or the market’s assessment of the issuer. We may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company or to a general downturn in the economy. However, we will be subject to the diversification requirements applicable to RICs under Subchapter M of the Code.

 

E.

Risks Related to Debt Financing

When we use leverage, the potential for loss on amounts invested in us and may increase the risk of investing in us. Leverage may also adversely affect the return on our assets, reduce cash available for distribution to our shareholders, and result in losses.

The use of borrowings, also known as leverage, increases the volatility of investments by magnifying the potential for loss on invested equity capital. When we use leverage to partially finance our investments, through borrowing from banks and other lenders, shareholders will experience increased risks of investing in our shares. If the value of our assets decreases, leveraging would cause NAV to decline more sharply than it otherwise would have had we not leveraged. Similarly, any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to make distributions to our shareholders. In addition, our shareholders will bear the burden of any increase in our expenses as a result of our use of leverage, including interest expenses and any increase in the management or incentive fees payable to the Adviser.

We use and intend to continue to use leverage to finance our investments. The amount of leverage that we employ will depend on the Adviser’s and our Board’ assessment of market and other factors at the time of any proposed borrowing. There can be no assurance that leveraged financing will be available to us on favorable terms or at all. However, to the extent that we use leverage to finance our assets, our financing costs will reduce cash available for distributions to shareholders. Moreover, we may not be able to meet our financing obligations and, to the extent that we cannot, we risk the loss of some or all of our assets to liquidation or sale to satisfy the obligations. In such an event, we may be forced to sell assets at significantly depressed prices due to market conditions or otherwise, which may result in losses.

 

64


Table of Contents

As a BDC, we generally are required to meet a coverage ratio of total assets to total borrowings and other senior securities, which include all of our borrowings and any preferred shares that we may issue in the future, of at least 150%. If this ratio were to fall below 150%, we could not incur additional debt and could be required to sell a portion of our investments to repay some debt when it is disadvantageous to do so. This could have a material adverse effect on our operations and investment activities. Moreover, our ability to make distributions to shareholders may be significantly restricted or we may not be able to make any such distributions whatsoever. The amount of leverage that we will employ will be subject to oversight by our Board, a majority of whom are independent trustees with no material interests in such transactions.

Although leverage has the potential to enhance overall returns that exceed the Company’s cost of funds, they will further diminish returns (or increase losses on capital) to the extent overall returns are less than the Company’s cost of funds. In addition, borrowings and reverse repurchases agreements or similar arrangements in which the Company may engage may be secured by the shareholders’ investments as well as by the Company’s assets and the documentation relating to such transactions may provide that during the continuance of a default under such arrangement, the interests of the holders of shares may be subordinated to the interests of the Company’s lenders or debtholders.

Our credit facilities and unsecured notes impose financial and operating covenants that restrict our business activities, including limitations that could hinder our ability to finance additional loans and investments or to make the distributions required to maintain our status as a regulated investment company under the 1940 Act. A failure to renew our facilities or to add new or replacement debt facilities or issue additional debt securities or other evidences of indebtedness could have a material adverse effect on our business, financial condition, results of operations and liquidity.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition, Liquidity and Capital Resources” for more information regarding our borrowings.

We may default under our credit facilities.

In the event we default under our credit facilities or other borrowings, our business could be adversely affected as we may be forced to sell a portion of our investments quickly and prematurely at what may be disadvantageous prices to us in order to meet our outstanding payment obligations and/or support working capital requirements under such borrowing facility, any of which would have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, following any such default, the agent for the lenders under such borrowing facility could assume control of the disposition of any or all of our assets, including the selection of such assets to be disposed and the timing of such disposition, which would have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our credit ratings may not reflect all risks of an investment in our debt securities.

Our credit ratings are an assessment by third parties of our ability to pay our obligations. Consequently, real or anticipated changes in our credit ratings will generally affect the market value of our debt securities. Our credit ratings, however, may not reflect the potential impact of risks related to market conditions generally or other factors discussed above on the market value of or trading market for the publicly issued debt securities.

The Notes present other risks to common shareholders, including the possibility that such notes could discourage an acquisition of us by a third party.

Certain provisions of the Notes could make it more difficult or more expensive for a third party to acquire us. Upon the occurrence of certain transactions constituting a fundamental change, holders of the Notes will have the right, at their option, to require us to repurchase all of their notes or any portion of the principal amount of such notes in integral multiples of $1,000. These provisions could discourage an acquisition of us by a third party.

 

65


Table of Contents

Failure to refinance our existing Notes could have a material adverse effect on our results of operations and financial position.

The 2023 Notes, 2026 Notes, New 2026 Notes, 2027 Notes and 2028 Notes mature on July 14, 2023, January 15, 2026, September 16, 2026, February 15, 2027 and September 30, 2028, respectively. If we are unable to refinance the Notes or find a new source of borrowing on acceptable terms, we will be required to pay down the amounts outstanding at maturity through one or more of the following: (1) borrowing additional funds under our then current credit facility, (2) issuance of additional common shares or (3) possible liquidation of some or all of our loans and other assets, any of which could have a material adverse effect on our results of operations and financial position.

The trading market or market value of our issued debt securities may fluctuate.

Our issued debt securities may or may not have an established trading market. We cannot assure our noteholders that a trading market for our issued debt securities will ever develop or be maintained if developed. In addition to our creditworthiness, many factors may materially adversely affect the trading market for, and market value of, our issued debt securities. These factors include, but are not limited to, the following:

 

   

the time remaining to the maturity of these debt securities;

 

   

the outstanding principal amount of debt securities with terms identical to these debt securities;

 

   

the ratings assigned by national statistical ratings agencies;

 

   

the general economic environment;

 

   

the supply of debt securities trading in the secondary market, if any;

 

   

the redemption or repayment features, if any, of these debt securities;

 

   

the level, direction and volatility of market interest rates generally; and

 

   

market rates of interest higher or lower than rates borne by the debt securities.

Our noteholders should also be aware that there may be a limited number of buyers when they decide to sell their debt securities. This too may materially adversely affect the market value of the debt securities or the trading market for the debt securities.

Terms relating to redemption may materially adversely affect our noteholders return on any debt securities that we may issue.

If our noteholders’ debt securities are redeemable at our option, we may choose to redeem their debt securities at times when prevailing interest rates are lower than the interest rate paid on their debt securities. In addition, if our noteholders’ debt securities are subject to mandatory redemption, we may be required to redeem their debt securities also at times when prevailing interest rates are lower than the interest rate paid on their debt securities. In this circumstance, our noteholders may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as their debt securities being redeemed.

Provisions in a credit facility may limit our investment discretion.

A credit facility may be backed by all or a portion of our loans and securities on which the lenders will have a security interest. We may pledge up to 100% of our assets and may grant a security interest in all of our assets under the terms of any debt instrument we enter into with lenders. We expect that any security interests we grant will be set forth in a pledge and security agreement and evidenced by the filing of financing statements by the agent for the lenders. In addition, we expect that the custodian for our securities serving as collateral for such loan would include in its electronic systems notices indicating the existence of such security interests and,

 

66


Table of Contents

following notice of occurrence of an event of default, if any, and during its continuance, will only accept transfer instructions with respect to any such securities from the lender or its designee. If we were to default under the terms of any debt instrument, the agent for the applicable lenders would be able to assume control of the timing of disposition of any or all of our assets securing such debt, which would have a material adverse effect on our business, financial condition, results of operations and cash flows. In connection with one or more credit facilities entered into by the Company, distributions to shareholders may be subordinated to payments required in connection with any indebtedness contemplated thereby.

In addition, any security interests and/or negative covenants required by a credit facility may limit our ability to create liens on assets to secure additional debt and may make it difficult for us to restructure or refinance indebtedness at or prior to maturity or obtain additional debt or equity financing. In addition, if our borrowing base under a credit facility were to decrease, we may be required to secure additional assets in an amount sufficient to cure any borrowing base deficiency. In the event that all of our assets are secured at the time of such a borrowing base deficiency, we could be required to repay advances under a credit facility or make deposits to a collection account, either of which could have a material adverse impact on our ability to fund future investments and to make distributions.

In addition, we may be subject to limitations as to how borrowed funds may be used, which may include restrictions on geographic and industry concentrations, loan size, payment frequency and status, average life, collateral interests and investment ratings, as well as regulatory restrictions on leverage which may affect the amount of funding that may be obtained. There may also be certain requirements relating to portfolio performance, including required minimum portfolio yield and limitations on delinquencies and charge-offs, a violation of which could limit further advances and, in some cases, result in an event of default. An event of default under a credit facility could result in an accelerated maturity date for all amounts outstanding thereunder, which could have a material adverse effect on our business and financial condition. This could reduce our liquidity and cash flow and impair our ability to grow our business.

The following table illustrates the effect of leverage on returns from an investment in our shares assuming various annual returns on our portfolio, net of expenses. The calculations in the table below are hypothetical, and actual returns may be higher or lower than those appearing in the table below.

 

     Assumed Return on Our Portfolio (Net of Expenses)  
     -10%     -5%     0%     5%     10%  

Corresponding return to common shareholder(1)

     -23.47     -13.24     -3.02     7.21     17.44

 

(1)

Based on (i) $7.7 billion in total assets as of June 30, 2021, (ii) $3.8 billion in outstanding indebtedness as of June 30, 2021, (iii) $3.7 billion in net assets as of June 30, 2021 and (iv) an annualized average interest rate, including fees (such as fees on undrawn amounts and amortization of financing costs), on our indebtedness, as of June 30, 2021, of 2.98%.

Based on an outstanding indebtedness of $3.8 billion as of June 30, 2021 and the weighted average effective annual interest rate, including fees (such as fees on undrawn amounts and amortization of financing costs), of 2.98% as of that date, our investment portfolio at fair value would have had to produce an annual return of approximately 1.47% to cover annual interest payments on the outstanding debt. For more information on our indebtedness, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition, Liquidity and Capital Resources.

Changes in interest rates may affect our cost of capital and net investment income.

Since we use debt to finance a portion of our investments, our net investment income will depend, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse

 

67


Table of Contents

effect on our net investment income. In periods of rising interest rates when we have debt outstanding, our cost of funds will increase, which could reduce our net investment income. We expect that our long-term fixed-rate investments will be financed primarily with equity and long-term debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. These techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. These activities may limit our ability to participate in the benefits of lower interest rates with respect to the hedged portfolio. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition and results of operations. Also, we have limited experience in entering into hedging transactions, and we will initially have to purchase or develop such expertise.

Segregation and asset coverage requirements may limit our investment discretion.

Certain portfolio management techniques, such as engaging in reverse repurchase agreements or firm commitments may be considered senior securities unless appropriate steps are taken to segregate our assets or otherwise cover its obligations. When employing these techniques, we may segregate liquid assets, enter into offsetting transactions or own positions covering its obligations. To the extent we cover our commitment under such a portfolio management technique, such instrument will not be considered a senior security for the purposes of the 1940 Act. We may cover such transactions using other methods currently or in the future permitted under the 1940 Act, the rules and regulations thereunder, or orders issued by the SEC thereunder. For these purposes, interpretations and guidance provided by the SEC staff may be taken into account when deemed appropriate by us. These segregation and coverage requirements could result in the Company maintaining securities positions that we would otherwise liquidate, segregating assets at a time when it might be disadvantageous to do so or otherwise restricting portfolio management and limit our investment discretion. Such segregation and cover requirements will not limit or offset losses on related positions. In connection with the adoption of Rule 18f-4 of the 1940 Act, the SEC eliminated the asset segregation framework arising from prior SEC guidance for covering positions in derivatives and certain financial instruments. Among other things, Rule 18f-4 limits a company’s derivatives exposure through a value-at-risk test and requires the adoption and implementation of a derivatives risk management program for certain derivatives users. Subject to certain conditions, limited derivatives users (as defined in Rule 18f-4), such as the Company, however, would not be subject to the full requirements of Rule 18f-4. We will comply with the requirements of the new rule on or before the SEC’s compliance date in 2022.

 

F.

Federal Income Tax Risks

We will be subject to corporate-level income tax if we are unable to qualify as a RIC under Subchapter M of the Code or to satisfy RIC distribution requirements.

To obtain and maintain RIC tax treatment under Subchapter M of the Code, we must, among other things, meet annual distribution, income source and quarterly asset diversification requirements. If we do not qualify for or maintain RIC tax treatment for any reason and are subject to corporate income tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions.

We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.

For federal income tax purposes, we may be required to recognize taxable income in circumstances in which we do not receive a corresponding payment in cash. For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount (such as zero coupon securities, debt instruments with PIK interest or, in certain cases, increasing interest rates or debt instruments that were issued with warrants), we must include in income each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. We may also have to include in income other amounts that we have not yet received in cash, such as deferred loan

 

68


Table of Contents

origination fees that are paid after origination of the loan or are paid in non-cash compensation such as warrants or stock. We anticipate that a portion of our income may constitute original issue discount or other income required to be included in taxable income prior to receipt of cash. Furthermore, we have elected to amortize market discount and include such amounts in our taxable income on a current basis, instead of upon disposition of the applicable debt obligation.

Because any original issue discount, market discount or other amounts accrued will be included in our investment company taxable income for the year of the accrual, we may be required to make a distribution to our shareholders in order to satisfy the annual distribution requirement, even though we will not have received any corresponding cash amount. As a result, we may have difficulty meeting the annual distribution requirement necessary to qualify for and maintain RIC tax treatment under Subchapter M of the Code. We may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may not qualify for or maintain RIC tax treatment and thus we may become subject to corporate-level income tax.

Some of our investments may be subject to corporate-level income tax.

We may invest in certain debt and equity investments through taxable subsidiaries and the taxable income of these taxable subsidiaries will be subject to federal and state corporate income taxes. We may invest in certain foreign debt and equity investments which could be subject to foreign taxes (such as income tax, withholding and value added taxes).

Our portfolio investments may present special tax issues.

The Company expects to invest in debt securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Investments in these types of instruments may present special tax issues for the Company. U.S. federal income tax rules are not entirely clear about issues such as when the Company may cease to accrue interest, original issue discount or market discount, when and to what extent deductions may be taken for bad debts or worthless instruments, how payments received on obligations in default should be allocated between principal and income and whether exchanges of debt obligations in a bankruptcy or workout context are taxable. These and other issues will be addressed by the Company, to the extent necessary, to preserve its status as a RIC and to distribute sufficient income to not become subject to U.S. federal income tax.

Legislative or regulatory tax changes could adversely affect investors.

At any time, the federal income tax laws governing RICs or the administrative interpretations of those laws or regulations may be amended. Any of those new laws, regulations or interpretations may take effect retroactively and could adversely affect the taxation of us or our shareholders. Therefore, changes in tax laws, regulations or administrative interpretations or any amendments thereto could diminish the value of an investment in our shares or the value or the resale potential of our investments.

 

G.

Risks Related to an Investment in the Common Shares

There are material limitations with making available preliminary estimates of our financial results for the quarter ended September 30, 2021 prior to the completion of our and our auditor’s financial review procedures for such period.

The preliminary financial estimates contained in “Prospectus Summary—Preliminary Estimates of Results as of September 30, 2021” are not a comprehensive statement of our financial results for the quarter ended September 30, 2021 and have not been audited, reviewed, compiled, examined or subject to any procedures by

 

69


Table of Contents

Deloitte & Touche LLP, our independent registered public accounting firm, or any other independent accountants. Our consolidated financial statements for the quarter ended September 30, 2021 will not be available until after this offering is completed and, consequently, will not be available to you prior to making an investment decision. Our actual financial results for the quarter ended September 30, 2021 could differ materially from the preliminary financial estimates we have provided as a result of the completion of our financial closing procedures and related internal controls over financial reporting, final adjustments, execution of our disclosures and procedures and other developments arising between now and the time that our financial results for the quarter ended September 30, 2021 are finalized. The preliminary financial data included herein has been prepared by, and is the responsibility of, management. Deloitte & Touche LLP has not audited, reviewed, compiled, examined or performed any procedures with respect to such preliminary estimates, and, accordingly, does not express an opinion or any other form of assurance with respect thereto. Our final results of operations will include financial information not included in this prospectus, including, for example, a schedule of investments and industry information on our portfolio.

Prior to this offering, there has been no public market for our common shares, and we cannot assure you that a market for our common shares will develop or that the market price of common shares will not decline following the offering. Our common share price may be volatile and may fluctuate substantially.

We have applied to list our common shares on The New York Stock Exchange under the symbol “BXSL.” We cannot assure you that a trading market will develop for our common shares after this offering or, if one develops, that the trading market can be sustained. In addition, we cannot predict the prices at which our common shares will trade. The offering price for our common shares will be determined through our negotiations with the underwriters and may not bear any relationship to the market price at which it may trade after this offering. Shares of companies offered in an initial public offering often trade at a discount to the initial offering price due to underwriting discounts and commissions and related offering expenses. Also, shares of closed-end investment companies, including BDCs, frequently trade at a discount from their net asset value and our shares may also be discounted in the market. This characteristic of closed-end investment companies is separate and distinct from the risk that our net asset value per share may decline. We cannot predict whether our common shares will trade at, above or below net asset value. The risk of loss associated with this characteristic of closed-end management investment companies may be greater for investors expecting to sell common shares purchased in the offering soon after the offering. In addition, if our common shares trades below its net asset value, we will generally not be able to sell additional common shares to the public at its market price without first obtaining the approval of a majority of our shareholders (including a majority of our unaffiliated shareholders) and our independent directors for such issuance.

The market price and liquidity of the market for our common shares may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include:

 

   

significant volatility in the market price and trading volume of securities of BDCs or other companies in the sector in which we operate, which are not necessarily related to the operating performance of these companies;

 

   

changes in regulatory policies or tax guidelines, particularly with respect to RICs or BDCs;

 

   

loss of RIC status;

 

   

changes in earnings or variations in operating results;

 

   

changes in the value of our portfolio of investments;

 

   

any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts;

 

   

departure of key personnel from our Adviser;

 

70


Table of Contents
   

operating performance of companies comparable to us;

 

   

general economic trends and other external factors; and

 

   

loss of a major funding source.

A shareholder’s interest in us will be diluted if we issue additional shares, which could reduce the overall value of an investment in us.

Our shareholders do not have preemptive rights to purchase any shares we issue in the future. Our charter authorizes us to issue an unlimited number of shares. Our Board may elect to sell additional shares in the future or issue equity interests in private offerings. To the extent we issue additional equity interests at or below net asset value, your percentage ownership interest in us may be diluted. In addition, depending upon the terms and pricing of any additional offerings and the value of our investments, you may also experience dilution in the book value and fair value of your shares.

Under the 1940 Act, we generally are prohibited from issuing or selling our common shares at a price below net asset value per share, which may be a disadvantage as compared with certain public companies. We may, however, sell our common shares, or warrants, options, or rights to acquire our common shares, at a price below the current net asset value of our common shares if our Board and independent directors determine that such sale is in our best interests and the best interests of our shareholders, and our shareholders, including a majority of those shareholders that are not affiliated with us, approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our Board, closely approximates the fair value of such securities (less any distributing commission or discount). If we raise additional funds by issuing common shares or senior securities convertible into, or exchangeable for, our common shares, then the percentage ownership of our shareholders at that time will decrease and you will experience dilution.

Sales of substantial amounts of our common shares in the public market may have an adverse effect on the market price of our common shares.

Assuming we issue 7,650,000 common shares in this offering, we will have 166,039,951 common shares outstanding (or 167,187,451 common shares if the underwriters’ exercise their option to purchase additional common shares). The common shares sold in the offering will be freely tradable without restriction or limitation under the Securities Act.

Any shares purchased in this offering or currently owned by our affiliates, as defined in the Securities Act, will be subject to the public information, manner of sale and volume limitations of Rule 144 under the Securities Act. The remaining common shares that will be outstanding upon the completion of this offering will be “restricted securities” under the meaning of Rule 144 promulgated under the Securities Act and may only be sold if such sale is registered under the Securities Act or exempt from registration, including the exemption under Rule 144. See “Shares Eligible for Future Sale.”

In addition, without the consent of the Adviser:

 

   

prior to the later of 60 days following an Exchange Listing and January 3, 2022, a shareholder is not permitted to transfer (whether by sale, gift, merger, by operation of law or otherwise), exchange, assign, pledge, hypothecate or otherwise dispose of or encumber any common share held by such shareholder prior to the date of an Exchange Listing (and any DRIP shares received with respect to such common shares);

 

   

prior to the later of 120 days following an Exchange Listing and March 1, 2022, a shareholder is not permitted to transfer (whether by sale, gift, merger, by operation of law or otherwise), exchange, assign, pledge, hypothecate or otherwise dispose of or encumber 90% of the common shares held by such shareholder prior to the date of an Exchange Listing (and any DRIP shares received with respect to such common shares);

 

71


Table of Contents
   

prior to the later of 180 days following an Exchange Listing and May 1, 2022, a shareholder is not permitted to transfer (whether by sale, gift, merger, by operation of law or otherwise), exchange, assign, pledge, hypothecate or otherwise dispose of or encumber 75% of the common shares held by such shareholder prior to the date of an Exchange Listing (and any DRIP shares received with respect to such common shares); and

 

   

prior to the later of 240 days following an Exchange Listing and July 1, 2022, a shareholder is not permitted to transfer (whether by sale, gift, merger, by operation of law or otherwise), exchange, assign, pledge, hypothecate or otherwise dispose of or encumber 50% of the common shares held by such shareholder prior to the date of an Exchange Listing (and any DRIP shares received with respect to such common shares).

This means that, as a result of these transfer restrictions, without the consent of the Adviser, a shareholder who owned 100 common shares on the date of an Exchange Listing could not sell any of such shares until the later of 60 days following an Exchange Listing and January 3, 2022; prior to the later of 120 days following an Exchange Listing and March 1, 2022, such shareholder could only sell up to 10 of such shares; prior to the later of 180 days following an Exchange Listing and May 1, 2022 , such shareholder could only sell up to 25 of such shares; prior to the later of 240 days following an Exchange Listing and July 1, 2022, such shareholder could only sell up to 50 of such shares; and after the later of 240 days following an Exchange Listing and July 1, 2022, such shareholder could sell all of such shares. Consent by the Adviser to waive any of the foregoing transfer restrictions is subject to the consent of the representatives on behalf of the underwriters. See “Description of Our Shares.” In addition, our trustees have agreed for a period of 180 days after the date of this prospectus and our executive officers who are not trustees have agreed for a period of 180 days after the date of this prospectus, not to transfer (whether by sale, gift, merger, by operation of law or otherwise) their common shares without the prior written consent of the representatives on behalf of the underwriters, subject to certain exceptions. See “Underwriting.”

Following this offering and the expiration of applicable lock-up periods, subject to applicable securities laws, sales of substantial amounts of our common shares, or the perception that such sales could occur, could adversely affect the prevailing market prices for our common shares. If this occurs, it could impair our ability to raise additional capital through the sale of equity securities should we desire to do so. We cannot predict what effect, if any, future sales of securities, or the availability of securities for future sales, will have on the market price of our common shares prevailing from time to time.

We may use proceeds of this offering in a way with which you may not agree.

We will have significant flexibility in applying the proceeds of this offering and may use the net proceeds from this offering in ways with which you may not agree, or for purposes other than those contemplated at the time of this offering. We will also pay operating expenses, and may pay other expenses such as due diligence expenses of potential new investments, from the net proceeds of this offering. Our ability to achieve our investment objectives may be limited to the extent that net proceeds of this offering, pending full investment, are used to pay expenses rather than to make investments.

We may have difficulty paying distributions and the tax character of any distributions is uncertain.

We generally intend to distribute substantially all of our available earnings annually by paying distributions on a quarterly basis, as determined by the Board in its discretion. We cannot assure shareholders that we will achieve investment results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions. Our ability to pay distributions might be adversely affected by the impact of one or more of the risk factors described in this prospectus. Due to the asset coverage test applicable to us under the 1940 Act as a BDC, we may be limited in our ability to make distributions. In addition, if we enter into a credit facility or any other borrowing facility, for so long as such facility is outstanding, we anticipate that we may be required by its terms to use all payments of interest and principal that we receive from our current investments as

 

72


Table of Contents

well as any proceeds received from the sale of our current investments to repay amounts outstanding thereunder, which could adversely affect our ability to make distributions.

Furthermore, the tax treatment and characterization of our distributions may vary significantly from time to time due to the nature of our investments. The ultimate tax characterization of our distributions made during a taxable year may not finally be determined until after the end of that taxable year. We may make distributions during a taxable year that exceed our investment company taxable income and net capital gains for that taxable year. In such a situation, the amount by which our total distributions exceed investment company taxable income and net capital gains generally would be treated as a return of capital up to the amount of a shareholder’s tax basis in the shares, with any amounts exceeding such tax basis treated as a gain from the sale or exchange of such shares. A return of capital generally is a return of a shareholder’s investment rather than a return of earnings or gains derived from our investment activities. Moreover, we may pay all or a substantial portion of our distributions from the proceeds of the sale of our shares or from borrowings in anticipation of future cash flow, which could constitute a return of shareholders’ capital and will lower such shareholders’ tax basis in our shares, which may result in increased tax liability to shareholders when they sell such shares.

Distributions on our common shares may exceed our taxable earnings and profits. Therefore, portions of the distributions that we pay may represent a return of capital to you. A return of capital is a return of a portion of your original investment in common shares. As a result, a return of capital will (i) lower your tax basis in your shares and thereby increase the amount of capital gain (or decrease the amount of capital loss) realized upon a subsequent sale or redemption of such shares, and (ii) reduce the amount of funds we have for investment in portfolio companies. We have not established any limit on the extent to which we may use offering proceeds to fund distributions.

We may pay our distributions from offering proceeds in anticipation of future cash flow, which may constitute a return of your capital and will lower your tax basis in your shares, thereby increasing the amount of capital gain (or decreasing the amount of capital loss) realized upon a subsequent sale or redemption of such shares, even if such shares have not increased in value or have, in fact, lost value.

Shareholders will experience dilution in their ownership percentage if they do not participate in our dividend reinvestment plan.

All distributions declared in cash payable to shareholders that are participants in our dividend reinvestment plan will generally be automatically reinvested in common shares if the investor opts in to the plan. As a result, shareholders that do not elect to participate in our dividend reinvestment plan may experience dilution over time.

Shareholders may experience dilution in the net asset value of their shares if they do not participate in our dividend reinvestment plan and if our shares are trading at a discount to net asset value.

All distributions declared in cash payable to shareholders that are participants in our dividend reinvestment plan will generally be automatically reinvested in common shares if the investor opts in to the plan. As a result, shareholders who do not elect to participate in our dividend reinvestment plan may experience accretion to the net asset value of their shares if our shares are trading at a premium to net asset value and dilution if our shares are trading at a discount to net asset value. The level of accretion or discount would depend on various factors, including the proportion of our shareholders who participate in the plan, the level of premium or discount at which our shares are trading and the amount of the distribution payable to shareholders.

Purchases of our common shares by us under the Company 10b5-1 Plan may result in the price of our common shares being higher than the price that otherwise might exist in the open market.

On October 18, 2021, our Board approved the Company 10b5-1 Plan which we intend to enter into. Under the Company 10b5-1 Plan, Morgan Stanley & Co. LLC, as agent for the Company, will acquire up to the greater of

 

73


Table of Contents

$250 million and the net proceeds from this offering in the aggregate of our common shares during the period beginning on the later of (i) 30 calendar days following the date of this prospectus and (ii) four full calendar weeks following the completion of the offering and will terminate upon the earliest to occur of (i) 12-months (tolled for periods during which the Company 10b5-1 Plan is suspended), (ii) the end of the trading day on which the aggregate purchase price for all shares purchased under the Company 10b5-1 Plan equals the greater of $250 million and the net proceeds from this offering and (iii) the occurrence of certain other events described in the Company 10b5-1 Plan.

Whether purchases will be made under the Company 10b5-1 Plan and how much will be purchased at any time is uncertain, dependent on prevailing market prices and trading volumes, all of which we cannot predict. These activities may have the effect of maintaining the market price of our common shares or retarding a decline in the market price of the common shares, and, as a result, the price of our common shares may be higher than the price that otherwise might exist in the open market.

Purchases of our common shares by us under the Company 10b5-1 Plan may result in dilution to our net asset value per share.

The Company 10b5-1 Plan is intended to require Morgan Stanley & Co. LLC, as our agent, to repurchase our common shares on our behalf when the market price per share is below the most recently reported net asset value per share (including any updates, corrections or adjustments publicly announced by us to any previously announced net asset value per share). Under the Company 10b5-1 Plan, the agent will increase the volume of purchases made as the price of our common shares declines, subject to volume restrictions.

Because purchases under the Company 10b5-1 Plan will be made beginning at any price below our most recently reported net asset value per share, if our net asset value per share as of the end of a quarter is lower than the net asset per share as of the end of the prior quarter, purchases under the Company 10b5-1 Plan during the period from the end of a quarter to the time of our earnings release announcing the new net asset value per share for that quarter may result in dilution to our net asset value per share. This dilution would occur because we would repurchase shares under the Company 10b5-1 Plan at a price above the net asset value per share as of the end of the most recent quarter end, which would cause a proportionately smaller increase in our shareholders’ interest in our earnings and assets and their voting interest in us than the decrease in our assets resulting from such repurchase. As a result of any such dilution, our market price per share may decline. The actual dilutive effect will depend on the number of common shares that could be so repurchased, the price and the timing of any repurchases under the Company 10b5-1 Plan.

If we issue preferred shares or convertible debt securities, the net asset value of our common shares may become more volatile.

We cannot assure you that the issuance of preferred shares and/or convertible debt securities would result in a higher yield or return to the holders of our common shares. The issuance of preferred shares or convertible debt would likely cause the net asset value of our common shares to become more volatile. If the dividend rate on the preferred shares, or the interest rate on the convertible debt securities, were to approach the net rate of return on our investment portfolio, the benefit of such leverage to the holders of our common shares would be reduced. If the dividend rate on the preferred shares, or the interest rate on the convertible debt securities, were to exceed the net rate of return on our portfolio, the use of leverage would result in a lower rate of return to the holders of common shares than if we had not issued the preferred shares or convertible debt securities. Any decline in the net asset value of our investment would be borne entirely by the holders of our common shares. Therefore, if the market value of our portfolio were to decline, the leverage would result in a greater decrease in net asset value to the holders of our common shares than if we were not leveraged through the issuance of preferred shares or debt securities. This decline in net asset value would also tend to cause a greater decline in the market price, if any, for our common shares.

 

74


Table of Contents

There is also a risk that, in the event of a sharp decline in the value of our net assets, we would be in danger of failing to maintain required asset coverage ratios, which may be required by the preferred shares or convertible debt, or our current investment income might not be sufficient to meet the dividend requirements on the preferred shares or the interest payments on the debt securities. In order to counteract such an event, we might need to liquidate investments in order to fund the redemption of some or all of the preferred shares or convertible debt. In addition, we would pay (and the holders of our common shares would bear) all costs and expenses relating to the issuance and ongoing maintenance of the preferred shares, debt securities, convertible debt, or any combination of these securities. Holders of preferred shares or convertible debt may have different interests than holders of common shares and may at times have disproportionate influence over our affairs.

Holders of any preferred shares that we may issue will have the right to elect certain members of our Board and have class voting rights on certain matters.

The 1940 Act requires that holders of preferred shares must be entitled as a class to elect two trustees at all times and to elect a majority of the trustees if dividends on such preferred shares are in arrears by two years or more, until such arrearage is eliminated. In addition, certain matters under the 1940 Act require the separate vote of the holders of any issued and outstanding preferred shares, including changes in fundamental investment restrictions and conversion to open-end status and, accordingly, preferred shareholders could veto any such changes. Restrictions imposed on the declarations and payment of dividends or other distributions to the holders of our common shares and preferred shares, both by the 1940 Act and by requirements imposed by rating agencies, might impair our ability to maintain our tax treatment as a RIC for U.S. federal income tax purposes.

No shareholder approval is required for certain mergers.

Our Board may undertake to approve mergers between us and certain other funds or vehicles. Subject to the requirements of the 1940 Act and, after a quotation or listing of the Company’s securities on a national securities exchange (including through this initial public offering) or a sale of all or substantially all of its assets to, or a merger or other liquidity transaction with, an entity in which the Company’s shareholders receive shares of a publicly-traded company which continues to be managed by the Adviser or an affiliate thereof (“Exchange Listing”), the applicable stock exchange rules, such mergers will not require shareholder approval so shareholders will not be given an opportunity to vote on these matters unless such mergers are reasonably anticipated to result in a material dilution of the NAV per Share of the Company. These mergers may involve funds managed by affiliates of Blackstone Credit. The Board may also convert the form and/or jurisdiction of organization, including to take advantage of laws that are more favorable to maintaining board control in the face of dissident shareholders.

Investing in our shares involves a high degree of risk.

The investments we make in accordance with our investment objectives may result in a higher amount of risk than alternative investment options and volatility or loss of principal. Our investments in portfolio companies may be highly speculative and aggressive and, therefore, an investment in our shares may not be suitable for someone with lower risk tolerance.

Certain provisions of our charter and actions of our Board could deter takeover attempts and have an adverse impact on the value of common shares.

Our charter, as well as certain statutory and regulatory requirements, contain certain provisions that may have the effect of discouraging a third party from attempting to acquire us. Our Board may, without shareholder action, authorize the issuance of shares in one or more classes or series, including preferred shares. These anti-takeover provisions may inhibit a change of control in circumstances that could give the holders of common shares the opportunity to realize a premium over the value of common shares.

 

75


Table of Contents

POTENTIAL CONFLICTS OF INTEREST

The Adviser, Blackstone Credit, Blackstone and their respective affiliates will be subject to certain conflicts of interest with respect to the services the Adviser and the Administrator provide to us. These conflicts will arise primarily from the involvement of Blackstone Credit, Blackstone and their respective affiliates, or collectively (the “Firm”), in other activities that may conflict with our activities. You should be aware that individual conflicts will not necessarily be resolved in favor of your interest. The foregoing list of conflicts does not purport to be a complete enumeration or explanation of the actual and potential conflicts involved in an investment in the Company.

Performance Based Compensation and Management Fees. The existence of the incentive fees payable to Blackstone Credit may create a greater incentive for Blackstone Credit to make more speculative investments on behalf of the Company, or to time the purchase or sale of investments in a manner motivated by the personal interests of Blackstone Credit and/or Blackstone personnel. However, the fact that the hurdle rate for the incentive fee based on income is calculated on an aggregate basis each quarter and that realized and unrealized losses are netted against realized gains for the incentive fee based on capital gains should reduce the incentives for the Adviser to make more speculative investments or otherwise time the purchase or sale of investments.

In addition, the manner in which the Adviser’s entitlement to incentive fees is determined may result in a conflict between its interests and the interests of shareholders with respect to the sequence and timing of disposals of investments, as the Adviser may want to dispose of lower yielding investments in favor of higher yielding ones. With respect to the Adviser’s entitlement to incentive fees on capital gains, the Adviser may be incentivized to realize capital gains prior to a year end if such gains, net of realized and unrealized losses, would result in an incentive fee on capital gains.

The Firm’s Policies and Procedures. Because the Firm has many different asset management and advisory businesses, it is subject to a number of actual and potential conflicts of interest, greater regulatory oversight and more legal and contractual restrictions than that to which it would be subject if it had just one line of business. Certain policies and procedures implemented by the Firm to mitigate potential conflicts of interest and address certain regulatory requirements and contractual restrictions, such as the Firm’s information wall policy, will from time to time reduce the synergies and collaboration across the Firm’s various businesses that the Company expects to draw on for purposes of identifying, pursuing and managing attractive investment opportunities. For example, the Firm will come into possession of material non-public information with respect to companies, including companies in which the Company has investments or is considering making investments. The information, which could be of benefit to the Company, is likely to be restricted to those other businesses and otherwise be unavailable to the Company. It is also possible that the Company could be restricted from trading despite the fact that the Company did not receive such information. The inability to buy or sell securities in such circumstances could materially adversely affect the investment results of the Company, including but not limited to a material loss with respect to an individual investment or differing results than those obtained by Other Clients with respect to the same investment. Additionally, the Firm may restrict or otherwise limit the Company and/or its portfolio companies from entering into agreements with, or related to, companies that either are advisory clients of the Firm or in which any fund of the Firm has invested or has considered making an investment. The Firm will from time to time restrict or otherwise limit the ability of the Company and/or its portfolio companies to make investments in or otherwise engage in businesses or activities competitive with companies of other advisory clients of the Firm, either as a result of contractual restrictions or otherwise. Furthermore, there will be circumstances in which affiliates of the Firm (including Other Clients) may refrain from taking certain confidential information in order to avoid trading restrictions. Finally, the Firm has and will enter into one or more strategic relationships in certain regions or with respect to certain types of investments that, although possibly intended to provide greater opportunities for the Company, may require the Company to share such opportunities or otherwise limit the amount of an opportunity the Company can otherwise take. There can be no assurance that additional restrictions will not be imposed that would further limit the ability of the Firm to share information internally.

 

76


Table of Contents

Blackstone Credit Advantage. Blackstone Credit Advantage is a global platform within Blackstone Credit’s Performing Credit team. The Credit Advantage team makes use of Blackstone’s centralized Portfolio Operations Group (the “Portfolio Operations Group”) and seeks to provide access to a range of cost-saving, revenue-generating and best-practice sharing opportunities for Blackstone Credit portfolio companies. The Portfolio Operations Group is organized into seven functional areas, across geographic regions and industry verticals:

Procurement: Blackstone’s Group Purchasing program harnesses spending from portfolio companies across more than 75 categories, including IT hardware and software, office supplies, shipping, energy and telecommunications.

Healthcare Cost Containment: Blackstone’s Equity Healthcare team partners with portfolio companies to optimize the strategy and value of healthcare spending by reducing cost and improving the quality of healthcare services received by employees and their dependents. Equity Healthcare is one of the largest private sector purchasers of healthcare services in the United States and has helped drive cumulative healthcare cost savings to portfolio companies and strengthened portfolio companies’ ability to attract and retain talent.

Lean Process: The lean process team seeks to drive transformational improvements focused on material and information flows by reducing waste and non-value add activities across manufacturing functions. It develops prescriptive solutions for portfolio companies and aligns with senior leadership to support tailored strategies and guide management teams in executing and sustaining improved workflow processes.

Leadership and Talent: The Portfolio Operations Group employs the following strategies to optimize leadership and organizational performance: (i) delivering fit-for-purpose resources to portfolio companies, which include non-executive chairpersons, board members, advisors, and operating specialists, (ii) strengthening company teams and organizational practices through assisting with restructuring, integrations and growth actions, and (iii) convening conferences for portfolio company executives to share best practices and improve alignment to the Firm.

Sustainability: By improving the operation and maintenance of mechanical systems, the Portfolio Operations Group seeks to reduce energy spend while improving productivity, safety, and environmental performance.

Technology / BPO: Blackstone’s Technology / BPO team helps the portfolio management teams recruit/ upgrade their information technology leadership teams; import contemporary operating systems and application software to address their respective business priorities; leverage portfolio investments in technology companies to promote and serve the overall portfolio interests; and evaluate and negotiate preferred partnerships with digital/technology suppliers, advisors, and consultants from around the world.

Data Science: The Firm has invested in a team of data scientists and engineers to help the portfolio companies realize operational efficiencies and drive new revenue through data and analytics. This team focuses on (i) building predictive models to enhance decision making; (ii) leveraging big data within operations; (iii) data visualization to democratize access to information; and (iv) data monetization.

Members of Blackstone’s Portfolio Operations Group, who are Blackstone employees, are permitted to provide services to the Company’s portfolio companies, including without limitation those related to the functional areas described above and other similar management consulting, operational and financial matters and are permitted to participate in the Firm co-investment rights. There can be no assurance that members of the Portfolio Operations Group will be able to provide their services to portfolio companies and/or that any individuals within the Portfolio Operations Group will remain employed by Blackstone. The level of involvement and role of Blackstone’s Portfolio Operations Group within each part of Blackstone with respect to the Company or any of the Company’s portfolio companies may vary, including having no involvement or role at all. In addition, the Portfolio Operations Group will provide services to the Company or the Company’s portfolio

 

77


Table of Contents

companies as described in more detail in “—Firm Affiliated Service Providers”, including facilitation of arrangements for obligors relating to group procurement (such as the group purchasing organization) and other operational, administrative or management related matters from third parties or Firm affiliates, and other similar operational initiatives. These services may result in commissions or similar payments, including related to a portion of the savings achieved by the portfolio companies, and in each case payments made to the Firm in connection therewith will not offset the management fee. See also “—Group Procurement; Discounts” and “—Firm Affiliated Service Providers” for further information regarding such programs.

Broad and Wide-Ranging Activities. The Firm engages in a broad spectrum of activities. In the ordinary course of its business activities, the Firm will engage in activities where the interests of certain divisions of the Firm or the interests of its clients will conflict with the interests of the shareholders in the Company. Other present and future activities of the Firm will give rise to additional conflicts of interest. In the event that a conflict of interest arises, the Adviser will attempt to resolve such conflict in a fair and equitable manner. Subject to applicable law, including the 1940 Act, and the Board of Trustees’ oversight, the Adviser will have the power to resolve, or consent to the resolution of, conflicts of interest on behalf of the Company. Investors should be aware that conflicts will not necessarily be resolved in favor of the Company’s interests. In addition, the Adviser may in certain situations choose to consult with or obtain the consent of the Board of Trustees with respect to any specific conflict of interest, including with respect to the approvals required under the 1940 Act, including Section 57(f), and the Advisers Act. The Company may enter into joint transactions or cross-trades with clients or affiliates of the Adviser to the extent permitted by the 1940 Act, the Advisers Act and any applicable co-investment order from the SEC. Subject to the limitations of the 1940 Act, the Company may invest in loans or other securities, the proceeds of which may refinance or otherwise repay debt or securities of companies whose debt is owned by other Blackstone Credit funds.

Management Fee. The fact that all or a portion of the management fee is calculated based on each shareholder’s capital contributions for investments (and, in the case of management fees, also on the amounts borrowed to fund the purchase of investments) rather than solely on capital commitments may create an incentive for the Adviser to (i) make more speculative investments than it otherwise would have made if management fees and servicing fees were solely based on capital commitments, (ii) seek to deploy the capital commitments in investments at an accelerated pace and/or (iii) hold investments, or retain and not distribute proceeds, longer than it otherwise would have if management fees and servicing fees were based solely on capital commitments.

Allocation of Personnel. The Adviser and its members, officers and employees will devote as much of their time to the activities of the Company as they deem necessary to conduct its business affairs in an appropriate manner. By the terms of the Investment Advisory Agreement, the Firm is not restricted from forming additional investment funds, from entering into other investment advisory relationships or from engaging in other business activities, even though such activities may be in competition with the Company and/or may involve substantial time and resources of the Adviser. Firm personnel, including members of the investment committee, will work on other projects, serve on other committees and source potential investments for and otherwise assist the investment programs of Other Clients and their portfolio companies, including other investment programs to be developed in the future. These activities could be viewed as creating a conflict of interest in that the time and effort of the members of the Adviser and its officers and employees will not be devoted exclusively to the business of the Company, but will be allocated between the business of the Company and the management of the monies of such other advisees of the Adviser. Time spent on these other initiatives diverts attention from the activities of the Company, which could negatively impact the Company shareholders. Furthermore, Blackstone Credit and Blackstone Credit personnel derive financial benefit from these other activities, including fees and performance-based compensation. Firm personnel outside of Blackstone Credit may share in the fees and performance-based compensation from the Company; similarly, Blackstone Credit personnel may share in the fees and performance-based compensation generated by Other Clients. These and other factors create conflicts of interest in the allocation of time by Firm personnel. Blackstone Credit’s determination of the amount of time necessary to conduct the Company’s activities will be conclusive, and shareholders rely on Blackstone Credit’s judgment in this regard.

 

78


Table of Contents

Outside Activities of Principals and Other Personnel and their Related Parties. Certain of the principals and employees of the Adviser may be subject to a variety of conflicts of interest relating to their responsibilities to the Company. Other clients and their respective portfolio companies, and their outside business activities as members of investment or advisory committees or boards of directors of or advisors to investment funds, corporations, foundations or other organizations. Such positions create a conflict if such other entities have interests that are adverse to those of the Company, including if such other entities compete with the Company for investment opportunities or other resources. The other managed accounts and/or investment funds in which such individuals may become involved may have investment objectives that overlap with the Company. Furthermore, certain principals and employees of the Adviser may have a greater financial interest in the performance of such other funds or accounts than the performance of the Company. Such involvement may create conflicts of interest in making investments on behalf of the Company and such other funds and accounts. Although such principals and employees will seek to limit any such conflicts in a manner that is in accordance with their fiduciary duties to the Company, there can be no assurance they will be resolved favorably for the Company. Also, Blackstone personnel, Firm employees, including employees of the Adviser, are generally permitted to invest in alternative investment funds, private equity funds, real estate funds, hedge funds or other investment vehicles, including potential competitors of the Company. Shareholders will not receive any benefit from any such investments, and the financial incentives of such Firm employees in such other investments could be greater than their financial incentives in relation to the Company.

Additionally, certain employees and other professionals of the Firm have family members or relatives employed by such advisers and service providers (or their affiliates) or otherwise actively involved in industries and sectors in which the Company invests, or have business, financial, personal or other relationships with companies in such industries and sectors (including the advisors and service providers described above) or other industries, which gives rise to potential or actual conflicts of interest. For example, such family members or relatives might be employees, officers, directors or owners of companies or assets that are actual or potential investments of the Company or other counterparties of the Company and its portfolio companies and/or assets. Moreover, in certain instances, the Company or its portfolio companies may issue loans to or acquire securities from, or otherwise transact with, companies that are owned by such family members or relatives or in respect of which such family members or relatives have other involvement. These relationships may influence Blackstone, the Adviser and/or Blackstone Credit in deciding whether to select or recommend such service providers to perform services for the Company or portfolio companies (the cost of which will generally be borne directly or indirectly by the Company or such portfolio companies, as applicable). Notwithstanding the foregoing, investment transactions relating to the Company that require the use of a service provider will generally be allocated to service providers on the basis of best execution, the evaluation of which includes, among other considerations, such service provider’s provision of certain investment-related services and research that the Adviser believes to be of benefit to the Company. To the extent that the Firm determines appropriate, conflict mitigation strategies may be put in place with respect to a particular circumstance, such as internal information barriers or recusal, disclosure or other steps determined appropriate by the Firm. The shareholders rely on the Firm to manage these conflicts in its sole discretion.

Secondments and Internships. Certain personnel of the Firm and its affiliates, including consultants, will, in certain circumstances, be seconded to one or more portfolio companies, vendors, service providers and vendors or shareholders or other investors of the Company and Other Clients to provide services, including the sourcing of investments for the Company or other parties. The salaries, benefits, overhead and other similar expenses for such personnel during the secondment could be borne by the Firm and its affiliates or the organization for which the personnel are working or both. In addition, personnel of portfolio companies, vendors and service providers (including law firms and accounting firms) and shareholders or other investors of the Company and Other Clients will, in certain circumstances, be seconded to, serve internships at or otherwise provide consulting services to, the Firm, the Company, Other Clients and portfolio companies of the Company and Other Clients. While often the Company, Other Clients and their portfolio companies are the beneficiaries of these types of arrangements, the Firm is from time to time a beneficiary of these arrangements as well, including in circumstances where the vendor or service provider also provides services to the Company, Other Clients,

 

79


Table of Contents

their portfolio companies or the Firm in the ordinary course. The Firm, the Company, Other Clients or their portfolio companies could receive benefits from these arrangements at no cost, or alternatively could pay all or a portion of the fees, compensation or other expenses in respect of these arrangements. The management fee will not be reduced as a result of these arrangements or any fees, expense reimbursements or other costs related thereto and the Company may not receive any benefit as a result of these arrangements. The personnel described above may provide services in respect of multiple matters, including in respect of matters related to the Firm, the Company, Other Clients, portfolio companies, each of their respective affiliates and related parties, and the Firm will endeavor in good faith to allocate the costs of these arrangements, if any, to the Firm, the Company, Other Clients, portfolio companies and other parties based on time spent by the personnel or another methodology the Firm deems appropriate in a particular circumstance.

Other Benefits. Blackstone Credit and its personnel will receive certain intangible and/or other benefits, rebates and/or discounts and/or perquisites arising or resulting from their activities on behalf of the Company, which will not reduce the management fee or incentive fees or otherwise be shared with the Company, investors and/or portfolio companies. For example, airline travel or hotel stays incurred as Company expenses, as set forth in the Investment Advisory Agreement and Administration Agreement (“Company Expenses”), may result in “miles” or “points” or credit in loyalty/status programs, and such benefits and/or amounts will, whether or not de minimis or difficult to value, inure exclusively to Blackstone Credit and/or such personnel (and not the Company and/or portfolio companies) even though the cost of the underlying service is borne by the Company and/or portfolio companies. Blackstone Credit, its personnel, and other related persons also receive discounts on products and services provided by portfolio companies and/or customers or suppliers of such portfolio companies. Such other benefits or fees may give rise to conflicts of interest in connection with the Company’s investment activities, and while the Adviser and Blackstone Credit will seek to resolve any such conflicts in a fair and equitable manner, there is no assurance that any such conflicts will be resolved in favor of the Company. (See also “—Portfolio Company Service Providers and Vendors” and “—Portfolio Company Relationships Generally” below.)

Advisors, Consultants and Operating Partners. Blackstone Credit may engage and retain strategic advisers, consultants, senior advisors, executive advisors, industry experts, operating partners, deal sourcers and/or other similar professionals (which may include former Blackstone and/or Blackstone Credit employees as well as current and former employees of portfolio companies of Blackstone and/or Blackstone Credit) as well as consultants, and other similar professionals who are not employees or affiliates of Blackstone Credit (collectively, “Consultants”), including through joint ventures, investment platforms, other entities or similar arrangements, and who will, from time to time, receive payments from, or allocations of a profits interest with respect to, portfolio companies (as well as from Blackstone Credit or the Company). In particular, in some cases, Consultants, including those with a “Senior Advisor” title, have been and will be engaged with the responsibility to source and recommend transactions to Blackstone Credit or to undertake a build-up strategy to acquire and develop assets and businesses in a particular sector or involving a particularly strategy, potentially on a full-time and/or exclusive basis and notwithstanding any overlap with the responsibilities of Blackstone Credit under the Advisory Agreement, the compensation to such consultants may be borne fully by the Company, Other Clients and/or portfolio companies (with no reduction to management fee payable by the Company) and not Blackstone Credit. In such circumstances, such payments from, or allocations of a profits interest with respect to, portfolio companies and/or the Company may, subject to applicable law, be treated as Company Expenses and will not, even if they have the effect of reducing any retainers or minimum amounts otherwise payable by Blackstone Credit, be deemed paid to or received by Blackstone Credit, and such amounts will not reduce the management fees or incentive fees payable.

To the extent permitted by applicable law and/or any applicable SEC-granted exemptive or no-action relief, these Consultants often have the right or may be offered the ability to (i) co-invest alongside the Company, including in the specific investments in which they are involved (and for which they may be entitled to receive performance-related incentive fees, which will reduce the Company’s returns), (ii) otherwise participate in equity plans for management of any such portfolio company or (iii) invest directly in the Company or in a vehicle

 

80


Table of Contents

controlled by the Company subject to reduced or waived management fees and/or incentive fees, including after the termination of their engagement by or other status with the Firm. Such co-investment and/or participation generally will result in the Company being allocated a smaller share of the applicable investment will not be considered as part of the Firm’s side-by-side co-investment rights. Such co-investment and/or participation may vary by transaction and such participation may, depending on its structure, reduce the Company’s returns. Additionally, and notwithstanding the foregoing, these Consultants, as well as other Blackstone Clients, may be (or have the preferred right to be) investors in Blackstone Credit’s portfolio companies (which, in some cases, may involve agreements to pay performance fees or allocate profits interests to such persons in connection with the Company’s investment therein, which will reduce the Company’s returns) and/or Other Clients. Such Consultants, as well as other Blackstone Clients, may also, subject to applicable law, have rights to co-invest with the Company on a side-by-side basis, which rights are generally offered on a no-fee/no-carried interest basis and generally result in the Company being allocated a smaller share of an investment than would otherwise be the case in the absence of such side-by-side participation.

The time, dedication and scope of work of, and the nature of the relationship with each of the Consultants vary considerably. In certain cases, they may provide the Adviser and/or Blackstone Credit with industry-specific insights and feedback on investment themes, assist in transaction due diligence or make introductions to and provide reference checks on management teams. In other cases, they take on more extensive roles (and may be exclusive service providers to Blackstone Credit) and serve as executives or directors on the boards of portfolio companies or contribute to the identification and origination of new investment opportunities. The Company may rely on these Consultants to recommend Blackstone Credit as a preferred investment partner, identify investments, source opportunities, and otherwise carry out its investment program, but there is no assurance that these advisers will continue to be involved with the Company for any length of time. In certain instances, Blackstone Credit has formal arrangements with these Consultants (which may or may not be terminable upon notice by any party), and in other cases the relationships are more informal. They are either compensated (including pursuant to retainers and expense reimbursement, and, in any event, pursuant to negotiated arrangements that will not be confirmed as being comparable to the market rates for such services) by Blackstone Credit, the Company, and/or portfolio companies or otherwise uncompensated unless and until an engagement with a portfolio company develops. In certain cases, they have certain attributes of Blackstone Credit “employees” (e.g., they may have dedicated offices at Blackstone Credit, receive administrative support from Blackstone Credit personnel, participate in general meetings and events for Blackstone Credit personnel, work on Blackstone Credit matters as their primary or sole business activity, service Blackstone Credit exclusively, have Blackstone Credit-related e-mail addresses and/or business cards and participate in certain benefit arrangements typically reserved for Blackstone Credit employees, etc.) even though they are not considered Blackstone Credit employees, affiliates or personnel for purposes of the Advisory Agreement between the Company and Blackstone Credit. Some Consultants work only for the Company and its portfolio companies, while others may have other clients. The determination of whether a particular party is a Consultant will be made by Blackstone Credit, in its sole discretion. Over time, certain existing and former employees of Blackstone (including senior personnel) may transition to a Consultant role, which shifts the burden of compensating such persons from Blackstone to the Company, Other Clients and/or their portfolio companies, and any compensation received by such persons will not reduce any management fees. Consultants could have conflicts of interest between their work for the Company and its portfolio companies, on the one hand, and themselves or other clients, on the other hand, and Blackstone Credit is limited in its ability to monitor and mitigate these conflicts. Blackstone Credit expects, where applicable, to allocate the costs of such Consultants to the Company and/or applicable portfolio companies, and to the extent any such costs are allocated to the Company, they would be treated as Company Expenses. Payments or allocations to Consultants will not be reduced by the management fee, and can be expected to increase the overall costs and expenses borne indirectly by investors in the Company. There can be no assurance that any of the Consultants, to the extent engaged, will continue to serve in such roles and/or continue their arrangements with Blackstone Credit, the Company and/or any portfolio companies for the duration of the relevant investments or throughout the term of the Company.

 

81


Table of Contents

As an example of the foregoing, in certain investments through platform arrangements, the Company will from time to time enter into an arrangement with one or more individuals (who may be former personnel of the Firm or current or former personnel of portfolio companies of the Company or Other Clients, may have experience or capability in sourcing or managing investments, and may form a management team) to undertake a build-up strategy to acquire and develop assets and businesses in a particular sector or involving a particular strategy. The services provided by such individuals or relevant portfolio company, as the case may be, could include the following with respect to investments: origination or sourcing, due diligence, evaluation, negotiation, servicing, development, management (including turnaround) and disposition. The individuals or relevant portfolio company could be compensated with a salary and equity incentive plan, including a portion of profits derived from the Company or a portfolio company or asset of the Company, or other long-term incentive plans. Compensation could also be based on assets under management, a waterfall similar to a carried interest, respectively, or other similar metric. The Company could initially bear the cost of overhead (including rent, utilities, benefits, salary or retainers for the individuals or their affiliated entities) and the sourcing, diligence and analysis of investments, as well as the compensation for the individuals and entity undertaking the build-up strategy. Such expenses could be borne directly by the Company as Company Expenses (or Broken Deal Expense (as defined below), if applicable) or indirectly through expenditures by a portfolio company. None of the fees, costs or expenses described above will reduce the management fee.

In addition, the Adviser may engage third parties as Consultants (or in another similar capacity) in order to advise it with respect to existing investments, specific investment opportunities, and economic and industry trends. Such Consultants may receive reimbursement of reasonable related expenses by portfolio companies or the Company and may have the opportunity to invest in a portion of the equity and/or debt available to the Company for investment that would otherwise be taken by the Adviser and its affiliates. If such Consultants generate investment opportunities on the Company’s behalf, such Consultants may receive special additional fees or allocations comparable to those received by a third party in an arm’s length transaction and such additional fees or allocations would be borne fully by the Company and/or portfolio companies (with no reduction to management fees) and not Blackstone Credit.

Multiple Firm Business Lines. The Firm has multiple business lines, including the Blackstone Capital Markets Group, which, subject to applicable law, Blackstone, Blackstone Credit, the Company, Other Clients, portfolio companies of the Company and Other Clients and third parties may engage for debt and equity financings and to provide other investment banking, brokerage, investment advisory or other services. As a result of these activities, the Firm is subject to a number of actual and potential conflicts of interest, greater regulatory oversight and more legal and contractual restrictions than if it had one line of business. For example, the Firm may come into possession of information that limits the Company’s ability to engage in potential transactions. Similarly, other Firm businesses and their personnel may be prohibited by law or contract from sharing information with Blackstone Credit that would be relevant to monitoring the Company’s investments and other activities. Additionally, Blackstone, Blackstone Credit or Other Clients can be expected to enter into covenants that restrict or otherwise limit the ability of the Company or its portfolio companies and their affiliates to make investments in, or otherwise engage in, certain businesses or activities. For example, Other Clients could have granted exclusivity to a joint venture partner that limits the Company and Other Clients from owning assets within a certain distance of any of the joint venture’s assets, or Blackstone, Blackstone Credit or an Other Client could have entered into a non-compete in connection with a sale or other transaction. These types of restrictions may negatively impact the ability of the Company to implement its investment program. (See also “—Other Blackstone and Blackstone Credit Clients; Allocation of Investment Opportunities”). Finally, Blackstone and Blackstone Credit personnel who are members of the investment team or investment committee may be excluded from participating in certain investment decisions due to conflicts involving other Firm businesses or for other reasons, in which case the Company will not benefit from their experience. The shareholders will not receive a benefit from any fees earned by the Firm or their personnel from these other businesses.

Blackstone is under no obligation to decline any engagements or investments in order to make an investment opportunity available to the Company. The Firm has long-term relationships with a significant

 

82


Table of Contents

number of corporations and their senior management. In determining whether to invest in a particular transaction on behalf of the Company, the Adviser will consider those relationships and may decline to participate in a transaction as a result of one or more of such relationships (e.g., investments in a competitor of a client or other person with whom Blackstone has a relationship). The Company may be forced to sell or hold existing investments as a result of investment banking relationships or other relationships that the Firm may have or transactions or investments the Firm may make or have made. (See “—Other Blackstone and Blackstone Credit Clients; Allocation of Investment Opportunities” and “—Portfolio Company Relationships Generally.”) Subject to the 1940 Act and any applicable co-investment order issued by the SEC, the Company may also co-invest with clients of the Firm in particular investment opportunities, and the relationship with such clients could influence the decisions made by the Adviser with respect to such investments. There can be no assurance that all potentially suitable investment opportunities that come to the attention of the Firm will be made available to the Company.

Finally, Blackstone and other Blackstone Clients could acquire shares in the Company in the secondary market. Blackstone and other Blackstone Clients would generally have greater information than counterparties in such transactions, and the existence of such business could produce conflicts, including in the valuation of the Company’s Investments.

Minority Investments in Asset Management Firms. Blackstone and other Blackstone Clients, including Blackstone Strategic Capital Holdings (“BSCH”) and its related parties, regularly make minority investments in alternative asset management firms that are not affiliated with Blackstone, the Company, other Blackstone Clients and their respective portfolio companies, and which may from time to time engage in similar investment transactions, including with respect to purchase and sale of investments, with these asset management firms and their sponsored funds and portfolio companies. Typically, the Blackstone related party with an interest in the asset management firm would be entitled to receive a share of carried interest/performance based incentive compensation and net fee income or revenue share generated by the various products, vehicles, funds and accounts managed by that third party asset management firm that are included in the transaction or activities of the third party asset management firm, or a subset of such activities such as transactions with a Blackstone related party. In addition, while such minority investments are generally structured so that Blackstone does not “control” such third party asset management firms, Blackstone may nonetheless be afforded certain governance rights in relation to such investments (typically in the nature of “protective” rights, negative control rights or anti-dilution arrangements, as well as certain reporting and consultation rights) that afford Blackstone the ability to influence the firm. Although Blackstone and other Blackstone Clients, including BSCH, do not intend to control such third party asset management firms, there can be no assurance that all third parties will similarly conclude that such investments are non-control investments or that, due to the provisions of the governing documents of such third party asset management firms or the interpretation of applicable law or regulations, investments by Blackstone and other Blackstone Clients, including BSCH, will not be deemed to have control elements for certain contractual, regulatory or other purposes. While such third party asset managers may not be affiliated with the Company within the meaning of the 1940 Act, Blackstone may, under certain circumstances, be in a position to influence the management and operations of such asset managers and the existence of its economic/revenue sharing interest therein may give rise to conflicts of interest. Participation rights in a third party asset management firm (or other similar business), negotiated governance arrangements and/or the interpretation of applicable law or regulations could expose the investments of the Company to claims by third parties in connection with such investments (as indirect owners of such asset management firms or similar businesses) that may have an adverse financial or reputational impact on the performance of the Company. The Company, its affiliates and their respective portfolio companies may from time to time engage in transactions with, and buy and sell investments from, any such third party asset managers and their sponsored funds and transactions and other commercial arrangements between such third party asset managers and the Company and its portfolio companies are not subject to approval by the Board of Trustees. There can be no assurance that the terms of these transactions between parties related to Blackstone, on the one hand, and the Company and its portfolio companies, on the other hand, will be at arm’s length or that Blackstone will not receive a benefit from such transactions, which can be expected to incentivize Blackstone to cause these transactions to occur. By

 

83


Table of Contents

executing a Subscription Agreement with respect to the Company, each shareholder acknowledges these conflicts related to investments in and arrangements with other asset management firms, acknowledges that these conflicts will not necessarily be resolved in favor of the Company, agrees that shareholders will not be entitled to receive notice or disclosure of the terms or occurrence of either the investments in alternative asset management firms or transactions therewith, otherwise understands that shareholders will not receive any benefit from such transactions, consents to all such transactions and arrangements to the fullest extent permitted by law, and waives any claim against the Firm and releases the Firm from any liability arising from the existence of any such conflict of interest.

Data. The Firm receives or obtains various kinds of data and information from the Company, Other Clients and their portfolio companies, including data and information relating to business operations, trends, budgets, customers and other metrics, some of which is sometimes referred to as “big data.” The Firm can be expected to be better able to anticipate macroeconomic and other trends, and otherwise develop investment themes, as a result of its access to (and rights regarding) this data and information from the Company, Other Clients and their portfolio companies. The Firm has entered and will continue to enter into information sharing and use arrangements with the Company, Other Clients and their portfolio companies, related parties and service providers, which may give the Firm access to (and rights regarding) data that it would not otherwise obtain in the ordinary course. Although the Firm believes that these activities improve the Firm’s investment management activities on behalf of the Company and Other Clients, information obtained from the Company and its portfolio companies also provides material benefits to Blackstone, Blackstone Credit or Other Clients without compensation or other benefit accruing to the Company or shareholders. For example, information from a portfolio company in which the Company holds an interest can be expected to enable the Firm to better understand a particular industry and execute trading and investment strategies in reliance on that understanding for Blackstone, Blackstone Credit and Other Clients that do not own an interest in the portfolio company, without compensation or benefit to the Company or its portfolio companies.

Furthermore, except for contractual obligations to third parties to maintain confidentiality of certain information, and regulatory limitations on the use of material nonpublic information, the Firm is generally free to use data and information from the Company’s activities to assist in the pursuit of the Firm’s various other activities, including to trade for the benefit of the Firm and/or an Other Client. Any confidentiality obligations in the operative documents do not limit the Firm’s ability to do so. For example, the Firm’s ability to trade in securities of an issuer relating to a specific industry may, subject to applicable law, be enhanced by information of a portfolio company in the same or related industry. Such trading can be expected to provide a material benefit to the Firm without compensation or other benefit to the Company or shareholders.

The sharing and use of “big data” and other information presents potential conflicts of interest and the shareholders acknowledge and agree that any benefits received by the Firm or its personnel (including fees, costs and expenses) will not reduce the management fees or incentive fees payable to the Adviser or otherwise be shared with the Company or shareholders. As a result, the Adviser has an incentive to pursue investments that have data and information that can be utilized in a manner that benefits the Firm or Other Clients.

Data Management Services. Blackstone or an affiliate of Blackstone formed in the future may provide Data Management Services (as defined below) to portfolio companies and may also provide such services directly to the Company and Other Clients (collectively, “Data Holders”). Such services may include assistance with obtaining, analyzing, curating, processing, packaging, organizing, mapping, holding, transforming, enhancing, marketing and selling such data (among other related data management and consulting services) for monetization through licensing or sale arrangements with third parties and, subject to applicable law and the limitations in the Investment Advisory Agreement and any other applicable contractual limitations, with the Company, Other Clients, portfolio companies and other Blackstone affiliates and associated entities (including funds in which Blackstone and Other Clients make investments, and portfolio companies thereof) (the “Data Management Services”). If Blackstone enters into data services arrangements with portfolio companies and receives compensation from such portfolio companies for such data services, the Company will indirectly bear its

 

84


Table of Contents

share of such compensation based on its pro rata ownership of such portfolio companies. Where Blackstone believes appropriate, data from one Data Holder may be pooled with data from other Data Holders. Any revenues arising from such pooled data sets would be allocated between applicable Data Holders on a fair and reasonable basis as determined by Blackstone Credit in its sole discretion, with Blackstone Credit able to make corrective allocations should it determine subsequently that such corrections were necessary or advisable. Blackstone is expected to receive compensation for such Data Management Services, which may include a percentage of the revenues generated through any licensing or sale arrangements with respect to the relevant data, and which compensation may also include fees, royalties and cost and expense reimbursement (including start-up costs and allocable overhead associated with personnel working on relevant matters (including salaries, benefits and other similar expenses)), provided that any compensation amounts will not exceed market rates for such services as determined by Blackstone Credit to be appropriate under the circumstances. Additionally, Blackstone may determine to share the products from such Data Management Services within Blackstone or its affiliates (including Other Clients or their portfolio companies) at no charge and, in such cases, the Data Holders would not receive any financial or other benefit from having provided such data to Blackstone. The potential receipt of such compensation by Blackstone could create incentives for the Firm to cause the Company to invest in portfolio companies with a significant amount of data that it might not otherwise have invested in or on terms less favorable than it otherwise would have sought to obtain.

Blackstone and Blackstone Credit Strategic Relationships. Blackstone and Blackstone Credit have entered, and it can be expected that Blackstone and Blackstone Credit in the future will enter, into strategic relationships with investors (and/or one or more of their affiliates) that involve an overall relationship with Blackstone or Blackstone Credit that could incorporate one or more strategies in addition to the Company’s strategy (“Strategic Relationships”), with terms and conditions applicable solely to such investor and its investment in multiple Blackstone or Blackstone Credit strategies that would not apply to any other investor’s investment in the Company. A Strategic Relationship often involves an investor agreeing to make a capital commitment to or investment in (as applicable) multiple Blackstone or Blackstone Credit funds, one of which may include the Company. Shareholders will not receive a copy of any agreement memorializing such a Strategic Relationship program (even if in the form of a side letter) and will be unable to elect in the “most-favored-nations” election process any rights or benefits afforded through a Strategic Relationship. Specific examples of such additional rights and benefits include, among others, specialized reporting, discounts on and/or reimbursement of management fees or carried interest, secondment of personnel from the investor to Blackstone or Blackstone Credit (or vice versa), rights to participate in the investment review and evaluation process, as well as priority rights or targeted amounts for co-investments alongside Blackstone Credit or Blackstone funds (including, without limitation, preferential or favorable allocation of co-investment and preferential terms and conditions related to co-investment or other participation in Blackstone or Blackstone Credit funds (including in respect of any carried interest and/or management fees to be charged with respect thereto, as well as any additional discounts or rebates with respect thereto or other penalties that may result if certain target co-investment allocations or other conditions under such arrangements are not achieved)). The co-investment that is part of a Strategic Relationship may include co-investment in investments made by the Company. Blackstone, including its personnel (including Blackstone Credit personnel), may receive compensation from Strategic Relationships and be incentivized to allocate investment opportunities away from the Company to or source investment opportunities for Strategic Relationships. Strategic Relationships may therefore result in fewer co-investment opportunities (or reduced or no allocations) being made available to shareholders, subject to the 1940 Act.

Portfolio Operations Group. Members of Blackstone’s Portfolio Operations group (the “Portfolio Operations”), who are Blackstone employees, are permitted to provide services to the Company’s portfolio companies, and any payments made by such portfolio companies to Blackstone for reimbursement of the internal compensation costs for time spent on such portfolio companies will not reduce the management fee payable by the Company. As a result, Blackstone may be incentivized to cause members of the Portfolio Operations group to spend more time on the Company’s portfolio companies as compared to portfolio companies of Other Clients that do reduce the management fee offset. There can be no assurance that members of the Portfolio Operations

 

85


Table of Contents

group will be able to provide their services to portfolio companies and/or that any individuals within the Portfolio Operations group will remain employed by Blackstone through the term of the Company.

Buying and Selling Investments or Assets from Certain Related Parties. The Company and its portfolio companies may purchase investments or assets from or sell investments or assets to shareholders, other portfolio companies of the Company, portfolio companies of Other Clients or their respective related parties. Purchases and sales of investments or assets between the Company or its portfolio companies, on the one hand, and shareholders, other portfolio companies of the Company, portfolio companies of Other Clients or their respective related parties, on the other hand, are not, unless required by applicable law, subject to the approval of the Board of Trustees or any shareholder. These transactions involve conflicts of interest, as the Firm may receive fees and other benefits, directly or indirectly, from or otherwise have interests in both parties to the transaction, including different financial incentives Blackstone may have with respect to the parties to the transaction. For example, there can be no assurance that any investment or asset sold by the Company to a shareholder, other portfolio companies of the Company, portfolio company of Other Clients or any of their respective related parties will not be valued or allocated a sale price that is lower than might otherwise have been the case if such asset were sold to a third party rather than to a shareholder, portfolio company of Other Clients or any of their respective related parties. The Firm will not be required to solicit third party bids or obtain a third party valuation prior to causing the Company or any of its portfolio companies to purchase or sell any asset or investment from or to a shareholder, other portfolio companies of the Company, portfolio company of Other Clients or any of their respective related parties as provided above.

Blackstone’s Relationship with Pátria. On October 1, 2010, Blackstone purchased a 40% equity interest in Pátria Investments Limited and Pátria Investimentos Ltda. (collectively, “Pátria”). Pátria is a leading alternative asset manager in Latin America. Pátria’s alternative asset management businesses include the management of private equity funds, real estate funds, infrastructure funds and hedge funds (e.g., a multi-strategy fund and a long/short equity fund). On January 26, 2021, Pátria completed its initial public offering (“IPO”), pursuant to which Blackstone sold a portion of its interest and no longer has representatives or the right to designate representatives on Pátria’s board of directors. As a result of Pátria’s pre-IPO reorganization transactions (which included Blackstone’s sale of 10% of Pátria’s pre-IPO shares to Pátria’s controlling shareholder) and the consummation of the IPO, Blackstone is deemed to no longer have significant influence over Pátria due to its decreased ownership and lack of board representation.

Other Firm Businesses, Activities and Relationships. As part of its regular business, Blackstone provides a broad range of investment banking, advisory and other services. In addition, from time to time, the Firm will provide services in the future beyond those currently provided. Shareholders will not receive any benefit from any fees relating to such services.

In the regular course of its capital markets, investment banking, real estate advisory and other businesses, Blackstone represents potential purchasers, sellers and other involved parties, including corporations, financial buyers, management, shareholders and institutions, with respect to transactions that could give rise to other transactions that are suitable for the Company. In such a case, a Blackstone advisory client would typically require Blackstone to act exclusively on its behalf. Such advisory client requests may preclude all Blackstone-affiliated clients, including the Company, from participating in related transactions that would otherwise be suitable. Blackstone will be under no obligation to decline any such engagements in order to make an investment opportunity available to the Company. In connection with its capital markets, investment banking, advisory, real estate and other businesses, Blackstone comes into possession of information that limits its ability to engage in potential transactions. The Company’s activities are expected to be constrained as a result of the inability of Blackstone personnel to use such information. For example, employees of Blackstone from time to time are prohibited by law or contract from sharing information with members of the Company’s investment team. Additionally, there are expected to be circumstances in which one or more individuals associated with Blackstone affiliates (including clients) will be precluded from providing services related to the Company’s activities because of certain confidential information available to those individuals or to other parts of Blackstone

 

86


Table of Contents

(e.g., trading may be restricted). Where Blackstone affiliates are engaged to find buyers or financing sources for potential sellers of assets, the seller may permit the Company to act as a participant in such transactions (as a buyer or financing partner), which would raise certain conflicts of interest inherent in such a situation (including as to the negotiation of the purchase price).

The Company may invest in securities of the same issuers as Other Clients, other investment vehicles, accounts and clients of the Firm and the Adviser. To the extent that the Company holds interests that are different (or more senior or junior) than those held by such Other Clients, Blackstone Credit may be presented with decisions involving circumstances where the interests of such Other Clients are in conflict with those of the Company. Furthermore, it is possible the Company’s interest may be subordinated or otherwise adversely affected by virtue of such Other Clients’ involvement and actions relating to its investment.

In addition, the 1940 Act may limit the Company’s ability to undertake certain transactions with its affiliates that are registered under the 1940 Act or regulated as BDCs under the 1940 Act. As a result of these restrictions, the Company may be prohibited from executing “joint” transactions with such affiliates, which could include investments in the same portfolio company (whether at the same or different times). These limitations may limit the scope of investment opportunities that would otherwise be available to the Company.

Blackstone Credit has received an exemptive order that permits certain funds, among other things, to co-invest with certain other persons, including certain affiliates of Blackstone Credit, and certain funds managed and controlled by Blackstone Credit and its affiliates subject to certain terms and conditions. In addition, other present and future activities of the Firm and its affiliates (including Blackstone Credit and the Adviser) will from time to time give rise to additional conflicts of interest relating to the Firm and its investment activities. In the event that any such conflict of interest arises, the Adviser will attempt to resolve such conflicts in a fair and equitable manner. Investors should be aware that, subject to applicable law, conflicts will not necessarily be resolved in favor of the Company’s interests.

Transactions with Clients of Blackstone Insurance Solutions. BIS is a business unit of Blackstone that is comprised of two affiliated registered investment advisers. BIS provides investment advisory services to insurers (including insurance companies that are owned, directly or indirectly, by Blackstone or Other Clients, in whole or in part). Actual or potential conflicts of interest may arise with respect to the relationship of the Company and its portfolio companies with the funds, vehicles or accounts BIS advises or sub-advises, including accounts where an insurer participates in investments directly and there is no separate vehicle controlled by Blackstone (collectively, “BIS Clients”). BIS Clients have invested and are expected to continue investing in Other Clients and the Company. BIS Clients may have investment objectives that overlap with those of the Company or its portfolio companies, and such BIS Clients may invest, as permitted by applicable law and the Company’s co-investment exemptive relief, alongside the Company or such portfolio companies in certain investments, which will reduce the investment opportunities otherwise available to the Company or such portfolio companies. BIS Clients will also participate in transactions related to the Company and/or its portfolio companies (e.g., as originators, co-originators, counterparties or otherwise). Other transactions in which BIS Clients will participate include, without limitation, investments in debt or other securities issued by portfolio companies or other forms of financing to portfolio companies (including special purpose vehicles established by the Company or such portfolio companies). When investing alongside the Company or its portfolio companies or in other transactions related to the Company or its portfolio companies, BIS Clients may or may not invest or divest at the same time or on the same terms as the Company or the applicable portfolio companies. BIS Clients may also from time to time acquire investments and portfolio companies directly or indirectly from the Company, as permitted by applicable law and the Company’s co-investment exemptive relief. In circumstances where Blackstone Credit determines in good faith that the conflict of interest is mitigated in whole or in part through various measures that Blackstone, Blackstone Credit or the Adviser implements, the Adviser may determine to proceed with the applicable transaction (subject to oversight by the Board of Trustees and the applicable law to which the Company is subject). In order to seek to mitigate any potential conflicts of interest with respect to such transactions (or other transactions involving BIS Clients), Blackstone may, in its discretion, involve independent

 

87


Table of Contents

members of the board of a portfolio company or a third party stakeholder in the transaction to negotiate price and terms on behalf of the BIS Clients or otherwise cause the BIS Clients to “follow the vote” thereof, and/or cause an independent client representative or other third party to approve the investment or otherwise represent the interests of one or more of the parties to the transaction. In addition, Blackstone or the Adviser may limit the percentage interest of the BIS Clients participating in such transaction, or obtain appropriate price quotes or other benchmarks, or, alternatively, a third-party price opinion or other document to support the reasonableness of the price and terms of the transaction. BIS will also from time to time require the applicable BIS Clients participating in a transaction to consent thereto (including in circumstances where the Adviser does not seek the consent of the Board of Trustees). There can be no assurance that any such measures or other measures that may be implemented by Blackstone will be effective at mitigating any actual or potential conflicts of interest.

Allocation of Portfolios. The Firm may have an opportunity to acquire a portfolio or pool of assets, securities and instruments that it determines should be divided and allocated among the Company and Other Clients. Such allocations generally would be based on the Firm’s assessment of the expected returns and risk profile of each of the assets. For example, some of the assets in a pool may have a return profile appropriate for us, while others may have a return profile not appropriate for the Company but appropriate for Other Clients. Also, a pool may contain both debt and equity instruments that the Firm determines should be allocated to different funds. In all of these situations, the combined purchase price paid to a seller would be allocated among the multiple assets, securities and instruments in the pool and therefore, subject to applicable law and the conditions of the Company’s co-investment relief, among the Company and Other Clients acquiring any of the assets, securities and instruments. Similarly, there will likely be circumstances in which the Company and Other Clients will sell assets in a single or related transactions to a buyer. In some cases a counterparty will require an allocation of value in the purchase or sale contract, though the Firm could determine such allocation of value is not accurate and should not be relied upon. The Firm will generally rely upon internal analysis to determine the ultimate allocation of value, though it could also obtain third party valuation reports. Regardless of the methodology for allocating value, the Firm will have conflicting duties to the Company and Other Clients when they buy or sell assets together in a portfolio, including as a result of different financial incentives the Firm has with respect to different vehicles, most clearly when the fees and compensation, including performance-based compensation, earned from the different vehicles differ. There can be no assurance that an investment will not be valued or allocated a purchase price that is higher or lower than it might otherwise have been allocated if such investment were acquired or sold independently rather than as a component of a portfolio shared with Other Clients.

Other Affiliate Transactions and Investments in Different Levels of Capital Structure. From time to time, the Company and the Other Clients may make investments at different levels of an issuer’s capital structure or otherwise in different classes of an issuer’s securities or loans, subject to the limitations of the 1940 Act. While less common, subject to applicable law, from time to time the Company could hold an investment in a different layer of the capital structure than an investor or another party with which Blackstone has a material relationship, in which case Blackstone could have an incentive to cause the Company or the portfolio company to offer more favorable terms to such parties (including, for instance, financing arrangements). Such investments may inherently give rise to conflicts of interest or perceived conflicts of interest between or among the various classes of securities or loans that may be held by such entities. To the extent the Company holds securities or loans that are different (including with respect to their relative seniority) than those held by an Other Client, the Adviser and its affiliates may be presented with decisions when the interests of the funds are in conflict. For example, conflicts could arise where the Company lends funds to a portfolio company while an Other Client invests in equity securities of such portfolio company. In this circumstance, for example, if such portfolio company were to go into bankruptcy, become insolvent or otherwise be unable to meet its payment obligations or comply with its debt covenants, conflicts of interest could arise between the holders of different types of securities or loans as to what actions the portfolio company should take. In addition, purchases or sales of securities or loans for the account of the Company (particularly marketable securities) will be bunched or aggregated with orders for Other Clients, including other funds. It is frequently not possible to receive the same price or execution on the entire volume of securities sold, and the various prices may be averaged, which may be disadvantageous to the Company. Further conflicts could arise after the Company and Other Clients have made their respective initial investments. For example, if additional financing is necessary as a

 

88


Table of Contents

result of financial or other difficulties, it may not be in the best interests of the Company to provide such additional financing. If the Other Clients were to lose their respective investments as a result of such difficulties, the ability of the Adviser to recommend actions in the best interests of the Company might be impaired. Any applicable co-investment order issued by the SEC may restrict the Company’s ability to participate in follow-on financings. Blackstone Credit may in its discretion take steps to reduce the potential for adversity between the Company and the Other Clients, including causing the Company and/or such Other Clients to take certain actions that, in the absence of such conflict, it would not take. Such conflicts will be more difficult if the Company and Other Clients hold significant or controlling interests in competing or different tranches of a portfolio company’s capital structure. Equity holders and debt holders have different (and often competing) motives, incentives, liquidity goals and other interests with respect to a portfolio company. In addition, there may be circumstances where Blackstone Credit agrees to implement certain procedures to ameliorate conflicts of interest that may involve a forbearance of rights relating to the Company or Other Clients, such as where Blackstone Credit may cause the Company or Other Clients to decline to exercise certain control- and/or foreclosure-related rights with respect to a portfolio company.

Further, the Company is prohibited under the 1940 Act from participating in certain transactions with certain of affiliates (including portfolio companies of Other Clients) without the prior approval of a majority of the independent members of the Board of Trustees and, in some cases, the SEC. Any person that owns, directly or indirectly, 5% or more of the outstanding voting securities will be an affiliate of the Company for purposes of the 1940 Act and generally the Company will be prohibited from buying or selling any securities from or to such affiliate, absent the prior approval of the Board of Trustees. However, the Company may under certain circumstances purchase any such affiliate’s loans or securities in the secondary market, which could create a conflict for the Adviser between the Company’s interests and the interests of such affiliate, in that the ability of the Adviser to recommend actions in the Company’s best interest may be limited. The 1940 Act also prohibits certain “joint” transactions with certain affiliates, which could include investments in the same portfolio company (whether at the same or closely related times), without prior approval of the Board of Trustees and, in some cases, the SEC.

In addition, conflicts may arise in determining the amount of an investment, if any, to be allocated among potential investors and the respective terms thereof. There can be no assurance that any conflict will be resolved in favor of the Company, and each shareholder acknowledges and agrees that in some cases, subject to applicable law, a decision by Blackstone Credit to take any particular action could have the effect of benefiting an Other Client (and, incidentally, may also have the effect of benefiting Blackstone Credit) and therefore may not have been in the best interests of, and may be adverse to, the Company. There can be no assurance that the return on the Company’s investment will be equivalent to or better than the returns obtained by the Other Clients participating in the transaction. The shareholders will not receive any benefit from fees paid to any affiliate of the Adviser from a portfolio company in which an Other Client also has an interest to the extent permitted by the 1940 Act.

Related Financing Counterparties. The Company may invest in companies or other entities in which Other Clients make an investment in a different part of the capital structure (and vice versa) subject to the requirements of the 1940 Act and the Company’s co-investment order. The Adviser requests in the ordinary course proposals from lenders and other sources to provide financing to the Company and its portfolio companies. Blackstone Credit takes into account various facts and circumstances it deems relevant in selecting financing sources, including whether a potential lender has expressed an interest in evaluating debt financing opportunities, whether a potential lender has a history of participating in debt financing opportunities generally and with the Firm in particular, the size of the potential lender’s loan amount, the timing of the relevant cash requirement, the availability of other sources of financing, the creditworthiness of the lender, whether the potential lender has demonstrated a long-term or continuing commitment to the success of Blackstone, Blackstone Credit and their funds, and such other factors that Blackstone and Blackstone Credit deem relevant under the circumstances. The cost of debt alone is not determinative.

Although the Company will generally be providing first lien financing to its portfolio companies, it is possible that shareholders, Other Clients, their portfolio companies, co-investors and other parties with material

 

89


Table of Contents

relationships with the Firm, such as shareholders of and lenders to the Firm and lenders to Other Clients and their portfolio companies (as well as Blackstone itself), could provide additional first lien financing to portfolio companies of the Company, subject to the requirements of the 1940 Act. The Firm could have incentives to cause the Company and its portfolio companies to accept less favorable financing terms from a shareholder, Other Clients, their portfolio companies, Blackstone, and other parties with material relationships with the Firm than it would from a third party. If the Company or a portfolio company occupies a more senior position in the capital structure than a shareholder, Other Client, their portfolio companies and other parties with material relationships with Blackstone, Blackstone could have an incentive to cause the Company or portfolio company to offer more favorable financing terms to such parties. In the case of a related party financing between the Company or its portfolio companies, on the one hand, and Blackstone or Other Clients’ portfolio companies, on the other hand, to the extent permitted by the 1940 Act, the Adviser could, but is not obligated to, rely on a third party agent to confirm the terms offered by the counterparty are consistent with market terms, or the Adviser could instead rely on its own internal analysis, which the Adviser believes is often superior to third party analysis given the Firm’s scale in the market. If however any of the Firm, the Company, an Other Client or any of their portfolio companies delegates to a third party, such as another member of a financing syndicate or a joint venture partner, the negotiation of the terms of the financing, the transaction will be assumed to be conducted on an arms-length basis, even though the participation of the Firm related vehicle impacts the market terms. For example, in the case of a loan extended to the Company or a portfolio company by a financing syndicate in which an Other Client has agreed to participate on terms negotiated by a third party participant in the syndicate, it may have been necessary to offer better terms to the financing provider to fully subscribe the syndicate if the Other Client had not participated. It is also possible that the frequent participation of Other Clients in such syndicates could dampen interest among other potential financing providers, thereby lowering demand to participate in the syndicate and increasing the financing costs to the Company. The Adviser does not believe either of these effects is significant, but no assurance can be given to shareholders that these effects will not be significant in any circumstance. Unless required by applicable law, the Adviser will not seek any consent or approvals from shareholders or the Board of Trustees in the case of any of these conflicts.

The Firm could cause actions adverse to the Company to be taken for the benefit of Other Clients that have made an investment more senior in the capital structure of a portfolio company than the Company (e.g., provide financing to a portfolio company, the equity of which is owned by the Company) and, vice versa, actions may be taken for the benefit of the Company and its portfolio companies that are adverse to Other Clients. The Firm could seek to implement procedures to mitigate conflicts of interest in these situations such as (i) a forbearance of rights, including some or all non-economic rights, by the Company or relevant Other Client (or their respective portfolio companies, as the case may be) by, for example, agreeing to follow the vote of a third party in the same tranche of the capital structure, or otherwise deciding to recuse itself with respect to decisions on defaults, foreclosures, workouts, restructurings and other similar matters, (ii) causing the Company or relevant Other Client (or their respective portfolio companies, as the case may be) to hold only a non-controlling interest in any such portfolio company, (iii) retaining a third party loan servicer, administrative agent or other agent to make decisions on behalf of the Company or relevant Other Client (or their respective portfolio companies, as the case may be), or (iv) create groups of personnel within the Firm separated by information barriers (which may be temporary and limited purpose in nature), each of which would advise one of the clients that has a conflicting position with other clients. As an example, to the extent an Other Client holds an interest in a loan or security that is different (including with respect to relative seniority) than those held by the Company or its portfolio companies, the Firm may decline to exercise, or delegate to a third party, certain control, foreclosure and other similar governance rights of the Other Client. In these cases, the Firm would generally act on behalf of one of its clients, though the other client would generally retain certain control rights, such as the right to consent to certain actions taken by the trustee or administrative or other agent of the investment, including a release, waiver, forgiveness or reduction of any claim for principal or interest; extension of maturity date or due date of any payment of any principal or interest; release or substitution of any material collateral; release, waiver, termination or modification of any material provision of any guaranty or indemnity; subordination of any lien; and release, waiver or permission with respect to any covenants.

 

90


Table of Contents

In connection with negotiating loans and bank financings in respect of Blackstone Credit-sponsored transactions, Blackstone Credit will generally obtain the right to participate (for its own account or an Other Client) in a portion of the financings with respect to such Blackstone Credit-sponsored transactions on the same terms negotiated by third parties with the Firm or other terms the Adviser determines to be consistent with the market. Although the Firm could rely on third parties to verify market terms, the Firm may nonetheless have influence on such third parties. No assurance can be given that negotiating with a third party, or verification of market terms by a third party, will ensure that the Company and its portfolio companies receive market terms.

In addition, it is anticipated that in a bankruptcy proceeding the Company’s interests will likely be subordinated or otherwise adverse to the interests of Other Clients with ownership positions that are more senior to those of the Company. For example, an Other Client that has provided debt financing to an investment of the Company may take actions for its benefit, particularly if the Company’s Investment is in financial distress, which adversely impact the value of the Company’s subordinated interests.

Although Other Clients can be expected to provide financing to the Company and its portfolio companies subject to the requirements of the 1940 Act, there can be no assurance that any Other Client will indeed provide any such financing with respect to any particular Investment. Participation by Other Clients in some but not all financings of the Company and its portfolio companies may adversely impact the ability of the Company and its portfolio companies to obtain financing from third parties when Other Clients do not participate, as it may serve as a negative signal to market participants.

Any financing provided by a shareholder or an affiliate to the Company or a portfolio company is not an investment in the Company.

Conflicting Fiduciary Duties to Debt Funds. Other Clients include funds and accounts that make investments in senior secured loans, distressed debt, subordinated debt, high-yield securities, commercial mortgage-backed securities and other debt instruments. As discussed above, it is expected that these Other Clients or investors therein will be offered the opportunity, subject to applicable law, to provide financing with respect to investments made by the Company and its portfolio companies. The Firm owes a fiduciary duty to these Other Clients as well as to the Company and will encounter conflicts in the exercise of these duties. For example, if an Other Client purchases high-yield securities or other debt instruments of a portfolio company of the Company, or otherwise occupies a senior (or other different) position in the capital structure of an investment relative to the Company, the Firm will encounter conflicts in providing advice to the Company and to these Other Clients with regard to appropriate terms of such high-yield securities or other instruments, the enforcement of covenants, the terms of recapitalizations and the resolution of workouts or bankruptcies, among other matters. More commonly, the Company could hold an investment that is senior in the capital structure, such as a debt instrument, to an Other Client. Although measures described above in “Related Financing Counterparties” above can mitigate these conflicts, they cannot completely eliminate them.

Similarly, certain Other Clients may invest in securities of publicly traded companies that are actual or potential investments of the Company or its portfolio companies. The trading activities of those vehicles may differ from or be inconsistent with activities that are undertaken for the account of the Company or its portfolio companies in any such securities or related securities. In addition, the Company may not pursue an investment in a portfolio company otherwise within the investment mandate of the Company as a result of such trading activities by Other Clients.

Other Blackstone and Blackstone Credit Clients; Allocation of Investment Opportunities. Certain inherent conflicts of interest arise from the fact that the Adviser, Blackstone Credit and Blackstone provide investment management, advisory and sub-advisory services to the Company and Other Clients.

 

91


Table of Contents

For purposes of this discussion and ease of reference, the following terms shall have the meanings as set forth below:

Other Blackstone Credit Clients” means, collectively, the investment funds, client accounts (including managed accounts) and proprietary accounts and/or other similar arrangements (including such arrangements in which the Company or one or more Other Blackstone Credit Clients own interests) that Blackstone Credit may establish, advise or sub-advise from time to time and to which Blackstone Credit provides investment management or sub-advisory services (other than the Company and any such funds and accounts in which the Company has an interest), in each case including any alternative investment vehicles and additional capital vehicles relating thereto and any vehicles established by Blackstone Credit to exercise its side-by-side or other general partner investment rights as set forth in their respective governing documents; provided, that for the avoidance of doubt, “Other Blackstone Credit Clients” shall not include Blackstone Credit in its role as principal of any account, including any accounts for which Blackstone Credit or an affiliate thereof acts as an advisor.

Blackstone Clients” means, collectively, the investment funds, client accounts (including managed accounts) and proprietary accounts and/or other similar arrangements (including such arrangements in which the Company or one or more Blackstone Clients own interests) that Blackstone may establish, advise or sub-advise from time to time and to which Blackstone provides investment management or sub-advisory services (other than the Company, any such funds and accounts in which the Company has an interest and Other Blackstone Credit Clients), in each case including any alternative investment vehicles and additional capital vehicles relating thereto and any vehicles established by Blackstone to exercise its side-by-side or other general partner investment rights as set forth in their respective governing documents; provided that, for the avoidance of doubt, “Blackstone Clients” shall not include Blackstone in its role as principal of any account, including any accounts for which Blackstone or an affiliate thereof acts as an advisor.

Other Clients” means, collectively, Other Blackstone Credit Clients and Blackstone Clients.

The respective investment programs of the Company and the Other Clients may or may not be substantially similar. Blackstone Credit and/or Blackstone may give advice to, and recommend securities for, Other Clients that may differ from advice given to, or securities recommended or bought for, the Company, even though their investment objectives may be the same as or similar to those of the Company. While Blackstone Credit will seek to manage potential conflicts of interest in a fair and equitable manner, the portfolio strategies employed by Blackstone Credit and Blackstone in managing their respective Other Clients are likely to conflict from time to time with the transactions and strategies employed by the Adviser in managing the Company and may affect the prices and availability of the securities and instruments in which the Company invests. Conversely, participation in specific investment opportunities may be appropriate, at times, for both the Company and Other Clients. In any event, it is the policy of Blackstone Credit to allocate investment opportunities and sale opportunities on a basis deemed by Blackstone Credit, in its sole discretion, to be fair and equitable over time.

Allocation Methodology Considerations

Blackstone Credit will share any investment and sale opportunities with such Other Clients and the Company in accordance with the Advisers Act, and Firm-wide allocation policies, which generally provide for sharing pro rata based on targeted acquisition size or targeted sale size.

Notwithstanding the foregoing, Blackstone Credit may also consider the following factors in making any allocation determinations, and such factors may result in a different allocation of investment and/or sale opportunities: (i) the risk-return and target return profile of the proposed investment relative to the Company’s and the Other Clients’ current risk profiles; (ii) the Company’s and/or the Other Clients’ investment guidelines, restrictions, terms and objectives, including whether such objectives are considered solely in light of the specific investment under consideration or in the context of the respective portfolios’ overall holdings; (iii) the need to re-size risk in the Company’s or the Other Clients’ portfolios (including the potential for the proposed investment

 

92


Table of Contents

to create an industry, sector or issuer imbalance in the Company’s and Other Clients’ portfolios, as applicable) and taking into account any existing non-pro rata investment positions in the portfolio of the Company and Other Clients; (iv) liquidity considerations of the Company and the Other Clients, including during a ramp-up or wind-down of one or more of the Company or such Other Clients, proximity to the end of the Company’s or Other Clients’ specified term or investment period, any redemption/withdrawal requests, anticipated future contributions and available cash; (v) legal, tax, accounting, political, national security and other consequences; (vi) regulatory or contractual restrictions or consequences (including, without limitation, requirements under the 1940 Act and any related rules, orders, guidance or other authority applicable to Other Blackstone Credit Clients); (vii) avoiding a de minimis or odd lot allocation; (viii) availability and degree of leverage and any requirements or other terms of any existing leverage facilities; (ix) the Company’s or Other Clients’ investment focus on a classification attributable to an investment or issuer of an investment, including, without limitation, investment strategy, geography, industry or business sector; (x) the nature and extent of involvement in the transaction on the part of the respective teams of investment professionals dedicated to the Company or such Other Clients; (xi) the management of any actual or potential conflict of interest; (xii) with respect to investments that are made available to Blackstone Credit by counterparties pursuant to negotiated trading platforms (e.g., ISDA contracts), the absence of such relationships which may not be available to the Company and all Other Clients; (xiii) available capital of the Company and the Other Clients, (xiv) primary and permitted investment strategies and objectives of the Company and the Other Clients, including, without limitation, with respect to Other Clients that expect to invest in or alongside other funds or across asset classes based on expected return (such as certain managed accounts with similar investment strategies and objectives), (xv) sourcing of the investment, (xvi) the specific nature (including size, type, amount, liquidity, holding period, anticipated maturity and minimum investment criteria) of the investment, (xvii) expected investment return, (xviii) expected cash characteristics (such as cash-on-cash yield, distribution rates or volatility of cash flows), (xix) capital expenditure required as part of the investment, (xx) portfolio diversification concerns (including, but not limited to, whether a particular fund already has its desired exposure to the investment, sector, industry, geographic region or markets in question), (xxi) relation to existing investments in a fund, if applicable (e.g., “follow on” to existing investment, joint venture or other partner to existing investment, or same security as existing investment), and (xxii) any other considerations deemed relevant by Blackstone Credit in good faith.

Blackstone Credit shall not have any obligation to present any investment opportunity (or portion of any investment opportunity) to the Company if Blackstone Credit determines in good faith that such opportunity (or portion thereof) should not be presented to the Company for any one or a combination of the reasons specified above, or if Blackstone Credit is otherwise restricted from presenting such investment opportunity to the Company.

In addition, Blackstone Credit has received an exemptive order from the SEC that permits certain existing and future funds regulated under the 1940 Act (each, a “Regulated Fund”), among other things, to co-invest with certain other persons, including certain affiliates of Blackstone Credit, and certain funds managed and controlled by Blackstone Credit and its affiliates, including the Company, subject to certain terms and conditions. For so long as any privately negotiated investment opportunity falls within the investment criteria of one or more Regulated Funds, such investment opportunity shall also be offered to such Regulated Fund(s). In the event that the aggregate targeted investment sizes of the Company and such Regulated Fund(s) exceed the amount of such investment opportunity, allocation of such investment opportunity to each of the Company and such Regulated Fund(s) will be reduced proportionately based on their respective “available capital” as defined in the exemptive order, which may result in allocation to the Company in an amount less than what it would otherwise have been if such Regulated Fund(s) did not participate in such investment opportunity. The exemptive order also restricts the ability of the Company (or any other Blackstone Credit fund) from investing in any privately negotiated investment opportunity alongside a Regulated Fund except at the same time and on same terms. As a result, the Company may be unable to make investments in different parts of the capital structure of the same issuer in which a Regulated Fund has invested or seeks to invest. The rules promulgated by the SEC under the 1940 Act, as well as any related guidance from the SEC and/or the terms of the exemptive order itself, are subject to change, and Blackstone Credit could undertake to amend the exemptive order (subject to SEC approval), obtain

 

93


Table of Contents

additional exemptive relief, or otherwise be subject to other requirements in respect of co-investments involving the Company and any Regulated Funds, any of which may impact the amount of any allocation made available to Regulated Funds and thereby affect (and potentially decrease) the allocation made to the Company.

Moreover, with respect to Blackstone Credit’s ability to allocate investment opportunities, including where such opportunities are within the common objectives and guidelines of the Company and one or more Other Clients (which allocations are to be made on a basis that Blackstone Credit believes in good faith to be fair and reasonable), Blackstone Credit and Blackstone have established general guidelines and policies, which it may update from time to time, for determining how such allocations are to be made, which, among other things, set forth principles regarding what constitutes “debt” or “debt-like” investments, criteria for defining “control-oriented equity” or “infrastructure” investments, guidance regarding allocation for certain types of investments (e.g., distressed energy) and other matters. In addition, certain Other Clients may receive certain priority or other allocation rights with respect to certain investments, subject to various conditions set forth in such Other Clients’ respective governing agreements. The application of those guidelines and conditions may result in the Company or Other Clients not participating (and/or not participating to the same extent) in certain investment opportunities in which they would have otherwise participated had the related allocations been determined without regard to such guidelines and conditions and based only on the circumstances of those particular investments. Additionally, investment opportunities sourced by Blackstone Credit will be allocated in accordance with Blackstone’s and Blackstone Credit’s allocation policies, which may provide that investment opportunities will be allocated in whole or in part to other business units of the Firm on a basis that Blackstone and Blackstone Credit believe in good faith to be fair and reasonable, based on various factors, including the involvement of the respective teams from Blackstone Credit and such other business units. It should also be noted that investment opportunities sourced by business units of the Firm other than Blackstone Credit will be allocated in accordance with such business units’ allocation policies, which will result in such investment opportunities being allocated, in whole or in part, away from Blackstone Credit, the Company and Other Blackstone Credit Clients. In addition, we may offer opportunities appropriate for the Company to subsidiaries not wholly owned by the Company, which will result in the Company having less exposure to such assets than it otherwise would have if it did not offer these opportunities to subsidiaries.

When Blackstone Credit determines not to pursue some or all of an investment opportunity for the Company that would otherwise be within the Company’s objectives and strategies, and Blackstone or Blackstone Credit provides the opportunity or offers the opportunity to Other Clients, Blackstone or Blackstone Credit, including their personnel (including Blackstone Credit personnel), may receive compensation from the Other Clients, whether or not in respect of a particular investment, including an allocation of carried interest or referral fees, and any such compensation could be greater than amounts paid by the Company to Blackstone Credit. As a result, Blackstone Credit (including Blackstone Credit personnel who receive such compensation) could be incentivized to allocate investment opportunities away from the Company to or source investment opportunities for Other Clients. In addition, in some cases Blackstone or Blackstone Credit may earn greater fees when Other Clients participate alongside or instead of the Company in an Investment.

Blackstone Credit makes good faith determinations for allocation decisions based on expectations that may prove inaccurate. Information unavailable to Blackstone Credit, or circumstances not foreseen by Blackstone Credit at the time of allocation, may cause an investment opportunity to yield a different return than expected. Conversely, an investment that Blackstone Credit expects to be consistent with the Company’s objectives may fail to achieve them.

The Adviser may, but will be under no obligation to, provide co-investment opportunities relating to investments made by the Company to Company shareholders, Other Clients, and investors of such Other Clients, subject to the Company’s exemptive relief and the 1940 Act. Such co-investment opportunities may be offered to such parties in the Adviser’s subject to the Company’s exemptive relief. From time to time, Blackstone Credit may form one or more funds or accounts to co-invest in transactions with the Company (or transactions alongside any of the Company and one or more Other Clients). Furthermore, for the avoidance of doubt, to the extent that

 

94


Table of Contents

the Company has received its target amount in respect of an investment opportunity, any remaining portion of such investment opportunity initially allocated to the Company may be allocated to Other Clients or to co-investors in Blackstone Credit’s discretion pursuant to the Company’s exemptive relief.

Orders may be combined for the Company and all other participating Other Clients, and if any order is not filled at the same price, they may be allocated on an average price basis. Similarly, if an order on behalf of more than one account cannot be fully executed under prevailing market conditions, securities may be allocated among the different accounts on a basis that Blackstone Credit or its affiliates consider equitable.

Additionally, it can be expected that the Firm will, from time to time, enter into arrangements or strategic relationships with third parties, including other asset managers, financial firms or other businesses or companies, that, among other things, provide for referral, sourcing or sharing of investment opportunities. Blackstone or Blackstone Credit may pay management fees and performance-based compensation in connection with such arrangements. Blackstone or Blackstone Credit may also provide for or receive reimbursement of certain expenses incurred or received in connection with these arrangements, including diligence expenses and general overhead, administrative, deal sourcing and related corporate expenses. The amount of these rebates may relate to allocations of co-investment opportunities and increase if certain co-investment allocations are not made. While it is possible that the Company will, along with the Firm itself, benefit from the existence of those arrangements and/or relationships, it is also possible that investment opportunities that would otherwise be presented to or made by the Company would instead be referred (in whole or in part) to such third party, or, as indicated above, to other third parties, either as a contractual obligation or otherwise, resulting in fewer opportunities (or reduced allocations) being made available to the Company and/or shareholders. This means that co-investment opportunities that are sourced by the Company may be allocated to investors that are not shareholders. For example, a firm with which the Firm has entered into a strategic relationship may be afforded with “first-call” rights on a particular category of investment opportunities, although there is not expected to be substantial overlap in the investment strategies and/or objectives between the Company and any such firm. (See “—Blackstone’s Relationship with Pátria.”)

Certain Investments Inside the Company’s Mandate that are not Pursued by the Company. Under certain circumstances, Blackstone or Blackstone Credit may determine not to pursue some or all of an investment opportunity within the Company’s mandate, including without limitation, as a result of business, reputational or other reasons applicable to the Company, Other Clients, their respective portfolio companies or Blackstone. In addition, Blackstone Credit may determine that the Company should not pursue some or all of an investment opportunity, including, by way of example and without limitation, because the Company has already invested sufficient capital in the investment, sector, industry, geographic region or markets in question, as determined by Blackstone Credit in its good faith discretion, or the investment is not appropriate for the Company for other reasons as determined by Blackstone Credit in its good faith reasonable sole discretion. In any such case Blackstone or Blackstone Credit could, thereafter, offer such opportunity to other parties, including Other Clients or portfolio companies or limited partners or shareholders of the Company or Other Clients, joint venture partners, related parties or third parties. Any such Other Clients may be advised by a different Blackstone or Blackstone Credit business group with a different investment committee, which could determine an investment opportunity to be more attractive than Blackstone Credit believes to be the case. In any event, there can be no assurance that Blackstone Credit’s assessment will prove correct or that the performance of any investments actually pursued by the Company will be comparable to any investment opportunities that are not pursued by the Company. Blackstone and Blackstone Credit, including their personnel, may receive compensation from any such party that makes the investment, including an allocation of carried interest or referral fees, and any such compensation could be greater than amounts paid by the Company to Blackstone Credit. In some cases, Blackstone or Blackstone Credit earns greater fees when Other Clients participate alongside or instead of the Company in an Investment.

Cross Transactions. Situations may arise where certain assets held by the Company may be transferred to Other Clients and vice versa. Such transactions will be conducted in accordance with, and subject to, the Adviser’s contractual obligations to the Company and applicable law, including the 1940 Act.

 

95


Table of Contents

Co-Investment. The Company will co-invest with its shareholders, limited partners and/or shareholders of the Other Clients, the Firm’s affiliates and other parties with whom Blackstone Credit has a material relationship. The allocation of co-investment opportunities is entirely and solely in the discretion of Blackstone Credit, subject to applicable law. In addition to participation by Consultants in specific transactions or investment opportunities, Consultants and/or other Firm employees may be permitted to participate in the Firm’s side-by-side co-investment rights. Such rights generally do not provide for a management fee or carried interest payable by participants therein and generally result in the Company being allocated a smaller share of an investment than would otherwise be the case in the absence of such side-by-side. Furthermore, Other Clients will be permitted (or have a preferred right) to participate in the Firm’s side-by-side co-investment rights.

In certain circumstances, Blackstone Credit will determine that a co-investment opportunity should be offered to one or more third parties (such investors, “Co-Investors”) and will maintain sole discretion with respect to which Co-Investors are offered any such opportunity. It is expected that many investors who may have expressed an interest in co-investment opportunities will not be allocated any co-investment opportunities or may receive a smaller amount of co-investment opportunities than the amount requested. Furthermore, co-investment offered by Blackstone Credit will be on such terms and conditions (including with respect to management fees, performance-based compensation and related arrangements and/or other fees applicable to co-investors) as Blackstone Credit determine to be appropriate in its sole discretion on a case-by-case basis, which may differ amongst co-investors with respect to the same co-investment. In addition, the performance of Other Clients co-investing with the Company is not considered for purposes of calculating the carried interest payable by the Company to the Adviser. Furthermore, the Company and co-investors will often have different investment objectives and limitations, such as return objectives and maximum hold period. Blackstone Credit, as a result, will have conflicting incentives in making decisions with respect to such opportunities. Even if the Company and any such parties invest in the same securities on similar terms, conflicts of interest will still arise as a result of differing investment profiles of the investors, among other items.

General Co-Investment Considerations: There are expected to be circumstances where an amount that would otherwise have been invested by the Company is instead allocated to co-investors (who may or may not be shareholders of the Company or limited partners of Other Clients) or supplemental capital vehicles, and there is no guarantee that any shareholders will be offered any particular co-investment opportunity. Each co-investment opportunity (should any exist) is likely to be different, and allocation of each such opportunity will depend on the facts and circumstances specific to that unique situation (e.g., timing, industry, size, geography, asset class, projected holding period, exit strategy and counterparty). Different situations will require that the various facts and circumstances of each opportunity be weighted differently, as Blackstone Credit deems relevant to such opportunity. Such factors are likely to include, among others, whether a co-investor adds strategic value, industry expertise or other similar synergies; whether a potential co-investor has expressed an interest in evaluating co-investment opportunities; whether a potential co-investor has an overall strategic relationship with the Firm; whether a potential co-investor has demonstrated a long-term and/or continuing commitment to the potential success of Blackstone, Blackstone Credit, the Company, Other Clients or other co-investments (including whether a potential co-investor will help establish, recognize, strengthen and/or cultivate relationships that may provide indirectly longer-term benefits to the Company or Other Clients and their respective underlying portfolio companies, or whether the potential co-investor has significant capital under management by the Firm or intends to increase such amount); the ability of a potential co-investor to commit to a co-investment opportunity within the required timeframe of the particular transaction; Blackstone Credit’s assessment of a potential co-investor’s ability to invest an amount of capital that fits the needs of the investment (taking into account the amount of capital needed as well as the maximum number of investors that can realistically participate in the transaction); whether the co-investor is considered “strategic” to the investment because it is able to offer the Company certain benefits, including but not limited to, the ability to help consummate the investment, the ability to aid in operating or monitoring the portfolio company or the possession of certain expertise; the transparency, speed and predictability of the potential co-investor’s investment process; whether the Firm has previously expressed a general intention to seek to offer co-investment opportunities to such potential co-investor; whether a potential co-investor has the financial and operational resources and other relevant wherewithal to evaluate and participate

 

96


Table of Contents

in a co-investment opportunity; the familiarity the Firm has with the personnel and professionals of the investor in working together in investment contexts (which may include such potential co-investor’s history of investment in other Firm co-investment opportunities); the extent to which a potential co-investor has committed to an Other Client; the size of such potential co-investor’s interest to be held in the underlying portfolio company as a result of the Company’s investment (which is likely to be based on the size of the potential co-investor’s capital commitment or investment in the Company); the extent to which a potential co-investor has been provided a greater amount of co-investment opportunities relative to others; the ability of a potential co-investor to invest in potential add-on acquisitions for the portfolio company or participate in defensive investments; the likelihood that the potential co-investor would require governance rights that would complicate or jeopardize the transaction (or, alternatively, whether the investor would be willing to defer to the Firm and assume a more passive role in governing the portfolio company); any interests a potential co-investor may have in any competitors of the underlying portfolio company; the tax profile of the potential co-investor and the tax characteristics of the investment (including whether the potential co-investor would require particular structuring implementation or covenants that would not otherwise be required but for its participation or whether such co-investor’s participation is beneficial to the overall structuring of the investment); whether a potential co-investor’s participation in the transaction would subject the Company and/or the portfolio company to additional regulatory requirements, review and/or scrutiny, including any necessary governmental approvals required to consummate the investment; the potential co-investor’s interaction with the potential management team of the portfolio company; whether the potential co-investor has any existing positions in the portfolio company (whether in the same security in which the Company is investing or otherwise); whether there is any evidence to suggest that there is a heightened risk with respect to the potential co-investor maintaining confidentiality; whether the potential co-investor has demonstrated a long-term and/or continuing commitment to the potential success of the Company, other affiliated funds and/or other co-investments, including the size of such commitment; whether the potential co-investor has any known investment policies and restrictions, guideline limitations or investment objectives that are relevant to the transaction, including the need for distributions; whether the expected holding period and risk-return profile of the investment is consistent with the stated goals of the investor; and such other factors as the Adviser deems relevant and believes to be appropriate under the circumstances. Furthermore, in connection with any such co-investment by third-party co-investors, the Adviser may establish one or more investment vehicles managed or advised by the Firm to facilitate such co-investors’ investment alongside the Company. The factors listed in the foregoing sentence are neither presented in order of importance nor weighted, except that Blackstone Credit has historically primarily relied upon the following two factors in making the determination to offer co-investment opportunities to co-investors: (i) whether the potential co-investor has demonstrated a long-term and/or continuing commitment to the potential success of the Company (including whether a potential co-investor will help establish, recognize, strengthen and/or cultivate relationships that may provide indirectly longer-term benefits to the Company or Other Clients and their respective underlying portfolio companies), other affiliated funds, and/or other co-investments, including the size of any such commitment and fee revenue or profits generated for the benefit of Blackstone Credit or Blackstone as a result thereof and (ii) the ability of a potential co-investor to process a co-investment decision within the required timeline of the particular transaction. Except as otherwise described herein, co-investors generally will not share Broken Deal Expenses with the Company and Other Clients, with the result that the Company and such Other Clients will bear all such Broken Deal Expenses, and such expenses may be significant. However, the Adviser does not intend to offer any such co-investment opportunities to shareholders in their capacity as shareholders. Blackstone Credit may (but is not required to) establish co-investment vehicles (including dedicated or “standing” co-investment vehicles) for one or more investors (including third party investors and investors in the Company) in order to co-invest alongside the Company in one or more future investments. The existence of these vehicles could reduce the opportunity for other shareholders to receive allocations of co-investment. In addition, the allocation of investments to Other Clients, including as described under “Other Blackstone and Blackstone Credit Clients; Allocation of Investment Opportunities” herein, may result in fewer co-investment opportunities (or reduced allocations) being made available to shareholders.

 

97


Table of Contents

Additional Potential Conflicts of Interest with respect to Co-Investment; Strategic Relationships Involving Co-Investment: In addition, the Adviser and/or its affiliates will in certain circumstances be incentivized to offer certain potential co-investors (including, by way of example, as a part of an overall strategic relationship with the Firm) opportunities to co-invest because the extent to which any such co-investor participates in (or is offered) co-investment opportunities may impact the amount of performance-based compensation and/or management fees or other fees paid by the co-investor. The amount of carried interest or expenses charged and/or management fees paid by the Company may be less than or exceed such amounts charged or paid by co-investment vehicles pursuant to the terms of such vehicles’ partnership agreements and/or other agreements with co-investors, and such variation in the amount of fees and expenses may create an economic incentive for Blackstone Credit to allocate a greater or lesser percentage of an investment opportunity to the Company or such co-investment vehicles or co-investors, as the case may be. In addition, other terms of existing and future co-investment vehicles may differ materially, and in some instances may be more favorable to Blackstone Credit, than the terms of the Company, and such different terms may create an incentive for Blackstone Credit to allocate a greater or lesser percentage of an investment opportunity to the Company or such co-investment vehicles, as the case may be. Such incentives will from time to time give rise to conflicts of interest, and there can be no assurance that such conflicts of interest will be resolved in favor of the Company. Accordingly, any investment opportunities that would have otherwise been offered or allocated, in whole or in part, to the Company may be reduced and made available to co-investment vehicles. Co-investments may be offered by the Adviser on such terms and conditions as the Adviser determines in its discretion on a case-by-case basis.

Company Co-Investment Opportunities. As a BDC regulated under the 1940 Act, the Company is subject to certain limitations relating to co-investments and joint transactions with affiliates, which likely will in certain circumstances limit the Company’s ability to make investments or enter into other transactions alongside the Other Clients. There can be no assurance that such regulatory restrictions will not adversely affect the Company’s ability to capitalize on attractive investment opportunities. However, subject to the 1940 Act and any applicable co-investment order issued by the SEC, the Company may co-invest with Other Clients (including co-investment or other vehicles in which the Firm or its personnel invest and that co-invest with such Other Clients) in investments that are suitable for the Company and one or more of such Other Clients. Even if the Company and any such Other Clients and/or co-investment or other vehicles invest in the same securities, conflicts of interest may still arise.

We have received an exemptive order from the SEC that permits us, among other things, to co-invest with certain other persons, including certain affiliates of the Adviser and certain funds managed and controlled by the Adviser and its affiliates, subject to certain terms and conditions. Such order may restrict our ability to enter into follow-on investments or other transactions. Pursuant to such order, we may co-invest in a negotiated deal with certain affiliates of the Adviser or certain funds managed and controlled by the Adviser and its affiliates, subject to certain terms and conditions. We may also receive an allocation in such a deal alongside affiliates pursuant to other mechanisms to the extent permitted by the 1940 Act.

Investments in Portfolio Companies Alongside Other Clients. From time to time, the Company will co-invest with Other Clients (including co-investment or other vehicles in which the Firm or its personnel invest and that co-invest with such Other Clients) in investments that are suitable for both the Company and such Other Clients, as permitted by applicable law and/or any applicable SEC-granted order. Even if the Company and any such Other Clients invest in the same securities or loans, conflicts of interest may still arise. For example, it is possible that as a result of legal, tax, regulatory, accounting, political, national security or other considerations, the terms of such investment (and divestment thereof) (including with respect to price and timing) for the Company and such other funds and vehicles may not be the same. Additionally, the Company and such Other Clients and/or vehicles will generally have different investment periods and/or investment objectives (including return profiles) and Blackstone Credit, as a result, may have conflicting goals with respect to the price and timing of disposition opportunities. As such, subject to applicable law and any applicable order issued by the SEC, the Company and/or such Other Clients may dispose of any such shared investment at different times and on different terms.

 

98


Table of Contents

Firm Involvement in Financing of Third Party Dispositions by the Company. The Company may from time to time dispose of all or a portion of an investment by way of accepting a third-party purchaser’s bid where the Firm or one or more Other Clients is providing financing as part of such bid or acquisition of the investment or underlying assets thereof. This generally would include the circumstance where the Firm or one or more Other Clients is making commitments to provide financing at or prior to the time such third-party purchaser commits to purchase such investments or assets from the Company. Such involvement of the Firm or one or more Other Clients as such a provider of debt financing in connection with the potential acquisition of portfolio investments by third parties from the Company may give rise to potential or actual conflicts of interest.

Blackstone Europe. Blackstone, Blackstone Credit and Other Clients may incorporate or otherwise organize, and one or more of its affiliates have incorporated or otherwise organized, one or more Luxembourg-based or Ireland-based entities (and in the future may organize other non-U.S. entities) that are the master holding companies or other structures through which the Company and Other Blackstone Credit Clients may principally invest into European investments (any such structure, “Blackstone Europe”) and that may be utilized by Blackstone Credit. Blackstone Europe is expected to provide one or more of the following key service functions to the Company and/or to the European-domiciled entities that are part of the investments of Other Blackstone Credit Clients and may also be owned, directly or indirectly, by Other Clients or their affiliates. The key service functions expected to be provided by Blackstone Europe and its employees are: (i) domiciliation, (ii) account management, (iii) administration, (iv) accounting, (v) tax, regulatory and organizational compliance, (vi) transaction support services, and (vii) local office space, though other services may also be provided. If approved by the Board of Trustees, Blackstone Europe is expected to receive fees for such services at no greater than market rates deemed competitive by the Firm. The Firm will endeavor to allocate fees and expenses associated with Blackstone Europe fairly and equitably, which allocation is expected to involve certain subjective assumptions based on actual data pertaining to the services provided. The Adviser believes that this method will result in a fair and equitable allocation of expenses. Any such expenses attributable directly or indirectly to the Company, including, without limitation, the Company’s allocable portion of overhead expenses (including, for example, the salary and compensation of personnel of Blackstone Europe) and costs associated with the leasing of office space, will be treated as a Company Expense and will not reduce the management fee or otherwise be shared with the Company or the shareholders.

Self-Administration of the Company. Blackstone Credit and its affiliates expect to provide certain fund administration services to the Company rather than engage or rely on a third party administrator to perform such services. The costs for providing these services are not included in the management fee under the Investment Advisory Agreement and will be paid separately by the Company. Blackstone Credit also reserves the right to charge the Company a reduced rate for these services, or to reduce or waive such charges entirely, subject to the 1940 Act. Blackstone Credit’s ability to determine the reimbursement obligation from the Company creates a conflict of interest. Blackstone Credit addresses this conflict by reviewing its fund administration fee to ensure that it is comparable and fair with regard to equivalent services performed by a non-affiliated third party at a rate negotiated on an arm’s length basis. The Board of Trustees periodically reviews the reimbursement obligation.

Outsourcing. Subject to the oversight and, in certain circumstances, approval by the Board of the Company, Blackstone may outsource to third parties many of the services performed for the Company and/or its portfolio entities, including services (such as administrative, legal, accounting, tax or other related services) that can be or historically have been performed in-house by Blackstone and its personnel. For certain third-party service providers, the fees, costs and expenses of such service providers will be borne by the Company, and in other circumstances, the fees, costs and expenses of such service providers will be borne by Blackstone. Certain third- party service providers and/or their employees will dedicate substantially all of their business time to the Company, Other Clients and/or their respective portfolio entities, while others will have other clients. In certain cases, third- party service providers and/or their employees may spend a significant amount of time at Blackstone offices, have dedicated office space at Blackstone, receive administrative support from Blackstone personnel or participate in meetings and events for Blackstone personnel, even though they are not Blackstone employees or affiliates. This creates a conflict of interest because Blackstone will have an incentive to outsource services to

 

99


Table of Contents

third parties due to a number of factors, including because retaining third parties will reduce Blackstone’s internal overhead and compensation costs for employees who would otherwise perform such services in-house.

The involvement of third-party service providers may present a number of risks due to Blackstone’s reduced control over the functions that are outsourced. There can be no assurances that Blackstone will be able to identify, prevent or mitigate the risks of engaging third-party service providers. The Company may suffer adverse consequences from actions, errors or failures to act by such third parties, and will have obligations, including indemnity obligations, and limited recourse against them. Outsourcing may not occur uniformly for all Blackstone managed vehicles and accounts and, accordingly, certain costs may be incurred by (or allocated to) the Company through the use of third-party service providers that are not incurred by (or allocated to) Other Clients.

Material, Non-Public Information. Blackstone Credit will come into possession of confidential information with respect to an issuer. Blackstone Credit may be restricted from buying, originating or selling securities, loans of, or derivatives with respect to, the issuer on behalf of the Company until such time as the information becomes public or is no longer deemed material such that it would preclude the Company from participating in an investment. Disclosure of such information to the Adviser’s personnel responsible for the affairs of the Company will be on a need-to-know basis only, and the Company may not be free to act for the Company upon any such information. Therefore, the Company may not have access to confidential information in the possession of Blackstone Credit that might be relevant to an investment decision to be made for the Company. In addition, Blackstone Credit, in an effort to avoid buying or selling restrictions on behalf of the Company or Other Blackstone Credit Clients, may choose to forego an opportunity to receive (or elect not to receive) information that other market participants or counterparties, including those with the same positions in the issuer as the Company, are eligible to receive or have received, even if possession of such information would otherwise be advantageous to the Company.

In addition, affiliates of Blackstone Credit within Blackstone may come into possession of confidential information with respect to an issuer. Blackstone Credit may be restricted from buying, originating or selling securities, loans of, or derivatives with respect to, the issuer on behalf of the Company if the Firm deemed such restriction appropriate. Disclosure of such information to the Adviser’s personnel responsible for the affairs of the Company will be on a need-to-know basis only, and the Company may not be free to act upon any such information. Therefore, the Company may not have access to confidential information in the possession of the Firm that might be relevant to an investment decision to be made by the Company. Accordingly, the Company may not be able to initiate a transaction that it otherwise might have initiated and may not be able to sell an investment that it otherwise might have sold.

Break-up and other Similar Fees. Break-up or topping fees with respect to the Company’s investments can be paid to Blackstone Credit. Alternatively, the Company could receive the break-up or topping fees directly. Break-up or topping fees paid to Blackstone Credit or the Company in connection with a transaction could be allocated, or not, to Other Clients or co-investment vehicles that invest (or are expected to invest) alongside the Company, as determined by Blackstone Credit to be appropriate in the circumstances. Generally, Blackstone Credit would not allocate break-up or topping fees with respect to a potential investment to the Company, an Other Client or co-investment vehicle unless such person would also share in Broken Deal Expenses related to the potential Investment. With respect to fees received by Blackstone Credit relating to the Company’s investments or from unconsummated transactions, shareholders will not receive the benefit of any fees relating to the Company’s investments (including, without limitation, as described above). In the case of fees for services as a director of a portfolio company, the management fee will not be reduced to the extent any Firm personnel continues to serve as a director after the Company has exited (or is in the process of exiting) the applicable portfolio company and/or following the termination of such employee’s employment with the Firm. For the avoidance of doubt, although the financial advisory and restructuring business of Blackstone has been spun out, to the extent any investment banking fees, consulting (including management consulting) fees, syndication fees, capital markets syndication and advisory fees (including underwriting fees), origination fees, servicing fees,

 

100


Table of Contents

healthcare consulting / brokerage fees, fees relating to group purchasing, financial advisory fees and similar fees for arranging acquisitions and other major financial restructurings, loan servicing and/or other types of insurance fees, operations fees, financing fees, fees for asset services, title insurance fees, and other similar fees and annual retainers (whether in cash or in kind) are received by Blackstone, such fees will not be required to be shared with the Company or the shareholders and will not reduce the management fee payable by the Company.

Broken Deal Expenses. Any expenses that may be incurred by the Company for actual investments as described herein may also be incurred by the Company with respect to broken deals (i.e., investments that are not consummated). Blackstone Credit is not required to and in most circumstances will not seek reimbursement of Broken Deal Expenses (i.e., expenses incurred in pursuit of an investment that is not consummated) from third parties, including counterparties to the potential transaction or potential co-investors. Examples of such Broken Deal Expenses include, but are not limited to, reverse termination fees, extraordinary expenses such as litigation costs and judgments, travel and entertainment expenses incurred, costs of negotiating co-investment documentation, and legal, accounting, tax and other due diligence and pursuit costs and expenses. Any such Broken Deal Expenses could, in the sole discretion of Blackstone Credit, be allocated solely to the Company and not to Other Clients or co-investment vehicles that could have made the investment, even when the Other Client or co-investment vehicle commonly invests alongside the Company in its investments or the Firm or Other Clients in their investments. In such cases, the Company’s shares of expenses would increase. In the event Broken Deal Expenses are allocated to an Other Client or a co-investment vehicle, Blackstone Credit may advance such fees and expenses without charging interest until paid by the Other Client or co-investment vehicle, as applicable.

Other Firm Business Activities. The Firm, Other Clients, their portfolio companies, and personnel and related parties of the foregoing will receive fees and compensation, including performance-based and other incentive fees, for products and services provided to the Company and its portfolio companies, such as fees for asset and property management; investment management, underwriting, syndication or refinancing of a loan or investment; loan servicing; special servicing; administrative services; advisory services on purchase or sale of an asset or company; investment banking and capital markets services; placement agent services; fund administration; internal legal and tax planning services; information technology products and services; insurance procurement; brokerage; solutions and risk management services; data extraction and management products and services; and other products and services. Such parties will also provide products and services for fees to the Firm, Other Clients and their portfolio companies, and their personnel and related parties, as well as third parties. Through its Innovations group, Blackstone incubates businesses that can be expected to provide goods and services to the Company (subject to the requirements of the 1940 Act and applicable guidance) and Other Clients and their portfolio companies, as well as other Firm-related parties and third parties. By contracting for a product or service from a business related to the Firm, the Company and its portfolio companies would provide not only current income to the business and its stakeholders, but could also create significant enterprise value in them, which would not be shared with the Company or shareholders and could benefit the Firm directly and indirectly. Also, the Firm, Other Clients and their portfolio companies, and their personnel and related parties may receive compensation or other benefits, such as through additional ownership interests or otherwise, directly related to the consumption of products and services by the Company and its portfolio companies. The Company and its portfolio companies will incur expense in negotiating for any such fees and services, which will be treated as Company Expenses. In addition, the Firm may receive fees associated with capital invested by co-investors relating to investments in which the Company participates or otherwise, in connection with a joint venture in which the Company participates (subject to the 1940 Act) or otherwise with respect to assets or other interests retained by a seller or other commercial counterparty with respect to which the Firm performs services. Finally, the Firm and its personnel and related parties may also receive compensation in connection with referrals and related activities of such business incubated by the Blackstone Innovations group.

The Company will, as determined by Blackstone Credit and as permitted by the governing fund documents, bear the cost of fund administration, in house legal, tax planning and other related services provided by Firm personnel and related parties to the Company and its portfolio companies, including the allocation of their

 

101


Table of Contents

compensation and related overhead otherwise payable by the Firm, or pay for their services at market rates, as discussed below in “Self-Administration of the Company.” Such allocations or charges can be based on any of the following methodologies: (i) requiring personnel to periodically record or allocate their historical time spent with respect to the Company or the Firm approximating the proportion of certain personnel’s time spent with respect to the Company, and in each case allocating their compensation and allocable overhead based on time spent, or charging their time spent at market rates, (ii) the assessment of an overall dollar amount (based on a fixed fee or percentage of assets under management) that the Firm believes represents a fair recoupment of expenses and a market rate for such services or (iii) any other similar methodology determined by the Firm to be appropriate under the circumstances. Certain Firm personnel will provide services to few, or only one, of the Company and Other Clients, in which case the Firm could rely upon rough approximations of time spent by the employee for purposes of allocating the salary and overhead of the person if the market rate for services is clearly higher than allocable salary and overhead. However, any methodology (including the choice thereof) involves inherent conflicts and may result in incurrence of greater expenses by the Company and its portfolio companies than would be the case if such services were provided by third parties.

Blackstone Credit, Other Clients and their portfolio companies, and their affiliates, personnel and related parties could continue to receive fees, including performance-based or incentive fees, for the services described in the preceding paragraphs with respect to investments sold by the Company or a portfolio company to a third party buyer after the sale is consummated. Such post-disposition involvement will give rise to potential or actual conflicts of interest, particularly in the sale process. Moreover, Blackstone Credit, Other Clients and their portfolio companies, and their affiliates, personnel and related parties may acquire a stake in the relevant asset as part of the overall service relationship, at the time of the sale or thereafter.

Blackstone Credit does not have any obligation to ensure that fees for products and services contracted by the Company or its portfolio companies are at market rates unless the counterparty is considered an affiliate of the Firm and given the breadth of the Firm’s investments and activities Blackstone Credit may not be aware of every commercial arrangement between the Company and its portfolio companies, on the one hand, and the Firm, Other Clients and their portfolio companies, and personnel and related parties of the foregoing, on the other hand.

Except as set forth above, the Company and shareholders will not receive the benefit (e.g., through a reduction to the management fee or otherwise) of any fees or other compensation or benefit received by Blackstone Credit, its affiliates or their personnel and related parties. (See also “—Service Providers, Vendors and Other Counterparties Generally” and “—Other Firm Business Activities.”)

Securities and Lending Activities. Blackstone, its affiliates and their related parties and personnel will from time to time participate in underwriting or lending syndicates with respect to current or potential portfolio companies, or may otherwise act as arrangers of financing, including with respect to the public offering and/or private placement of debt or equity securities issued by, or loan proceeds borrowed by the Company and its portfolio companies, or otherwise in arranging financing (including loans) for such portfolio companies or advise on such transactions. Such underwritings or engagements may be on a firm commitment basis or may be on an uncommitted “best efforts” basis, and the underwriting or financing parties are under no duty to provide any commitment unless specifically set forth in the relevant contract. Blackstone may also provide placement or other similar services to purchasers or sellers of securities, including loans or instruments issued by portfolio companies. There may also be circumstances in which the Company commits to purchase any portion of such issuance from the portfolio company that a Blackstone broker-dealer intends to syndicate to third parties. As a result thereof, subject to the limitations of the 1940 Act, Blackstone may receive commissions or other compensation, thereby creating a potential conflict of interest. This could include, by way of example, fees and/or commissions for equity syndications to co-investment vehicles. In certain cases, subject to the limitations of the 1940 Act, a Blackstone broker-dealer will from time to time act as the managing underwriter or a member of the underwriting syndicate or broker for the Company or its portfolio companies, or as dealer, broker or advisor to a counterparty to the Company or a portfolio company and purchase securities from or sell securities to the Company, Other Clients or portfolio companies of the Company or Other Clients or advise on such transactions.

 

102


Table of Contents

Blackstone will also from time to time, on behalf of the Company or other parties to a transaction involving the Company or its portfolio companies, effect transactions, including transactions in the secondary markets that result in commissions or other compensation paid to Blackstone by the Company or its portfolio companies or the counterparty to the transaction, thereby creating a potential conflict of interest. This could include, by way of example, fees and/or commissions for equity syndications to co-investment vehicles. Subject to applicable law, Blackstone will from time to time receive underwriting fees, discounts, placement commissions, loan modification or restructuring fees, servicing fees, capital markets advisory fees, lending arrangement fees, asset/property management fees, insurance (including title insurance) fees and consulting fees, monitoring fees, commitment fees, syndication fees, origination fees, organizational fees, operational fees, loan servicing fees, and financing and divestment fees (or, in each case, rebates in lieu of any such fees, whether in the form of purchase price discounts or otherwise, even in cases where Blackstone, an Other Client or its portfolio companies are purchasing debt) or other compensation with respect to the foregoing activities, which are not required to be shared with the Company. In addition, the management fee with respect to a shareholder generally will not be reduced by such amounts. Therefore, Blackstone will from time to time have a potential conflict of interest regarding the Company and the other parties to those transactions to the extent it receives commissions, discounts or other compensation from such other parties. The Board of Trustees, in its sole discretion, will approve any transactions, subject to the limitations of the 1940 Act, in which a Blackstone broker-dealer acts as an underwriter, as broker for the Company, or as dealer, broker or advisor, on the other side of a transaction with the Company only where the Board of Trustees believes in good faith that such transactions are appropriate for the Company and, by executing a Subscription Agreement for shares in the Company, a shareholder consents to all such transactions, along with the other transactions involving conflicts of interest described herein, to the fullest extent permitted by law.

When Blackstone serves as underwriter with respect to securities of the Company or its portfolio companies, the Company and such portfolio companies could from time to time be subject to a “lock-up” period following the offering under applicable regulations during which time the Company or portfolio company would be unable to sell any securities subject to the “lock-up.” This may prejudice the ability of the Company and its portfolio companies to dispose of such securities at an opportune time. In addition, Blackstone Capital Markets may serve as underwriter in connection with the sale of securities by the Company or its portfolio companies. Conflicts may arise because such engagement would result in Blackstone Capital Markets receiving selling commissions or other compensation in connection with such sale. (See also “—Portfolio Company Relationships Generally” below).

Blackstone and Blackstone Credit employees are generally permitted to invest in alternative investment funds, real estate funds, hedge funds or other investment vehicles, including potential competitors of the Company. The Company will not receive any benefit from any such investments.

PJT. On October 1, 2015, Blackstone spun off its financial and strategic advisory services, restructuring and reorganization advisory services, and its Park Hill fund placement businesses and combined these businesses with PJT Partners Inc. (“PJT”), an independent financial advisory firm founded by Paul J. Taubman. While the combined business operates independently from Blackstone and is not an affiliate thereof, it is expected that there will be substantial overlapping ownership between Blackstone and PJT for a considerable period of time going forward. Therefore, conflicts of interest will arise in connection with transactions between or involving the Company and its portfolio companies, on the one hand, and PJT, on the other. The pre-existing relationship between Blackstone and its former personnel involved in financial and strategic advisory services at PJT, the overlapping ownership and co-investment and other continuing arrangements between PJT and Blackstone may influence Blackstone Credit to select or recommend PJT to perform services for the Company or its portfolio companies, the cost of which will generally be borne directly or indirectly by the Company. Given that PJT is no longer an affiliate of Blackstone, Blackstone Credit and its affiliates will be free to cause the Company and portfolio companies to transact with PJT generally without restriction under the applicable governing documents, notwithstanding the relationship between Blackstone and PJT.

 

103


Table of Contents

Portfolio Company Relationships Generally. The Company’s portfolio companies are expected to be counterparties to or participants in agreements, transactions or other arrangements with portfolio companies of Other Clients for the provision of goods and services, purchase and sale of assets and other matters. Although the Firm may determine that such agreements, transactions or other arrangements are consistent with the requirements of such Other Clients’ offering and/or governing agreements, such agreements, transactions or other arrangements may not have otherwise been entered into but for the affiliation with Blackstone Credit and/or Blackstone. These agreements, transactions or other agreements involve fees, commissions, servicing payments and/or discounts to Blackstone Credit, any Blackstone affiliate (including personnel) or a portfolio company, none of which reduce the management fee payable by the Company). This may give rise to actual or potential conflicts of interest for the Adviser, the Company and/or their respective affiliates, as such agreements, transactions and arrangements may be more favorable for on portfolio company than another, thus benefiting the Company or Other Clients at the expense of the other. For example, the Firm may cause, or offer the opportunity to, portfolio companies to enter into agreements regarding group procurement (such as the group purchasing organization), benefits management, purchase of title and/or other insurance policies (which may be pooled across portfolio companies and discounted due to scale) and other operational, administrative or management related matters from a third party or a Firm affiliate, and other similar operational initiatives that may result in commissions or similar payments, including related to a portion of the savings achieved by the portfolio company. Such agreements, transactions or other arrangements may be entered into without the consent or direct involvement of the Company and/or such Other Client or the consent of the Board of Trustees and/or the shareholders of the Company or such Other Client (including, without limitation, in the case of minority and/or non-controlling investments by the Company in such portfolio companies or the sale of assets from one portfolio company to another) and/or such Other Client. In any such case, the Company may not be involved in the negotiation process, and there can be no assurance that the terms of any such agreement, transaction or other arrangement will be as favorable to the Company as otherwise would be the case if the counterparty were not related to the Firm.

In addition, it is possible that certain portfolio companies of Other Clients or companies in which Other Clients have an interest will compete with the Company for one or more investment opportunities and/or engage in activities that may have adverse consequences on the Company and/or its portfolio companies. As an example of the latter, the laws and regulations of certain jurisdictions (e.g., bankruptcy, environmental, consumer protection and/or labor laws) may not recognize the segregation of assets and liabilities as between separate entities and may permit recourse against the assets of not just the entity that has incurred the liabilities, but also the other entities that are under common control with, or part of the same economic group as, such entity. In such circumstances, the assets of the Company and/or its portfolio companies may be used to satisfy the obligations or liabilities of one or more Other Clients, their portfolio companies and/or affiliates.

Certain portfolio companies may have established or invested in, or may in the future establish or invest in, vehicles that are managed exclusively by the portfolio company (and not the Company or the Firm or any of its affiliates) and that invest in asset classes or industry sectors (such as cyber security) that fall within the Company’s investment strategy. Such vehicles, which may not be considered affiliates of the Firm and would not be subject to the Firm’s policies and procedures, may compete with the Company for investment opportunities. Portfolio companies and affiliates of the Firm may also establish other investment products, vehicles and platforms focusing on specific asset classes or industry sectors (such as reinsurance) that may compete with the Company for investment opportunities (it being understood that such arrangements may give rise to conflicts of interest that may not necessarily be resolved in favor of the Company). Portfolio companies and affiliates of the Firm may also establish other investment products, vehicles and platforms focusing on specific asset classes or industry sectors (such as reinsurance) that may compete with the Company for investment opportunities (it being understood that such arrangements may give rise to conflicts of interest that may not necessarily be resolved in favor of the Company). In addition, the Company may hold non-controlling interests in certain portfolio companies and, as a result, such portfolio companies could engage in activities outside of the Company’s control that may have adverse consequences on the Company and/or its other portfolio companies.

 

104


Table of Contents

In addition, the Firm has also entered into an investment management arrangement whereby it provides investment management services to Fidelity & Guaranty Life Insurance Company (a portfolio company of certain Other Clients), which will involve investments across a variety of asset classes (including investments that may otherwise be appropriate for the Company), and in the future the Firm may enter into similar arrangements with other portfolio companies. Such arrangements may reduce the allocations of investments to the Company, and the Firm may be incentivized to allocate investments away from the Company to the counterparties to such investment management arrangements or other vehicles/accounts to the extent the economic arrangements related thereto are more favorable to the Firm relative to the terms of the Company.

Further, portfolio companies with respect to which the Company may elect members of the board of directors may, as a result, subject the Company and/or such directors to fiduciary obligations to make decisions that they believe to be in the best interests of any such portfolio company. Although in most cases the interests of the Company and any such portfolio company will be aligned, this may not always be the case. This can be expected to create conflicts of interest between the relevant director’s obligations to any such portfolio company and its stakeholders, on the one hand, and the interests of the Company, on the other hand. Although Blackstone Credit will generally seek to minimize the impact of any such conflicts, there can be no assurance they will be resolved favorably for the Company. For instance, such positions could impair the ability of the Company to sell the securities of an issuer in the event a director receives material non-public information by virtue of his or her role, which would have an adverse effect on the Company. Furthermore, an employee of Blackstone serving as a director to a portfolio company owes a fiduciary duty to the portfolio company, on the one hand, and the Company, on the other hand, and such employee may be in a position where they must make a decision that is either not in the best interest of the Company, or is not in the best interest of the portfolio company. Blackstone personnel serving as directors may make decisions for a portfolio company that negatively impact returns received by the Company as an investor in the portfolio company. In addition, to the extent an employee serves as a director on the board of more than one portfolio company, such employees’ fiduciaries duties among the two portfolio companies can be expected to create a conflict of interest. Certain decisions made by a director may subject the Adviser, its affiliates or the Company to claims they would not otherwise be subject to as an investor, including claims of breach of duty of loyalty, securities claims and other director-related claims. In general, the Company will indemnify the Adviser and Blackstone Credit personnel from such claims.

Portfolio Company Service Providers and Vendors. Subject to applicable law, the Company, Other Clients, portfolio companies of each of the foregoing and Blackstone Credit can be expected to engage portfolio companies of the Company and Other Clients to provide some or all of the following services: (a) corporate support services (including, without limitation, accounts payable, accounting/audit (including valuation support services), account management, insurance, procurement, placement, brokerage, consulting, cash management, corporate secretarial services, domiciliation, data management, directorship services, finance/budget, human resources, information technology/systems support, internal compliance/KYC, judicial processes, legal, operational coordination (i.e., coordination with JV partners, property managers), risk management, reporting, tax, tax analysis and compliance (e.g., CIT and VAT compliance), transfer pricing and internal risk control, treasury and valuation services); (b) loan services (including, without limitation, monitoring, restructuring and work-out of performing, sub-performing and nonperforming loans, administrative services, and cash management); (c) management services (i.e., management by a portfolio company, Blackstone affiliate or third party (e.g., a third-party manager) of operational services); (d) operational services (i.e., general management of day to day operations); (e) risk management (tax and treasury); (f) insurance procurement, placement, brokerage and consulting services; and (g) other services. Similarly, Blackstone Credit, Other Clients and their portfolio companies can be expected to engage portfolio companies of the Company to provide some or all of these services. Some of the services performed by portfolio company service providers could also be performed by Blackstone Credit from time to time and vice versa. Fees paid by the Company or its portfolio companies to the other portfolio company service providers do not reduce the management fee payable by the Company and are not otherwise shared with the Company.

 

105


Table of Contents

Portfolio companies of the Company and Other Clients that can be expected to provide services to the Company and its portfolio companies include, without limitation, the following, and may include additional portfolio companies that may be formed or acquired in the future:

BTIG. BTIG, LLC (“BTIG”) is a global financial services firm in which certain Blackstone entities own a strategic minority investment. BTIG provides institutional trading, investment banking, research and related brokerage services and may provide goods and services for the Company or its portfolio companies.

Optiv. Optiv Security, Inc. is a portfolio company held by certain Blackstone private equity funds that provides a full slate of information security services and solutions and may provide goods and services for the Company and its portfolio companies.

PSAV. PSAV, Inc. is a portfolio company held by certain Blackstone private equity funds that provides outsourced audiovisual services and event production and may provide goods and services for the Company and its portfolio companies.

Refinitiv. On October 1, 2018, a consortium led by Blackstone announced that private equity funds managed by Blackstone had completed an acquisition of Thomson Reuters’ Financial & Risk business (“Refinitiv”). On January 29, 2021, Refinitiv was sold to London Stock Exchange Group (“LSEG”), with Blackstone private equity funds receiving a minority stake in LSEG. Refinitiv operates a pricing service that provides valuation services and may provide goods and services for the Company and its portfolio companies.

Kryalos. Blackstone through one or more Other Clients has made a minority investment in Kryalos Investments S.r.l. (“Kryalos”), an operating partner in certain real estate investments made by Other Clients. Kryalos may perform services for the Company and its portfolio companies.

Valkyrie. Valkyrie BTO Aviation LLC (“Valkyrie”) is a Blackstone affiliate that provides asset management and loan servicing solutions for investments in the aviation space, including for investments by the Company, Other Clients and their portfolio companies, affiliates and related parties. The asset management services provided by Valkyrie with respect to such investments can be expected to include, without limitation, origination or sourcing of investment opportunities, diligence, negotiation, analysis, servicing, development, management and disposition and other related services (e.g., marketing, financial, administrative, legal and risk management). In exchange for such services, Valkyrie earns fees, including through incentive-based compensation payable to their management team, which would have otherwise been paid to third parties. As a result of the foregoing and Blackstone’s ownership of Valkyrie, Blackstone may be incentivized to participate in and pursue more aviation-related transactions due to the prospect of Valkyrie earning such fees. Engaging Valkyrie to perform services will reduce Blackstone’s internal overhead and compensation costs for employees who would otherwise perform such services. As a result, while Blackstone believes that Valkyrie will provide services at or better than those provided by third parties, there is an inherent conflict of interest that would incentivize Blackstone to pursue aviation-related transactions and engage Valkyrie to perform such services.

The Company and its portfolio companies will compensate one or more of these service providers and vendors owned by the Company or Other Clients, including through incentive based compensation payable to their management teams and other related parties. The incentive-based compensation paid with respect to a portfolio company or asset of the Company or Other Clients will vary from the incentive based compensation paid with respect to other portfolio companies and assets of the Company and Other Clients; as a result the management team or other related parties can be expected to have greater incentives with respect to certain assets and portfolio companies relative to others, and the performance of certain assets and portfolio companies may provide incentives to retain management that also service other assets and portfolio companies. Some of these service providers and vendors owned or controlled by the Company or Other Clients will charge the Company and its portfolio companies for goods and services at rates generally consistent with those available in the market for similar goods and services. The discussion regarding the determination of market rates under “Firm Affiliated

 

106


Table of Contents

Service Providers” herein applies equally in respect of the fees and expenses of the portfolio company service providers, if charged at rates generally consistent with those available in the market. Other service providers and vendors owned and/or controlled by the Company or Other Clients pass through expenses on a cost reimbursement, no-profit or break-even basis, in which case the service provider allocates costs and expenses directly associated with work performed for the benefit of the Company and its portfolio companies to them, along with any related tax costs and an allocation of the service provider’s overhead, including any of the following: salaries, wages, benefits and travel expenses; marketing and advertising fees and expenses; legal, accounting and other professional fees and disbursements; office space and equipment; insurance premiums; technology expenditures, including hardware and software costs; costs to engage recruitment firms to hire employees; diligence expenses; one-time costs, including costs related to building-out and winding-down a portfolio company; taxes; and other operating and capital expenditures. Any of the foregoing costs, although allocated in a particular period, will, in certain circumstances, relate to activities occurring outside the period, and therefore the Company could pay more than its pro rata portion of fees for services. The allocation of overhead among the entities and assets to which services are provided can be expected to be based on any of a number of different methodologies, including, without limitation, “cost” basis as described above, “time-allocation” basis, “per unit” basis, “per square footage” basis or “fixed percentage” basis. There can be no assurance that a different manner of allocation would result in the Company and its portfolio companies bearing less or more costs and expenses. Blackstone Credit will not always perform or obtain benchmarking analysis or third-party verification of expenses with respect to services provided on a cost reimbursement, no profit or break even basis. There can be no assurances that amounts charged by portfolio company service providers that are not controlled by the Company or Other Clients will be consistent with market rates or that any benchmarking, verification or other analysis will be performed with respect to such charges. If benchmarking is performed, the related expenses will be borne by the Company, Other Clients and their respective portfolio companies and will not reduce the management fee. A portfolio company service provider will, in certain circumstances, subcontract certain of its responsibilities to other portfolio companies. In such circumstances, the relevant subcontractor could invoice the portfolio company for fees (or in the case of a cost reimbursement arrangement, for allocable costs and expenses) in respect of the services provided by the subcontractor. The portfolio company, if charging on a cost reimbursement, no-profit or break-even basis, would in turn allocate those costs and expenses as it allocates other fees and expenses as described above. Similarly, Other Clients, their portfolio companies and Blackstone Credit can be expected to engage portfolio companies of the Company to provide services, and these portfolio companies will generally charge for services in the same manner described above, but the Company and its portfolio companies generally will not be reimbursed for any costs (such as start-up costs) relating to such portfolio companies incurred prior to such engagement. Some of the services performed by these service providers could also be performed by Blackstone Credit from time to time and vice versa. Fees paid by the Company or its portfolio companies to these service providers do not the management fee payable to the Adviser.

Where compensation paid to an affiliated service provider from the Company or its portfolio company is based on market rates, such compensation will not be based on the cost incurred by the applicable service provider and therefore will likely result in a profit to such service provider. In the event the service provider is an affiliate of Blackstone Credit, Blackstone Credit experiences a conflict of interest in determining the terms of any such engagement. There can be no assurance that an unaffiliated third party would not charge a lesser rate.

Service Providers, Vendors and Other Counterparties Generally. Certain third party advisors and other service providers and vendors to the Company and its portfolio companies (including accountants, administrators, lenders, bankers, brokers, attorneys, consultants, title agents and investment or commercial banking firms) are owned by the Firm, the Company or Other Clients or provide goods or services to, or have other business, personal, financial or other relationships with, the Firm, the Other Clients and their respective portfolio companies and affiliates and personnel. Such advisors and service providers referred to above may be investors in the Company, affiliates of the Adviser, sources of financing and investment opportunities or co-investors or commercial counterparties or entities in which the Firm and/or Other Clients have an investment, and payments by the Company and/or such entities may indirectly benefit the Firm, the Other Clients and their respective portfolio companies or any affiliates or personnel. Also, advisors, lenders, investors, commercial

 

107


Table of Contents

counterparties, vendors and service providers (including any of their affiliates or personnel) to the Company and its portfolio companies could have other commercial or personal relationships with the Firm, Other Clients and their respective portfolio companies, or any affiliates, personnel or family members of personnel of the foregoing. Although the Firm selects service providers and vendors it believes are most appropriate in the circumstances based on its knowledge of such service providers and vendors (which knowledge is generally greater in the case of service providers and vendors that have other relationships to the Firm), the relationship of service providers and vendors to the Firm as described above will influence the Firm in deciding whether to select, recommend or form such an advisor or service provider to perform services for the Company, subject to applicable law, or a portfolio company, the cost of which will generally be borne directly or indirectly by the Company and can be expected to incentivize the Firm to engage such service provider over a third party, utilize the services of such service providers and vendors more frequently than would be the case absent the conflict, or to pay such service providers and vendors higher fees or commissions, resulting in higher fees and expenses being borne by the Company, than would be the case absent the conflict. The incentive could be created by current income and/or the generation of enterprise value in a service provider or vendor; the Firm can be expected to also have an incentive to invest in or create service providers and vendors to realize on these opportunities.

The Firm has a practice of not entering into any arrangements with advisors, vendors or service providers that provide lower rates or discounts to the Firm itself compared to those it enters into on behalf of the Company and its portfolio companies for the same services. However, legal fees for unconsummated transactions are often charged at a discount rate, such that if the Company and its portfolio companies consummate a higher percentage of transactions with a particular law firm than the Firm, the Company, Other Clients and their portfolio companies, the shareholders could indirectly pay a higher net effective rate for the services of that law firm than the Firm, the Company or Other Clients or their portfolio companies. Also, advisors, vendors and service providers often charge different rates or have different arrangements for different types of services. For example, advisors, vendors and service providers often charge fees based on the complexity of the matter as well as the expertise and time required to handle it. Therefore, to the extent the types of services used by the Company and its portfolio companies are different from those used by the Firm, Other Clients and their portfolio companies, and their affiliates and personnel, the Company and its portfolio companies can be expected to pay different amounts or rates than those paid by such other persons. Similarly, the Firm, the Company, the Other Clients and their portfolio companies and affiliates can be expected to enter into agreements or other arrangements with vendors and other similar counterparties (whether such counterparties are affiliated or unaffiliated with the Firm) from time to time whereby such counterparty will, in certain circumstances, charge lower rates (or no fee) or provide discounts or rebates for such counterparty’s products or services depending on the volume of transactions in the aggregate or other factors.

Subject to applicable law, the Company, Other Clients and their portfolio companies are expected to enter into joint ventures with third parties to which the service providers and vendors described above will provide services. In some of these cases, the third party joint venture partner may negotiate to not pay its pro rata share of fees, costs and expenses to be allocated as described above, in which case the Company, Other Clients and their portfolio companies that also use the services of the portfolio company service provider will, directly or indirectly, pay the difference, or the portfolio company service provider will bear a loss equal to the difference.

The Firm may, from time to time, encourage service providers to funds and investments to use, generally at market rates and/or on arm’s length terms (and/or on the basis of best execution, if applicable), the Firm-affiliated service providers in connection with the business of the Company, portfolio companies, and unaffiliated entities. This practice creates a conflict of interest because it provides an indirect benefit to the Firm in the form of added business for the Firm-affiliated service providers without any reduction to the Company’s management fee.

 

108


Table of Contents

Certain portfolio companies that provide services to the Company, Other Clients and/or portfolio companies or assets of the Company and/or Other Clients may be transferred between and among the Company and/or Other Clients (where the Company may be a seller or a buyer in any such transfer) for minimal or no consideration (based on a third party valuation confirming the same). Such transfers may give rise to actual or potential conflicts of interest for Blackstone Credit.

Firm Affiliated Service Providers. Certain of the Company’s, the Firm’s and/or portfolio companies’ advisers and other service providers, or their affiliates (including accountants, administrators, lenders, bankers, brokers, attorneys, consultants, and investment or commercial banking firms) also provide goods or services to, or have business, personal, financial or other relationships with, the Firm, its affiliates and portfolio companies. Such advisers and service providers (or their affiliates) may be investors in the Company, affiliates of the Firm, sources of investment opportunities, co-investors, commercial counterparties and/or portfolio companies in which the Firm and/or the Company has an investment. Accordingly, payments by the Company and/or such entities may indirectly benefit the Company and/or its affiliates, including the Firm and Other Clients. No fees charged by these service providers and vendors will reduce the management fees payable to the Adviser. Furthermore, the Firm, the Other Clients and their portfolio companies and their affiliates and related parties will use the services of these Firm affiliates, including at different rates. Although the Firm believes the services provided by its affiliates are equal or better than those of third parties, the Firm directly benefits from the engagement of these affiliates, and there is therefore an inherent conflict of interest such as those described above.

Because the Firm has many different businesses, including the Blackstone Capital Markets Group, which Blackstone investment teams and portfolio companies may engage to provide underwriting and capital market advisory services, it is subject to a number of actual and potential conflicts of interest, greater regulatory oversight and more legal and contractual restrictions than that to which it would be subject if it had just one line of business. To the extent Blackstone determines appropriate, conflict mitigation strategies may be put in place with respect to a particular circumstance, such as internal information barriers or recusal, disclosure or other steps determined appropriate by the Adviser. Service providers affiliated with the Firm, which are generally expected to receive competitive market rate fees (as determined by the Adviser or its affiliates) with respect to certain Investments, include:

BPM. Blackstone Property Management is a Blackstone affiliate that may provide property management, leasing oversight, corporate services (including accounting and reporting), development and construction management, and transaction support services to any of the Company’s investment properties primarily located in the United Kingdom and continental Europe.

Equity Healthcare. Equity Healthcare LLC (“Equity Healthcare”) is a Blackstone affiliate that negotiates with providers of standard administrative services for health benefit plans and other related services for cost discounts, quality of service monitoring, data services and clinical consulting. Because of the combined purchasing power of its client participants, which include unaffiliated third parties, Equity Healthcare is able to negotiate pricing terms that are believed to be more favorable than those that the portfolio companies could obtain on an individual basis. The fees received by Equity Healthcare in connection with services provided to investments will not reduce the management fee payable by the Company.

LNLS. Blackstone wholly owns a leading national title agency, Lexington National Land Services (“LNLS”), a title agent company. LNLS may act as an agent for one or more underwriters in issuing title policies and/or providing support services in connection with investments by the Company, Other Clients and third parties. LNLS focuses on transactions in rate-regulated U.S. states where the cost of title insurance is non-negotiable. LNLS will not perform services in nonregulated U.S. states for the Company and Other Clients unless (i) in the context of a portfolio transaction that includes assets in rate-regulated U.S. states, (ii) as part of a syndicate of title insurance companies where the rate is negotiated by other insurers or their agents, (iii) when a third party is paying all or a material portion of the premium or (iv) when providing only support services to the underwriter and not negotiating the title policy or issuing it to the insured. LNLS

 

109


Table of Contents

earns fees, which would have otherwise been paid to third parties, by providing title agency services and facilitating the placement of title insurance with underwriters. Blackstone receives distributions from LNLS in connection with investments by the Company based on its equity interest in LNLS. In each case, there will be no related reduction in management fees. As a result, while Blackstone believes that venture will provide services at or better than those provided by third parties (even in jurisdictions where insurance rates are regulated), there is an inherent conflict of interest that would incentivize Blackstone to engage LNLS over a third party.

Refinitiv. See “—Portfolio Company Service Providers and Vendors.”

Certain Blackstone-affiliated service providers and their respective personnel will receive a management promote, an incentive fee and other performance-based compensation in respect of investments, sales or other transaction volume. Furthermore, Blackstone-affiliated service providers may charge costs and expenses based on allocable overhead associated with personnel working on relevant matters (including salaries, benefits and other similar expenses).

In connection with such relationships, Blackstone Credit and, if required by applicable law, the Board of Trustees, will make determinations of competitive market rates based on its consideration of a number of factors, which are generally expected to include Blackstone Credit’s experience with non-affiliated service providers, benchmarking data and other methodologies determined by Blackstone Credit to be appropriate under the circumstances (i.e., rates that fall within a range that Blackstone Credit has determined is reflective of rates in the applicable market and certain similar markets, though not necessarily equal to or lower than the median rate of comparable firms). In respect of benchmarking, while Blackstone Credit often obtains benchmarking data regarding the rates charged or quoted by third parties for services similar to those provided by Blackstone Credit affiliates in the applicable market or certain similar markets, relevant comparisons may not be available for a number of reasons, including, without limitation, as a result of a lack of a substantial market of providers or users of such services or the confidential or bespoke nature of such services (e.g., different assets may receive different services). In addition, benchmarking data is based on general market and broad industry overviews, rather than determined on an asset by asset basis. As a result, benchmarking data does not take into account specific characteristics of individual assets then invested in by the Company (such as location or size), or the particular characteristics of services provided. For these reasons, such market comparisons may not result in precise market terms for comparable services. Expenses to obtain benchmarking data will be borne by the Company, Other Clients and their respective portfolio companies and will not reduce the management fee. Finally, in certain circumstances Blackstone Credit may determine that third party benchmarking is unnecessary, either because the price for a particular good or service is mandated by law (e.g., title insurance in rate regulated states) or because Blackstone Credit has access to adequate market data to make the determination without reference to third party benchmarking. For example, certain portfolio companies may enter into an employer health program arrangement or similar arrangements with Equity Healthcare, a Blackstone affiliate that negotiates with providers of standard administrative services and insurance carriers for health benefit plans and other related services for cost discounts, quality of service monitoring, data services and clinical consulting. Because of the combined purchasing power of its client participants, Equity Healthcare is able to negotiate pricing terms from providers that are believed to be more favorable than the companies could obtain for themselves on an individual basis. The payments made to Blackstone in connection with Equity Healthcare, group purchasing, insurance and benefits management will not reduce the management fee payable to the Adviser.

Portfolio company service providers described in this section are generally owned by one or more Blackstone funds. In certain instances a similar company could be owned by Blackstone directly. Blackstone could cause a transfer of ownership of one of these service providers from an Other Client to the Company. The transfer of a portfolio company service provider between the Company and an Other Client (where the Company may be a seller or a buyer in any such transfer) will generally be consummated for minimal or no consideration. The Adviser may, but is not required to, obtain a third party valuation confirming the same, and if it does, the Adviser may rely on such valuation.

 

110


Table of Contents

Advisers and service providers, or their affiliates, often charge different rates, including below-market or no fee, or have different arrangements for different types of services. With respect to service providers, for example, the fee for a given type of work may vary depending on the complexity of the matter as well as the expertise required and demands placed on the service provider. Therefore, to the extent the types of services used by the Company and/or portfolio companies differ from those used by the Firm and its affiliates (including personnel), Blackstone Credit and/or Blackstone or their respective affiliates (including personnel) may pay different amounts or rates than those paid by the Company and/or portfolio companies. However, Blackstone Credit and its affiliates have a longstanding practice of not entering into any arrangements with advisers or service providers that could provide for lower rates or discounts than those available to the Company, Other Clients and/or portfolio companies for the same services. Furthermore, advisers and service providers may provide services exclusively to the Firm and its affiliates, including the Company, Other Clients and their portfolio companies, although such advisers and service providers would not be considered employees of Blackstone or Blackstone Credit. Similarly, Blackstone, Blackstone Credit, each of their respective affiliates, the Company, the Other Clients and/or their portfolio companies, may enter into agreements or other arrangements with vendors and other similar counterparties (whether such counterparties are affiliated or unaffiliated with the Firm) from time to time whereby such counterparty may charge lower rates (or no fee) and/or provide discounts or rebates for such counterparty’s products and/or services depending on certain factors, including volume of transactions entered into with such counterparty by the Firm, its affiliates, the Company, the Other Clients and their portfolio companies in the aggregate.

In addition, investment banks or other financial institutions, as well as Blackstone employees, may also be investors in the Company. These institutions and employees are a potential source of information and ideas that could benefit the Company. Blackstone has procedures in place reasonably designed to prevent the inappropriate use of such information by the Company.

Transactions with Portfolio Companies. The Firm and portfolio companies of the Company and Other Clients provide products and services to or otherwise contract with the Company and its portfolio companies, among others. In the alternative, the Firm may form a joint venture with such a company to implement such referral arrangement. For example, such arrangements may include the establishment of a joint venture or other business arrangement between the Firm, on the one hand, and a portfolio company of the Company, portfolio company of an Other Client or third party, on the other hand, pursuant to which the joint venture or business provides services (including, without limitation, corporate support services, loan management services, management services, operational services, risk management services, data management services, consulting services, brokerage services, insurance procurement, placement, brokerage and consulting services, and other services) to portfolio companies of the Company (and portfolio companies of Other Clients) that are referred to the joint venture or business by the Firm. The Firm, the Company and Other Clients and their respective portfolio companies and personnel and related parties of the foregoing may make referrals or introductions to portfolio companies of the Company or Other Clients in an effort, in part, to increase the customer base of such companies or businesses (and therefore the value of the investment held by the Company or Other Client, which would also benefit the Firm financially through its participation in such joint venture or business) or because such referrals or introductions may result in financial benefits, such as additional equity ownership and/or milestones benefitting the referring or introducing party that are tied or related to participation by the portfolio companies of the Company and/or of Other Clients, accruing to the party making the introduction. The Company and the shareholders will not share in any fees, economics, equity or other benefits accruing to the Firm, Other Clients and their portfolio companies as a result of the introduction of the Company and its portfolio companies. Moreover, payments made to the Firm in connection with such arrangements will not reduce the management fee payable to the Adviser. There may, however, be instances in which the applicable arrangements provide that the Company or its portfolio companies share in some or all of any resulting financial incentives (including, in some cases, equity ownership) based on structures and allocation methodologies determined in the sole discretion of the Firm. Conversely, where the Company or one of its portfolio companies is the referring or introducing party, rather than receiving all of the financial incentives (including, in some cases, additional equity ownership) for

 

111


Table of Contents

similar types of referrals and/or introductions, such financial incentives (including, in some cases, equity ownership) may be similarly shared with the participating Other Clients or their respective portfolio companies.

The Firm may also enter into commercial relationships with third party companies, including those in which the Company considered making an investment (but ultimately chose not to pursue). For example, the Firm may enter into an introducer engagement with such company, pursuant to which the Firm introduces the company to unaffiliated third parties (which may include current and former portfolio companies and portfolio companies of Other Clients and/or their respective employees) in exchange for a fee from, or equity interest in, such company. Even though the Firm may benefit financially from this commercial relationship, the Firm will be under no obligation to reimburse the Company for Broken Deal Expenses incurred in connection with its consideration of the prospective investment and such arrangements will not be subject to the management fee payable to the Adviser and otherwise described herein.

Additionally, the Firm or an affiliate thereof will from time to time hold equity or other investments in companies or businesses that provide services to or otherwise contract with portfolio companies. Blackstone and Blackstone Credit have in the past entered (and can be expected in the future to enter) into relationships with companies in the information technology, corporate services and related industries whereby Blackstone acquires an equity or similar interest in such company. In connection with such relationships, Blackstone and/or Blackstone Credit may also make referrals and/or introductions to portfolio companies (which may result in financial incentives (including additional equity ownership) and/or milestones benefitting Blackstone and/or Blackstone Credit that are tied or related to participation by portfolio companies). Such joint venture or business could use data obtained from portfolio companies of the Company and/or portfolio companies of Other Clients. (See “—Data.”) These arrangements may be entered into without the consent or direct involvement of the Company. The Company and the shareholders will not share in any fees or economics accruing to Blackstone and/or Blackstone Credit as a result of these relationships and/or participation by portfolio companies.

With respect to transactions or agreements with portfolio companies (including, for the avoidance of doubt, long-term incentive plans), at times if officers unrelated to the Firm have not yet been appointed to represent a portfolio company, the Firm may negotiate and execute agreements between the Firm and/or the Company on the one hand, and the portfolio company or its affiliates, on the other hand, without arm’s length representation of the portfolio company, which could entail a conflict of interest in relation to efforts to enter into terms that are arm’s length. Among the measures the Firm may use to mitigate such conflicts are to involve outside counsel to review and advise on such agreements and provide insights into commercially reasonable terms, or establish separate groups with information barriers within the Firm to advise on each side of the negotiation.

Related Party Leasing. Subject to applicable law, the Company and its portfolio companies may lease property to or from Blackstone, Other Clients and their portfolio companies and affiliates and other related parties. The leases are generally expected to be at market rates. Blackstone may confirm market rates by reference to other leases it is aware of in the market, which Blackstone expects to be generally indicative of market given the scale of Blackstone’s real estate business. Blackstone will nonetheless have conflicts of interest in making these determinations. There can be no assurance that the Company and its portfolio companies will lease to or from any such related parties on terms as favorable to the Company and its portfolio companies as would apply if the counterparties were unrelated.

Cross-Guarantees and Cross-Collateralization. While Blackstone Credit generally seeks to use reasonable efforts to avoid cross-guarantees and other similar arrangements, a counterparty, lender or other participant in any transaction to be pursued by the Company (other than alternative investment vehicles) and/or the Other Clients may require or prefer facing only one fund entity or group of entities, which may result in any of the Company, such Other Clients, the portfolio companies, such Other Clients’ portfolio companies and/or other vehicles being jointly and severally liable for such applicable obligation (subject to any limitations set forth in the applicable partnership agreements or other governing documents thereof), which in each case may result in the Company, such Other Clients, such portfolio companies, and/or vehicles entering into a back-to-back or other

 

112


Table of Contents

similar reimbursement agreement, subject to applicable law. In such situation, better financing terms may be available through a cross-collateralized arrangement, but it is not expected that any of the Company or such Other Clients or vehicles would be compensated (or provide compensation to the other) for being primarily liable vis-à-vis such third party counterparty. Also, it is expected that cross-collateralization will generally occur at portfolio companies rather than the Company for obligations that are not recourse to the Company except in limited circumstances such as “bad boy” events. Any cross-collateralization arrangements with Other Clients could result in the Company losing its interests in otherwise performing investments due to poorly performing or non-performing investments of Other Clients in the collateral pool.

Similarly, a lender could require that it face only one portfolio company of the Company and Other Clients, even though multiple portfolio companies of the Company and Other Clients benefit from the lending, which will typically result in (i) the portfolio company facing the lender being solely liable with respect to the entire obligation, and therefore being required to contribute amounts in respect of the shortfall attributable to other portfolio companies, and (ii) portfolio companies of the Company and Other Clients being jointly and severally liable for the full amount of the obligation, liable on a cross-collateralized basis or liable for an equity cushion (which cushion amount may vary depending upon the type of financing or refinancing (e.g., cushions for refinancings may be smaller)). The portfolio companies of the Company and Other Clients benefiting from a financing may enter into a back-to-back or other similar reimbursement agreements to ensure no portfolio company bears more than its pro rata portion of the debt and related obligations. It is not expected that the portfolio companies would be compensated (or provide compensation to other portfolio companies) for being primarily liable, or jointly liable, for other portfolio companies pro rata share of any financing.

Joint Venture Partners. The Company will from time to time enter into one or more joint venture arrangements with third party joint venture partners. Investments made with joint venture partners will often involve performance-based compensation and other fees payable to such joint venture partners, as determined by the Adviser in its sole discretion. The joint venture partners could provide services similar to those provided by the Adviser to the Company. Yet, no compensation or fees paid to the joint venture partners would reduce the management fees payable by the Company. Additional conflicts would arise if a joint venture partner is related to the Firm in any way, such as a limited partner investor in, lender to, a shareholder of, or a service provider to the Firm, the Company, Other Clients, or their respective portfolio companies, or any affiliate, personnel, officer or agent of any of the foregoing.

Group Procurement; Discounts. The Company (subject to applicable law) and certain portfolio companies will enter into agreements regarding group procurement (such as CoreTrust, an independent group purchasing organization), benefits management, purchase of title and/or other insurance policies (which may include brokerage and/or placement thereof, and will from time to time be pooled across portfolio companies and discounted due to scale, including through sharing of deductibles and other forms of shared risk retention) from a third party or an affiliate of Blackstone Credit and/or Blackstone, and other operational, administrative or management related initiatives. The Firm will allocate the cost of these various services and products purchased on a group basis among the Company, Other Clients and their portfolio companies. Some of these arrangements result in commissions, discounts, rebates or similar payments to Blackstone Credit and/or Blackstone or their affiliates (including personnel), or Other Clients and their portfolio companies, including as a result of transactions entered into by the Company and its portfolio companies and/or related to a portion of the savings achieved by the portfolio companies. Such commissions or payment will not reduce the management fee. The Firm may also receive consulting or other fees from the parties to these group procurement arrangements. To the extent that a portfolio company of an Other Client is providing such a service, such portfolio company and such Other Client will benefit. Further, the benefits received by a particular portfolio company providing the service may be greater than those received by the Company and its portfolio companies receiving the service. Conflicts exist in the allocation of the costs and benefits of these arrangements, and shareholders rely on the Adviser to handle them in its sole discretion.

 

113


Table of Contents

Diverse Shareholder Group. The Company’s shareholders are expected to be based in a wide variety of jurisdictions and take a wide variety of forms. The shareholders may have conflicting investment, tax and other interests with respect to their investments in the Company and with respect to the interests of investors in other investment vehicles managed or advised by the Adviser and Blackstone Credit that may participate in the same investments as the Company. The conflicting interests of individual shareholders with respect to other shareholders and relative to investors in other investment vehicles would generally relate to or arise from, among other things, the nature of investments made by the Company and such other partnerships, the structuring or the acquisition of investments and the timing of disposition of investments. As a consequence, conflicts of interest may arise in connection with the decisions made by the Adviser or Blackstone Credit, including with respect to the nature or structuring of investments that may be more beneficial for one investor than for another investor, especially with respect to investors’ individual tax situations. In addition, the Company may make investments that may have a negative impact on related investments made by the shareholders in separate transactions. In selecting and structuring investments appropriate for the Company, the Adviser or Blackstone Credit will consider the investment and tax objectives of the Company and the shareholders (and those of investors in other investment vehicles managed or advised by the Adviser or Blackstone Credit) as a whole, not the investment, tax or other objectives of any Shareholder individually.

In addition, certain shareholders also may be investors in Other Clients, including supplemental capital vehicles and co-investment vehicles that may invest alongside the Company in one or more investments, consistent with applicable law and/or any applicable SEC-granted order. Shareholders also may include affiliates of the Firm, such as Other Clients, affiliates of portfolio companies of the Company or Other Clients, charities, foundations or other entities or programs associated with Firm personnel and/or current or former Firm employees, the Firm’s senior advisors and/or operating partners and any affiliates, funds or persons may also invest in the Company through the vehicles established in connection with the Firm’s side-by-side co-investment rights, subject to applicable law, in each case, without being subject to management fees, and shareholders will not be afforded the benefits of such arrangements. Some of the foregoing Firm related parties are sponsors of feeder vehicles that could invest in the Company as shareholders. The Firm related sponsors of feeder vehicles generally charge their investors additional fees, including performance based fees, which could provide the Firm current income and increase the value of its ownership position in them. The Firm will therefore have incentives to refer potential investors to these feeder vehicles. All of these Firm related shareholders will have equivalent rights to vote and withhold consents as nonrelated shareholders. Nonetheless, the Firm may have the ability to influence, directly or indirectly, these Firm related shareholders.

It is also possible that the Company or its portfolio companies will be a counterparty (such counterparties dealt with on an arm’s-length basis) or participant in agreements, transactions or other arrangements with a shareholder or an affiliate of a shareholder. Such transactions may include agreements to pay performance fees to operating partners, a management team and other related persons in connection with the Company’s investment therein, which will reduce the Company’s returns. Such shareholders described in the previous sentences may therefore have different information about the Firm and the Company than shareholders not similarly positioned. In addition, conflicts of interest may arise in dealing with any such shareholders, and the Adviser and its affiliates may not be motivated to act solely in accordance with its interests relating to the Company. Similar information disparity may occur as a result of shareholders monitoring their investments in vehicles such as the Company differently. For example, certain shareholders may periodically request from the Adviser information regarding the Company, its investments and/or portfolio companies that is not otherwise set forth in (or has yet to be set forth) in the reporting and other information required to be delivered to all shareholders. In such circumstances, the Adviser may provide such information to such shareholders, subject to applicable law and regulations. Unless required by applicable law, the Adviser will not be obligated to affirmatively provide such information to all shareholders (although the Adviser will generally provide the same information upon request and treat shareholders equally in that regard). As a result, certain shareholders may have more information about the Company than other shareholders, and, unless required by applicable law, the Adviser will have no duty to ensure all shareholders seek, obtain or process the same information regarding the Company, its investments and/or portfolio companies. Therefore, certain shareholders may be able to take actions on the basis of such

 

114


Table of Contents

information which, in the absence of such information, other shareholders do not take. Furthermore, at certain times the Firm may be restricted from disclosing to the shareholders material non-public information regarding any assets in which the Company invests, particularly those investments in which an Other Client or portfolio company that is publicly registered co-invests with the Company. In addition, investment banks or other financial institutions, as well as Firm personnel, may also be shareholders. These institutions and personnel are a potential source of information and ideas that could benefit the Company, and may receive information about the Company and its portfolio companies in their capacity as a service provider or vendor to the Company and its portfolio companies.

Possible Future Activities. The Firm and its affiliates may expand the range of services that it provides over time. Except as provided herein, the Firm and its affiliates will not be restricted in the scope of its business or in the performance of any such services (whether now offered or undertaken in the future) even if such activities could give rise to conflicts of interest, and whether or not such conflicts are described herein. The Firm and its affiliates have, and will continue to develop, relationships with a significant number of companies, financial sponsors and their senior managers, including relationships with clients who may hold or may have held investments similar to those intended to be made by the Company. These clients may themselves represent appropriate investment opportunities for the Company or may compete with the Company for investment opportunities.

Restrictions Arising under the Securities Laws. The Firm’s activities and the activities of Other Clients (including the holding of securities positions or having one of its employees on the board of directors of a portfolio company) could result in securities law restrictions on transactions in securities held by the Company, affect the prices of such securities or the ability of such entities to purchase, retain or dispose of such investments, or otherwise create conflicts of interest, any of which could have an adverse impact on the performance of the Company and thus the return to the shareholders.

The 1940 Act may limit the Company’s ability to undertake certain transactions with or alongside its affiliates that are registered under the 1940 Act. As a result of these restrictions, the Company may be prohibited from executing “joint” transactions with the Company’s 1940 Act registered affiliates, which could include investments in the same portfolio company (whether at the same or different times) or buying investments from, or selling them to, Other Clients. These limitations may limit the scope of investment opportunities that would otherwise be available to the Company.

We have received an exemptive order from the SEC that permits us, among other things, to co-invest with certain other persons, including certain affiliates of the Adviser and certain funds managed and controlled by the Adviser and its affiliates, subject to certain terms and conditions.

Shareholders’ Outside Activities. A shareholder shall be entitled to and may have business interests and engage in activities in addition to those relating to the Company, including business interests and activities in direct competition with the Company and its portfolio companies, and may engage in transactions with, and provide services to, the Company or its portfolio companies (which may include providing leverage or other financing to the Company or its portfolio companies as determined by the Adviser in its sole discretion). None of the Company, any shareholder or any other person shall have any rights by virtue of the Company’s operative documents in any business ventures of any shareholder. The shareholder, and in certain cases the Adviser, will have conflicting loyalties in these situations.

Insurance. The Adviser will cause the Company to purchase, and/or bear premiums, fees, costs and expenses (including any expenses or fees of insurance brokers) for insurance to insure the Company and the Board of Trustees against liability in connection with the activities of the Company. This includes a portion of any premiums, fees, costs and expenses for one or more “umbrella,” group or other insurance policies maintained by the Firm that cover the Company and one or more of the Other Clients, the Adviser, Blackstone Credit and/or Blackstone (including their respective directors, officers, employees, agents, representatives, independent client

 

115


Table of Contents

representative (if any) and other indemnified parties). The Adviser will make judgments about the allocation of premiums, fees, costs and expenses for such “umbrella,” group or other insurance policies among the Company, one or more Other Clients, the Adviser, Blackstone Credit and/or Blackstone on a fair and reasonable basis, subject to approval by the Board of Trustees.

Additional Potential Conflicts of Interest. The officers, directors, members, managers, employees and personnel of the Adviser may trade in securities for their own accounts, subject to restrictions and reporting requirements as may be required by law or the Firm’s policies, or otherwise determined from time to time by the Adviser. In addition, certain Other Clients may be subject to the 1940 Act or other regulations that, due to the role of the Firm, could restrict the ability of the Company to buy investments from, to sell investments to or to invest in the same securities as, such Other Clients. Such regulations may have the effect of limiting the investment opportunities available to the Company. In addition, as a consequence of Blackstone’s status as a public company, the officers, directors, members, managers and personnel of the Adviser may take into account certain considerations and other factors in connection with the management of the business and affairs of the Company and its affiliates that would not necessarily be taken into account if Blackstone were not a public company. The directors of Blackstone have fiduciary duties to shareholders of the public company that may conflict with their duties to the Company. Finally, although the Firm believes its positive reputation in the marketplace provides benefit to the Company and Other Clients, the Adviser could decline to undertake investment activity or transact with a counterparty on behalf of the Company for reputational reasons, and this decision could result in the Company foregoing a profit or suffering a loss.

The foregoing list of conflicts does not purport to be a complete enumeration or explanation of the actual and potential conflicts involved in an investment in the Company. Prospective investors should read this prospectus and consult with their own advisors before deciding whether to invest in the Company. In addition, as the Company’s investment program develops and changes over time, an investment in the Company may be subject to additional and different actual and potential conflicts. Although the various conflicts discussed herein are generally described separately, prospective investors should consider the potential effects of the interplay of multiple conflicts.

 

116


Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve substantial risks and uncertainties. Such statements involve known and unknown risks, uncertainties and other factors and undue reliance should not be placed thereon. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about Blackstone Secured Lending Fund (together with its consolidated subsidiaries, the “Company,” “we” or “our”), our current and prospective portfolio investments, our industry, our beliefs and opinions, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” “outlook,” “potential,” “predicts” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:

 

   

our future operating results;

 

   

our business prospects and the prospects of the companies in which we may invest, including our and their ability to achieve our respective objectives as a result of the COVID-19 pandemic;

 

   

the impact of the investments that we expect to make;

 

   

general economic and political trends and other external factors, including the current COVID-19 pandemic;

 

   

the ability of our portfolio companies to achieve their objectives;

 

   

our current and expected financing arrangements and investments;

 

   

changes in the general interest rate environment

 

   

the adequacy of our cash resources, financing sources and working capital;

 

   

the timing and amount of cash flows, distributions and dividends, if any, from our portfolio companies;

 

   

our contractual arrangements and relationships with third parties;

 

   

actual and potential conflicts of interest with the Adviser or any of its affiliates;

 

   

the dependence of our future success on the general economy and its effect on the industries in which we may invest;

 

   

our use of financial leverage;

 

   

the ability of the Adviser to source suitable investments for us and to monitor and administer our investments;

 

   

the ability of the Adviser or its affiliates to attract and retain highly talented professionals;

 

   

our ability to maintain our qualification as a regulated investment company and as a BDC;

 

   

the impact on our business of U.S. and international financial reform legislation, rules and regulations;

 

   

our preliminary estimated third quarter 2021 results;

 

   

the effect of changes to tax legislation and our tax position; and

 

   

the tax status of the enterprises in which we may invest.

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. In light of these and other uncertainties, the

 

117


Table of Contents

inclusion of a projection or forward-looking statement in this prospectus should not be regarded as a representation by us that our plans and objectives will be achieved. These forward-looking statements apply only as of the date of this prospectus. Moreover, we assume no duty and do not undertake to update the forward-looking statements, except as required by applicable law. Because we are an investment company, the forward-looking statements and projections contained in this prospectus are excluded from the safe harbor protection provided by Section 21E of the Exchange Act.

 

118


Table of Contents

USE OF PROCEEDS

We estimate that the net proceeds we will receive from this offering will be approximately $185.5 million, or approximately $213.8 million if the underwriters exercise their option to purchase additional amounts of our common shares, based on an offering price of $26.15 per share, after deducting the underwriting discounts and commissions paid by us and estimated offering expenses of approximately $2.5 million payable by us. Such estimate is subject to change and no assurances can be given that actual expenses will not exceed such amount.

We intend to use the net proceeds from this offering to pay down some or all of our existing indebtedness outstanding under the Revolving Credit Facility and/or the SPV Financing Facilities. As of June 30, 2021, the amount of indebtedness outstanding under the Revolving Credit Facility and each of the SPV Financing Facilities were as follows:

 

   

Revolving Credit Facility1: approximately $588.4 million,

 

   

Jackson Hole Funding Facility2: approximately $401.3 million,

 

   

Breckenridge Funding Facility3: approximately $538.3 million, and

 

   

Big Sky Funding Facility4: approximately $354.5 million.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Borrowings” and “Senior Securities for further information.

We intend to use any remaining proceeds to make investments in accordance with our investment objectives and strategies and for general corporate purposes.

Affiliates of certain lenders under the foregoing facilities are acting as underwriters in this offering. Accordingly, affiliates of certain of the underwriters may receive more than 5% of the proceeds of this offering to the extent the proceeds are used to pay down outstanding indebtedness under the foregoing facilities.

 

1 

The Revolving Credit Facility has a maturity date of June 15, 2025. Loans under the Revolving Credit Facility currently bear interest at a per annum rate equal to, (x) for loans for which the Company elects the base rate option, the “alternate base rate” (which is the greatest of (a) the prime rate as publicly announced by Citi, (b) the sum of (i) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System plus (ii) 0.5%, and (c) one month LIBOR plus 1% per annum) plus (A) if the gross borrowing base is equal to or greater than 1.6 times the combined revolving debt amount, 0.75%, or (B) if the gross borrowing base is less than 1.6 times the combined revolving debt amount, 0.875%, and (y) for loans for which the Company elects the Eurocurrency option, the applicable LIBO Rate for the related Interest Period for such Borrowing plus (A) if the gross borrowing base is equal to or greater than 1.6 times the combined revolving debt amount, 1.75%, or (B) if the gross borrowing base is less than 1.6 times the combined revolving debt amount, 1.875%.

2 

The Jackson Hole Funding Facility has a maturity date of May 15, 2023 and currently bears interest at a per annum rate equal to the three-month LIBOR in effect, plus the applicable margin of 2.375% per annum.

3 

The Breckenridge Funding Facility has a maturity date of December 21, 2023 and currently bears interest at a per annum rate equal to the three-month LIBOR (or other Base Rate) in effect, plus an applicable margin of 1.75%, 2.00% or 2.22% per annum, as applicable.

4 

The Big Sky Funding Facility has a maturity date of December 10, 2022 and currently bears interest at a per annum rate equal to the one-month or three-month LIBOR in effect, plus the applicable margin of 1.60% per annum.

 

119


Table of Contents

DISTRIBUTIONS

The Company elected to be treated as a BDC under the 1940 Act. The Company also elected to be treated as a RIC under the Code. So long as the Company maintains its status as a RIC, it generally will not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that it distributes at least annually to its shareholders as dividends. Rather, any tax liability related to income earned and distributed by the Company would represent obligations of the Company’s investors and would not be reflected in the consolidated financial statements of the Company.

The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, ongoing analyses of tax laws, regulations and interpretations thereof.

To qualify for and maintain qualification as a RIC, the Company must, among other things, meet certain source-of-income and quarterly asset diversification requirements. In addition, to qualify for RIC tax treatment, the Company must distribute to its shareholders, for each taxable year, at least 90% of the sum of (i) its “investment company taxable income” for that year (without regard to the deduction for dividends paid), which is generally its ordinary income plus the excess, if any, of its realized net short-term capital gains over its realized net long-term capital losses and (ii) its net tax-exempt income.

In addition, based on the excise tax distribution requirements, the Company is subject to a 4% nondeductible federal excise tax on any undistributed income unless the Company distributes in a timely manner in each taxable year an amount at least equal to the sum of:

 

   

98% of its ordinary income for the calendar year;

 

   

98.2% of its capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year; and

 

   

100% of any undistributed income from prior years.

For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate income tax is considered to have been distributed. We have previously incurred, and may incur in the future, excise tax on a portion of our income and gains. While we intend to distribute income and capital gains to minimize exposure to the 4% excise tax, we may not be able to, or may not choose to, distribute amounts sufficient to avoid the imposition of the tax entirely. In that event, we will be liable for the tax only on the amount by which we do not meet the foregoing distribution requirement.

Distributions

On October 18, 2021, our Board increased the Company’s quarterly distribution from $0.50 per share to $0.53 per share payable to shareholders of record on December 31, 2021, which will be paid on or around January 31, 2022.

 

120


Table of Contents

On October 18, 2021, our Board declared the following special distributions which are only payable if this offering is consummated on or before December 31, 2021:

 

Record Date(1)

   Special
Distribution
Amount
(per share)
 

The later of 75 days following the consummation of this offering or January 18, 2022

   $ 0.10  

The later of 135 days following the consummation of this offering or March 16, 2022

   $ 0.15  

The later of 195 days following the consummation of this offering or May 16, 2022

   $ 0.20  

The later of 255 days following the consummation of this offering or July 16, 2022

   $ 0.20  

 

(1)

If any of the record dates falls on a date that is not a business day, the record date shall be the next business day thereafter.

The payable date of each of the above distributions shall be 45 days after the end of the calendar quarter in which the record date occurred, or if such date is not a business day, the preceding business day. Shares sold pursuant to this prospectus will be entitled to receive these distributions.

The following table summarizes our distributions declared and payable since January 1, 2019 (dollars in thousands except per share amounts):

 

Date Declared

   Record Date    Payment Date    Per Share Amount      Total Amount  

January 22, 2019

   January 23, 2019    May 15, 2019    $                 0.1239      $ 1,192  

February 28, 2019

   March 27, 2019    May 15, 2019      0.3536        5,406  

March 26, 2019

   March 31, 2019    May 15, 2019      0.0225        565  

June 26, 2019

   June 26, 2019    August 14, 2019      0.4780        12,010  

June 26, 2019

   June 30, 2019    August 14, 2019      0.0220        827  

August 8, 2019

   August 8, 2019    November 14, 2019      0.2120        7,967  

September 24, 2019

   September 24, 2019    November 14, 2019      0.2554        9,973  

September 24, 2019

   September 30, 2019    November 14, 2019      0.0326        1,752  

December 13, 2019

   December 15, 2019    January 30, 2020      0.4130        22,226  

December 16, 2019

   December 31, 2019    January 30, 2020      0.0870        5,593  

January 29, 2020

   January 29, 2020    May 15, 2020      0.1593        10,241  

February 26, 2020

   March 31, 2020    May 15, 2020      0.3407        27,688  

April 7, 2020

   April 7, 2020    August 14, 2020      0.0385        3,129  

June 29, 2020

   June 30, 2020    August 14, 2020      0.4615        44,454  

July 14, 2020

   July 14, 2020    November 13, 2020      0.0761        7,330  

July 27, 2020

   July 27, 2020    November 13, 2020      0.0707        7,185  

August 26, 2020

   September 30, 2020    November 13, 2020      0.3532        36,021  

November 5, 2020

   November 5, 2020    January 29, 2021      0.1957        19,958  

December 14, 2020

   December 14, 2020    January 29, 2021      0.2120        22,654  

December 14, 2020

   December 14, 2020    January 29, 2021      0.3000        32,057 (1) 

December 14, 2020

   December 31, 2020    January 29, 2021      0.0923        11,968  

February 24, 2021

   March 31, 2021    May 14, 2021      0.5000        65,052  

June 7, 2021

   June 7, 2021    August 13, 2021      0.3736                      48,734  

 

121


Table of Contents

Date Declared

   Record Date    Payment Date    Per Share Amount      Total Amount  

June 7, 2021

   June 30, 2021    August 13, 2021    $ 0.1264      $ 18,241  

September 7, 2021(2)

   September 7, 2021    November 12, 2021      0.3750        54,250  

September 7, 2021(2)

   September 30, 2021    November 12, 2021      0.1250        19,799  
        

 

 

    

 

 

 

Total distributions

         $                 5.8000      $             496,272  
        

 

 

    

 

 

 

 

(1)

Represents a special distribution

(2)

Common shares sold pursuant to this prospectus will not be entitled to receive this distribution.

Pursuant to our dividend reinvestment plan, the following table summarizes the amounts received and shares issued to shareholders who have not opted out of our dividend reinvestment plan since January 1, 2020 (dollars in thousands except share amounts):

 

Payment Date

   DRIP Shares Value      DRIP Shares Issued  

January 30, 2020

   $ 2,882        112,302  

May 15, 2020

     4,244        194,694  

August 14, 2020

     5,437        229,591  

November 13, 2020

     6,182        248,194  

January 29, 2021

     11,179        443,639  

May 14, 2021

     8,674        339,398  
  

 

 

    

 

 

 

Total

   $ 38,598        1,567,818  
  

 

 

    

 

 

 

All of the dividends disclosed above were derived from ordinary income, determined on a tax basis.

 

122


Table of Contents

CAPITALIZATION

The following table sets forth:

 

   

the actual consolidated capitalization of the Company at June 30, 2021;

 

   

the consolidated capitalization of the Company at June 30, 2021 as adjusted for the effect of approximately $1,617.3 million of net investments funded, at cost, and drawdowns on our debt facilities to fund investments from July 1, 2021 through October 15, 2021, the dividend reinvestment pursuant to the dividend payable on or before August 13, 2021, the issuance of $1.3 billion principal amount of unsecured notes issued in July 2021 and September 2021 and proceeds from the capital call drawdown notice issued on September 1, 2021; and

 

   

the consolidated capitalization of the Company at June 30, 2021, on a pro forma as adjusted basis to reflect the items in the previous bullet and the assumed sale of 7,650,000 common shares in this offering (assuming no exercise of the underwriters’ option to purchase additional shares) at a public offering price of $26.15 per share after deducting the underwriting discounts and commissions and estimated offering expenses of approximately $2.5 million payable by us and application of the net proceeds as discussed in more detail under “Use of Proceeds”.

You should read this table together with “Use of Proceeds” and the consolidated financial statements and the related notes thereto included elsewhere in this prospectus.

 

($ in thousands, except per share amounts)    June 30, 2021      As
Adjusted(1)(2)(3)(4)
     As Adjusted
for this
Offering
 

Assets

        

Total investments at fair value(1)

   $ 7,356,640      $ 8,973,963      $ 8,973,963  

Cash

     181,643        181,643        181,643  

Interest receivable

     35,057        35,057        35,057  

Deferred financing costs

     9,554        9,554        9,554  

Receivable for investments sold

     67,679        67,679        67,679  

Subscription receivable

     1,808        1,808        1,808  

Other assets

     457        457        457  

Total Assets

   $ 7,652,838      $ 9,270,161      $ 9,270,161  

Liabilities

        

Total Debt (net of unamortized debt issuance costs of $21,750 actual; $48,198 as adjusted)(2)

   $ 3,760,694      $ 5,021,767      $ 4,836,223  

Payable for investments purchased

     3,008      3,008        3,008  

Due to affiliates

     5,077      5,077        5,077  

Management fee payable

     13,272      13,272        13,272  

Income based incentive fee payable

     13,800      13,800        13,800  

Capital gains incentive fee payable

     13,247      13,247        13,247  

Interest payable

     35,497      35,497        35,497  

Distribution payable(4)

     66,976      57,835        57,835  

Accrued expenses and other liabilities

     165      165        165  

Total Liabilities

   $ 3,911,736      $ 5,163,668      $ 4,978,124  

Net Assets

        

Common shares $0.001 par value, unlimited shares authorized; 144,314,260 shares issued and outstanding, actual; 158,389,951 shares issued and outstanding, as adjusted(3)(4), 166,039,951 shares issued and outstanding, as adjusted for this offering

   $ 144      $ 158        166  

 

123


Table of Contents
($ in thousands, except per share amounts)    June 30, 2021      As
Adjusted(1)(2)(3)(4)
     As Adjusted
for this
Offering
 

Additional paid-in-capital

   $ 3,609,406    $ 3,974,783      $ 4,160,319  

Total distributable earnings (losses)

     131,552      131,552        131,552  

Total Net Assets

   $ 3,741,102      $ 4,106,493      $ 4,292,037  

Total Liabilities and Net Assets

   $ 7,652,838      $ 9,270,161      $ 9,270,161  

Net Asset Value Per Share

   $ 25.92      $ 25.93      $ 25.85  

 

(1)

Includes the effect of approximately $1,617.3 million net investments funded with net proceeds from increases in our debt outstanding and issuances of equity from July 1, 2021 through October 15, 2021.

(2)

Adjusted for the issuance of and use of net proceeds in the amounts of $635.7 million and $637.9 million, respectively from the 2027 Notes and 2028 Notes and net paydowns under existing credit facilities of $12.5 million subsequent to June 30, 2021.

(3)

Adjusted for capital call drawdown notice issued on September 1, 2021 of $356.3 million, at a per share amount of $25.96.

(4)

Adjusted for the dividend reinvestment payable on or before August 13, 2021 in the amount of $9.1 million.

 

124


Table of Contents

DILUTION

If you invest in our common shares, your interest will be diluted to the extent of the difference between the initial public offering price per common share of our beneficial interest and the pro forma net asset value per common share of our beneficial interest immediately after the completion of this offering. The net asset value per share is determined by dividing the value of (a) total assets minus liabilities by (b) the total number of shares outstanding.

Our net asset value as of June 30, 2021 was approximately $3.7 billion, or $25.92 per share. Our net asset value as of September 30, 2021 was approximately $4.1 billion, or $26.15 per share.

After giving effect to the assumed sale of 7,650,000 shares in this offering at the initial public offering price of $26.15 per share, the deduction of underwriting discounts and estimated expenses of this offering payable by us, and the application of the net proceeds as discussed in more detail under “Use of Proceeds,” our net asset value would have been approximately $4.3 billion, or $26.06 per share. That net asset value represents an immediate dilution of $0.09 per share, or 0.3%, to new investors who purchase our common shares in the offering at the initial public offering price. The foregoing assumes no exercise of the underwriters’ option to purchase additional shares. If the underwriters’ option to purchase additional shares is exercised in full, the immediate dilution to shares sold in this offering would be $0.10 per share.

The following table illustrates the dilution to the shares on a per share basis (without exercise of the underwriters option to purchase additional amounts of our common shares):

 

Assumed initial public offering price per share

   $ 26.15  

June 30, 2021 net asset value per share

   $ 25.92  

Increase due to share transactions subsequent to June 30, 2021(1)(2)

   $ 0.01  

As adjusted net asset value per share

   $ 25.93  

Other changes in net asset value per share subsequent to June 30, 2021(3)

   $ 0.22  

September 30, 2021 net asset value per share

   $  26.15  

Decrease attributable to this offering

   $ 0.09  

As-adjusted net asset value per share immediately after this offering

   $ 26.06  

Dilution per share to new shareholders (without exercise of the underwriters’ option to purchase additional amounts of our common shares)

   $ 0.09  

 

125


Table of Contents

The following table sets forth information with respect to the shares prior to and following this offering:

 

     Shares      Total Consideration      Average Price  
     Number      %      Amount      %      Per Share  

Common shares of beneficial interest outstanding(1)

     158,389,951        95.39%      $ 4,141,897,218        95.39%      $ 26.15  

Common shares of beneficial interest to be sold in this offering

     7,650,000        4.61%      $ 200,047,500        4.61%      $ 26.15  

Total

     166,039,951        100.0%      $ 4,341,944,718        100.0%     

 

(1)

Amount represents net asset value at September 30, 2021, calculated as 158,389,951 shares outstanding multiplied by net asset value per share of $26.15.

The as-adjusted net asset value upon completion of this offering is calculated as follows:

 

Numerator

  

June 30, 2021 net asset value, as adjusted(1)(2)

   $ 4,106,492,849  

Other changes in net asset value subsequent to June 30, 2021(3)

   $ 35,404,369  

Assumed proceeds from this offering (after deduction of sales load and offering expenses payable by us)

   $ 185,544,650  

NAV upon completion of this offering

   $ 4,327,441,868  

Denominator

  

Common shares of beneficial interest outstanding

     158,389,951  

Common shares of beneficial interest included in this offering

     7,650,000  

Total shares outstanding upon completion of this offering

     166,039,951  

 

(1)

Adjusted for the issuance of 13,723,035 shares issued after June 30, 2021 at a per share price of $25.96 in connection with a $356.3 million capital call drawdown notice issued on September 1, 2021.

(2)

Adjusted for $9.1 million dividends reinvested on August 13, 2021, resulting in the issuance of 352,656 shares at a per share price of $25.92.

(3)

Increase attributable to other changes in net asset value during the three months ended September 30, 2021. The increase was comprised primarily of an excess amount of net investment income over dividends declared and net unrealized gains for such period.

 

126


Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The information contained in this section should be read in conjunction with “Financial Highlights” and our financial statements and related notes appearing elsewhere in this prospectus. This discussion contains forward-looking statements, which relate to future events or the future performance or financial condition of Blackstone Secured Lending Fund and involves numerous risks and uncertainties. Please see “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” for a discussion of uncertainties, risk and assumptions associated with these statements.

Overview and Investment Framework

We are a Delaware statutory trust structured as a non-diversified, closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. In addition, for U.S. federal income tax purposes, we have elected to be treated, and intend to qualify annually, as a RIC under the Code. We are managed by our Adviser. The Administrator will provide the administrative services necessary for us to operate.

Our investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation.

Under normal market conditions, we generally invest at least 80% of our total assets (net assets plus borrowings for investment purposes) in secured debt investments (including investments that are secured by equity interests) and our portfolio is composed primarily of first lien senior secured and unitranche loans (including first out/last out loans). To a lesser extent, we have and may continue to also invest in second lien, third lien, unsecured or subordinated loans and other debt and equity securities. We do not currently focus on investments in issuers that are distressed or in need of rescue financing.

We commenced our loan origination and investment activities contemporaneously with the Initial Drawdown on November 20, 2018. The proceeds from the Initial Drawdown and availability under our credit facilities provided us with the necessary seed capital to commence operations.

Key Components of Our Results of Operations

Investments

We focus primarily on loans and securities, including syndicated loans, of private U.S. companies, specifically small and middle market companies. In many market environments, we believe such a focus offers an opportunity for superior risk-adjusted returns.

Our level of investment activity (both the number of investments and the size of each investment) can and will vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle market companies, the level of merger and acquisition activity for such companies, the general economic environment, trading prices of loans and other securities and the competitive environment for the types of investments we make.

Revenues

We generate revenues in the form of interest income from the debt securities we hold and dividends and capital appreciation on either direct equity investments or equity interests obtained in connection with originating loans, such as options, warrants or conversion rights. Our debt investments typically have a term of five to eight years and bear interest at floating rates on the basis of a benchmark such as LIBOR. In some instances, we receive payments on our debt investments based on scheduled amortization of the outstanding balances. In

 

127


Table of Contents

addition, we may receive repayments of some of our debt investments prior to their scheduled maturity date. The frequency or volume of these repayments fluctuates significantly from period to period. Our portfolio activity also reflects the proceeds of sales of securities. In some cases, our investments may provide for deferred interest payments or PIK interest. The principal amount of loans and any accrued but unpaid interest generally become due at the maturity date.

In addition, we generate revenue in the form of commitment, loan origination, structuring or diligence fees, fees for providing managerial assistance to our portfolio companies, and possibly consulting fees.

Expenses

Except as specifically provided below, all investment professionals and staff of the Adviser, when and to the extent engaged in providing investment advisory services to us, and the base compensation, bonus and benefits, and the routine overhead expenses, of such personnel allocable to such services, will be provided and paid for by the Adviser. We bear all other costs and expenses of our operations, administration and transactions, including, but not limited to (a) investment advisory fees, including management fees and incentive fees, to the Adviser, pursuant to the Investment Advisory Agreement; (b) our allocable portion of compensation, overhead (including rent, office equipment and utilities) and other expenses incurred by the Administrator in performing its administrative obligations under the Administration Agreement, including but not limited to: (i) our chief compliance officer, chief financial officer and their respective staffs; (ii) investor relations, legal, operations and other non-investment professionals at the Administrator that perform duties for us; and (iii) any internal audit group personnel of Blackstone or any of its affiliates; and (c) all other expenses of our operations, administrations and transactions.

With respect to costs incurred in connection with the Company’s organization and offering costs, if actual organization and offering costs incurred exceed 0.10% of our total Capital Commitments, the Adviser or its affiliates will bear the excess costs. To the extent our Capital Commitments later increase, the Adviser or its affiliates may be reimbursed for past payments of excess organization and offering costs made on our behalf provided that the total organization and offering costs borne by us do not exceed 0.10% of total Capital Commitments and provided further that the Adviser or its affiliates may not be reimbursed for payment of excess organization and offering expenses that were incurred more than three years prior to the proposed reimbursement. Any sales load, platform fees, servicing fees or similar fees or expenses charged directly to an investor in our Private Offering by a placement agent or similar party will not be considered organization or offering expenses of the Company for purposes of our cap on organization and offering expenses.

From time to time, the Adviser, the Administrator or their affiliates may pay third-party providers of goods or services. We will reimburse the Adviser, Administrator or such affiliates thereof for any such amounts paid on our behalf. From time to time, the Adviser or the Administrator may defer or waive fees and/or rights to be reimbursed for expenses. In this regard, the Administrator has waived the right to be reimbursed for rent and related occupancy costs. However, the Administrator may seek reimbursement for such costs in future periods. All of the foregoing expenses will ultimately be borne by our shareholders, subject to the cap on organization and offering expenses described above.

Costs and expenses of the Administrator and the Adviser that are eligible for reimbursement by us will be reasonably allocated to the Company on the basis of time spent, assets under management, usage rates, proportionate holdings, a combination thereof or other reasonable methods determined by the Administrator in accordance with policies adopted by the Board.

On December 12, 2018, we entered into an Expense Support Agreement with the Adviser. The Expense Support Agreement provides that, at such times as the Adviser determines, the Adviser may pay certain Expense Payments of the Company, provided that no portion of the payment will be used to pay any of our interest expense. Such Expense Payment must be made in any combination of cash or other immediately available funds

 

128


Table of Contents

no later than forty-five days after a written commitment from the Adviser to pay such expense, and/or by an offset against amounts due from us to the Adviser or its affiliates. Following any calendar quarter in which Available Operating Funds (as defined in the Expense Support Agreement) exceed Excess Operating Funds, we shall pay Reimbursement Payments to the Adviser until such time as all Expense Payments made by the Adviser to us within three years prior to the last business day of such calendar quarter have been reimbursed. The amount of the Reimbursement Payment for any calendar quarter shall equal the lesser of (i) the Excess Operating Funds in such quarter and (ii) the aggregate amount of all Expense Payments made by the Adviser to us within three years prior to the last business day of such calendar quarter that have not been previously reimbursed by us to the Adviser. The Expense Support Agreement provides additional restrictions on the amount of each Reimbursement Payment for any calendar quarter. The Adviser may waive its right to receive all or a portion of any Reimbursement Payment in any particular calendar quarter, so that such Reimbursement Payment may be reimbursable in a future calendar quarter. As of June 30, 2021 there were no unreimbursed Expense Payments remaining.

Portfolio and Investment Activity

For the three months ended June 30, 2021, we acquired $2,121.6 million aggregate principal amount of investments (including $589.2 million of unfunded commitments), $2,086.7 million of which was first lien debt, $15.7 million of which was second lien debt, $14.2 million of which was unsecured debt and $5.0 million of which was equity.

For the three months ended June 30, 2020, we acquired $535.6 million aggregate principal amount of investments (including $61.3 million of unfunded commitments), $493.7 million of which was first lien debt and $41.9 million of which was unsecured debt.

Our investment activity is presented below (information presented herein is at amortized cost unless otherwise indicated) (dollar amounts in thousands):

 

     As of and for the three months
ended June 30,
 
     2021      2020  

Investments:

     

Total investments, beginning of period

   $     6,063,216      $     3,970,044  

New investments purchased

     1,496,134        490,840  

Net accretion of discount on investments

     9,681        7,648  

Net realized gain (loss) on investments

     3,682        1,650  

Investments sold or repaid

     (302,401      (280,110
  

 

 

    

 

 

 

Total investments, end of period

   $ 7,270,312      $ 4,189,892  
  

 

 

    

 

 

 

Amount of investments funded at principal:

     

First lien debt investments

   $ 1,497,480      $ 470,885  

Second lien debt investments

     15,717        —  

Unsecured debt

     14,248        41,938  

Equity investments

     4,957        —  
  

 

 

    

 

 

 

Total

   $ 1,532,402      $ 512,823  
  

 

 

    

 

 

 

Proceeds from investments sold or repaid:

     

First lien debt investments

   $ (290,736    $ (227,563

Second lien debt investments

     —        (11,250

Unsecured debt

     (11,665      (40,582

Equity investments

     —        (715
  

 

 

    

 

 

 

Total

   $ (302,401    $ (280,110
  

 

 

    

 

 

 

 

129


Table of Contents
     As of and for the three months
ended June 30,
 
     2021     2020  

Number of portfolio companies

                     111                       74  

Weighted average yield on debt and income producing investments, at cost(1)(2)

     7.48     7.68

Weighted average yield on debt and income producing investments, at fair value(1)(2)

     7.40     7.98

Percentage of debt investments bearing a floating rate

     99.7     99.9

Percentage of debt investments bearing a fixed rate

     0.3     0.1

 

(1)

Computed as (a) the annual stated interest rate or yield plus the annual accretion of discounts or less the annual amortization of premiums, as applicable, on accruing debt included in such securities, divided by (b) total debt investments (at fair value or cost, as applicable) included in such securities. Actual yields earned over the life of each investment could differ materially from the yields presented above.

(2)

As of June 30, 2021 and 2020, the weighted average total portfolio yield at cost was 7.41% and 7.65%, respectively. The weighted average total portfolio yield at fair value was 7.33% and 7.94%, respectively.

Our investments consisted of the following (dollar amounts in thousands):

 

     June 30, 2021     December 31, 2020  
     Cost      Fair Value      % of Total
Investments at
Fair Value
    Cost      Fair Value      % of Total
Investments at
Fair Value
 

First lien debt

   $ 7,139,358      $ 7,213,639        98.06   $ 5,493,561      $ 5,502,899        98.51

Second lien debt

     53,499        55,314        0.75       48,979        50,199        0.90  

Unsecured debt

     10,547        10,475        0.14       —          —          —    

Equity investments

     66,908        77,212        1.05       32,942        32,844        0.59  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total

   $ 7,270,312      $ 7,356,640        100.00   $ 5,575,482      $ 5,585,942        100.00
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

As of June 30, 2021 and December 31, 2020, no loans in the portfolio were on non-accrual status.

As of June 30, 2021 and December 31, 2020, on a fair value basis, approximately 99.7% and 100.0%, respectively, of our performing debt investments bore interest at a floating rate and approximately 0.3% and 0.0%, respectively, of our performing debt investments bore interest at a fixed rate.

For the year ended December 31, 2020, we acquired $4,912.8 million aggregate principal amount of investments (including $580.2 million of unfunded commitments), $4,729.6 million of which was first lien debt, $35.4 million of which was second lien debt, $129.9 million of which was unsecured debt and $17.9 million of which was equity.

For the year ended December 31, 2019, we acquired $3,298.8 million aggregate principal amount of investments (including $173.0 million of unfunded commitments), $3,243.2 million of which was first lien debt, $42.1 million of which was second lien debt and $13.5 million of which was equity.

For the year ended December 31, 2018, we acquired $616.9 million aggregate principal amount of investments (including $54.7 million of unfunded commitments), $610.5 million of which was first lien debt and $6.4 million of which was second lien debt.

 

130


Table of Contents

Our investment activity is presented below (information presented herein is at amortized cost unless otherwise indicated) (dollar amounts in thousands):

 

     For the Year Ended December 31,  
     2020     2019     2018  

Investments:

      

Total investments, beginning of period

   $ 3,067,767     $ 548,753     $ —    

New investments purchased

     4,536,541       3,078,070       549,058  

Net accretion of discount on investments

     50,058       9,812       127  

Net realized gain (loss) on investments

     (4,378     3,962       —    

Investments sold or repaid

     (2,074,506     (572,830     (432
  

 

 

   

 

 

   

 

 

 

Total investments, end of period

   $ 5,575,482     $ 3,067,767     $ 548,753  
  

 

 

   

 

 

   

 

 

 

Amount of investments funded at principal:

      

First lien debt investments

   $ 4,436,388     $ 3,104,807     $ 555,449  

Second lien debt investments

     35,352       42,083       6,381  

Unsecured debt

     129,933       —         —    

Equity

     17,852       13,487       —    
  

 

 

   

 

 

   

 

 

 

Total

   $ 4,619,525     $ 3,160,377     $ 561,830  
  

 

 

   

 

 

   

 

 

 

Proceeds from investments sold or repaid:

      

First lien debt investments

   $ (1,923,689   $ (558,149   $ (432

Second lien debt investments

     (18,473     (14,681     —    

Unsecured debt

     (131,629     —         —    

Equity

     (715     —         —    
  

 

 

   

 

 

   

 

 

 

Total

   $ (2,074,506   $ (572,830   $ (432
  

 

 

   

 

 

   

 

 

 

Number of portfolio companies

     81       56       61  

Weighted average yield on debt and income producing investments, at amortized cost(1)(2)

     7.70     8.64     8.70

Weighted average yield on debt and income producing investments, at fair value(1)(2)

     7.68     8.57     8.76

Percentage of debt investments bearing a floating rate

     100     100     100

Percentage of debt investments bearing a fixed rate

     —       —       —  

 

(1)

Computed as (a) the annual stated interest rate or yield plus the annual accretion of discounts or less the annual amortization of premiums, as applicable, on accruing debt included in such securities, divided by (b) total debt investments (at fair value or cost, as applicable) included in such securities. Actual yields earned over the life of each investment could differ materially from the yields presented above.

(2)

As of December 31, 2020, 2019 and 2018, the weighted average total portfolio yield at cost was 7.65%, 8.60% and 8.70%, respectively. The weighted average total portfolio yield at fair value was 7.64%, 8.53% and 8.76%, respectively.

Our investments consisted of the following (dollar amounts in thousands):

 

     December 31, 2020     December 31, 2019  
     Cost      Fair Value      % of Total
Investments
at Fair
Value
    Cost      Fair Value      % of Total
Investments
at Fair
Value
 

First lien debt

   $ 5,493,561      $ 5,502,899        98.51   $ 3,021,498      $ 3,046,101        98.50

Second lien debt

     48,979        50,199        0.90       32,782        32,419        1.05  

Equity

     32,942        32,844        0.59       13,487        13,920        0.45  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total

   $ 5,575,482      $ 5,585,942        100.00   $ 3,067,767      $ 3,092,440        100.00
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

 

131


Table of Contents

As of December 31, 2020 and December 31, 2019, no loans in the portfolio were on non-accrual status.

Results of Operations

The following table represents our operating results (dollar amounts in thousands):

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2021      2020      2021      2020  

Total investment income

   $ 135,097      $ 81,159      $ 265,807      $ 161,354  

Net expenses

     63,688        32,734        118,763        62,153  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net investment income before excise tax

     71,409        48,425        147,044        99,201  

Excise tax expense

     —          —          (282      104  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net investment income after excise tax

     71,409        48,425        147,326        99,097  

Net unrealized appreciation (depreciation)

     41,943        178,874        73,995        (179,953

Net realized gain (loss)

     3,343        1,678        7,141        2,373  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net increase (decrease) in net assets resulting from operations

   $ 116,695      $ 228,977      $ 228,462      $ (78,483
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     For The Year Ended December 31,  
     2020      2019      2018  

Total investment income

   $ 389,641      $ 148,048      $ 3,174  

Net expenses

     149,543        73,729        1,835  
  

 

 

    

 

 

    

 

 

 

Net investment income before excise tax

     240,098        74,319        1,339  

Excise tax expense

     517        465        52  
  

 

 

    

 

 

    

 

 

 

Net investment income after excise tax

     239,581        73,854        1,287  

Net unrealized appreciation (depreciation)

     (16,582      28,329        (3,650

Net realized gain (loss)

     (4,361      4,023        (581
  

 

 

    

 

 

    

 

 

 

Net increase (decrease) in net assets resulting from operations

   $ 218,638      $ 106,206      $ (2,944
  

 

 

    

 

 

    

 

 

 

Net increase (decrease) in net assets resulting from operations can vary from period to period as a result of various factors, including acquisitions, the level of new investment commitments, the recognition of realized gains and losses and changes in unrealized appreciation and depreciation on the investment portfolio. As a result, comparisons may not be meaningful.

Investment Income

Investment income was as follows (dollar amounts in thousands):

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2021      2020      2021      2020  

Interest income

   $ 130,774      $ 78,494      $ 258,724      $ 156,085  

Payment-in-kind interest income

     362        2,641        2,279        5,243  

Fee income

     3,961        24        4,804        26  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total investment income

   $ 135,097      $ 81,159      $ 265,807      $ 161,354  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

132


Table of Contents
     For The Year Ended December 31,  
     2020      2019      2018  

Interest income

   $ 381,797      $ 146,380      $ 3,174  

Payment-in-kind interest income

     7,119        988        —    

Fee income

     725        680        —    
  

 

 

    

 

 

    

 

 

 

Total investment income

   $ 389,641      $ 148,048      $ 3,174  
  

 

 

    

 

 

    

 

 

 

Total investment income increased to $135.1 million for the three months ended June 30, 2021 from $81.2 million for the same period in the prior year primarily driven by our deployment of capital and the increased balance of our investments partially offset by lower weighted average yield on our investments, at fair value, which decreased to 7.40% as of June 30, 2021 from 7.98% as of June 30, 2020. The size of our investment portfolio at fair value increased to $7,356.6 million at June 30, 2021 from $4,034.6 million at June 30, 2020. Additionally, for the three months ended June 30, 2021, we accrued $6.2 million and $4.0 million of non-recurring income (e.g. prepayment premiums, accelerated accretion of upfront loan origination fees and unamortized discounts) and other fee income, respectively, as compared to $2.0 million and $0.0 million for the same period in the prior year.

Total investment income increased to $265.8 million for the six months ended June 30, 2021 from $161.4 million for the same period in the prior year primarily driven by our deployment of capital and the increased balance of our investments partially offset by a lower weighted average yield on our debt investments, at fair value, which decreased to 7.40% as of June 30, 2021 from 7.98% as of June 30, 2020. The size of our investment portfolio at fair value increased to $7,356.6 million at June 30, 2021 from $4,034.6 million at June 30, 2020. Additionally, for the six months ended June 30, 2021, we accrued $24.6 million and $4.8 million of non-recurring interest income (e.g. prepayment premiums, accelerated accretion of upfront loan origination fees and unamortized discounts) and other fee income, respectively, as compared to $5.1 million and $0.0 million, respectively, for the same periods in the prior year.

Total investment income increased to $389.6 million for the year ended December 31, 2020 from $148.0 million in the prior year primarily driven by our deployment of capital and the increased balance of our investments, higher level of prepayment related income, partially offset by lower weighted average yield on our investments. The size of our investment portfolio at fair value increased to $5,585.9 million at December 31, 2020 from $3,092.4 million at December 31, 2019. Additionally, for the year ended December 31, 2020, we accrued $48.9 million of non-recurring income (e.g. prepayment premiums, accelerated accretion of upfront loan origination fees and unamortized discounts and ticking fees) as compared to $3.7 million in the prior year.

Total investment income increased to $148.0 million for the year ended December 31, 2019 from $3.2 million in the prior year primarily driven by our deployment of capital, increased balance of our investments and a full year of operations as compared to the partial period in the prior year. The size of our investment portfolio at fair value increased to $3,092.4 million at December 31, 2019 from $545.3 million at December 31, 2018. Additionally, for the year ended December 31, 2019, we accrued $3.7 million of non-recurring income (e.g. prepayment premiums, accelerated accretion of upfront loan origination fees and unamortized discounts and ticking fees) as compared to $0.0 million in the prior year.

As the impact of the COVID-19 pandemic persists, it could cause operational and/or liquidity issues at our portfolio companies which could restrict their ability to make cash interest payments. Additionally, we may experience full or partial losses on our investments which may ultimately reduce our investment income in future periods.

 

133


Table of Contents

Expenses

Expenses were as follows (dollar amounts in thousands):

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2021      2020      2021      2020  

Interest expense

   $ 27,167      $ 14,441      $ 48,313      $ 30,512  

Management fees

     13,272        7,454        24,949        13,991  

Income based incentive fee

     13,800        8,616        28,146        16,884  

Capital gains incentive fee

     6,793        —          12,171        (4,218

Professional fees

     654        334        1,242        860  

Board of Trustees’ fees

     144        111        275        226  

Administrative service expenses

     630        508        1,122        1,091  

Other general and administrative

     1,228        638        2,545        1,468  

Amortization of offering costs

     —          232        —          539  

Excise tax expense

     —          —          (282      104  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses (including excise tax expense)

     63,688        32,334        118,481        61,457  

Recoupment of expense support

     —          400        —          800  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net expenses (including excise tax expense)

   $ 63,688      $ 32,734      $ 118,481      $ 62,257  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     For The Year Ended December 31,  
     2020      2019      2018  

Interest expense

   $ 65,949      $ 35,431      $ 1,351  

Management fees

     32,874        12,635        309  

Income based incentive fee

     41,983        13,818        —    

Capital gains incentive fee

     (3,141      4,218        —    

Professional fees

     1,999        1,338        212  

Board of Trustees’ fees

     467        430        177  

Administrative service fees

     2,271        1,506        362  

Other general and administrative

     4,166        3,033        333  

Organization costs

     —          —          670  

Amortization of offering costs

     1,509        1,090        117  

Excise tax expense

     517        465        52  
  

 

 

    

 

 

    

 

 

 

Total expenses (including excise tax expense)

     148,594        73,964        3,583  

Expense support

     —          (570      (1,696

Recoupment of expense support

     1,466        800        —    
  

 

 

    

 

 

    

 

 

 

Net expenses (including excise tax expense)

   $ 150,060      $ 74,194      $ 1,887  
  

 

 

    

 

 

    

 

 

 

Interest Expense

Total interest expense (including unused fees and other debt financing expenses), increased to $27.2 million for the three months ended June 30, 2021 from $14.4 million for the same period in the prior year primarily driven by increased borrowings under our credit facilities and our unsecured bond issuances resulting from increased deployment of capital for investments. The average principal debt outstanding increased to $3,451.2 million for the three months ended June 30, 2021 from $1,644.3 million for the same period in the prior year, partially offset by a decrease in our weighted average interest rate to 3.06% for the three months ended June 30, 2021 from 3.36% for the same period in the prior year.

Total interest expense (including unused fees and other debt financing expenses), increased to $48.3 million for the six months ended June 30, 2021 from $30.5 million for the same period in the prior year primarily driven

 

134


Table of Contents

by increased borrowings under our credit facilities and our unsecured bond issuances resulting from increased deployment of capital for investments. The average principal debt outstanding increased to $3,068.1 million for the six months ended June 30, 2021 from $1,634.1 million for the same period in the prior year, partially offset by a decrease in our weighted average interest rate to 3.06% for the six months ended June 30, 2021 from 3.59% for the same period in the prior year.

Total interest expense (including unused fees and other debt financing expenses), increased to $65.9 million for the year ended December 31, 2020 from $35.4 million in the prior year primarily driven by increased borrowings under our credit facilities and our unsecured bond issuances. The average principal debt outstanding increased to $1,902.7 million for the year ended December 31, 2020 from $776.6 million in the prior year, partially offset by a decrease in our weighted average interest rate to 3.26% for the year ended December 31, 2020 from 4.36% in the prior year.

Total interest expense (including unused fees and other debt financing expenses), increased to $35.4 million for the year ended December 31, 2019 from $1.4 million in the prior year primarily driven by increased borrowings under our credit facilities related to increased deployment of capital for investments and a full year of operations as compared to a partial period in the prior year. The average principal debt outstanding increased to $776.6 million for the year ended December 31, 2019 from $162.0 million in the prior year, partially offset by a decrease in our weighted average interest rate to 4.36% for the year ended December 31, 2019 from 5.42% in the prior year.

Management Fees

Management fees increased to $13.3 million for the three months ended June 30, 2021 from $7.5 million for the same period in the prior year primarily due to an increase in gross assets. Management fees increased to $24.9 million for the six months ended June 30, 2021 from $14.0 million for the same period in the prior year primarily due to an increase in gross assets. Our total gross assets increased to $7,652.8 million at June 30, 2021 from $4,168.1 million at June 30, 2020.

Management fees increased to $32.9 million for the year ended December 31, 2020 from $12.6 million in the prior year primarily due to an increase in gross assets. Our total gross assets increased to $5,950.9 million at December 31, 2020 from $3,190.1 million at December 31, 2019.

Management fees increased to $12.6 million for the year ended December 31, 2019 from $0.3 million in the prior year primarily due to an increase in gross assets. Our total gross assets increased to $3,190.1 million at December 31, 2019 from $574.7 million at December 31, 2018.

Income Based Incentive Fees

Income based incentive fees increased to $13.8 million for the three months ended June 30, 2021 from $8.6 million for the same period in the prior year primarily due to our deployment of capital. Pre-incentive fee net investment income increased to $92.0 million for the three months ended June 30, 2021 from $57.4 million for the same period in the prior year.

Income based incentive fees increased to $28.1 million for the six months ended June 30, 2021 from $16.9 million for the same period in the prior year primarily due to our deployment of capital. Pre-incentive fee net investment income increased to $187.6 million for the six months ended June 30, 2021 from $112.6 million for the same period in the prior year.

Income based incentive fees increased to $42.0 million for the year ended December 31, 2020 from $13.8 million in the prior year primarily due to our deployment of capital. Pre-incentive fee net investment income increased to $279.9 million for the year ended December 31, 2020 from $92.1 million in the prior year.

 

135


Table of Contents

Income based incentive fees increased to $13.8 million for the year ended December 31, 2019 from $0.0 million in the prior year primarily due to our deployment of capital and a full year of operations as compared to a partial period in the prior year which resulted in higher pre-incentive fee income returns.

Capital Gains Based Incentive Fees

We accrued capital gains incentive fees of $6.8 million for the three months ended June 30, 2021 compared to $0.0 million for the same period in the prior year, primarily due to net realized and unrealized gains in the current year. We accrued capital gains incentive fees of $12.2 million for the six months ended June 30, 2021 compared to $(4.2) million for the same period in the prior year, primarily due to net realized and unrealized gains in the current year contrasted by a reversal of previously accrued incentive fees due to net realized and unrealized losses during the six months ended June 30, 2020. We accrued capital gains incentive fees of $(3.1) million for the year ended December 31, 2020 compared to $4.2 million for the prior year. In 2020, the reversal of previously accrued incentive fees were attributable to net realized and unrealized losses in that year. The accrual for any capital gains incentive fee under U.S. GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reduction of previously recorded expense if such cumulative amount is less in the prior period. If such cumulative amount is negative, then there is no accrual.

Other Expenses

Organization costs and offering costs include expenses incurred in our initial formation and our Private Offering. Professional fees include legal, rating agencies, audit, tax, valuation, technology and other professional fees incurred related to the management of us. Administrative service fees represent fees paid to the Administrator for our allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the administration agreement, including our allocable portion of the cost of certain of our executive officers, their respective staff and other non-investment professionals that perform duties for us. Other general and administrative expenses include insurance, filing, research, our sub-administrator, subscriptions and other costs.

Total other expenses increased to $2.7 million for the three months ended June 30, 2021 from $1.8 million for the same period in the prior year primarily driven by larger other general and administrative costs, including expense associated with our Sub-Administrator.

Total other expenses increased to $5.2 million for the six months ended June 30, 2021 from $4.2 million for the same period in the prior year primarily driven by larger other general and administrative costs, including expense associated with our Sub-Administrator.

Total other expenses increased to $10.9 million for the year ended December 31, 2020 from $7.9 million in the prior year primarily driven by an increase in certain general and administrative expenses and administrative service expense in the prior year. The increase in costs was attributable to servicing a growing investment portfolio.

Total other expenses increased to $7.9 million for the year ended December 31, 2019 from $1.9 million in the prior year primarily driven by an increase in costs associated with servicing a growing investment portfolio and a full year of operations compared to a partial period in the prior year.

The Adviser may elect to make Expense Payments on our behalf, subject to future Reimbursement Payments pursuant to the Expense Support Agreement described above in “—Key Components of Our Results of Operations—Expenses.”

Income Taxes, Including Excise Taxes

We elected to be treated as a RIC under Subchapter M of the Code, and we intend to operate in a manner so as to continue to qualify for the tax treatment applicable to RICs. To qualify for tax treatment as a RIC, we must,

 

136


Table of Contents

among other things, distribute to our shareholders in each taxable year generally at least 90% of the sum of our investment company taxable income, as defined by the Code (without regard to the deduction for dividends paid), and net tax-exempt income for that taxable year. To maintain our tax treatment as a RIC, we, among other things, intend to make the requisite distributions to our shareholders, which generally relieve us from corporate-level U.S. federal income taxes.

In addition, based on the excise tax distribution requirements, the Company is subject to a 4% nondeductible federal excise tax on any undistributed income unless the Company distributes in a timely manner in each taxable year an amount at least equal to the sum of:

 

   

98% of its ordinary income for the calendar year;

 

   

98.2% of its capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year; and

 

   

100% of any undistributed income from prior years.

For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate income tax is considered to have been distributed.

To the extent that the Company’s estimated annual income for the current year, as determined according to the excise rules described above, will exceed the Company’s estimated annual dividend distributions for the current year, we will accrue an excise tax. For the three and six months ended June 30, 2021, we incurred $0.0 million and $(0.3) million, respectively, of U.S. federal excise tax. For the three and six months ended June 30, 2020, we incurred $0.0 million and $0.1 million, respectively, of U.S. federal excise tax. For the years ended December 31, 2020, 2019 and 2018, we incurred $0.5 million, $0.5 million and $0.1 million, respectively, of U.S. federal excise tax.

Net Unrealized Gain (Loss)

Net unrealized gain (loss) was comprised of the following (dollar amounts in thousands):

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2021      2021      2021      2020  

Net unrealized gain (loss) on investments

   $ 41,831      $ 178,860      $ 74,597      $ (179,954

Net unrealized gain (loss) on translation of assets and liabilities in foreign currencies

     112        14        (602      1  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net unrealized gain (loss)

   $ 41,943      $ 178,874      $ 73,995      $ (179,953
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     For The Year Ended December 31,  
     2020      2019      2018  

Net unrealized gain (loss) on investments

   $ (16,593    $ 28,173      $ (3,428

Net unrealized gain (loss) on forward purchase obligation

     —          222        (222

Net unrealized gain (loss) on translation of assets and liabilities in foreign currencies

     11        (66      —    
  

 

 

    

 

 

    

 

 

 

Net unrealized gain (loss) on investments

   $ (16,582    $ 28,329      $ (3,650
  

 

 

    

 

 

    

 

 

 

For the three months ended June 30, 2021, the net unrealized gain was primarily driven by an increase in the fair value of our debt investments during the period. The fair value of our debt investments as a percentage of

 

137


Table of Contents

principal increased by 0.7% as compared to 4.7% increase for the same period in the prior year. The unrealized gains for the three months ended June 30, 2020 were mainly driven by a recovery from the COVID-19 pandemic as credit spreads tightened and the private and syndicated leverage loan markets significantly rebounded from the March 2020 lows. For the six months ended June 30, 2021, the net unrealized gain was primarily driven by an increase in the fair value of our debt investments during the period. The fair value of our debt investments as a percentage of principal increased by 1.3% as compared to a 4.5% decrease for the same period in the prior year. The unrealized losses during the six months ended June 30, 2020 were driven by market volatility resulting from the onset of the COVID-19 pandemic.

For the year ended December 31, 2020, the net unrealized loss was primarily driven by a decrease in fair value of our debt investments as compared to December 31, 2019. The fair value of our debt investments as a percentage of principal decreased by 0.6% as compared to a 1.2% increase in fair value of our debt investments in the prior year. The unrealized loss was partially driven by the impacts of COVID-19, with global credit market volatility peaking in March 2020 and substantially recovering through year end. To the extent that the credit risk of our portfolio companies increases as a result of financial impacts due to COVID-19, we may incur additional unrealized losses in the future.

For the year ended December 31, 2019, the net unrealized gain was primarily driven by an increase in the fair value of our debt investments as compared to December 31, 2018. The fair value of our debt investments as a percentage of principal increased by 1.2% for the year ended December 31, 2019.

Net Realized Gain (Loss)

The realized gains and losses on fully exited and partially exited investments comprised of the following (dollar amounts in thousands):

 

     Three Months
Ended June 30,
     Six Months
Ended June 30,
 
     2021      2020      2021      2020  

Net realized gain (loss) on investments

   $ 3,682      $ 1,650      $ 8,316      $ 2,349  

Net realized gain (loss) on translation of assets and liabilities in foreign currencies

     (339      28        (1,175      24  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net realized gain (loss)

   $ 3,343      $ 1,678      $ 7,141      $ 2,373  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     For The Year Ended
December 31,
 
     2020      2019      2018  

Net realized gain (loss) on investments

   $ (4,378    $ 3,962      $ —    

Net realized gain (loss) on foreign currency transactions

     17        61        —    

Net realized gain (loss) on derivative

     —          —          (581
  

 

 

    

 

 

    

 

 

 

Net realized gain (loss) on investments

   $ (4,361    $ 4,023      $ (581
  

 

 

    

 

 

    

 

 

 

For the three and six months ended June 30, 2021, we generated realized gains of $3.7 million and $8.7 million, respectively, partially offset by realized losses of $0.4 million and $1.6 million respectively, primarily from full or partial sales of our debt investments. For the three and six months ended June 30, 2020, we generated realized gains of $3.7 million and $4.7 million, respectively, partially offset by realized losses of $2.0 million and $2.3 million respectively, primarily from full or partial sales of our debt investments.

For the year ended December 31, 2020, we generated realized gains of $20.9 million, which were more than offset by realized losses of $25.3 million, primarily from full or partial sales of quoted loans, including a $20.5 million loss relating to Travelport Finance S.A.R.L.

 

138


Table of Contents

For the year ended December 31, 2019, we generated realized gains of $4.8 million, partially offset by realized losses of $0.9 million, primarily from full or partial sales of quoted loans.

For the year ended December 31, 2018, we generated realized losses of $0.6 million relating to our acquisition of the Syndicated Warehouse.

As the impact of the COVID-19 pandemic persists, it may cause us to experience full or partial losses on our investments upon the exit or restructuring of our investments.

Financial Condition, Liquidity and Capital Resources

We generate cash from the net proceeds from the issuances of unsecured debt, proceeds from net borrowings on our credit facilities and income earned on our debt investments. The primary uses of our cash and cash equivalents are for (i) originating loans and purchasing senior secured debt investments, (ii) funding the costs of our operations (including fees paid to our Adviser and expense reimbursements paid to our Administrator), (iii) debt service, repayment and other financing costs of our borrowings and (iv) cash distributions to the holders of our shares.

As of June 30, 2021 and December 31, 2020, we had four and four credit facilities outstanding and we had three and two issuances of unsecured bonds outstanding, respectively. We may from time to time enter into additional credit facilities, increase the size of our existing credit facilities or issue further debt securities. Any such incurrence or issuance would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors. In accordance with the 1940 Act, with certain limited exceptions, we are only allowed to incur borrowings, issue debt securities or issue preferred stock, if immediately after the borrowing or issuance, the ratio of total assets (less total liabilities other than indebtedness) to total indebtedness plus preferred stock, is at or above 150%. As of June 30, 2021 and December 31, 2020, we had an aggregate amount of $3,782.4 million and $2,514.6 million of senior securities outstanding and our asset coverage ratio was 198.9% and 230.0%, respectively. We seek to carefully consider our unfunded commitments for the purpose of planning our ongoing financial leverage. Further, we maintain sufficient borrowing capacity within the 150% asset coverage limitation to cover any outstanding unfunded commitments we are required to fund.

Cash and cash equivalents as of June 30, 2021, taken together with our $1,018.8 million of available capacity under our credit facilities (subject to borrowing base availability) and our $356.3 million of uncalled Capital Commitments is expected to be sufficient for our investing activities and to conduct our operations in the near term. Although we were able to issue unsecured debt during the period ended June 30, 2021, disruption in the financial markets caused by the COVID-19 outbreak or any other negative economic development could restrict our access to financing in the future. We may not be able to find new financing for future investments or liquidity needs and, even if we are able to obtain such financing, such financing may not be on as favorable terms as we have recently obtained. These factors may limit our ability to make new investments and adversely impact our results of operations.

As of June 30, 2021, we had $181.6 million in cash and cash equivalents. During the six months ended June 30, 2021, cash used in operating activities was $1,515.5 million, primarily as a result of funding portfolio investments of $2,592.6 million; partially offset by proceeds from sale of investments of $939.4 million. Cash provided by financing activities was $1,479.3 million during the period, which was primarily as a result of net borrowings on our credit facilities and our unsecured debt issuances of $1,257.2 million; our proceeds from issuance of common shares of $358.6 million; and partially offset by dividends paid in cash of $131.8 million.

As of June 30, 2020, we had $73.9 million in cash and cash equivalents. During the six months ended June 30, 2020, cash used in operating activities was $951.4 million, primarily as a result of funding portfolio investments of $1,511.1 million; partially offset by proceeds from sale of investments of $410.3 million and an

 

139


Table of Contents

increase in payables for investments purchased of $98.8 million. Cash provided by financing activities was $959.8 million during the period, which was primarily the result of proceeds from the issuance of shares of $770.8 million, net borrowings on our credit facilities of $254.2 million; partially offset by dividends paid in cash of $58.6 million.

As of December 31, 2020 and December 31, 2019, we had four and four revolving credit facilities outstanding, respectively. During the year ended December 31, 2020, we also issued two unsecured bonds totaling $1.2 billion in aggregate principal amount. Refer to “—Borrowings” below. We may from time to time enter into additional credit facilities, increase the size of our existing credit facilities or issue further debt securities. Any such incurrence or issuance would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors. In accordance with the 1940 Act, with certain limited exceptions, we are only allowed to incur borrowings, issue debt securities or issue preferred shares, if immediately after the borrowing or issuance, the ratio of total assets (less total liabilities other than indebtedness) to total indebtedness plus preferred shares, is at or above 150%. As of December 31, 2020 and December 31, 2019, we had an aggregate amount of $2,514.6 million and $1,454.2 million of senior securities outstanding and our asset coverage ratio was 230.0% and 215.1%, respectively. We seek to carefully consider our unfunded commitments for the purpose of planning our ongoing financial leverage. Further, we maintain sufficient borrowing capacity within the 150% asset coverage limitation to cover any outstanding unfunded commitments we are required to fund.

Cash and cash equivalents as of December 31, 2020, taken together with our $1,055.4 million of available capacity under our credit facilities (subject to borrowing base availability) and our $713.3 million of uncalled Capital Commitments is expected to be sufficient for our investing activities and to conduct our operations in the near term. Although we were able to issue unsecured debt during the year ended December 31, 2020, a continued disruption in the financial markets caused by the COVID-19 outbreak could restrict our access to financing in the future. We may not be able to find new financing for future investments or liquidity needs and, even if we are able to obtain such financing, such financing will likely not be on as favorable terms as we could have obtained prior to the outbreak of the pandemic. These factors may limit our ability to make new investments and adversely impact our results of operations.

As of December 31, 2020, we had $218.0 million in cash and cash equivalents. During the year ended December 31, 2020, cash used in operating activities was $2,320.2 million, primarily as a result of funding portfolio investments of $4,485.2 million, partially offset by proceeds from sale of investments of $2,030.8 million. Cash provided by financing activities was $2,472.7 million during the period, which was primarily the result of proceeds from the issuance of shares of $1,582.5 million and net borrowings on our credit facilities and our unsecured debt issuances of $1,044.6 million, partially offset by dividends paid in cash of $145.1 million.

As of December 31, 2019, we had $65.5 million in cash and cash equivalents. During the year ended December 31, 2019, cash used in operating activities was $2,558.3 million, primarily as a result of funding portfolio investments of $3,077.3 million and a decrease in payables for investments purchased of $139.4 million, partially offset by proceeds from sale of investments of $572.8 million. Cash provided by financing activities was $2,617.6 million during the period, which was primarily the result of proceeds from the issuance of shares of $1,387.8 million and net borrowings on our credit facilities of $1,269.2 million, partially offset by dividends paid in cash of $35.4 million.

As of December 31, 2018, we had $6.2 million in cash and cash equivalents. During the year ended December 31, 2018, cash used in operating activities was $349.8 million, primarily as a result of funding portfolio investments of $428.1 million, the purchase of the equity interests in the Syndicated Warehouse (discussed below), net of cash of $24.0 million; partially offset by a decrease in receivables for investments sold of $12.0 million and an increase in payables for investments purchased of $86.8 million. Cash provided by financing activities was $356.0 million during the period, which was the result of proceeds from the issuance of

 

140


Table of Contents

shares of $239.3 million and net borrowings on our credit facilities of $120.0 million, partially offset by deferred financing costs paid of $2.6 million.

Equity

The following table summarizes the total shares issued and proceeds received related to our capital drawdowns delivered pursuant to the Subscription Agreements for the six months ended June 30, 2021 (dollars in millions except share amounts):

 

Common Share Issuance Date

   Number of
Common Shares
Issued
     Aggregate
Offering Proceeds
 

June 8, 2021 (1)

     13,869,637      $  357.0  
  

 

 

    

 

 

 

Total

     13,869,637      $ 357.0  
  

 

 

    

 

 

 

 

(1)

On May 24, 2021, the Company issued a capital call and delivered capital drawdown notices totaling $357.0 million, of which $1.8 million was received subsequent to June 30, 2021 recorded as a subscription receivable on the Consolidated Statements of Assets and Liabilities.

The following table summarizes the total shares issued and proceeds received related to capital drawdowns delivered pursuant to the Subscription Agreements for the six months ended June 30, 2020 (dollar amounts in millions, except share amounts):

 

Common Share Issuance Date

   Number of
Common Shares
Issued
     Aggregate
Offering Proceeds
 

January 30, 2020

     16,864,983      $ 440.9  
  

 

 

    

 

 

 

April 8, 2020

     14,864,518      $ 324.0  
  

 

 

    

 

 

 

Total

     31,729,501      $ 764.9  
  

 

 

    

 

 

 

On June 30, 2020, the Company issued a capital call and delivered capital drawdown notices totaling $125.6 million, which was due on July 15, 2020. Subscribed but unissued shares are presented in equity with a deduction of subscriptions receivable until cash is received for a subscription. No cash was received related to this capital call as of June 30, 2020.

The following table summarizes the total shares issued and proceeds received related to capital drawdowns delivered pursuant to the Subscription Agreements for the year ended December 31, 2020 (dollar amounts in millions, except share amounts):

 

Common Share Issuance Date

   Number of
Common Shares
Issued
     Aggregate
Offering Price
 

January 30, 2020

     16,864,983      $ 440.9  

April 8, 2020

     14,864,518        324.0  

July 15, 2020

     5,304,125        125.6  

July 28, 2020

     123,229        2.9  

November 6, 2020

     4,627,528        115.4  

December 15, 2020 (1)

     22,802,680        571.2  
  

 

 

    

 

 

 

Total

     64,587,063      $ 1,580.0  
  

 

 

    

 

 

 

 

(1)

On December 1, 2020, the Company issued a capital call and delivered capital drawdown notices totaling $571.2 million, of which $3.4 million was received subsequent to December 31, 2020 and recorded as a subscription receivable on the Consolidated Statements of Assets and Liabilities.

 

141


Table of Contents

The following table summarizes the total shares issued and proceeds received related to capital drawdowns delivered pursuant to the Subscription Agreements for the year ended December 31, 2019 (dollar amounts in millions, except share amounts):

 

Common Share Issuance Date

   Number of
Common
Shares
Issued
     Aggregate
Offering
Price
 

January 24, 2019

     5,666,095      $ 142.1  

March 28, 2019

     9,818,817        247.5  

June 27, 2019

     12,453,261        319.7  

August 9, 2019

     1,401,367        36.1  

September 25, 2019

     14,686,050        377.3  

December 16, 2019 (1)

     10,474,169        271.1  
  

 

 

    

 

 

 

Total

     54,499,759      $ 1,393.8  
  

 

 

    

 

 

 

The following table summarizes the total shares issued and proceeds received related to our initial capitalization and capital drawdowns delivered pursuant to the Subscription Agreements for the year ended December 31, 2018 (dollar amounts in millions, except share amounts):

 

Common Share Issuance Date

   Number of
Common
Shares
Issued
     Aggregate
Offering
Price
 

September 14, 2018

     60      $ —    

November 20, 2018

     5,671,181        141.8  

December 13, 2018

     3,950,078        97.5  
  

 

 

    

 

 

 

Total

     9,621,319      $ 239.3  
  

 

 

    

 

 

 

Distributions and Dividend Reinvestment

The following table summarizes our distributions declared and payable for the six months ended June 30, 2021 (dollar amounts in thousands, except share amounts):

 

Date Declared

   Record Date      Payment Date      Per Share Amount      Total Amount  

February 24, 2021

     March 31, 2021        May 14, 2021      $ 0.5000      $ 65,052  
        

 

 

    

 

 

 

June 7, 2021

     June 7, 2021        August 13, 2021        0.3736        48,734  
        

 

 

    

 

 

 

June 7, 2021

     June 30, 2021        August 13, 2021        0.1264        18,241  
        

 

 

    

 

 

 

Total distributions

         $ 1.0000      $ 132,027  
        

 

 

    

 

 

 

The following table summarizes our distributions declared and payable for the six months ended June 30, 2020 (dollar amounts in thousands, except share amounts):

 

Date Declared

   Record Date      Payment Date      Per Share Amount      Total Amount  

January 29, 2020

     January 29, 2020        May 15, 2020      $ 0.1593      $ 10,241  

February 26, 2020

     March 31, 2020        May 15, 2020        0.3407        27,688  

April 7, 2020

     April 7, 2020        August 14, 2020        0.0385        3,129  

June 29, 2020

     June 30, 2020        August 14, 2020        0.4615        44,454  
        

 

 

    

 

 

 

Total distributions

         $ 1.0000      $ 85,512  
        

 

 

    

 

 

 

 

142


Table of Contents

The following table summarizes our distributions declared and payable for the year ended December 31, 2020 (dollar amounts in thousands, unless otherwise noted):

 

Date Declared

   Record Date      Payment Date      Per Share Amount      Total Amount  

January 29, 2020

     January 29, 2020        May 15, 2020      $ 0.1593      $ 10,241  

February 26, 2020

     March 31, 2020        May 15, 2020        0.3407        27,688  

April 7, 2020

     April 7, 2020        August 14, 2020        0.0385        3,129  

June 29, 2020

     June 30, 2020        August 14, 2020        0.4615        44,454  

July 14, 2020

     July 14, 2020        November 13, 2020        0.0761        7,330  

July 27, 2020

     July 27, 2020        November 13, 2020        0.0707        7,185  

August 26, 2020

     September 30, 2020        November 13, 2020        0.3532        36,021  

November 5, 2020

     November 5, 2020        January 29, 2021        0.1957        19,958  

December 14, 2020

     December 14, 2020        January 29, 2021        0.2120        22,654  

December 14, 2020

     December 14, 2020        January 29, 2021        0.3000        32,057 (1) 

December 14, 2020

     December 31, 2020        January 29, 2021        0.0923        11,968  
        

 

 

    

 

 

 

Total distributions

         $ 2.3000      $ 222,685  
        

 

 

    

 

 

 

 

(1)

Represents a special distribution.

The following table summarizes our distributions declared and payable for the year ended December 31, 2019 (dollars in thousands except per share amounts):

 

Date Declared

   Record Date      Payment Date      Per Share Amount      Total Amount  

January 22, 2019

     January 23, 2019        May 15, 2019      $ 0.1239      $ 1,192  

February 28, 2019

     March 27, 2019        May 15, 2019        0.3536        5,406  

March 26, 2019

     March 31, 2019        May 15, 2019        0.0225        565  

June 26, 2019

     June 26, 2019        August 14, 2019        0.4780        12,010  

June 26, 2019

     June 30, 2019        August 14, 2019        0.0220        827  

August 8, 2019

     August 8, 2019        November 14, 2019        0.2120        7,967  

September 24, 2019

     September 24, 2019        November 14, 2019        0.2554        9,973  

September 24, 2019

     September 30, 2019        November 14, 2019        0.0326        1,752  

December 13, 2019

     December 15, 2019        January 30, 2020        0.4130        22,226  

December 16, 2019

     December 31, 2019        January 30, 2020        0.0870        5,593  
        

 

 

    

 

 

 

Total distributions

         $ 2.0000      $ 67,511  
        

 

 

    

 

 

 

During the year ended December 31, 2018, we did not declare or pay any distributions.

With respect to distributions, we have adopted an “opt out” dividend reinvestment plan for shareholders. As a result, in the event of a declared cash distribution or other distribution, each shareholder that has not “opted out” of the dividend reinvestment plan will have their dividends or distributions automatically reinvested in additional shares rather than receiving cash distributions. Shareholders who receive distributions in the form of shares will be subject to the same U.S. federal, state and local tax consequences as if they received cash distributions.

 

143


Table of Contents

The following table summarizes the amounts received and shares issued to shareholders who have not opted out of our dividend reinvestment plan during the six months ended June 30, 2021 (dollars in thousands except share amounts):

 

Payment Date

   DRIP Shares Value      DRIP Shares Issued  

January 29, 2021

   $ 11,179        443,639  
  

 

 

    

 

 

 

May 14, 2021

     8,674        339,398  
  

 

 

    

 

 

 

Total distributions

   $ 19,853        783,037  
  

 

 

    

 

 

 

The following table summarizes the amounts received and shares issued to shareholders who have not opted out of our dividend reinvestment plan during the six months ended June 30, 2020 (dollars in thousands except share amounts):

 

Payment Date

   DRIP Shares Value      DRIP Shares Issued  

January 30, 2020

   $ 2,882        112,302  
  

 

 

    

 

 

 

May 15, 2020

     4,244        194,694  
  

 

 

    

 

 

 

Total distributions

   $ 7,126        306,996  
  

 

 

    

 

 

 

The following table summarizes the amounts received and shares issued to shareholders who have not opted out of our dividend reinvestment plan during the year ended December 31, 2020 (dollars in thousands except share amounts):

 

Payment Date

   DRIP Shares Value      DRIP Shares Issued  

January 30, 2020

   $ 2,882        112,302  

May 15, 2020

     4,244        194,694  

August 14, 2020

     5,437        229,591  

November 13, 2020

     6,182        248,194  
  

 

 

    

 

 

 

Total

   $ 18,745        784,781  
  

 

 

    

 

 

 

The following table summarize the amounts received and shares issued to shareholders who have not opted out of our dividend reinvestment plan during the year ended December 31, 2019 (dollars in thousands except share amounts):

 

Payment Date

   DRIP Shares Value      DRIP Shares Issued  

May 15, 2019

   $ 519        20,605  

August 14, 2019

     1,748        68,165  

November 14, 2019

     2,051        79,894  
  

 

 

    

 

 

 

Total

   $ 4,318        168,664  
  

 

 

    

 

 

 

During the year ended December 31, 2018, we did not declare or pay any distributions.

 

144


Table of Contents

Borrowings

Our outstanding debt obligations were as follows (dollar amounts in thousands):

 

     June 30, 2021  
     Aggregate
Principal
Committed
     Outstanding
Principal
     Carrying
Value
     Unused
Portion (1)
     Amount
Available (2)
 

Jackson Hole Funding Facility(3)

   $ 400,000      $ 401,286      $ 401,286      $ —        $ —    

Breckenridge Funding Facility

     825,000        538,280        538,280        286,720        286,720  

Big Sky Funding Facility

     400,000        354,506        354,506        45,494        45,494  

Revolving Credit Facility(4)

     1,275,000        588,373        588,373        686,627        686,627  

2023 Notes(5)

     400,000        400,000        395,612        —          —    

2026 Notes(5)

     800,000        800,000        791,854        —          —    

New 2026 Notes(5)

     700,000        700,000        690,783        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 4,800,000      $ 3,782,445      $ 3,760,694      $ 1,018,841      $ 1,018,84  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     December 31, 2020  
     Aggregate
Principal
Committed
     Outstanding
Principal
     Carrying
Value
     Unused
Portion (1)
     Amount
Available (2)
 

Jackson Hole Funding Facility (3)

   $ 400,000      $ 362,316      $ 362,316      $ 37,684      $ 37,684  

Breckenridge Funding Facility

     825,000        569,000        569,000        256,000        256,000  

Big Sky Funding Facility

     400,000        200,346        200,346        199,654        117,599  

Revolving Credit Facility (4)

     745,000        182,901        182,901        562,099        562,099  

2023 Notes(5)

     400,000        400,000        394,549        —          —    

2026 Notes(5)

     800,000        800,000        791,281        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 3,570,000      $ 2,514,563      $ 2,500,393      $ 1,055,437      $ 973,382  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     December 31, 2019  
     Aggregate
Principal
Committed
     Outstanding
Principal
     Carrying
Value
     Unused
Portion (1)
     Amount
Available (2)
 

Subscription Facility

   $ 400,000      $ 119,752      $ 119,752      $ 280,248      $ 280,248  

Jackson Hole Funding Facility (3)

     600,000        514,151        514,151        85,849        5,843  

Breckenridge Funding Facility

     875,000        820,311        820,311        54,689        10,769  

Big Sky Funding Facility

     400,000        —          —          400,000        25,481  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 2,275,000      $ 1,454,214      $ 1,454,214      $ 820,786      $ 322,341  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

The unused portion is the amount upon which commitment fees, if any, are based.

(2)

The amount available reflects any limitations related to each respective credit facility’s borrowing base.

(3)

Under the Jackson Hole Funding Facility, the Company may borrow in U.S. dollars or certain other permitted currencies. As of June 30, 2021 and December 31, 2020, we had borrowings denominated in Euros (EUR) of 23.4 million and 23.5 million, respectively. As of December 31, 2019, the Company had borrowings denominated in Euros (EUR) of $23.9 million. The Jackson Hole Funding Facility carrying value was in excess of aggregate outstanding principal at June 30, 2021 due to unrealized losses on foreign denominated debt balances.

(4)

Under the Revolving Credit Facility, the Company may borrow in U.S. dollars or certain other permitted currencies. As of June 30, 2021, the Company had borrowings denominated in Canadian Dollars (CAD), Euros (EUR) and British Pounds (GBP) of 237.5 million, 8.0 million and 24.7 million, respectively. As of December 31, 2020, we had borrowings denominated in Canadian Dollars (CAD) of 138.1 million.

(5)

The carrying value of the Company’s 2023 Notes, 2026 Notes, and New 2026 Notes are presented net of unamortized debt issuance costs of $4.4 million, $8.1 million, and $9.2 million, respectively, as of

 

145


Table of Contents
  June 30, 2021. The carrying value of our 2023 Notes and 2026 Notes is presented net of unamortized debt issuance costs of $5.5 million and $8.7 million, respectively, as of December 31, 2020.

 

     December 31, 2018  
     Aggregate
Principal
Committed
     Outstanding
Principal
     Carrying
Value
     Unused
Portion (1)
     Amount
Available (2)
 

Subscription Facility

   $ 200,000      $ —        $ —        $ 200,000      $ 174,032  

JPM SPV Facility

     300,000        120,000        120,000        180,000        22,966  

BNP SPV Facility

     400,000        65,000        65,000        335,000        5,183  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 900,000      $ 185,000      $ 185,000      $ 715,000      $ 202,181  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

The unused portion is the amount upon which commitment fees, if any, are based.

(2)

The amount available reflects any limitations related to each respective credit facility’s borrowing base.

Off-Balance Sheet Arrangements

Portfolio Company Commitments

Our investment portfolio contains and is expected to continue to contain debt investments which are in the form of lines of credit or delayed draw commitments, which require us to provide funding when requested by portfolio companies in accordance with underlying loan agreements. As of June 30, 2021, December 31, 2020 and December 31, 2019, we had outstanding commitments to fund delayed draw term loans totaling $882.2 million, $432.3 million and $179.4 million, respectively.

Additionally, from time to time, the Adviser and its affiliates may commit to an investment on behalf of the funds it manages. Certain terms of these investments are not finalized at the time of the commitment and each respective fund’s allocation may change prior to the date of funding. In this regard, as of June 30, 2021 and December 31, 2020, we estimate that $1,244.1 million and $0.0 million, respectively, of investments were committed but not yet funded.

Cash and cash equivalents as of June 30, 2021, taken together with our $1,018.8 million of available capacity under our credit facilities (subject to borrowing base availability) as of June 30, 2021, is expected to be sufficient to support any future funding’s of these delayed draw term loans. As of December 31, 2019, we had unfunded delayed draw term loans and revolvers with an aggregate principal amount of $179.4 million.

Warehousing Transactions

We entered into two Warehousing Transactions whereby we agreed, subject to certain conditions, to purchase certain assets from parties unaffiliated with the Adviser. Such Warehousing Transactions were designed to assist us in deploying capital upon receipt of drawdown proceeds. The Middle Market Warehouse related primarily to originated or anchor investments in middle market loans. The Syndicated Warehouse related primarily to broadly syndicated loans prior to the acquisition of the equity interests of the Syndicated Warehouse by us and merger of the Syndicated Warehouse with our wholly-owned subsidiary, as described below. See—“Risk Factors — Risks Related to an Investment in the Shares — Risks related to the Warehousing Transactions.

For additional information on our Warehousing Transactions see note 7 to our consolidated financial statements for the period ending December 31, 2020, included elsewhere in this prospectus.

Other Commitments and Contingencies

From time to time, we may become a party to certain legal proceedings incidental to the normal course of its business. At June 30, 2021, December 31, 2020 and December 31, 2019, management is not aware of any pending or threatened litigation.

 

146


Table of Contents

Contractual Obligations

Our contractual obligations consisted of the following as of June 30, 2021 (dollar amounts in thousands):

 

     Payments Due by Period  
     Total      Less than
1 year
     1-3 years      3-5 years      After 5
years
 

Jackson Hole Funding Facility

   $ 401,286      $ —        $ 401,286      $ —        $ —    

Breckenridge Funding Facility

     538,280        —          538,280        —          —    

Big Sky Funding Facility

     354,506        —          354,506        —          —    

Revolving Credit Facility

     588,373        —          —          588,373        —    

2023 Notes

     400,000        —          400,000        —          —    

2026 Notes

     800,000        —          —          800,000        —    

New 2026 Notes

     700,000        —          —          —          700,000  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Contractual Obligations

   $ 3,782,445      $ —        $ 1,694,072      $ 1,388,373      $ 700,000  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Related-Party Transactions

We have entered into a number of business relationships with affiliated or related parties, including the following:

 

   

the Investment Advisory Agreement;

 

   

the Administration Agreement; and

 

   

Expense Support and Conditional Reimbursement Agreement.

In addition to the aforementioned agreements, we, our Adviser and certain of our Adviser’s affiliates have been granted exemptive relief by the SEC to co-invest with other funds managed by our Adviser or its affiliates in a manner consistent with our investment objectives, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors.

COVID-19 Update

There is an ongoing global outbreak of COVID-19, which has spread to over 200 countries and territories, including the United States, and has spread to every state in the United States. The global impact of the outbreak has been rapidly evolving, and as cases of COVID-19, including new variants, have continued to be identified in additional countries, many countries have reacted by instituting quarantines and restrictions on travel, closing financial markets and/or restricting trading, and limiting operations of non-essential businesses. Such actions have created disruption in global supply chains, and adversely impacted many industries. The outbreak has had a continued adverse impact on economic and market conditions and has triggered a period of global economic slowdown.

The COVID-19 pandemic (including the restrictive measures taken in response thereto) has to date (i) created significant business disruption issues for certain of our portfolio companies, and (ii) materially and adversely impacted the value and performance of certain of our portfolio companies. As vaccines have been widely distributed in the U.S., most U.S. states have reopened and we believe the economy is beginning to rebound in certain respects, the uncertainty surrounding the COVID-19 pandemic, including uncertainty regarding new variants of COVID-19 that have emerged in, at least, the United Kingdom, South Africa, India and Brazil, and other factors have and may continue to contribute to significant volatility in the global markets. COVID-19 and the current financial, economic and capital markets environment, and future developments in these and other areas present uncertainty and risk with respect to our performance, financial condition, results of operations and ability to pay distributions.

 

147


Table of Contents

Critical Accounting Policies

The preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets, and any other parameters used in determining such estimates could cause actual results to differ. Our critical accounting policies should be read in connection with our risk factors described in “Risk Factors.”

Fair Value Measurements

The Company is required to report its investments for which current market values are not readily available at fair value. The Company values its investments in accordance with Financial Accounting Standards Board Accounting Standards Codification 820, Fair Value Measurements (“ASC 820”), which defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the applicable measurement date. ASC 820 prioritizes the use of observable market prices derived from such prices over entity-specific inputs. Due to the inherent uncertainties of valuation, certain estimated fair values may differ significantly from the values that would have been realized had a ready market for these investments existed, and these differences could be material.

Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. The Company utilizes mid-market pricing (i.e. mid-point of average bid and ask prices) to value these investments. These market quotations are obtained from independent pricing services, if available; otherwise from at least two principal market makers or primary market dealers. To assess the continuing appropriateness of pricing sources and methodologies, the Adviser regularly performs price verification procedures and issues challenges as necessary to independent pricing services or brokers, and any differences are reviewed in accordance with the valuation procedures. The Adviser does not adjust the prices unless it has a reason to believe market quotations are not reflective of the fair value of an investment. Examples of events that would cause market quotations to not reflect fair value could include cases when a security trades infrequently or not at all, causing a quoted purchase or sale price to become stale, or in the event of a “fire sale” by a distressed seller. All price overrides require approval from the Company’s Board.

Where prices or inputs are not available or, in the judgment of the Board, not reliable, valuation techniques based on the facts and circumstances of the particular investment will be utilized. Securities that are not publicly traded or for which market prices are not readily available are valued at fair value as determined in good faith by the Board, based on, among other things, the input of the Adviser, the Audit Committee of the Board (the “Audit Committee”) and independent valuation firms engaged on the recommendation of the Adviser and at the direction of the Board. These valuation approaches involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the investments or market and the investments’ complexity.

The Company’s Board undertakes a multi-step valuation process each quarter in connection with determining the fair value of the Company’s investments for which market quotations are not readily available, or are available but deemed not reflective of the fair value of an investment, which includes, among other procedures, the following:

 

   

The valuation process begins with each investment being preliminarily valued by the Adviser’s valuation team in conjunction with the Adviser’s investment professionals responsible for each portfolio investment;

 

   

In addition, independent valuation firms engaged by the Board prepare valuations of all the Company’s investments over a de minimis threshold. The independent valuation firms provide a final range of values on such investments to the Board and the Adviser. The independent valuation firms also provide analyses to support their valuation methodology and calculations;

 

148


Table of Contents
   

The Adviser’s Valuation Committee reviews each valuation recommendation to confirm they have been calculated in accordance with the valuation policy and compares such valuations to the independent valuation firms’ valuation ranges to ensure the Adviser’s valuations are reasonable;

 

   

The Valuation Committee makes valuation recommendations to the Audit Committee;

 

   

The Audit Committee reviews the valuation recommendations made by the Adviser’s Valuation Committee, including the independent valuation firms’ valuations, and once approved, recommends them for approval by the Board; and

 

   

The Board reviews the valuation recommendations of the Audit Committee and determines the fair value of each investment in the portfolio in good faith based on the input of the Audit Committee, the Adviser’s Valuation Committee and, where applicable, the independent valuation firms and other external service providers.

Valuation of each of our investments will generally be made as described above as of the end of each fiscal quarter. In cases where we determine our NAV at times other than a quarter end, we intend to update the value of securities with market quotations to the most recent market quotation. For securities without market quotations, non-quarterly valuations will generally be the most recent quarterly valuation unless a material event has occurred since the most recent quarter end with respect to the investment. Independent valuation firms are generally not used for non-quarterly valuations.

As part of the valuation process, the Board takes into account relevant factors in determining the fair value of its investments, many of which are loans, including and in combination, as relevant, of: (i) the estimated enterprise value of a portfolio company, (ii) the nature and realizable value of any collateral, (iii) the portfolio company’s ability to make payments based on its earnings and cash flow, (iv) the markets in which the portfolio company does business, (v) a comparison of the portfolio company’s securities to any similar publicly traded securities, and (vi) overall changes in the interest rate environment and the credit markets that may affect the price at which similar investments may be made in the future. When an external event such as a purchase transaction, public offering or subsequent equity or debt sale occurs, the Board considers whether the pricing indicated by the external event corroborates its valuation.

The Company applies ASC 820, as amended, which establishes a framework for measuring fair value in accordance with U.S. GAAP and required disclosures of fair value measurements. ASC 820 determines fair value to be the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date. Market participants are defined as buyers and sellers in the principal or most advantageous market (which may be a hypothetical market) that are independent, knowledgeable, and willing and able to transact. In accordance with ASC 820, the Company considers its principal market to be the market that has the greatest volume and level of activity. ASC 820 specifies a fair value hierarchy that prioritizes and ranks the level of observability of inputs used in determination of fair value. In accordance with ASC 820, these levels are summarized below:

 

   

Level 1: Valuations based on quoted prices in active markets for identical assets or liabilities that we have the ability to access.

 

   

Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

 

   

Level 3: Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfer occurred. In addition to using the above inputs in investment valuations, we apply the valuation policy approved by our Board that is consistent with ASC 820. Consistent with the valuation policy, we evaluate the source of the inputs, including any markets in which our investments are trading (or any markets in which securities with

 

149


Table of Contents

similar attributes are trading), in determining fair value. When an investment is valued based on prices provided by reputable dealers or pricing services (that is, broker quotes), we subject those prices to various criteria in making the determination as to whether a particular investment would qualify for treatment as a Level 2 or Level 3 investment. For example, we, or the independent valuation firm(s), review pricing support provided by dealers or pricing services in order to determine if observable market information is being used, versus unobservable inputs.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of such investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that may ultimately be realized. Further, such investments are generally less liquid than publicly traded securities and may be subject to contractual and other restrictions on resale. If we were required to liquidate a portfolio investment in a forced or liquidation sale, it could realize amounts that are different from the amounts presented and such differences could be material.

In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected herein.

Interest and Dividend Income Recognition

Interest income is recorded on an accrual basis and includes the accretion of discounts and amortizations of premiums. Discounts from and premiums to par value on debt investments purchased are accreted/amortized into interest income over the life of the respective security using the effective interest method. The amortized cost of debt investments represents the original cost, including loan origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion of discounts and amortization of premiums, if any. Upon prepayment of a loan or debt security, any prepayment premiums, unamortized upfront loan origination fees and unamortized discounts are recorded as interest income in the current period.

Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected in full. Accrued interest is generally reversed when a loan is placed on non-accrual status. Additionally, any original issue discount and market discount are no longer accreted to interest income as of the date the loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid current and, in management’s judgment, are likely to remain current. Management may make exceptions to this treatment and determine to not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection.

Dividend income on preferred equity securities is recorded on the accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly-traded portfolio companies.

Fee income (such as structuring, consent, waiver, amendment, syndication fees as well as fees for managerial assistance rendered by the Company) is recognized as income when earned or the services are rendered.

Distributions

To the extent of any available investment company taxable income, the Company intends to make quarterly distributions to its shareholders. Distributions to shareholders are recorded on the record date. All distributions

 

150


Table of Contents

will be paid at the discretion of the Board and will depend on our earnings, financial condition, maintenance of our tax treatment as a RIC, compliance with applicable BDC regulations and such other factors as the Board may deem relevant from time to time.

The Company has adopted a dividend reinvestment plan, pursuant to which it will reinvest all cash dividends declared by the Board on behalf of its shareholders who do not elect to receive their dividends in cash as provided below. As a result, if the Board and the Company declares, a cash dividend or other distribution, then the Company’s shareholders who have not opted out of its dividend reinvestment plan will have their cash distributions automatically reinvested in additional shares as described below, rather than receiving the cash dividend or other distribution. Distributions on fractional shares will be credited to each participating shareholder’s account to three decimal places. A participating shareholder will receive an amount of shares equal to the amount of the distribution on that participant’s shares divided by the most recent quarter-end NAV per share that is available on the date such distribution was paid (unless the Board determines to use the NAV per share as of another time). Shareholders who receive distributions in the form of shares will generally be subject to the same U.S. federal, state and local tax consequences as if they received cash distributions; however, since their cash distributions will be reinvested, those shareholders will not receive cash with which to pay any applicable taxes. The Company intends to use newly issued shares to implement the plan. Shares issued under the dividend reinvestment plan will not reduce outstanding Capital Commitments.

Income Taxes

The Company has elected to be treated as a BDC under the 1940 Act. The Company also has elected to be treated as a RIC under the Code. So long as the Company maintains its status as a RIC, it generally will not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that it distributes at least annually to its shareholders as dividends. Rather, any tax liability related to income earned and distributed by the Company would represent obligations of the Company’s investors and would not be reflected in the consolidated financial statements of the Company.

The Company evaluates tax positions taken or expected to be taken in the course of preparing its financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, ongoing analyses of tax laws, regulations and interpretations thereof.

In addition, based on the excise tax distribution requirements, the Company is subject to a 4% nondeductible federal excise tax on undistributed income unless the Company distributes in a timely manner in each taxable year an amount at least equal to the sum of (1) 98% of its ordinary income for the calendar year, (2) 98.2% of its capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) 100% of any undistributed income from prior years. For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate income tax is considered to have been distributed.

Quantitative and Qualitative Disclosures About Market Risk.

Uncertainty with respect to the economic effects of the COVID-19 outbreak has introduced significant volatility in the financial markets, and the effect of the volatility could materially impact our market risks, including those listed below. We are subject to financial market risks, including valuation risk and interest rate risk.

 

151


Table of Contents

Valuation Risk

We have invested, and plan to continue to invest, primarily in illiquid debt and equity securities of private companies. Most of our investments will not have a readily available market price, and we value these investments at fair value as determined in good faith by the Board, based on, among other things, the input of the Adviser, our Audit Committee and independent third-party valuation firms engaged at the direction of the Board, and in accordance with our valuation policy. There is no single standard for determining fair value. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we may realize amounts that are different from the amounts presented and such differences could be material.

Interest Rate Risk

Interest rate sensitivity refers to the change in earnings that may result from changes in the level of interest rates. We intend to fund portions of our investments with borrowings, and at such time, our net investment income will be affected by the difference between the rate at which we invest and the rate at which we borrow. Accordingly, we cannot assure shareholders that a significant change in market interest rates will not have a material adverse effect on our net investment income.

As of June 30, 2021, 99.7% of our debt investments at fair value were at floating rates. Based on our Consolidated Statements of Assets and Liabilities as of June 30, 2021, the following table shows the annualized impact on net income of hypothetical base rate changes in interest rates (considering base rate floors and ceilings for floating rate instruments assuming no changes in our investment and borrowing structure) (dollar amounts in thousands):

 

     Interest Income      Interest Expense      Net Income  

Up 300 basis points

   $ 165,025      $ (56,348    $ 108,677  

Up 200 basis points

     91,425      (37,565      53,860  

Up 100 basis points

     19,367      (18,783      584  

Down 100 basis points

     (1,169      2,737        1,568  

Down 200 basis points

     (1,169      2,737        1,568  

 

152


Table of Contents

THE COMPANY

Our Company

We are a specialty finance company that invests primarily in the debt of private U.S. companies. We are managed by an affiliate of Blackstone Inc., which is the largest alternative asset manager in the world with deep investment expertise and leading investment businesses across asset classes and geographies. We focus on investing in privately originated senior secured loans which are generally debt instruments that pay floating interest rates and rank ahead of subordinated debt and equity, where we believe lender protections are stronger and offer superior return opportunities as compared to broadly syndicated loans and public market debt instruments. The companies we lend to are oftentimes backed by financial sponsors who can make operational improvements and provide capital. Our investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation.

We were formed on March 26, 2018 as a Delaware statutory trust. We are an externally managed, a non-diversified, closed-end management investment company that has elected to be regulated as a BDC under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “1940 Act”). In addition, for U.S. federal income tax purposes, we have elected to be treated, and intend to qualify annually, as a regulated investment company (a “RIC”) under the Internal Revenue Code of 1986, as amended (together with the rules and regulations promulgated thereunder, the “Code”). We are managed by our Adviser. Blackstone Alternative Credit Advisors LP (the “Administrator” and, collectively with its affiliates in the credit-focused business of Blackstone Inc., “Blackstone Credit,” which, for the avoidance of doubt, excludes Harvest Fund Advisors LLC and Blackstone Insurance Solutions (“BIS”) provides the administrative services necessary for us to operate.

Our investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. To achieve our investment objectives, we will leverage the Adviser’s investment team’s and Blackstone’s extensive network of relationships with other sophisticated institutions to source, evaluate and, as appropriate, partner with on transactions. There are no assurances that we will achieve our investment objectives.

Under normal market conditions, we generally invest at least 80% of our total assets (net assets plus borrowings for investment purposes) in secured debt investments (including investments that are secured by equity interests). Our portfolio is composed primarily of first lien senior secured and unitranche loans (including first out/last out loans). To a lesser extent, we have and may continue to also invest in second lien, third lien, unsecured or subordinated loans and other debt and equity securities. We do not currently expect to focus on investments in issuers that are distressed or in need of rescue financing. Subject to the limitations of the 1940 Act, we may invest in loans or other securities, the proceeds of which may refinance or otherwise repay debt or securities of companies whose debt is owned by other Blackstone Credit funds. As of June 30, 2021 and December 31, 2020, based on fair value, our portfolio consisted of 98.06% and 98.51% first lien senior secured investments and unitranche loans, respectively, 0.75% and 0.90% second lien debt investments, respectively, and 1.05% and 0.59% in equity instruments, respectively. As of June 30, 2021 and December 31, 2020, on a fair value basis, approximately 99.7% and 100.0%, respectively, of our performing debt investments bore interest at a floating rate and approximately 0.3% and 0.0%, respectively, of our performing debt investments bore interest at a fixed rate.

As a BDC, at least 70% of our assets must be the type of “qualifying” assets listed in Section 55(a) of the 1940 Act, as described herein, which are generally privately-offered securities issued by U.S. private or thinly-traded companies. We may also invest up to 30% of our portfolio opportunistically in “non-qualifying” portfolio investments, such as investments in non-U.S. companies. We generally intend to distribute substantially all of our available earnings annually by making quarterly cash distributions. We use leverage and intend to continue to use leverage for our investment activities. We use and intend to continue to use leverage, which is permitted up to the maximum amount allowed by the 1940 Act (currently limited to a debt-to-equity ratio of 2:1), to enhance

 

153


Table of Contents

potential returns. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition, Liquidity and Capital Resources—Borrowings.”

On December 10, 2020, we changed our name from “Blackstone / GSO Secured Lending Fund” to “Blackstone Secured Lending Fund.”

Market Opportunity

We believe that there are and will continue to be significant investment opportunities in the targeted asset classes discussed below.

Attractive Opportunities in Senior Secured Loans

We believe that opportunities in senior secured loans are significant because of the strong defensive characteristics of this asset class. While there is inherent risk in investing in any securities, senior secured debt is on the top of the capital structure and thus has priority in payment among an issuer’s security holders (i.e. senior secured debt holders are due to receive payment before junior creditors and equity holders). Further, these investments are secured by the issuer’s assets, which may be collateralized in the event of a default, if necessary. Senior secured debt often has restrictive covenants for the purpose of additional principal protection and ensuring repayment before junior creditors (i.e. most types of unsecured bondholders, and other security holders) and preserving collateral to protect against credit deterioration.

Opportunity in U.S. Private Companies

In addition to investing in senior secured loans generally, we believe that the market for lending to private companies, which includes the middle market private companies within the United States, is underserved and presents a compelling investment opportunity. We believe that the following characteristics support our belief:

Secular Tailwinds in the Private Market, Including Private Credit. One of the important drivers of growth in the strategy is the increasing secular tailwinds in the private markets (i.e., social or economic trends positively impacting private markets), including growing demand for private credit, which has created attractive opportunities for private capital providers like Blackstone Credit. As of August 2021, private equity funds with strategies focused on leveraged buyouts in North America had approximately $581.2 billion of “dry powder” (i.e., uncalled capital commitments), which should similarly drive demand for private capital providers like Blackstone Credit.6 This shift is partially due to traditional banks continuing to face regulatory limitations and retreating from the space, creating additional opportunities for private credit to take advantage of. Further, financial sponsors and companies are becoming increasingly interested in working directly with private lenders as they are seeing the tremendous benefits versus accessing the public credit markets. The Company believes some of these benefits include faster execution and greater certainty, ability to partner with sophisticated lenders, more efficient process, and in some instances fewer regulatory requirements. As a result, Blackstone Credit benefits from increasing flow of larger scale deals that have become increasingly available to direct lending universe over traditional banks and other financing institutions.

Attractive Market Segment. We believe that the underserved nature of such a large segment of the market can at times create a significant opportunity for investment. In many environments, we believe that private companies are more likely to offer attractive economics in terms of transaction pricing, up-front and ongoing fees, prepayment penalties and security features in the form of stricter covenants and quality collateral than loans to public companies.

 

6 

Source: Preqin, August 2021. Represents dry powder (i.e., uncalled capital commitments) for private equity buyouts in North America.

 

154


Table of Contents

Limited Investment Competition. Despite the size of the overall corporate credit market, we believe that regulatory changes and other factors, some of which are discussed above, have diminished the role of traditional financial institutions and certain other capital providers in providing financing to companies. As tracked by S&P Capital IQ LCD, U.S. banks’ share of senior secured loans has declined from 33.1% in 1995 to 7.5% as of June 30, 2021. In addition, due to bank consolidation, the number of banks has also rapidly declined, furthering the lack of supply in financing to private companies. As of September 30, 2020, there were approximately 4,375 banks in the U.S., which was only one-third of the number of banks in 1984 (see Federal Reserve Economic Data as of December 2020).

We also believe that lending and originating new loans to private companies generally requires a greater dedication of the lender’s time and resources compared to lending to public companies, due in part to the size of each investment and the often fragmented nature of information available from these companies. Further, we believe that many investment firms lack the breadth and scale necessary to identify investment opportunities, particularly in regards to directly originated investments in private companies, and thus attractive investment opportunities are often overlooked.

Blackstone Credit Competitive Strengths

Blackstone Credit is one of the largest private credit investment platforms globally and a key player in the direct lending space. Blackstone Credit has experience scaling funds across its platform that invest throughout all parts of the capital structure. Blackstone Credit strives to focus on transactions where it can differentiate itself from other providers of capital, targeting large transactions and those where Blackstone Credit can bring its expertise and experience in negotiating and structuring. We believe that Blackstone Credit has the scale and platform to effectively manage a U.S. private credit investment strategy, offering investors the following potential strengths:

Ability to Provide Scale, Differentiated Capital Solutions. We believe that the breadth and scale of Blackstone Credit’s approximately $163 billion platform, as of June 30, 2021, and affiliation with Blackstone are distinct strengths when sourcing proprietary investment opportunities and provide Blackstone Credit with a differentiated capability to invest in large, complex opportunities. Blackstone Credit is invested in over 2,100 corporate issuers across its portfolios globally and has focused primarily on the non-investment grade corporate credit market since its inception in 2005.7 Blackstone Credit expects that in the current environment, in which committed capital from banks remains scarce (as tracked by S&P Capital IQ LCD, U.S. banks’ share of senior secured loans has declined from 33.1% in 1995 to 7.5% as of June 30, 2021), the ability to provide flexible, well-structured capital commitments in appropriate sizes will enable Blackstone Credit to command more favorable terms for its investments. Blackstone Credit seeks to generate investment opportunities through its direct origination channels and through syndicate and club deals (generally, investments made by a small group of investment firms). With respect to Blackstone Credit’s origination channel, we seek to leverage the global presence of Blackstone Credit to generate access to a substantial amount of directly originated transactions with attractive investment characteristics. We believe that the broad network of Blackstone Credit provides a significant pipeline of investment opportunities for us. With respect to syndicate and club deals, Blackstone Credit has built a network of relationships with commercial and investment banks, finance companies and other investment funds as a result of the long track record of its investment professionals in the leveraged finance marketplace. Blackstone Credit also has a significant trading platform, which, we believe, allows us access to the secondary market for investment opportunities.

Established Origination Platform with Strong Credit Expertise. As of June 30, 2021, Blackstone Credit had 397 employees globally, including 196 investment professionals. Blackstone Credit’s 97-person private

 

7 

As of June 30, 2021. Issues across portfolios include all corporate issues covered by both the Liquid Credit Strategies and Private Credit research teams across Private Credit Funds and Liquid Credit Funds, including, but not limited to, broadly syndicated assets, middle market assets, high yield bonds, investment grade assets, and mezzanine transactions.

 

155


Table of Contents

origination investment team (excluding Dwight Scott, global head of Blackstone Credit), together with a 13-person U.S. Direct Lending Portfolio Management team, are involved with investment activities and portfolio management activities for BXSL, respectively. Blackstone Credit’s senior managing directors have on average ~24 years of industry experience. Since inception, Blackstone Credit has originated approximately $87 billion in private credit transactions and during the period beginning June 30, 2020 and ending on June 30, 2021, Blackstone Credit originated approximately $20.0 billion in private credit transactions.8 We believe that Blackstone Credit’s strong reputation and longstanding relationships with corporate boards, management teams, leveraged buyout sponsors, financial advisors, and intermediaries position Blackstone Credit as a partner and counterparty of choice and provides us with attractive sourcing capabilities. In Blackstone Credit’s experience, these relationships help drive substantial proprietary deal flow and insight into investment opportunities.

Blackstone Credit believes that having one team responsible for alternatives private origination allows us to leverage the strengths and experiences of investment professionals to deliver the leading financing solutions to our companies. The team has operated through multiple industry cycles, with deep credit expertise, providing them valuable experience and a long-term view of the market. The team is also focused on making investments in what are characterized as “good neighborhoods”, which are industries experiencing favorable tailwinds, such as life sciences, software & technology, and renewable energy. In addition, the team is able to leverage the expertise of other parts of Blackstone’s business that specialize in these fields.

Additionally, over the last several years, Blackstone Credit has also expanded its U.S. origination and sponsor coverage footprint with regional offices opened in select markets. Blackstone Credit has investment professionals across the U.S. and Europe and has developed a reputation for being a valued partner, with the ability to provide speed, creativity, and assurance of transaction execution. We believe that establishing this regional presence in the U.S. may help us more effectively source investment opportunities from mid-sized leveraged buyout sponsors as well as direction from companies, while potentially strengthening the Blackstone Credit brand.

Value-Added Capital Provider and Partner Leveraging the Blackstone Credit Advantage Program. Blackstone Credit has established a reputation for providing creative, value-added solutions to address a company’s financing requirements and believes our ability to solve a need for a company can lead to attractive investment opportunities. In addition, Blackstone Credit has access to the significant resources of the Blackstone platform, including Blackstone Advantage, which refers to the active management of the Blackstone portfolio company network, including cross-selling efforts across all of Blackstone, and aims to ensure practice sharing, operational, and commercial synergies among portfolio companies, effective deployment of Blackstone resources, and communication of the program with businesses and partners, and Blackstone Credit Advantage, which is a global platform that provides access to a range of cost saving, revenue generating and best practice sharing opportunities. Specifically, Blackstone Credit Advantage provides (i) partnership and best practices for portfolio companies by offering invaluable access to industry and function experts both within the Blackstone organization (including the Blackstone Portfolio Operations team) and the network among portfolio companies; (ii) cross selling opportunities across Blackstone and Blackstone Credit portfolio companies; (iii) industry knowledge via leadership summits and roundtables; and (iv) quarterly reports sharing meaningful insights from CEOs on business and economic trends. Finally, one of the most important benefits of the program is Blackstone’s GPO, which is a collective purchasing platform that leverages the scale and buying power of the $5 billion of average annual spending of Blackstone’s portfolio companies with strategic partners and vendors measured over the past 10 years. Blackstone and Blackstone Credit portfolio companies have generated significant cost savings through their use of the GPO, ranging from 3% to 40%, often from existing suppliers, on maintenance, repair, operations, back office, information technology, hardware, software, telecommunications, business insurance and human resources, among others. The benefits of working with Blackstone’s GPO can include improved pricing and terms, differentiated service, and ongoing service that drops straight to the bottom line. As of July 16, 2021, Blackstone Advantage has grown

 

8 

As of June 30, 2021. Includes Blackstone Credit funds that are primarily invested in privately originated investments, including GSO Capital Opportunities Funds, GSO Capital Solutions Funds, GSO European and U.S. Direct Lending Funds, GSO Energy Select Opportunities Fund, and GSO Credit Alpha Funds.

 

156


Table of Contents

revenue by over $300 million for Blackstone portfolio companies and Blackstone Credit Advantage has reduced annual costs by $167 million. The dedicated Blackstone Credit operational program provides support to portfolio companies and has created over $1.0 billion in value.9 Blackstone Advantage has 63 internal Blackstone resources available to our portfolio companies as of July 16, 2021. As of June 30, 2021, 28 of our portfolio companies have used Blackstone Credit Advantage.

Flexible Investment Approach. Blackstone Credit believes that the ability to invest opportunistically throughout a capital structure is a meaningful strength when sourcing transactions and enables the Company to seek investments that provide the best risk/return proposition in any given transaction. Blackstone Credit’s creativity and flexibility with regard to deal-structuring distinguishes it from other financing sources, including traditional mezzanine providers, whose investment mandates are typically more restrictive. Over time, Blackstone Credit has demonstrated the ability to negotiate favorable terms for its investments by providing creative structures that add value for an issuer. Blackstone Credit will continue to seek to use this flexible investment approach to focus on principal preservation, while generating attractive returns throughout different economic and market cycles.

Long-Term Investment Horizon. Our long-term investment horizon gives us great flexibility, which we believe allows us to maximize returns on our investments. Unlike most private equity and venture capital funds, as well as many private debt funds, we will not be required to return capital to our shareholders once we exit a portfolio investment. We believe that freedom from such capital return requirements, which allows us to invest using a long-term focus, provides us with an attractive opportunity to increase total returns on invested capital.

Disciplined Investment Process and Income-Oriented Investment Philosophy. Blackstone Credit employs a rigorous investment process and defensive investment approach to evaluate all potential opportunities with a focus on long-term credit performance and principal protection. We believe Blackstone Credit has generated attractive risk-adjusted returns in its investing activities throughout many economic and credit cycles by (i) maintaining its investment discipline; (ii) performing intensive credit work; (iii) carefully structuring transactions; and (iv) actively managing its portfolios. Blackstone Credit’s investment approach involves a multi-stage selection process for each investment opportunity, as well as ongoing monitoring of each investment made, with particular emphasis on early detection of deteriorating credit conditions at portfolio companies which would result in adverse portfolio developments. This strategy is designed to maximize current income and minimize the risk of capital loss while maintaining the potential for long-term capital appreciation. Additionally, Blackstone Credit’s senior investment professionals have dedicated their careers to the leveraged finance and private equity sectors and we believe that their experience in due diligence, credit analysis and ongoing management of investments is invaluable to the success of the U.S. direct lending investment strategy. Blackstone Credit generally targets businesses with leading market share positions, sustainable barriers to entry, high free cash flow generation, strong asset values, liquidity to withstand market cycles, favorable underlying industry trends, strong internal controls and high-quality management teams.

Strong Investment Track Record. Blackstone Credit’s track record in private debt lending and investing in below investment grade credit dates back to the inception of Blackstone Credit. Since 2005, Blackstone Credit has provided approximately $87 billion in capital in privately-originated transactions. Blackstone Credit has approximately $118 billion of investor capital currently deployed.10

Efficient Cost Structure. We believe that we have an efficient cost structure, as compared to other publicly traded BDCs, with low management fees, expenses, and financing costs. We believe our operating efficiency and

 

9 

Value creation represents $167 million of annual savings as of July 16, 2021, representing estimated savings utilizing the Blackstone Credit Advantage program at the time cost is benchmarked with portfolio companies. Savings improved portfolio company EBITDA and created value assuming a 10x average EBITDA multiple.

10 

As of June 30, 2021. Investor capital currently deployed consists of fee earning AUM of $79 billion for Liquid Credit Strategies, $34 billion for Private Credit and other liquid funds (inclusive of leverage), and $5 billion for Structured Products.

 

157


Table of Contents

senior investment strategy enable us to generate greater risk-adjusted investment returns for our investors relative to other publicly traded BDCs.

Scale. Scale allows for more resources to source, diligence and monitor investments, and enables us to move up market where there is often less competition.

COVID-19 Update

Equity, debt, lending and other financial markets have experienced significant volatility recently related to COVID-19 pandemic and its effects. Although many markets have experienced varying degrees of recovery since the initial outbreak of COVID-19, the future impact of the pandemic on financial markets and the Company and its investments is still uncertain. See “Risk Factors” for additional risks around COVID-19 and its impact on the Company.

Blackstone Credit

Blackstone Credit is part of the credit-focused platform of Blackstone, which is the largest alternative asset manager in the world with leading investment businesses across asset classes. Blackstone’s platform provides significant competitive advantages including scale, expertise across industries and capital structures, and deep relationships with companies and financial sponsors.

Blackstone’s four business segments are real estate, private equity, hedge fund solutions and credit and insurance. Through its different investment businesses, as of June 30, 2021, Blackstone had total assets under management of approximately $684 billion. As of June 30, 2021, Blackstone Credit’s asset management operation had aggregate assets under management of approximately $163 billion across multiple strategies within the leveraged finance marketplace, including loans, high yield bonds, distressed and mezzanine debt and private equity, including hedge funds, and $174 billion with the inclusion of Harvest and BIS. Blackstone Credit, through its affiliates, employed over 397 people headquartered in New York, with offices in London, Dublin, Houston, Baltimore, San Francisco, Toronto, Frankfurt, Madrid, Milan, Paris, Hong Kong, Tokyo and Singapore as of June 30, 2021. Blackstone Credit’s 97-person private origination investment team (excluding Dwight Scott, global head of Blackstone Credit), together with a 13-person U.S. Direct Lending Portfolio Management team, are involved with investment activities and portfolio management activities for BXSL, respectively. Blackstone Credit believes that the depth and breadth of its team provides it with a significant competitive advantage in sourcing product on a global basis, structuring transactions and actively managing investments in the portfolio.

Our Investment Adviser

Our investment activities are managed by our Adviser, a subsidiary of Blackstone Alternative Credit Advisors LP, the primary investment manager for Blackstone Credit. Our Adviser is responsible for originating prospective investments, conducting research and due diligence investigations on potential investments, analyzing investment opportunities, negotiating and structuring our investments and monitoring our investments and portfolio companies on an ongoing basis.

In conducting our investment activities, we believe that we benefit from the significant scale and resources of Blackstone Credit, including our Adviser and its affiliates, subject to the policies and procedures of Blackstone Inc. (collectively with its affiliates as the context requires, “Blackstone”) regarding the management of conflicts of interest. In order to source transactions, the Adviser utilizes its significant access to transaction flow, along with its trading platform. The Adviser seeks to generate investment opportunities through direct origination channels as well as through syndicate and club deals. With respect to Blackstone Credit’s origination channel, the global presence of Blackstone Credit generates access to a substantial amount of directly originated transactions with what we believe to be attractive investment characteristics. With respect to syndicate and club deals (i.e.,

 

158


Table of Contents

where a limited number of investors participate in a loan transaction), Blackstone Credit has built a network of relationships with commercial and investment banks, finance companies and other investment funds as a result of the long track record of its investment professionals in the leveraged finance marketplace. Blackstone Credit also has a significant trading platform, which, we believe, allows us access to the secondary market for investment opportunities. Blackstone Credit employs a rigorous investment process and defensive investment approach to evaluate all potential opportunities with a focus on long-term credit performance and principal protection. The investment professionals employed by Blackstone Credit have spent their careers developing the resources necessary to invest in private companies. Before undertaking an investment, the Adviser’s transaction team conducts a thorough and rigorous due diligence review of the opportunity to ensure the portfolio company fits our investment strategy.

Our Adviser’s investment committee (the “Investment Committee”) is responsible for reviewing and approving our investment opportunities. The Adviser’s Investment Committee review process is consensus-driven, multi-step and iterative, and occurs in parallel with the diligence and structuring of investments. Others who participate in the Investment Committee process include the team responsible for conducting due diligence, others on the investing team and other senior members of Blackstone and Blackstone Credit. There are no representatives from other business groups of Blackstone involved in the Adviser’s Investment Committee process.

We pay our Adviser a management fee at an annual rate of (i) prior to an Exchange Listing (defined below), 0.75%, and (ii) following an Exchange Listing, 1.0%, in each case of the average value of our gross assets at the end of the two most recently completed calendar quarters. We also pay the Adviser incentive fees based on income and capital gains. However, in order to maintain the same management fee and incentive fee arrangements that the Company currently has in place for a period of time following the completion of this offering, the Adviser voluntarily waived its right to receive the base management fee in excess of 0.75% and incentive fees above 15% during the Waiver Period. See “—Investment Advisory Agreement.”

The members of the senior management and Investment Team of the Adviser serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do, or of investment funds managed by the same personnel. As a result, the Adviser, its officers and employees and certain of its affiliates will have conflicts of interest in allocating their time between us and other activities in which they are or may become involved, including the management of its affiliated equipment funds. See “—Allocation of Investment Opportunities and Potential Conflicts of Interests” and “Risk Factors—Risks Related to the Adviser and Its Affiliates; Conflicts of Interest.”

The principal executive offices of our Adviser are located at 345 Park Avenue, 31st Floor New York, NY, 10154.

Our Administrator

Blackstone Alternative Credit Advisors LP, a Delaware limited partnership, serves as our Administrator. The principal executive offices of our Administrator are located at 345 Park Avenue, New York, New York 10154. We reimburse the Administrator for its costs, expenses and allocable overhead (including compensation of personnel performing administrative duties) in connection with administrative services performed for us. See “Management and Other AgreementsAdministration Agreement.”

Investment Strategy

Our investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. We seek to meet our investment objectives by:

 

   

utilizing the experience and expertise of the management team of the Adviser, along with the broader resources of Blackstone Credit, which include its access to the relationships and human capital of

 

159


Table of Contents
 

Blackstone Credit’s parent, Blackstone, in sourcing, evaluating and structuring transactions, subject to Blackstone’s policies and procedures regarding the management of conflicts of interest;

 

   

employing a defensive investment approach focused on long-term credit performance and principal protection, generally lending on what the Adviser believes are (i) protective multiples of the borrower’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) to its interest coverage obligations, (ii) conservative loan-to-value ratios and (iii) favorable financial covenant protections;

 

   

focusing primarily on loans and securities of private U.S. companies, including syndicated loans, specifically small and middle market companies. In many market environments, we believe such a focus offers an opportunity for superior risk-adjusted returns;

 

   

investing primarily in established, stable enterprises with positive cash flows;

 

   

maintaining rigorous portfolio monitoring in an attempt to anticipate and pre-empt negative credit events within our portfolio; and

 

   

utilizing the power and scale of Blackstone and the Blackstone Credit platform to offer operational expertise to portfolio companies through the Blackstone Credit Advantage Program.

Under normal market conditions, we generally invest at least 80% of our total assets (net assets plus borrowings for investment purposes) in secured debt investments (including investments that are secured by equity interests). Our portfolio is composed primarily of first lien senior secured and unitranche loans (including first out/last out loans). To a lesser extent, we have and may continue to also invest in second lien, third lien, unsecured or subordinated loans and other debt and equity securities. We do not currently focus on investments in issuers that are distressed or in need of rescue financing. Subject to the limitations of the 1940 Act, we may invest in loans or other securities the proceeds of which may refinance or otherwise repay debt or securities of companies whose debt is owned by other Blackstone Credit funds.

Although we do not expect a significant portion of our portfolio to be composed of second lien, third lien, unsecured or subordinated loans, there is no limit on the amount of such loans in which we may invest, subject to compliance with our 80% policy. We may purchase interests in loans or make other debt investments, including investments in senior secured bonds, through secondary market transactions in the “over-the-counter” market or directly from our target companies as primary market, directly originated or syndicated investments. In connection with our debt investments, we may on occasion receive equity interests such as warrants or options as additional consideration. We have and may continue to also purchase or otherwise acquire minority interests in the form of common or preferred equity or equity-related securities, such as rights and warrants that may be converted into or exchanged for our common shares or other equity or the cash value of shares or other equity, in our target companies, generally in conjunction with one of our debt investments or through a co-investment with a financial sponsor, such as an institutional investor or private equity firm, or a finance company transaction (such as a joint venture). In addition, a portion of our portfolio may be composed of unsecured bonds, CLOs, other debt securities and derivatives, including total return swaps and credit default swaps. Depending on market conditions, we may increase or decrease our exposure to less senior portions of the capital structure or otherwise make opportunistic investments.

Investment Selection

When identifying prospective investment opportunities, the Adviser currently intends to rely on fundamental credit analysis in order to minimize the loss of the Company’s capital. The Adviser expects to invest in companies possessing the following attributes, which it believes will help achieve our investment objectives:

Leading, Defensible Market Positions. The Adviser intends to invest in companies that it believes have developed strong positions within their respective markets and exhibit the potential to maintain sufficient cash flows and profitability to service their obligations in a range of economic environments. The Adviser will seek companies that it believes possess advantages in scale, scope, customer loyalty, product pricing, or product quality versus their competitors, thereby minimizing business risk and protecting profitability.

 

160


Table of Contents

Proven Management Teams. The Adviser focuses on investments in which the target company has an experienced and high-quality management team with an established track record of success. The Adviser typically requires companies to have in place proper incentives to align management’s goals with the Company’s goals.

Private Equity Sponsorship. Often the Adviser seeks to participate in transactions sponsored by what it believes to be high-quality private equity firms. The Adviser believes that a private equity sponsor’s willingness to invest significant sums of equity capital into a company is an implicit endorsement of the quality of the investment. Further, private equity sponsors of companies with significant investments at risk generally have the ability and a strong incentive to contribute additional capital in difficult economic times should operational issues arise, which could provide additional protections for our investments.

Diversification. The Adviser seeks to invest broadly among companies and industries, thereby potentially reducing the risk of a downturn in any one company or industry having a disproportionate impact on the value of the Company’s portfolio.

Viable Exit Strategy. In addition to payments of principal and interest, we expect the primary methods for the strategy to realize returns on our investments include refinancings, sales of portfolio companies, and in some cases initial public offerings and secondary offerings. While many debt instruments in which we will invest have stated maturities of five to eight years, we expect the majority to be redeemed or sold prior to maturity. These instruments often have call protection that requires an issuer to pay a premium if it redeems in the early years of an investment. The Investment Team regularly reviews investments and related market conditions in order to determine if an opportunity exists to realize returns on a particular investment. We believe the ability to utilize the entire resources of Blackstone Credit, including the public market traders and research analysts, allows the Adviser to gain access to current market information where the opportunity may exist to sell positions into the market at attractive prices.

Investment Process Overview

Our investment activities are managed by our Adviser. The Adviser is responsible for originating prospective investments, conducting research and due diligence investigations on potential investments, analyzing investment opportunities, negotiating and structuring our investments and monitoring our investments and portfolio companies on an ongoing basis.

The investment professionals employed by Blackstone Credit have spent their careers developing the resources necessary to invest in private companies. Our transaction process is highlighted below.

LOGO

Sourcing and Origination

In order to source transactions, the Adviser utilizes its significant access to transaction flow, along with its trading platform. The Adviser seeks to generate investment opportunities primarily through direct origination channels, and also through syndicate and club deals. With respect to Blackstone Credit’s origination channel, the global presence of Blackstone Credit generates access to a substantial amount of directly originated transactions with what we believe to be attractive investment characteristics. With respect to syndicate and club deals, Blackstone Credit has built a network of relationships with commercial and investment banks, finance companies and other investment funds as a result of the long track record of its investment professionals in the leveraged finance marketplace. We believe that Blackstone Credit’s strong reputation and longstanding relationships with its broad network will help drive substantial proprietary deal flow and provide a significant pipeline of investment opportunities for us.

 

161


Table of Contents

Evaluation

Initial Review. The Investment Team examines information furnished by the target company and external sources, including banks, advisors and rating agencies, if applicable, to determine whether the investment meets our basic investment criteria within the context of proper allocation of our portfolio among various issuers and industries, and offers an acceptable probability of attractive returns with identifiable downside risk. In the case of directly originated transactions, Blackstone Credit conducts detailed due diligence investigations. For the majority of securities available on the secondary market, a comprehensive analysis is conducted and continuously maintained by a dedicated Blackstone Credit research analyst, the results of which are available for the transaction team to review.

Credit Analysis/Due Diligence. Before undertaking an investment, the Investment Team conducts a thorough and rigorous due diligence review of the opportunity to ensure the company fits our investment strategy for originated investments, which may include:

 

   

a full operational analysis to identify the key risks and opportunities of the target’s business, including a detailed review of historical and projected financial results;

 

   

a detailed analysis of industry and customer dynamics, competitive position, regulatory, tax, legal and environmental, social and governance matters;

 

   

on-site visits and customer and supplier reference calls, if deemed necessary;

 

   

background checks to further evaluate management and other key personnel;

 

   

a review by legal and accounting professionals, environmental or other industry consultants, if necessary;

 

   

financial sponsor due diligence, including portfolio company and lender reference checks, if necessary; and

 

   

a review of management’s experience and track record.

Third parties are often involved in the Adviser’s due diligence process, whether they are hired by the Adviser or by the lead sponsor in a transaction. Utilizing consultants to help evaluate a business and test an investment thesis is typically very beneficial. When possible, the Adviser seeks to structure transactions in such a way that our target companies are required to bear the costs of due diligence, including those costs related to any outside consulting work we may require.

The foregoing initial assessment is then followed by extensive credit analysis, including asset valuation, financial analysis, cash flow analysis and scenario analysis, legal and accounting review, and comparable credit and equity analyses. A thorough assessment of structure and leverage of a transaction and how the particular investment fits into the overall investment strategy of the portfolio is conducted. Blackstone Credit’s typical diligence process for an originated investment opportunity spans two to six months, from the initial screen through final approval and funding. Depending on the deal, each investment team typically consists of three to four investment professionals, consisting of a portfolio manager, managing director, principal or vice president and associate and/or analyst.

Blackstone Credit’s due diligence emphasizes the following key criteria to facilitate decisions by the Investment Committee (described below) on an investment:

 

   

Valuation: What is the intrinsic value of the business? How has the business historically generated returns on capital? Will these returns continue in the future? What growth opportunities does the business have, if any? And, most importantly, is the investment being purchased at a deep discount to long-term intrinsic value?

 

   

Return Hurdles: Is the investment expected to generate a rate of return that meets the Company’s objectives?

 

162


Table of Contents
   

Risk of Principal Loss & Risk/Reward: What is the expected recovery in a severe downside case? Does the expected upside appropriately compensate for risk of loss?

 

   

Company Analysis: Does the business have a reason to exist? Does it provide needed products and services? Does it have strong business characteristics such as high relative market share and a defensible niche?

 

   

Industry Analysis: What is the expected time and depth of cyclical downturn? Is the distress related to cyclical or secular issues? Is there a favorable industry structure with respect to customers, suppliers and regulation?

 

   

Due Diligence: Do we have sufficient information to make an informed investment decision?

 

   

Catalyst: What steps are required to complete a reorganization, eliminate financial distress, gain control and implement improved business strategies?

 

   

Exit Plan: Do we expect refinancings, a sale of the company, or other exit opportunities?

Investment Committee Process. The Investment Committee review process is multi-step and iterative, and occurs in parallel with the diligence and structuring of investments. The initial investment screening process involves an Investment Committee heads-up (the “Heads-Up”) review presentation by the portfolio manager and members of the investment team. The Heads-Up review involves the production of a short memo with a focus on the following diligence items: an early diligence review of the underlying business fundamentals; expected return potential; expected investment size; assessment of key risks; and an appropriate initial diligence plan. At this point in the decision-making process, the Investment Committee will decide whether or not the Investment Team should proceed with deeper diligence on the investment opportunity.

Once in-depth diligence has begun, the investment team presents updates at the weekly Investment Committee meetings. The senior team reviews all activity for the prior week, with a focus on detailed updates of ongoing situations and in-depth review of all new investment opportunities. The type of diligence materials reviewed at these meetings for each company may include, but are not limited to:

 

   

Detailed historical financial performance

 

   

Financial models with detailed revenue drivers

 

   

This includes the construction of a base case, a downside case and specifically tailored cases. This process includes probability-weighted analysis and a range of outcomes analysis.

 

   

Quarterly liquidity analyses

 

   

Industry analysis incorporating internal and external work from research analysts and industry consultants

 

   

Competitive position and market share analysis

 

   

Customer analysis, including revenue, profitability and concentration risk

 

   

Pricing and volume analyses

 

   

Detailed fixed vs. variable cost analysis, and line item analysis of cost of goods sold as well as selling, general and administrative expenses

 

   

Public and private credit and equity comparable analysis

 

   

Accounting quality of earnings analysis

 

   

Legal due diligence

The ultimate results and findings of the investment analysis are compiled in comprehensive investment memoranda that are used as the basis to support the investment thesis and are utilized by the Investment

 

163


Table of Contents

Committee (or the applicable delegates or sub-committees as described below) for final investment review and approval. Each investment requires the consent of the Investment Committee, which may emphasize the following key criteria (among others) in making a decision:

 

   

Company Analysis: Does the company meet the investment criteria defined by the “Blackstone Credit Scorecard”?:

 

   

Leading market share position

 

   

Sustainable barriers to entry that drive pricing power

 

   

High-quality management team

 

   

Stable financials: strong free cash flow generation, high earnings before interest and tax margins

 

   

Conservative capital structure with underlying equity value

 

   

Liquidity to withstand market cycles

 

   

Industry Analysis: Is there a favorable industry structure with respect to customers, suppliers and regulation?

 

   

Due Diligence: Have we fully diligenced each of the investment criteria specified by the Blackstone Credit Scorecard? Have we completely vetted each of the risk factors identified throughout the diligence and Investment Committee process?

 

   

Valuation: What is the intrinsic value of the business? How has the business historically generated returns on capital? Will these returns continue in the future? What growth opportunities does the business have, if any? Is there substantial equity value to support the capital structure?

 

   

Risk of Principal Loss & Risk/Reward: What is the expected recovery in a severe downside case? Does the expected upside appropriately compensate for risk of loss?

 

   

Return Hurdles: Is the investment expected to generate a rate of return that meets the Company’s objectives?

 

   

Exit Plan: Do we expect refinancings, a sale of the company, or other exit opportunities?

The Investment Committee utilizes a consensus-driven approach and currently consists of the following senior investment professionals: Dwight Scott, Brad Marshall, Steve Kuppenheimer, Rob Zable, Michael Zawadzki, Dan Smith, Rob Horn, Rob Petrini, Louis Salvatore and Paulo Eapen. Others who participate in the Investment Committee process include the members of the Investment Team responsible for sourcing, analyzing and conducting due diligence on the investment and other senior members of Blackstone Credit. For certain investments, generally smaller investments where the Company is participating alongside other lenders in a “club” deal, providing an anchor order or purchasing broadly syndicated loans, the Investment Committee has delegated the authority to make an investment decision to a sub-committee of the full Investment Committee. For broadly syndicated loan investments made by the Company alongside funds within Blackstone Credit’s Liquid Credit Strategies, the portfolio managers of the Company may conduct a joint investment committee with the Liquid Credit Strategies business that follows the investment committee process for the Liquid Credit Strategies business in lieu of the Investment Committee process described above. There are no representatives from other business groups of Blackstone involved in the Company’s Investment Committee process.

Monitoring

Portfolio Monitoring. Active management of our investments is performed by the team responsible for making the initial investment. The Adviser believes that actively managing an investment allows the Investment Team to identify problems early and work with companies to develop constructive solutions when necessary. The Adviser will monitor our portfolio with a focus toward anticipating negative credit events. In seeking to maintain portfolio company performance and help to ensure a successful exit, the Adviser will work closely with, as

 

164


Table of Contents

applicable, the lead equity sponsor, loan syndicator, portfolio company management, consultants, advisers and other security holders to discuss financial position, compliance with covenants, financial requirements and execution of the company’s business plan. In addition, depending on the size, nature and performance of the transaction, we may occupy a seat or serve as an observer on a portfolio company’s board of directors or similar governing body.

Watch List. Typically for its portfolio companies, Blackstone Credit establishes at closing a number of reporting and management tools. These tools include regular reporting on portfolio composition and reporting, calls with CEOs and detailed reports and calls with senior management on a regular basis, and quarterly in-person board meetings and board presentations. All reports and presentations are designed with Blackstone Credit input based on its past experience with private investments. These tools allow Blackstone Credit to identify problems quickly and work to fix them before they impair an investment. In addition, Blackstone Credit maintains a “watch list” for each business under-performing its expectations. Blackstone Credit seeks to approach each situation with the view that working closely with senior management and the shareholders of the company on strategies to remedy problems will ultimately maximize value realization. When, in order to maximize our recovery, Blackstone Credit is forced to take positions inconsistent with the company’s shareholders, Blackstone Credit expects to act quickly to enforce its rights.

Blackstone Credit strives to position itself to be able to identify and manage the process surrounding a troubled portfolio company. When companies under-perform, Blackstone Credit generally increases its involvement in the business and works closely with senior management to develop plans to help get performance on track. Blackstone Credit will request more information and will enhance our information quality so that we are aware of any developments. Blackstone Credit’s Investment Committee process is designed to identify red flags of a potential opportunity early and to leverage the collective knowledge of its prior experiences. Blackstone Credit believes that vetting all investments through its Investment Committee, which has deep expertise across industries, differentiates Blackstone Credit and can help it avoid mistakes. Additionally, Blackstone Credit may provide guidance on key management hires or supplement the portfolio company’s board with relevant industry people that Blackstone Credit has worked with previously to engage more deeply in the operations of a portfolio company. Additionally, the GPO team can be leveraged to help reduce costs and augment key leadership positions.

Default/Workout. An important element of Blackstone Credit’s strategy for originated investments is to attempt to structure investments in a manner such that Blackstone Credit will control negotiations should an issuer violate covenants or need to restructure its balance sheet. Blackstone Credit believes that this is typically achieved by ensuring that an investment is at or above the “fulcrum” security, if a restructuring were to occur. A fulcrum security is the security in a company’s capital structure that, if the company were to be liquidated, would be partially repaid. Generally, securities more senior than the fulcrum security would typically be fully repaid in such a liquidation and securities more junior than the fulcrum security would typically receive no recovery in a liquidation. If an investment should default, Blackstone Credit believes it has ample resources necessary to take a company through a restructuring, as many of its investment professionals have restructuring backgrounds.

The Blackstone Credit deal team, along with other creditors and outside counsel, will be responsible for monitoring any defaulting portfolio companies and driving the restructuring processes thereafter. The same Investment Team members who originate an investment remain actively involved, from sourcing through diligence, execution and ongoing management all the way to exit. In the case that an investment requires a heavy workout that results in a board seat and more operational involvement, Blackstone Credit may dedicate or add a senior investment professional to solely focus on the workout situation. This individual will get involved and run the full workout process to allow the other deal team members to focus on new origination and other portfolio companies. Any investment undergoing a workout will also be discussed with portfolio management and the Investment Committee on a regular basis.

Valuation Process. Each quarter, we will value investments in our portfolio, and such values will be disclosed each quarter in reports filed with the SEC. With respect to investments for which market quotations are

 

165


Table of Contents

not readily available, a valuation committee appointed by the Board of Trustees will assist the Board of Trustees in determining the fair value of such investments in good faith, based on procedures adopted by and subject to the supervision of the Board of Trustees.

We will also determine our NAV as of the last day of a month that is not also the last day of a calendar quarter and we intend to update the value of securities with reliable market quotations to the most recent market quotation. For securities without reliable market quotations, the Adviser’s valuation team will generally value such assets at the most recent quarterly valuation unless the Adviser determines that a significant observable change has occurred since the most recent quarter end with respect to the investment (which determination may be as a result of a material event at a portfolio company, material change in market spreads, secondary market transaction in the securities of an investment or otherwise). Investments for which market quotations are readily available are recorded at such market quotations.

Managerial Assistance. As a BDC, we must offer, and provide upon request, significant managerial assistance to certain of our portfolio companies except where the Company purchases securities of an issuer in conjunction with one or more other persons acting together, one of the other persons in the group makes available such managerial assistance. This assistance could involve, among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance, including through the Blackstone Credit Advantage program. The Adviser and the Administrator will provide such managerial assistance on our behalf to portfolio companies that request this assistance. To the extent fees are paid for these services, we, rather than the Adviser, will retain any fees paid for such assistance.

Exit

In addition to payments of principal and interest, we expect the primary methods for the strategy to realize returns on its investments include refinancings, sales of portfolio companies, and in some cases initial public offerings and secondary offerings. While many debt securities in which we will invest have stated maturities of five to eight years, based on Blackstone Credit’s past experience, we believe most of these securities will be redeemed or sold prior to maturity. These securities often have call protection that requires an issuer to pay a premium if it redeems in the early years of an investment. However, there is no assurance that our investments will achieve realization events as a result of refinancings, sales of portfolio companies or public offerings and these realization events will become more unlikely when conditions in the loan and capital markets have deteriorated.

The Investment Team regularly reviews investments and related market conditions in order to determine if an opportunity exists to realize returns on a particular investment. We believe the Adviser’s ability to utilize the entire resources of Blackstone Credit, including the public market traders and research analysts, allows the Adviser to gain access to current market information where the opportunity may exist to sell positions into the market at attractive prices.

Allocation of Investment Opportunities and Potential Conflicts of Interest

Blackstone Credit, including the Adviser, provides investment management services to other registered investment companies, investment funds, client accounts and proprietary accounts that Blackstone Credit may establish (other than the Company) (collectively the “Other Blackstone Credit Clients”). In addition, Blackstone provides investment management services to other registered investment companies, investment funds, client accounts and proprietary accounts that Blackstone may establish (together with the Other Blackstone Credit Clients, the “Other Clients”). See “Risk Factors—Risks Related to the Adviser and Its Affiliates; Conflicts of Interest—There may be conflicts of interest related to obligations that the Adviser’s senior management and Investment Team have to other clients.

Blackstone Credit will share any investment and sale opportunities with its other clients and the Company in accordance with the Advisers Act and firm-wide allocation policies, which generally provide for sharing pro rata

 

166


Table of Contents

based on targeted acquisition size or targeted sale size. Subject to the Advisers Act and as further set forth in the prospectus, certain other clients may receive certain priority or other allocation rights with respect to certain investments, subject to various conditions set forth in such other clients’ respective governing agreements.

In addition, as a BDC regulated under the 1940 Act, the Company is subject to certain limitations relating to co-investments and joint transactions with affiliates, which likely in certain circumstances limit the Company’s ability to make investments or enter into other transactions alongside other clients.

Co-Investment Relief

We have in the past co-invested, and in the future may co-invest, with certain affiliates of the Adviser. We have received an exemptive order from the Securities and Exchange Commission (“SEC”) that permits us, among other things, to co-invest with certain other persons, including certain affiliates of the Adviser and certain funds managed and controlled by the Adviser and its affiliates, subject to certain terms and conditions. Pursuant to such order, the board of trustees of the Company (the “Board”) has established objective criteria (“Board Criteria”) clearly defining co-investment opportunities in which the Company will have the opportunity to participate with one or more listed or private Blackstone Credit-managed BDCs (including the Company, the “Blackstone Credit BDCs”), and other public or private Blackstone Credit funds that target similar assets. If an investment falls within the Board Criteria, Blackstone Credit must offer an opportunity for the Blackstone Credit BDCs to participate. The Blackstone Credit BDCs may determine to participate or not to participate, depending on whether Blackstone Credit determines that the investment is appropriate for the Blackstone Credit BDCs (e.g., based on investment strategy). The co-investment would generally be allocated to us, any other Blackstone Credit BDCs and the other Blackstone Credit funds that target similar assets pro rata based on available capital in the applicable asset class. If the Adviser determines that such investment is not appropriate for us, the investment will not be allocated to us, but the Adviser will be required to report such investment and the rationale for its determination for us to not participate in the investment to the Board at the next quarterly board meeting.

Investments

As of the three months ended June 30, 2021 and the years ended December 31, 2020 and December 31, 2019, the fair value of our investments was approximately $7,356.6 million and $5,585.9 million and $3,092.4 million, respectively, in 111 and 81 and 56 portfolio companies, respectively.

The composition of our investment portfolio at cost and fair value is as follows (dollar amounts in thousands):

 

     June 30, 2021  
     Cost      Fair Value      % of Total
Investments at
Fair Value
 

First lien debt

   $ 7,139,358      $ 7,213,639        98.06

Second lien debt

     53,499        55,314        0.75  

Unsecured debt

     10,547        10,475        0.14  

Equity investments

     66,908        77,212        1.05  
  

 

 

    

 

 

    

 

 

 

Total

   $ 7,270,312      $ 7,356,640        100.00
  

 

 

    

 

 

    

 

 

 

 

     December 31, 2020     December 31, 2019  
     Cost      Fair Value      % of Total
Investments at
Fair Value
    Cost      Fair Value      % of Total
Investments at
Fair Value
 

First lien debt

   $ 5,493,561      $ 5,502,899        98.51   $ 3,021,498      $ 3,046,101        98.50

Second lien debt

     48,979        50,199        0.90       32,782        32,419        1.05  

Equity

     32,942        32,844        0.59       13,487        13,920        0.45  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total

   $ 5,575,482      $ 5,585,942        100.00   $ 3,067,767      $ 3,092,440        100.00
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

 

167


Table of Contents

The industry composition of our investments at fair value is as follows:

 

     June 30,
2021
    December 31,
2020
 

Aerospace & Defense

     6.73     7.03

Air Freight & Logistics

     6.38       6.44  

Building Products

     6.39       7.79  

Capital Markets

     —         0.11  

Chemicals

     4.87       8.31  

Commercial Services & Supplies

     9.48       8.16  

Communications Equipment

     0.06       —    

Construction & Engineering

     0.74       1.07  

Distributors

     6.05       8.10  

Diversified Financial Services

     1.64       1.08  

Electrical Equipment

     1.16       2.61  

Electronic Equipment, Instruments & Components

     1.65       2.19  

Electric Utilities

     0.56       —    

Energy Equipment & Services

     0.90       1.35  

Health Care Equipment & Supplies

     —         0.69  

Health Care Providers & Services

     12.74       9.31  

Health Care Technology

     4.11       5.50  

Hotels, Restaurants & Leisure

     0.44       0.77  

Industrial Conglomerates

     0.37       0.52  

Insurance

     5.27       2.39  

Interactive Media & Services

     0.64       0.84  

Internet & Direct Marketing Retail

     4.97       7.17  

IT Services

     2.00       1.27  

Leisure Products

     0.09       —    

Machinery

     0.38       0.95  

Oil, Gas & Consumable Fuels

     2.05       2.66  

Paper & Forest Products

     0.09       0.26  

Personal Products

     0.74       0.96  

Professional Services

     4.08       2.32  

Real Estate Management & Development

     1.56       —    

Software

     6.17       2.94  

Specialty Retail

     2.45       3.22  

Technology Hardware, Storage & Peripherals

     1.85       2.67  

Trading Companies & Distributors

     1.29       0.86  

Transportation Infrastructure

     2.10       0.46  
  

 

 

   

 

 

 

Total

     100.00     100.00
  

 

 

   

 

 

 

 

168


Table of Contents
     December 31,
2020
    December 31,
2019
 

Aerospace & Defense

     7.03    

Air Freight & Logistics

     6.44       11.00  

Building Products

     7.79       12.23  

Capital Markets

     0.11       —    

Chemicals

     8.31       3.79  

Commercial Services & Supplies

     8.16       8.55  

Construction & Engineering

     1.07       4.44  

Distributors

     8.10       18.51  

Diversified Financial Services

     1.08       2.51  

Electrical Equipment

     2.61       —    

Electronic Equipment, Instruments & Components

     2.19       0.46  

Energy Equipment & Services

     1.35       2.60  

Health Care Equipment & Supplies

     0.69       1.78  

Health Care Providers & Services

     9.31       4.75  

Health Care Technology

     5.50       0.08  

Hotels, Restaurants & Leisure

     0.77       1.52  

Industrial Conglomerates

     0.52       1.01  

Insurance

     2.39       —    

Interactive Media & Services

     0.84       1.51  

Internet & Direct Marketing Retail

     7.17       1.35  

IT Services

     1.27       3.66  

Machinery

     0.95       1.63  

Media

     —         0.95  

Oil, Gas & Consumable Fuels

     2.66       4.81  

Paper & Forest Products

     0.26       —    

Personal Products

     0.96       —    

Professional Services

     2.32       1.76  

Software

     2.94       3.03  

Specialty Retail

     3.22       6.07  

Technology Hardware, Storage & Peripherals

     2.67       1.06  

Trading Companies & Distributors

     0.86       0.21  

Transportation Infrastructure

     0.46       0.73  
  

 

 

   

 

 

 

Total

     100.00     100.00
  

 

 

   

 

 

 

The geographic composition of our investments at cost and fair value is as follows (dollar amounts in thousands):

 

     June 30, 2021  
     Cost      Fair Value      % of Total
Investments at
Fair Value
    Fair Value
as % of Net
Assets
 

United States

   $ 6,783,022      $ 6,855,233        93.18     183.24

Canada

     452,966        466,180        6.34       12.46  

United Kingdom

     34,324        35,227        0.48       0.94  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 7,270,312      $ 7,356,640        100.00     196.64
  

 

 

    

 

 

    

 

 

   

 

 

 

 

169


Table of Contents
     December 31, 2020  
     Cost      Fair Value      % of Total
Investments at
Fair Value
    Fair Value
as % of
Net Assets
 

United States

   $ 5,205,832      $ 5,209,138        93.25     159.41

Canada

     267,544        270,126        4.84       8.27  

Germany

     102,106        106,678        1.91       3.26  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 5,575,482      $ 5,585,942        100.00     170.94
  

 

 

    

 

 

    

 

 

   

 

 

 

 

     December 31, 2019  
     Cost      Fair Value      % of Total
Investments at
Fair Value
    Fair Value
as % of Net
Assets
 

United States

   $ 2,675,743      $ 2,698,272        87.25     161.27

Canada

     261,911        263,704        8.53       15.76  

Luxembourg

     130,113        130,464        4.22       7.80  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 3,067,767      $ 3,092,440        100.00     184.83
  

 

 

    

 

 

    

 

 

   

 

 

 

As of June 30, 2021, December 31, 2020 and December 31, 2019, we had outstanding commitments to fund delayed draw term loans totaling $882.2 million, $432.3 million and $179.4 million, respectively.

See the Consolidated Schedule of Investments, audited and unaudited, as applicable, as of June 30, 2021, December 31, 2020 and December 31, 2019 in our consolidated financial statements accompanying this prospectus for more information on these investments.

Capital Resources and Borrowings

As a RIC, we intend to distribute substantially all of our net income to our shareholders. We anticipate generating cash in the future from the issuance of shares and cash flows from operations, including interest received on our debt investments.

Additionally, we are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of shares senior to our shares if our asset coverage, as defined in the 1940 Act, is at least equal to 150% immediately after each such issuance. As of June 30, 2021, December 31, 2020 and December 31, 2019, our asset coverage was 198.9%, 230.0% and 215.1%, respectively.

Furthermore, while any indebtedness and senior securities remain outstanding, we must take provisions to prohibit any distribution to our shareholders (which may cause us to fail to distribute amounts necessary to avoid entity-level taxation under the Code), or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. In addition, we must also comply with positive and negative covenants customary for these types of facilities. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition, Liquidity and Capital Resources.

Warehousing Transactions

We entered into two warehousing transactions whereby we agreed, subject to certain conditions, to purchase certain assets from parties unaffiliated with the Adviser. Such warehousing transactions were designed to assist us in deploying capital upon receipt of drawdown proceeds. One of these warehousing transactions related primarily to originated or anchor investments in middle market loans (the “Middle Market Warehouse”). The other warehouse related primarily to broadly syndicated loans (the “Syndicated Warehouse” and, together with the Middle Market Warehouse, the “Warehousing Transactions”) prior to the acquisition of the equity interests of the Syndicated Warehouse by us and merger of the Syndicated Warehouse with our wholly-owned subsidiary. Both the Middle Market Warehouse and the Syndicated Warehouse have been terminated.

 

170


Table of Contents

Distributions

We generally intend to distribute substantially all of our available earnings annually by paying distributions on a quarterly basis, as determined by the Board in its discretion. We cannot assure investors that we will achieve investment results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions. We anticipate that our distributions will generally be paid from post-offering taxable earnings, including interest and capital gains generated by our investment portfolio, and any other income, including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees, that we receive from portfolio companies. However, if we do not generate sufficient taxable earnings during a year, all or part of a distribution may constitute a return of capital. The specific tax characteristics of our dividends and other distributions are reported to shareholders after the end of each calendar year.

Our Private Offering

Prior to this offering, the Company conducted a private offering (the “Private Offering”) of its common shares (i) to accredited investors, as defined in Regulation D under the Securities Act of 1933, as amended (the “1933 Act”), and (ii) in the case of shares sold outside the United States, to persons that are not “U.S. persons,” as defined in Regulation S under the 1933 Act, in reliance on exemptions from the registration requirements of the 1933 Act. At each closing of the Private Offering, each investor made a capital commitment (“Capital Commitment”) to purchase common shares pursuant to a subscription agreement entered into with the Company. Investors were required to fund drawdowns to purchase the Company’s shares up to the amount of their Capital Commitments on an as-needed basis each time the Company delivered a notice to investors.

On October 31, 2018, the Company began its initial period of closing of capital commitments (“Initial Closing Period”) which ended on October 31, 2020. The Company commenced its loan origination and investment activities on November 20, 2018, the date of receipt of the initial drawdown from investors in the Private Offering (the “Initial Drawdown Date”). As of June 30, 2021, the Company had received Capital Commitments totaling $3,926.3 million ($356.3 million remaining undrawn), of which $80.0 million ($0.0 million remaining undrawn) were from affiliates of the Adviser.

On September 1, 2021, we delivered a capital drawdown notice to our investors relating to the sale of 13,723,035 common shares for an aggregate offering price of approximately $356 million, our then current net asset value. The sale of these shares closed on September 8, 2021. Following this capital call, we do not have any remaining undrawn capital commitments. See “Prospectus Summary—Recent Developments.”

Competition

We compete for investments with other BDCs and investment funds (including private equity funds, mezzanine funds, performing and other credit funds, and funds that invest in CLOs, structured notes, derivatives and other types of collateralized securities and structured products), as well as traditional financial services companies such as commercial banks and other sources of funding. These other BDCs and investment funds might be reasonable investment alternatives to us and may be less costly or complex with fewer and/or different risks than we have. Moreover, alternative investment vehicles, such as hedge funds, have begun to invest in areas in which they have not traditionally invested, including making investments in middle market private U.S. companies. As a result of these new entrants, competition for investment opportunities in middle market private U.S. companies may intensify. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of capital and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments than we have. These characteristics could allow our competitors to consider a wider variety of investments, establish more relationships and offer better pricing and more flexible structuring than we are able to do. We may lose investment opportunities if we do not match our

 

171


Table of Contents

competitors’ pricing, terms or structure. If we are forced to match our competitors’ pricing, terms or structure, we may not be able to achieve acceptable returns on our investments or may bear substantial risk of capital loss. A significant part of our competitive advantage stems from the fact that the market for investments in middle market private U.S. companies is underserved by traditional commercial banks and other financial sources. A significant increase in the number and/or the size of our competitors in this target market could force us to accept less attractive investment terms. Furthermore, many of our competitors have greater experience operating under, or are not subject to, the regulatory restrictions that the 1940 Act imposes on us as a BDC.

For additional information concerning the competitive risks we face, see “Risk Factors—Risks Related To Our Business And Structure.

Investment Advisory Agreement

We entered into the Investment Advisory Agreement, pursuant to which the Adviser manages the Company on a day-to-day basis. The Investment Advisory Agreement, as amended and restated, was entered into on October 18, 2021. The Adviser is responsible for originating prospective investments, conducting research and due diligence investigations on potential investments, analyzing investment opportunities, negotiating and structuring the Company’s investments and monitoring its investments and portfolio companies on an ongoing basis. See “Management and Other Agreements — Investment Advisory Agreement” for further information.

Administration Agreement

On October 1, 2018, we entered into an Administration Agreement with the Administrator, which was re-approved by the Board, including a majority of our Independent Trustees, on May 6, 2021. Under the terms of the Administration Agreement, the Administrator provides, or oversees the performance of, administrative and compliance services, including, but not limited to, maintaining financial records, overseeing the calculation of NAV, compliance monitoring (including diligence and oversight of our other service providers), preparing reports to shareholders and reports filed with the SEC, preparing materials and coordinating meetings of our Board, managing the payment of expenses and the performance of administrative and professional services rendered by others and providing office space, equipment and office services. We will reimburse the Administrator for its costs, expenses and allocable portion of overhead (including compensation of personnel performing administrative duties) in connection with the services performed for us pursuant to the terms of the Administration Agreement. In addition, pursuant to the terms of the Administration Agreement, the Administrator may delegate its obligations under the Administration Agreement to an affiliate or to a third party and we will reimburse the Administrator for any services performed for us by such affiliate or third party. The Administrator has hired a sub-administrator to assist in the provision of administrative services. The sub-administrator receives compensation for its provision of sub-administrative services under a sub-administration agreement. See “Management and Other Agreements — Administration Agreement” for further information.

Affiliated Transactions

We may be prohibited under the 1940 Act from conducting certain transactions with our affiliates without prior approval of the directors who are not interested persons, and in some cases, the prior approval of the SEC. We, the Adviser and certain of our affiliates have been granted exemptive relief by the SEC to co-invest with other funds managed by the Adviser or its affiliates in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors. Pursuant to such exemptive relief, we generally are permitted to co-invest with certain of our affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transaction, including the consideration to be paid, are reasonable and fair to us and our shareholders and do not involve overreaching of us or our shareholders on the part of any person concerned, (2) the transaction is consistent with

 

172


Table of Contents

the interests of our shareholders and is consistent with our investment objective and strategies, and (3) the investment by our affiliates would not disadvantage us, and our participation would not be on a basis different from or less advantageous than that on which our affiliates are investing. The Adviser’s investment allocation policy incorporates the conditions of the exemptive relief.

Share Repurchase Plan

On October 18, 2021, our Board approved the Company 10b5-1 Plan, to acquire up to the greater of $250 million and the net proceeds from this offering in the aggregate of our common shares at prices below our net asset value per share over a specified period, in accordance with the guidelines specified in Rule 10b-18 and Rule 10b5-1 of the Exchange Act. We intend to put the Company 10b5-1 Plan in place because we believe that, in the current market conditions, if our common shares are trading below our then-current net asset value per share, it is in the best interest of our shareholders for us to reinvest in our portfolio.

The Company 10b5-1 Plan is intended to allow us to repurchase our common shares at times when we otherwise might be prevented from doing so under insider trading laws. The Company 10b5-1 Plan requires Morgan Stanley & Co. LLC, as our agent, to repurchase common shares on our behalf when the market price per share is below the most recently reported net asset value per share (including any updates, corrections or adjustments publicly announced by us to any previously announced net asset value per share). Under the Company 10b5-1 Plan, the agent will increase the volume of purchases made as the price of our common shares declines, subject to volume restrictions. The timing and amount of any share repurchases will depend on the terms and conditions of the Company 10b5-1 Plan, the market price of our common shares and trading volumes, and no assurance can be given that any particular amount of common shares will be repurchased.

The purchase of shares pursuant to the Company 10b5-1 Plan is intended to satisfy the conditions of Rule 10b5-1 and Rule 10b-18 under the Exchange Act, and will otherwise be subject to applicable law, including Regulation M, which may prohibit purchases under certain circumstances.

The Company 10b5-1 Plan will commence on the later of (i) 30 calendar days following the date of this prospectus and (ii) four full calendar weeks following the completion of the offering and will terminate upon the earliest to occur of (i) 12-months (tolled for periods during which the Company 10b5-1 Plan is suspended), (ii) the end of the trading day on which the aggregate purchase price for all shares purchased under the Company 10b5-1 Plan equals the greater of $250 million and the net proceeds from this offering and (iii) the occurrence of certain other events described in the Company 10b5-1 Plan.

Human Resource Capital

We do not currently have any employees and do not expect to have any employees. Services necessary for our business are provided by individuals who are employees of the Adviser or its affiliates pursuant to the terms of the Investment Advisory Agreement and the Administrator or its affiliates pursuant to the Administration Agreement. Each of our executive officers described herein is employed by the Adviser or its affiliates. Our day-to-day investment operations are managed by the Adviser. The services necessary for the sourcing and administration of our investment portfolio are provided by investment professionals employed by the Adviser or its affiliates. The Investment Team focuses on origination, non-originated investments and transaction development and the ongoing monitoring of our investments. See “Management and Other Agreements — Investment Advisory Agreement” and “Management and Other Agreements — Administration Agreement.”

Regulation as a Business Development Company

We are an externally managed, closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. We have elected to be treated, and intend to qualify annually, as a RIC under the Code for U.S. federal income tax purposes. As a BDC and a RIC, we are required to comply with certain regulatory requirements. As a BDC, at least 70% of our assets must be assets of the type listed in Section 55(a) of the 1940 Act, as described herein. See “Regulation” for further information.

 

173


Table of Contents

Taxation as a Regulated Investment Company

We have elected to be treated as a RIC under Subchapter M of the Code, and we intend to operate in a manner so as to continue to qualify for the tax treatment applicable to RICs. To qualify for tax treatment as a RIC, we must, among other things, distribute to our shareholders in each taxable year generally at least 90% of the sum of our investment company taxable income, as defined by the Code, and net tax-exempt income for that taxable year. To maintain our tax treatment as a RIC, we, among other things, intend to make the requisite distributions to our shareholders, which generally relieves us from corporate-level U.S. federal income taxes.

In addition, based on the excise tax distribution requirements, the Company is subject to a 4% nondeductible federal excise tax on any undistributed income unless the Company distributes in a timely manner in each taxable year an amount at least equal to the sum of:

 

   

98% of its ordinary income for the calendar year;

 

   

98.2% of its capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year; and

 

   

100% of any undistributed income from prior years.

For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate income tax is considered to have been distributed.

 

174


Table of Contents

SENIOR SECURITIES

Information about the Company’s senior securities is shown as of the dates indicated in the below table. This information about the Company’s senior securities should be read in conjunction with the Company’s audited consolidated financial statements and related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operation.” The report of our independent registered public accounting firm on the senior securities table as of December 31, 2020, December 31, 2019 and December 31, 2018 is attached as an exhibit to the registration statement of which this prospectus is a part.

 

Class and Period

  Total Amount
Outstanding Exclusive of
Treasury Securities (1)
($in millions)
    Asset Coverage per
Unit (2)
($in millions)
    Involuntary Liquidating
Preference per Unit (3)
    Average Market Value
per Unit (4)
 

Subscription Facility(5)

       

June 30, 2021 (unaudited)

    —         1,989.0       —         N/A  

December 31, 2020

    —         2,300.0       —         N/A  

December 31, 2019

    119.8       2,151.0       —         N/A  

December 31, 2018

    —         2,278.0       —         N/A  

Jackson Hole Funding Facility

       

June 30, 2021 (unaudited)

    401.3       1,989.0       —         N/A  

December 31, 2020

    362.3       2,300.0       —         N/A  

December 31, 2019

    514.2       2,151.0       —         N/A  

December 31, 2018

    120.0       2,278.0       —         N/A  

Breckenridge Funding Facility

       

June 30, 2021 (unaudited)

    538.3       1,989.0       —         N/A  

December 31, 2020

    569.0       2,300.0       —         N/A  

December 31, 2019

    820.3       2,151.0       —         N/A  

December 31, 2018

    65.0       2,278.0       —         N/A  

Big Sky Funding Facility

       

June 30, 2021 (unaudited)

    354.5       1,989.0       —         N/A  

December 31, 2020

    200.3       2,300.0       —         N/A  

December 31, 2019

    —         —         —         N/A  

December 31, 2018

    —         —         —         N/A  

Revolving Credit Facility

       

June 30, 2021 (unaudited)

    588.4       1,989.0       —      

December 31, 2020

    182.9       2,300.0       —         N/A  

December 31, 2019

    —         —         —         N/A  

December 31, 2018

    —         —         —         N/A  

2023 Notes

       

June 30, 2021 (unaudited)

    400.0       1,989.0       —         N/A  

December 31, 2020

    400.0       2,300.0       —         N/A  

December 31, 2019

    —         —         —         N/A  

December 31, 2018

    —         —         —         N/A  

2026 Notes

       

June 30, 2021 (unaudited)

    800.0       1,989.0       —         N/A  

December 31, 2020

    800.0       2,300.0       —         N/A  

December 31, 2019

    —         —         —         N/A  

December 31, 2018

    —         —         —         N/A  

New 2026 Notes

       

June 30, 2021 (unaudited)

    700.0       1,989.0       —         N/A  

December 31, 2020

    —         —         —         N/A  

 

175


Table of Contents

Class and Period

  Total Amount
Outstanding Exclusive of
Treasury Securities (1)
($in millions)
    Asset Coverage per
Unit (2)
($in millions)
    Involuntary Liquidating
Preference per Unit (3)
    Average Market Value
per Unit (4)
 

December 31, 2019

    —         —         —         N/A  

December 31, 2018

    —         —         —         N/A  

 

 

(1)

Total amount of each class of senior securities outstanding at the end of the period presented.

(2)

Asset coverage per unit is the ratio of the carrying value of our total assets, less all liabilities excluding indebtedness represented by senior securities in this table, to the aggregate amount of senior securities representing indebtedness. Asset coverage per unit is expressed in terms of dollar amounts per $1,000 of indebtedness and is calculated on a consolidated basis. Estimated asset coverage per unit as of September 30, 2021 (unaudited) is $1,920.0. Following the receipt of proceeds from the capital call drawdown notice we delivered on September 1, 2021, the issuance of $1.3 billion principal amount of unsecured notes issued after June 30, 2021 and the net proceeds from this offering and the repayment of indebtedness upon receipt of these proceeds, we expect our asset coverage per unit to be approximately $1,847.0 after the offering.

(3)

The amount to which such class of senior security would be entitled upon our involuntary liquidation in preference to any security junior to it. The “-” in this column indicates information that the SEC expressly does not require to be disclosed for certain types of senior securities.

(4)

Not applicable because the senior securities are not registered for public trading.

(5)

The Subscription Facility was terminated on November 3, 2020.

 

176


Table of Contents

PORTFOLIO COMPANIES

The following table sets forth certain information as of June 30, 2021 for each portfolio company in which the Company had an investment. Percentages shown for class of securities held by the Company represent percentage of the class owned and do not necessarily represent voting ownership or economic ownership.

The Board of Trustees of the Company (the “Board”) approved the valuation of the Company’s investment portfolio, as of June 30, 2021, at fair value as determined in good faith using a consistently applied valuation process in accordance with the Company’s documented valuation policy that has been reviewed and approved by the Board, who also approve in good faith the valuation of such securities as of the end of each quarter. For more information relating to the Company’s investments, see the Company’s financial statements included in this prospectus.

 

Investments (1)

  Industry   Type of
Investment
  Reference
Rate and
Spread
    Interest
Rate (2)
    Maturity
Date
    % of
Class
Held at
6/30/2021
    Par
Amount/
Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 

Abaco Energy Technologies, LLC (4)(13)

1999 Bryan Street, Suite 900, Dallas TX 75201 United States

  Energy
Equipment &
Services
  First
Lien
   
L + 7.00

   
8.50

   
10/4/2024
 
     
49,145
 
   
48,184
 
   
46,073
 
   
1.23

ADCS Clinics Intermediate Holdings, LLC (4)(7)(11)

151 Southhall Lane Suite 300 Maitland FL 32751 United States

  Health Care
Providers &
Services
  First
Lien
   
L + 6.25

   
7.25

   
5/7/2027
 
     
12,361
 
   
12,058
 
   
12,050
 
   
0.32

AGI-CFI Holdings, Inc. - Revolving Term Loan (4)(5)(7)(14)

9130 S Dadeland Blvd Ste 1801, Miami, FL, 33156-7858 United States

  Air Freight &
Logistics
  First
Lien
   
L + 4.50

   
6.25

   
6/11/2027
 
     
6,513
 
   
6,513
 
   
6,513
 
   
0.17

AGI-CFI Holdings, Inc. (4)(7)(10)

9130 S Dadeland Blvd Ste 1801, Miami, FL, 33156-7858 United States

  Air Freight &
Logistics
  First
Lien
   
L + 5.50

   
6.25

   
6/11/2027
 
     
95,158
 
   
93,198
 
   
93,180
 
   
2.49

Albireo Energy, LLC (4)(5)(7)(11)

3 Ethel Road, Suite 300, Edison, NJ 08817

  Electronic
Equipment,
Instruments &
Components
  First
Lien
   
L + 6.00

   
7.00

   
12/23/2026
 
     
107,686
 
   
105,434
 
   
106,779
 
   
2.85

ALKU, LLC (4)(10)

200 Brickstone Square, Suite 503, Andover, MA 01810

  Professional
Services
  First
Lien
   
L + 5.25

   
6.00

   
3/1/2028
 
     
110,044
 
   
108,996
 
   
109,494
 
   
2.93

 

177


Table of Contents

Investments (1)

  Industry   Type of
Investment
  Reference
Rate and
Spread
    Interest
Rate (2)
    Maturity
Date
    % of
Class
Held at
6/30/2021
    Par
Amount/
Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 

Apex Tool Group, LLC (12)

910 Ridgebrook Road Suite 200 Sparks MD 21152 United States

  Machinery
  First
Lien
   
L + 5.25

   
6.50

   
8/1/2024
 
     
27,934
 
   
27,288
 
   
28,087
 
   
0.75

APFS Staffing Holdings, Inc. (8)

125 S. Wacker Drive, Suite 2700 Chicago, IL 60606 United States

  Professional
Services
  First
Lien
   
L + 4.75

   
4.85

   
4/15/2026
 
     
18,108
 
   
17,860
 
   
18,090
 
   
0.48

ASP Endeavor Acquisition, LLC (4)(5)(9)

515 Houston St Ste 500, Fort Worth, TX 76102 United States

  Professional
Services
  First
Lien
   
L + 6.50

   
7.00

   
5/3/2027
 
     
24,000
 
   
23,533
 
   
23,520
 
   
0.63

Barbri Holdings, Inc. (4)(7)(10)

12222 Merit Drive, Suite 1340, Dallas, TX 75251 United States

  Diversified
Financial
Services
  First
Lien
   
L + 5.75

   
6.50

   
4/30/2028
 
     
62,000
 
   
60,790
 
   
60,760
 
   
1.62

Bazaarvoice, Inc. (4)(7)(8)

338 Pier Avenue, Hermosa Beach CA 90254 United States

  Commercial
Services &
Supplies
  First
Lien
   
L + 5.75

   
5.83

   
5/7/2028
 
     
248,111
 
   
248,111
 
   
248,111
 
   
6.63

BPPH2 Limited (4)(5)(6)(8)

One Wood Street, London, EC2V 7WS

  Professional
Services
  First
Lien
   
L + 6.75

   
6.75

   
3/2/2028
 
     
25,500
 
   
34,324
 
   
35,227
 
   
0.94

Bungie, Inc. (4)(11)

550 106th Ave NE, Ste 207 Bellevue, WA 98004 United States

  Interactive
Media &
Services
  First
Lien
   
L + 6.25

   
7.25

   
8/28/2024
 
     
47,200
 
   
46,753
 
   
47,200
 
   
1.26

Bution Holdco 2, Inc. (4)(11)

907 S. Detroit Ave Tulsa, OK 74120 United States

  Distributors
  First
Lien
   
L + 6.25

   
7.25

   
10/17/2025
 
     
102,461
 
   
100,995
 
   
100,412
 
   
2.68

Canadian Hospital Specialties Ltd. (4)(5)(6)(7)(11)

676 North Michigan Avenue Suite 3300 Chicago IL 60611 United States

  Health Care
Providers &
Services
  First
Lien
   
L + 4.50

   
5.50

   
4/14/2028
 
     
27,120
 
   
21,276
 
   
21,575
 
   
0.58

Canadian Hospital Specialties Ltd. (4)(5)(6)(8)

676 North Michigan Avenue Suite 3300 Chicago IL 60611 United States

  Health Care
Providers &
Services
  Second
Lien
Debt
   
0.0875
 
   
8.75

   
4/15/2029
 
     
10,533
 
   
8,248
 
   
8,336
 
   
0.22

Capstone Logistics, LLC (7)(11)

30 Technology Parkway South, Suite 200, Peachtree Corner, GA 30092

  Transportation
Infrastructure
  First
Lien
   
L + 4.75

   
5.75

   
11/12/2027
 
     
5,433
 
   
5,391
 
   
5,459
 
   
0.15

 

178


Table of Contents

Investments (1)

  Industry   Type of
Investment
  Reference
Rate and
Spread
    Interest
Rate (2)
    Maturity
Date
    % of
Class
Held at
6/30/2021
    Par
Amount/
Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 

ConvergeOne Holdings, Inc. (8)

0900 Nesbitt Avenue South Bloomington MN 55437 United States

  Electronic
Equipment,
Instruments &
Components
  First
Lien
   
L + 5.00

   
5.10

   
1/4/2026
 
     
14,543
 
   
14,157
 
   
14,414
 
   
0.39

COP Home Services TopCo IV, Inc. (4)(5)(11)

3150 E Birch St., Brea, CA 92821

  Construction &
Engineering
  Second
Lien
Debt
    L + 8.75     9.75     12/31/2028         6,061       5,933       6,061       0.16

COP Home Services TopCo IV, Inc. (4)(5)(7)(11)

3150 E Birch St., Brea, CA 92821

  Construction &
Engineering
  First
Lien
    L + 5.00     6.00     12/31/2027         17,906       17,269       17,662       0.47

Corfin Holdings, Inc. (4)(11)

1050 Perimeter Road, Manchester, NH 03103 United States

  Aerospace &
Defense
  First
Lien
    L + 6.00     7.00     2/5/2026         272,752       268,270       272,070       7.27

Cross Country Healthcare, Inc. (4)(10)

5201 Congress Avenue Suite 100B Boca Raton FL 33487 United States

  Health Care
Providers &
Services
  First
Lien
   
L + 5.75

   
6.50

   
6/8/2027
 
     
29,750
 
   
29,161
 
   
29,155
 
   
0.78

Cumming Group, Inc. (4)(7)(11)

485 Lexington Avenue, New York NY 10017 United States

  Real Estate
Management
& Development
  First
Lien
   
L + 6.00

   
7.00

   
5/26/2027
 
     
60,958
 
   
59,650
 
   
59,627
 
   
1.59

CustomInk, LLC (4)(11)

2910 District Avenue Fairfax VA 22031 United States

  Specialty
Retail
  First
Lien
    L + 6.21     7.21     5/3/2026         133,125       131,324       130,463       3.49

Dana Kepner Company, LLC (4)(7)(11)

700 Alcott St. Denver, CO 80204

  Distributors   First
Lien
    L + 6.25     7.25     12/29/2026         64,268       63,090       63,946       1.71

DCA Investment Holdings, LLC
(4)(7)(10)

6240 Lake Osprey Drive, Sarasota, FL 34240

  Health Care
Providers &
Services
  First
Lien
    L + 6.25     7.00     3/12/2027         22,090       21,730       21,711       0.58

DCG Acquisition Corp. (4)(5)(8)

3630 East Kemper Road Sharonville, OH 45241 United States

  Chemicals   First
Lien
    L + 4.50     4.59     9/30/2026         34,913       34,661       35,000       0.94

Deliver Buyer, Inc. (4)(11)

3955 East Blue Lick Road, Louisville, KY 40229 United States

  Technology
Hardware,
Storage &
Peripherals
  First
Lien
    L + 6.25     7.25     5/1/2024         49,625       48,515       49,904       1.33

 

179


Table of Contents

Investments (1)

  Industry   Type of
Investment
  Reference
Rate and
Spread
    Interest
Rate (2)
    Maturity
Date
    % of
Class
Held at
6/30/2021
    Par
Amount/
Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 

Diligent Corporation (4)(11)

111 West 33rd St., 16th Floor, New York, NY 10120

  Software   First
Lien
    L + 5.75     6.75     8/4/2025         59,850       59,061       59,102       1.58

Donuts, Inc. (4)(11)

10500 NE 8th Street Suite 750, Bellevue, WA 98004

  Internet &
Direct
Marketing
Retail
  First
Lien
    L + 6.00     7.00     12/29/2026         327,405       321,407       325,768       8.71

Eagle Midstream Canada Finance, Inc. (4)(6)(13)

222 3rd Avenue S.W. Suite 900 Calgary, Alberta T2P 0B4 Canada

  Oil, Gas &
Consumable
Fuels
  First
Lien
   
L + 6.25

   
7.75

   
11/26/2024
 
     
150,862
 
   
149,321
 
   
150,485
 
   
4.02

Edifecs, Inc. (4)(11)

756 114TH AVE SE BELLEVUE WA 98004 United States

  Health Care
Technology
  First
Lien
   
L + 7.00

   
8.00

   
9/21/2026
 
     
222,515
 
   
217,670
 
   
224,740
 
   
6.01

EIS Buyer, LLC (4)(13)

2018 Powers Ferry Road, Suite 400 Atlanta, Georgia 30339 United States

  Distributors
  First
Lien
   
L + 6.25

   
7.75

   
9/30/2025
 
     
83,895
 
   
82,693
 
   
81,798
 
   
2.19

Electronics For Imaging, Inc. (8)

6750 Dumbarton Circle Fremont CA 94555 United States

  Technology
Hardware,
Storage &
Peripherals
  First
Lien
   
L + 5.00

   
5.10

   
7/23/2026
 
     
17,945
 
   
17,036
 
   
17,148
 
   
0.47

Endure Digital, Inc. (5)(8)

10 Corporate Drive, Burlington, MA 01803

  IT Services
  Unsecured
Debt
   
0.06
 
   
6.00

   
2/15/2029
 
     
3,125
 
   
3,125
 
   
3,098
 
   
0.08

Episerver, Inc. (4)(5)(7)(11)

542A Amherst Street Route 101A Nashua, NH 03063 United States

  Software
  First
Lien
   
L + 5.50

   
6.50

   
4/9/2026
 
     
9,791
 
   
9,615
 
   
9,613
 
   
0.26

Episerver, Inc. (5)(11)

542A Amherst Street Route 101A Nashua, NH 03063 United States

  Software   Second
Lien
Debt
    L + 7.75     8.75     7/31/2028         11,186       11,038       11,588       0.31

Epoch Acquisition, Inc. (4)(11)

4600 Lena Drive Mechanicsburg, PA 17055 United States

  Health Care
Providers &
Services
  First
Lien
    L + 6.75     7.75     10/4/2024         24,687       24,501       24,687       0.66

Excel Fitness Holdings, Inc. (11)

8015 Sharon Road Volente TX 78641 United States

  Hotels,
Restaurants &
Leisure
  First
Lien
    L + 5.25     6.25     10/7/2025         32,884       31,828       32,076       0.86

 

180


Table of Contents

Investments (1)

  Industry   Type of
Investment
  Reference
Rate and
Spread
    Interest
Rate (2)
    Maturity
Date
    % of
Class
Held at
6/30/2021
    Par
Amount/
Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 

Fastlane Parent Company, Inc. (8)

600 E, Las Colinas Blvd., Ste 400 Irving, TX 75039 United States

  Distributors   First
Lien
    L + 4.50     4.60     2/4/2026         7,443       7,254       7,422       0.20

Fencing Supply Group Acquisition, LLC (4)(5)(7)(11)

211 Perimeter Center Pkwy NE #250 Dunwoody, GA 30346

  Building
Products
  First
Lien
    L + 6.00     7.00     2/26/2027         57,653       56,417       56,938       1.52

Frontline Road Safety, LLC (4)(7)(10)

2714 Sherman Street, Grand Prairie, TX 75051 United States

  Transportation
Infrastructure
  First
Lien
    L + 5.75     6.50     5/3/2027         83,090       81,473       81,428       2.18

Garda World Security Corp. (5)(6)(8)

1390 Barre Street, Montreal QC H3C 1N4 Canada

  Commercial
Services &
Supplies
  Unsecured
Debt
    0.06       6.00     6/1/2029         2,674      
2,674
 
   
2,657
 
    0.07

GraphPAD Software, LLC (4)(7)(11)

2365 Northside Dr #560, San Diego, CA 92108 United States

  Software   First
Lien
    L + 5.50     6.50     4/27/2027         13,125      
12,903
 
   
12,896
 
    0.34

Healthcomp Holding Company, LLC (4)(5)(7)(11)

621 Santa Fe Ave. Fresno, CA 93721

  Health Care
Providers &
Services
  First
Lien
    L + 6.00     7.00     10/27/2026         77,414       75,466       76,767       2.05

High Street Buyer, Inc. (4)(5)(7)(10)

600 Unicorn Park Drive, Suite 208, Woburn, MA 01801 United States

  Insurance   First
Lien
    L + 6.00     6.75     4/14/2028        
16,856
 
   
16,348
 
   
16,191
 
    0.43

IEA Energy Services, LLC (8)

6325 Digital Way Suite 460 Indianapolis IN 46278 United States

  Construction &
Engineering
  First
Lien
    L + 6.75     6.90     9/25/2024         30,517       29,684       30,352       0.81

Integrity Marketing Acquisition, LLC (4)(5)(7)(11)

2300 Highland Village Suite 300 Highland Village, TX 75077 United States

  Insurance   First
Lien
    L + 5.75     6.75     8/27/2025         58,025       57,139       57,010       1.52

 

181


Table of Contents

Investments (1)

  Industry   Type of
Investment
  Reference
Rate and
Spread
    Interest
Rate (2)
    Maturity
Date
    % of
Class
Held at
6/30/2021
    Par
Amount/
Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 

Jacuzzi Brands, LLC (4)(11)

3925 City Center Drive Suite 200 Chino Hills CA 91709 United States

  Building
Products
  First
Lien
    L + 6.50     7.50     2/25/2025         94,817       93,715       94,817       2.53

Jayhawk Buyer, LLC (4)(11)

8717 West 110th Street, Suite 300 Overland Park, KS 66210

  Health Care
Providers &
Services
  Second
Lien
Debt
    L + 8.75     9.75     10/15/2027         5,183      
5,081
 
   
5,080
 
    0.14

Jayhawk Buyer, LLC (4)(7)(11)

8717 West 110th Street, Suite 300 Overland Park, KS 66210

  Health Care
Providers &
Services
  First
Lien
    L + 5.00     6.00     10/15/2026         142,944       139,803       141,157       3.77

Jones Deslauriers Insurance Management, Inc. (4)(5)(6)(7)(10)

2375 Skymark Avenue, Mississauga, Ontario L4W 4Y6

  Insurance   First
Lien
    L + 4.25     5.00     3/28/2028         68,375       53,409       55,338       1.48

Jones Deslauriers Insurance Management, Inc. (4)(5)(6)(7)(9)

2375 Skymark Avenue, Mississauga, Ontario L4W 4Y6

  Insurance   Second
Lien
Debt
    L + 7.50     8.00     3/26/2029       C$
 
 
25,495
 
 
    19,749       20,723       0.55

JSS Holdings, Inc. (4)(11)

180 North Stetson, 29th Floor, Chicago, IL 60601 United States

  Commercial
Services &
Supplies
  First
Lien
   
L + 6.25

    7.25     12/17/2027         290,266       286,269       288,815       7.72

Latham Pool Products, Inc. (8)

787 Watervliet Shaker Road Latham NY 2110 United States

  Building
Products
  First
Lien
    L + 6.00     6.10     6/18/2025         47,513       46,588       47,736       1.28

LD Lower Holdings, Inc. (4)(7)(11)

8201 Greensboro Drive, Suite 717 Mclean, VA 22102-3810 United States

  Software   First
Lien
    L + 6.50     7.50     2/8/2026         119,575       117,371       118,380       3.16

Lew’s Intermediate Holdings, LLC (4)(10)

209 Stoneridge Dr, Columbia, South Carolina 29210

  Leisure
Products
  First
Lien
    L + 5.00     5.75     1/26/2028         6,584       6,521       6,616       0.18

Lindstrom, LLC (4)(11)

2950 100th Court Northeast Blaine MN 55449 United States

  Building
Products
  First
Lien
    L + 6.25     7.25     4/7/2025        
122,712
 
 
    121,244       122,712       3.28

 

182


Table of Contents

Investments (1)

  Industry   Type of
Investment
  Reference
Rate and
Spread
    Interest
Rate (2)
    Maturity
Date
    % of
Class
Held at
6/30/2021
    Par
Amount/
Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 

Livingston International, Inc. (4)(6)(11)

The West Mall Suite 400 Toronto ON M9C 5K7 Canada

  Air Freight &
Logistics
  First
Lien
    L + 5.75     6.75     4/30/2026         121,518       118,184       121,670       3.25

Lytx, Inc. (4)(7)(11)

9785 Towne Centre Drive San Diego CA 92121 United States

  Technology
Hardware,
Storage &
Peripherals
  First
Lien
    L + 6.25     7.25     2/28/2026         68,964       68,009       69,393       1.85

MAG DS Corp. (11)

3580 Groupe Drive Suite 200 Woodbridge VA 22192 United States

  Aerospace &
Defense
  First
Lien
    L + 5.50     6.50     4/1/2027         87,168       79,843       85,533       2.29

Maverick Acquisition, Inc. (4)(7)(11)

3063 Philmont Ave B, Huntingdon Valley, PA 19006 United States

  Aerospace &
Defense
  First
Lien
    L + 6.00     7.00     6/1/2027        
21,000
 
   
20,500
 
   
20,493
 
    0.55

Mode Purchaser, Inc. (4)(11)

17330 Preston Rd., Suite 200 C Dallas, TX 75252 United States

  Air Freight &
Logistics
  First
Lien
    L + 6.25     7.25     12/9/2026         176,096       173,359       171,694       4.59

Monroe Capital Holdings, LLC
(4)(7)(11)

311 South Wacker Drive 64th Floor Chicago IL 60606 United States

  Health Care
Providers &
Services
  First
Lien
    L + 6.25     7.25     9/8/2026         129,404       127,127       132,988       3.55

MRI Software, LLC (4)(5)(7)(11)

28925 Fountain Parkway Solon OH 44139 United States

  Software   First
Lien
    L + 5.50     6.50     2/10/2026         25,690       25,482       25,718       0.69

NDC Acquisition Corp. - Revolving Term Loan (4)(5)(7)(11)

402 BNA Drive, Suite 500, Nashville, TN 37217

  Distributors   First
Lien
    L + 5.75     6.75     3/9/2027         1,156       1,067       1,062       0.03

NDC Acquisition Corp. (4)(11)

402 BNA Drive, Suite 500, Nashville, TN 37217

  Distributors   First
Lien
    L + 5.75     6.75     3/9/2027         22,444       21,859       21,827       0.58

NIC Acquisition Corp. (5)(10)

150 Dascomb Road Andover, MA 01810

  Chemicals   First
Lien
    L + 3.75     4.50     12/29/2027         733       730       733       0.02

NIC Acquisition Corp. (5)(10)

150 Dascomb Road Andover, MA 01810

  Chemicals   Second
Lien
Debt
    L + 7.75     8.50     12/29/2028         3,500       3,450       3,526       0.09

 

183


Table of Contents

Investments (1)

  Industry   Type of
Investment
  Reference
Rate and
Spread
    Interest
Rate (2)
    Maturity
Date
    % of
Class
Held at
6/30/2021
    Par
Amount/
Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 

NMC Crimson Holdings, Inc. (4)(7)(10)

1050 Winter Street, Suite 2700 Waltham, MA 02451

  Health Care
Technology
  First
Lien
    L + 6.00     6.75     3/1/2028         71,173       68,692       69,101       1.85

Odyssey Holding Company, LLC
(4)(11)

100 Winners Circle Suite 440 Brentwood, TN 37027 United States

  Health Care
Providers &
Services
  First
Lien
    L + 5.75     6.75     11/16/2025         17,989       17,799       17,989       0.48

Omni Intermediate Holdings, LLC - Revolving Term Loan (4)(5)(7)(11)

3100 Olympus Blvd, Suite 420, Dallas, TX 75019

  Air Freight &
Logistics
  First
Lien
    L + 5.00     6.00     12/30/2025         132       119       132       0.00

Omni Intermediate Holdings, LLC
(4)(5)(7)(11)

3100 Olympus Blvd, Suite 420, Dallas, TX 75019

  Air Freight &
Logistics
  First
Lien
    L + 5.00     6.00     12/30/2026         7,531       7,367       7,531       0.20

Park Place Technologies, LLC (11)

5910 Landerbrook Drive, Mayfield Heights, OH 44124

  IT Services   First
Lien
    L + 5.00     6.00     11/10/2027         44,888       43,252       45,101       1.21

Paula’s Choice Holdings, Inc. (4)(11)

705 5th Ave S, Ste 200 Seattle, WA 98104

  Personal
Products
  First
Lien
    L + 6.25     7.25     11/17/2025         54,313       53,003       54,313       1.45

PaySimple, Inc. (4)(8)

515 Wynkoop Street Suite 250 Denver CO 80202 United States

  Software   First
Lien
    L + 5.50     5.61     8/23/2025         61,400       59,886       61,093       1.63

Pixelle Specialty Solutions, LLC (11)

228 South Main Street Spring Grove, PA 17362 United States

  Paper &
Forest
Products
  First
Lien
    L + 6.50     7.50     10/31/2024         6,929       6,831       6,947       0.19

Plantronics, Inc. (5)(6)(8)

345 Encinal Street Santa Cruz, California 95060

  Communications
Equipment
  Unsecured
Debt
    0.0475       4.75     3/1/2029         4,748       4,748       4,720       0.13

Polymer Additives, Inc. (8)

5929 Lakeside Blvd Indianapolis IN 46278 United States

  Chemicals   First
Lien
    L + 6.00     6.18     7/31/2025         29,302       28,368       28,086       0.75

 

184


Table of Contents

Investments (1)

  Industry   Type of
Investment
  Reference
Rate and
Spread
    Interest
Rate
(2)
    Maturity
Date
    % of
Class
Held at
6/30/2021
    Par
Amount/
Units
    Cost
(3)
    Fair
Value
    Percentage
of Net
Assets
 

Porcelain Acquisition Corp. (4)(7)(11)

20 Sanker Road, Dickson, TN 37055 United States

  Trading
Companies &
Distributors
  First Lien     L + 6.00     7.00     4/30/2027         47,795       45,786       45,816       1.22

Progress Residential PM Holdings, LLC (4)(7)(10)

7500 N Dobson Rd., Suite 300 Scottsdale, AZ 85256

  Real Estate
Management &
Development
  First Lien
    L + 6.25     7.00     2/16/2028         55,898       54,575       55,200       1.48

Project Ruby Ultimate Parent Corp. (10)

11711 West 79th Street Lenexa, Kansas 62214

  Health Care
Technology
  First Lien
    L + 3.25     4.00     3/3/2028         8,590       8,549       8,575       0.23

PSS Industrial Group Corp. (13)

010 Lamar Street Suite 710 Houston TX 77002 United States

  Distributors   First Lien
   


L + 8.00

(incl. 2.00%
PIK)


 
 

    9.50     4/10/2025         53,894       51,383       44,261       1.18

Qualus Power Services Corp. (4)(7)(11)

4040 Rev Drive Cincinatti, OH 45232

  Electric
Utilities
  First Lien
    L + 5.50     6.50     3/26/2027         42,643       41,439       41,383       1.11

R1 Holdings, LLC (4)(7)(11)

One Kellaway Drive Randolph, MA 02368 United States

  Air Freight &
Logistics
  First Lien
    L + 6.00     7.00     1/2/2026         57,377       56,729       57,377       1.53

Red River Technology, LLC (4)(7)(11)

875 3rd Avenue, New York NY 10022 United States

  IT Services   First Lien     L + 6.00     7.00     5/26/2027         100,800       99,065       99,036       2.65

Relativity ODA, LLC (4)(7)(11)

231 South LaSalle Street, 8th Floor, Chicago, IL 60604 United States

  Software   First Lien    

L + 7.50

PIK


 

    8.50     5/12/2027         28,184       27,420       27,397       0.73

Roadsafe Holdings, Inc. (4)(7)(11)

3331 Street Rd #430, Bensalem, PA 19020 United States

  Transportation
Infrastructure
  First Lien     L + 5.75     6.75     10/19/2027         42,197       41,104       41,070       1.10

 

185


Table of Contents

Investments (1)

  Industry   Type of
Investment
  Reference
Rate and
Spread
    Interest
Rate
(2)
    Maturity
Date
    % of
Class
Held at
6/30/2021
    Par
Amount/
Units
    Cost
(3)
    Fair
Value
    Percentage
of Net
Assets
 

Sciens Building Solutions, LLC (4)(7)(11)

500 Griswold Suite 2700 Detroit MI 48226 United States

  Commercial
Services &
Supplies
  First Lien
   
L + 5.75

   
6.75

   
5/21/2027
 
     
24,413
 
   
23,816
 
   
23,788
 
   
0.64

SEKO Global Logistics Network, LLC (4)(5)(7)(11)

1100 N. Arlington Heights Rd., Itasca, IL 60143

  Air Freight &
Logistics
  First Lien
   
L + 5.00

   
6.00

   
12/30/2026
 
     
5,080
 
   
4,996
 
   
5,060
 
   
0.14

SelectQuote, Inc. (4)(10)

6800 West 115th Street Suite 2511 Overland Park KS 66211 United States

  Diversified
Financial
Services
  First Lien
   
L + 5.00

   
5.75

   
11/5/2024
 
     
59,714
 
   
58,354
 
   
59,714
 
   
1.60

SG Acquisition, Inc. (4)(9)

2635 Century Parkway Northeast Suite 900 Atlanta GA 30345 United States

  Insurance
  First Lien
   
L + 5.00

   
5.50

   
1/27/2027
 
     
111,867
 
   
110,270
 
   
110,189
 
   
2.95

Shoals Holdings, LLC (4)(11)

1400 Shoals Way Portland, TN 37148

  Electrical
Equipment
  First Lien
    L + 3.25     4.25     11/25/2026         84,787       82,844       85,211       2.28

Shutterfly, LLC (11)

2800 Bridge Parkway Redwood City CA 94065 United States

  Internet &
Direct
Marketing
Retail
  First Lien
   
L + 6.00

   
7.00

   
9/25/2026
 
     
26,457
 
   
24,666
 
   
26,559
 
   
0.71

Shutterfly, LLC (11)

2800 Bridge Parkway Redwood City CA 94065 United States

  Internet &
Direct
Marketing
Retail
  First Lien
   
L + 6.50

   
7.50

   
9/25/2026
 
     
13,550
 
   
13,647
 
   
13,606
 
   
0.36

Snoopy Bidco, Inc. (4)(7)(10)

8039 Beach Blvd, Buena Park, CA United States

  Health Care
Providers &
Services
  First Lien
   
L + 6.00

   
6.75

   
6/1/2028
 
     
124,100
 
   
119,444
 
   
119,389
 
   
3.19

SpecialtyCare, Inc. (4)(5)(7)(11)

111 Radio Circle, Mount Kisco NY 10549 United States

  Health Care
Providers &
Services
  First Lien
   
L + 5.75

   
6.75

   
6/18/2028
 
     
12,351
 
   
11,935
 
   
11,934
 
   
0.32

Spencer Spirit Holdings, Inc. (8)

6826 Black Horse Pike, Egg Harbor Township, NJ 08234 United States

  Specialty
Retail
  First Lien
   
L + 6.00

   
6.10

   
6/19/2026
 
     
44,924
 
   
43,023
 
   
44,873
 
   
1.20

 

186


Table of Contents

Investments (1)

  Industry   Type of
Investment
  Reference
Rate and
Spread
    Interest
Rate
(2)
    Maturity
Date
    % of
Class
Held at
6/30/2021
    Par
Amount/
Units
    Cost
(3)
    Fair
Value
    Percentage
of Net
Assets
 

Spireon, Inc. (4)(11)

6802 Aston Street Irvine CA 92606 United States

  Transportation
Infrastructure
  First Lien
   
L + 6.50

   
7.50

   
10/4/2024
 
     
22,847
 
   
22,690
 
   
22,847
 
   
0.61

Spitfire Parent, Inc. (4)(5)(11)

10161 Park Run Drive, Suite 150, Las Vegas, Nevada

  Software
  First Lien
   
L + 5.50

   
6.50

   
3/11/2027
 
     
10,500
 
   
12,448
 
   
12,203
 
   
0.33

Spitfire Parent, Inc. (4)(7)(11)

10161 Park Run Drive, Suite 150, Las Vegas, Nevada

  Software
  First Lien
   
L + 5.50

   
6.50

   
3/11/2027
 
     
44,000
 
   
43,025
 
   
42,972
 
   
1.15

Tailwind Colony Holding Corporation (4)(5)(7)(11)

269 South Lambert Road Orange, CT 06512 United States

  Distributors
  First Lien
   
L + 7.50

   
8.50

   
11/13/2024
 
     
32,691
 
   
32,393
 
   
32,038
 
   
0.86

Tailwind Smith Cooper Intermediate Corporation (8)

485 Lexington Avenue, 23rd Floor New York, NY 10017 United States

  Industrial
Conglomerates
  First Lien
   
L + 5.00

   
5.11

   
5/28/2026
 
     
27,535
 
   
26,772
 
   
27,500
 
   
0.74

TCFI AEVEX, LLC (4)(7)(11)

440 Stevens Ave. Ste 150 Solana Beach, CA 92075 United States

  Aerospace &
Defense
  First Lien
   
L + 6.00

   
7.00

   
3/18/2026
 
     
113,086
 
   
110,935
 
   
111,644
 
   
2.98

Tetra Technologies, Inc. (4)(6)(11)

24955 Interstate 45 North The Woodlands TX 77380 United States

  Energy
Equipment &
Services
  First Lien     L + 6.25     7.25     9/10/2025         20,098       20,003       19,796       0.53

The Action Environmental Group, Inc. (4)(12)

451 Frelinghuysen Avenue Newark NJ 07114 United States

  Commercial
Services &
Supplies
  First Lien
   
L + 6.00

   
7.25

   
1/16/2026
 
     
117,678
 
   
115,867
 
   
112,971
 
   
3.02

The Cook & Boardman Group, LLC (11)

3064 Salem Industrial Drive Winston Salem NC 27127 United States

  Trading
Companies &
Distributors
  First Lien
   
L + 5.75

   
6.75

   
10/17/2025
 
     
49,976
 
   
49,644
 
   
48,851
 
   
1.31

 

187


Table of Contents

Investments (1)

  Industry   Type of
Investment
  Reference
Rate and
Spread
    Interest
Rate
(2)
    Maturity
Date
    % of
Class
Held at
6/30/2021
    Par
Amount/
Units
    Cost
(3)
    Fair
Value
    Percentage
of Net
Assets
 

The GI Alliance Management, LLC (4)(11)

8267 Elmbrook Drive, Ste. 200 Dallas, TX 75247 United States

  Health Care
Providers &
Services
  First Lien
   
L + 6.25

   
7.25

   
11/4/2024
 
     
273,730
 
   
268,169
 
   
269,624
 
   
7.21

The Wolf Organization, LLC (4)(11)

20 West Market Street York PA 7405 United States

  Building
Products
  First Lien
   
L + 6.50

   
7.50

   
9/3/2026
 
     
89,167
 
   
87,854
 
   
92,734
 
   
2.48

Titan Investment Company, Inc.
(4)(5)(8)

6130 Sprint Parkway, Overland Park, KS 66211

  Professional
Services
  First Lien     L + 5.75     5.88     3/20/2027         42,676       40,772       42,889       1.15

Trinity Air Consultants Holdings Corp. (4)(7)(10)

330 7th Ave, New York, NY 10001 United States

  Professional
Services
  First Lien     L + 5.25     6.00     6/29/2027         64,425       62,729       62,771       1.68

Triple Lift, Inc. (4)(7)(10)

400 Lafayette St 5th floor, New York, NY 10003 United States

  Software
  First Lien
   
L + 5.75

   
6.50

   
5/6/2028
 
     
49,000
 
   
47,891
 
   
47,866
 
   
1.28

Unified Door & Hardware Group, LLC (4)(11)

1650 Suckle Highway Pennsauken, NJ 08110 United States

  Distributors
  First Lien
   
L + 6.25

   
7.25

   
6/30/2025
 
     
90,602
 
   
89,124
 
   
90,602
 
   
2.42

USALCO, LLC (4)(12)

2601 Cannery Avenue Baltimore MD 21226 United States

  Chemicals
  First Lien
   
L + 6.50

   
7.75

   
6/1/2026
 
     
35,514
 
   
34,869
 
   
34,804
 
   
0.93

USALCO, LLC (4)(7)(12)

2601 Cannery Avenue Baltimore MD 21226 United States

  Chemicals
  First Lien
   
L + 7.25

   
8.50

   
6/1/2026
 
     
165,915
 
   
162,283
 
   
167,706
 
   
4.48

VDM Buyer, Inc. (4)(8)

One North Transit Road Lockport, NY 14094 United States

  Chemicals   First Lien     L + 6.75     6.94     4/22/2025         23,901       26,563       27,494       0.73

 

188


Table of Contents

Investments (1)

  Industry   Type of
Investment
  Reference
Rate and
Spread
    Interest
Rate
(2)
    Maturity
Date
    % of
Class
Held at
6/30/2021
    Par
Amount/
Units
    Cost
(3)
    Fair
Value
    Percentage
of Net
Assets
 

VDM Buyer, Inc. (4)(8)

One North Transit Road Lockport, NY 14094 United States

  Chemicals   First Lien     L + 6.75     6.94     4/22/2025         62,769       61,972       60,886       1.63

Veregy Consolidated, Inc. (11)

23325 N. 23rd Ave, Suite 120 Phoenix, AZ 85027

  Commercial
Services &
Supplies
  First Lien     L + 6.00     7.00     11/2/2027         21,205       20,671       21,364       0.57

VT Topco, Inc. (8)

290 West Mount Pleasant Avenue, Suite 3200 Livingston, NJ 07039 United States

  Professional
Services
  First Lien     L + 3.25     3.35     8/1/2025         4,841       4,573       4,814       0.13

Westland Insurance Group LTD (4)(5)(6)(11)

200, 2121 – 160th Street, Surrey, BC

  Insurance   First Lien     L + 7.00     8.00     1/5/2027         42,483       38,933       40,040       1.07

Westland Insurance Group LTD (4)(5)(6)(7)(11)

200, 2121 – 160th Street, Surrey, BC

  Insurance   First Lien     L + 7.00     8.00     1/5/2027         78,073       56,615       61,382       1.64

WHCG Purchaser III, Inc. (4)(5)(7)(10)

251 Little Falls Drive, Wilmington, DE 19808 United States

  Health Care
Providers &
Services
  First Lien     L + 5.75     6.50     6/22/2028         45,370       44,114       44,110       1.18

Windows Acquisition Holdings, Inc.
(4)(5)(11)

235 Sunshine Road Royal, AR 71968

  Building
Products
  First Lien     L + 6.50     7.50     12/29/2026         55,698       54,658       55,420       1.48

AGI Group Holdings LP - A2 Common Units (4)

9130 S Dadeland Blvd Ste 1801, Miami, FL, 33156-7858 United States

  Air Freight &
Logistics
  Class A2
Common
Units
         
30.1

   
902
 
   
902
 
   
902
 
   
0.02

Corfin Holdco, Inc. - Common Stock (4)

1050 Perimeter Road, Manchester, NH 03103 United States

  Aerospace &
Defense
  Common
Stock
          2.7     2,137,866       4,767       5,131       0.14
                   

 

189


Table of Contents

Investments (1)

  Industry   Type of
Investment
  Reference
Rate and
Spread
    Interest
Rate
(2)
    Maturity
Date
    % of
Class
Held at
6/30/2021
    Par
Amount/
Units
    Cost
(3)
    Fair
Value
    Percentage
of Net
Assets
 

CustomInk, LLC - Series A Preferred Units (4)

2910 District Avenue Fairfax VA 22031 United States

  Specialty
Retail
  Series A
Preferred
Units
         
1.1

   
384,520
 
   
5,200
 
   
5,003
 
   
0.13

EIS Acquisition Holdings, LP - Class A Common Units (4)

2018 Powers Ferry Road, Suite 400 Atlanta, Georgia 30339 United States

  Distributors   Class A
Common
Units
          37.6     7,519       1,773       1,873       0.05

Frontline Road Safety Investments, LLC - Class A Common Units (4)

2714 Sherman Street, Grand Prairie, TX 75051 United States

  Transportation
Infrastructure
  Class A
Common
Units
          3.1     26,666       2,800       2,800       0.07

Jayhawk Holdings, LP - A-1 Common Units (4)

8717 West 110th Street, Suite 300 Overland Park, KS 66210

  Health Care
Providers &
Services
  Class A-1
Common
Units
          0.1     2,201       392       392       0.01

Jayhawk Holdings, LP - A-2 Common Units (4)

8717 West 110th Street, Suite 300 Overland Park, KS 66210

  Health Care
Providers &
Services
  Class A-2
Common
Units
         
0.1

   
1,185
 
   
211
 
   
211
 
   
0.01

Mermaid Equity Co. L.P. - Class A-2 Common Units (4)

100 Pall Mall, St. James’s, London, SW1Y 5NQ

  Software   Class A-2
Common
Units
          17.4     14,849,355       14,849       22,423       0.60

Mermaid EquityCo L.P. - Class B Units (4)

100 Pall Mall, St. James’s, London, SW1Y 5NQ

  Software
  Warrants
         
19.8

   
4,550,697
 
   
865
 
   
2,821
 
   
0.08

 

190


Table of Contents

Investments (1)

  Industry   Type of
Investment
  Reference
Rate and
Spread
    Interest
Rate
(2)
    Maturity
Date
    % of
Class
Held at
6/30/2021
    Par
Amount/
Units
    Cost
(3)
    Fair
Value
    Percentage
of Net
Assets
 

Mode Holdings, L.P. - Class A-2 Common Units (4)

17330 Preston Rd., Suite 200 C Dallas, TX 75252 United States

  Air Freight &
Logistics
  Class A-2
Common
Units
          9.2     5,486,923       5,487       5,487       0.15

OHCP V TC COI, LP. - LP Interest (4)

330 7th Ave, New York, NY 10001 United States

  Professional
Services
  LP
Interest
          35.0     3,500,000       3,500       3,500       0.09

Blackstone Donegal Holdings LP - LP Interests (Westland Insurance Group LTD) (4)(5)(6)(15)

200, 2121 – 160th Street, Surrey, BC

  Insurance
  LP Interests
         
18.8

     
26,163
 
   
26,671
 
   
0.71

 

(1)

Unless otherwise indicated, issuers of debt and equity investments held by the Company (which such term “Company” shall include the Company’s consolidated subsidiaries for purposes of this Consolidated Schedule of Investments) are denominated in dollars. All debt investments are income producing unless otherwise indicated. All equity investments are non-income producing unless otherwise noted. Certain portfolio company investments are subject to contractual restrictions on sales. The total par amount is presented for debt investments, while the number of shares or units owned is presented for equity investments. Each of the Company’s investments is pledged as collateral, under one or more of its credit facilities unless otherwise indicated.

(2)

Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to either LIBOR (“L”) or an alternate base rate (commonly based on the Federal Funds Rate (“F”) or the U.S. Prime Rate (“P”)), which generally resets periodically. For each loan, the Company has indicated the reference rate used and provided the spread and the interest rate in effect as of June 30, 2021. As of June 30, 2021, the reference rates for our variable rate loans were the 30-day L at 0.10%, the 90-day L at 0.15% and the 180-day L at 0.16% and P at 3.25%. Variable rate loans typically include an interest reference rate floor feature, which is generally 1.00%. As of June 30, 2021, 89.1% of the portfolio at fair value had a base rate floor above zero.

(3)

The cost represents the original cost adjusted for the amortization of discounts and premiums, as applicable, on debt investments using the effective interest method in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

(4)

These investments were valued using unobservable inputs and are considered Level 3 investments. Fair value was determined in good faith by or under the direction of the Board of Trustees (the “Board”) (see Note 2 and Note 5), pursuant to the Company’s valuation policy.

(5)

These debt investments are not pledged as collateral under any of the Company’s credit facilities. For other debt investments that are pledged to the Company’s credit facilities, a single investment may be divided into parts that are individually pledged as collateral to separate credit facilities.

(6)

The investment is not a qualifying asset under Section 55(a) of the 1940 Act. The Company may not acquire any non-qualifying asset unless, at the time of acquisition, qualifying assets represent at least 70% of the Company’s total assets. As of June 30, 2021, non-qualifying assets represented 8.9% of total assets as calculated in accordance with regulatory requirements.

(7)

Position or portion thereof is an unfunded loan commitment, and no interest is being earned on the unfunded portion, although the investment may be subject to unused commitment fees. Negative cost and fair value results from unamortized fees, which are capitalized to the investment cost. The unfunded loan commitment

 

191


Table of Contents
  may be subject to a commitment termination date that may expire prior to the maturity date stated. See below for more information on the Company’s unfunded commitments (all commitments are first lien, unless otherwise noted):

 

Investments—non-controlled/non-affiliated

  

Commitment
Type

   Commitment
Expiration Date
     Unfunded
Commitment
     Fair
Value
 

First and Second Lien Debt

           

ADCS Clinics Intermediate Holdings, LLC

   Delayed Draw Term Loan      5/7/2023        3,756        —    

ADCS Clinics Intermediate Holdings, LLC

   Revolver     
5/7/2027
 
  

 

1,301

 

  

 

(26

AGI-CFI Holdings, Inc.

   Delayed Draw Term Loan     
6/11/2023
 
     22,700       
—  
 

AGI-CFI Holdings, Inc.

   Revolver      6/11/2027        9,770        —    

Albireo Energy, LLC

  

Delayed Draw Term Loan

     6/23/2022        36,817        —    

Barbri, Inc.

   Delayed Draw Term Loan      4/28/2023        18,834        —    

Bazaarvoice, Inc.

   Delayed Draw Term Loan      11/7/2022        38,288        —    

Bazaarvoice, Inc.

   Revolver      5/7/2026        28,662        —    

Canadian Hospital Specialties Ltd.

   Delayed Draw Term Loan      4/14/2023        5,754        —    

Canadian Hospital Specialties Ltd.

   Revolver      4/14/2027        2,877        —    

Capstone Logistics, LLC

   Delayed Draw Term Loan      11/12/2027        547        —    

COP Home Services TopCo IV, Inc.

   Delayed Draw Term Loan      12/31/2022        1,650        —    

COP Home Services TopCo IV, Inc.

   Revolver      12/31/2025        1,830        —    

Cumming Group, Inc.

   Delayed Draw Term Loan      5/26/2027        13,522        —    

Cumming Group, Inc.

   Revolver      5/26/2027        5,593        (112

Dana Kepner Company, LLC

   Delayed Draw Term Loan      12/29/2021        26,920        —    

DCA Investment Holdings, LLC

   Delayed Draw Term Loan      3/12/2023        6,391        (48

Episerver, Inc.

   Revolver      4/9/2026        2,064        (31

Fencing Supply Group Acquisition, LLC

   Delayed Draw Term Loan      2/26/2023        13,776        (138

Frontline Road Safety, LLC - A

   Delayed Draw Term Loan      5/3/2027        11,836        —    

Frontline Road Safety, LLC - B

   Delayed Draw Term Loan      5/3/2022        26,351        —    

GI Consilio Parent, LLC

   Revolver      5/14/2026        4,200        —    

GraphPAD Software, LLC

   Revolver      4/27/2027        2,124        —    

Healthcomp Holding Company, LLC

   Delayed Draw Term Loan      4/27/2022        20,754        (259

High Street Buyer, Inc. - A

   Delayed Draw Term Loan      11/4/2021        51        —    

High Street Buyer, Inc. - B

   Delayed Draw Term Loan      4/16/2028        14,089        (282

High Street Buyer, Inc.

   Revolver      4/16/2027        2,254        (45

Integrity Marketing Acquisition, LLC

   Delayed Draw Term Loan      8/27/2025        11,658        —    

Jayhawk Buyer, LLC

   Delayed Draw Term Loan      10/15/2021        6,652        —    

Jones Deslauriers Insurance Management, Inc.

   Delayed Draw Term Loan      3/28/2022        15,248        —    

Jones Deslauriers Insurance Management, Inc. (2nd Lien)

   Delayed Draw Term Loan      3/28/2022        2,441        —    

LD Lower Holdings, Inc.

   Delayed Draw Term Loan      2/8/2023        19,979        —    

Lytx, Inc.

   Delayed Draw Term Loan      2/28/2022        16,761        —    

Maverick Acquisition, Inc.

   Delayed Draw Term Loan      6/1/2023        8,715        (87

Monroe Capital Holdings, LLC

   Delayed Draw Term Loan      6/8/2022        8,282        —    

Monroe Capital Holdings, LLC

   Delayed Draw Term Loan      6/8/2022        44,592        —    

MRI Software, LLC

  

Delayed Draw Term Loan

     1/31/2022        621        —    

MRI Software, LLC

   Delayed Draw Term Loan      1/31/2022        1,946        (8

MRI Software, LLC

   Revolver      1/31/2022        1,516        —    

NDC Acquisition Corp.

   Revolver      3/9/2027        2,269        —    

NMC Crimson Holdings, Inc.

   Delayed Draw Term Loan      3/1/2023        31,400        (471

Omni Intermediate Holdings, LLC

   Delayed Draw Term Loan      12/30/2021        1,950        —    

 

192


Table of Contents

Investments—non-controlled/non-affiliated

  

Commitment
Type

   Commitment
Expiration Date
     Unfunded
Commitment
     Fair
Value
 

Omni Intermediate Holdings, LLC

   Revolver      12/30/2025        424        —    

Porcelain Acquisition Corp.

   Delayed Draw Term Loan      4/30/2022        22,627        (665

Progress Residential PM Holdings, LLC

   Delayed Draw Term Loan      2/16/2022        16,623        —    

Qualus Power Services Corp.

   Delayed Draw Term Loan      3/26/2023        15,545        (194

R1 Holdings, LLC

   Delayed Draw Term Loan      4/19/2022        12,341        —    

Red River Technology, LLC

   Delayed Draw Term Loan      5/26/2023        31,888        —    

Relativity ODA, LLC

  

Revolver

     5/12/2027        3,292        (82

Roadsafe Holdings, Inc.

   Delayed Draw Term Loan      10/19/2021        28,317        (283

Sciens Building Solutions, LLC

   Delayed Draw Term Loan      5/21/2027        19,688        —    

Sciens Building Solutions, LLC

   Revolver      5/21/2027        5,850        —    

SEKO Global Logistics Network, LLC

   Delayed Draw Term Loan      12/30/2022        800        (11

SEKO Global Logistics Network, LLC

   Revolver      12/30/2026        197        —    

Snoopy Bidco, Inc.

   Delayed Draw Term Loan      6/1/2023        65,900        (19

SpecialtyCare, Inc.

   Delayed Draw Term Loan      9/18/2021        1,260        —    

SpecialtyCare, Inc.

   Revolver      6/18/2026        922        —    

Spitfire Parent, Inc.

   Delayed Draw Term Loan      9/4/2022        14,755        (148

Tailwind Colony Holding Corporation

   Delayed Draw Term Loan      2/10/2022        10,644        —    

TCFI AEVEX, LLC

   Delayed Draw Term Loan      12/31/2021        1,579        —    

TCFI AEVEX, LLC

   Delayed Draw Term Loan      12/31/2021        30,445        (295

Trinity Air Consultants Holdings Corp.

   Delayed Draw Term Loan      6/29/2023        24,085        (241

Trinity Air Consultants Holdings Corp.

  

Revolver

     6/29/2027        6,262        —    

Triple Lift, Inc.

   Revolver      5/6/2028        7,698        (154

USALCO, LLC

   Delayed Draw Term Loan      6/1/2022        11,295        (282

Westland Insurance Group LTD

   Delayed Draw Term Loan      7/5/2022        24,459        —    

WHCG Purchaser III, Inc.

   Delayed Draw Term Loan      6/22/2023        21,890        (219

WHCG Purchaser III, Inc.

   Revolver      6/22/2026        6,723        (134
        

 

 

    

 

 

 

Total Unfunded Commitments

           882,250        (4,234
        

 

 

    

 

 

 

 

(8)

There are no interest rate floors on these investments.

(9)

The interest rate floor on these investments as of June 30, 2021 was 0.50%.

(10)

The interest rate floor on these investments as of June 30, 2021 was 0.75%.

(11)

The interest rate floor on these investments as of June 30, 2021 was 1.00%.

(12)

The interest rate floor on these investments as of June 30, 2021 was 1.25%.

(13)

The interest rate floor on these investments as of June 30, 2021 was 1.50%.

(14)

The interest rate floor on these investments as of June 30, 2021 was 1.75%.

(15)

Under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “1940 Act”), the Company would be deemed to “control” a portfolio company if the Company owned more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. As of June 30, 2021, the Company does not “control” any of these portfolio companies. Under the 1940 Act, the Company would be deemed an “affiliated person” of a portfolio company if the Company owns 5% or more of the portfolio company’s outstanding voting securities. As of June 30, 2021, the Company’s non-controlled/affiliated investments were as follows:

 

     Fair value

as of
December 31,
2020
     Gross
Additions
     Gross
Reductions
     Change in
Unrealized
Gains
(Losses)
     Fair value
as of

June 30,
2021
     Dividend
and
Interest
Income
 

Non-Controlled/Affiliated Investments

                 

Blackstone Donegal Holdings LP

   $ —        $ 26,163      $ —        $ 508      $ 26,671      $ —    

Total

   $ —        $ 26,163      $ —        $ 508      $ 26,671      $ —    

 

193


Table of Contents

MANAGEMENT

Our business and affairs are managed under the direction of the Board. The responsibilities of the Board include, among other things, the oversight of our investment activities, the quarterly and non-quarterly valuation of our assets, oversight of our financing arrangements and corporate governance activities. Our Board consists of six members, four of whom are not “interested persons” of the Company or of the Adviser as defined in Section 2(a)(19) of the 1940 Act and are “independent,” as determined by the Board. These individuals are referred to as independent trustees. Our Board elects the Company’s executive officers, who serve at the discretion of the Board. Effective June 24, 2020, November 4, 2020 and December 31, 2020, respectively, each of Thomas Joyce, Robert Harteveldt and Bennett Goodman resigned from his respective position as a trustee of the Company. Messers, Joyce, Harteveldt and Goodman’s resignation was not a result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices. Effective August 26, 2020 and November 5, 2020, the Board appointed Vicki L. Fuller and James F. Clark to the Board, respectively, and as members of the Board’s Audit Committee and Nominating and Governance Committee. Effective August 4, 2021, the Board established the Compensation Committee of the Board and appointed Robert Bass, Tracy Collins, Vicki Fuller and James Clark as members of the Compensation Committee. Effective October 18, 2021, the Board appointed Vikrant Sawhney as a trustee of the Company.

Pursuant to the Fund’s Fourth Amended and Restated Declaration of Trust, on October 18, 2021 our Board was divided into three classes by resolution of the Board, with the terms of one class expiring at each annual meeting of shareholders. At each annual meeting, one class of trustees is elected to a three-year term. See “Description of Our Shares—Term and Election; Certain Transactions.”

Board of Trustees and Executive Officers

Trustees

Information regarding the Board is as follows:

 

Name

  Year
of
Birth
 

Position

  Trustee
Since
 

Principal Occupation
During Past 5 Years

  Number of
Funds
in Fund
Complex
Overseen by
Trustee(1)
 

Other Directorships
Held by Trustee

Interested Trustees:

           

Daniel H. Smith, Jr.

  1963   Trustee   2018   Mr. Smith is a Senior Managing Director of Blackstone Credit and is Head of GSO / Blackstone Debt Funds Management LLC.   6   None.

Brad Marshall

  1972   Trustee, Chairperson, and Chief Executive Officer   2018   Mr. Marshall is a Senior Managing Director of Blackstone. He is a senior portfolio manager in Blackstone Credit’s Performing Credit Group and oversees Blackstone Credit’s Direct Lending effort. Mr. Marshall is a member of Blackstone Credit’s Performing Credit Investment Committee.   2   None.

Vikrant Sawhney

  1970   Trustee   2021   Mr. Sawhney is a Senior Managing Director of Blackstone. Mr. Sawhney is Blackstone’s Chief Administrative Officer and Global Head of Institutional Client Solutions.   2   None.

 

194


Table of Contents

Name

  Year
of
Birth
 

Position

  Trustee
Since
 

Principal Occupation
During Past 5 Years

  Number of
Funds
in Fund
Complex
Overseen by
Trustee(1)
 

Other Directorships
Held by Trustee

Independent Trustees:

           

Robert Bass

  1949   Trustee   2018   Vice Chairman (2006-2012) and Partner (1982-2012) of Deloitte & Touche LLP.   2   Director, Groupon Inc. (2012-present); Director, Apex Tool Group, LLC (2014-present); Director, Redfin Corporation (2016-present); Director, Sims Metal Management (2013-2018); and Director, New Page Corporation (2013-2015).

Tracy Collins

  1963   Trustee   2018   Independent finance professional and Chief Executive Officer of SmartFinance LLC (a Fintech startup) (2013-2017).   2   Director, KKR Financial (2006-2014).

Vicki L. Fuller

  1957   Trustee   2020   Chief Investment Officer of the New York State Common Retirement Fund (2012-2018).   2   Director, The Williams Companies (2018-present); Director, Fidelity Equity and High Income Funds (2018–present); Treliant, LLC (international multi-industry consulting firm) (2019-present).

James F. Clark

  1961   Trustee   2020   Partner (2004-Present) and Investment Committee member (2004-2020) of Sound Shore Management, Inc.   2  

None.

 

(1)

The “Fund Complex” consists of the Company, Blackstone Private Credit Fund the Blackstone Credit Closed-End Funds (BXSL, BSL, BGX, BGB and BGFLX), as well as the Blackstone Alternative Alpha Funds (Blackstone Alternative Alpha Fund, Blackstone Alternative Alpha Fund II and Blackstone Alternative Alpha Master Fund) and Blackstone Alternative Multi-Strategy Fund.

The address for each of our trustees is c/o Blackstone Credit BDC Advisors LLC, 345 Park Avenue, 31st Floor, New York, NY 10154.

Executive Officers Who are Not Trustees

 

Name

  Year of Birth  

Position

  Length of
Time
Served
 

Principal Occupation
During Past 5 Years

  Number of
Funds in
Fund
Complex
Overseen

Stephan Kuppenheimer

  1970   Chief Financial Officer   Since
2018
  Mr. Kuppenheimer is a Senior Managing Director of Blackstone. He is part of Blackstone Credit’s Performing Credit Group focused on portfolio management, structuring and capital markets. Mr. Kuppenheimer is a member of Blackstone Credit’s Performing Credit Investment Committee.   2

Katherine Rubenstein

  1978   Chief Operating Officer   Since
2021
  Ms. Rubenstein is a Managing Director of Blackstone Credit. Before joining Blackstone, Ms. Rubenstein originated senior secured loans and equipment finance opportunities in the industrial, consumer, and retail sectors for GE Capital   2

 

195


Table of Contents

Name

  Year of Birth  

Position

  Length of
Time
Served
 

Principal Occupation
During Past 5 Years

  Number of
Funds in
Fund
Complex
Overseen

Carlos Whitaker

  1976   President   Since
2021
  Mr. Whitaker is a Managing Director of Blackstone Credit. Before joining Blackstone, Mr. Whitaker served as Head of New York and Co-Head of EMEA Equity Advisory Sales of Credit Suisse in the Investment Banking division.   2

Robert W. Busch

  1982   Chief Accounting Officer and Treasurer   Since
2018
  Mr. Busch is a Senior Vice President of Blackstone Inc. Before joining Blackstone Credit, Mr. Busch worked previously at Fifth Street Asset Management from 2012 to 2018, where he was Senior Vice President of Finance and served as Controller of the firm’s two publicly traded business development companies and publicly traded alternative asset manager.   6

Beth Chartoff

  1969   Public Relations Officer   Since
2018
  Ms. Chartoff is a Senior Managing Director of Blackstone and Head of Investor Relations and Business Development at Blackstone Credit.   1

Marisa J. Beeney

  1970   Chief Compliance Officer, Chief Legal Officer and Secretary   Since
2018
  Ms. Beeney is a Senior Managing Director of Blackstone Inc. and General Counsel of Blackstone Credit.   6

Biographical Information

Trustees

Our trustees have been divided into two groups—interested trustees and independent trustees. An interested trustee is an “interested person” as defined in Section 2(a)(19) of the 1940 Act.

Interested Trustees

Brad Marshall (Portfolio Manager), Trustee, Chief Executive Officer of the Company, Senior Managing Director of Blackstone and Co-head of Performing Credit. Mr. Marshall is Co-head of Blackstone Credit’s Performing Credit Platform and a Senior Managing Director of Blackstone. Mr. Marshall also serves on the board of trustees of Blackstone Private Credit Fund (“BCRED”). Mr. Marshall focuses on Blackstone Credit’s Direct Lending effort and is a member of the performing credit investment committee. Before joining Blackstone Credit in 2005, at its inception, Mr. Marshall worked in various roles at RBC, including fixed income research and business development within RBC’s private equity funds effort. Prior to RBC, Mr. Marshall helped develop a private equity funds business for TAL Global, a Canadian asset management division of CIBC, and prior to that, he co-founded a microchip verification software company where he served as chief financial officer. Mr. Marshall received an MBA from McGill University in Montreal and a BA (Honors) in Economics from Queen’s University in Kingston, Canada.

Daniel H. Smith, Jr., Trustee, Senior Managing Director of Blackstone and Head of Liquid Credit Strategies. Mr. Smith is a Trustee of the Company, a Senior Managing Director of Blackstone Inc. and is Head of Liquid Credit Strategies unit, which includes various commingled credit funds, permanent capital vehicles, CLOs, closed-end funds and leveraged and unleveraged separately managed accounts (“SMAs”). Mr. Smith is also the Chief Executive Officer, Trustee and Chairman of Blackstone Senior Floating Rate Term Fund (“BSL”), Blackstone Long-Short Credit Income Fund (“BGX”), Blackstone Strategic Credit Fund (“BGB”), Blackstone Floating Rate Enhanced Income Fund (“BGFLX”). Mr. Smith also serves on the board of trustees of BCRED. Mr. Smith joined Blackstone Credit from the Royal Bank of Canada in July 2005 where he was a Managing Partner and Co-Head of RBC Capital Market’s Alternative Investments Unit. Mr. Smith joined RBC in 2001 from Indosuez Capital, a division of Crédit Agricole Indosuez, where he was a Co-Head and Managing Director overseeing the firm’s debt investments business and merchant banking activities. Prior to Indosuez Capital, Mr. Smith was a Principal at Frye-Louis Capital Management in Chicago. He began his career in investment

 

196


Table of Contents

management in 1987 at Van Kampen American Capital (f/k/a Van Kampen Merritt), a mutual fund company in Chicago where he held a variety of positions including Co-Head of the firm’s high-yield investment group and head of the firm’s equity fund complex. Mr. Smith received a B.S. in Petroleum Engineering from the University of Southern California and a Masters in Management from the J.L. Kellogg Graduate School of Management at Northwestern University.

Vikrant Sawhney, Trustee, Senior Managing Director of Blackstone and Chief Administrative Officer. Mr. Sawhney currently serves as Chief Administrative Officer and Global Head of Institutional Client Solutions of Blackstone Inc. Since joining Blackstone in 2007, Mr. Sawhney started Blackstone Capital Markets and also served as the Chief Operating Officer of the Private Equity group. Before joining Blackstone, Mr. Sawhney worked as a Managing Director in the Financial Sponsors Group at Deutsche Bank, and prior to that was an Associate at the law firm of Simpson Thacher & Bartlett. Mr. Sawhney represented Blackstone as a Rockefeller Fellow during 2010-2011, and currently sits on the board of the Blackstone Charitable Foundation. He is also the Board Chair of Dream, an east Harlem-based educational and social services organization. He graduated from Dartmouth College and received a J.D. from Harvard Law School.

Independent Trustees

Robert Bass. Mr. Bass has served on the board of Groupon, Inc. since June 2012. He served as a Vice Chairman of Deloitte & Touche LLP from 2006 through June 2012, and was a Partner in Deloitte from 1982 through June 2012, where he specialized in e-commerce, mergers and acquisitions, SEC filings and related issues. At Deloitte, Mr. Bass was responsible for all services provided to Forstmann Little and its portfolio companies and was the advisory partner for Blackstone, DIRECTV, 24 Hour Fitness, McKesson, IMG and CSC. In addition, he has been an advisory partner for RR Donnelley, Automatic Data Processing, Community Health Systems, and Avis Budget. Mr. Bass has served on the board of directors of Sims Metal Management (ASX: SGM.AX) and as a member of the risk and audit committee from September 2013 to December 31, 2018, including as Chairman of the risk and audit committee from November 2014, the board of directors and as a member of the audit committee of Apex Tool Group, LLC since December 2014, including as Chairman of the audit committee since April 2015, the board of directors and as Chairman of the audit committee of New Page Corporation from January 2013 (emergence from chapter XI) to January 2015 (sale of the company), and the board of directors and as Chairman of the audit committee of Redfin Corporation (NASDAQ: RDFN) since October 2016. Mr. Bass is a certified public accountant licensed in New York and Connecticut. He is a member of the American Institute of Certified Public Accountants and the Connecticut State Society of Certified Public Accountants. Mr. Bass brings to the Board a wealth of experience and knowledge of public company financial reporting and accounting, including with respect to companies in the e-commerce sector, and his experience at the highest levels of a Big Four accounting firm is an invaluable resource to the Board in its oversight of the Company’s SEC filings, all of which make him well qualified to serve on our Board. Mr. Bass also serves on the board of trustees of BCRED.

James F. Clark. Mr. Clark has served as a Partner with Sound Shore Management, Inc. (“Sound Shore”), which he joined in 2004. At Sound Shore, Mr. Clark is a generalist on the investment team, responsible for the firm’s investments in energy, industrials, materials and utility stocks. His tenure also includes heading Sound Shore’s Environmental, Social, and Governance (ESG) Committee and having served on its Investment Committee and operating committee. Previously, Mr. Clark worked at Credit Suisse First Boston (CSFB) from 1984 to 2004, most recently as a Managing Director, 1996-2004. At CSFB, Mr. Clark served as Head of US Equity Research, 2000-2004, and as the firm’s International and Domestic Oil Analyst, 1989-2000. Mr. Clark was selected to 14 Institutional Investor magazine’s All America Research teams, 1993-1999. Mr. Clark was named a Wall Street Journal All-Star Analyst, 1994-1999, and also named to that newspaper’s All-Star Analyst Hall of Fame, 1998-1999. Mr. Clark has an MBA from Harvard University and a BA from Williams College, cum laude and with highest honors. Mr. Clark also has served as a winter study adjunct faculty member at Williams College, 2020-2021. Mr. Clark also serves on the board of trustees of BCRED.

 

197


Table of Contents

Tracy Collins. Ms. Collins is an independent finance professional and most recently served as CEO to SmartFinance LLC (2013-2017), a Fintech startup purchased by MidFirst Bank in December of 2017. During her career in financial services, Ms. Collins worked as a Senior Managing Director (Partner) and Head of Asset-Backed Securities Research at Bear Stearns & Co., Inc. for six years and prior to that as a Managing Director (Partner) and Head of Asset-Backed Securities and Structured Products at Credit Suisse (formerly known as Credit Suisse First Boston) for nine years. During her tenure as a structured product specialist, Ms. Collins was consistently recognized as a “First Team All American Research Analyst.” Ms. Collins served as an independent director for KKR Financial from August 2006 to May 2014. She graduated from the University of Texas at Austin in the Plan II Honors Program. Ms. Collins has held numerous management positions and her broad experiences in the financial services sector provide her with skills and valuable insight in handling complex financial transactions and issues, all of which make her well qualified to serve on our Board. Ms. Collins’ spouse is the founder, managing partner and co-CIO of Good Hill Partners LP (“Good Hill”). Good Hill is a registered investment adviser that manages various types of collective investment vehicles and investment accounts. Affiliates of the Adviser (but not the Adviser) have invested on behalf of their clients in Good Hill-managed vehicles or accounts since 2010, and the amount of such investment is material to Good Hill. Ms. Collins also serves on the board of trustees of BCRED.

Vicki L. Fuller. Ms. Fuller has served as a Director of The Williams Companies, Inc. since 2018. Ms. Fuller joined the board of The Williams Companies, Inc. after retirement from the New York State Common Retirement Fund (“NYSCRF”) where she served as Chief Investment Officer beginning in August 2012. NYSCRF is the third largest public pension fund in the nation and holds and invests the assets of the New York State and Local Retirement System on behalf of more than one million state and local government employees and retirees and their beneficiaries. Prior to joining NYSCRF, Ms. Fuller spent 27 years in leadership positions at AllianceBernstein Holding L.P., which has approximately $500 billion in assets under management. She joined the company in 1993 from the Equitable Capital Management Corporation, which was acquired by Alliance Capital Management LP (in 2000, the company became AllianceBernstein LP after the company acquired Sanford C. Bernstein). In December 2019, Ms. Fuller was appointed to the board of directors of Treliant, LLC, an international multi-industry consulting firm specializing in regulatory requirements. In 2018, Ms. Fuller was appointed to the Board of Trustees for Fidelity Equity and High Income Funds. Ms. Fuller, who was inducted into the National Association of Securities Professionals Wall Street Hall of Fame, was named to Chief Investment Officer Magazine’s “Power 100” and received the Urban Technology Center’s Corporate Leadership Award. She has also been named one of the most powerful African Americans on Wall Street by Black Enterprise. Ms. Fuller’s skills, experience, and attributes include executive leadership, public policy and government, securities and capital markets, financial and accounting, and diversity, all of which make her well qualified to serve on our Board. Ms. Fuller also serves on the board of trustees of BCRED.

Executive Officers Who Are Not Trustees

Beth Chartoff, Public Relations Officer. Ms. Chartoff is the Public Relations Officer of the Company, a Senior Managing Director of Blackstone and Head of Investor Relations and Business Development at Blackstone Credit. Before joining Blackstone Credit in 2005, Ms. Chartoff worked as a Director in Investment Banking at Banc of America Securities in the Financial Sponsors Group. Prior to working at Banc of America Securities, Ms. Chartoff was in the investment banking groups of Credit Suisse and DLJ. Ms. Chartoff worked on a variety of financing, M&A and restructuring transactions in the consumer & retail and media & telecommunications industries. Ms. Chartoff received a B.A. in Economics from Cornell University and an M.B.A. from the Wharton School of the University of Pennsylvania. She is Head of the Blackstone Women’s Initiative, focused on the recruitment, retention and advancement of women at the firm. In addition, Ms. Chartoff serves as a member of the Executive Committee of American Ballet Theatre’s Board of Governing Trustees.

Katherine Rubenstein, Chief Operating Officer. Kate Rubenstein is a Managing Director in Blackstone Credit and Chief Operating Officer of the Company and of Blackstone Private Credit Fund. Since joining Blackstone in 2015, Ms. Rubenstein created and led the GSO Advantage platform (now Blackstone Credit

 

198


Table of Contents

Advantage), which brings Blackstone’s broad set of capabilities to drive operational efficiencies and growth for Blackstone Credit’s portfolio companies. She subsequently created and led the Blackstone Advantage program, focusing on building networks and expanding access to resources for portfolio companies across Blackstone business units. Ms. Rubenstein is on the Blackstone Charitable Foundation Leadership Council and on the Board of Let’s Get Ready, a non-profit organization that provides low-income and first generation to college students support to gain admission to and graduate from college. Before joining Blackstone, Ms. Rubenstein originated senior secured loans and equipment finance opportunities in the industrial, consumer, and retail sectors for GE Capital and prior to that worked in brand management at World Kitchen. Ms. Rubenstein received an MBA from The Johnson Graduate School of Management at Cornell University, where she was a Roy H. Park Leadership Fellow, and an AB from Dartmouth College.

Carlos Whitaker, President. Carlos Whittaker is a Senior Managing Director in Blackstone Credit, the parent company of the Company’s investment adviser, and the President of the Company and of Blackstone Private Credit Fund. Prior to joining Blackstone Credit on September 7, 2021, Mr. Whitaker served as Head of New York and Co-Head of EMEA Equity Advisory Sales of Credit Suisse in the Investment Banking division. As a senior salesperson, Carlos was responsible for developing relationships with large institutional clients, profitably growing revenues, selling initial public offerings and secondary offerings, as well as cross-selling the bank’s other products. His clients consisted of large institutional asset management firms that employ a myriad of investment strategies including long only, long/short equity, event driven, risk arbitrage, and global macro. Mr. Whitaker began his career at Credit Suisse in 2000 as an Analyst. Mr. Whitaker sits on the boards of New York for McCombs and Rising Stars Capital Management, which is a nonprofit focused on increasing Black representation in the finance industry. Mr. Whitaker graduated with honors from the University of Texas at Austin, holding a Bachelor of Arts from the Plan II Honors Program, Bachelor of Business Administration in Accounting and Master in Professional Accounting.

Stephan Kuppenheimer, Chief Financial Officer. Mr. Kuppenheimer is the Chief Financial Officer of the Company and a Senior Managing Director with Blackstone Credit. He is a member of Blackstone Credit’s Performing Credit Group focused on portfolio management and capital markets. Mr. Kuppenheimer is a member of the performing credit investment committee. Before joining Blackstone Credit, then known as GSO Capital Partners, in 2015 Mr. Kuppenheimer was a Senior Managing Director at Stifel Financial where he served as Head of Principal Investing and Head of Debt Capital Markets from 2010 to 2015. Prior to Stifel, Mr. Kuppenheimer was founder and CEO of FSI Capital, an alternative asset management company focused on U.S. credit products. Previously, Mr. Kuppenheimer was head of CLOs and structured funds for Merrill Lynch. Mr. Kuppenheimer received a J.D., with Distinction, from Emory University School of Law and a B.A. from Colgate University with Honors in Philosophy. Mr. Kuppenheimer serves on the board of trustees for the George Jackson Academy.

Marisa J. Beeney, Chief Compliance Officer, Chief Legal Officer and Secretary. Ms. Beeney has been with Blackstone Credit since 2007 and is a Senior Managing Director and General Counsel of Blackstone Credit. As General Counsel, Ms. Beeney works on a variety of legal matters within Blackstone Credit and oversees all legal and compliance issues. Ms. Beeney is the Chief Compliance Officer, Chief Legal Officer and Secretary of BSL, BGX, BGB, BGFLX and BCRED. Before joining Blackstone Credit, Ms. Beeney was an attorney at DLA Piper within the finance group. Prior to that, she worked at Latham & Watkins primarily on project finance and development transactions, as well as leveraged finance transactions, restructurings and certain structured credit products. Ms. Beeney holds a B.S. in Engineering from Cornell University, and a J.D., magna cum laude, from Boston University.

Robert Busch, Chief Accounting Officer and Treasurer. Mr. Busch is the Chief Accounting Officer and Treasurer of the Company and a Senior Vice President with Blackstone Credit. Mr. Busch is the Chief Financial Officer and Treasurer of BSL, BGX, BGB and BGFLX and the Treasurer and Chief Accounting Officer of BCRED. Mr. Busch joined Blackstone Credit in 2018. Mr. Busch worked previously at Fifth Street Asset Management from 2012 to 2018, where he was Senior Vice President Finance and served as Controller of the firm’s two publicly traded business development companies and publicly traded alternative asset manager. Prior

 

199


Table of Contents

to that, Mr. Busch was an Audit Manager at Deloitte & Touche LLP serving clients in various industries including alternative asset management and real estate. Mr. Busch is a Certified Public Accountant in the state of New York and received a Bachelor’s Degree in Business Administration with a concentration in Accounting from Boston University’s Questrom School of Business where he graduated cum laude.

Board Leadership Structure

Our business and affairs are managed under the direction of our Board. Among other things, our Board sets broad policies for us and approves the appointment of our investment adviser, administrator and officers. The role of our Board, and of any individual Trustee, is one of oversight and not of management of our day-to-day affairs.

Under our bylaws, our Board may designate one of our Trustees as chair to preside over meetings of our Board and meetings of shareholders, and to perform such other duties as may be assigned to him or her by our Board. The Board has appointed Brad Marshall to serve in the role of chairperson of the Board. The chairperson’s role is to preside at all meetings of the Board and to act as a liaison with the Adviser, counsel and other Trustees generally between meetings. The chairperson serves as a key point person for dealings between management and the Trustees. The chairperson also may perform such other functions as may be delegated by the Board from time to time. The Board reviews matters related to its leadership structure annually. The Board has determined that its leadership structure is appropriate because it allows the Board to exercise informed and independent judgment over the matters under its purview and it allocates areas of responsibility among committees of Trustees and the full board in a manner that enhances effective oversight.

Our Board believes that its leadership structure is the optimal structure for us at this time. Our Board, which will review its leadership structure periodically as part of its annual self-assessment process, further believes that its structure is presently appropriate to enable it to exercise its oversight of us.

Following an Exchange Listing, the Trustees may be classified, with respect to the terms for which they severally hold office, into classes, as determined by the Board, as nearly equal in size as is practicable.

Board’s Role in Risk Oversight

Our Board performs its risk oversight function primarily through (i) its standing committees, which report to the entire Board and are comprised solely of independent Trustees, and (ii) active monitoring of our chief compliance officer and our compliance policies and procedures. Oversight of other risks is delegated to the committees.

Oversight of our investment activities extends to oversight of the risk management processes employed by the Adviser as part of its day-to-day management of our investment activities. The Board anticipates reviewing risk management processes at both regular and special board meetings throughout the year, consulting with appropriate representatives of the Adviser as necessary and periodically requesting the production of risk management reports or presentations. The goal of the Board’s risk oversight function is to ensure that the risks associated with our investment activities are accurately identified, thoroughly investigated and responsibly addressed. Investors should note, however, that the Board’ oversight function cannot eliminate all risks or ensure that particular events do not adversely affect the value of investments.

We believe that the role of our Board in risk oversight is effective and appropriate given the extensive regulation to which we are already subject as a BDC. As a BDC, we are required to comply with certain regulatory requirements that control the levels of risk in our business and operations. For example, we are limited in our ability to enter into transactions with our affiliates, including investing in any portfolio company in which one of our affiliates currently has an investment.

 

200


Table of Contents

Corporate Governance

Committees

The Board has an Audit Committee, a Nominating and Governance Committee and a Compensation Committee and may form additional committees in the future.

Audit Committee

The Audit Committee is composed of Robert Bass, Tracy Collins, Vicki Fuller and James Clark, each of whom is not considered an “interested person” of the Company as that term is defined in Section 2(a)(19) of the 1940 Act. Robert Bass serves as Chair of the Audit Committee. Mr. Bass currently serves on the audit committees of more than three public companies, and the Board has determined that his service on the audit committees of other public companies does not impair his ability to effectively serve on the Audit Committee. Our Board determined that Robert Bass is an “audit committee financial expert” as that term is defined under Item 407 of Regulation S-K, as promulgated under the Exchange Act. The Audit Committee members meet the current independence and experience requirements of Rule 10A-3 of the Exchange Act.

In accordance with its written charter adopted by the Board, the Audit Committee (a) assists the Board’s oversight of the integrity of our financial statements, the independent registered public accounting firm’s qualifications and independence, our compliance with legal and regulatory requirements and the performance of our independent registered public accounting firm; (b) prepares an Audit Committee report, if required by the SEC, to be included in our annual proxy statement, if any; (c) oversees the scope of the annual audit of our financial statements, the quality and objectivity of our financial statements, accounting and financial reporting policies and internal controls; (d) determines the selection, appointment, retention and termination of our independent registered public accounting firm, as well as approving the compensation thereof; (e) pre-approves all audit and non-audit services provided to us and certain other persons by such independent registered public accounting firm; and (f) acts as a liaison between our independent registered public accounting firm and the Board.

Nominating and Governance Committee

The Nominating Committee is composed of Robert Bass, Tracy Collins, Vicki Fuller and James Clark, each of whom is not considered an “interested person” of the Company as that term is defined in Section 2(a)(19) of the 1940 Act. Tracy Collins serves as Chair of the Nominating Committee.

In accordance with its written charter adopted by the Board, the Nominating Committee recommends to the Board persons to be nominated by the Board for election at the Company’s meetings of our shareholders, special or annual, if any, or to fill any vacancy on the Board that may arise between shareholder meetings. The Nominating Committee also makes recommendations with regard to the tenure of the trustees and is responsible for overseeing an annual evaluation of the Board and its committee structure to determine whether the structure is operating effectively. The Nominating Committee will consider for nomination to the Board candidates submitted by our shareholders or from other sources it deems appropriate.

Compensation Committee

The Compensation Committee is composed of Robert Bass, Tracy Collins, Vicki Fuller and James Clark, each of whom is not considered an “interested person” of the Company as that term is defined in Section 2(a)(19) of the 1940 Act. Vicki Fuller serves as Chair of the Compensation Committee.

The Compensation Committee is responsible for annually reviewing and recommending for approval to the Board the Investment Advisory Agreement and the Administration Agreement. The Compensation Committee is also responsible for reviewing and approving the compensation of the independent trustees. In addition, although we do not directly compensate our executive officers currently, to the extent that we do so in the future, the Compensation Committee would also be responsible for reviewing and evaluating their compensation and

 

201


Table of Contents

making recommendations to the Board regarding their compensation. Lastly, the Compensation Committee would produce a report on our executive compensation practices and policies for inclusion in our proxy statement if required by applicable proxy rules and regulations and, if applicable, make recommendations to the Board on our executive compensation practices and policies. The Compensation Committee has the authority to engage compensation consultants and to delegate their duties and responsibilities to a member or to a subcommittee of the Compensation Committee. The Compensation Committee was established on August 4, 2021 and has not held any meetings as of the date of this Prospectus.

Communications to the Board of Trustees

The independent trustees serving on our Board intend to meet in executive sessions at the conclusion of or preceding each regularly scheduled meeting of the Board, and additionally as needed, without the presence of any directors or other persons who are part of our management.

Shareholders and other interested parties may contact any member (or all members) of the Board by mail. To communicate with the Board, any individual trustees or any group or committee of trustees, correspondence should be addressed to the Board or any such individual trustees or group or committee of trustees by either name or title. The address for each of our trustees is c/o Blackstone Credit BDC Advisors LLC, 345 Park Avenue, 31st Floor, New York, NY 10154. Any communication to report potential issues regarding accounting, internal controls and other auditing matters will be directed to the Audit Committee. Appropriate Company personnel will review and sort through communications before forwarding them to the addressee(s).

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our executive officers, members of our Board, and persons who own more than ten percent of our shares to file initial reports of ownership and reports of changes in ownership with the SEC and furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on our review of the copies of such reports furnished to us, we believe that, with respect to the fiscal year ended December 31, 2020, such persons complied with all such filing requirements.

Dollar Range of Equity Securities Beneficially Owned by Trustees

The following table sets forth the dollar range of equity securities of the Company beneficially owned by each trustee of September 15, 2021:

 

     Dollar Range of
Equity Securities
in the  Company(1)(2)
     Dollar Range
of

Equity
Securities

in the Fund
Complex(1)(2)(3)
 

Interested Trustees

     

Daniel H. Smith, Jr.

     over $100,000        over $100,000  

Brad Marshall

     over $100,000        over $100,000  

Vikrant Sawhney (4)

     None        None  

Independent Trustees

     

Robert Bass

     over $100,000        over $100,000  

Tracy Collins

     None        None  

Vicki L. Fuller (5)

     None        None  

James F. Clark (6)

     None        over $100,000  

 

(1)

Dollar ranges are as follows: none, $1 – $10,000, $10,001 – $50,000, $50,001 – $100,000, or over $100,000.

(2)

Dollar ranges were determined using the number of shares that are beneficially owned as of September 15, 2021, multiplied by the Company’s net asset value per share as of December 31, 2020.

 

202


Table of Contents
(3)

The “Fund Complex” consists of the Company, Blackstone Private Credit Fund, the Blackstone Credit Closed-End Funds (Blackstone Senior Floating Rate Term Fund, Blackstone Long Short Credit Income Fund, Blackstone Strategic Credit Fund and Blackstone Floating Rate Enhanced Income Fund), as well as the Blackstone Alternative Alpha Funds (Blackstone Alternative Alpha Fund, Blackstone Alternative Alpha Fund II and Blackstone Alternative Alpha Master Fund) and Blackstone Alternative Multi-Strategy Fund.

(4)

Mr. Sawhney joined the Board on October 18, 2021.

(5)

Ms. Fuller joined the Board on August 26, 2020.

(6)

Mr. Clark joined the Board on November 5, 2020.

Executive Compensation

None of our executive officers will receive direct compensation from us. We will reimburse the Administrator the allocable portion of the compensation paid by the Administrator (or its affiliates) to our chief compliance officer and chief financial officer and their respective staffs as well as other administrative personnel (based on the percentage of time such individuals devote, on an estimated basis, to our business and affairs). The members of the Investment Committee, through their financial interests in the Adviser, are entitled to a portion of the profits earned by the Adviser, which includes any fees payable to the Adviser under the terms of the Investment Advisory Agreement, less expenses incurred by the Adviser in performing its services under the Investment Advisory Agreement.

Further, we are prohibited under the 1940 Act from issuing equity incentive compensation, including share options, share appreciation rights, restricted shares and shares, to our officers, directors and employees.

Trustee Compensation

No compensation is paid to our trustees who are “interested persons,” as such term is defined in Section 2(a)(19) of the 1940 Act. Effective January 1, 2021, we pay each independent trustee: (i) $100,000 per year (prorated for any partial year), (ii) $2,500 for each regular meeting of the Board attended, (iii) $1,000 for each committee meeting attended (in addition to regular meeting fees to the extent committees meet on regular meeting dates) and (iv) $10,000 per year for the chairman of the Audit Committee. We are also authorized to pay the reasonable out-of-pocket expenses of each independent trustee incurred by such trustee in connection with the fulfillment of his or her duties as an independent trustee. The table below excludes Vikrant Sawhney, who joined the Board effective October 18, 2021.

 

     Total Compensation
earned from the
Company for Fiscal
Year 2020 (8)
     Total Compensation
earned from Fund
Complex for Fiscal
Year 2020 (9)
 

Interested Trustees

     

Bennett Goodman (2)

   $ —        $ —    

Daniel H. Smith, Jr. (1)

   $ —        $ —    

Brad Marshall (1)

   $ —        $ —    

Independent Trustees

     

Robert Bass (3)

   $ 127,500      $ 160,281  

Tracy Collins

   $ 120,000      $ 150,071  

Robert Harteveldt (4)

   $ 101,383      $ 101,383  

Thomas Joyce (5)

   $ 52,764      $ 52,764  

Vicki L. Fuller (6)

   $ 46,867      $ 76,938  

James F. Clark (7)

   $ 18,617      $ 32,362  

 

(1)

These are interested trustees and, as such, do not receive compensation from the Company or the Fund Complex for their services as trustees.

(2)

Mr. Goodman resigned from the Board on December 31, 2020.

(3)

Includes compensation as chairman of Audit Committee.

 

203


Table of Contents
(4)

Mr. Harteveldt resigned from the Board on November 4, 2020.

(5)

Mr. Joyce resigned from the Board on June 24, 2020.

(6)

Ms. Fuller joined the Board on August 26, 2020.

(7)

Mr. Clark joined the Board of November 5, 2020.

(8)

The Company does not have a profit-sharing plan, and trustees do not receive any pension or retirement benefits from the Company.

(9)

The Blackstone Credit Closed-End Funds, the Blackstone Real Estate Income Funds, the Blackstone Alternative Alpha Funds and Blackstone Alternative Multi Strategy Fund do not pay compensation to the trustees of the Company. Blackstone Private Credit Fund does pay compensation to the Independent Trustees of the Company.

Portfolio Managers

The Company’s investment activities are managed by Blackstone Credit BDC Advisors LLC.

Investment Committee

The Investment Committee is composed of Dwight Scott, Brad Marshall, Steve Kuppenheimer, Rob Zable, Michael Zawadzki, Dan Smith, Robert Horn, Robert Petrini, Louis Salvatore and Paulo Eapen. Biographical information regarding members of the Investment Committee, who are not Trustees or our executive officers, is as follows:

Dwight Scott, Global Head of Blackstone Credit, Senior Managing Director of Blackstone. Mr. Scott is the Global Head of Blackstone Credit and a Senior Managing Director of Blackstone. Prior to his current role, Mr. Scott managed the energy investing activity at Blackstone Credit, where he remains active. Before joining Blackstone Credit in 2005, at its inception, Mr. Scott was an Executive Vice President and Chief Financial Officer of El Paso Corporation. Prior to joining El Paso, Mr. Scott served as a Managing Director in the energy investment banking practice of Donaldson, Lufkin & Jenrette. Mr. Scott is currently a Director of GEP Haynesville. He is a member of the Wall Street for McCombs Board. Mr. Scott graduated from the University of North Carolina and the University of Texas’ McCombs School of Business.

Robert Zable, Senior Managing Director of Blackstone. Mr. Zable is a Senior Managing Director and Senior Portfolio Manager for Blackstone Credit’s U.S. CLOs, closed-end funds, and high yield separately managed accounts. He is also a member of Blackstone Credit’s LCS Management Committee and sits on LCS’s U.S. Syndicated Credit Investment Committee, Global Structured Credit Investment Committee, Global Dynamic Credit Asset Allocation Committee, and CLO Origination Committee. Prior to joining Blackstone Credit in 2007, Mr. Zable was a Vice President at FriedbergMilstein LLC, where he was responsible for credit opportunity investments and junior capital origination and execution. Mr. Zable began his career at JP Morgan Securities Inc., where he focused on leveraged finance in New York and London. Mr. Zable received a B.S. from Cornell University and an M.B.A in Finance from The Wharton School at the University of Pennsylvania.

Michael Zawadzki, Senior Managing Director of Blackstone, Co-head of Energy. Mr. Zawadzki is Co-head of Blackstone Credit’s Energy platform and a Senior Managing Director of Blackstone. Mr. Zawadzki sits on the investment committees for Blackstone Credit’s energy funds, performing credit funds and distressed funds. Before joining Blackstone Credit in 2006, Mr. Zawadzki was with Citigroup Private Equity, where he completed numerous private equity and subordinated debt investments. Previously, Mr. Zawadzki worked in the investment banking division of Salomon Smith Barney. Mr. Zawadzki serves on the board of directors (as a director or observer) of 3Bear Energy, Alta Resources, Community Development Capital Group IV, Elevation Midstream, LLC, Sequel Energy Group, Sequel Energy Group II, Targa Badlands, Twin Eagle Resources Management and WPX Energy Mineral Partners, LP. Mr. Zawadzki graduated magna cum laude with a B.S. in Economics from the Wharton School of the University of Pennsylvania.

 

204


Table of Contents

Robert Horn, Senior Managing Director of Blackstone, Co-head of Energy. Mr. Horn is Co-head of Blackstone Credit’s Energy platform and a Senior Managing Director of Blackstone. Mr. Horn sits on the investment committees for Blackstone Credit’s energy funds, performing credit funds and distressed funds. Before joining Blackstone Credit in 2005, Mr. Horn worked in Credit Suisse’s Global Energy Group, where he advised on high yield financings and merger and acquisition assignments for companies in the power and utilities sector. Mr. Horn serves on the board of directors of various companies involved in the upstream, midstream and oilfield service sectors, including Altus Power America, Inc., Compass Well Services, Delaware Basin Investment Group, GEP Haynesville, GulfTex Energy III, GulfTex Energy IV, Legacy Reserves, M5 Midstream, M6 Midstream, MR Italia, River Bend Oil and Gas, Sanchez UnSub and Sierra Resources Partners. Mr. Horn graduated with academic honors from McGill University.

Robert Petrini, Senior Managing Director of Blackstone, Co-head of Performing Credit. Mr. Petrini is Co-head of Blackstone Credit’s Performing Credit platform and a Senior Managing Director of Blackstone. Mr. Petrini is a Joint Portfolio Manager for Blackstone Credit’s Capital Opportunities Funds and sits on the investment committees for Blackstone Credit’s performing credit funds, distressed funds and energy funds. Before joining Blackstone Credit in 2005, at its inception, Mr. Petrini was a Principal of DLJ Investment Partners, the mezzanine fund of CSFB’s Alternative Capital Division. Prior to that, Mr. Petrini was a member of DLJ’s Leveraged Finance Group specializing in financial sponsor transactions since 1997. Mr. Petrini graduated magna cum laude with a B.S. in Economics from the Wharton School of the University of Pennsylvania, where he was a Joseph Wharton and Benjamin Franklin Scholar.

Louis Salvatore, Senior Managing Director of Blackstone, Co-head of Performing Credit. Mr. Salvatore is Co-head of Blackstone Credit’s Performing Credit platform and a Senior Managing Director of Blackstone. Mr. Salvatore is a Joint Portfolio Manager for Blackstone Credit’s Capital Opportunities Funds and sits on the investment committee for Blackstone Credit’s performing credit funds. He also sits on the BIS and Blackstone Total Alternatives Solution, or BTAS, investment committees. Before joining Blackstone Credit in 2005, at its inception, Mr. Salvatore was a Principal of DLJ Investment Partners, the mezzanine fund of CSFB’s Alternative Capital Division. Mr. Salvatore joined CSFB in 2000 when it acquired DLJ, where he was a member of the Merchant Banking Group. He had been a member of DLJ’s Leveraged Finance Group, specializing in corporate restructurings. Prior to that, he worked for Kidder Peabody. Mr. Salvatore is on the board of directors (either as a member or observer) of Acrisure LLC, Community Development Capital Group IV and Loar Group. Mr. Salvatore received a BA in Economics from Cornell University and an MBA from the Wharton School of the University of Pennsylvania.

Paulo Eapen, Senior Managing Director of Blackstone, Head of Europe. Mr. Eapen is Head of Blackstone Credit’s European business and a Senior Managing Director of Blackstone. Mr. Eapen sits on the investment committees for Blackstone Credit’s performing credit funds and distressed funds. Mr. Eapen is focused on the origination and management of private credit and equity investments, spanning acquisitions and corporate refinancings. These investments include a wide variety of industries and geographies, primarily headquartered in Europe. Before joining Blackstone Credit in 2007, Mr. Eapen was with Citigroup Private Equity and previously worked in M&A investment banking with Salomon Smith Barney. Mr. Eapen is, on the boards (as a director or observer) of Accord BidCo, iAero Group, Cobham Mission Systems and Cobham Aviation Services UK, Curium Pharma and Morson Group. Additionally, Mr. Eapen is on the board of directors for the Ubuntu Education Fund, a charitable organization. Mr. Eapen has a B.A. in Economics and Political Science from the University of Pennsylvania and is an Infantry Officer in the Singapore Armed Forces.

Portfolio Management

Set forth below is information regarding the team of professionals at the Adviser (who are not Trustees or members of the Investment Committee) that support overseeing the day-to-day operations of the Company. The Adviser utilizes a team approach, with decisions derived from interaction among various investment management

 

205


Table of Contents

sector specialists. Under this team approach, management of the Company’s portfolio will reflect a consensus of interdisciplinary views. Mr. Marshall is primarily responsible for overseeing the day-to-day operations of the Company.

Brad Colman, Managing Director. Mr. Colman focuses on originating, analyzing, executing and monitoring credit investments across a diverse range of industries primarily for the Direct Lending business. Mr. Colman’s responsibilities also include acting as the Portfolio Manager for the GSO Diamond Portfolio Fund, which focuses on senior and stretch senior loans to middle market issuers in the U.S. Before joining Blackstone in 2012, Mr. Colman worked as a Director in the Strategic Investments group at PartnerRe, a Senior Associate in the sponsor finance team at American Capital, and an Analyst in Merrill Lynch’s investment banking group. Mr. Colman graduated magna cum laude from New York University’s Leonard N. Stern School of Business with a BS in Finance, Accounting, and Operations.

Joseph McKnight, Managing Director. Mr. McKnight is a Managing Director with Blackstone Credit and is focused on portfolio management and monitoring in the U.S. Direct Lending business. Mr. McKnight previously focused on mezzanine lending and private equity investments as part of Blackstone Credit’s energy platform. Before joining Blackstone Credit in 2014, Mr. McKnight served as a Vice President at Goldman Sachs, where he focused on private equity and proprietary direct investments in power generation and renewable energy within the firm’s J. Aron commodity division. He previously worked as an Associate in the Natural Resources private equity vertical at Apollo Management. Mr. McKnight received a BA in History from the University of Pennsylvania and a BS in Economics from The Wharton School of the University of Pennsylvania, where he graduated with academic honors.

Bradley Boggess, Managing Director. Mr. Boggess is a Managing Director with Blackstone Credit and is involved with portfolio management and monitoring. Since joining Blackstone in 2018, Mr. Boggess has been focused on the Blackstone Credit Advantage program, which looks to bring Blackstone’s broad set of capabilities to bear for Blackstone Credit’s portfolio companies. Prior to joining Blackstone, Mr. Boggess was Managing Director and Chief Administrative Officer of Hudson Advisors, the asset management affiliate of Lone Star Funds since 2011. He also previously led the asset management team for private equity investments at Hudson. Mr. Boggess served as Chairman of the Board of Continental Building Products (NYSE:CBPX) and on the Board of Del Frisco’s Restaurant Group (NASDAQ:DFRG) and Forterra, PLC (LSE:FORT). Prior to Hudson he had various roles as a management consultant and restructuring advisor at AlixPartners, Ariba, and Accenture. Mr. Boggess was an Armor Officer in the United States Army and received a BS in Management from Tulane University.

Teddy Desloge, Principal. Teddy Desloge is a principal with Blackstone Credit and leads Investment Management for the Company and Blackstone Private Credit Fund. Since joining Blackstone Credit in 2015, Mr. Desloge has focused on origination, research, and execution of private and opportunistic credit investments across industries, primarily supporting various vehicles within Blackstone Credit’s Direct Lending strategy. Before joining Blackstone Credit in 2015, Mr. Desloge was an Associate at Gefinor Capital where he focused on research and execution of private credit investments. He started his career in the Leveraged Finance Group at Jefferies. Mr. Desloge graduated with a major in Economics from Hobart & William Smith Colleges.

Other Accounts Managed

The table below identifies the number of accounts (other than the Company) for which the Company’s portfolio manager has day-to-day management responsibilities and the total assets in such accounts, within each of the following categories: registered investment companies, other pooled investment vehicles and other accounts. For each category, the number of accounts and total assets in the accounts where fees are based on performance is also indicated as of December 31, 2020.

 

206


Table of Contents

As of December 31, 2020, Brad Marshall managed, or was a member of the management team for, the following client accounts:

 

     Number of
Accounts
     Assets of
Accounts
     Number of
Accounts
Subject to a
Performance Fee
     Assets
Subject to a
Performance Fee
 

Registered Investment Companies

     1      $ 7.553 billion        1      $ 7.553 billion  

Pooled Investment Vehicles Other Than Registered Investment Companies

     1      $ 1.401 billion        1      $ 1.401 billion  

Other Accounts

     5      $ 4,663.5 billion        5      $ 4,663.5 billion  

Portfolio Manager Compensation

The Adviser’s financial arrangements with its portfolio managers, its competitive compensation and its career path emphasis at all levels reflect the value senior management places on key resources. Compensation may include a variety of components and may vary from year to year based on a number of factors. The principal components of compensation include a base salary and a discretionary bonus.

Base Compensation. Generally, portfolio managers receive base compensation and employee benefits based on their individual seniority and/or their position with the firm.

Discretionary Compensation. In addition to base compensation, portfolio managers may receive discretionary compensation. Discretionary compensation is based on individual seniority, contributions to the Adviser and performance of the client assets that the portfolio manager has primary responsibility for. The discretionary compensation is not based on a precise formula, benchmark or other metric. These compensation guidelines are structured to closely align the interests of employees with those of the Adviser and its clients.

Securities Ownership of the Portfolio Manager

The following table shows the dollar range of equity securities owned by the portfolio manager in the Company as of December 31, 2020.

 

Name of Portfolio Manager

   Dollar Range of
Equity Securities in
the Company

Brad Marshall

   Over 1,000,000

 

207


Table of Contents

MANAGEMENT AND OTHER AGREEMENTS

Investment Advisory Agreement

The Adviser provides management services to us pursuant to the Investment Advisory Agreement. The Investment Advisory Agreement has been approved by the Board. Under the terms of the Investment Advisory Agreement, the Adviser is responsible for the following:

 

 

determining the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes in accordance with our investment objectives, policies and restrictions;

 

 

identifying investment opportunities and making investment decisions for us, including negotiating the terms of investments in, and dispositions of, portfolio securities and other instruments on our behalf;

 

 

monitoring our investments;

 

 

performing due diligence on prospective portfolio companies;

 

 

exercising voting rights in respect of portfolio securities and other investments for us;

 

 

serving on, and exercising observer rights for, boards of directors and similar committees of our portfolio companies;

 

 

negotiating, obtaining and managing financing facilities and other forms of leverage; and

 

 

providing us with such other investment advisory and related services as we may, from time to time, reasonably require for the investment of capital.

The Adviser’s services under the Investment Advisory Agreement are not exclusive, and it is free to furnish similar services to other entities, and it intends to do so, so long as its services to us are not impaired.

Pursuant to the Investment Advisory Agreement, we pay our Adviser a fee for investment advisory and management services consisting of two components—a management fee and an incentive fee. The cost of both the management fee and the incentive fee will ultimately be borne by the shareholders.

Management Fee

The management fee is payable quarterly in arrears at an annual rate of (i) prior to an Exchange Listing, 0.75%, and (ii) following an Exchange Listing, 1.0%, in each case of the average value of our gross assets at the end of the two most recently completed calendar quarters. For purposes of the Investment Advisory Agreement, “gross assets” means our total assets determined on a consolidated basis in accordance with U.S. GAAP, excluding undrawn commitments but including assets purchased with borrowed amounts. If an Exchange Listing occurs on a date other than the first day of a calendar quarter, the management fee shall be calculated for such calendar quarter at a weighted rate calculated based on the fee rates applicable before and after the Exchange Listing based on the number of days in such calendar quarter before and after the Exchange Listing.

In order to maintain the same management fee arrangement that the Company currently has in place for a period of time following the completion of this offering, the Adviser voluntarily waived its right to receive the base management fee in excess of 0.75% of the average value of the Company’s gross assets at the end of the two most recently completed calendar quarters from the date of consummation of this offering through the two year anniversary of the consummation of this offering (the “Waiver Period”). As a result of the fee waiver, the pre-listing management fee and incentive fee rates paid by the Company to the Adviser will not increase during the Waiver Period. Amounts waived by the Adviser are not subject to recoupment by the Adviser. For the years ended December 31, 2020, 2019 and 2018, base management fees were $32.9 million, $12.6 million and $0.3 million, respectively. As of December 31, 2020 and December 31, 2019, $10.3 million and $5.0 million, respectively, was payable to the Adviser relating to management fees.

 

208


Table of Contents

Incentive Fee

The incentive fee consists of two components that are independent of each other, with the result that one component may be payable even if the other is not. A portion of the incentive fee is based on a percentage of our income and a portion is based on a percentage of our capital gains, each as described below.

(i) Incentive Fee on Pre-Incentive Fee Net Investment Income

The portion based on our income is based on Pre-Incentive Fee Net Investment Income Returns. “Pre-Incentive Fee Net Investment Income Returns” means, as the context requires, either the dollar value of, or percentage rate of return on the value of our net assets at the end of the immediately preceding quarter from, interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during the calendar quarter, minus our operating expenses accrued for the quarter (including the management fee, expenses payable under the administration agreement entered into between us and the Administrator (the “Administration Agreement”), and any interest expense or fees on any credit facilities or outstanding debt and dividends paid on any issued and outstanding preferred shares, but excluding the incentive fee).

Pre-Incentive Fee Net Investment Income Returns include, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with pay-in-kind (“PIK”) interest and zero coupon securities), accrued income that we have not yet received in cash. Pre-Incentive Fee Net Investment Income Returns do not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. The Company excludes the impact of expense support payments and recoupments from pre-incentive fee net investment income.

Pre-Incentive Fee Net Investment Income Returns, expressed as a rate of return on the value of our net assets at the end of the immediately preceding quarter, is compared to a “hurdle rate” of return of 1.5% per quarter (6.0% annualized).

Pursuant to the Investment Advisory Agreement, the Company is to pay an income based incentive fee of 15% prior to the consummation of this offering and 17.5% following the consummation of this offering, with a 1.5% hurdle and 100% catch-up. However, the Adviser has implemented a voluntary waiver with respect to the income based incentive fee. The Adviser has voluntarily waived its right to receive an income based incentive fee above 15% during the Waiver Period.

Beginning with the first calendar quarter in which this offering is consummated, the Company will pay its Adviser an income based incentive fee based on its aggregate pre-incentive fee net investment income, as adjusted as described above, from the calendar quarter then ending (including the quarter in which this offering is consummated) and the eleven preceding calendar quarters (including the quarters prior to the consummation of this offering) (such period, the “Trailing Twelve Quarters”).

The hurdle amount for the income based incentive fee will be determined on a quarterly basis and is equal to 1.5% multiplied by the Company’s NAV at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters. The hurdle amount is calculated after making appropriate adjustments for issuances by the Company of common shares, including issuances pursuant to its dividend reinvestment plan and distributions that occurred during the relevant Trailing Twelve Quarters. The income based incentive fee for any partial period will be appropriately prorated.

For the income based incentive fee, the Company will pay the Adviser a quarterly incentive fee based on the amount by which (A) aggregate pre-incentive fee net investment income in respect of the relevant Trailing

 

209


Table of Contents

Twelve Quarters exceeds (B) the hurdle amount for such Trailing Twelve Quarters. The amount of the excess of (A) over (B) described in this paragraph for such Trailing Twelve Quarters is referred to as the “Excess Income Amount.”

The income based incentive fee for each quarter will be determined as follows:

 

   

No income based incentive fee is payable to the Adviser for any calendar quarter for which there is no Excess Income Amount.

 

   

The Adviser will be paid 100% of the pre-incentive fee net investment income in respect of the Trailing Twelve Quarters, if any, that exceeds the hurdle amount for such Trailing Twelve Quarters, but is less than or equal to an amount, which we refer to as the “Catch-up Amount,” determined as the sum of 1.76% (7.06% annualized) prior to the end of the Waiver Period, or 1.82% (7.27% annualized) following the Waiver Period, multiplied by the Company’s NAV at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters that is included in the calculation of the Incentive Fee based on income.

 

   

The Adviser will be paid 15% prior to the end of the Waiver Period, or 17.5% following the Waiver Period, of the pre-incentive fee net investment income in respect of the Trailing Twelve Quarters that exceeds the Catch-up Amount.

The amount of the income based incentive fee that will be paid to the Adviser for a particular quarter will equal the excess of (a) the income based incentive fee so calculated over (b) the aggregate income based incentive fee that was paid in respect of the first eleven calendar quarters included in the relevant Trailing Twelve Quarters subject to the Incentive Fee Cap as described below.

The income based incentive fee that will be paid to the Adviser for a particular quarter is subject to a cap (the “Incentive Fee Cap”). The Incentive Fee Cap for any quarter is an amount equal to (a) 15% prior to the end of the Waiver Period, or 17.5% following the Waiver Period, of the Cumulative Net Return (as defined below) during the relevant Trailing Twelve Quarters minus (b) the aggregate income based incentive fee that was paid in respect of the first eleven calendar quarters (or the portion thereof) included in the relevant Trailing Twelve Quarters.

Cumulative Net Return” means (x) the pre-incentive fee net investment income in respect of the relevant Trailing Twelve Quarters minus (y) any Net Capital Loss (as defined below), if any, in respect of the relevant Trailing Twelve Quarters. If, in any quarter, the Incentive Fee Cap is zero or a negative value, the Company will pay no income based incentive fee to the Adviser for such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is a positive value but is less than the income based incentive fee that is payable to the Adviser for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, the Company will pay an income based incentive fee to the Adviser equal to the Incentive Fee Cap for such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is equal to or greater than the income based incentive fee that is payable to the Adviser for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, the Company will pay an income based incentive fee to the Adviser equal to the incentive fee calculated as described above for such quarter without regard to the Incentive Fee Cap.

Net Capital Loss” in respect of a particular period means the difference, if positive, between (i) aggregate capital losses, whether realized or unrealized, in such period and (ii) aggregate capital gains, whether realized or unrealized, in such period.

These calculations are prorated for any period of less than three months and adjusted for any share issuances or repurchases during the relevant quarter. A rise in the general level of interest rates can be expected to lead to higher interest rates applicable to our debt investments. Accordingly, an increase in interest rates would make it easier for us to meet or exceed the incentive fee hurdle rate and may result in a substantial increase of the amount

 

210


Table of Contents

of incentive fees payable to the Adviser with respect to Pre-Incentive Fee Net Investment Income Returns. Because of the structure of the incentive fee, it is possible that we may pay an incentive fee in a calendar quarter in which we incur an overall loss taking into account capital account losses. For example, if we receive Pre-Incentive Fee Net Investment Income Returns in excess of the quarterly hurdle rate, we will pay the applicable incentive fee even if we have incurred a loss in that calendar quarter due to realized and unrealized capital losses. If the Waiver Period ends on a date other than the first day of a calendar quarter, the incentive fee applicable after the Waiver Period will be calculated for such calendar quarter at a weighted rate calculated based on the fee rates applicable during and after the Waiver Period based on the number of days in such calendar quarter during and after the Waiver Period. In no event will the amendments to the income based incentive fee to include the three year income and total return lookback features allow the Adviser to receive greater cumulative income based incentive fees under the Investment Advisory Agreement than it would have under the prior investment advisory agreement. Amounts waived by the Adviser are not subject to recoupment by the Adviser.

The following is a graphical representation of the calculation of the Incentive Fee based on income:

Incentive Fee based on Income Prior to the End of the Waiver Period(1)

Percentage of pre-incentive fee net income comprising the Incentive Fee based on Income

(expressed as an annualized rate(2) of return on the value of net assets as of the beginning

of each of the quarters included in the Trailing Twelve Quarters)

 

 

LOGO

 

(1)

Following the end of the Waiver Period, the Catch-up Amount will increase to 7.27% annualized and the income based incentive fee will increase to 17.5%.

(2)

The income based incentive fee is determined on a quarterly basis but has been annualized for purposes of the above diagram. The diagram also does not reflect the Incentive Fee Cap.

(ii) Incentive Fee on Capital Gains

The second part of the incentive fee, the capital gains incentive fee, is payable at the end of each calendar year (or at the time of an Exchange Listing) in arrears.

Upon completion of this offering, the capital gains incentive fee will be determined and payable in arrears as of the end of each calendar year in an amount equal to 17.5% of realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees as calculated in accordance with U.S. GAAP. However, similar to the voluntary waivers referenced above, the Adviser voluntarily waived its right to receive a capital gains based incentive fee above 15% during the Waiver Period. The Company will accrue, but will not pay, a capital gains incentive fee with respect to unrealized appreciation because a capital gains incentive fee would be owed to the Adviser if the Company were to sell the relevant investment and realize a capital gain.

If the Waiver Period terminates on a date other than the first day of a fiscal year, a capital gains incentive fee will be calculated as of the day before the expiration of the Waiver Period, with such capital gains incentive fee paid to the Adviser following the end of the fiscal year in which the Waiver Period ended. For the avoidance of doubt, such capital gains incentive fee will be equal to 15% of our realized capital gains on a cumulative basis from inception through the end of the Waiver Period, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gains

 

211


Table of Contents

incentive fees. Solely for purposes of calculating the capital gains incentive fee after the Waiver Period, the Company will be deemed to have previously paid capital gains incentive fees prior to the end of the Waiver Period equal to the product obtained by multiplying (a) the actual aggregate amount of previously paid capital gains incentive fees for all periods prior to the end of the Waiver Period by (b) the percentage obtained by dividing (x) 17.5% by (y) 15%. Amounts waived by the Adviser are not subject to recoupment by the Adviser.

Each year, the fee paid for the capital gains incentive fee is net of the aggregate amount of any previously paid capital gains incentive fee for all prior periods. We will accrue, but will not pay, a capital gains incentive fee with respect to unrealized appreciation because a capital gains incentive fee would be owed to the Adviser if we were to sell the relevant investment and realize a capital gain. In no event will the capital gains incentive fee payable pursuant to the Investment Advisory Agreement be in excess of the amount permitted by the Investment Advisers Act of 1940, as amended (the “Advisers Act”), including Section 205 thereof.

The fees that are payable under the Investment Advisory Agreement for any partial period are appropriately prorated.

For the years ended December 31, 2020, 2019 and 2018, the Company accrued income based incentive fees of $42.0 million, $13.8 million and $0.0 million, respectively. As of December 31, 2020 and December 31, 2019, $15.3 million and $6.3 million, respectively was payable to the Adviser for income based incentive fees. For the year ended December 31, 2020 the Company accrued capital gains incentive fees of $(3.1) million, none of which was payable as of December 31, 2020 under the Investment Advisory Agreement. As of December 31, 2019, the Company had accrued capital gains incentive fees of $4.2 million, none of which was payable on such date under the Investment Advisory Agreement. For the year ended December 31, 2018, the Company did not accrue any capital gains incentive fee since there were cumulative net unrealized and realized losses as of such date.

Administration Agreement

Under the terms of the Administration Agreement, the Administrator provides, or oversees the performance of, administrative and compliance services, including, but not limited to, maintaining financial records, overseeing the calculation of net asset value (“NAV”), compliance monitoring (including diligence and oversight of our other service providers), preparing reports to shareholders and reports filed with the SEC, preparing materials and coordinating meetings of our Board, managing the payment of expenses and the performance of administrative and professional services rendered by others and providing office space, equipment and office services. We will reimburse the Administrator for its costs, expenses and allocable portion of overhead (including compensation of personnel performing administrative duties) in connection with the services performed for us pursuant to the terms of the Administration Agreement. In addition, pursuant to the terms of the Administration Agreement, the Administrator may delegate its obligations under the Administration Agreement to an affiliate or to a third party and we will reimburse the Administrator for any services performed for us by such affiliate or third party. The Administrator has hired a sub-administrator to assist in the provision of administrative services. The sub-administrator receives compensation for its provision of sub-administrative services under a sub-administration agreement.

For the years ended December 31, 2020, 2019 and 2018, the Company incurred $2.3 million, $1.5 million and $0.4 million, respectively, under the Administration Agreement, which were recorded in administrative service expenses in the Company’s Consolidated Statements of Operations. As of December 31, 2020 and December 31, 2019, $1.1 million and $0.9 million, respectively, was unpaid and included in due to affiliate in the Consolidated Statements of Assets and Liabilities.

Certain Terms of the Investment Advisory Agreement and Administration Agreement

Each of the Investment Advisory Agreement and the Administration Agreement has been approved by the Board. Unless earlier terminated as described below, each of the Investment Advisory Agreement and the

 

212


Table of Contents

Administration Agreement will remain in effect for a period of two years from the date it first became effective and will remain in effect from year-to-year thereafter if approved annually by a majority of the Board or by the holders of a majority of our outstanding voting securities and, in each case, a majority of the independent trustees. We may terminate the Investment Advisory Agreement or the Administration Agreement, without payment of any penalty, upon 60 days’ written notice. The decision to terminate either agreement may be made by a majority of the Board or the shareholders holding a majority outstanding voting securities, which means the lesser of (1) 67% or more of such company’s voting securities present at a meeting if more than 50% of the outstanding voting securities of such company are present or represented by proxy, or (b) more than 50% of the outstanding voting securities of such company. In addition, the Adviser may terminate the Investment Advisory Agreement or the Administrator may terminate the Administration Agreement, without payment of any penalty, upon 60 days’ written notice. The Investment Advisory Agreement will automatically terminate within the meaning of the 1940 Act and related SEC guidance and interpretations in the event of its assignment.

The Adviser and the Administrator shall not be liable for any error of judgment or mistake of law or for any act or omission or any loss suffered by the Company in connection with the matters to which the Investment Advisory Agreement and Administration Agreement, respectively, relate, provided that the Adviser and Administrator shall not be protected against any liability to the Company or its shareholders to which the Adviser or Administrator would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or by reason of the reckless disregard of its duties and obligations (“disabling conduct”). Each of the Investment Advisory Agreement and the Administration Agreement provides that, absent disabling conduct, each of our Adviser and our Administrator, as applicable, and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with it are entitled to indemnification from us for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of our Adviser’s services under the Investment Advisory Agreement and our Administrator’s services under the Administration Agreement or otherwise as adviser or administrator for us. The Adviser and the Administrator shall not be liable under their respective agreements with us or otherwise for any loss due to the mistake, action, inaction, negligence, dishonesty, fraud or bad faith of any broker or other agent; provided, that such broker or other agent shall have been selected, engaged or retained and monitored by the Adviser or the Administrator in good faith, unless such action or inaction was made by reason of disabling conduct, or in the case of a criminal action or proceeding, where the Adviser or Administrator had reasonable cause to believe its conduct was unlawful.

Expense Support

On December 12, 2018, we entered into an expense support and conditional reimbursement agreement (the “Expense Support Agreement”) with the Adviser. The Expense Support Agreement provides that, at such times as the Adviser determines, the Adviser may pay certain expenses of the Company, provided that no portion of the payment will be used to pay any of our interest expense (each, an “Expense Payment”). Such Expense Payment must be made in any combination of cash or other immediately available funds no later than forty-five days after a written commitment from the Adviser to pay such expense, and/or by an offset against amounts due from us to the Adviser or its affiliates. Following any calendar quarter in which Available Operating Funds (as defined in the Expense Support Agreement) exceed the cumulative distributions accrued to our shareholders based on distributions declared with respect to record dates occurring in such calendar quarter (such amount referred to as the “Excess Operating Funds”), we shall pay such Excess Operating Funds, or a portion thereof (each, a “Reimbursement Payment”), to the Adviser until such time as all Expense Payments made by the Adviser to us within three years prior to the last business day of such calendar quarter have been reimbursed. The amount of the Reimbursement Payment for any calendar quarter shall equal the lesser of (i) the Excess Operating Funds in such quarter and (ii) the aggregate amount of all Expense Payments made by the Adviser to us within three years prior to the last business day of such calendar quarter that have not been previously reimbursed by us to the Adviser. The Expense Support Agreement provides additional restrictions on the amount of each Reimbursement Payment for any calendar quarter. The Adviser may waive its right to receive all or a portion of any

 

213


Table of Contents

Reimbursement Payment in any particular calendar quarter, so that such Reimbursement Payment may be reimbursable in a future calendar quarter.

The following table presents a summary of Expense Payments and the related Reimbursement Payments since the Company’s commencement of operations:

 

For the Quarter Ended

   Expense Payments
by Adviser
     Reimbursement
Payments to
Adviser
     Unreimbursed
Expense Payments
 

December 31, 2018

   $ 1,696      $ (1,696    $ —    

March 31, 2019

     570        (570      —    
  

 

 

    

 

 

    

 

 

 

Total

   $ 2,266      $ (2,266    $ —    
  

 

 

    

 

 

    

 

 

 

For the years ended December 31, 2020, 2019 and 2018, the Adviser made Expense Payments in the amount of $0.0 million, $0.6 million and $1.7 million, respectively. For the years ended December 31, 2020, 2019 and 2018, the Company made Reimbursement Payments related to Expense Payments by the Adviser of $1.5 million, $0.8 million and $0.0 million, respectively.

 

214


Table of Contents

CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS

As of October 15, 2021, there were 158,389,951 shares of the Company’s beneficial interest outstanding.

No person is deemed to control the Company, as such term is defined in the 1940 Act.

The following table sets forth, as of October 15, 2021, information with respect to the beneficial ownership of the Company’s common shares by:

 

   

each person known to the Company to beneficially own more than 5% of the outstanding shares of the Company’s beneficial interest;

 

   

each of the Company’s trustees and each named executive officer; and

 

   

all of the Company’s directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. Such shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person. Percentage of beneficial ownership is based on 158,389,951 shares of the Company’s beneficial interest outstanding as of October 15, 2021.

Unless otherwise indicated, to the Company’s knowledge, each shareholder listed below has sole voting and investment power with respect to the shares beneficially owned by the shareholder, except to the extent authority is shared by spouses under applicable law. Unless otherwise indicated, each shareholder maintains an address of c/o Blackstone Secured Lending Fund, 345 Park Avenue, 31st Floor, New York, New York 10154.

Ownership information for those persons, if any, who own, control or hold the power to vote, 5% or more of our shares is based upon Schedule 13D or Schedule 13G filings by such persons with the SEC and other information obtained from such persons, if available. Such ownership information is as of the date of the applicable filing and may no longer be accurate.

 

Name and Address

   Number of
Shares
     Percentage
of Class
 

Trustees and Executive Officers:

     

Independent Trustees

     

Robert Bass

     4,550        *  

Tracy Collins

     0        —    

Vicki L. Fuller

     0        —    

James F. Clark

     0        —    

Interested Trustees

     

Daniel H. Smith, Jr.

     22,139        *  

Brad Marshall

     83,044        *  

Vikrant Sawhney

     0        *  

Executive Officers

     

Stephan Kuppenheimer

     12,457        *  

Robert W. Busch

     0        —    

Beth Chartoff

     2,076        *  

Marisa J. Beeney

     0        —    

Katherine Rubenstein

     0        —    

Carlos Whitaker

     0        —    

Trustees and Executive Officers as a Group (13 persons)

     124,266        *  

5% Holders:

     

Universities Superannuation Scheme Ltd as trustee for Universities Superannuation Scheme and

USS Investment Management Limited

     12,002,967        7.6

QIA FIG Glass Holding Limited

     13,723,035        8.7

 

215


Table of Contents

 

*

Less than 1%.

Set forth in the table below is the dollar range of equity securities held in the Company by each Trustee as of December 31, 2020.

 

Name of Trustee

   Dollar Range(1)(2) of
Equity Securities in
the Company
 

Independent Trustees

  

Robert Bass

     Over $100,000  

Tracy Collins

     None  

Vicki L. Fuller(3)

     None  

James F. Clark(4)

     None  

Interested Trustees

  

Daniel H. Smith, Jr

     Over $100,000  

Brad Marshall

     Over $100,000  

 

 

(1)

Beneficial ownership has been determined in accordance with Rule 16a-1(a)(2) of the Exchange Act.

(2)

Based on NAV per share as of September 30, 2020 ($24.91).

(3)

Ms. Fuller joined the Board on August 26, 2020.

(4)

Mr. Clark joined the Board on November 5, 2020.

 

216


Table of Contents

DETERMINATION OF NET ASSET VALUE

We conduct the valuation of our portfolio companies, pursuant to which our NAV shall be determined, at all times consistent with U.S. GAAP and the 1940 Act. Our Board, with the assistance of the Adviser, the Audit Committee and independent third-party valuation firm(s), will determine the fair value of our assets on at least a quarterly basis.

Investments for which market quotations are readily available will typically be valued at those market quotations. To validate market quotations, we will utilize a number of factors to determine if the quotations are representative of fair value, including the source and number of the quotations. Where it is possible to obtain reliable, independent market quotations from a third party vendor, we will use these quotations to determine the value of our investments. Debt and equity securities that are not publicly-traded or whose market prices are not readily available, as is expected to be the case for a substantial portion of our investments, will be valued at fair value as determined in good faith pursuant to procedures adopted by, and under the oversight of, the Board, based on, among other things, the input of the Adviser, the Audit Committee and independent third-party valuation firm(s) engaged at the direction of the Board to review our investments.

With respect to investments for which market quotations are not readily available, the Company uses a multi-step valuation process, which includes, among other procedures, the following:

 

   

The valuation process begins with each investment being preliminarily valued by the Adviser’s valuation team in conjunction with the Adviser’s investment professionals responsible for each portfolio investment;

 

   

In addition, independent valuation firms engaged by the Board prepare quarter-end valuations of such investments except de minimis investments, as determined by the Adviser. The independent valuation firms provide a final range of values on such investments to the Board and the Adviser. The independent valuation firms also provide analyses to support their valuation methodology and calculations;

 

   

The Adviser’s Valuation Committee reviews each valuation recommendation to confirm they have been calculated in accordance with the valuation policy and compares such valuations to the independent valuation firms’ valuation ranges to ensure the Adviser’s valuations are reasonable;

 

   

The Adviser’s Valuation Committee makes valuation recommendations to the Audit Committee;

 

   

The Audit Committee reviews the valuation recommendations made by the Adviser’s Valuation Committee, including the independent valuation firms’ quarterly valuations, and once approved, recommends them for approval by the Board; and

 

   

The Board reviews the valuation recommendations of the Audit Committee and determines the fair value of each investment in the portfolio in good faith based on the input of the Audit Committee, the Adviser’s Valuation Committee and, where applicable, the independent valuation firms and other external service providers.

Valuation of each of our investments will generally be made as described above as of the end of each fiscal quarter. In cases where the Company determines its NAV at times other than a quarter end, the Company updates the value of securities with reliable market quotations to the most recent market quotation. For securities without reliable market quotations, non-quarterly valuations will generally be the most recent quarterly valuation unless the Adviser determines that a significant observable change has occurred since the most recent quarter end with respect to the investment (which determination may be as a result of a material event at a portfolio company, material change in market spreads, secondary market transaction in the securities of an investment or otherwise). If the Adviser determines such a change has occurred with respect to one or more investments, the Adviser will determine whether to update the value for each relevant investment using a range of values from an independent valuation firm, where applicable, in accordance with the Company’s valuation policy, pursuant to authority delegated by the Board.

 

217


Table of Contents

As part of the valuation process, the Board takes into account relevant factors in determining the fair value of the Company’s investments for which reliable market quotations are not readily available, many of which are loans, including and in combination, as relevant, of: (i) the estimated enterprise value of a portfolio company, (ii) the nature and realizable value of any collateral, (iii) the portfolio company’s ability to make payments based on its earnings and cash flow, (iv) the markets in which the portfolio company does business, (v) a comparison of the portfolio company’s securities to any similar publicly traded securities, and (vi) overall changes in the interest rate environment and the credit markets that may affect the price at which similar investments may be made in the future. When an external event such as a purchase transaction, public offering or subsequent equity or debt sale occurs, the Board considers whether the pricing indicated by the external event corroborates its valuation.

The Board has and will continue to engage independent valuation firms to provide assistance regarding the determination of the fair value of the Company’s portfolio securities for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment each quarter, and the Board may reasonably rely on that assistance. However, the Board is responsible for the ultimate valuation of the portfolio investments at fair value as determined in good faith pursuant to the Company’s valuation policy and a consistently applied valuation process.

Determinations in connection with offerings

In connection with certain offerings of common shares, our Board or one of its committees may be required to make the determination that we are not selling common shares at a price below the then current net asset value of our common shares at the time at which the sale is made. Our Board or the applicable committee will consider the following factors, among others, in making any such determination:

 

   

the net asset value of our common shares most recently disclosed by us in the most recent periodic report that we filed with the SEC;

 

   

our Adviser’s assessment of whether any material change in the net asset value of our common shares has occurred (including through the realization of gains on the sale of our portfolio securities) during the period beginning on the date of the most recently disclosed net asset value of our common shares and ending no earlier than two days prior to the date of the sale of our common shares; and

 

   

the magnitude of the difference between the net asset value of our common shares most recently disclosed by us and our Adviser’s assessment of any material change in the net asset value of our common shares since that determination, and the offering price of the common shares in the proposed offering.

This determination will not require that we calculate the net asset value of our common shares in connection with each offering of common shares, but instead it will involve the determination by our Board or a committee thereof that we are not selling common shares at a price below the then current net asset value of our common shares at the time at which the sale is made or otherwise in violation of the 1940 Act.

These processes and procedures are part of our compliance policies and procedures. Records will be made contemporaneously with all determinations described in this section and these records will be maintained with other records that we are required to maintain under the 1940 Act.

 

218


Table of Contents

DIVIDEND REINVESTMENT PLAN

Pursuant to the amended and restated dividend reinvestment plan, we will reinvest all cash distributions declared by the Board on behalf of our shareholders who do not elect to receive their distribution in cash as provided below. As a result, if the Board authorizes, and we declare, a cash dividend or other distribution, then our shareholders who have not opted out of our dividend reinvestment plan will have their cash distributions automatically reinvested in additional common shares as described below, rather than receiving the cash dividend or other distribution.

If newly issued shares are used to implement the dividend reinvestment plan, the number of shares to be issued to a shareholder will be determined by dividing the total dollar amount of the cash dividend or distribution payable to a shareholder by the market price per common share at the close of regular trading on the New York Stock Exchange on the payment date of a distribution, or if no sale is reported for such day, the average of the reported bid and ask prices. However, if the market price per share on the payment date of a cash dividend or distribution exceeds the most recently computed net asset value per share, we will issue shares at the greater of (i) the most recently computed net asset value per share and (ii) 95% of the current market price per share (or such lesser discount to the current market price per share that still exceeded the most recently computed net asset value per share). For example, if the most recently computed net asset value per share is $25.00 and the market price on the payment date of a cash dividend is $24.00 per share, we will issue shares at $24.00 per share. If the most recently computed net asset value per share is $25.00 and the market price on the payment date of a cash dividend is $27.00 per share, we will issue shares at $25.65 per share (95% of the current market price). If the most recently computed net asset value per share is $25.00 and the market price on the payment date of a cash dividend is $26.00 per share, we will issue shares at $25.00 per share.

If shares are purchased in the open market to implement the dividend reinvestment plan, the number of shares to be issued to a shareholder shall be determined by dividing the dollar amount of the cash dividend payable to such shareholder by the weighted average price per share for all shares purchased by the plan administrator in the open market in connection with the dividend.

No action is required on the part of a registered shareholder to have his, her or its cash dividend or other distributions reinvested in common shares. A registered shareholder is able to elect to receive an entire cash dividend or other distribution in cash by notifying the Adviser in writing so that such notice is received by the Adviser no later than ten days prior to the record date for distributions to the shareholders.

There are no brokerage charges or other charges to shareholders who participate in the plan.

The plan is terminable by us upon notice in writing mailed to each shareholder of record at least 30 days prior to any record date for the payment of any distribution by us.

During each quarter, but in no event later than 30 days after the end of each calendar quarter, our transfer agent or another designated agent will mail and/or make electronically available to each participant in the dividend reinvestment plan, a statement of account describing, as to such participant, the distributions received during such quarter, the number of common shares purchased during such quarter, and the per share purchase price for such shares. Annually, as required by the Code, we will include tax information for income earned on shares under the dividend reinvestment plan on a Form 1099-DIV that is mailed to shareholders subject to Internal Revenue Service (“IRS”) tax reporting. We reserve the right to amend, suspend or terminate the dividend reinvestment plan. Any distributions reinvested through the issuance of shares through our dividend reinvestment plan will increase our gross assets on which the base management fee and the incentive fee are determined and paid under the Investment Advisory Agreement. DST Systems, Inc. acts as the administrator of the dividend reinvestment plan.

For additional discussion regarding the tax implications of participation in the dividend reinvestment plan, see “Certain U.S. Federal Income Tax Considerations”. Additional information about the dividend reinvestment plan may be obtained by contacting shareholder services for Blackstone Secured Lending Fund at (212) 503-2100.

 

219


Table of Contents

CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS

The following discussion is a general summary of certain U.S. federal income tax considerations applicable to us and the purchase, ownership and disposition of our common shares. This discussion does not purport to be complete or to deal with all aspects of U.S. federal income taxation that may be relevant to shareholders in light of their particular circumstances. Unless otherwise noted, this discussion applies only to U.S. shareholders that hold our common shares as capital assets. A U.S. shareholder is a shareholder that is for U.S. federal income tax purposes: (i) an individual who is a citizen or resident of the United States, (ii) a U.S. corporation, (iii) a trust if it (a) is subject to the primary supervision of a court in the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust or (b) has made a valid election to be treated as a U.S. person, or (iv) any estate the income of which is subject to U.S. federal income tax regardless of its source. This discussion is based upon present provisions of the Code, the regulations promulgated thereunder, and judicial and administrative ruling authorities, all of which are subject to change, or differing interpretations (possibly with retroactive effect). This discussion does not represent a detailed description of the U.S. federal income tax consequences relevant to special classes of taxpayers including, without limitation, financial institutions, insurance companies, partnerships or other pass-through entities (or investors therein), U.S. shareholders whose “functional currency” is not the U.S. dollar, tax-exempt organizations, dealers in securities or currencies, traders in securities or commodities that elect mark to market treatment, or persons that will hold our common shares as a position in a “straddle,” “hedge” or as part of a “constructive sale” for U.S. federal income tax purposes. In addition, this discussion does not address U.S. federal estate or gift tax laws, the application of the Medicare tax on net investment income or the U.S. federal alternative minimum tax, or any tax consequences attributable to persons being required to accelerate the recognition of any item of gross income with respect to our common shares as a result of such income being recognized on an applicable financial statement. Prospective investors should consult their tax advisors with regard to the U.S. federal tax consequences of the purchase, ownership, or disposition of our common shares, as well as the tax consequences arising under the laws of any state, foreign country or other taxing jurisdiction.

Taxation as a Regulated Investment Company

The Company has elected to be treated, and intends to operate in a manner so as to continue to qualify, as a regulated investment company (a “RIC”) under Subchapter M of the Code.

To qualify for the favorable tax treatment accorded to RICs under Subchapter M of the Code, the Company must, among other things: (1) have an election in effect to be treated as a BDC under the 1940 Act at all times during each taxable year; (2) derive in each taxable year at least 90% of its gross income from (a) dividends, interest, payments with respect to certain securities loans, and gains from the sale or other disposition of stock or securities or foreign currencies, or other income (including but not limited to gains from options, futures or forward contracts) derived with respect to its business of investing in such stock, securities, or currencies; and (b) net income derived from an interest in certain publicly traded partnerships that are treated as partnerships for U.S. federal income tax purposes and that derive less than 90% of their gross income from the items described in (a) above (each, a “Qualified Publicly Traded Partnership”); and (3) diversify its holdings so that, at the end of each quarter of each taxable year of the Company (a) at least 50% of the value of the Company’s total assets is represented by cash and cash items (including receivables), U.S. government securities and securities of other RICs, and other securities for purposes of this calculation limited, in respect of any one issuer to an amount not greater in value than 5% of the value of the Company’s total assets, and to not more than 10% of the outstanding voting securities of such issuer, and (b) not more than 25% of the value of the Company’s total assets is invested in the securities (other than U.S. government securities or securities of other RICs) of (I) any one issuer, (II) any two or more issuers which the Company controls and which are determined to be engaged in the same or similar trades or businesses or related trades or businesses or (III) any one or more Qualified Publicly Traded Partnerships (described in 2(b) above).

If the Company fails to satisfy as of the close of any quarter the asset diversification test referred to in the preceding paragraph, it will have 30 days to cure the failure by, for example, selling securities that are the source

 

220


Table of Contents

of the violation. Other cure provisions are available in the Code for a failure to satisfy the asset diversification test, but any such cure provision may involve the payment of a penalty excise tax.

As a RIC, the Company generally will not be subject to U.S. federal income tax on its investment company taxable income (as that term is defined in the Code, but determined without regard to the deduction for dividends

paid) and net capital gain (the excess of net long-term capital gain over net short-term capital loss), if any, that it distributes in each taxable year to its shareholders, provided that it distributes at least 90% of the sum of its investment company taxable income and its net tax-exempt income for such taxable year. Generally, the Company intends to distribute to its shareholders, at least annually, substantially all of its investment company taxable income and net capital gains, if any.

Amounts not distributed on a timely basis in accordance with a calendar year distribution requirement are subject to a nondeductible 4% U.S. federal excise tax. To prevent imposition of the excise tax, the Company must distribute during each calendar year an amount at least equal to the sum of (i) 98% of its ordinary income for the calendar year, (ii) 98.2% of its capital gains in excess of its capital losses (adjusted for certain ordinary losses) for the one-year period ending October 31 of the calendar year and (iii) any ordinary income and capital gains for previous years that were not distributed during those years. For these purposes, the Company will be deemed to have distributed any income or gains on which it paid U.S. federal income tax.

A dividend will be treated as paid on December 31 of any calendar year if it is declared by the Company in October, November or December with a record date in such a month and paid by the Company during January of the following calendar year. Such dividends will be taxable to shareholders in the calendar year in which the distributions are declared, rather than the calendar year in which the dividends are received.

If the Company failed to qualify as a RIC or failed to satisfy the 90% distribution requirement in any taxable year, the Company would be subject to U.S. federal income tax at regular corporate rates on its taxable income (including distributions of net capital gain), even if such income were distributed to its shareholders, and all distributions out of earnings and profits would be taxed to shareholders as ordinary dividend income. Such distributions generally would be eligible (i) to be treated as “qualified dividend income” in the case of individual and other non-corporate shareholders and (ii) for the dividends received deduction in the case of corporate shareholders. In addition, the Company could be required to recognize unrealized gains, pay taxes and make distributions (which could be subject to interest charges) before requalifying for taxation as a RIC.

Distributions

Distributions to shareholders by the Company of ordinary income, and of net short-term capital gains, if any, realized by the Company will generally be taxable to shareholders as ordinary income to the extent such distributions are paid out of the Company’s current or accumulated earnings and profits. Distributions, if any, of net capital gains properly reported as “capital gain dividends” will be taxable as long-term capital gains, regardless of the length of time the shareholder has owned our common shares. A distribution of an amount in excess of the Company’s current and accumulated earnings and profits (as determined for U.S. federal income tax purposes) will be treated by a shareholder as a return of capital which will be applied against and reduce the shareholder’s basis in his or her common shares. To the extent that the amount of any such distribution exceeds the shareholder’s basis in his or her common shares, the excess will be treated by the shareholder as gain from a sale or exchange of the common shares. Distributions paid by the Company generally will not be eligible for the dividends received deduction allowed to corporations or for the reduced rates applicable to certain qualified dividend income received by non-corporate shareholders.

Distributions will be treated in the manner described above regardless of whether such distributions are paid in cash or invested in additional common shares pursuant to the dividend reinvestment plan. Shareholders

 

221


Table of Contents

receiving distributions in the form of additional common shares will generally be treated as receiving a distribution in the amount of cash that they would have received if they had elected to receive the distribution in cash, unless the Company issues additional common shares with a fair market value equal to or greater than net asset value, in which case such shareholders will generally be treated as receiving a distribution in the amount of the fair market value of the distributed common shares. The additional common shares received by a shareholder pursuant to the dividend reinvestment plan will have a new holding period commencing on the day following the day on which the common shares are credited to the shareholder’s account.

The Company may elect to retain its net capital gain or a portion thereof for investment and be taxed at corporate rates on the amount retained. In such case, the Company may designate the retained amount as undistributed capital gains in a notice to its shareholders, who will be treated as if each received a distribution of his pro rata share of such gain, with the result that each common shareholder will (i) be required to report its pro rata share of such gain on its tax return as long-term capital gain, (ii) receive a refundable tax credit for its pro rata share of tax paid by the Company on the gain and (iii) increase the tax basis for its common shares by an amount equal to the deemed distribution less the tax credit.

The IRS currently requires that a RIC that has two or more classes of stock allocate to each such class proportionate amounts of each type of its income (such as ordinary income and capital gains) based upon the percentage of total dividends paid to each class for the tax year. Accordingly, if the Company issues preferred shares, the Company intends to allocate capital gain dividends, if any, between its common shares and preferred shares in proportion to the total dividends paid to each class with respect to such tax year. Shareholders will be notified annually as to the U.S. federal tax status of distributions.

Sale or Exchange of Common Shares

Upon the sale, exchange or other disposition of our common shares, a shareholder will generally realize a capital gain or loss in an amount equal to the difference between the amount realized and the shareholder’s adjusted tax basis in the common shares sold. Such gain or loss will be long-term or short-term, depending upon the shareholder’s holding period for the common shares. Generally, a shareholder’s gain or loss will be a long-term gain or loss if the common shares have been held for more than one year. For non-corporate taxpayers, long-term capital gains are currently eligible for reduced rates of taxation.

No loss will be allowed on the sale or other disposition of common shares if the owner acquires (including pursuant to the dividend reinvestment plan) or enters into a contract or option to acquire securities that are substantially identical to such common shares within 30 days before or after the disposition. In such a case, the basis of the securities acquired will be adjusted to reflect the disallowed loss. Losses realized by a shareholder on the sale or exchange of common shares held for six months or less are treated as long-term capital losses to the extent of any distribution of long-term capital gain received (or amounts designated as undistributed capital gains) with respect to such common shares.

Under U.S. Treasury regulations, if a shareholder recognizes a loss with respect to common shares of $2 million or more for an individual shareholder or $10 million or more for a corporate shareholder, the shareholder must file with the IRS a disclosure statement on IRS Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a RIC are not excepted. Future guidance may extend the current exception from this reporting requirement to shareholders of most or all RICs. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer’s treatment of the loss is proper. Shareholders should consult their tax advisors to determine the applicability of these regulations in light of their individual circumstances.

Nature of the Company’s Investments

Certain of the Company’s hedging and derivatives transactions are subject to special and complex U.S. federal income tax provisions that may, among other things, (i) disallow, suspend or otherwise limit the

 

222


Table of Contents

allowance of certain losses or deductions, (ii) convert lower-taxed long-term capital gain into higher-taxed short-term capital gain or ordinary income, (iii) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited), (iv) cause the Company to recognize income or gain without a corresponding receipt of cash, (v) adversely affect the time as to when a purchase or sale of stock or securities is deemed to occur, (vi) adversely alter the intended characterization of certain complex financial transactions and (vii) produce income that will not be treated as qualifying income for purposes of the 90% gross income test described above.

These rules could therefore affect the character, amount and timing of distributions to shareholders and the Company’s status as a RIC. The Company will monitor its transactions and may make certain tax elections in order to mitigate the effect of these provisions.

Below Investment Grade Instruments

The Company expects to invest in debt securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Investments in these types of instruments may present special tax issues for the Company. U.S. federal income tax rules are not entirely clear about issues such as when the Company may cease to accrue interest, original issue discount or market discount, when and to what extent deductions may be taken for bad debts or worthless instruments, how payments received on obligations in default should be allocated between principal and income and whether exchanges of debt obligations in a bankruptcy or workout context are taxable. These and other issues will be addressed by the Company, to the extent necessary, to preserve its status as a RIC and to distribute sufficient income to not become subject to U.S. federal income tax.

Original Issue Discount and Market Discount

For federal income tax purposes, we may be required to recognize taxable income in circumstances in which we do not receive a corresponding payment in cash. For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount (such as zero coupon securities, debt instruments with PIK interest or, in certain cases, increasing interest rates or debt instruments that were issued with warrants), we must include in income each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. Furthermore, we have elected to amortize market discount (as determined for federal income tax purposes) and include such amounts in our taxable income on a current basis, instead of upon disposition of the applicable debt obligation. Because any original issue discount or market discount will be included in our investment company taxable income for the year of the accrual, we may be required to make a distribution to our shareholders in order to satisfy the annual distribution requirement, even though we will not have received any corresponding cash amount. As a result, we may have difficulty meeting the annual distribution requirement necessary to qualify for and maintain RIC tax treatment under Subchapter M of the Code. We may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may not qualify for or maintain RIC tax treatment and thus we may become subject to corporate-level income tax.

Currency Fluctuations

Under Section 988 of the Code, gains or losses attributable to fluctuations in exchange rates between the time the Company accrues income or receivables or expenses or other liabilities denominated in a foreign currency and the time the Company actually collects such income or receivables or pays such liabilities are generally treated as ordinary income or loss. Similarly, gains or losses on foreign currency, foreign currency forward contracts, certain foreign currency options or futures contracts and the disposition of debt securities denominated in foreign currency, to the extent attributable to fluctuations in exchange rates between the acquisition and disposition dates, are also treated as ordinary income or loss.

 

223


Table of Contents

Foreign Taxes

The Company’s investment in non-U.S. securities may be subject to non-U.S. withholding taxes. In that case, the Company’s yield on those securities would be decreased. Shareholders will generally not be entitled to claim a credit or deduction with respect to foreign taxes paid by the Company.

Preferred Shares or Borrowings

If the Company utilizes leverage through the issuance of preferred shares or borrowings, it may be restricted by certain covenants with respect to the declaration of, and payment of, dividends on common shares in certain circumstances. Limits on the Company’s payments of dividends on common shares may prevent the Company from meeting the distribution requirements described above, and may, therefore, jeopardize the Company’s qualification for taxation as a RIC and possibly subject the Company to the 4% excise tax. The Company will endeavor to avoid restrictions on its ability to make dividend payments.

Backup Withholding

The Company may be required to withhold from all distributions to U.S. shareholders who fail to provide the Company with their correct taxpayer identification numbers or to make required certifications, or who have been notified by the IRS that they are subject to backup withholding. Certain shareholders specified in the Code generally are exempt from such backup withholding. This backup withholding is not an additional tax. Any amounts withheld may be refunded or credited against the shareholder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.

Foreign Shareholders

U.S. taxation of a shareholder who is a nonresident alien individual, a foreign trust or estate or a foreign corporation, as defined for U.S. federal income tax purposes (a “foreign shareholder”), depends on whether the income from the Company is “effectively connected” with a U.S. trade or business carried on by the shareholder.

If the income from the Company is not “effectively connected” with a U.S. trade or business carried on by the foreign shareholder, distributions of investment company taxable income will be subject to a U.S. tax of 30% (or lower treaty rate), which tax is generally withheld from such distributions. However, dividends paid by the Company that are “interest-related dividends” or “short-term capital gain dividends” will generally be exempt from such withholding, in each case to the extent the Company properly reports such dividends to shareholders. For these purposes, interest-related dividends and short-term capital gain dividends generally represent distributions of interest or short-term capital gains that would not have been subject to U.S. federal withholding tax at the source if received directly by a foreign shareholder, and that satisfy certain other requirements. A foreign shareholder whose income from the Company is not “effectively connected” with a U.S. trade or business would generally be exempt from U.S. federal income tax on capital gain dividends, any amounts retained by the Company that are designated as undistributed capital gains and any gains realized upon the sale, exchange or other disposition of common shares. However, a foreign shareholder who is a nonresident alien individual and is physically present in the United States for more than 182 days during the taxable year and meets certain other requirements will nevertheless be subject to a U.S. tax of 30% on such capital gain dividends, undistributed capital gains and gains realized upon the sale, exchange or other disposition of common shares.

If the income from the Company is “effectively connected” with a U.S. trade or business carried on by a foreign shareholder, then distributions of investment company taxable income, any capital gain dividends, any amounts retained by the Company that are designated as undistributed capital gains and any gains realized upon the sale, exchange or other disposition of common shares will be subject to U.S. federal income tax at the rates applicable to U.S. citizens, residents or domestic corporations. Foreign corporate shareholders may also be subject to the branch profits tax imposed by the Code.

 

224


Table of Contents

The Company may be required to withhold from distributions that are otherwise exempt from U.S. federal withholding tax (or taxable at a reduced treaty rate) unless the foreign shareholder certifies his or her foreign status under penalties of perjury or otherwise establishes an exemption.

The tax consequences to a foreign shareholder entitled to claim the benefits of an applicable tax treaty may differ from those described herein. Foreign shareholders are advised to consult their own tax advisors with respect to the particular tax consequences to them of an investment in the Company.

Additional Withholding Requirements

Under Sections 1471 through 1474 of the Code (such Sections commonly referred to as “FATCA”), a 30% U.S. federal withholding tax may apply to any dividends that the Company pays to (i) a “foreign financial institution” (as specifically defined in the Code), whether such foreign financial institution is the beneficial owner or an intermediary, unless such foreign financial institution agrees to verify, report and disclose its United States “account” holders (as specifically defined in the Code) and meets certain other specified requirements or (ii) a non-financial foreign entity, whether such non-financial foreign entity is the beneficial owner or an intermediary, unless such entity provides a certification that the beneficial owner of the payment does not have any substantial United States owners or provides the name, address and taxpayer identification number of each such substantial United States owner and certain other specified requirements are met. In certain cases, the relevant foreign financial institution or non-financial foreign entity may qualify for an exemption from, or be deemed to be in compliance with, these rules. In addition, foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules. You should consult your own tax advisor regarding FATCA and whether it may be relevant to your ownership and disposition of our common shares.

Other Taxation

Shareholders may be subject to state, local and foreign taxes on their distributions from the Company. Shareholders are advised to consult their own tax advisors with respect to the particular tax consequences to them of an investment in the Company.

 

225


Table of Contents

DESCRIPTION OF OUR SHARES

The following description is based on relevant portions of Delaware law and on our Fourth Amended and Restated Declaration of Trust (“Declaration of Trust”) and bylaws. This summary is not necessarily complete, and we refer you to Delaware law, our Declaration of Trust and our bylaws for a more detailed description of the provisions summarized below.

Description of our Shares

General

The terms of the Declaration of Trust authorize an unlimited number of shares, which may include preferred shares.

None of our shares are subject to further calls or to assessments, sinking fund provisions, obligations of the Company or potential liabilities associated with ownership of the security (not including investment risks). In addition, except as may be provided by the Board in setting the terms of any class or series of Common Shares, no shareholder of the Company (“Shareholder”) will be entitled to exercise appraisal rights in connection with any transaction.

The following are the Company’s outstanding classes of securities as of October 15, 2021:

 

(1) Title of Class

   (2)
Amount
Authorized
     (3) Amount
Held by
the Company
or for the
Company’s
Account
     (4) Amount
Outstanding
Exclusive of
Amounts
Shown
Under (3)
 

Common Shares

     Unlimited        —          158,389,951  

Preferred Shares

     Unlimited        —          —    

Common Shares

Under the terms of the Declaration of Trust, we retain the right to issue common shares. In addition, Shareholders are entitled to one vote for each share held on all matters submitted to a vote of Shareholders and do not have cumulative voting rights in the election or removal of the trustees. Accordingly, subject to the rights of any outstanding preferred shares, holders of a majority of the shares entitled to vote in any election of trustees may elect all of the trustees standing for election. Shareholders are entitled to receive proportionately any dividends declared by the Board, subject to any preferential dividend rights of outstanding preferred shares. Upon our liquidation, dissolution or winding up, the Shareholders will be entitled to receive ratably our net assets available after the payment of all debts and other liabilities and will be subject to the prior rights of any outstanding preferred shares. Shareholders have no redemption or preemptive rights. The rights, preferences and privileges of Shareholders are subject to the rights of the holders of any series of preferred shares that we may designate and issue in the future.

Preferred Shares

Under the terms of the Declaration of Trust, the Board is authorized to issue preferred shares in one or more series without Shareholder approval. The 1940 Act limits our flexibility as certain rights and preferences of the preferred shares require, among other things: (i) immediately after issuance and before any distribution is made with respect to Shares, we must meet an asset coverage ratio of total assets to total senior securities, which include all of our borrowings and preferred shares, of at least 150%; and (ii) the holders of preferred shares, if any are issued, must be entitled as a class to elect two trustees at all times and to elect a majority of the trustees if and for so long as dividends on the preferred shares are unpaid in an amount equal to two full years of dividends on the preferred shares.

 

226


Table of Contents

Redemptions by the Company

Each Share is subject to redemption (out of the assets of the Company) by the Company at the redemption price equal to the then current NAV per Share of the Company determined in accordance with the Declaration of Trust at any time if the Trustees determine in their sole discretion that a Shareholder has breached any of its representations or warranties contained in such Shareholder’s subscription agreement with the Company, and upon such redemption the holders of the Shares so redeemed will have no further right with respect thereto other than to receive payment of such redemption price.

Limitation on Liability of Trustees and Officers; Indemnification and Advance of Expenses

Delaware law permits a Delaware statutory trust to include in its declaration of trust a provision to indemnify and hold harmless any trustee or beneficial owner or other person from and against any and all claims and demands whatsoever with the exception of any act or omission that constitutes a bad faith violation of the implied contractual covenant of good faith and fair dealing. Our Declaration of Trust provides that no Shareholder will be subject in such capacity to any personal liability whatsoever to any Person (as defined in the Declaration of Trust”) in connection with Trust Property (as defined in the Declaration of Trust”) or the acts, obligations or affairs of the Company. Shareholders will have the same limitation of personal liability as is extended to stockholders of a private corporation for profit incorporated under the Delaware General Corporation Law. No trustee or officer of the Company will be subject in such capacity to any personal liability whatsoever to any Person, save only liability to the Company or its Shareholders arising from bad faith, willful misconduct, gross negligence or reckless disregard for his duty to such Person; and, subject to the foregoing exception, all such Persons will look solely to the Trust Property for satisfaction of claims of any nature arising in connection with the affairs of the Company. If any Shareholder, trustee or officer, as such, of the Company, is made a party to any suit or proceeding to enforce any such liability, subject to the foregoing exception, he will not, on account thereof, be held to any personal liability. Any repeal or modification of the applicable section of the Declaration of Trust will not adversely affect any right or protection of a trustee or officer of the Company existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification.

Pursuant to our Declaration of Trust, the Company will indemnify each person who at any time serves as a trustee, officer or employee of the Company (each such person being an “indemnitee”) against any liabilities and expenses, including amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and reasonable counsel fees reasonably incurred by such indemnitee in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, before any court or administrative or investigative body in which he may be or may have been involved as a party or otherwise or with which he may be or may have been threatened, while acting in any capacity set forth in the applicable section of the Declaration of Trust by reason of his having acted in any such capacity, except with respect to any matter as to which he will not have acted in good faith in the reasonable belief that his action was in the best interest of the Company or, in the case of any criminal proceeding, as to which he will have had reasonable cause to believe that the conduct was unlawful, provided, however, that no indemnitee will be indemnified thereunder against any liability to any person or any expense of such indemnitee arising by reason of (i) willful misconduct, (ii) bad faith, (iii) gross negligence, or (iv) reckless disregard of the duties involved in the conduct of his position (the conduct referred to in such clauses (i) through (iv) being sometimes referred to herein as “disabling conduct”). Notwithstanding the foregoing, with respect to any action, suit or other proceeding voluntarily prosecuted by any indemnitee as plaintiff, indemnification will be mandatory only if the prosecution of such action, suit or other proceeding by such indemnitee (1) was authorized by a majority of the Board or (2) was instituted by the indemnitee to enforce his or her rights to indemnification hereunder in a case in which the indemnitee is found to be entitled to such indemnification. The rights to indemnification set forth in the Declaration of Trust will continue as to a person who has ceased to be a trustee or officer of the Company and will inure to the benefit of his or her heirs, executors and personal and legal representatives. No amendment or restatement of the Declaration of Trust or

 

227


Table of Contents

repeal of any of its provisions will limit or eliminate any of the benefits provided to any person who at any time is or was a trustee or officer of the Company or otherwise entitled to indemnification hereunder in respect of any act or omission that occurred prior to such amendment, restatement or repeal.

Notwithstanding the foregoing, the Company will not indemnify an indeminitee unless there has been a determination (i) by a final decision on the merits by a court or other body of competent jurisdiction before whom the issue of entitlement to indemnification hereunder was brought that such indemnitee is entitled to indemnification hereunder or, (ii) in the absence of such a decision, by (1) a majority vote of a quorum of those trustees who are neither Interested Persons of the Company (as defined in Section 2(a)(19) of the 1940 Act) nor parties to the proceeding (“Disinterested Non-Party Trustees”), that the indemnitee is entitled to indemnification hereunder, or (2) if such quorum is not obtainable or even if obtainable, if such majority so directs, independent legal counsel in a written opinion concludes that the indemnitee should be entitled to indemnification hereunder. All determinations to make advance payments in connection with the expense of defending any proceeding will be authorized and made in accordance with the immediately succeeding paragraph below.

In addition, the Declaration of Trust permits the Company to make advance payments in connection with the expenses of defending any action with respect to which indemnification might be sought hereunder if the Company receives a written affirmation by the indemnitee of the indemnitee’s good faith belief that the standards of conduct necessary for indemnification have been met and a written undertaking to reimburse the Company unless it is subsequently determined that the indemnitee is entitled to such indemnification and if a majority of the Trustees determine that the applicable standards of conduct necessary for indemnification appear to have been met. In addition, at least one of the following conditions must be met: (i) the indemnitee will provide adequate security for his undertaking, (ii) the Company will be insured against losses arising by reason of any lawful advances, or (iii) a majority of a quorum of the Disinterested Non-Party Trustees, or if a majority vote of such quorum so direct, independent legal counsel in a written opinion, will conclude, based on a review of readily available facts (as opposed to a full trial-type inquiry), that there is substantial reason to believe that the indemnitee ultimately will be found entitled to indemnification.

Subject to any limitations provided by the 1940 Act and the Declaration, the Company will have the power and authority to indemnify and provide for the advance payment of expenses to employees, agents and other Persons providing services to the Company or serving in any capacity at the request of the Company or provide for the advance payment of expenses for such Persons, provided that such indemnification has been approved by a majority of the Board.

Delaware Law and Certain Declaration of Trust Provisions

Organization and Duration

We were formed in Delaware on March 26, 2018, and will remain in existence until dissolved in accordance with our Declaration of Trust or pursuant to Delaware law.

Purpose

Under the Declaration of Trust, we are permitted to conduct, operate and carry on the business of a BDC within the meaning of the 1940 Act and engage in any business activity that lawfully may be conducted by a statutory trust organized under Delaware law and, in connection therewith, to exercise all of the rights and powers conferred upon us pursuant to the agreements relating to such business activity.

Term and Election; Certain Transactions

The Company’s Declaration of Trust includes provisions that could have the effect of limiting the ability of other entities or persons to acquire control of the Company or to change the composition of our Board of Trustees. This could have the effect of depriving shareholders of an opportunity to sell their common shares at a

 

228


Table of Contents

premium over prevailing market prices by discouraging a third party from seeking to obtain control over the Company. Such attempts could have the effect of increasing the expenses of the Company and disrupting the normal operation of the Company. On October 18, 2021 the Board was divided into three classes, with the terms of one class expiring at each annual meeting of shareholders. At each annual meeting, one class of trustees is elected to a three-year term. This provision could delay for up to two years the replacement of a majority of the Board of Trustees. A trustee may be removed from office for cause only, and not without cause, and only by the action of a majority of the remaining trustees followed by a vote of the holders of a majority of the shares then entitled to vote for the election of the respective trustee.

The Declaration of Trust grants special approval rights with respect to certain matters to members of the Board of Trustees who qualify as “Continuing Trustees,” which term means trustees who either (i) have been members of the Board of Trustees for a period of at least thirty-six months (or since the commencement of the Fund’s operations, if less than thirty-six months) or (ii) were nominated to serve as members of the Board of Trustees by a majority of the Continuing Trustees then members of the Board of Trustees.

The Declaration of Trust requires the affirmative vote or consent of at least seventy-five percent (75%) of the trustees and holders of at least seventy-five percent (75%) of the Company’s outstanding shares (including common shares and preferred shares, if any) to authorize certain Company transactions not in the ordinary course of business, including a merger, conversion or consolidation, certain issuances or transfers by the Company of the Company’s shares (except as may be pursuant to a public offering, the Company’s dividend reinvestment plan or upon exercise of any stock subscription rights), certain sales, transfers or other dispositions of Company assets, or any shareholder proposal regarding specific investment decisions, unless the transaction is authorized by both a majority of the trustees and seventy-five percent (75%) of the Continuing Trustees (in which case no shareholder authorization would be required by the By-Laws and Declaration of Trust, but may be required in certain cases under the 1940 Act).

The overall effect of these provisions is to render more difficult the accomplishment of a merger or the assumption of control by a third party. These provisions also provide, however, the advantage of potentially requiring persons seeking control of the Company to negotiate with its management regarding the price to be paid and facilitating the continuity of the Company’s investment objective and policies. The provisions of the Declaration of Trust described above could have the effect of discouraging a third party from seeking to obtain control of the Company in a tender offer or similar transaction. The Board of Trustees has considered the foregoing anti-takeover provisions and concluded that they are in the best interests of the Fund and its shareholders.

Action by Shareholders

The Shareholders will only have voting rights as required by the 1940 Act, and Exchange Listing or as otherwise provided for in the Declaration of Trust. Under the Declaration of Trust, the Company will hold annual meetings. A special meeting of the Shareholders may be called at any time by a majority of the Board or the Chief Executive Officer and will be called by any trustee for any proper purpose upon written request of Shareholders holding in the aggregate not less than thirty-three and one-third percent (331/3%) of the outstanding shares of the Company, such request specifying the purpose or purposes for which such meeting is to be called, provided that in the case of a meeting called by any trustee at the request of Shareholders for the purpose of electing trustees or removing the Adviser, written request of Shareholders holding in the aggregate not less than fifty-one percent (51%) of the outstanding Shares of the Company or class or series of Shares having voting rights on the matter will be required. For a special Shareholder meeting to be called for a proper purpose (as used in the preceding sentence), it is not a requirement that such purpose relate to a matter on which Shareholders are entitled to vote, provided that if such meeting is called for a purpose for which Shareholders are not entitled to vote, no vote will be taken at such meeting. Any shareholder meeting, including a special meeting, will be held within or without the State of Delaware on such day and at such time as the Board will designate, and may be held virtually.

 

229


Table of Contents

Amendment of the Declaration of Trust; No Approval by Shareholders

The Board may, without Shareholder vote, amend or otherwise supplement the Declaration of Trust by making an amendment, a Declaration of Trust supplemental thereto or an amended and restated Declaration of Trust. Shareholders will only have the right to vote on any amendment: (i) which would eliminate their right to vote granted in the Declaration of Trust, (ii) to the amendment provision of the Declaration of Trust, (iii) that would adversely affect the powers, preferences or special rights of the Shares as determined by the Board Trustees in good faith and (iv) submitted to them by the Board. In addition, the Board will have the authority to amend the Declaration of Trust without a Shareholder vote in connection with an Exchange Listing (as defined in the Declaration of Trust”) without regard to (i), (ii) and (iii) above, including without limitation, to classify the Board, to permit annual meetings of Shareholders, to impose advance notice bylaw provisions for Trustee nominations or for Shareholder proposals, to require super-majority approval for certain types of transactions or to otherwise add provisions that may be deemed to adverse to Shareholders. A proposed amendment to the Declaration of Trust requires the affirmative vote of a majority of the Board for adoption.

An amendment duly adopted by the requisite vote of the Board and, if required, the Shareholders as aforesaid, will become effective at the time of such adoption or at such other time as may be designated by the Board or Shareholders, as the case may be. A certification in recordable form signed by a majority of the Board setting forth an amendment and reciting that it was duly adopted by the Trustees and, if required, the Shareholders as aforesaid, or a copy of the Declaration, as amended, in recordable form, and executed by a majority of the Board, will be conclusive evidence of such amendment when lodged among the records of the Company or at such other time designated by the Board.

Merger, Consolidation, Incorporation

Notwithstanding anything else in the Declaration of Trust, the Board may, without Shareholder approval unless such approval is required by the 1940 Act or, after an Exchange Listing, the applicable stock exchange rules, or if such transaction is reasonably anticipated to result in a material dilution of the NAV per Share of the Company, cause and approve a merger, conversion, reorganization or consolidation of the Company, (ii) cause the Shares to be exchanged under or pursuant to any state or federal statute to the extent permitted by law, (iii) cause the Company to incorporate under the laws of a state, commonwealth, possession or colony of the United States, (iv) sell or convey all or substantially all of the assets of the Company or (v) at any time sell or convert into money all or any part of the assets of the Company. Any agreement of merger, reorganization, consolidation, exchange or conversion or certificate of merger, certificate of conversion or other applicable certificate may be signed by a majority of the Board or an authorized officer of the Company and facsimile signatures conveyed by electronic or telecommunication means will be valid.

Derivative Actions

No person, other than a Trustee, who is not a Shareholder will be entitled to bring any derivative action, suit or other proceeding on behalf of the Company. No Shareholder may maintain a derivative action on behalf of the Company unless holders of at least ten percent (10%) of the outstanding Shares join in the bringing of such action.

In addition to the requirements set forth in Section 3816 of the Delaware Statutory Trust Statute, a Shareholder may bring a derivative action on behalf of the Company only if the following conditions are met: (i) the Shareholder or Shareholders must make a pre-suit demand upon the Board to bring the subject action unless an effort to cause the Board to bring such an action is not likely to succeed; and a demand on the Board will only be deemed not likely to succeed and therefore excused if a majority of the Board, or a majority of any committee established to consider the merits of such action, is composed of Board who are not “independent trustees” (as that term is defined in the Delaware Statutory Trust Statute); and (ii) unless a demand is not required under clause (i) above, the Board must be afforded a reasonable amount of time to consider such Shareholder

 

230


Table of Contents

request and to investigate the basis of such claim; and the Board will be entitled to retain counsel or other advisors in considering the merits of the request and may require an undertaking by the Shareholders making such request to reimburse the Company for the expense of any such advisors in the event that the Board determine not to bring such action. For purposes of this paragraph, the Board may designate a committee of one or more trustees to consider a Shareholder demand.

For the avoidance of doubt, Section 6.10 of the Company’s Agreement and Declaration of Trust, which prohibits derivative actions as set forth above, shall not apply to any claims asserted under the U.S. federal securities laws, including, without limitation, the 1940 Act.

Exclusive Delaware Jurisdiction

Each Trustee, each officer and each person legally or beneficially owning a Share or an interest in a Share of the Company (whether through a broker, dealer, bank, trust company or clearing corporation or an agent of any of the foregoing or otherwise), to the fullest extent permitted by law, including Section 3804(e) of the Delaware Statutory Trust Statute, (i) irrevocably agrees that any claims, suits, actions or proceedings asserting a claim governed by the internal affairs (or similar) doctrine or arising out of or relating in any way to the Company, the Delaware Statutory Trust Statute, the Company’s By-Laws or the Declaration of Trust (including, without limitation, any claims, suits, actions or proceedings to interpret, apply or enforce (A) the provisions of the Declaration of Trust, or (B) the duties (including fiduciary duties), obligations or liabilities of the Company to the Shareholders or the Board, or of officers or the Board to the Company, to the Shareholders or each other, or (C) the rights or powers of, or restrictions on, the Company, the officers, the Board or the Shareholders, or (D) any provision of the Delaware Statutory Trust Statute or other laws of the State of Delaware pertaining to trusts made applicable to the Company pursuant to Section 3809 of the Delaware Statutory Trust Statute, or (E) any other instrument, document, agreement or certificate contemplated by any provision of the Delaware Statutory Trust Statute or the Declaration of Trust relating in any way to the Company (regardless, in each case, of whether such claims, suits, actions or proceedings (x) sound in contract, tort, fraud or otherwise, (y) are based on common law, statutory, equitable, legal or other grounds, or (z) are derivative or direct claims)), will be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, any other court in the State of Delaware with subject matter jurisdiction, (ii) irrevocably submits to the exclusive jurisdiction of such courts in connection with any such claim, suit, action or proceeding, (iii) irrevocably agrees not to, and waives any right to, assert in any such claim, suit, action or proceeding that (A) it is not personally subject to the jurisdiction of such courts or any other court to which proceedings in such courts may be appealed, (B) such claim, suit, action or proceeding is brought in an inconvenient forum, or (C) the venue of such claim, suit, action or proceeding is improper, (iv) consents to process being served in any such claim, suit, action or proceeding by mailing, certified mail, return receipt requested, a copy thereof to such party at the address in effect for notices hereunder, and agrees that such service will constitute good and sufficient service of process and notice thereof; provided, nothing in clause (iv) hereof will affect or limit any right to serve process in any other manner permitted by law, and (v) irrevocably waives any and all right to trial by jury in any such claim, suit, action or proceeding. For the avoidance of doubt, Section 13.3 of the Company’s Agreement and Declaration of Trust shall not apply to any claims asserted under the U.S. federal securities laws, including, without limitation, the 1940 Act.

Term of the Company

If we have not consummated an Exchange Listing by the earlier of (i) the five-year anniversary of the end of the Initial Drawdown Period, as may be extended for up to an additional one-year period pursuant to the Adviser’s recommendation with the approval of the Board and (ii) the ten year anniversary of the date of our initial closing, then the Board (subject to market conditions and any necessary Shareholder approvals and applicable requirements of the 1940 Act) will use its commercially reasonable efforts to wind down, sell and/or liquidate and dissolve the Company in an orderly manner. If we have consummated an Exchange Listing, the Company may be dissolved by the affirmative vote or consent of at least a majority of the Board and 75% of the Continuing Trustees, without the vote of the Shareholders.

 

231


Table of Contents

Books and Reports

We are required to keep appropriate books of our business at our principal offices. The books will be maintained for both tax and financial reporting purposes on an accrual basis in accordance with U.S. GAAP.

 

232


Table of Contents

REGULATION

We have elected to be regulated as a BDC under the 1940 Act. The 1940 Act contains prohibitions and restrictions relating to transactions between BDCs and their affiliates (including any investment advisers or sub-advisers), principal underwriters and affiliates of those affiliates or underwriters and requires that a majority of the trustees be persons other than “interested persons,” as that term is defined in the 1940 Act.

In addition, the 1940 Act provides that we may not change the nature of our business so as to cease to be, or to withdraw our election as, a BDC unless approved by “a majority of our outstanding voting securities” as defined in the 1940 Act. A majority of the outstanding voting securities of a company is defined under the 1940 Act as the lesser of: (a) 67% or more of such company’s voting securities present at a meeting if more than 50% of the outstanding voting securities of such company are present or represented by proxy, or (b) more than 50% of the outstanding voting securities of such company. We do not anticipate any substantial change in the nature of our business.

We are not generally able to issue and sell our common shares at a price below net asset value per share. We may, however, issue and sell our common shares, or warrants, options or rights to acquire our common shares, at a price below the then-current net asset value of our common shares if (1) our board of trustees determines that such sale is in our best interests and the best interests of our shareholders, and (2) our shareholders have approved our policy and practice of making such sales within the preceding 12 months. In any such case, the price at which our securities are to be issued and sold may not be less than a price which, in the determination of our board of trustees, closely approximates the market value of such securities.

We may also be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our board of directors who are not interested persons and, in some cases, prior approval by the SEC.

We may invest up to 100% of our assets in securities acquired directly from issuers in privately negotiated transactions. With respect to such securities, we may, for the purpose of public resale, be deemed an “underwriter” as that term is defined in the Securities Act. Our intention is to not write (sell) or buy put or call options to manage risks associated with the publicly traded securities of our portfolio companies, except that we may enter into hedging transactions to manage the risks associated with interest rate or currency fluctuations. However, we may purchase or otherwise receive warrants to purchase the common stock of our portfolio companies in connection with acquisition financing or other investments. Similarly, in connection with an acquisition, we may acquire rights to require the issuers of acquired securities or their affiliates to repurchase them under certain circumstances. We also do not intend to acquire securities issued by any investment company that exceed the limits imposed by the 1940 Act. Under these limits, except for registered money market funds, we generally cannot acquire more than 3% of the voting stock of any registered investment company, invest more than 5% of the value of our total assets in the securities of one investment company, or invest more than 10% of the value of our total assets in the securities of more than one investment company. With regard to that portion of our portfolio invested in securities issued by investment companies, if any, it should be noted that such investments might subject our shareholders to additional expenses as they will be indirectly responsible for the costs and expenses of such companies. None of our investment policies are fundamental, and thus may be changed without shareholder approval.

Qualifying Assets. Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as “Qualifying Assets,” unless, at the time the acquisition is made, Qualifying Assets represent at least 70% of the company’s total assets. The principal categories of Qualifying Assets relevant to our business are any of the following:

 

  (1)

Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an Eligible Portfolio Company (as defined below), or from any person who is, or has been during the preceding 13 months, an affiliated

 

233


Table of Contents
  person of an Eligible Portfolio Company, or from any other person, subject to such rules as may be prescribed by the SEC. An “Eligible Portfolio Company” is defined in the 1940 Act as any issuer which:

 

  (a)

is organized under the laws of, and has its principal place of business in, the United States;

 

  (b)

is not an investment company (other than a small business investment company wholly owned by the BDC) or a company that would be an investment company but for certain exclusions under the 1940 Act; and

 

  (c)

satisfies any of the following:

 

  (i)

does not have any class of securities that is traded on a national securities exchange;

 

  (ii)

has a class of securities listed on a national securities exchange, but has an aggregate market value of outstanding voting and non-voting common equity of less than $250 million;

 

  (iii)

is controlled by a BDC or a group of companies including a BDC and the BDC has an affiliated person who is a director of the Eligible Portfolio Company; or

 

  (iv)

is a small and solvent company having total assets of not more than $4 million and capital and surplus of not less than $2 million.

 

  (2)

Securities of any Eligible Portfolio Company controlled by the BDC.

 

  (3)

Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements.

 

  (4)

Securities of an Eligible Portfolio Company purchased from any person in a private transaction if there is no ready market for such securities and the BDC already owns 60% of the outstanding equity of the Eligible Portfolio Company.

 

  (5)

Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of warrants or rights relating to such securities.

 

  (6)

Cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment.

In addition, a BDC must be operated for the purpose of making investments in the types of securities described in (1), (2) or (3) above.

Significant Managerial Assistance. A BDC must have been organized and have its principal place of business in the United States and must be operated for the purpose of making investments in the types of securities described above. However, in order to count portfolio securities as Qualifying Assets for the purpose of the 70% test, the BDC must either control the issuer of the securities or must offer to make available to the issuer of the securities (other than small and solvent companies described above) significant managerial assistance; except that, where the BDC purchases such securities in conjunction with one or more other persons acting together, one of the other persons in the group may make available such managerial assistance. Making available significant managerial assistance means, among other things, any arrangement whereby the BDC, through its trustees, officers or employees, offers to provide and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company through monitoring of portfolio company operations, selective participation in board and management meetings, consulting with and advising a portfolio company’s officers or other organizational or financial guidance.

Temporary Investments. Pending investment in other types of Qualifying Assets, as described above, our investments can consist of cash, cash equivalents, U.S. government securities or high-quality debt securities

 

234


Table of Contents

maturing in one year or less from the time of investment, which are referred to herein, collectively, as temporary investments, so that 70% of our assets would be Qualifying Assets.

Warrants. Under the 1940 Act, a BDC is subject to restrictions on the issuance, terms and amount of warrants, options or rights to purchase shares that it may have outstanding at any time. In particular, the amount of shares that would result from the conversion or exercise of all outstanding warrants, options or rights to purchase shares cannot exceed 25% of the BDC’s total outstanding shares.

Leverage and Senior Securities; Coverage Ratio. We are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of shares senior to our shares if our asset coverage, as defined in the 1940 Act, would at least equal 150% immediately after each such issuance. On September 25, 2018, our sole shareholder approved the adoption of this 150% threshold pursuant to Section 61(a)(2) of the 1940 Act and such election became effective the following day. In addition, while any senior securities remain outstanding, we are required to make provisions to prohibit any dividend distribution to our shareholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the dividend distribution or repurchase. We are also permitted to borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes, which borrowings would not be considered senior securities.

We have established asset based credit facilities and may establish future facilities or enter into other financing arrangements to facilitate investments and the timely payment of our expenses. Our existing financing facilities bear, and it is anticipated that any future credit facilities will bear interest at floating rates at to be determined spreads over LIBOR. Shareholders indirectly bear the costs associated with any borrowings under a credit facility or otherwise, including increased management fees payable to the Adviser as a result of such borrowings. Our current credit facilities require us, and future lenders may require us to pledge assets, commitments and/or drawdowns (and the ability to enforce the payment thereof) and to comply with positive or negative covenants that could have an effect on our operations. In addition, from time to time, our losses on leveraged investments may result in the liquidation of other investments held by us and may result in additional drawdowns to repay such amounts.

As of June 30, 2021, we have also issued three unsecured bonds and may have additional bond offerings in the future.

We may enter into a TRS agreement. A TRS is a contract in which one party agrees to make periodic payments to another party based on the change in the market value of the assets underlying the TRS, which may include a specified security, basket of securities or securities indices during a specified period, in return for periodic payments based on a fixed or variable interest rate. A TRS effectively adds leverage to a portfolio by providing investment exposure to a security or market without owning or taking physical custody of such security or investing directly in such market. Because of the unique structure of a TRS, a TRS often offers lower financing costs than are offered through more traditional borrowing arrangements. The Company would typically have to post collateral to cover this potential obligation. To the extent the Company segregates liquid assets with a value equal (on a daily mark-to-market basis) to its obligations under TRS transactions, enters into offsetting transactions or otherwise covers such TRS transactions in accordance with applicable SEC guidance, the leverage incurred through TRS will not be considered a borrowing for purposes of the Company’s overall leverage limitation.

We may also create leverage by securitizing our assets (including in CLOs) and retaining the equity portion of the securitized vehicle. Debt securitizations (including in CLOs) are a form of secured financing, which would generally be consolidated on our financial statements and subject to our overall asset coverage requirement. There can be no assurance that we will be able to obtain a CLO debt securitization on favorable terms or at all or that any such financing will benefit our investment performance. We may also from time to time make secured loans of our marginable securities to brokers, dealers and other financial institutions.

Code of Ethics. We and the Adviser have adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act and Rule 204A-1 under the Advisers Act, respectively, that establishes procedures for personal investments

 

235


Table of Contents

and restricts certain personal securities transactions. Personnel subject to the code are permitted to invest in securities for their personal investment accounts, including securities that may be purchased or held by us, so long as such investments are made in accordance with the code’s requirements. You may obtain copies of the codes of ethics, after paying a duplicating fee, by electronic request at the following email address: publicinfo@sec.gov.

Affiliated Transactions. We may be prohibited under the 1940 Act from conducting certain transactions with our affiliates without the prior approval of our trustees who are not interested persons and, in some cases, the prior approval of the SEC. We have received an exemptive order from the SEC that permits us, among other things, to co-invest with certain other persons, including certain affiliates of the Adviser and certain funds managed and controlled by the Adviser and its affiliates, subject to certain terms and conditions.

Other. We will be periodically examined by the SEC for compliance with the 1940 Act, and be subject to the periodic reporting and related requirements of the Exchange Act.

We are also required to provide and maintain a bond issued by a reputable fidelity insurance company to protect against larceny and embezzlement. Furthermore, as a BDC, we are prohibited from protecting any trustee or officer against any liability to our shareholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.

We are also required to designate a chief compliance officer and to adopt and implement written policies and procedures reasonably designed to prevent violation of the federal securities laws and to review these policies and procedures annually for their adequacy and the effectiveness of their implementation.

Proxy Voting Policies and Procedures

We have delegated our proxy voting responsibility to the Adviser. The Proxy Voting Policies and Procedures of the Adviser are set forth below. The guidelines are reviewed periodically by the Adviser, and, accordingly, are subject to change.

As an investment adviser registered under the Advisers Act, the Adviser has a duty to monitor corporate events and to vote proxies, as well as a duty to cast votes in the best interest of clients and not subrogate client interests to its own interests. Rule 206(4)-6 under the Advisers Act places specific requirements on registered investment advisers with proxy voting authority.

Proxy Policies

The Adviser’s policies and procedures are reasonably designed to ensure that the Adviser votes proxies in the best interest of the Company and addresses how it will resolve any conflict of interest that may arise when voting proxies and, in so doing, to maximize the value of the investments made by the Company, taking into consideration the Company’s investment horizons and other relevant factors. It will review on a case-by-case basis each proposal submitted for a shareholder vote to determine its impact on the portfolio securities held by its clients. Although the Adviser will generally vote against proposals that may have a negative impact on its clients’ portfolio securities, it may vote for such a proposal if there exists compelling long-term reasons to do so.

Decisions on how to vote a proxy generally are made by the Adviser. The Investment Committee and the members of the Investment Team covering the applicable security often have the most intimate knowledge of both a company’s operations and the potential impact of a proxy vote’s outcome. Decisions are based on a number of factors which may vary depending on a proxy’s subject matter, but are guided by the general policies described in the proxy policy. In addition, the Adviser may determine not to vote a proxy after consideration of the vote’s expected benefit to clients and the cost of voting the proxy. To ensure that its vote is not the product of

 

236


Table of Contents

a conflict of interest, the Adviser will require the members of the Investment Committee to disclose any personal conflicts of interest they may have with respect to overseeing a Company’s investment in a particular company.

Proxy Voting Records

You may obtain information, without charge, regarding how we voted proxies with respect to our portfolio securities by making a written request for proxy voting information to: Chief Compliance Officer, Blackstone Credit BDC Advisors LLC, 345 Park Avenue, 31st Floor, New York, NY 10154.

Reporting Obligations and Available Information

We furnish our shareholders with annual reports containing audited financial statements, quarterly reports, and such other periodic reports as we determine to be appropriate or as may be required by law. We are required to comply with all periodic reporting, proxy solicitation and other applicable requirements under the Exchange Act.

We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Definitive Proxy Statement on Schedule 14A, and our directors, officers and 10% beneficial owners file reports on Forms 3, 4 and 5 pursuant to section 13(a), 15(d) or 16(a) of the Exchange Act. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information. We have made available free of charge on our website (www.bxsl.com) our annual reports on Form 10-K, quarterly reports on Form 10-Q, our current reports on Form 8-K and our governing documents.

 

237


Table of Contents

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common shares. We cannot predict the effect, if any, that sales of shares or the availability of shares for sale will have on the market price of our common shares prevailing from time to time. Sales of substantial amounts of our common shares in the public market, or the perception that such sales could occur, could adversely affect the prevailing market price of our common shares.

Prior to this offering, we had 158,389,951 common shares of our beneficial interest outstanding. Upon completion of this offering 166,039,951 common shares of our beneficial interest will be issued and outstanding. If the underwriters exercise their option to purchase additional common shares of our beneficial interest, 167,187,451 common shares of our beneficial interest will be issued and outstanding immediately after the completion of this offering.

Rule 144

Up to 130,797,279 of the shares of our beneficial interest outstanding prior to the consummation of this offering will not be considered “restricted” securities under the meaning of Rule 144 and will be eligible for resale pursuant to Rule 144 and 27,592,672 shares of our beneficial interest outstanding prior to the consummation of this offering will be “restricted” securities under the meaning of Rule 144 under the Securities Act, and may not be sold in the absence of registration under the Securities Act unless an exemption from registration is available, including the exemption provided by Rule 144. Additionally, any shares purchased in this offering by our affiliates, as that term is defined in Rule 144 under the Securities Act, would only be able to be sold in compliance with the Rule 144 limitations described below. See “Risk Factors—Risks Related to an Investment in Our Common Shares—Prior to this offering, there has been no public market for our common shares, and we cannot assure you that a market for our common shares will develop or that the market price of our common shares will not decline following the offering.

In general, under Rule 144 under the Securities Act, a person (or persons whose shares are aggregated) who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months (including any period of consecutive ownership of preceding non-affiliated holders) would be entitled to sell those shares, subject only to the availability of current public information about us. A non-affiliated person who has beneficially owned restricted securities within the meaning of Rule 144 for at least one year would be entitled to sell those shares without regard to the provisions of Rule 144.

A person (or persons whose shares are aggregated) who is deemed to be an affiliate of ours and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months would be entitled to sell within any three-month period a number of shares that does not exceed the greater of 1% of the then outstanding shares of our beneficial interest or the average weekly trading volume of our common shares during the four calendar weeks preceding such sale. Such sales are also subject to certain manner of sale provisions, notice requirements and the availability of current public information about us (which requires that we are current in our periodic reports under the Exchange Act).

Transfer Restrictions

Pursuant to the terms of each current Shareholder’s subscription agreement (with limited exceptions) transfers of common shares are restricted unless approved by the Adviser. We have informed current Shareholders that following an Exchange Listing (which will include this offering), without the prior written consent of the Adviser, a shareholder who purchased shares prior to this offering is not permitted to transfer (whether by sale, gift, merger, by operation of law or otherwise), exchange, assign, pledge, hypothecate or otherwise dispose of or encumber (collectively, “Transfer”) (i) any common shares held by such shareholder

 

238


Table of Contents

prior to later of 60 days following an Exchange Listing and January 3, 2022; (ii) 90% of the common shares held by such shareholder prior to the later of 120 days following an Exchange Listing and March 1, 2022; (iii) 75% of the common shares held by such shareholder prior to later of 180 days following an Exchange Listing and May 1, 2022; and (iv) 50% of the common shares held by such shareholder prior to the later of 240 days following an Exchange Listing and July 1, 2022. This means that, as a result of these transfer restrictions, without the consent of the Adviser, a shareholder who owned 100 common shares on the date of an Exchange Listing could not sell any of such shares until the later of 60 days following an Exchange Listing and January 3, 2022; prior to the later of 120 days following an Exchange Listing and March 1, 2022, such shareholder could only sell up to 10 of such shares; prior to the later of 180 days following an Exchange Listing and May 1, 2022, such shareholder could only sell up to 25 of such shares; prior to the later of 240 days following an Exchange Listing and July 1, 2022, such shareholder could only sell up to 50 of such shares; and after the later of 240 days following an Exchange Listing and July 1, 2022, such shareholder could sell all of such shares. In addition, the Adviser and our trustees have agreed for a period of 180 days after the date of this prospectus and we and our executive officers who are not trustees have agreed for a period of 180 days after the date of this prospectus, (i) not to offer, sell, contract to sell, pledge, grant any option to purchase, lend or otherwise dispose of, or file with the SEC a registration statement under the Securities Act (other than a registration statement pursuant to Rule 415 of the Securities Act) relating to, any of our common shares, or any options or warrants to purchase any of our common, or any securities convertible into, exchangeable for or that represent the right to receive our common shares or (ii) engage in any hedging or other transaction or arrangement (including, without limitation, any short sale or the purchase or sale of, or entry into, any put or call option, or combination thereof, forward, swap or any other derivative transaction or instrument, however described or defined) which is designed to or which reasonably could be expected to lead to or result in a sale or disposition (whether by the undersigned or someone other than the undersigned), or transfer of any of the economic consequences of ownership, in whole or in part, directly or indirectly, of our common shares or any such other securities whether any such transaction or arrangement (or instrument provided for thereunder) would be settled by delivery of our common shares or other securities, in cash or otherwise, without the prior written consent of the representatives on behalf of the underwriters, subject to certain exceptions. See “Underwriting.”

 

239


Table of Contents

UNDERWRITING

We are offering our common shares of our beneficial interest described in this prospectus through a number of underwriters. BofA Securities, Inc., Citigroup Global Markets Inc., Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC and Wells Fargo Securities, LLC are acting as representatives of the underwriters. We have entered into an underwriting agreement with the underwriters. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriters, and each underwriter has severally agreed to purchase, at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus, the number of common shares of our beneficial interest listed next to its name in the following table:

 

Name

   Number of
Shares
 

BofA Securities, Inc.

                       

Citigroup Global Markets Inc.

  

Goldman Sachs & Co. LLC

  

Morgan Stanley & Co. LLC

  

Wells Fargo Securities, LLC

  

Barclays Capital Inc.

  

J.P. Morgan Securities LLC

  

RBC Capital Markets, LLC

  

Keefe, Bruyette & Woods, Inc.

  

Raymond James & Associates, Inc.

  

UBS Securities LLC

  

Blackstone Securities Partners, L.P.

  

BNP Paribas Securities Inc.

  

Deutsche Bank Securities Inc.

  

Compass Point Research & Trading, LLC

  

Janney Montgomery Scott LLC

  

MUFG Securities Americas Inc.

  

SMBC Nikko Securities America, Inc.

  

SG Americas Securities, LLC

  

Academy Securities, Inc.

  

Blaylock Van, LLC

  

R. Seelaus & Co., LLC

  

Samuel A. Ramirez & Co.

  
  

 

 

 

Total

     7,650,000  
  

 

 

 

The underwriters are committed to purchase all the common shares of our beneficial interest offered by us if they purchase any shares. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may also be increased or the offering may be terminated.

The underwriters propose to offer the common shares of our beneficial interest directly to the public at the initial public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $ per share. Any such dealers may resell shares to certain other brokers or dealers at a discount of up to $ per share from the initial public offering price. After the initial public offering of the shares, the offering price and other selling terms may be changed by the underwriters.

The underwriters have an option to buy up to 1,147,500 additional shares of common stock from us to cover sales of shares by the underwriters which exceed the number of shares specified in the table above. The underwriters have 30 days from the date of this prospectus to exercise this option. If any shares are purchased pursuant to this option, the underwriters will purchase shares in approximately the same proportion as shown in

 

240


Table of Contents

the table above. If any additional shares of common stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the shares are being offered.

The underwriting fee is equal to the public offering price per share less the amount paid by the underwriters to us per share of common stock. The underwriting fee is $             per share. The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares.

 

     Without
option to
purchase
additional
shares
     With
option to
purchase
additional
shares
 

Per Share

   $                    $                

Total

   $        $    

We estimate that the total expenses of this offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, and up to $25,000 reimbursement of certain underwriters’ counsel fees in connection with the review of the terms of this offering by the Financial Industry Regulatory Authority, Inc., but excluding the underwriting discounts and commissions, will be approximately $2.5 million.

A prospectus in electronic format may be made available on the web sites maintained by one or more underwriters, or selling group members, if any, participating in the offering. The underwriters may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters and selling group members that may make Internet distributions on the same basis as other allocations.

The representatives have agreed for a period of 180 days after the date of this prospectus and we, our trustees and our executive officers who are not trustees have agreed for a period of 180 days after the date of this prospectus, subject to certain customary exceptions, (i) not to offer, sell, contract to sell, pledge, grant any option to purchase, lend or otherwise dispose of, or file with the SEC a registration statement under the Securities Act relating to, any shares of our common stock, or any options or warrants to purchase any shares of our common stock, or any securities convertible into, exchangeable for or that represent the right to receive shares of our common stock or (ii) engage in any hedging or other transaction or arrangement (including, without limitation, any short sale or the purchase or sale of, or entry into, any put or call option, or combination thereof, forward, swap or any other derivative transaction or instrument, however described or defined) which is designed to or which reasonably could be expected to lead to or result in a sale or disposition (whether by the undersigned or someone other than the undersigned), or transfer of any of the economic consequences of ownership, in whole or in part, directly or indirectly, of our common stock or other securities, in cash or otherwise, without the prior written consent of the representatives on behalf of the underwriters.

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act.

We have applied for our common shares to be listed on the New York Stock Exchange under the symbol “BXSL”.

In connection with this offering, the underwriters may engage in stabilizing transactions, which involves making bids for, purchasing and selling shares of common stock in the open market for the purpose of preventing or retarding a decline in the market price of the common stock while this offering is in progress. These stabilizing transactions may include making short sales of the common stock, which involves the sale by the underwriters of a greater number of shares of common stock than they are required to purchase in this offering, and purchasing shares of common stock on the open market to cover positions created by short sales. Short sales may be

 

241


Table of Contents

“covered” shorts, which are short positions in an amount not greater than the underwriters’ option to purchase additional shares of our common stock referred to above, or may be “naked” shorts, which are short positions in excess of that amount. The underwriters may close out any covered short position either by exercising their option to purchase additional shares of our common stock, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market compared to the price at which the underwriters may purchase shares through their option to purchase additional shares of our common stock. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market that could adversely affect investors who purchase in this offering. To the extent that the underwriters create a naked short position, they will purchase shares in the open market to cover the position.

The underwriters have advised us that, pursuant to Regulation M of the Securities Act, they may also engage in other activities that stabilize, maintain or otherwise affect the price of the common stock, including the imposition of penalty bids. This means that if the representatives of the underwriters purchase common stock in the open market in stabilizing transactions or to cover short sales, the representatives can require the underwriters that sold those shares as part of this offering to repay the underwriting discount received by them.

These activities may have the effect of raising or maintaining the market price of the common stock or preventing or retarding a decline in the market price of the common stock, and, as a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them at any time. The underwriters may carry out these transactions on the New York Stock Exchange, in the over-the-counter market or otherwise.

Prior to this offering, there has been no public market for our common stock. The initial public offering price will be determined by negotiations between us and the representatives of the underwriters. In determining the initial public offering price, we and the representatives of the underwriters expect to consider a number of factors including:

 

   

the information set forth in this prospectus and otherwise available to the representatives;

 

   

our prospects and the history and prospects for the industry in which we compete;

 

   

an assessment of our management;

 

   

our prospects for future earnings;

 

   

the general condition of the securities markets at the time of this offering;

 

   

the recent market prices of, and demand for, publicly traded common stock of generally comparable companies; and

 

   

other factors deemed relevant by the underwriters and us.

Neither we nor the underwriters can assure investors that an active trading market will develop for our common shares, or that the shares will trade in the public market at or above the initial public offering price.

The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services. Certain of the underwriters and their respective affiliates have provided, and may in the future provide, a variety of these services to the issuer and to persons and entities with relationships with the issuer, for which they received or will receive customary fees and expenses.

In the ordinary course of their various business activities, the underwriters and their respective affiliates, officers, directors and employees may purchase, sell or hold a broad array of investments and actively traded

 

242


Table of Contents

securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for their own account and for the accounts of their customers, and such investment and trading activities may involve or relate to assets, securities or instruments of the issuer (directly, as collateral securing other obligations or otherwise) or persons and entities with relationships with the issuer. The underwriters and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long or short positions in such assets, securities and instruments.

We intend to use the net proceeds of this offering to pay down some or all of our existing indebtedness, and we intend to use any remaining proceeds to make investments in accordance with our investment objectives and strategies and for general corporate purposes. Affiliates of certain underwriters serve as lenders under certain of our credit facilities. Accordingly, affiliates of certain underwriters are expected to receive proceeds from this offering that may be used to reduce our outstanding obligations under such credit facilities.

Blackstone Inc. controls Blackstone Securities Partners, L.P., a participating underwriter in this offering, and the Adviser is under common control with Blackstone Securities Partners, L.P.

On October 18, 2021 our Board approved the Company 10b5-1 Plan, to acquire up to the greater of $250 million and the net proceeds from this offering in the aggregate of our common shares at prices below our net asset value per share over a specified period, in accordance with the guidelines specified in Rule 10b-18 and Rule 10b5-1 of the Exchange Act. We intend to put the Company 10b5-1 Plan in place because we believe that, in the current market conditions, if our common shares are trading below our then-current net asset value per share, it is in the best interest of our shareholders for us to reinvest in our portfolio. Morgan Stanley & Co. LLC, which is acting as an underwriter in this offering, will act as agent under this 10b5-1 plan with the Company. See “The Company—Share Repurchase Plan.”

Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required.

The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

NOTICE TO PROSPECTIVE INVESTORS IN CANADA

This prospectus constitutes an “exempt offering document” as defined in and for the purposes of applicable Canadian securities laws. No prospectus has been filed with any securities commission or similar regulatory authority in Canada in connection with the offer and sale of the shares. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed upon this prospectus or on the merits of the shares and any representation to the contrary is an offence.

Canadian investors are advised that this prospectus has been prepared in reliance on section 3A.3 of National Instrument 33-105 Underwriting Conflicts (“NI 33-105”). Pursuant to section 3A.3 of NI 33-105, the company and the underwriters in the offering are exempt from the requirement to provide Canadian investors with certain conflicts of interest disclosure pertaining to “connected issuer” and/or “related issuer” relationships as would otherwise be required pursuant to subsection 2.1(1) of NI 33-105.

 

243


Table of Contents

Resale Restrictions

The offer and sale of the shares in Canada is being made on a private placement basis only and is exempt from the requirement that the Company prepares and files a prospectus under applicable Canadian securities laws. Any resale of Shares by a Canadian investor in this offering must be made in accordance with applicable Canadian securities laws, which may vary depending on the relevant jurisdiction, and which may require resales to be made in accordance with Canadian prospectus requirements, a statutory exemption from the prospectus requirements, in a transaction exempt from the prospectus requirements or otherwise under a discretionary exemption from the prospectus requirements granted by the applicable local Canadian securities regulatory authority. These resale restrictions may under certain circumstances apply to resales of the shares outside of Canada.

Representations of Purchasers

Each Canadian investor who purchases the shares will be deemed to have represented to the Company, the underwriters and to each dealer from whom a purchase confirmation is received, as applicable, that the investor is (i) purchasing as principal, or is deemed to be purchasing as principal in accordance with applicable Canadian securities laws; (ii) an “accredited investor” as such term is defined in section 1.1 of National Instrument 45-106 Prospectus Exemptions or, in Ontario, as such term is defined in section 73.3(1) of the Securities Act (Ontario); and (iii) a “permitted client” as such term is defined in section 1.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations.

Taxation and Eligibility for Investment

Any discussion of taxation and related matters contained in this prospectus does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a Canadian investor when deciding to purchase the shares and, in particular, does not address any Canadian tax considerations. No representation or warranty is hereby made as to the tax consequences to a resident, or deemed resident, of Canada of an investment in the shares or with respect to the eligibility of the shares for investment by such investor under relevant Canadian federal and provincial legislation and regulations.

Rights of Action for Damages or Rescission

Securities legislation in certain of the Canadian jurisdictions provides certain purchasers of securities pursuant to an offering memorandum (such as this prospectus), including where the distribution involves an “eligible foreign security” as such term is defined in Ontario Securities Commission Rule 45-501 Ontario Prospectus and Registration Exemptions and in Multilateral Instrument 45-107 Listing Representation and Statutory Rights of Action Disclosure Exemptions, as applicable, with a remedy for damages or rescission, or both, in addition to any other rights they may have at law, where the offering memorandum, or other offering document that constitutes an offering memorandum, and any amendment thereto, contains a “misrepresentation” as defined under applicable Canadian securities laws. These remedies, or notice with respect to these remedies, must be exercised or delivered, as the case may be, by the purchaser within the time limits prescribed under, and are subject to limitations and defences under, applicable Canadian securities legislation. In addition, these remedies are in addition to and without derogation from any other right or remedy available at law to the investor.

Language of Documents

Upon receipt of this document, each Canadian investor hereby confirms that it has expressly requested that all documents evidencing or relating in any way to the sale of the securities described herein (including for greater certainty any purchase confirmation or any notice) be drawn up in the English language only. Par la réception de ce document, chaque investisseur canadien confirme par les présentes qu’il a expressément exigé que tous les documents faisant foi ou se rapportant de quelque manière que ce soit à la vente des valeurs mobilières décrites aux présentes (incluant, pour plus de certitude, toute confirmation d’achat ou tout avis) soient rédigés en anglais seulement.

 

244


Table of Contents

NOTICE TO PROSPECTIVE INVESTORS IN SINGAPORE

This Prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this Prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

 

  a)

a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

 

  b)

a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the shares pursuant to an offer made under Section 275 of the SFA except:

 

  1.

to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;

 

  2.

where no consideration is or will be given for the transfer;

 

  3.

where the transfer is by operation of law;

 

  4.

as specified in Section 276(7) of the SFA; or

 

  5.

as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore.

NOTICE TO PROSPECTIVE INVESTORS IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE

This document relates to a company which is not subject to any form of regulation or approval by the Dubai Financial Services Authority (“DFSA”).

The DFSA has not approved this document nor has any responsibility for reviewing or verifying any document or other documents in connection with this company. Accordingly, the DFSA has not approved this document or any other associated documents nor taken any steps to verify the information set out in this document, and has no responsibility for it.

The shares have not been offered and will not be offered to any persons in the Dubai International Financial Centre except on that basis that an offer is:

 

  i.

an ‘‘Exempt Offer’’ in accordance with the Markets Rules (MKT) module of the DFSA; and

 

  ii.

made only to persons who meet the Professional Client criteria set out in Rule 2.3.2 of the DFSA Conduct of Business Module

This documents must not, therefore, be delivered to, or relied on by, any other type of person.

 

245


Table of Contents

The fund to which this document relates may be illiquid and/or subject to restrictions on its resale. Prospective purchasers should conduct their own due diligence on the Fund.

The DFSA has not taken steps to verify the information set out in this document, and has no responsibility for it. If you do not understand the contents of this document you should consult an authorised financial adviser.

NOTICE TO PROSPECTIVE INVESTORS IN AUSTRALIA

No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission (“ASIC”), in relation to the offering. This Prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001 (the “Corporations Act”), and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.

Any offer in Australia of the common shares may only be made to persons (the “Exempt Investors”) who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the common shares without disclosure to investors under Chapter 6D of the Corporations Act.

The common shares applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring common shares must observe such Australian on-sale restrictions.

This Prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this Prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.

NOTICE TO PROSPECTIVE INVESTORS IN HONG KONG

The shares of common shares have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the common shares has been or may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares of common shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.

 

246


Table of Contents

CUSTODIAN, TRANSFER AND DIVIDEND PAYING AGENT AND REGISTRAR

Our securities are held under a custody agreement by State Street Bank and Trust Company. The address of the custodian is 100 Summer Street, Floor 5, Boston, Massachusetts 02110. DST Systems, Inc. acts as our transfer agent, dividend disbursing agent for our common shares. The principal business address of DST Systems, Inc. is 333 West 11th Street, 5th Floor, Kansas City, Missouri 64105-1594, telephone number: (816) 435-3455.

BROKERAGE ALLOCATION AND OTHER PRACTICES

Since we will generally acquire and dispose of our investments in privately negotiated transactions, we will infrequently use brokers in the normal course of our business. Subject to policies established by the Board, if any, the Adviser will be primarily responsible for the execution of any publicly-traded securities portfolio transactions and the allocation of brokerage commissions. The Adviser does not expect to execute transactions through any particular broker or dealer, but will seek to obtain the best net results for us, taking into account such factors as price (including the applicable brokerage commission or dealer spread), size of order, difficulty of execution, and operational facilities of the firm and the firm’s risk and skill in positioning blocks of securities. While the Adviser generally will seek reasonably competitive trade execution costs, we will not necessarily pay the lowest spread or commission available. Subject to applicable legal requirements, the Adviser may select a broker based partly upon brokerage or research services provided to it and us and any other clients. In return for such services, we may pay a higher commission than other brokers would charge if the Adviser determines in good faith that such commission is reasonable in relation to the services provided.

LEGAL MATTERS

Certain legal matters with respect to the validity of the common shares offered by this prospectus have been passed upon for us by Richards, Layton & Finger, P.A., Wilmington, Delaware and for the underwriters by Ropes & Gray LLP.

EXPERTS

The consolidated financial statements included in this Registration Statement and the related financial statement schedules included elsewhere in the Registration Statement, have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports appearing herein and elsewhere in the Registration Statement. Such financial statements and financial statement schedules are included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.

AVAILABLE INFORMATION

We have filed with the SEC a registration statement on Form N-2, together with all amendments and related exhibits, under the Securities Act, with respect to the common shares offered by this prospectus. The registration statement contains additional information about us and the shares of our common shares being offered by this prospectus.

We also file with or submit to the SEC periodic and current reports, proxy statements and other information meeting the informational requirements of the Exchange Act.

We furnish our shareholders with annual reports containing audited financial statements, quarterly reports, and such other periodic reports as we determine to be appropriate or as may be required by law.

 

247


Table of Contents

Our website address is www.bxsl.com. Through our website, we make available, free of charge, the following documents as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Our website also contains additional information with respect to our industry and businesses. The information contained on, or that may be accessed through, our website is not part of, and is not incorporated into, this prospectus.

 

248


Table of Contents

APPENDIX A

SUPPLEMENTAL PERFORMANCE INFORMATION

Blackstone Secured Lending Fund (the “Company”) commenced investment operations on October 31, 2018. The performance information presented below is for the Company and funds and accounts currently or previously advised or sub-advised by the Adviser or its affiliates that have investment strategies that are substantially similar to the investment strategies of the Company (“Similar Accounts”). However, it is not the performance record of the Company and should not be considered a substitute for the Company’s own performance. Past returns are not indicative of future performance.

The performance information presented below is for Similar Accounts. Performance information is presented for funds and accounts that invest primarily in secured debt investments with a focus on originated transactions, including first and/or second lien senior secured loans and unitranche loans and, to a lesser extent, in subordinated and junior loans and other debt or equity instruments. The Similar Accounts represent all funds and accounts managed by Adviser or its affiliates that have substantially similar investment strategies to the investment strategies of the Company.

This supplemental performance information is provided to illustrate the past performance of the Adviser and its affiliates, in managing funds and accounts with investment strategies that are substantially similar to the investment strategies of the Company.

Certain of the Similar Accounts are not subject to investment limitations, leverage restrictions, diversification requirements and other restrictions imposed on business development companies by the 1940 Act and RICs under the Code. If these accounts were operated as business development companies and/or RICs their returns might have been lower. The fees and expenses of the Company may be higher than those of certain of the Similar Accounts. Had the Similar Accounts’ performance reflected the anticipated fees and expenses of the Company, their performance may have been lower. In addition, although the Similar Accounts have substantially similar investment strategies to the investment strategies of the Company, the Company will not always make the same investments as any Similar Accounts, and, therefore, the investment performance of the Company will differ from the investment performance of the Similar Accounts. For certain of the Similar Accounts, affiliates of the Adviser act or acted as a non-discretionary investment adviser or sub-adviser. Thus, while these affiliates of the Adviser propose or proposed investment opportunities to the advisers or investors of such accounts for investment, such advisers or investors have or had investment discretion to approve or reject such investment recommendations.

The following table sets forth the historical “net” and “gross” annualized total returns of the Similar Accounts for periods ending June 30, 2021.

Similar Accounts*

 

     1 year     3 year     5 year     10 year     Since
Inception
 

Net

     17.7     9.7     10.1     8.6     11.1

Gross

     22.7     13.8     15.3     14.4     18.0

*Performance presented for the Similar Accounts excludes the three month period ended June 30, 2018, during which the Adviser and its affiliates did not advise or sub-advise any Similar Accounts, except for certain sub-advised funds for which the resignation of the Adviser’s affiliates had already been announced but did not become effective until April 9, 2018.

Returns for periods over one year are annualized. The Similar Accounts include unitized and non-unitized funds with returns for unitized funds calculated on a total return basis and returns for separately managed accounts and non-unitized funds calculated on an internal rate of return basis. Annualized returns for the Similar Accounts are calculated by geometrically linking weighted fund quarterly returns. The historical performance presented above does not reflect the impact of any sales load, transaction or other fees, distribution fees or servicing fees.

 

249


Table of Contents

Net” returns are presented after management fees, distribution fees, organizational expenses, fund expenses, and performance-based compensation but before any taxes or tax withholding incurred by investors. “Gross” returns are returns presented before management fees, organizational expenses, fund expenses, performance-based compensation and taxes and tax withholding incurred by investors, which in the aggregate are expected to be substantial.

 

250


Table of Contents

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

Report of Independent Registered Public Accounting Firm

     F-2  

Consolidated Statements of Assets and Liabilities as of December  31, 2020 and December 31, 2019

     F-4  

Consolidated Statements of Operations for the years ended December  31, 2020, 2019 and 2018

     F-5  

Consolidated Statements of Changes in Net Assets for the years ended December 31, 2020, 2019 and 2018

     F-6  

Consolidated Statements of Cash Flows for the years ended December  31, 2020, 2019 and 2018

     F-7  

Consolidated Schedules of Investments as of December  31, 2020 and December 31, 2019

     F-9  

Notes to Consolidated Financial Statements

     F-25  
INTERIM FINANCIAL STATEMENTS

 

Consolidated Statements of Assets and Liabilities as of June  30, 2021 (Unaudited) and December 31, 2020

     F-57  

Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 (Unaudited)

     F-58  

Consolidated Statements of Changes in Net Assets for the three and six months ended June 30, 2021 and 2020 (Unaudited)

     F-59  

Consolidated Statements of Cash Flows for the six months ended June  30, 2021 and 2020 (Unaudited)

     F-61  

Consolidated Schedules of Investments as of June  30, 2021 (Unaudited) and December 31, 2020

     F-63  

Notes to Consolidated Financial Statements (Unaudited)

     F-86  

 

F-1


Table of Contents

Report of Independent Registered Public Accounting Firm

To the shareholders and the Board of Trustees of Blackstone Secured Lending Fund:

Opinion on the Consolidated Financial Statements and Financial Highlights

We have audited the accompanying consolidated statements of assets and liabilities of Blackstone Secured Lending Fund and its subsidiaries (the “Company”), including the consolidated schedule of investments, as of December 31, 2020 and 2019, the related consolidated statements of operations, cash flows, changes in net assets, and the financial highlights for the years ended December 31, 2020 and 2019 and the period from November 20, 2018 (commencement of operations) to December 31, 2018, and the related notes. In our opinion, the consolidated financial statements and financial highlights present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations, changes in net assets, cash flows, and the financial highlights for the years ended December 31, 2020 and 2019 and the period from November 20, 2018 (commencement of operations) to December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements and financial highlights are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and financial highlights. Our procedures included confirmation of investments owned as of December 31, 2020 and 2019, by correspondence with the custodian, loan agents, and borrowers; when replies were not received, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

 

F-2


Table of Contents

Fair Value — Investments — Refer to Footnote 2 and 5 in the financial statements

Critical Audit Matter Description

As described in Note 5 to the consolidated financial statements, the Company’s level 3 investments carried at fair value were $4,785,325 thousand as of December 31, 2020, which includes debt investments of $4,261,272 thousand for which the fair values were determined by Blackstone Credit BDC Advisors (the “Adviser”) using a yield analysis. The significant unobservable input used in the yield analysis is the discount rate based on comparable market yields. We identified the valuation of level 3 debt investments utilizing yield analyses as a critical audit matter given the significant judgments made by the Adviser to estimate the fair value. This required a high degree of auditor judgment and extensive audit effort, including the need to involve fair value specialists who possess significant valuation experience, to evaluate the appropriateness of the valuation techniques and the significant unobservable input.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the unobservable inputs and assumptions used to estimate the fair value of investments included the following, among others:

 

   

We evaluated the appropriateness of the valuation methodologies used by the Adviser.

 

   

We evaluated the appropriateness of the estimates and assumptions in the yield analyses through independent analysis and evidence, including the selected yields for debt investments.

 

   

With the assistance of our internal fair value specialists, we evaluated the valuation methodologies and related significant assumptions.

 

   

We evaluated the impact of current market events and conditions on the valuation methodology and inputs used by the Adviser.

/s/ DELOITTE & TOUCHE LLP

New York, New York

March 3, 2021

We have served as the Company’s auditor since 2018.

 

F-3


Table of Contents

Blackstone Secured Lending Fund

Consolidated Statements of Assets and Liabilities

(in thousands, except share and per share amounts)

 

     December 31,
2020
     December 31,
2019
 

ASSETS

     

Investments at fair value

     

Non controlled/non affiliated investments (cost of $5,575,482 and $3,067,767 at December 31, 2020 and December 31, 2019, respectively)

   $ 5,585,942      $ 3,092,440  

Cash and cash equivalents

     217,993        65,495  

Interest receivable from non controlled/non affiliated investments

     21,456        16,990  

Deferred financing costs

     6,933        5,172  

Deferred offering costs

     —          760  

Receivable for investments sold

     114,537        2,726  

Subscription receivable

     3,427        5,942  

Other assets

     578        582  
  

 

 

    

 

 

 

Total assets

   $ 5,950,866      $ 3,190,107  
  

 

 

    

 

 

 

LIABILITIES

     
Debt (net of unamortized debt issuance costs of $14,170 and $0 at December 31, 2020 and December 31, 2019, respectively)    $ 2,500,393      $ 1,454,214  

Payable for investments purchased

     48,582        10,086  

Due to affiliates

     5,546        2,007  

Management fees payable

     10,277        5,045  

Income based incentive fee payable

     15,262        6,345  

Capital gains incentive fee payable

     1,077        4,218  

Interest payable

     14,715        5,496  

Distribution payable (Note 8)

     86,638        27,827  

Accrued expenses and other liabilities

     567        1,752  
  

 

 

    

 

 

 

Total liabilities

     2,683,057        1,516,990  
  

 

 

    

 

 

 

Commitments and contingencies (Note 7)

     

NET ASSETS

     

Common shares, $0.001 par value (unlimited shares authorized; 129,661,586 and 64,289,742 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively)

     130        64  

Additional paid in capital

     3,232,562        1,635,915  

Distributable earnings (loss)

     35,117        37,138  
  

 

 

    

 

 

 

Total net assets

     3,267,809        1,673,117  
  

 

 

    

 

 

 

Total liabilities and net assets

   $ 5,950,866      $ 3,190,107  
  

 

 

    

 

 

 

NET ASSET VALUE PER SHARE

   $ 25.20      $ 26.02  

The accompanying notes are an integral part of these consolidated financial statements.

 

F-4


Table of Contents

Blackstone Secured Lending Fund

Consolidated Statements of Operations

(in thousands, except share and per share amounts)

 

     For the Year Ended December 31,  
     2020     2019     2018  

Investment income:

      

From non-controlled/non-affiliated investments:

      

Interest income

   $ 381,797     $ 146,380     $ 3,174  

Payment-in-kind interest income

     7,119       988       —    

Fee income

     725       680       —    
  

 

 

   

 

 

   

 

 

 

Total investment income

     389,641       148,048       3,174  

Expenses:

      

Interest expense

     65,949       35,431       1,351  

Management fees

     32,874       12,635       309  

Income based incentive fee

     41,983       13,818       —    

Capital gains incentive fee

     (3,141     4,218       —    

Professional fees

     1,999       1,338       212  

Board of Trustees’ fees

     467       430       177  

Administrative service expenses (Note 3)

     2,271       1,506       362  

Other general and administrative

     4,166       3,033       333  

Organization costs

     —         —         670  

Amortization of offering costs

     1,509       1,090       117  
  

 

 

   

 

 

   

 

 

 

Total expenses

     148,077       73,499       3,531  

Expense support (Note 3)

     —         (570     (1,696

Recoupment of expense support (Note 3)

     1,466       800       —    
  

 

 

   

 

 

   

 

 

 

Net expenses

     149,543       73,729       1,835  

Net investment income before excise tax

     240,098       74,319       1,339  

Excise tax expense

     517       465       52  
  

 

 

   

 

 

   

 

 

 

Net investment income after excise tax

     239,581       73,854       1,287  
  

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss):

      

Net change in unrealized appreciation (depreciation):

      

Non-controlled/non-affiliated investments

     (16,593     28,173       (3,428

Forward purchase obligation (Note 7)

     —         222       (222

Translation of assets and liabilities in foreign currencies

     11       (66     —    
  

 

 

   

 

 

   

 

 

 

Net unrealized appreciation (depreciation)

     (16,582     28,329       (3,650

Realized gain (loss):

      

Non-controlled/non-affiliated investments

     (4,378     3,962       —    

Foreign currency transactions

     17       61       —    

Derivative (Note 5)

     —         —         (581
  

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (4,361     4,023       (581
  

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (20,943     32,352       (4,231
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net assets resulting from operations

   $ 218,638     $ 106,206     $ (2,944
  

 

 

   

 

 

   

 

 

 

Net investment income per share (basic and diluted)

   $ 2.51     $ 2.18     $ 0.17  

Earnings (loss) per share (basic and diluted)

   $ 2.29     $ 3.14     $ (0.39

Weighted average shares outstanding (basic and diluted)

     95,333,867       33,858,642       7,458,181  

Distributions declared per share

   $ 2.30     $ 2.00     $ —    

The accompanying notes are an integral part of these consolidated financial statements.

 

F-5


Table of Contents

Blackstone Secured Lending Fund

Consolidated Statements of Changes in Net Assets

(in thousands)

 

     Par
Amount
     Additional
Paid in
Capital
    Distributable
Earnings
(Loss)
    Total Net
Assets
 
Balance, November 20, 2018 (commencement of operations)    $ —        $ —        $ —        $ —     
Issuance of common shares      10        239,299       —          239,309  
Net investment income      —           —          1,287       1,287  
Net realized gain (loss) on investments      —           —          (581     (581
Net change in unrealized appreciation (depreciation) on investments      —           —          (3,650     (3,650
Tax reclassification of shareholders’ equity in accordance with US GAAP      —           (52     52       —     
  

 

 

    

 

 

   

 

 

   

 

 

 

Balance, December 31, 2018

     10        239,247       (2,892     236,365  
  

 

 

    

 

 

   

 

 

   

 

 

 
Issuance of common shares      54        1,393,685       —          1,393,739  
Reinvestment of dividends      —           4,318       —          4,318  
Net investment income      —           —          73,854       73,854  
Net realized gain (loss) on investments      —           —          4,023       4,023  
Net change in unrealized appreciation (depreciation) on investments      —           —          28,329       28,329  
Dividends declared from net investment income      —           —          (67,511     (67,511
Tax reclassification of shareholders’ equity in accordance with US GAAP      —           (1,335     1,335       —     
  

 

 

    

 

 

   

 

 

   

 

 

 

Balance, December 31, 2019

     64        1,635,915       37,138       1,673,117  
  

 

 

    

 

 

   

 

 

   

 

 

 
Issuance of common shares      65        1,579,929       —          1,579,994  
Reinvestment of dividends      1        18,744       —          18,745  
Net investment income      —           —          239,581       239,581  
Net realized gain (loss) on investments      —           —          (4,361     (4,361
Net change in unrealized appreciation (depreciation) on investments      —           —          (16,582     (16,582
Dividends declared from net investment income      —           —          (222,685     (222,685
Tax reclassification of shareholders’ equity in accordance with US GAAP      —           (2,026     2,026       —     
  

 

 

    

 

 

   

 

 

   

 

 

 

Balance, December 31, 2020

   $ 130      $ 3,232,562     $ 35,117     $ 3,267,809  
  

 

 

    

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-6


Table of Contents

Blackstone Secured Lending Fund

Consolidated Statements of Cash Flows

(in thousands)

 

     For the Year Ended December 31,  
     2020     2019     2018  

Cash flows from operating activities:

      

Net increase (decrease) in net assets resulting from operations

   $ 218,638     $ 106,206     $ (2,944

Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:

      

Net unrealized (appreciation) depreciation on investments

     16,593       (28,173     3,428  

Net unrealized (appreciation) depreciation on forward purchase obligation

     —         (222     222  

Net unrealized (appreciation) depreciation on translation of assets and liabilities in foreign currencies

     (11     66       —    

Net realized (gain) loss on investments

     4,378       (3,962     581  

Net accretion of discount and amortization of premium

     (50,058     (9,812     (127

Payment-in-kind interest capitalized

     (7,635     (803     —    

Amortization of deferred financing costs

     3,811       1,565       327  

Amortization of debt financing and debt issuance costs

     1,327       —         —    

Amortization of offering costs

     1,509       1,090       117  

Payment in connection with settlement of derivative, net of cash received

     —         —         (24,015

Purchases of investments

     (4,485,214     (3,077,267     (428,071

Proceeds from sale of investments and principal repayments

     2,030,814       572,830       432  

Changes in operating assets and liabilities:

      

Interest receivable

     (4,466     (14,778     (1,608

Receivable for investments

     (111,811     15,020       11,994  

Other assets

     4       (211     (371

Payable for investments purchased

     38,496       (139,427     86,754  

Management fee payable

     5,232       4,736       309  

Income based incentive fee payable

     8,917       6,345       —    

Capital gains incentive fee payable

     (3,141     4,218       —    

Due to affiliates

     3,450       (349     1,761  

Interest payable

     9,219       4,578       779  

Accrued expenses and other liabilities

     (217     65       655  
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (2,320,165     (2,558,285     (349,777
  

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

      

Borrowings on debt

     2,992,142       2,259,973       238,650  

Repayments on debt

     (1,947,550     (990,754     (118,650

Deferred financing costs paid

     (6,540     (3,435     (2,597

Debt issuance costs paid

     (2,027     —         —    

Deferred offering costs paid

     (749     (663     (707

Proceeds from issuance of common shares

     1,582,509       1,387,797       239,309  

Dividends paid in cash

     (145,122     (35,366     —    
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     2,472,663       2,617,552       356,005  
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     152,498       59,267       6,228  

Cash and cash equivalents, beginning of period

     65,495       6,228       —    
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 217,993     $ 65,495     $ 6,228  
  

 

 

   

 

 

   

 

 

 

 

F-7


Table of Contents
     For the Year Ended December 31,  
     2020     2019      2018  
Supplemental information and non-cash activities:        
Interest paid during the period    $ 51,918     $ 28,946      $ 105  
Distribution payable    $ 86,638     $ 27,827      $ —     
Subscription receivable    $ 3,427     $ 5,942      $ —     
Reinvestment of distributions during the period    $ 18,744     $ 4,318      $ —     
Accrued but unpaid debt financing and debt issuance costs    $ 878     $ 1,032      $ —     
Accrued but unpaid offering costs    $ —        $ 596      $ —     
Non-cash purchases of investments    $ (43,692   $ —         $ —     
Non-cash sales of investments    $ 43,692     $ —         $ —     
Excise taxes paid    $ 570     $ 52      $ —     
Investments received in purchase of Syndicated Warehouse (Note 7)    $ —        $ —         $ 120,988  
Debt assumed in purchase of Syndicated Warehouse (Note 7)    $ —        $ —         $ (65,000
Other net operating assets and liabilities assumed in purchase of Syndicated Warehouse (Note 7)    $ —        $ —         $ (31,635

The accompanying notes are an integral part of these consolidated financial statements.

 

F-8


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

December 31, 2020

(in thousands)

 

Investments—non-controlled/
non-affiliated (1)

  

Reference
Rate
and Spread

   Interest
Rate (2)
    Maturity
Date
     Par
Amount/
Units
     Cost (3)      Fair
Value
     Percentage
of Net
Assets
 

First Lien Debt

                   

Aerospace & Defense

                   

Corfin Holdings, Inc. (4)(9)

   L + 6.00%      7.00     2/5/2026      $ 203,463      $ 200,008      $ 202,954        6.21

MAG DS Corp (9)

   L + 5.50%      6.50     4/1/2027        87,607        79,610        83,884        2.57  

TCFI AEVEX, LLC (4)(7)(9)

   L + 6.00%      7.00     3/18/2026        102,020        100,089        100,868        3.09  
             

 

 

    

 

 

    

 

 

 
                379,707        387,706        11.87  

Air Freight & Logistics

                   

Livingston International Inc. (4)(6)(9)

   L + 5.75%      6.75     4/30/2026        122,138        118,447        121,527        3.72  

Mode Purchaser, Inc. (4)(9)

   L + 6.25%      7.25     12/9/2026        176,988        173,986        171,235        5.24  

Omni Intermediate Holdings, LLC (4)(5)(7)(9)

   L + 5.00%      6.00     12/30/2026        5,000        4,875        4,875        0.15  

Omni Intermediate Holdings, LLC - Revolving Term Loan (4)(5)(7)(9)

   L + 5.00%      6.00     12/30/2025        42        28        28        —    

R1 Holdings, LLC (4)(7)(9)

   L + 6.00%      7.06     1/2/2026        57,669        56,856        57,093        1.75  
             

 

 

    

 

 

    

 

 

 
                354,192        354,758        10.86  

Building Products

                   

Jacuzzi Brands, LLC (4)(9)

   L + 6.50%      7.50     2/25/2025        99,228        97,922        95,755        2.93  

Latham Pool Products, Inc. (8)

   L + 6.00%      6.15     6/18/2025        49,193        47,888        49,117        1.50  

Lindstrom, LLC (4)(9)

   L + 6.25%      7.25     4/7/2025        129,650        127,891        127,057        3.89  

The Wolf Organization, LLC (4)(9)

   L + 6.50%      7.50     9/3/2026        95,750        94,204        96,707        2.96  

Windows Acquisition Holdings, Inc. (4)(5)(9)

   L + 6.50%      7.50     12/29/2026        62,996        61,737        61,736        1.89  

Windows Acquisition Holdings, Inc. - Revolving Term Loan (4)(5)(7)(9)

   L + 6.50%      7.50     12/29/2025        4,620        4,620        4,620        0.14  
             

 

 

    

 

 

    

 

 

 
                434,262        434,992        13.31  

Capital Markets

                   

Advisor Group Holdings, Inc. (8)

   L + 5.00%      5.15     7/31/2026        6,430        5,981        6,390        0.20  

 

F-9


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

December 31, 2020

(in thousands)

 

Investments—non-controlled/
non-affiliated (1)

  

Reference
Rate
and Spread

   Interest
Rate (2)
    Maturity
Date
     Par
Amount/
Units
     Cost (3)      Fair
Value
     Percentage
of Net
Assets
 
First Lien Debt (continued)                                              

Chemicals

                   

DCG Acquisition Corp. (4)(7)(9)

   L + 7.50%      8.50     9/30/2026        39,800        38,886        39,402        1.21  

LSF11 Skyscraper US Bidco 2, LLC (4)(6)(9)

   L + 5.50%      6.50     9/29/2027        106,878        101,786        106,344        3.25  

LSF11 Skyscraper Holdco S.à r.l, LLC (4)(6)(9)

   L + 5.50%      6.50     9/29/2027        335        319        334        0.01  

Polymer Additives, Inc. (8)

   L + 6.00%      6.21     7/31/2025        29,452        28,400        24,726        0.76  

USALCO, LLC (4)(7)(10)

   L + 7.25%      8.50     6/1/2026        166,751        162,734        168,553        5.16  

USALCO, LLC (4)(9)

   L + 6.50%      7.50     6/1/2026        35,693        34,979        34,979        1.07  

VDM Buyer, Inc. (4)(8)

   L + 6.75%      6.97     4/22/2025      24,023        26,651        28,512        0.87  

VDM Buyer, Inc. (4)(8)

   L + 6.75%      6.97     4/22/2025        63,089        62,184        61,197        1.87  
             

 

 

    

 

 

    

 

 

 
                455,939        464,046        14.20  

Commercial Services & Supplies

                   

Veregy Consolidated, Inc. (9)

   L + 6.00%      7.00     11/3/2027        20,000        19,413        19,850        0.61  

JSS Holdings, Inc. (4)(9)

   L + 6.25%      7.25     12/17/2027        327,174        322,295        322,266        9.86  

The Action Environmental Group, Inc. (4)(7)(10)

   L + 6.00%      7.25     1/16/2026        118,275        116,101        113,544        3.47  
             

 

 

    

 

 

    

 

 

 
                457,809        455,660        13.94  

Construction & Engineering

                   

Brand Industrial Services, Inc. (9)

   L + 4.25%      5.25     6/21/2024        7,884        7,317        7,706        0.24  

COP Home Services TopCo IV, Inc. (4)(5)(7)(9)

   L + 5.00%      6.00     12/31/2027        16,162        15,482        15,482        0.47  

IEA Energy Services, LLC (8)

   L + 6.75%      7.00     9/25/2024        30,517        29,556        30,466        0.93  
             

 

 

    

 

 

    

 

 

 
                52,355        53,654        1.64  

Distributors

                   

Bution Holdco 2, Inc. (4)(9)

   L + 6.25%      7.25     10/17/2025        123,438        121,467        120,969        3.70  

 

F-10


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

December 31, 2020

(in thousands)

 

Investments—non-controlled/
non-affiliated (1)

  

Reference
Rate
and Spread

   Interest
Rate (2)
    Maturity
Date
     Par
Amount/
Units
     Cost (3)      Fair
Value
     Percentage
of Net
Assets
 
First Lien Debt (continued)                                              

Dana Kepner Company, LLC (4)(7)(9)

   L + 6.25%      7.25     12/29/2026        71,667        70,236        70,234        2.15  

EIS Buyer, LLC (4)(11)

   L + 6.25%      7.75     9/30/2025        81,984        80,687        79,524        2.43  

Fastlane Parent Company, Inc. (8)

   L + 4.50%      4.65     2/4/2026        12,481        12,285        12,450        0.38  

PSS Industrial Group Corp. (11)

   L + 6.00%      7.50     4/10/2025        56,162        53,161        39,875        1.22  

SEKO Global Logistics Network, LLC (4)(5)(7)(9)

   L + 5.00%      6.00     12/30/2026        4,700        4,609        4,608        0.14  

Tailwind Colony Holding Corporation (4)(9)

   L + 7.50%      8.50     11/13/2024        33,045        32,698        31,971        0.98  

Unified Door & Hardware Group, LLC (4)(9)

   L + 6.25%      7.25     6/30/2025        91,063        89,440        91,063        2.79  
             

 

 

    

 

 

    

 

 

 
                464,583        450,695        13.79  

Diversified Financial Services

                   

SelectQuote, Inc. (4)(9)

   L + 6.00%      7.00     11/5/2024        59,714        58,153        60,311        1.85  

Electrical Equipment

                   

Shoals Holdings, LLC (4)(9)

   L + 3.25%      4.25     11/25/2026        149,687        145,982        145,944        4.47  

Electronic Equipment, Instruments & Components

                   

Albireo Energy, LLC (4)(5)(7)(9)

   L + 6.00%      7.00     12/23/2026        111,978        108,911        108,899        3.34  

Convergeone Holdings, Inc. (8)

   L + 5.00%      5.15     1/4/2026        14,617        14,187        13,849        0.42  
             

 

 

    

 

 

    

 

 

 
                123,098        122,748        3.76  

Energy Equipment & Services

                   

Abaco Energy Technologies, LLC (4)(11)

   L + 7.00%      8.50     10/4/2024        58,246        56,934        53,877        1.65  

Tetra Technologies, Inc. (4)(6)(9)

   L + 6.25%      7.25     9/10/2025        23,296        23,174        21,666        0.66  
             

 

 

    

 

 

    

 

 

 
                80,108        75,543        2.31  

Health Care Equipment & Supplies

                   

Lifescan Global Corporation (8)

   L + 6.00%      6.23     10/1/2024        5,797        5,633        5,537        0.17  

 

F-11


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

December 31, 2020

(in thousands)

 

Investments—non-controlled/
non-affiliated (1)

  

Reference
Rate
and Spread

   Interest
Rate (2)
    Maturity
Date
     Par
Amount/
Units
     Cost (3)      Fair
Value
     Percentage
of Net
Assets
 
First Lien Debt (continued)                                              

Surgical Specialties Corp (US) Inc. (4)(6)(8)

   L + 5.00%      5.25     5/7/2025        32,998        32,036        32,997        1.01  
             

 

 

    

 

 

    

 

 

 
                37,669        38,535        1.18  

Health Care Providers & Services

                   

Epoch Acquisition, Inc. (4)(9)

   L + 6.75%      7.75     10/4/2024        24,813        24,598        24,689        0.76  

Healthcomp Holding Company, LLC (4)(5)(7)(9)

   L + 6.00%      7.00     10/27/2026        87,300        84,901        84,827        2.60  

Jayhawk Buyer, LLC (4)(7)(9)

   L + 5.75%      6.75     10/15/2026        107,884        105,283        105,187        3.22  

Monroe Capital Holdings, LLC (4)(7)(9)

   L + 6.75%      7.75     9/8/2026        107,359        105,317        106,286        3.25  

Odyssey Holding Company, LLC (4)(9)

   L + 5.75%      6.75     11/16/2025        18,898        18,680        18,898        0.58  

The GI Alliance Management, LLC (4)(7)(9)

   L + 6.25%      7.25     11/4/2024        189,409        184,953        180,127        5.51  
             

 

 

    

 

 

    

 

 

 
                523,732        520,014        15.92  

Health Care Technology

                   

Edifecs, Inc. (4)(9)

   L + 7.50%      8.50     9/21/2026        263,008        256,739        259,063        7.93  

Project Ruby Ultimate Parent Corp (4)(9)

   L + 4.25%      5.25     2/9/2024        30,000        29,550        30,075        0.92  
             

 

 

    

 

 

    

 

 

 
                286,289        289,138        8.85  

Hotels, Restaurants & Leisure

                   

Excel Fitness Holdings, Inc (9)

   L + 5.25%      6.25     10/7/2025        46,588        44,918        42,939        1.31  

Industrial Conglomerates

                   

Tailwind Smith Cooper Intermediate Corporation (8)

   L + 5.00%      5.15     5/28/2026        30,682        29,746        29,190        0.89  

Insurance

                   

Integrity Marketing Acquisition, LLC (4)(5)(7)(9)

   L + 6.25%      7.25     8/27/2025        32,651        31,962        31,902        0.98  

SG Acquisition, Inc. (4)(8)

   L + 5.75%      5.90     1/27/2027        102,895        101,111        101,352        3.10  
             

 

 

    

 

 

    

 

 

 
                133,073        133,254        4.08  

 

F-12


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

December 31, 2020

(in thousands)

 

Investments—non-controlled/
non-affiliated (1)

  

Reference
Rate
and Spread

   Interest
Rate (2)
    Maturity
Date
     Par
Amount/
Units
     Cost (3)      Fair
Value
     Percentage
of Net
Assets
 
First Lien Debt (continued)                                              

Interactive Media & Services

                   

Bungie, Inc. (4)(9)

   L + 6.25%      7.25     8/28/2024        47,200        46,683        47,200        1.44  

Internet & Direct Marketing Retail

                   

Shutterfly, Inc. (9)

   L + 6.00%      7.00     9/25/2026        26,457        24,488        26,386        0.81  

Donuts, Inc. (4)(7)(9)

   L + 6.00%      7.00     12/29/2026        381,538        373,918        373,908        11.44  
             

 

 

    

 

 

    

 

 

 
                398,405        400,294        12.25  

IT Services

                   

Ahead Data Blue, LLC (9)

   L + 5.00%      6.00     10/13/2027        13,207        12,180        13,025        0.40  

Park Place Technologies, LLC (9)

   L + 5.00%      6.00     11/10/2027        45,000        43,232        43,350        1.33  
             

 

 

    

 

 

    

 

 

 
                55,412        56,375        1.73  

Machinery

                   

Apex Tool Group, LLC (10)

   L + 5.25%      6.50     8/1/2024        53,301        52,194        52,845        1.62  

Oil, Gas & Consumable Fuels

                   

Eagle Midstream Canada Finance, Inc (4)(6)(11)

   L + 6.25%      7.75     11/26/2024        150,862        149,099        148,599        4.55  

Paper & Forest Products

                   

Pixelle Specialty Solutions, LLC (9)

   L + 6.50%      7.50     10/31/2024        14,380        14,146        14,373        0.44  

Personal Products

                   

Paula’s Choice Holdings, Inc. (4)(9)

   L + 6.25%      7.25     11/17/2025        55,000        53,523        53,488        1.64  

Professional Services

                   

APFS Staffing Holdings, Inc. (8)

   L + 4.75%      4.90     4/15/2026        18,201        17,922        17,916        0.55  

GI Revelation Acquisition LLC (8)

   L + 5.00%      5.15     4/16/2025        32,163        29,987        31,681        0.97  

Minotaur Acquisition, Inc. (8)

   L + 5.00%      5.15     3/27/2026        33,180        31,782        32,641        1.00  

Titan Investment Company, Inc. (4)(5)(8)

   L + 5.75%      5.99     3/20/2027        42,892        40,812        42,356        1.30  

VT Topco, Inc. (8)

   L + 3.50%      3.65     8/1/2025        4,866        4,562        4,811        0.15  
             

 

 

    

 

 

    

 

 

 
                125,065        129,405        3.97  

 

F-13


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

December 31, 2020

(in thousands)

 

Investments—non-controlled/
non-affiliated (1)

  

Reference
Rate
and Spread

   Interest
Rate (2)
    Maturity
Date
     Par
Amount/
Units
     Cost (3)      Fair
Value
     Percentage
of Net
Assets
 
First Lien Debt (continued)                                              

Software

                   

LD Intermediate Holdings, Inc. (4)(9)

   L + 5.88%      6.88     12/9/2022        17,105        16,633        17,041        0.52  

MRI Software, LLC (4)(5)(7)(9)

   L + 5.50%      6.50     2/10/2026        22,329        22,081        22,220        0.68  

PaySimple, Inc. (4)(7)(8)

   L + 5.50%      5.65     8/23/2025        53,058        51,710        51,824        1.58  

Vero Parent, Inc. (9)

   L + 6.00%      7.00     8/16/2024        45,528        41,661        45,598        1.40  
             

 

 

    

 

 

    

 

 

 
                132,085        136,683        4.18  

Specialty Retail

                   

CustomInk, LLC (4)(9)

   L + 6.21%      7.21     5/3/2026        133,125        131,139        130,130        3.98  

Spencer Spirit Holdings, Inc. (8)

   L + 6.00%      6.15     6/19/2026        45,037        42,941        44,896        1.38  
             

 

 

    

 

 

    

 

 

 
                174,080        175,026        5.36  

Technology Hardware, Storage & Peripherals

                   

Deliver Buyer, Inc. (4)(9)

   L + 6.25%      7.25     5/1/2024        49,875        48,564        50,187        1.54  

Electronics For Imaging, Inc. (8)

   L + 5.00%      5.15     7/23/2026        34,650        32,723        29,788        0.90  

Lytx, Inc. (4)(7)(9)

   L + 6.00%      7.00     2/28/2026        69,313        68,327        69,146        2.12  
             

 

 

    

 

 

    

 

 

 
                149,614        149,121        4.56  

Trading Companies & Distributors

                   

The Cook & Boardman Group, LLC (9)

   L + 5.75%      6.75     10/17/2025        50,233        49,859        48,035        1.47  

Transportation Infrastructure

                   

Capstone Logistics, LLC (5)(7)(9)

   L + 4.75%      5.75     11/12/2027        3,053        3,020        3,094        0.09  

Spireon, Inc. (4)(9)

   L + 6.50%      7.50     10/4/2024        22,961        22,780        22,847        0.70  
             

 

 

    

 

 

    

 

 

 
                25,800        25,941        0.79  
             

 

 

    

 

 

    

 

 

 

Total First Lien Debt

              $ 5,493,561      $ 5,502,899        168.40
             

 

 

    

 

 

    

 

 

 

Second Lien Debt

                   

Construction & Engineering

                   

COP Home Services TopCo IV, Inc. (4)(5)(9)

   L + 8.75%      9.75     12/31/2028      $ 6,061      $ 5,925      $ 5,925        0.18

Health Care Technology

                   

Project Ruby Ultimate Parent Corp (4)(5)(9)

   L + 8.25%      9.25     2/10/2025        17,900        17,542        18,079        0.55  

 

F-14


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

December 31, 2020

(in thousands)

 

Investments—non-controlled/
non-affiliated (1)

  

Reference
Rate
and Spread

   Interest
Rate (2)
    Maturity
Date
     Par
Amount/
Units
     Cost (3)      Fair
Value
     Percentage
of Net
Assets
 
Second Lien Debt
(continued)
                                             

IT Services

                   

WEB.COM Group, Inc. (8)

   L + 7.75%      7.90     10/9/2026        15,098        14,485        14,488        0.45  

Software

                   

Epicor Software Corp. (5)(9)

   L + 7.75%      8.75     7/31/2028        11,186        11,027        11,707        0.36  
             

 

 

    

 

 

    

 

 

 

Total Second Lien Debt

              $ 48,979      $ 50,199        1.54
             

 

 

    

 

 

    

 

 

 

Warrants

                   

Software

                   

Mermaid EquityCo L.P. - Class B Units (4)

             4,550,697      $ 865      $ 865        0.03
             

 

 

    

 

 

    

 

 

 

Total Warrants

              $ 865      $ 865        0.03
             

 

 

    

 

 

    

 

 

 

Equity

                   

Aerospace & Defense

                   

Corfin Holdco, Inc. - Common Stock (4)

             2,137,866      $ 4,767      $ 4,767        0.15

Air Freight & Logistics

                   

Mode Holdings, L.P. - Class A-2 Common Units (4)

             5,486,923        5,487        5,487        0.17  

Distributor

                   

EIS Acquisition Holdings, LP - Class A Common Units (4)

             7,519        1,773        1,873        0.06  

Software

                   

Mermaid EquityCo L.P. - Class A-2 Common Units (4)

             14,849,355        14,850        14,849        0.45  

Specialty Retail

                   

CustomInk, LLC - Series A Preferred Units (4)

             384,520        5,200        5,003        0.15  
             

 

 

    

 

 

    

 

 

 

Total Equity Investments

              $ 32,077      $ 31,979        0.98
             

 

 

    

 

 

    

 

 

 

Total Investment Portfolio

              $ 5,575,482      $ 5,585,942        170.94
             

 

 

    

 

 

    

 

 

 

Cash and Cash Equivalents

                   

State Street Institutional U.S. Government Money Market Fund

              $ 29,427      $ 29,427        0.90

 

F-15


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

December 31, 2020

(in thousands)

 

Investments—non-controlled/
non-affiliated (1)

  

Reference
Rate
and Spread

   Interest
Rate (2)
     Maturity
Date
     Par
Amount/
Units
     Cost (3)      Fair
Value
     Percentage
of Net
Assets
 

Other Cash and Cash Equivalents

                 188,566        188,566        5.77
              

 

 

    

 

 

    

 

 

 

Total Cash and Cash Equivalents

               $ 217,993      $ 217,993        6.67
              

 

 

    

 

 

    

 

 

 

Total Portfolio Investments, Cash and Cash Equivalents

               $ 5,793,475      $ 5,803,935        177.61
              

 

 

    

 

 

    

 

 

 

 

(1)

Unless otherwise indicated, issuers of debt and equity investments held by the Company (which such term “Company” shall include the Company’s consolidated subsidiaries for purposes of this Consolidated Schedule of Investments) are denominated in dollars. All debt investments are income producing unless otherwise indicated. All equity investments are non-income producing unless otherwise noted. Certain portfolio company investments are subject to contractual restrictions on sales. Under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “1940 Act”), the Company would be deemed to “control” a portfolio company if the Company owned more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. As of December 31, 2020, the Company does not “control” any of these portfolio companies. Under the 1940 Act, the Company would be deemed an “affiliated person” of a portfolio company if the Company owns 5% or more of the portfolio company’s outstanding voting securities. As of December 31, 2020, the Company is not an “affiliated person” of any of its portfolio companies. The total par amount is presented for debt investments, while the number of shares or units owned is presented for equity investments. Each of the Company’s investments is pledged as collateral, under one or more of its credit facilities unless otherwise indicated.

(2)

Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to either LIBOR (“L”) or an alternate base rate (commonly based on the Federal Funds Rate (“F”) or the U.S. Prime Rate (“P”)), which generally resets periodically. For each loan, the Company has indicated the reference rate used and provided the spread and the interest rate in effect as of December 31, 2020. As of December 31, 2020, the reference rates for our variable rate loans were the 30-day L at 0.14%, the 90-day L at 0.24% and the 180-day L at 0.26% and P at 3.25%. Variable rate loans typically include an interest reference rate floor feature, which is generally 1.00%. As of December 31, 2020, 88.0% of the debt portfolio at fair value had an interest rate floor above zero.

(3)

The cost represents the original cost adjusted for the amortization of discounts and premiums, as applicable, on debt investments using the effective interest method in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

(4)

These investments were valued using unobservable inputs and are considered Level 3 investments. Fair value was determined in good faith by or under the direction of the Board of Trustees (see Note 2 and Note 5), pursuant to the Company’s valuation policy.

(5)

These debt investments are not pledged as collateral under any of the Company’s credit facilities. For other debt investments that are pledged to the Company’s credit facilities, a single investment may be divided into parts that are individually pledged as collateral to separate credit facilities.

(6)

The investment is not a qualifying asset under Section 55(a) of the 1940 Act. The Company may not acquire any non-qualifying asset unless, at the time of acquisition, qualifying assets represent at least 70% of the Company’s total assets. As of December 31, 2020, non-qualifying assets represented 9.7% of total assets as calculated in accordance with regulatory requirements.

 

F-16


Table of Contents
(7)

Position or portion thereof is an unfunded loan commitment, and no interest is being earned on the unfunded portion, although the investment may be subject to unused commitment fees. Negative cost and fair value results from unamortized fees, which are capitalized to the investment cost. The unfunded loan commitment may be subject to a commitment termination date that may expire prior to the maturity date stated. See below for more information on the Company’s unfunded commitments:

 

Investments—non-controlled/non-affiliated

  

Commitment Type

   Commitment
Expiration
Date
     Unfunded
Commitment
     Fair
Value
 

First Lien Debt

           

Albireo Energy, LLC - Delayed Draw A

   Delayed Draw Term Loan      2/21/2021      $ 25,404      $ (254

Albireo Energy, LLC - Delayed Draw B

   Delayed Draw Term Loan      6/23/2022        45,043        (450

Albireo Energy, LLC

   Revolver      12/23/2026        9,009        (135

Capstone Logistics, LLC

   Delayed Draw Term Loan      11/12/2027        547        —    

COP Home Services TopCo IV, Inc.

   Delayed Draw Term Loan      12/31/2022        3,328        (92

COP Home Services TopCo IV, Inc.

   Revolver      12/31/2025        1,941        (63

Dana Kepner Company, LLC

   Delayed Draw Term Loan      12/29/2021        29,861        —    

DCG Acquisition Corporation

   Delayed Draw Term Loan      6/30/2021        50,000        —    

Donuts, Inc.

   Revolver      12/29/2026        10,598        —    

Healthcomp Holding Company, LLC

   Delayed Draw Term Loan      4/27/2022        23,280        (291

Integrity Marketing Acquisition, LLC

   Delayed Draw Term Loan      2/7/2022        17,267        —    

Jayhawk Buyer, LLC

   Delayed Draw Term Loan      10/15/2021        25,173        —    

Lytx, Inc.

   Delayed Draw Term Loan      2/28/2022        16,761        (168

Monroe Capital Holdings, LLC

   Delayed Draw Term Loan      6/8/2022        22,269        —    

MRI Software, LLC

   Delayed Draw Term Loan      1/31/2022        6,055        (15

MRI Software, LLC

   Revolver      2/10/2026        1,516        (38

Omni Intermediate Holdings, LLC

   Delayed Draw Term Loan      12/30/2021        3,250        —    

Omni Intermediate Holdings, LLC

   Revolver      12/30/2025        514        —    

PaySimple, Inc.

   Delayed Draw Term Loan      8/23/2025        8,652        —    

R1 Holdings, LLC

   Delayed Draw Term Loan      1/2/2021        6,851        —    

SEKO Global Logistics Network, LLC

   Delayed Draw Term Loan      12/30/2022        800        (12

SEKO Global Logistics Network, LLC

   Revolver      12/30/2026        600        (9

TCFI AEVEX, LLC

   Delayed Draw Term Loan      12/31/2021        13,158        (132

The Action Environmental Group, Inc.

   Delayed Draw Term Loan      4/16/2021        7,992        —    

The GI Alliance Management, LLC

   Delayed Draw Term Loan      5/3/2022        85,236        (852

USALCO, LLC

   Delayed Draw Term Loan      6/1/2022        11,295        (282

Windows Acquisition Holdings, Inc.

   Revolver      12/29/2025        5,880        —    
        

 

 

    

 

 

 

Total First Lien Debt Unfunded Commitments

         $ 432,280      $ (2,793
        

 

 

    

 

 

 

 

(8)

There are no interest rate floors on these investments.

(9)

The interest rate floor on these investments as of December 31, 2020 was 1.00%

(10)

The interest rate floor on these investments as of December 31, 2020 was 1.25%.

(11)

The interest rate floor on these investments as of December 31, 2020 was 1.50%

The accompanying notes are an integral part of these consolidated financial statements.

 

F-17


Table of Contents

Blackstone Secured Lending Fund Consolidated Schedule of Investments December 31, 2019 (in thousands)

 

Investments—non-controlled/
non-affiliated (1)(5)

 

Reference Rate
and Spread

  Interest
Rate (2)
   

Maturity
Date

  Par
Amount/
Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 

First Lien Debt

             

Air Freight and Logistics

             

Livingston International Inc. (6)(8)

  L + 5.75%     7.69   4/30/2026   $ 116,415     $ 113,249     $ 115,105       6.88

Mode Purchaser, Inc. (4)(10)

  L + 6.25%     8.14   12/9/2026     178,325       174,791       174,759       10.45  

R1 Holdings, LLC (4)(7)(10)

  L + 6.00%     7.69   1/2/2026     44,732       44,047       44,732       2.67  
         

 

 

   

 

 

   

 

 

 
            332,087       334,596       20.00  

Building Products

             

Jacuzzi Brands LLC (4)(7)(10)

  L + 6.50%     8.30   2/25/2025     91,640       90,132       90,723       5.42  

Latham Pool Products, Inc. (8)

  L + 6.00%     7.76   6/13/2025     53,571       51,824       52,812       3.16  

Lindstrom, LLC (4)(10)

  L + 6.25%     8.48   4/7/2025     130,633       128,444       129,980       7.77  

Mi Windows and Doors, LLC (10)

  L + 5.50%     7.21   11/26/2026     30,000       28,382       30,038       1.80  

The Wolf Organization, LLC (4)(10)

  L + 6.50%     8.41   9/3/2026     74,813       73,386       74,625       4.46  
         

 

 

   

 

 

   

 

 

 
            372,168       378,178       22.61  

Chemicals

             

Alchemy US Holdco 1, LLC (8)

  L + 5.50%     7.24   10/10/2025     3,900       3,892       3,843       0.23  

Polymer Additives, Inc. (4)(8)

  L + 6.00%     7.80   7/31/2025     29,752       28,457       24,248       1.45  

VDM Buyer, Inc. (4)(10)

  L + 6.75%     8.69   4/22/2025   24,267       26,828       26,695       1.60  

VDM Buyer, Inc. (4)(7)(10)

  L + 6.75%     8.71   4/22/2025     63,730       62,603       62,455       3.73  
         

 

 

   

 

 

   

 

 

 
            121,780       117,241       7.01  

Commercial Services & Supplies

             

Research Now Group, LLC (10)

  L + 5.50%     7.41   12/20/2024     28,662       28,296       28,701       1.72  

JSS Holdings, Inc. (4)(10)

  L + 6.25% (incl. 2.00% PIK)     7.99   10/18/2025     237,678       234,806       234,707       14.03  
         

 

 

   

 

 

   

 

 

 
            263,102       263,408       15.75  

Construction & Engineering

             

IEA Energy Services LLC (8)

  L + 8.25%     10.19   9/25/2024     10,200       9,804       10,315       0.62  

Therma LLC (4)(10)

  L + 6.50%     8.46   3/29/2025     128,421       126,114       127,137       7.60  
         

 

 

   

 

 

   

 

 

 
            135,918       137,452       8.22  

 

F-18


Table of Contents

Blackstone Secured Lending Fund Consolidated Schedule of Investments December 31, 2019 (in thousands)

 

Investments—non-controlled/
non-affiliated (1)(5)

 

Reference Rate
and Spread

  Interest
Rate (2)
   

Maturity
Date

  Par
Amount/
Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 
First Lien Debt (continued)                                      

Distributors

             

Bution Holdco 2, Inc. (4)(10)

  L + 6.25%     7.99   10/17/2025     124,688       122,280       122,194       7.30  

Construction Supply Acquisition, LLC (4)(7)(10)

  L + 6.00%     7.69   10/1/2025     135,756       132,800       134,738       8.05  

Tailwind Colony Holding Corporation (4)(10)

  L + 7.50%     9.44   11/13/2024     32,081       31,703       31,439       1.88  

EIS Buyer, LLC (4)(7)(12)

  L + 6.25%     8.05   9/30/2025     134,072       131,504       131,390       7.85  

EIS Buyer, LLC (4)(12)

  L + 6.25%     8.05   9/30/2020     19,551       19,259       19,258       1.15  

Fastlane Parent Company, Inc. (4)(8)

  L + 4.50%     6.45   2/4/2026     34,738       34,131       34,477       2.06  

PSS Industrial Group Corp. (4)(12)

  L + 6.00%     7.94   4/10/2025     58,695       54,825       57,374       3.43  

Unified Door and Hardware Group, LLC (4)(7)(10)

  L + 6.25%     8.19   6/30/2025     39,048       38,333       38,852       2.32  
         

 

 

   

 

 

   

 

 

 
            564,835       569,722       34.04  

Diversified Financial Services

             

SelectQuote, Inc. (4)(10)

  L + 6.00%     7.70   11/5/2024     78,087       75,497       77,697       4.64  

Electronic Equipment, Instruments & Components

          .        

Convergeone Holdings, Inc. (8)

  L + 5.00%     6.80   1/4/2026     14,766       14,244       14,165       0.85  

Energy Equipment & Services

             

Abaco Energy Technologies LLC (4)(12)

  L + 7.00%     8.69   10/4/2024     58,836       57,157       57,071       3.41  

Tetra Technologies, Inc. (4)(6)(10)

  L + 6.25%     8.05   9/10/2025     24,055       23,901       23,213       1.39  
         

 

 

   

 

 

   

 

 

 
            81,058       80,284       4.80  

Health Care Equipment & Supplies

             

Lifescan Global Corporation (8)

  L + 6.00%     8.06   10/1/2024     22,862       22,072       21,890       1.31  

Surgical Specialties Corp (US) Inc. (6)(8)

  L + 5.00%     6.80   5/7/2025     33,416       32,218       33,166       1.98  
         

 

 

   

 

 

   

 

 

 
            54,290       55,056       3.29  

 

F-19


Table of Contents

Blackstone Secured Lending Fund Consolidated Schedule of Investments December 31, 2019 (in thousands)

 

Investments—non-controlled/
non-affiliated (1)(5)

 

Reference Rate
and Spread

  Interest
Rate (2)
   

Maturity
Date

  Par
Amount/
Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 
First Lien Debt (continued)                                      

Health Care Providers & Services

             

Epoch Acquisition, Inc. (4)(10)

  L + 6.75%     8.49   10/4/2024     25,066       24,791       25,066       1.50  

The GI Alliance Management, LLC (4)(7)(10)

  L + 6.25%     8.19   11/2/2024     109,902       107,804       108,191       6.47  

Odyssey Holding Company, LLC (4)(10)

  L + 5.75%     7.78   11/16/2025     13,628       13,483       13,492       0.81  
         

 

 

   

 

 

   

 

 

 
            146,078       146,749       8.78  

Health Care Technology

             

Precyse Acquisition Corporation (10)

  L + 4.50%     6.30   10/20/2022     2,962       2,940       2,482       0.15  

Hotels, Restaurants & Leisure

             

Excel Fitness Holdings, Inc. (10)

  L + 5.25%     7.05   10/7/2025     47,059       45,018       47,118       2.82  

Industrial Conglomerates

             

Tailwind Smith Cooper Intermediate Corporation (8)

  L + 5.00%     6.80   5/28/2026     32,502       31,754       31,202       1.86  

Interactive Media & Services

             

Bungie, Inc. (4)(10)

  L + 6.25%     8.05   8/28/2024     47,200       46,541       46,846       2.80  

Internet & Direct Marketing Retail

             

Shutterfly, Inc. (10)

  L + 6.00%     7.94   9/25/2026     44,053       40,216       41,611       2.49  

IT Services

             

Travelport Worldwide Ltd. (6)(8)

  L + 5.00%     6.94   5/29/2026     103,730       97,896       97,299       5.81  

Media

             

DiscoverOrg, LLC (8)

  L + 4.50%     6.30   2/2/2026     13,092       12,978       13,157       0.79  

Radiate Holdco LLC (5)(9)

  L + 3.50%     5.30   2/1/2024     4,975       4,908       5,015       0.30  
         

 

 

   

 

 

   

 

 

 
            17,886       18,172       1.09  

Machinery

             

Apex Tool Group, LLC (11)

  L + 5.50%     7.30   8/1/2024     50,955       49,820       50,390       3.01  

Oil, Gas & Consumable Fuels

             

Eagle Midstream Canada Finance Inc. (4)(7)(12)

  L + 6.25%     8.17   11/26/2024     150,862       148,662       148,599       8.87  

 

F-20


Table of Contents

Blackstone Secured Lending Fund Consolidated Schedule of Investments December 31, 2019 (in thousands)

 

Investments—non-controlled/
non-affiliated (1)(5)

 

Reference Rate
and Spread

  Interest
Rate (2)
   

Maturity
Date

  Par
Amount/
Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 
First Lien Debt (continued)                                      

Professional Services

             

APFS Staffing Holdings, Inc. (8)

  L + 5.00%     6.79   4/15/2026     22,614       22,206       22,614       1.35  

Minotaur Acquisition, Inc. (8)

  L + 5.00%     6.80   3/27/2026     17,597       17,283       17,377       1.04  

GI Revelation Acquisition LLC (8)

  L + 5.00%     6.80   4/16/2025     15,155       14,714       14,341       0.86  
         

 

 

   

 

 

   

 

 

 
            54,203       54,332       3.25  

Software

             

LD Intermediate Holdings, Inc. (10)

  L + 5.88%     7.93   12/9/2022     14,572       14,314       14,608       0.87  

PaySimple, Inc. (4)(5)(7)(8)

  L + 5.50%     7.30   8/23/2025     26,488       25,984       26,328       1.57  

Vero Parent, Inc. (10)

  L + 6.00%     7.91   8/16/2024     51,000       45,471       48,705       2.91  
         

 

 

   

 

 

   

 

 

 
            85,769       89,641       5.35  

Specialty Retail

             

CustomInk, LLC (4)(10)

  L + 6.00%     8.21   5/3/2026     133,125       130,766       132,459       7.92  

Spencer Spirit Holdings, Inc. (8)

  L + 6.00%     7.79   6/19/2026     49,875       47,102       49,485       2.96  
         

 

 

   

 

 

   

 

 

 
            177,868       181,944       10.88  

Trading Companies & Distributors

             

The Cook & Boardman Group, LLC (10)

  L + 5.75%     7.67   10/17/2025     6,806       6,751       6,567       0.39  

Technology Hardware, Storage & Peripherals

             

Electronics For Imaging, Inc. (8)

  L + 5.00%     6.94   7/23/2026     35,000       32,703       32,703       1.95  

Transportation Infrastructure

             

Spireon, Inc. (4)(7)(10)

  L + 6.50%     8.44   10/4/2024     22,646       22,414       22,646       1.35  
         

 

 

   

 

 

   

 

 

 

Total First Lien Debt

          $ 3,021,498     $ 3,046,101       182.06
         

 

 

   

 

 

   

 

 

 
Second Lien Debt                                      

Commercial Services & Supplies

             

TKC Holdings, Inc. (10)

  L + 8.00%     9.80   2/1/2024   $ 1,000     $ 997     $ 910       0.05

IT Services

             

WEB.COM Group, Inc. (8)

  L + 7.75%     9.49   10/9/2026     16,607       15,882       16,031       0.96  

 

F-21


Table of Contents

Blackstone Secured Lending Fund Consolidated Schedule of Investments December 31, 2019 (in thousands)

 

Investments—non-controlled/
non-affiliated (1)(5)

 

Reference Rate
and Spread

  Interest
Rate (2)
   

Maturity
Date

  Par
Amount/
Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 
Second Lien Debt (continued)                                      

Media

             

DiscoverOrg, LLC (8)

  L + 8.50%     10.19   2/1/2027     11,250       11,100       11,306       0.68  

Software

             

Imperva, Inc. (10)

  L + 7.75%     9.74   1/11/2027     1,421       1,426       1,249       0.07  

Rocket Software, Inc. (8)

  L + 8.25%     10.05   11/27/2026     3,500       3,377       2,923       0.17  
         

 

 

   

 

 

   

 

 

 
            4,803       4,172       0.24  
         

 

 

   

 

 

   

 

 

 

Total Second Lien Debt

          $ 32,782     $ 32,419       1.93
         

 

 

   

 

 

   

 

 

 

Equity Investments

             

Air Freight and Logistics

             

Mode Holdings, L.P. - Class A-2 Common Units (4)

          5,486,923       5,487       5,487       0.33  

Distributors

             

EIS Acquisition Holdings, LP - Class A Common Units (4)

          11,200       2,800       2,800       0.17  

Specialty Retail

             

CustomInk, LLC - Series A Preferred Units (4)

          384,520       5,200       5,633       0.34  
         

 

 

   

 

 

   

 

 

 

Total Equity Investments

          $ 13,487     $ 13,920       0.84
         

 

 

   

 

 

   

 

 

 

Total Investment Portfolio

          $ 3,067,767     $ 3,092,440       184.83
         

 

 

   

 

 

   

 

 

 

Cash and Cash Equivalents

             

Other Cash and Cash Equivalents

          $ 65,495     $ 65,495       3.91
         

 

 

   

 

 

   

 

 

 

Total Portfolio Investments, Cash and Cash Equivalents

          $ 3,133,262     $ 3,157,935       188.74
         

 

 

   

 

 

   

 

 

 

 

(1)

Unless otherwise indicated, issuers of debt and equity investments held by the Company (which such term “Company” shall include the Company’s consolidated subsidiaries for purposes of this Consolidated Schedule of Investments) are denominated in dollars. All debt investments are income producing unless otherwise indicated. All equity investments are non-income producing unless otherwise noted. Certain portfolio company investments are subject to contractual restrictions on sales. Under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “1940 Act”), the Company would be deemed to “control” a portfolio company if the Company owned more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. As of December 31, 2019, the Company does not “control” any of

 

F-22


Table of Contents

Blackstone Secured Lending Fund Consolidated Schedule of Investments December 31, 2019 (in thousands)

 

  these portfolio companies. Under the 1940 Act, the Company would be deemed an “affiliated person” of a portfolio company if the Company owns 5% or more of the portfolio company’s outstanding voting securities. As of December 31, 2019, the Company is not an “affiliated person” of any of its portfolio companies. The total par amount is presented for debt investments, while the number of shares or units owned is presented for equity investments.
(2)

Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to either LIBOR (“L”) or an alternate base rate (commonly based on the Federal Funds Rate (“F”) or the U.S. Prime Rate (“P”)), which generally resets periodically. For each loan, the Company has indicated the reference rate used and provided the spread and the interest rate in effect as of December 31, 2019. As of December 31, 2019, the reference rates for our variable rate loans were the 30-day L at 1.76%, the 90-day L at 1.91% and the 180-day L at 1.91% and P at 4.75%. Variable rate loans typically include an interest reference rate floor feature, which is generally 1.00%. As of December 31, 2019, 79.1% of the portfolio at fair value had a base rate floor above zero.

(3)

The cost represents the original cost adjusted for the amortization of discounts and premiums, as applicable, on debt investments using the effective interest method in accordance with U.S. GAAP.

(4)

These investments were valued using unobservable inputs and are considered Level 3 investments. Fair value was determined in good faith by or under the direction of the Board of Trustees (see Note 2 and Note 5), pursuant to the Company’s valuation policy.

(5)

Each of the Company’s debt investments is pledged as collateral, other than the investments in PaySimple, Inc. and Radiate Holdco LLC, under one or more of its credit facilities. A single investment may be divided into parts that are individually pledged as collateral to separate credit facilities.

(6)

The investment is not a qualifying asset under Section 55(a) of the 1940 Act. The Company may not acquire any non-qualifying asset unless, at the time of acquisition, qualifying assets represent at least 70% of the Company’s total assets. As of December 31, 2019, non-qualifying assets represented 14.1% of total assets as calculated in accordance with regulatory requirements.

(7)

Position or portion thereof is an unfunded loan commitment, and no interest is being earned on the unfunded portion, although the investment may be subject to unused commitment fees. Negative cost and fair value results from unamortized fees, which are capitalized to the investment cost. The unfunded loan commitment may be subject to a commitment termination date that may expire prior to the maturity date stated. See below for more information on the Company’s unfunded commitments:

 

F-23


Table of Contents

Investments—non-controlled/non-affiliated

 

Commitment Type

  Commitment
Expiration Date
    Unfunded
Commitment
    Fair Value  

First Lien Debt

                        

Construction Supply Acquisition, LLC

  Delayed Draw Term Loan     10/1/2025     $ 22,626     $ —    

Jacuzzi Brands LLC

  Delayed Draw Term Loan     2/25/2021       8,450       —    

PaySimple, Inc.

  Delayed Draw Term Loan     8/23/2025       5,588       —    

R1 Holdings, LLC

  Delayed Draw Term Loan     1/2/2021       20,282       —    

Spireon, Inc.

  Delayed Draw Term Loan     6/30/2020       6,375       —    

EIS Acquisition Holdings, LP

  Delayed Draw Term Loan     9/30/2020       16,800       —    

The GI Alliance Management, LLC

  Delayed Draw Term Loan     11/2/2024       66,143       (612

Unified Door and Hardware Group, LLC

  Delayed Draw Term Loan     6/29/2020       15,094       —    

VDM Buyer, Inc.

  Delayed Draw Term Loan     10/22/2020       18,000       —    
     

 

 

   

 

 

 

Total First Lien Debt Unfunded Commitments

      $ 179,358     $ (612
     

 

 

   

 

 

 

 

(8)

There are no interest rate floors on these investments.

(9)

The interest rate floor on these investments as of December 31, 2019 was 0.75%

(10)

The interest rate floor on these investments as of December 31, 2019 was 1.00%

(11)

The interest rate floor on these investments as of December 31, 2019 was 1.25%.

(12)

The interest rate floor on these investments as of December 31, 2019 was 1.50%

The accompanying notes are an integral part of these consolidated financial statements.

 

F-24


Table of Contents

Blackstone Secured Lending Fund

Notes to Consolidated Financial Statements

(in thousands, unless otherwise indicated, except per share data, percentages and as otherwise noted)

Note 1. Organization

Blackstone Secured Lending Fund (together with its consolidated subsidiaries, the “Company”), is a Delaware statutory trust formed on March 26, 2018, and structured as an externally managed, non-diversified closed-end investment company. On October 26, 2018, the Company elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, the Company elected to be treated for U.S. federal income tax purposes, as a regulated investment company (“RIC”), as defined under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). The Company also intends to continue to comply with the requirements prescribed by the Code in order to maintain tax treatment as a RIC.

The Company’s investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. The Company seeks to achieve its investment objective primarily through originated loans and other securities, including syndicated loans, of private U.S. companies, specifically small and middle market companies, typically in the form of first lien senior secured and unitranche loans (including first out/last out loans), and to a lesser extent, second lien, third lien, unsecured and subordinated loans and other debt and equity securities.

The Company is externally managed by Blackstone Credit BDC Advisors LLC (the “Adviser”). Blackstone Alternative Credit Advisors LP (the “Administrator” and, collectively with its affiliates in the credit-focused business of The Blackstone Group Inc. (“Blackstone”), “Blackstone Credit,” which, for the avoidance of doubt, excludes Harvest Fund Advisors LLC and Blackstone Insurance Solutions) provides certain administrative and other services necessary for the Company to operate pursuant to an administration agreement (the “Administration Agreement”). Blackstone Credit is part of the credit-focused platform of Blackstone and is the primary part of its credit reporting segment.

The Company is conducting a private offering (the “Private Offering”) of its common shares of beneficial interest (i) to accredited investors, as defined in Regulation D under the Securities Act of 1933, as amended (the “1933 Act”), and (ii) in the case of shares sold outside the United States, to persons that are not “U.S. persons,” as defined in Regulation S under the 1933 Act, in reliance on exemptions from the registration requirements of the 1933 Act. At each closing of the Private Offering, each investor makes a capital commitment (“Capital Commitment”) to purchase shares of the beneficial interest of the Company pursuant to a subscription agreement entered into with the Company. Investors are required to fund drawdowns to purchase the Company’s shares up to the amount of their Capital Commitments on as as-needed basis each time the Company delivers a notice to investors.

On October 31, 2018, the Company began its initial period of closing of capital commitments (“Initial Closing Period”) which ended on October 31, 2020. The Company commenced its loan origination and investment activities on November 20, 2018, the date of receipt of the initial drawdown from investors in the Private Offering (the “Initial Drawdown Date”).

The year ended December 31, 2018 represents the period from November 20, 2018 (commencement of operations), which was from the Initial Drawdown Date to December 31, 2018.

Effective on December 10, 2020, the Company changed its name from “Blackstone / GSO Secured Lending Fund” to “Blackstone Secured Lending Fund”.

Note 2. Significant Accounting Policies

Basis of Presentation

The consolidated financial statements have been prepared on the accrual basis of accounting in accordance

 

F-25


Table of Contents

with U.S. GAAP. As an investment company, the Company applies the accounting and reporting guidance in Accounting Standards Codification (“ASC”) Topic 946, Financial Services – Investment Companies (“ASC 946”) issued by the Financial Accounting Standards Board (“FASB”). U.S. GAAP for an investment company requires investments to be recorded at fair value.

The annual consolidated financial statements have been prepared in accordance with U.S. GAAP for annual financial information and pursuant to the requirements for reporting on Form 10-K and Article 6 of Regulation S-X. In the opinion of management, all adjustments considered necessary for the fair presentation of the consolidated financial statements for the periods presented have been included. All intercompany balances and transactions have been eliminated.

Certain prior period information has been reclassified to conform to the current period presentation.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Such amounts could differ from those estimates and such differences could be material. Assumptions and estimates regarding the valuation of investments involve a higher degree of judgment and complexity and these assumptions and estimates may be significant to the consolidated financial statements.

The global impact of the COVID-19 outbreak has been rapidly evolving, and as cases of COVID-19 have continued to be identified, including different variants of the disease, many countries have reacted by instituting quarantines and restrictions on travel, closing financial markets and/or restricting trading, and limiting operations of non-essential businesses. Such actions are creating disruption in many industries. The outbreak has had a continued adverse impact on economic and market conditions and has triggered a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on economic and market conditions. The Company believes the estimates and assumptions underlying the consolidated financial statements are reasonable and supportable based on the information available as of December 31, 2020, however uncertainty over the ultimate impact COVID-19 will have on the global economy generally, and the Company’s business in particular, makes any estimates and assumptions as of December 31, 2020 inherently less certain than they would be absent the current and potential impacts of COVID-19. Actual results may ultimately differ from those estimates.

Consolidation

As provided under ASC 946, the Company will not consolidate its investment in a company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the results of the Company’s wholly-owned subsidiaries.

As of December 31, 2020, the Company’s consolidated subsidiaries were BGSL Jackson Hole Funding LLC (“Jackson Hole Funding”), BGSL Breckenridge Funding LLC (“Breckenridge Funding”), BGSL Big Sky Funding LLC (“Big Sky Funding”) and BGSL Investments LLC (“BGSL Investments” and collectively with Jackson Hole Funding, Breckenridge Funding and Big Sky Funding the “SPVs”).

Cash and Cash Equivalents

Cash and cash equivalents consist of demand deposits and highly liquid investments, such as money market funds, with original maturities of three months or less. Cash and cash equivalents are carried at cost, which

 

F-26


Table of Contents

approximates fair value. The Company deposits its cash and cash equivalents with financial institutions and, at times, may exceed the Federal Deposit Insurance Corporation insured limit.

Investments

Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds received (excluding prepayment fees, if any) and the amortized cost basis of the investment using the specific identification method without regard to unrealized gains or losses previously recognized, and include investments charged off during the period, net of recoveries. The net change in unrealized gains or losses primarily reflects the change in investment values, including the reversal of previously recorded unrealized gains or losses with respect to investments realized during the period.

The Company is required to report its investments for which current market values are not readily available at fair value. The Company values its investments in accordance with FASB ASC 820, Fair Value Measurements (“ASC 820”), which defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the applicable measurement date. ASC 820 prioritizes the use of observable market prices derived from such prices over entity-specific inputs. Due to the inherent uncertainties of valuation, certain estimated fair values may differ significantly from the values that would have been realized had a ready market for these investments existed, and these differences could be material. See “– Note 5. Fair Value Measurements.

Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. The Company utilizes mid-market pricing (i.e., mid-point of average bid and ask prices) to value these investments. These market quotations are obtained from independent pricing services, if available; otherwise from at least two principal market makers or primary market dealers. To assess the continuing appropriateness of pricing sources and methodologies, the Adviser regularly performs price verification procedures and issues challenges as necessary to independent pricing services or brokers, and any differences are reviewed in accordance with the valuation procedures. The Adviser does not adjust the prices unless it has a reason to believe market quotations are not reflective of the fair value of an investment. Examples of events that would cause market quotations to not reflect fair value could include cases when a security trades infrequently or not at all, causing a quoted purchase or sale price to become stale, or in the event of a “fire sale” by a distressed seller. All price overrides require approval from the Board of Trustees (“Board”).

Where prices or inputs are not available or, in the judgment of the Board, not reliable, valuation techniques based on the facts and circumstances of the particular investment will be utilized. Securities that are not publicly traded or for which market prices are not readily available are valued at fair value as determined in good faith by the Board, based on, among other things, the input of the Adviser, the Audit Committee of the Board (the “Audit Committee”) and independent valuation firms engaged on the recommendation of the Adviser and at the direction of the Board. These valuation approaches involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the investments or market and the investments’ complexity.

The Company’s Board undertakes a multi-step valuation process each quarter in connection with determining the fair value of the Company’s investments for which reliable market quotations are not readily available, or are available but deemed not reflective of the fair value of an investment, which includes, among other procedures, the following:

 

   

The valuation process begins with each investment being preliminarily valued by the Adviser’s valuation team in conjunction with the Adviser’s investment professionals responsible for each portfolio investment;

 

   

In addition, independent valuation firms engaged by the Board prepare valuations of all the Company’s investments over a de minimis threshold. The independent valuation firms provide a final range of

 

F-27


Table of Contents
 

values on such investments to the Board and the Adviser. The independent valuation firms also provide analyses to support their valuation methodology and calculations;

 

   

The Adviser’s Valuation Committee reviews each valuation recommendation to confirm they have been calculated in accordance with the valuation policy and compares such valuations to the independent valuation firms’ valuation ranges to ensure the Adviser’s valuations are reasonable;

 

   

The Valuation Committee makes valuation recommendations to the Audit Committee;

 

   

The Audit Committee reviews the valuation recommendations made by the Adviser’s Valuation Committee, including the independent valuation firms’ valuations, and once approved, recommends them for approval by the Board; and

 

   

The Board reviews the valuation recommendations of the Audit Committee and determines the fair value of each investment in the portfolio in good faith based on the input of the Audit Committee, the Adviser’s Valuation Committee and, where applicable, the independent valuation firms and other external service providers.

Valuation of each of our investments will generally be made as described above as of the end of each fiscal quarter. In cases where we determine our net asset value (“NAV”) at times other than a quarter end, we intend to update the value of securities with market quotations to the most recent market quotation. For securities without market quotations, non-quarterly valuations will generally be the most recent quarterly valuation unless a material event has occurred since the most recent quarter end with respect to the investment. Independent valuation firms are generally not used for non-quarterly valuations.

As part of the valuation process, the Board takes into account relevant factors in determining the fair value of its investments, many of which are loans, including and in combination, as relevant, of: (i) the estimated enterprise value of a portfolio company, (ii) the nature and realizable value of any collateral, (iii) the portfolio company’s ability to make payments based on its earnings and cash flow, (iv) the markets in which the portfolio company does business, (v) a comparison of the portfolio company’s securities to any similar publicly traded securities, and (vi) overall changes in the interest rate environment and the credit markets that may affect the price at which similar investments may be made in the future. When an external event such as a purchase transaction, public offering or subsequent equity or debt sale occurs, the Board considers whether the pricing indicated by the external event corroborates its valuation. See “—Note 5. Fair Value Measurements.”

The Board has and will continue to engage independent valuation firms to provide assistance regarding the determination of the fair value of the Company’s portfolio securities for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment each quarter, and the Board may reasonably rely on that assistance. However, the Board is responsible for the ultimate valuation of the portfolio investments at fair value as determined in good faith pursuant to the Company’s valuation policy and a consistently applied valuation process.

Receivables/Payables From Investments Sold/Purchased

Receivables/payables from investments sold/purchased consist of amounts receivable to or payable by the Company for transactions that have not settled at the reporting date. As of December 31, 2020 and 2019, the Company had $114.5 million and $2.7 million, respectively, of receivables for investments sold. As of December 31, 2020 and 2019, the Company had $48.6 million and $10.1 million, respectively, of payables for investments purchased.

Derivative Instruments

The Company recognizes all derivative instruments as assets or liabilities at fair value in its consolidated financial statements. Derivative contracts entered into by the Company are not designated as hedging instruments, and as a result the Company presents changes in fair value through current period gains or losses.

 

F-28


Table of Contents

In the normal course of business, the Company has commitments and risks resulting from its investment transactions, which may include those involving derivative instruments. Derivative instruments are measured in terms of the notional contract amount and derive their value based upon one or more underlying instruments. While the notional amount gives some indication of the Company’s derivative activity, it generally is not exchanged, but is only used as the basis on which interest and other payments are exchanged. Derivative instruments are subject to various risks similar to non-derivative instruments including market, credit, liquidity, and operational risks. The Company manages these risks on an aggregate basis as part of its risk management process.

Forward Purchase Agreement

The Company was a party to a forward purchase agreement pursuant to which the Company agreed to purchase certain assets held in the Middle Market Warehouse (defined in Note 7) at a purchase price based on the cost of the asset to the warehouse provider plus amounts of unpaid interest, original issue discount and structuring fees accrued to the warehouse provider during the time the warehouse provider owned the asset.

Forward purchase agreements are recognized at fair value through current period gains or losses on the date on which the contract is entered into and are subsequently re-measured at fair value. All forward purchase agreements are carried as assets when fair value is positive and as liabilities when fair value is negative. A forward purchase agreement is derecognized when the obligation specified in the contract is discharged, canceled or expired.

Foreign Currency Transactions

Amounts denominated in foreign currencies are translated into U.S. dollars on the following basis: (i) investments and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates effective on the last business day of the period; and (ii) purchases and sales of investments, borrowings and repayments of such borrowings, income, and expenses denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates prevailing on the transaction dates.

The Company includes net changes in fair values on investments held resulting from foreign exchange rate fluctuations in translation of assets and liabilities in foreign currencies on the Consolidated Statements of Operations, if any. Foreign security and currency translations may involve certain considerations and risks not typically associated with investing in U.S. companies and U.S. government securities. These risks include, but are not limited to, currency fluctuations and revaluations and future adverse political, social and economic developments, which could cause investments in foreign markets to be less liquid and prices more volatile than those of comparable U.S. companies or U.S. government securities.

Revenue Recognition

Interest Income

Interest income is recorded on an accrual basis and includes the accretion of discounts and amortizations of premiums. Discounts from and premiums to par value on debt investments purchased are accreted/amortized into interest income over the life of the respective security using the effective interest method. The amortized cost of debt investments represents the original cost, including loan origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion of discounts and amortization of premiums, if any. Upon prepayment of a loan or debt security, any prepayment premiums, unamortized upfront loan origination fees and unamortized discounts are recorded as interest income in the current period. For the years ended December 31, 2020, 2019 and 2018 the Company recorded $48.9 million, $3.7 million and $0.0 million, respectively, in non-recurring income (e.g. prepayment premiums, accelerated accretion of upfront loan origination fees and unamortized discounts and ticking fees).

 

F-29


Table of Contents

PIK Income

The Company has loans in its portfolio that contain payment-in-kind (“PIK”) provisions. PIK represents interest that is accrued and recorded as interest income at the contractual rates, increases the loan principal on the respective capitalization dates, and is generally due at maturity. Such income is included in interest income in the Consolidated Statements of Operations. If at any point the Company believes PIK is not expected to be realized, the investment generating PIK will be placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest is generally reversed through interest income. To maintain the Company’s status as a RIC, this non-cash source of income must be paid out to shareholders in the form of dividends, even though the Company has not yet collected cash. For the years ended December 31, 2020, 2019 and 2018 the Company recorded PIK income of $7.1 million, $1.0 million and $0.0 million, respectively.

Dividend Income

Dividend income on preferred equity securities is recorded on the accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly-traded portfolio companies.

Fee Income

The Company may receive various fees in the ordinary course of business such as structuring, consent, waiver, amendment, syndication fees as well as fees for managerial assistance rendered by the Company to the portfolio companies. Such fees are recognized as income when earned or the services are rendered.

Non-Accrual Income

Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected in full. Accrued interest is generally reversed when a loan is placed on non-accrual status. Additionally, any original issue discount and market discount are no longer accreted to interest income as of the date the loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid current and, in management’s judgment, are likely to remain current. Management may make exceptions to this treatment and determine to not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection.

Organization Expenses and Offering Expenses

Costs associated with the organization of the Company were expensed as incurred, subject to the limitations discussed below. These expenses consist primarily of legal fees and other costs of organizing the Company.

Costs associated with the offering of the Company’s shares are capitalized as “deferred offering costs” on the Consolidated Statements of Assets and Liabilities and amortized over a twelve-month period from incurrence, subject to the limitation below. These expenses consist primarily of legal fees and other costs incurred in connection with the Company’s continuous Private Offering of its shares. Upon the expiration of the Initial Closing Period, the Company expensed the remaining deferred offering costs.

The Company will not bear more than an amount equal to 0.10% of the aggregate Capital Commitments of the Company for organization and offering expenses in connection with the offering of shares. If actual organization and offering costs incurred exceed 0.10% of the Company’s total Capital Commitments, the Adviser or its affiliate will bear the excess costs. To the extent the Company’s Capital Commitments later increase, the

 

F-30


Table of Contents

Adviser or its affiliates may be reimbursed for past payments of excess organization and offering costs made on the Company’s behalf provided that the total organization and offering costs borne by the Company do not exceed 0.10% of total Capital Commitments and provided further that the Adviser of its affiliates may not be reimbursed for payment of excess organization and offering expenses that were incurred more than three years prior to the proposed reimbursement. For the years ended December 31, 2020 and December 31, 2019, the Company did not accrue any organization costs. For the year ended December 31, 2018, the Company accrued organization costs of $0.7 million. For the years ended December 31, 2020, 2019 and 2018, the Company accrued offering costs of $1.5 million, $1.1 million and $0.1 million, respectively.

Deferred Financing Costs and Debt Issuance Costs

Deferred financing and debt issuance costs represent fees and other direct incremental costs incurred in connection with the Company’s borrowings. These expenses are deferred and amortized into interest expense over the life of the related debt instrument using the straight-line method. Deferred financing costs related to revolving credit facilities are presented separately as an asset on the Company’s Statements of Assets and Liabilities. Debt issuance costs related to any issuance of installment debt or notes are presented net against the outstanding debt balance of the related security.

Income Taxes

The Company has elected to be treated as a BDC under the 1940 Act. The Company also has elected to be treated as a RIC under the Code. So long as the Company maintains its status as a RIC, it generally will not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that it distributes at least annually to its shareholders as dividends. Rather, any tax liability related to income earned and distributed by the Company would represent obligations of the Company’s investors and would not be reflected in the consolidated financial statements of the Company.

The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof.

To qualify for and maintain qualification as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements. In addition, to qualify for RIC tax treatment, the Company must distribute to its shareholders, for each taxable year, at least 90% of the sum of (i) its “investment company taxable income” for that year (without regard to the deduction for dividends paid), which is generally its ordinary income plus the excess, if any, of its realized net short-term capital gains over its realized net long-term capital losses and (ii) its net tax-exempt income.

In addition, based on the excise tax distribution requirements, the Company is subject to a 4% nondeductible federal excise tax on undistributed income unless the Company distributes in a timely manner in each taxable year an amount at least equal to the sum of (i) 98% of its ordinary income for the calendar year, (ii) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (iii) any income realized, but not distributed, in prior years. For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate income tax is considered to have been distributed.

Distributions

To the extent that the Company has taxable income available, the Company intends to make quarterly distributions to its shareholders. Distributions to shareholders are recorded on the record date. All distributions

 

F-31


Table of Contents

will be paid at the discretion of the Board and will depend on our earnings, financial condition, maintenance of our tax treatment as a RIC, compliance with applicable BDC regulations and such other factors as the Board may deem relevant from time to time.

Recent Accounting Pronouncements

In March 2020 and January 2021, the Financial Accounting Standards Board (“FASB”) issued guidance providing optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the LIBOR (London Interbank Offered Rate) or other interbank-offered based reference rates as of the end of December 2021. Management continues to evaluate the impact of the guidance and may apply other elections, as applicable, as the expected market transition to alternative reference rates evolves. The Company did not utilize the optional expedients and exceptions provided by ASU 2020-04 during the year ended December 31, 2020.

In August 2018, the FASB issued ASU 2018-13, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which changes the fair value disclosure requirements. The new guidance includes new, eliminated and modified fair value disclosures. Among other requirements, the guidance requires disclosure of the range and weighted average of the significant unobservable inputs for Level 3 fair value measurements and the way it is calculated. The guidance also eliminated the following disclosures: (i) amount and reason for transfers between Level 1 and Level 2, (ii) policy for timing of transfers between levels of the fair value hierarchy and (iii) valuation processes for Level 3 fair value measurement. The guidance is effective for all entities for interim and annual periods beginning after December 15, 2019. Early adoption is permitted upon issuance of the guidance. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.

Note 3. Agreements and Related Party Transactions

Investment Advisory Agreement

On October 1, 2018, the Company entered into an investment advisory agreement with the Adviser (the “Investment Advisory Agreement”), pursuant to which the Adviser manages the Company on a day-to-day basis. The Adviser is responsible for originating prospective investments, conducting research and due diligence investigations on potential investments, analyzing investment opportunities, negotiating and structuring the Company’s investments and monitoring its investments and portfolio companies on an ongoing basis.

The Company pays the Adviser a fee for its services under the Investment Advisory Agreement consisting of two components: a management fee and an incentive fee. The cost of both the management fee and the incentive fee will ultimately be borne by the shareholders. The initial term of the Investment Advisory Agreement was two years from October 1, 2018, and on May 6, 2020, it was renewed and approved by the Board, including a majority of trustees who are not parties to the Investment Advisory Agreement or “interested persons” (as such term is defined in Section 2(a)(19) of the 1940 Act) (the “Independent Trustees”), for a one-year period. Unless earlier terminated, the Investment Advisory Agreement will renew automatically for successive annual periods, provided that such continuance is specifically approved at least annually by the vote of the Board and by the vote of a majority of the Independent Trustees.

Base Management Fee

The management fee is payable quarterly in arrears at an annual rate of (i) prior to a quotation or listing of the Company’s securities on a national securities exchange (including through an initial public offering) or a sale of all or substantially all of its assets to, or a merger or other liquidity transaction with, an entity in which the Company’s shareholders receive shares of a publicly-traded company which continues to be managed by the Adviser or an affiliate thereof (“Exchange Listing”), 0.75%, and (ii) following an Exchange Listing, 1.0%, in

 

F-32


Table of Contents

each case of the average value of the Company’s gross assets at the end of the two most recently completed calendar quarters. For purposes of the Investment Advisory Agreement, gross assets means the Company’s total assets determined on a consolidated basis in accordance with U.S. GAAP, excluding undrawn commitments but including assets purchased with borrowed amounts. For the first calendar quarter in which the Company had operations, gross assets were measured as the average of gross assets at the Initial Drawdown Date and at the end of such first calendar quarter. If an Exchange Listing occurs on a date other than the first day of a calendar quarter, the management fee will be calculated for such calendar quarter at a weighted rate calculated based on the fee rates applicable before and after the Exchange Listing based on the number of days in such calendar quarter before and after the Exchange Listing.

For the years ended December 31, 2020, 2019 and 2018, base management fees were $32.9 million, $12.6 million and $0.3 million, respectively. As of December 31, 2020 and December 31, 2019, $10.3 million and $5.0 million, respectively, was payable to the Adviser relating to management fees.

Incentive Fees

The incentive fee consists of two components that are determined independently of each other, with the result that one component may be payable even if the other is not. One component is based on income and the other component is based on capital gains, each as described below:

(i) Income based incentive fee:

The first part of the incentive fee, an income based incentive fee, is calculated and payable quarterly in arrears based on the Company’s pre-incentive fee net investment income as defined in the Investment Advisory Agreement. Pre-incentive fee net investment income means, as the context requires, either the dollar value of, or percentage rate of return on the value of the Company’s net assets at the end of the immediately preceding quarter from, interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies) accrued during the calendar quarter, minus the Company’s operating expenses accrued for the quarter (including the management fee, expenses payable under the Administration Agreement, and any interest expense or fees on any credit facilities or outstanding debt and dividends paid on any issued and outstanding preferred shares, but excluding the incentive fee. Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with PIK interest and zero coupon securities)), accrued income that the Company has not yet received in cash. Pre-incentive fee net investment income excludes any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. The Company excludes the impact of expense support payments and recoupments from pre-incentive fee net investment income.

The Company pays its Adviser an income based incentive fee with respect to the Company’s pre-incentive fee net investment income in each calendar quarter as follows:

 

   

No income based incentive fee if the Company’s pre-incentive fee net investment income, expressed as a return on the value of our net assets at the end of the immediately preceding calendar quarter, does not exceed the hurdle rate of 1.5%;

 

   

100% of the Company’s pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than or equal to 1.76% (7.06% annualized) prior to an Exchange Listing, or 1.82% (7.27% annualized) following an Exchange Listing, of the value of the Company’s net assets. This “catch-up” portion is meant to provide the Adviser with approximately 15% prior to an Exchange Listing, or 17.5% following an Exchange Listing, of the Company’s pre-incentive fee net investment income as if a hurdle rate did not apply if the “catch up” is achieved; and

 

F-33


Table of Contents
   

15% prior to an Exchange Listing, or 17.5% following an Exchange Listing, of the Company’s pre-incentive fee net investment income, if any, that exceeds the rate of return of 1.76% (7.06% annualized) prior to an Exchange Listing, or 1.82% (7.27% annualized) following an Exchange Listing.

These calculations are prorated for any period of less than three months and adjusted for any share issuances or repurchases during the relevant quarter. If an Exchange Listing occurs on a date other than the first day of a calendar quarter, the income based incentive fee with respect to the Company’s pre-incentive fee net investment income shall be calculated for such calendar quarter at a weighted rate calculated based on the fee rates applicable before and after the Exchange Listing based on the number of days in such calendar quarter before and after the Exchange Listing.

(ii) Capital gains based incentive fee:

The second part of the incentive fee, a capital gains incentive fee, will be determined and payable in arrears as of the end of each calendar year in an amount equal to 15% prior to an Exchange Listing, or 17.5% following an Exchange Listing, of realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees as calculated in accordance with U.S. GAAP. The Company will accrue, but will not pay, a capital gains incentive fee with respect to unrealized appreciation because a capital gains incentive fee would be owed to the Adviser if the Company were to sell the relevant investment and realize a capital gain.

For the years ended December 31, 2020, 2019 and 2018, the Company accrued income based incentive fees of $42.0 million, $13.8 million and $0.0 million, respectively. As of December 31, 2020 and December 31, 2019, $15.3 million and $6.3 million, respectively was payable to the Adviser for income based incentive fees. For the year ended December 31, 2020 the Company accrued capital gains incentive fees of $(3.1) million, none of which was payable as of December 31, 2020 under the Investment Advisory Agreement. As of December 31, 2019, the Company had accrued capital gains incentive fees of $4.2 million, none of which was payable on such date under the Investment Advisory Agreement. For the year ended December 31, 2018, the Company did not accrue any capital gains incentive fee since there were cumulative net unrealized and realized losses as of such date.

Administration Agreement

On October 1, 2018, the Company entered into an Administration Agreement with the Administrator. Under the terms of the Administration Agreement, the Administrator provides, or oversees the performance of, administrative and compliance services, including, but not limited to, maintaining financial records, overseeing the calculation of NAV, compliance monitoring (including diligence and oversight of the Company’s other service providers), preparing reports to shareholders and reports filed with the United States Securities and Exchange Commission (“SEC”), preparing materials and coordinating meetings of the Company’s Board, managing the payment of expenses and the performance of administrative and professional services rendered by others and providing office space, equipment and office services. The Administrator may also offer to provide, on the Company’s behalf, managerial assistance to the Company’s portfolio companies. The initial term of the agreement was two years from October 1, 2018, and on May 6, 2020, it was renewed and approved by the Board and a majority of the Independent Trustees for a one-year period. Unless earlier terminated, the Administration Agreement will renew automatically for successive annual periods, provided that such continuance is approved at least annually by (i) the vote of the Board or by a majority vote of the outstanding voting securities of the Company and (ii) the vote of a majority of the Independent Trustees.

For providing these services, the Company will reimburse the Administrator for its costs, expenses and allocable portion of overhead (including rent, office equipment and utilities) and other expenses incurred by the Administrator in performing its administrative obligations under the Administration Agreement, including but

 

F-34


Table of Contents

not limited to: (i) the Company’s chief compliance officer, chief financial officer and their respective staffs; (ii) investor relations, legal, information technology, operations and other non-investment professionals at the Administrator that perform duties for the Company; and (iii) any internal audit group personnel of Blackstone or any of its affiliates. The Administrator has elected to forgo any reimbursement for rent and other occupancy costs for the years ended December 31, 2020, 2019 and 2018.

For the years ended December 31, 2020, 2019 and 2018, the Company incurred $2.3 million, $1.5 million and $0.4 million, respectively, under the Administration Agreement, which were recorded in administrative service expenses in the Company’s Consolidated Statements of Operations. As of December 31, 2020 and December 31, 2019, $1.1 million and $0.9 million, respectively, was unpaid and included in due to affiliate in the Consolidated Statements of Assets and Liabilities.

Sub-Administration and Custody Agreement

On October 1, 2018, the Administrator entered into a sub-administration agreement (the “Sub-Administration Agreement”) with State Street Bank and Trust Company (the “Sub-Administrator”) under which the Sub-Administrator provides various accounting and administrative services to the Company. The Sub-Administrator also serves as the Company’s custodian (the “Custodian”). The initial term of the Sub-Administration Agreement is two years from the effective date and after expiration of the initial term and the Sub-Administration Agreement shall automatically renew for successive one-year periods, unless a written notice of non-renewal is delivered prior to 120 days prior to the expiration of the initial term or renewal term.

Expense Support and Conditional Reimbursement Agreement

On December 12, 2018, the Company entered into an Expense Support and Conditional Reimbursement Agreement (the “Expense Support Agreement”) with the Adviser. The Adviser may elect to pay certain expenses of the Company on the Company’s behalf (each, an “Expense Payment”), provided that no portion of the payment will be used to pay any interest of the Company. Any Expense Payment that the Adviser has committed to pay must be paid by the Adviser to the Company in any combination of cash or other immediately available funds no later than forty-five days after such commitment was made in writing, and/or offset against amounts due from the Company to the Adviser or its affiliates.

Following any calendar quarter in which Available Operating Funds (as defined below) exceed the cumulative distributions accrued to the Company’s shareholders based on distributions declared with respect to record dates occurring in such calendar quarter (the amount of such excess being hereinafter referred to as “Excess Operating Funds”), the Company shall pay such Excess Operating Funds, or a portion thereof, to the Adviser until such time as all Expense Payments made by the Adviser to the Company within three years prior to the last business day of such calendar quarter have been reimbursed. Any payments required to be made by the Company shall be referred to herein as a “Reimbursement Payment.” Available Operating Funds means the sum of (i) the Company’s net investment company taxable income (including net short-term capital gains reduced by net long-term capital losses), (ii) the Company’s net capital gains (including the excess of net long-term capital gains over net short-term capital losses) and (iii) dividends and other distributions paid to the Company on account of investments in portfolio companies (to the extent such amounts listed in clause (iii) are not included under clauses (i) and (ii) above).

No Reimbursement Payment for any calendar quarter shall be made if the annualized rate of regular cash distributions declared by the Company on record dates in the applicable calendar quarter of such Reimbursement Payment is less than the annualized rate of regular cash distributions declared by the Company on record dates in the calendar quarter in which the Expense Payment was committed to which such Reimbursement Payment relates. The Company’s obligation to make a Reimbursement Payment shall automatically become a liability of the Company on the last business day of the applicable calendar quarter.

 

F-35


Table of Contents

The following table presents a summary of Expense Payments and the related Reimbursement Payments since the Company’s commencement of operations:

 

For the Quarter Ended

   Expense Payments by
Adviser
     Reimbursement Payments to
Adviser
     Unreimbursed Expense
Payments
 

December 31, 2018

   $ 1,696      $ (1,696    $ —    

March 31, 2019

     570        (570      —    
  

 

 

    

 

 

    

 

 

 

Total

   $ 2,266      $ (2,266    $ —    
  

 

 

    

 

 

    

 

 

 

For the years ended December 31, 2020, 2019 and 2018, the Adviser made Expense Payments in the amount of $0.0 million, $0.6 million and $1.7 million, respectively. For the years ended December 31, 2020, 2019 and 2018, the Company made Reimbursement Payments related to Expense Payments by the Adviser of $1.5 million, $0.8 million and $0.0 million, respectively.

Note 4. Investments

The composition of the Company’s investment portfolio at cost and fair value was as follows:

 

    December 31, 2020     December 31, 2019  
    Cost     Fair Value     % of Total Investments
at Fair Value
    Cost     Fair Value     % of Total Investments
at Fair Value
 

First lien debt

  $ 5,493,561     $ 5,502,899       98.51   $ 3,021,498     $ 3,046,101       98.50

Second lien debt

    48,979       50,199       0.90       32,782       32,419       1.05  

Equity

    32,942       32,844       0.59       13,487       13,920       0.45  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 5,575,482     $ 5,585,942       100.00   $ 3,067,767     $ 3,092,440       100.00
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The industry composition of investments at fair value was as follows:

 

     December 31, 2020     December 31, 2019  

Aerospace & Defense

     7.03    

Air Freight & Logistics

     6.44       11.00  

Building Products

     7.79       12.23  

Capital Markets

     0.11       —    

Chemicals

     8.31       3.79  

Commercial Services & Supplies

     8.16       8.55  

Construction & Engineering

     1.07       4.44  

Distributors

     8.10       18.51  

Diversified Financial Services

     1.08       2.51  

Electrical Equipment

     2.61       —    

Electronic Equipment, Instruments & Components

     2.19       0.46  

Energy Equipment & Services

     1.35       2.60  

Health Care Equipment & Supplies

     0.69       1.78  

Health Care Providers & Services

     9.31       4.75  

Health Care Technology

     5.50       0.08  

Hotels, Restaurants & Leisure

     0.77       1.52  

Industrial Conglomerates

     0.52       1.01  

Insurance

     2.39       —    

Interactive Media & Services

     0.84       1.51  

Internet & Direct Marketing Retail

     7.17       1.35  

IT Services

     1.27       3.66  

Machinery

     0.95       1.63  

 

F-36


Table of Contents
     December 31, 2020     December 3, 2019  

Media

     —         0.95  

Oil, Gas & Consumable Fuels

     2.66       4.81  

Paper & Forest Products

     0.26       —    

Personal Products

     0.96        

Professional Services

     2.32       1.76  

Software

     2.94       3.03  

Specialty Retail

     3.22       6.07  

Technology Hardware, Storage & Peripherals

     2.67       1.06  

Trading Companies & Distributors

     0.86       0.21  

Transportation Infrastructure

     0.46       0.73  
  

 

 

   

 

 

 

Total

     100.00     100.00
  

 

 

   

 

 

 

The geographic composition of investments at cost and fair value was as follows:

 

     December 31, 2020  
     Cost      Fair Value      % of Total Investments at
Fair Value
    Fair Value as % of
Net Assets
 

United States

   $ 5,205,832      $ 5,209,138        93.25     159.41

Canada

     267,544        270,126        4.84       8.27  

Germany

     102,106        106,678        1.91       3.26  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 5,575,482      $ 5,585,942        100.00     170.94
  

 

 

    

 

 

    

 

 

   

 

 

 

 

     December 31, 2019  
     Cost      Fair Value      % of Total Investments at
Fair Value
    Fair Value as % of Net
Assets
 

United States

   $ 2,675,743      $ 2,698,272        87.25     161.27

Canada

     261,911        263,704        8.53       15.76  

Luxembourg

     130,113        130,464        4.22       7.80  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 3,067,767      $ 3,092,440        100.00     184.83
  

 

 

    

 

 

    

 

 

   

 

 

 

As of December 31, 2020 and December 31, 2019, no loans in the portfolio were on non-accrual status.

As of December 31, 2020 and December 31, 2019, on a fair value basis, approximately 100.0% and 100.0%, respectively, of our performing debt investments bore interest at a floating rate and approximately 0.0% and 0.0%, respectively, of our performing debt investments bore interest at a fixed rate.

Note 5. Fair Value Measurements

The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the applicable measurement date.

The fair value hierarchy under ASC 820 prioritizes the inputs to valuation methodology used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these securities. The three levels of the fair value hierarchy are as follows:

 

   

Level 1: Inputs to the valuation methodology are quoted prices available in active markets for identical instruments as of the reporting date. The types of financial instruments included in Level 1 include unrestricted securities, including equities and derivatives, listed in active markets.

 

F-37


Table of Contents
   

Level 2: Inputs to the valuation methodology are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date. The types of financial instruments in this category include less liquid and restricted securities listed in active markets, securities traded in other than active markets, government and agency securities and certain over-the-counter derivatives where the fair value is based on observable inputs.

 

   

Level 3: Inputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in this category include debt and equity investments in privately held entities, collateralized loan obligations (“CLOs”) and certain over-the-counter derivatives where the fair value is based on unobservable inputs.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the overall fair value measurement. The Adviser’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfer occurs.

In addition to using the above inputs in investment valuations, the Company applies the valuation policy approved by its Board that is consistent with ASC 820. Consistent with the valuation policy, the Company evaluates the source of the inputs, including any markets in which its investments are trading (or any markets in which securities with similar attributes are trading), in determining fair value. When an investment is valued based on prices provided by reputable dealers or pricing services (that is, broker quotes), the Company subjects those prices to various criteria in making the determination as to whether a particular investment would qualify for treatment as a Level 2 or Level 3 investment.

In the absence of independent, reliable market quotes, an enterprise value analysis is typically performed to determine the value of equity investments, control debt investments and non-control debt investments that are credit-impaired, and to determine if debt investments are credit impaired. Enterprise value (“EV”) means the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. When an investment is valued using an EV analysis, the EV of a portfolio company is first determined and allocated over the portfolio company’s securities in order of their preference relative to one another (i.e. “waterfall” allocation).

If debt investments are credit-impaired, which occurs when there is insufficient coverage under the EV analysis through the respective investment’s position in the capital structure, the Adviser uses the enterprise value “waterfall” approach or a recovery method (if a liquidation or restructuring is deemed likely) to determine fair value. For debt investments that are not determined to be credit-impaired, the Adviser uses a market interest rate yield analysis (discussed below) to determine fair value.

The Adviser will generally utilize approaches including the market approach, the income approach or both approaches, as appropriate, when calculating EV. The primary method for determining EV for non-control investments, and control investments without reliable projections, uses a multiple analysis whereby appropriate multiples are applied to the portfolio company’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) or another key financial metric (e.g. such as revenues, cash flows or net income) (“Performance Multiple”). Performance Multiples are typically determined based upon a review of publicly traded comparable companies and market comparable transactions, if any. The second method for determining EV (and primary method for control investments with reliable projections) uses a discounted cash flow analysis whereby future expected cash flows and the anticipated terminal value of the portfolio company are discounted to determine a present value using estimated discount rates. The income approach is generally used when the Adviser has visibility into the long term projected cash flows of a portfolio company, which is more common with control investments.

 

F-38


Table of Contents

Subsequently, for non-control debt investments that are not credit-impaired, and where there is an absence of available market quotations, fair value is determined using a yield analysis. To determine fair value using a yield analysis, the expected cash flows are projected based on the contractual terms of the debt security and discounted back to the measurement date based on a market yield. A market yield is determined based upon an assessment of current and expected market yields for similar investments and risk profiles. The Company considers the current contractual interest rate, the maturity and other terms of the investment relative to risk of the company and the specific investment. A key determinant of risk, among other things, is the leverage through the investment relative to the enterprise value of the portfolio company. As debt investments held by the Company are substantially illiquid with no active transaction market, the Company depends on primary market data, including newly funded transactions, as well as secondary market data with respect to high yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable. The fair value of loans with call protection is generally capped at par plus applicable prepayment premium in effect at the measurement date.

The following table presents the fair value hierarchy of financial instruments:

 

     December 31, 2020  
     Level 1      Level 2      Level 3      Total  

First lien debt

   $ —        $ 774,421      $ 4,728,478      $ 5,502,899  

Second lien debt

     —          26,196        24,003        50,199  

Equity

     —          —          32,844        32,844  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ —        $ 800,617      $ 4,785,325      $ 5,585,942  
  

 

 

    

 

 

    

 

 

    

 

 

 
     December 31, 2019  
     Level 1      Level 2      Level 3      Total  

First lien debt

   $ —        $ 804,708      $ 2,241,393      $ 3,046,101  

Second lien debt

     —          32,419        —          32,419  

Equity

     —          —          13,920        13,920  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ —        $ 837,127      $ 2,255,313      $ 3,092,440  
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents changes in the fair value of financial instruments for which Level 3 inputs were used to determine the fair value:

 

     For the Year Ended December 31, 2020  
     First Lien Debt     Second Lien Debt      Equity     Total Investments  

Fair value, beginning of period

   $ 2,241,393     $ —        $ 13,920     $ 2,255,313  

Purchases of investments

     3,184,560       23,466        20,170       3,228,196  

Proceeds from principal repayments and sales of investments

     (769,646     —          (715     (770,361

Accretion of discount/amortization of premium

     25,107       —          —         25,107  

Net realized gain (loss)

     933       —          —         933  

Net change in unrealized appreciation (depreciation)

     (648     537        (531     (642

Transfers into Level 3 (1)

     162,879       —          —         162,879  

Transfers out of Level 3 (1)

     (116,100     —          —         (116,100
  

 

 

   

 

 

    

 

 

   

 

 

 

Fair value, end of period

   $ 4,728,478     $ 24,003      $ 32,844     $ 4,785,325  
  

 

 

   

 

 

    

 

 

   

 

 

 

Net change in unrealized appreciation (depreciation) included in earnings related to financial instruments still held as of December 31, 2020 included in net unrealized appreciation (depreciation) on the Consolidated Statements of Operations

   $ 2,212     $ 537      $ (531   $ 2,218  
  

 

 

   

 

 

    

 

 

   

 

 

 

 

F-39


Table of Contents
     For the Year Ended December 31, 2019  
     First Lien Debt     Equity Investments      Total Investments     Forward Purchase
Obligation
 

Fair value, beginning of period

   $ 328,125     $ —        $ 328,125     $ (222

Purchases of investments

     2,134,729       13,487        2,148,216       —    

Proceeds from principal repayments and sales of investments

     (177,349     —          (177,349     —    

Accretion of discount/amortization of premium

     5,560       —          5,560       —    

Net realized gain (loss)

     132       —          132       —    

Net change in unrealized appreciation (depreciation)

     11,780       433        12,213       222  

Transfers into Level 3 (1)

     —         —          —         —    

Transfers out of Level 3 (1)

     (61,584     —          (61,584     —    
  

 

 

   

 

 

    

 

 

   

 

 

 

Fair value, end of period

   $ 2,241,393     $ 13,920      $ 2,255,313     $ —    
  

 

 

   

 

 

    

 

 

   

 

 

 

Net change in unrealized appreciation (depreciation) included in earnings related to financial instruments still held as of December 31, 2019 included in net unrealized appreciation (depreciation) on the Consolidated Statements of Operations

   $ 11,821     $ 433      $ 12,254     $ —    
  

 

 

   

 

 

    

 

 

   

 

 

 

 

(1)

For the year ended December 31, 2020 and 2019, transfers into or out of Level 3 were primarily due to decreased or increased price transparency.

The following table presents quantitative information about the significant unobservable inputs of the Company’s Level 3 financial instruments. The table is not intended to be all-inclusive but instead captures the significant unobservable inputs relevant to the Company’s determination of fair value.

 

    December 31, 2020  
                  Range        
    Fair Value    

Valuation Technique

 

Unobservable Input

  Low     High     Weighted Average (1)  

Investments in first lien debt

  $ 4,255,348     Yield analysis   Discount rate     5.85%       10.98%       7.79%  
    468,483     Market quotations   Broker quoted price     98.00       100.63       99.05  
    4,647     Recent transaction   Recent transaction     97.50       100.00       99.99  
 

 

 

           
    4,728,478            

Investments in second lien debt

    5,924     Yield analysis   Discount rate     10.26%       10.26%       10.26%  
    18,079     Market quotations   Broker quoted price     101.00       101.00       101.00  
 

 

 

           
    24,003            

Investments in warrant

    865    

Option pricing model

  Expected volatility     25.00%       25.00%       25.00%  

Investments in equity

    31,979     Market approach   Performance multiple     9.17x       13.25x       10.60x  
 

 

 

           

Total

  $ 4,785,325            
 

 

 

           

 

F-40


Table of Contents
    December 31, 2019  
                  Range        
    Fair Value    

Valuation
Technique

 

Unobservable
Input

  Low     High     Weighted Average (1)  

Investments in first lien debt

  $ 1,886,531     Yield Analysis   Discount Rate     7.68%       13.58%       8.39%  
    354,862     Market Quotations   Broker Quoted Price     81.50       99.50       97.87  
 

 

 

           
    2,241,393            

Investments in equity

    13,920     Market Approach   Performance Multiple     6.15x       13.50x       10.18x  
 

 

 

           

Total

  $ 2,255,313            
 

 

 

           

 

(1)

Weighted averages are calculated based on fair value of investments.

The significant unobservable input used in the yield analysis is the discount rate based on comparable market yields. The significant unobservable input used for market quotations are broker quoted prices provided by independent pricing services. The significant unobservable input used under the market approach is the performance multiple. Significant increases in discount rates would result in a significantly lower fair value measurement. Significant decreases in quoted prices or performance multiples would result in a significantly lower fair value measurement.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Additionally, the fair value of the Company’s investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that the Company may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If the Company was required to liquidate a portfolio investment in a forced or liquidation sale, it could realize significantly less than the value at which the Company has recorded it. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected in the valuations currently assigned.

Derivative Instruments

Under the Syndicated Warehouse (See “—Note 7. Commitments and Contingencies”), the Company had the right, but not the obligation, to purchase equity interests of a warehouse vehicle from a third party at an agreed upon price. In this regard, the Company exercised its right to acquire such equity interests on December 11, 2018, at which time the assets and liabilities of the warehouse were included in the Company’s consolidated financial statements. The notional amount of assets acquired and liabilities assumed on December 11, 2018 were $152.3 million and $127.9 million, respectively. The Company determined that this contractual right met the definition of a derivative, and as a result, recorded a loss at the time the Company acquired the equity interests in the warehouse in the amount of $0.6 million, which was recorded in realized loss on derivatives in the Company’s Consolidated Statement of Operations.

Financial Instruments Not Carried at Fair Value

Debt

The fair value of the Company’s credit facilities, which would be categorized as Level 3 within the fair value hierarchy, as of December 31, 2020 and December 31, 2019, approximates its carrying value as the credit facilities have variable interest based on selected short term rates.

 

F-41


Table of Contents

The fair value of the Company’s 2023 Notes and 2026 Notes issued in the current year, which would be categorized as Level 2 within the fair value hierarchy, as of December 31, 2020 was $416.2 million and $823.2 million, respectively, based on vendor pricing received by the Company.

The carrying amounts of the Company’s assets and liabilities, other than investments at fair value and the 2023 Notes and the 2026 Notes, approximate fair value. These financial instruments are categorized as Level 3 within the hierarchy.

Note 6. Borrowings

In accordance with the 1940 Act, with certain limitations, the Company is allowed to borrow amounts such that its asset coverage, as defined in the 1940 Act, is at least 150% after such borrowing. As of December 31, 2020 and December 31, 2019, the Company’s asset coverage was 230.0% and 215.1%, respectively.

Subscription Facility

On November 6, 2018, the Company entered into a revolving credit facility (which was subsequently amended on September 16, 2019 and as further amended from time to time, the “Subscription Facility”) with Bank of America, N.A., as the administrative agent, the sole lead arranger, the letter of credit issuer and a lender, and the other lenders from time to time party thereto. The Subscription Facility was terminated on November 3, 2020.

Jackson Hole Funding Facility

On November 16, 2018, BGSL Jackson Hole Funding LLC (“Jackson Hole Funding”), the Company’s wholly-owned subsidiary that holds primarily originated loan investments, entered into a senior secured revolving credit facility (which was subsequently amended on February 6, 2019, September 20, 2019 and July 28, 2020 and as further amended from time to time, the “Jackson Hole Funding Facility”) with JPMorgan Chase Bank, National Association (“JPM”). JPM serves as administrative agent, Citibank, N.A., serves as collateral agent and securities intermediary, Virtus Group, LP serves as collateral administrator and the Company serves as portfolio manager under the Jackson Hole Funding Facility.

Advances under the Jackson Hole Funding Facility bear interest at a per annum rate equal to the three-month LIBOR in effect, plus the applicable margin of 2.375% per annum. Effective January 16, 2019, Jackson Hole Funding pays a commitment fee of 0.60% per annum (or 0.375% per annum until March 20, 2020) on the average daily unused amount of the financing commitments until the third anniversary of the Jackson Hole Funding Facility.

The initial maximum commitment amount of the Jackson Hole Funding Facility was $300 million. Effective September 20, 2019, the maximum commitment amount of the Jackson Hole Funding Facility was increased to $600 million and effective July 28, 2020, the maximum commitment amount of the Jackson Hole Funding Facility was reduced to $400 million. The Jackson Hole Funding Facility has an accordion feature, subject to the satisfaction of various conditions, which could bring total commitments under the Jackson Hole Funding Facility to up to $900 million. Proceeds from borrowings under the Jackson Hole Funding Facility may be used to fund portfolio investments by Jackson Hole Funding and to make advances under delayed draw term loans where Jackson Hole Funding is a lender. The period during which Jackson Hole Funding may make borrowings under the Jackson Hole Funding Facility expires on November 16, 2021 and the Jackson Hole Funding Facility is scheduled to mature on May 16, 2023 (“Maturity Date”).

Jackson Hole Funding’s obligations to the lenders under the Jackson Hole Funding Facility are secured by a first priority security interest in Jackson Hole Funding’s portfolio of investments and cash. The obligations of Jackson Hole Funding under the Jackson Hole Funding Facility are non-recourse to the Company, and the Company’s exposure under the Jackson Hole Funding Facility is limited to the value of its investment in Jackson Hole Funding.

 

F-42


Table of Contents

In connection with the Jackson Hole Funding Facility, Jackson Hole Funding has made certain customary representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar facilities. The Jackson Hole Funding Facility contains customary events of default for similar financing transactions, including if a change of control of Jackson Hole Funding occurs or if the Company is no longer the portfolio manager of Jackson Hole Funding. Upon the occurrence and during the continuation of an event of default, JPM may declare the outstanding advances and all other obligations under the Jackson Hole Funding Facility immediately due and payable.

The occurrence of an event of default (as described above) or a market value event (as defined in the Jackson Hole Funding Facility) triggers a requirement that Jackson Hole Funding obtain the consent of JPM prior to entering into any sale or disposition with respect to portfolio assets, and the occurrence of a market value event triggers the right of JPM to direct Jackson Hole Funding to enter into sales or dispositions with respect to any portfolio assets, in each case in JPM’s sole discretion.

As of December 31, 2020 and December 31, 2019, the Company was in compliance with all covenants and other requirements of the Jackson Hole Funding Facility.

Breckenridge Funding Facility

On December 21, 2018, BGSL Breckenridge Funding LLC (“Breckenridge Funding”), the Company’s wholly owned subsidiary that holds primarily syndicated loan investments, entered into a senior secured revolving credit facility (which was subsequently amended on June 11, 2019, August 2, 2019, September 27, 2019 and April 13, 2020, and as further amended from time to time, the “Breckenridge Funding Facility”) with BNP Paribas (“BNP”). BNP serves as administrative agent, Wells Fargo Bank, National Association serves as collateral agent and the Company serves as servicer under the Breckenridge Funding Facility.

Advances under the Breckenridge Funding Facility bear interest at a per annum rate equal to the three-month LIBOR (or other Base Rate) in effect, plus an applicable margin of 1.75%, 2.00% or 2.22% per annum, as applicable, depending on the nature of the advances being requested under the facility. Breckenridge Funding will pay a commitment fee of 0.70% per annum if the unused facility amount is greater than 50% or 0.35% per annum if the unused facility amount is less than or equal to 50% and greater than 25%, based on the average daily unused amount of the financing commitments until December 21, 2022, in addition to certain other fees as agreed between Breckenridge Funding and BNP.

The initial maximum commitment amount of the BNP SPV Facility was $400 million. Effective June 11, 2019, the maximum commitment amount of the BNP SPV Facility was increased to $575 million; effective September 27, 2019, the maximum commitment amount of the BNP SPV Facility was increased to $875 million and on April 13, 2020, the maximum commitment amount of the BNP Facility was increased to $1,125 million. Proceeds from borrowings under the BNP SPV Facility may be used to fund portfolio investments by Breckenridge Funding and to make advances under delayed draw and revolving loans where Breckenridge Funding is a lender. The period during which Breckenridge Funding may make borrowings under the BNP SPV Facility for the remaining commitment amounts expires on December 21, 2021 (or such later date as may be agreed by Breckenridge Funding, BNP, as administrative agent, and the lenders under the BNP SPV Facility), except for $300 million of outstanding principal which expired on September 27, 2020. The BNP SPV Facility is scheduled to mature on December 21, 2023.

Breckenridge Funding’s obligations to the lenders under the Breckenridge Funding Facility are secured by a first priority security interest in all of Breckenridge Funding’s portfolio of investments and cash. The obligations of Breckenridge Funding under the Breckenridge Funding Facility are non-recourse to the Company, and the Company’s exposure under the Breckenridge Funding Facility is limited to the value of its investment in Breckenridge Funding.

 

F-43


Table of Contents

In connection with the Breckenridge Funding Facility, Breckenridge Funding has made certain customary representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar facilities. The Breckenridge Funding Facility contains customary events of default for similar financing transactions, including if a change of control of Breckenridge Funding occurs or if the Company is no longer the servicer of Breckenridge Funding. Upon the occurrence and during the continuation of an event of default, BNP may declare the outstanding advances and all other obligations under the Breckenridge Funding Facility immediately due and payable. The occurrence of an event of default (as described above) suspends the ability of Breckenridge Funding to acquire or sell additional assets.

As of December 31, 2020 and December 31, 2019, the Company was in compliance with all covenants and other requirements of the Breckenridge Funding Facility.

Big Sky Funding Facility

On December 10, 2019, BGSL Big Sky Funding LLC (“Big Sky Funding”), the Company’s wholly-owned subsidiary, entered into a senior secured revolving credit facility (which was subsequently amended on December 30, 2020, and as further amended from time to time, the “Big Sky Funding Facility”) with Bank of America, N.A. (“Bank of America”). Bank of America serves as administrative agent, Wells Fargo Bank, N.A. serves as collateral administrator and the Company serves as manager under the Revolving Credit Facility.

Advances under the Big Sky Funding Facility bear interest at a per annum rate equal to the one-month or three-month London Interbank Offered Rate in effect, plus the applicable margin of 1.60% per annum. Big Sky Funding is required to utilize a minimum percentage of the financing commitments (the “Minimum Utilization Amount”), which amount increases in three-month intervals from 20% six months after the closing date of the Big Sky Funding Facility to 80% 15 months after the closing date of the Revolving Credit Facility and thereafter. Unused amounts below the Minimum Utilization Amount accrue a fee at a rate of 1.60% per annum. In addition, Big Sky Funding will pay an unused fee of 0.45% per annum on the daily unused amount of the financing commitments in excess of the Minimum Utilization Amount, commencing three months after the closing date of the Big Sky Funding Facility.

The initial maximum commitment amount of the Big Sky Funding Facility is $400 million. Effective May 14, 2020, Big Sky Funding exercised its accordion feature under the Big Sky Funding Facility, which increased the maximum commitment amount to $500 million. Effective December 30, 2020, the maximum commitment amount of the Big Sky Funding Facility was reduced to $400 million. Proceeds from borrowings under the Big Sky Funding Facility may be used to fund portfolio investments by Big Sky Funding and to make advances under revolving loans or delayed draw term loans where Big Sky Funding is a lender. All amounts outstanding under the Big Sky Funding Facility must be repaid by December 10, 2022.

Big Sky Funding’s obligations to the lenders under the Big Sky Funding Facility are secured by a first priority security interest in all of Big Sky Funding’s portfolio investments and cash. The obligations of Big Sky Funding under the Big Sky Funding Facility are non-recourse to the Company, and the Company’s exposure under the Big Sky Funding Facility is limited to the value of the Company’s investment in Big Sky Funding.

In connection with the Big Sky Funding Facility, Big Sky Funding has made certain customary representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar facilities. The Revolving Credit Facility contains customary events of default for similar financing transactions, including if a change of control of SPV occurs. Upon the occurrence and during the continuation of an event of default, Bank of America may declare the outstanding advances and all other obligations under the Revolving Credit Facility immediately due and payable. The occurrence of an event of default (as described above) triggers a requirement that SPV obtain the consent of Bank of America prior to entering into any sale or disposition with respect to portfolio investments.

 

F-44


Table of Contents

As of December 31, 2020, the Company was in compliance with all covenants and other requirements of the Big Sky Funding Facility.

Revolving Credit Facility

On June 15, 2020, the Company entered into a senior secured revolving credit facility (which was subsequently amended on June 29, 2020 and as further amended from time to time, the “Revolving Credit Facility”) with Citibank, N.A. (“Citi”). Citi serves as administrative agent and collateral agent.

The Revolving Credit Facility provides for borrowings in U.S. dollars and certain agreed upon foreign currencies in an initial aggregate amount of up to $550 million. Effective June 29, 2020, the maximum commitment amount of the Revolving Credit Facility increased to $650 million. Effective November 3, 2020, the maximum commitment amount of the Revolving Credit Facility increased to $745 million. Borrowings under the Revolving Credit Facility are subject to compliance with a borrowing base. The Revolving Credit Facility has an accordion feature, subject to the satisfaction of various conditions, which could bring total commitments under the Revolving Credit Facility to up to $1.2 billion. The Revolving Credit Facility provides for the issuance of letters of credit on behalf of the Company in an aggregate face amount not to exceed $100 million. Proceeds from the borrowings under the Revolving Credit Facility may be used for general corporate purposes of the Company and its subsidiaries in the ordinary course of business. Availability of the revolver under the Revolving Credit Facility will terminate on June 15, 2024 and all amounts outstanding under the Revolving Credit Facility must be repaid by June 15, 2025 pursuant to an amortization schedule.

Loans under the Revolving Credit Facility bear interest at a per annum rate equal to, (x) for loans for which the Company elects the base rate option, the “alternate base rate” (which is the greatest of (a) the prime rate as publicly announced by Citi, (b) the sum of (i) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System plus (ii) 0.5%, and (c) one month LIBOR plus 1% per annum) plus (A) if the gross borrowing base is equal to or greater than 1.6 times the combined revolving debt amount, 0.75%, or (B) if the gross borrowing base is less than 1.6 times the combined revolving debt amount, 0.875%, and (y) for loans for which the Company elects the Eurocurrency option, the applicable LIBO Rate for the related Interest Period for such Borrowing plus (A) if the gross borrowing base is equal to or greater than 1.6 times the combined revolving debt amount, 1.75%, or (B) if the gross borrowing base is less than 1.6 times the combined revolving debt amount, 1.875%. The Company will pay an unused fee of 0.375% per annum on the daily unused amount of the revolver commitments. The Company will pay letter of credit participation fees and a fronting fee on the average daily amount of any lender’s exposure with respect to any letters of credit issued under the Revolving Credit Facility.

The Company’s obligations to the lenders under the Revolving Credit Facility are secured by a first priority security interest in substantially all of the Company’s assets.

In connection with the Revolving Credit Facility, the Company has made certain customary representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar facilities. In addition, the Company must comply with the following financial covenants: (a) the Company must maintain a minimum shareholders’ equity, measured as of each fiscal quarter end; and (b) the Company must maintain at all times a 150% asset coverage ratio.

The Revolving Credit Facility contains customary events of default for similar financing transactions. Upon the occurrence and during the continuation of an event of default, Citi may terminate the commitments and declare the outstanding advances and all other obligations under the Revolving Credit Facility immediately due and payable.

As of December 31, 2020, the Company was in compliance with all covenants and other requirements of the Revolving Credit Facility.

 

F-45


Table of Contents

2023 Notes

On July 15, 2020, the Company issued $400 million aggregate principal amount of 3.650% notes due 2023 (the “2023 Notes”) pursuant to an indenture (the “Base Indenture”) and a supplemental indenture, each dated as of July 15, 2020 (the “First Supplemental Indenture,” and together with the Base Indenture, the “2023 Notes Indenture”), between the Company and U.S. Bank National Association (the “Trustee”).

The 2023 Notes will mature on July 14, 2023 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the 2023 Notes Indenture. The 2023 Notes bear interest at a rate of 3.650% per year payable semi-annually on January 14 and July 14 of each year, commencing on January 14, 2021. The 2023 Notes are general unsecured obligations of the Company that rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the 2023 Notes, rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank effectively junior to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries, financing vehicles or similar facilities.

The 2023 Notes Indenture contains certain covenants, including covenants requiring the Company to comply with the asset coverage requirements of Section 18(a)(1)(A) as modified by Section 61(a)(1) and (2) of the 1940 Act, whether or not it is subject to those requirements, and to provide financial information to the holders of the 2023 Notes and the Trustee if the Company is no longer subject to the reporting requirements under the Exchange Act. These covenants are subject to important limitations and exceptions that are described in the 2023 Notes Indenture.

In addition, on the occurrence of a “change of control repurchase event,” as defined in the 2023 Notes Indenture, the Company will generally be required to make an offer to purchase the outstanding 2023 Notes at a price equal to 100% of the principal amount of such 2023 Notes plus accrued and unpaid interest to the repurchase date.

As of December 31, 2020, the Company was in compliance with all covenants and other requirements of the 2023 Notes.

2026 Notes

On each of October 23, 2020 and December 1, 2020, the Company issued $500 million aggregate principal amount and $300 million aggregate principal amount, respectively, of 3.625% notes due 2026 (the “2026 Notes”) pursuant to a supplemental indenture, dated as of October 23, 2020 (the “Second Supplemental Indenture,” and together with the Base Indenture, the “2026 Notes Indenture”), to the Base Indenture between the Company and the Trustee.

The 2026 Notes will mature on January 15, 2026 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the 2026 Notes Indenture. The 2026 Notes bear interest at a rate of 3.625% per year payable semi-annually on January 15 and July 15 of each year, commencing on July 15, 2021. The 2026 Notes are general unsecured obligations of the Company that rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the 2026 Notes, rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank effectively junior to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company secures) to the extent of the value of the assets securing such indebtedness, and rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries, financing vehicles or similar facilities.

 

F-46


Table of Contents

The 2026 Notes Indenture contains certain covenants, including covenants requiring the Company to comply with the asset coverage requirements of Section 18(a)(1)(A) as modified by Section 61(a)(1) and (2) of the Investment Company Act of 1940, as amended, whether or not it is subject to those requirements, and to provide financial information to the holders of the Notes and the Trustee if the Company is no longer subject to the reporting requirements under the Securities Exchange Act of 1934, as amended. These covenants are subject to important limitations and exceptions that are described in the 2026 Notes Indenture.

In addition, on the occurrence of a “change of control repurchase event,” as defined in the 2026 Notes Indenture, the Company will generally be required to make an offer to purchase the outstanding Notes at a price equal to 100% of the principal amount of such Notes plus accrued and unpaid interest to the repurchase date.

As of December 31, 2020, the Company was in compliance with all covenants and other requirements of the 2026 Notes.

The Company’s outstanding debt obligations were as follows:

 

     December 31, 2020  
     Aggregate Principal
Committed
     Outstanding Principal      Carrying Value      Unused
Portion (1)
     Amount Available (2)  

Jackson Hole Funding Facility (3)

   $ 400,000      $ 362,316      $ 362,316      $ 37,684      $ 37,684  

Breckenridge Funding Facility

     825,000        569,000        569,000        256,000        256,000  

Big Sky Funding Facility

     400,000        200,346        200,346        199,654        117,599  

Revolving Credit Facility (4)

     745,000        182,901        182,901        562,099        562,099  

2023 Notes(5)

     400,000        400,000        394,549        —          —    

2026 Notes(5)

     800,000        800,000        791,281        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 3,570,000      $ 2,514,563      $ 2,500,393      $ 1,055,437      $ 973,382  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     December 31, 2019  
     Aggregate Principal
Committed
     Outstanding Principal      Carrying Value      Unused
Portion (1)
     Amount Available (2)  

Subscription Facility

   $ 400,000      $ 119,752      $ 119,752      $ 280,248      $ 280,248  

Jackson Hole Funding Facility (3)

     600,000        514,151        514,151        85,849        5,843  

Breckenridge Funding Facility

     875,000        820,311        820,311        54,689        10,769  

Big Sky Funding Facility

     400,000        —          —          400,000        25,481  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 2,275,000      $ 1,454,214      $ 1,454,214      $ 820,786      $ 322,341  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

The unused portion is the amount upon which commitment fees, if any, are based.

(2)

The amount available reflects any limitations related to each respective credit facility’s borrowing base.

(3)

Under the Jackson Hole Funding Facility, the Company may borrow in U.S. dollars or certain other permitted currencies. As of December 31, 2020, the Company had borrowings denominated in Euros (EUR) of 23.5 million. As of December 31, 2019, the Company had borrowings denominated in Euros (EUR) of 23.9 million.

(4)

Under the Revolving Credit Facility, the Company may borrow in U.S. dollars or certain other permitted currencies. As of December 31, 2020, the Company had borrowings denominated in Canadian Dollars (CAD) of 138.1 million.

 

F-47


Table of Contents
(5)

The carrying value of the Company’s 2023 Notes and 2026 Notes is presented net of unamortized debt issuance costs of $5.5 million and $8.7 million, respectively, as of December 31, 2020.

As of December 31, 2020 and December 31, 2019, $14.1 million and $5.3 million, respectively, of interest expense and $0.6 million and $0.2 million, respectively, of unused commitment fees was included in interest payable. For the years ended December 31, 2020, 2019 and 2018, the weighted average interest rate on all borrowings outstanding was 3.26%, 4.36% and 5.42% (including unused fees and accretion of net discounts on unsecured debt), respectively, and the average principal debt outstanding was $1,902.7 million,$776.6 million and $162.0 million, respectively.

The components of interest expense were as follows:

 

     For the Year Ended December 31,  
     2020      2019      2018  

Borrowing interest expense

   $ 57,437      $ 32,859      $ 935  

Facility unused fees

     3,374        1,007        89  

Amortization of financing costs and debt issuance costs

     3,993        1,565        327  

Accretion of original issue discount

     1,145        —          —    
  

 

 

    

 

 

    

 

 

 

Total Interest Expense

   $ 65,949      $ 35,431      $ 1,351  
  

 

 

    

 

 

    

 

 

 

Cash paid for interest expense

   $ 51,918      $ 28,946      $ 105  

Note 7. Commitments and Contingencies

Portfolio Company Commitments

The Company’s investment portfolio may contain debt investments which are in the form of lines of credit or delayed draw commitments, which require us to provide funding when requested by portfolio companies in accordance with underlying loan agreements. As of December 31, 2020 and December 31, 2019 the Company had unfunded delayed draw terms loans and revolvers in the aggregate principal amount of $432.3 million and $179.4 million, respectively.

Warehousing Transactions

The Company entered into two warehousing transactions whereby the Company agreed, subject to certain conditions, to purchase certain assets from parties unaffiliated with the Adviser. Such warehousing transactions were designed to assist the Company in deploying capital upon receipt of drawdown proceeds. One of these warehousing transactions related primarily to originated or anchor investments in middle market loans (the “Middle Market Warehouse”). The other warehouse related primarily to broadly syndicated loans (the “Syndicated Warehouse” and, together with the Middle Market Warehouse, the “Warehousing Transactions”) prior to the acquisition of the equity interests of the Syndicated Warehouse by the Company and merger of the Syndicated Warehouse with the Company’s wholly-owned subsidiary, as described below. Both the Middle Market Warehouse and the Syndicated Warehouse have been terminated.

Middle Market Warehouse

On September 10, 2018, the Company entered into a Warehousing Transaction for primarily middle market loans with a warehouse provider unaffiliated with the Adviser. The warehouse investments for the Middle Market Warehouse were ultimately selected by the warehouse provider, in its sole discretion, for an account which it solely controlled. Recommendations for such investments were made on a non-discretionary basis by an affiliate of the Adviser, but only if the Adviser determined the investment was desirable for the Company. The Company was a party to a forward purchase agreement pursuant to which the Company agreed to purchase certain assets held in the Middle Market Warehouse at a purchase price based on the cost of the asset to the warehouse provider plus amounts of unpaid interest, original issue discount and structuring fees accrued to the warehouse provider during the time the warehouse provider owned the asset.

 

F-48


Table of Contents

On July 12, 2019, the Company purchased all investments held by the Middle Market Warehouse for a total consideration of $86.9 million (including $0.2 million of accrued interest). The Middle Market Warehouse was terminated on September 10, 2019.

Since the Company had a contractual obligation to acquire all qualifying assets in the Middle Market Warehouse through a forward purchase agreement, the mark-to-market gain/loss of all investments was recognized in the Company’s consolidated financial statements. The Company did not, however, have any direct interest in the underlying assets nor did it have the power to control the activities most significant to the economic performance of the Middle Market Warehouse, and therefore, such assets were not included in the Company’s consolidated financial statements. This gain/loss amount is calculated as the difference between (1) the current purchase price the Company would be obligated to pay to purchase each asset under the forward purchase agreement and (2) the current fair value as determined by the Company’s valuation policy. For the years ended December 31, 2019 and December 31, 2018, the Company had a net unrealized gain of $0.2 million and an unrealized loss of $0.2 million, respectively, relating to this forward purchase obligation.

Syndicated Warehouse

On August 21, 2018, the Company entered into a Warehousing Transaction with a third party whereby the Company (or the Company’s designees) agreed, subject to certain contingencies, to purchase the equity interests of a warehouse vehicle from such third party at a price equal to the initial capital contribution made by the third party equity holder plus accrued but unpaid interest on the underlying assets in the warehouse vehicle remaining after the payment of all other obligations outstanding under the credit agreement of the Syndicated Warehouse vehicle other than principal on the loan made under such credit agreement. The warehouse investments for the Syndicated Warehouse vehicle were selected by an affiliate of the Adviser as the collateral manager of the Syndicated Warehouse. Neither the Adviser nor any of its affiliates received any additional compensation from the Company in connection with serving as collateral manager of the warehouse vehicle.

The Company exercised its rights to acquire the equity interests of the Syndicated Warehouse on December 11, 2018, at which time the assets and liabilities of the warehouse started to be included in the Company’s consolidated financial statements for a total purchase price of $24.9 million. For the year ended December 31, 2018, the Company recorded a loss $0.6 million, which represented the excess of total consideration paid for the equity interests over the fair value of the net assets of the Syndicated Warehouse we assumed on the date of acquisition.

The following table summarizes the assets and liabilities of the Syndicated Warehouse as of the acquisition date:

 

     December 11, 2018  

ASSETS

  

Investments at fair value

   $ 120,988  

Cash and cash equivalents

     919  

Interest receivable

     604  

Receivable for investments sold

     29,740  
  

 

 

 

Total assets

   $ 152,251  
  

 

 

 

LIABILITIES

  

Debt

   $ 65,000  

Payable for investments purchased

     62,758  

Interest payable

     140  
  

 

 

 

Total liabilities

     127,898  
  

 

 

 

NET ASSETS

  

Total net assets

     24,353  
  

 

 

 

Total liabilities and net assets

   $ 152,251  
  

 

 

 

 

F-49


Table of Contents

On December 28, 2018, the Company caused a certificate of merger to be filed with the Delaware Secretary of State to merge the Syndicated Warehouse, a Cayman Islands exempted company, into Breckenridge Funding, a Delaware limited liability company at which time all the assets and liabilities of the Syndicated Warehouse became owned by Breckenridge Funding. Breckenridge is, and at the time of the merger the Syndicated Warehouse was, a wholly-owned bankruptcy remote subsidiary of the Company. The Syndicated Warehouse and Breckenridge were established in connection with non-recourse credit facilities provided by BNP Paribas as lender on August 21, 2018 and December 21, 2018, respectively. In connection with the merger, the Company caused the credit facility at the Syndicated Warehouse to be paid off and terminated.

Other Commitments and Contingencies

From time to time, the Company may become a party to certain legal proceedings incidental to the normal course of its business. At December 31, 2020 and December 31, 2019, management is not aware of any pending or threatened litigation.

Note 8. Net Assets

Subscriptions and Drawdowns

In connection with its formation, the Company has the authority to issue an unlimited number of shares at $0.001 per share par value.

During the years ended December 31, 2020, 2019 and 2018, the Company entered into additional subscription agreements (the “Subscription Agreements”) with investors providing for the private placement of the Company’s shares. Under the terms of the Subscription Agreements, investors are required to fund drawdowns to purchase the Company’s shares up to the amount of their respective Capital Commitment on an as-needed basis each time the Company delivers a drawdown notice to its investors. As of December 31, 2020, the Company had received Capital Commitments totaling $3,926.3 million ($713.3 million remaining undrawn), of which $80.0 million ($8.0 million remaining undrawn) were from affiliates of the Adviser. As of December 31, 2019, the Company had received Capital Commitments totaling $3,230.6 million ($1,597.6 million remaining undrawn), of which $74.5 million ($36.7 million remaining undrawn) were from affiliates of the Adviser.

The following table summarizes the total shares issued and proceeds received related to the Company’s capital drawdowns delivered pursuant to the Subscription Agreements for the year ended December 31, 2020 (dollars in millions except share amounts):

 

Common Share Issuance Date

   Number of Common
Shares Issued
     Aggregate Offering
Price
 

January 30, 2020

     16,864,983      $ 440.9  

April 8, 2020

     14,864,518        324.0  

July 15, 2020

     5,304,125        125.6  

July 28, 2020

     123,229        2.9  

November 6, 2020

     4,627,528        115.4  

December 15, 2020 (1)

     22,802,680        571.2  
  

 

 

    

 

 

 

Total

     64,587,063      $ 1,580.0  
  

 

 

    

 

 

 

 

(1)

On December 1, 2020, the Company issued a capital call and delivered capital drawdown notices totaling $571.2 million, of which $3.4 million was received subsequent to December 31, 2020 and recorded as a subscription receivable on the Consolidated Statements of Assets and Liabilities.

 

F-50


Table of Contents

The following table summarizes the total shares issued and proceeds received related to the Company’s capital drawdowns delivered pursuant to the Subscription Agreements for the year ended December 31, 2019 (dollars in millions except share amounts):

 

Common Share Issuance Date

   Number of Common
Shares Issued
     Aggregate Offering
Price
 

January 24, 2019

     5,666,095      $ 142.1  

March 28, 2019

     9,818,817        247.5  

June 27, 2019

     12,453,261        319.7  

August 9, 2019

     1,401,367        36.1  

September 25, 2019

     14,686,050        377.3  

December 16, 2019 (1)

     10,474,169        271.1  
  

 

 

    

 

 

 

Total

     54,499,759      $ 1,393.8  
  

 

 

    

 

 

 

 

(1)

On December 2, 2019, the Company issued a capital call and delivered capital drawdown notices totaling $271.1 million, of which $5.9 million was received subsequent to December 31, 2019 and recorded as a subscription receivable on the Consolidated Statements of Assets and Liabilities.

The following table summarizes the total shares issued and proceeds received related to the Company’s initial capitalization and capital drawdowns delivered pursuant to the Subscription Agreements for the year ended December 31, 2018 (dollars in millions except share amounts):

 

Common Share Issuance Date

   Number of Common
Shares Issued
     Aggregate Offering
Price
 

September 14, 2018

     60      $ —    

November 20, 2018

     5,671,181      $ 141.8  

December 13, 2018

     3,950,078      $ 97.5  
  

 

 

    

 

 

 

Total

     9,621,319      $ 239.3  
  

 

 

    

 

 

 

Distributions

The following table summarizes the Company’s distributions declared and payable for the year ended December 31, 2020 (dollars in thousands except per share amounts):

 

Date Declared

   Record Date    Payment Date    Per Share Amount      Total Amount  

January 29, 2020

   January 29, 2020    May 15, 2020    $ 0.1593      $ 10,241  

February 26, 2020

   March 31, 2020    May 15, 2020      0.3407        27,688  

April 7, 2020

   April 7, 2020    August 14, 2020      0.0385        3,129  

June 29, 2020

   June 30, 2020    August 14, 2020      0.4615        44,454  

July 14, 2020

   July 14, 2020    November 13, 2020      0.0761        7,330  

July 27, 2020

   July 27, 2020    November 13, 2020      0.0707        7,185  

August 26, 2020

   September 30, 2020    November 13, 2020      0.3532        36,021  

November 5, 2020

   November 5, 2020    January 29, 2021      0.1957        19,958  

December 14, 2020

   December 14, 2020    January 29, 2021      0.2120        22,654  

December 14, 2020

   December 14, 2020    January 29, 2021      0.3000        32,057(1

December 14, 2020

   December 31, 2020    January 29, 2021      0.0923        11,968  
        

 

 

    

 

 

 

Total distributions

         $ 2.3000      $ 222,685  
        

 

 

    

 

 

 

 

(1)

Represents a special distribution.

 

F-51


Table of Contents

The following table summarizes the Company’s distributions declared and payable for the year ended December 31, 2019 (dollars in thousands except per share amounts):

 

Date Declared

   Record Date      Payment Date      Per Share Amount      Total Amount  

January 22, 2019

     January 23, 2019        May 15, 2019      $ 0.1239      $ 1,192  

February 28, 2019

     March 27, 2019        May 15, 2019        0.3536        5,406  

March 26, 2019

     March 31, 2019        May 15, 2019        0.0225        565  

June 26, 2019

     June 26, 2019        August 14, 2019        0.4780        12,010  

June 26, 2019

     June 30, 2019        August 14, 2019        0.0220        827  

August 8, 2019

     August 8, 2019        November 14, 2019        0.2120        7,967  

September 24, 2019

     September 24, 2019        November 14, 2019        0.2554        9,973  

September 24, 2019

     September 30, 2019        November 14, 2019        0.0326        1,752  

December 13, 2019

     December 15, 2019        January 30, 2020        0.4130        22,226  

December 16, 2019

     December 31, 2019        January 30, 2020        0.0870        5,593  
        

 

 

    

 

 

 

Total distributions

         $ 2.0000      $ 67,511  
        

 

 

    

 

 

 

For the year ended December 31, 2018, no distributions were declared or paid by the Company.

Dividend Reinvestment

The Company has adopted a dividend reinvestment plan (“DRIP”), pursuant to which it reinvests all cash dividends declared by the Board on behalf of its shareholders who do not elect to receive their dividends in cash. As a result, if the Board and the Company declares, a cash dividend or other distribution, then the Company’s shareholders who have not opted out of its dividend reinvestment plan will have their cash distributions automatically reinvested in additional shares as described below, rather than receiving the cash dividend or other distribution. Distributions on fractional shares will be credited to each participating shareholder’s account to three decimal places. A participating shareholder will receive an amount of shares equal to the amount of the distribution on that participant’s shares divided by the most recent quarter-end NAV per share that is available on the date such distribution was paid (unless the Board determines to use the NAV per share as of another time). Shareholders who receive distributions in the form of shares will generally be subject to the same U.S. federal, state and local tax consequences as if they received cash distributions; however, since their cash distributions will be reinvested, those shareholders will not receive cash with which to pay any applicable taxes. The Company intends to use newly issued shares to implement the plan. Shares issued under the dividend reinvestment plan will not reduce outstanding Capital Commitments.

The following table summarizes the amounts received and shares issued to shareholders who have not opted out of the Company’s DRIP during the year ended December 31, 2020 (dollars in thousands except share amounts):

 

Payment Date

   DRIP Shares Value      DRIP Shares Issued  

January 30, 2020

   $ 2,882        112,302  

May 15, 2020

     4,244        194,694  

August 14, 2020

     5,437        229,591  

November 13, 2020

     6,182        248,194  
  

 

 

    

 

 

 

Total distributions

   $ 18,745        784,781  
  

 

 

    

 

 

 

 

F-52


Table of Contents

The following table summarizes the amounts received and shares issued to shareholders who have not opted out of the DRIP during the year ended December 31, 2019 (dollars in thousands except share amounts):

 

Payment Date

   DRIP Shares Value      DRIP Shares Issued  

May 15, 2019

   $ 519        20,605  

August 14, 2019

     1,748        68,165  

November 14, 2019

     2,051        79,894  
  

 

 

    

 

 

 

Total distributions

   $ 4,318        168,664  
  

 

 

    

 

 

 

For the year ended December 31, 2018, no distributions were declared or paid by the Company.

Note 9. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:

 

     For The Year Ended December 31,  
     2020      2019      2018  

Net increase (decrease) in net assets resulting from operations

   $ 218,638      $ 106,206      $ (2,944

Weighted average shares outstanding (basic and diluted)

     95,333,867        33,858,642        7,458,181  

Earnings (loss) per common share (basic and diluted)

   $ 2.29      $ 3.14      $ (0.39

Note 10. Income Taxes

Taxable income differs from net increase (decrease) in net assets resulting from operations primarily due to: (1) unrealized appreciation (depreciation) on investments, as gains and losses are generally not included in taxable income until they are realized; (2) income or loss recognition on exited investments; (3) non-deductible U.S federal excise taxes; and (4) other non-deductible expenses.

The Company makes certain adjustments to the classification of net assets as a result of permanent book-to-tax differences, which include differences in the book and tax basis of certain assets and liabilities, and non-deductible federal taxes or losses among other items. To the extent these differences are permanent, they are charged or credited to additional paid in capital, undistributed net investment income or undistributed net realized gains on investments, as appropriate. For the years ended December 31, 2020, 2019 and 2018, permanent differences were as follows:

 

     For The Year Ended December 31,  
     2020      2019      2018  

Undistributed net investment income (loss)

   $ (24,912    $ (732    $ 43  

Accumulated net realized gain (loss)

     26,938        2,067        9  
  

 

 

    

 

 

    

 

 

 

Paid In Capital

   $ (2,026    $ (1,335    $ (52
  

 

 

    

 

 

    

 

 

 

During the years ended December 31, 2020, 2019 and 2018, permanent differences were principally related to $0.5 million, $0.5 million and $0.1 million , respectively, of U.S. federal excise taxes and $1.5 million, $0.5 million and $0.0 million, respectively, of non-deductible offering costs.

 

F-53


Table of Contents

For tax purposes, the Company may elect to defer any portion of a post-October capital loss or late-year ordinary loss to the first day of the following fiscal year. As of December 31, 2020, the post-October capital losses elected by the Company to defer, and as such deemed to arise on January 1, 2021, are as follows:

 

     For The Year Ended December 31,  
     2020      2019      2018  

Post-October Capital Loss Deferral - Short Term

   $ —        $ —        $ —    

Post-October Capital Loss Deferral - Long Term

     4,293        —          —    
  

 

 

    

 

 

    

 

 

 

Net Post-October Capital Loss Deferrals

   $ 4,293      $ —        $ —    
  

 

 

    

 

 

    

 

 

 

The following reconciles the increase in net assets resulting from operations to taxable income for the years ended December 31, 2020, 2019 and 2018:

 

     For The Year Ended December 31,  
     2020      2019      2018  

Net increase (decrease) in net assets resulting from operations

   $ 218,638      $ 106,206      $ (2,944

Net unrealized (appreciation) depreciation

     16,582        (28,329      3,650  

Realized losses for tax not included in book income

     (41      (511      581  

Nondeductible capital gains incentive fee

     (3,141      4,218        —    

Other nondeductible expenses and excise taxes

     2,026        1,335        52  

Net post-October capital loss deferral

     4,293        —          —    
  

 

 

    

 

 

    

 

 

 

Taxable/distributable income

   $ 238,357      $ 82,919      $ 1,339  
  

 

 

    

 

 

    

 

 

 

 

(1)

Tax information for the fiscal year ended December 31, 2020 is estimated and is not considered final until the Company files its tax return.

The components of accumulated gains / losses as calculated on a tax basis for the years ended December 31, 2020, 2019 and 2018 are as follows:

 

     For The Year Ended December 31,  
     2020      2019      2018  

Distributable ordinary income

   $ 32,419      $ 16,748      $ 1,339  

Other temporary book/tax differences

     (5,369      (4,212      —    

Net unrealized appreciation/(depreciation) on investments

     10,431        24,603        (4,231
  

 

 

    

 

 

    

 

 

 

Total accumulated under-distributed (over-distributed) earnings

   $ 37,481      $ 37,139      $ (2,892
  

 

 

    

 

 

    

 

 

 

The cost and unrealized gain (loss) of the Company’s investments, as calculated on a tax basis, at December 31, 2020, December 31, 2019 and December 31, 2018 were as follows:

 

     For The Year Ended December 31,  
     2020      2019      2018  

Gross unrealized appreciation

   $ 58,871      $ 35,465      $ 953  

Gross unrealized depreciation

     (48,439      (10,862      (4,962
  

 

 

    

 

 

    

 

 

 

Net unrealized appreciation (depreciation)

   $ 10,432      $ 24,603      $ (4,009
  

 

 

    

 

 

    

 

 

 

Tax cost of investments

   $ 5,575,511      $ 3,067,837      $ 549,334  

 

F-54


Table of Contents

All of the dividends declared during the year ended December 31, 2020 and 2019 were derived from ordinary income, as determined on a tax basis.

BGSL Investments, a wholly owned subsidiary that was formed in 2019, is a Delaware LLC which has elected to be treated as a corporation for U.S. tax purposes. As such, BGSL Investments is subject to U.S. Federal, state and local taxes. For the Company’s tax year ended December 31, 2020, BGSL Investments activity did not result in a material provision for income taxes.

Management has analyzed the Company’s tax positions taken, or to be taken, on federal income tax returns for all open tax years, and has concluded that no provision for income tax is required in the Company’s financial statements. The Company’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three fiscal years after they are filed.

Note 11. Financial Highlights

The following are the financial highlights for the years ended December 31, 2020, 2019 and 2018:

 

     For The Year Ended December 31,  
     2020      2019      2018  

Per Share Data:

        

Net asset value, beginning of period

   $ 26.02      $ 24.57      $ 25.00  

Net investment income (1)

     2.51        2.18        0.17  

Net unrealized and realized gain (loss) (2)

     (1.03)        1.27        (0.60)  
  

 

 

    

 

 

    

 

 

 

Net increase (decrease) in net assets resulting from operations

     1.48        3.45        (0.43)  

Distributions declared (3)

     (2.30)        (2.00)        —    
  

 

 

    

 

 

    

 

 

 

Total increase (decrease) in net assets

     (0.82)        1.45        (0.43)  
  

 

 

    

 

 

    

 

 

 

Net asset value, end of period

   $ 25.20      $ 26.02      $ 24.57  
  

 

 

    

 

 

    

 

 

 

Shares outstanding, end of period

     129,661,586        64,289,742        9,621,319  

Total return based on NAV (4)

     6.46%        14.43%        (1.72)%  

Ratios:

        

Ratio of net expenses to average net assets (5)

     6.50%        8.50%        8.89%  

Ratio of net investment income to average net assets (5)

     10.37%        8.46%        6.07%  

Portfolio turnover rate

     46.80%        31.49%        —%  

Supplemental Data:

        

Net assets, end of period

     3,267,809        1,673,117        236,365  

Total capital commitments, end of period

     3,926,295        3,230,641        952,234  

Ratios of total contributed capital to total committed capital, end of period

     81.83%        50.55%        25.13%  

Asset coverage ratio

     230.0%        215.1%        227.8%  

 

(1)

The per share data was derived by using the weighted average shares outstanding during the period.

(2)

For the years ended December 31, 2020, 2019 and 2018, the amount shown does not correspond with the aggregate amount for the period as it includes a $(0.81), $0.31 and $(0.03) impact, respectively, from the effect of the timing of capital transactions.

(3)

The per share data for distributions was derived by using the actual shares outstanding at the date of the relevant transactions (refer to Note 8).

(4)

Total return is calculated as the change in NAV per share during the period, plus distributions per share (assuming dividends and distributions are reinvested in accordance with the Company’s dividend reinvestment plan) divided by the beginning NAV per share. Total return does not include sales load.

 

F-55


Table of Contents
(5)

For the year ended December 31, 2018, amounts are annualized except for organizational costs and expense support amounts relating to organizational costs. For the years ended December 31, 2020, 2019 and 2018, the ratio of total operating expenses to average net assets was 6.43%, 8.47% and 14.09%, respectively, on an annualized basis, excluding the effect of expense support/(recoupment) by the Adviser which represented (0.07%), (0.03)% and 5.20%, respectively, of average net assets.

Note 12. Subsequent Events

The Company’s management evaluated subsequent events through the date of issuance of the consolidated financial statements. There have been no subsequent events that occurred during such period that would require disclosure in, or would be required to be recognized in, the consolidated financial statements as of December 31, 2020, except as discussed below.

On February 24, 2021, the Board declared a distribution of $0.50 per share, which is payable on May 14, 2021 to shareholders of record as of March 31, 2021.

 

F-56


Table of Contents

Blackstone Secured Lending Fund

Consolidated Statements of Assets and Liabilities

(in thousands, except share and per share amounts)

 

     June 30, 2021     December 31, 2020  

ASSETS

     (Unaudited)    

Investments at fair value

    

Non-controlled/non-affiliated investments (cost of $7,244,149 and $5,575,482 at June 30, 2021 and December 31, 2020, respectively)

   $ 7,329,969   $ 5,585,942

Non-controlled/affiliated investments (cost of $26,163 and $0 at June 30, 2021 and December 31, 2020, respectively)

     26,671     —    
  

 

 

   

 

 

 

Total investments at fair value (cost of $7,270,312 and $5,575,482 at June 30, 2021 and December 31, 2020, respectively)

     7,356,640     5,585,942
Cash and cash equivalents      181,643     217,993
Interest receivable from non-controlled/non-affiliated investments      35,057     21,456
Deferred financing costs      9,554     6,933
Receivable for investments sold      67,679     114,537
Subscription receivable      1,808     3,427
Other assets      457     578
  

 

 

   

 

 

 

Total assets

   $ 7,652,838   $ 5,950,866
  

 

 

   

 

 

 

LIABILITIES

    

Debt (net of unamortized debt issuance costs of $21,750 and $14,170 at June 30, 2021 and December 31, 2020, respectively)

   $ 3,760,694   $ 2,500,393

Payable for investments purchased

     3,008     48,582

Due to affiliates

     5,077     5,546

Management fees payable

     13,272     10,277

Income based incentive fee payable

     13,800     15,262

Capital gains incentive fee payable

     13,247     1,077

Interest payable

     35,497     14,715

Distribution payable (Note 8)

     66,976     86,638

Accrued expenses and other liabilities

     165     567
  

 

 

   

 

 

 

Total liabilities

     3,911,736     2,683,057
  

 

 

   

 

 

 

Commitments and contingencies (Note 7)

    

NET ASSETS

    

Common shares, $0.001 par value (unlimited shares authorized; 144,314,260 and 129,661,586 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively)

     144     130

Additional paid in capital

     3,609,406     3,232,562

Distributable earnings (loss)

     131,552     35,117
  

 

 

   

 

 

 

Total net assets

     3,741,102     3,267,809
  

 

 

   

 

 

 

Total liabilities and net assets

   $ 7,652,838   $ 5,950,866
  

 

 

   

 

 

 

NET ASSET VALUE PER SHARE

   $ 25.92   $ 25.20

The accompanying notes are an integral part of these consolidated financial statements.

 

F-57


Table of Contents

Blackstone Secured Lending Fund

Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(Unaudited)

 

    Three Months Ended June 30,     Six Months Ended June 30,  
    2021     2020     2021     2020  

Investment income:

       

From non-controlled/non-affiliated investments:

       

Interest income

  $ 130,774   $ 78,494   $ 258,724   $ 156,085

Payment-in-kind interest income

    362     2,641     2,279     5,243

Fee income

    3,961     24     4,804     26
 

 

 

   

 

 

   

 

 

   

 

 

 

Total investment income

    135,097     81,159     265,807     161,354
 

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

       

Interest expense

    27,167     14,441     48,313     30,512

Management fees

    13,272     7,454     24,949     13,991

Income based incentive fee

    13,800     8,616     28,146     16,884

Capital gains incentive fee

    6,793           12,171     (4,218

Professional fees

    654     334     1,242     860

Board of Trustees’ fees

    144     111     275     226

Administrative service expenses (Note 3)

    630     508     1,122     1,091

Other general and administrative

    1,228     638     2,545     1,468

Amortization of offering costs

    —         232     —         539
 

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    63,688     32,334     118,763     61,353

Recoupment of expense support (Note 3)

    —         400     —         800
 

 

 

   

 

 

   

 

 

   

 

 

 

Net expenses

    63,688     32,734     118,763     62,153
 

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income before excise tax

    71,409     48,425     147,044     99,201

Excise tax expense

    —         —         (282     104
 

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income after excise tax

    71,409     48,425     147,326     99,097
 

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss):

       

Net change in unrealized appreciation (depreciation):

       

Non-controlled/non-affiliated investments

    39,977     178,860     74,089     (179,954

Non-controlled/affiliated investments

    1,854     —         508     —    

Translation of assets and liabilities in foreign currencies

    112     14     (602     1
 

 

 

   

 

 

   

 

 

   

 

 

 

Net unrealized appreciation (depreciation)

    41,943     178,874     73,995     (179,953
 

 

 

   

 

 

   

 

 

   

 

 

 

Realized gain (loss):

       

Non-controlled/non-affiliated investments

    3,682     1,650     8,316     2,349

Foreign currency transactions

    (339     28     (1,175     24
 

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

    3,343     1,678     7,141     2,373
 

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

    45,286     180,552     81,136     (177,580
 

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net assets resulting from operations

  $ 116,695   $ 228,977   $ 228,462   $ (78,483
 

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income per share (basic and diluted)

  $ 0.53   $ 0.51   $ 1.12   $ 1.16

Earnings (loss) per share (basic and diluted)

  $ 0.87   $ 2.41   $ 1.73   $ (0.92

Weighted average shares outstanding (basic and diluted)

    133,789,760     95,088,676     131,889,042     85,472,680

Distributions declared per share

  $ 0.50   $ 0.50   $ 1.00   $ 1.00

The accompanying notes are an integral part of these consolidated financial statements.

 

F-58


Table of Contents

Blackstone Secured Lending Fund

Consolidated Statements of Changes in Net Assets

(in thousands)

(Unaudited)

 

     Par
Amount
     Additional
Paid in
Capital
     Distributable
Earnings
(Loss)
    Total Net
Assets
 

Balance, March 31, 2021

   $ 130    $ 3,243,741    $ 81,832   $ 3,325,703

Issuance of common shares

     14      356,991      —         357,005

Reinvestment of dividends

     —          8,674      —         8,674

Net investment income

     —          —          71,409     71,409

Net realized gain (loss)

     —          —          3,343     3,343

Net change in unrealized appreciation (depreciation)

     —          —          41,943     41,943

Dividends declared from net investment income

     —          —          (66,975     (66,975
  

 

 

    

 

 

    

 

 

   

 

 

 

Balance, June 30, 2021

   $ 144    $ 3,609,406    $ 131,552   $ 3,741,102
  

 

 

    

 

 

    

 

 

   

 

 

 

 

     Par
Amount
     Additional
Paid in
Capital
     Distributable
Earnings
(Loss)
    Total Net
Assets
 

Balance, December 31, 2020

   $ 130    $ 3,232,562    $ 35,117   $ 3,267,809

Issuance of common shares

     14      356,991      —         357,005

Reinvestment of dividends

     —          19,853      —         19,853

Net investment income

     —          —          147,326     147,326

Net realized gain (loss)

     —          —          7,141     7,141

Net change in unrealized appreciation (depreciation)

     —          —          73,995     73,995

Dividends declared from net investment income

     —          —          (132,027     (132,027
  

 

 

    

 

 

    

 

 

   

 

 

 

Balance, June 30, 2021

   $ 144    $ 3,609,406    $ 131,552   $ 3,741,102
  

 

 

    

 

 

    

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-59


Table of Contents

Blackstone Secured Lending Fund

Consolidated Statements of Changes in Net Assets

(in thousands)

(Unaudited)

 

     Par
Amount
    Additional
Paid in
Capital
    Distributable
Earnings
(Loss)
    Total Net
Assets
 

Balance, March 31, 2020

   $ 81   $ 2,079,631   $ (308,251   $ 1,771,461

Issuance of common shares

     15     324,031     —         324,046

Reinvestment of dividends

     —         4,244     —         4,244

Net investment income

     —         —         48,425     48,425

Subscribed but unissued shares

     5     125,597     —         125,602

Subscriptions receivable

     (5     (125,597     —         (125,602

Net realized gain (loss)

     —         —         1,678     1,678

Net change in unrealized appreciation (depreciation)

     —         —         178,874     178,874

Dividends declared from net investment income

     —         —         (47,583     (47,583
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance, June 30, 2020

   $ 96   $ 2,407,906   $ (126,857   $ 2,281,145
  

 

 

   

 

 

   

 

 

   

 

 

 

 

     Par
Amount
    Additional
Paid in
Capital
    Distributable
Earnings
(Loss)
    Total Net
Assets
 

Balance, December 31, 2019

   $ 64   $ 1,635,915   $ 37,138   $ 1,673,117

Issuance of common shares

     32     764,865     —         764,897

Reinvestment of dividends

     —         7,126     —         7,126

Net investment income

     —         —         99,097     99,097

Subscribed but unissued shares

     5     125,597     —         125,602

Subscriptions receivable

     (5     (125,597     —         (125,602

Net realized gain (loss)

     —         —         2,373     2,373

Net change in unrealized appreciation (depreciation)

     —         —         (179,953     (179,953

Dividends declared from net investment income

     —         —         (85,512     (85,512
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance, June 30, 2020

   $ 96   $ 2,407,906   $ (126,857   $ 2,281,145
  

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-60


Table of Contents

Blackstone Secured Lending Fund

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

     Six Months Ended June 30,  
     2021     2020  

Cash flows from operating activities:

    

Net increase (decrease) in net assets resulting from operations

   $ 228,462   $ (78,483

Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:

    

Net unrealized (appreciation) depreciation on investments

     (74,597     179,954

Net unrealized (appreciation) depreciation on translation of assets and liabilities in foreign currencies

     602     (1

Net realized (gain) loss on investments

     (8,316     (2,349

Payment-in-kind interest capitalized

     (2,558     (5,327

Net accretion of discount and amortization of premium

     (30,824     (13,656

Amortization of deferred financing costs

     1,051     1,188

Amortization of debt issuance costs

     2,474     —    

Amortization of offering costs

     —         538

Purchases of investments

     (2,592,570     (1,511,052

Proceeds from sale of investments and principal repayments

     939,438     410,259

Changes in operating assets and liabilities:

    

Interest receivable

     (13,601     (5,121

Receivable for investments sold

     46,858     (24,778

Other assets

     120     87

Payable for investments purchased

     (45,574     98,793

Due to affiliates

     (597     198

Management fee payable

     2,995     2,408

Income based incentive fee payable

     (1,462     2,271

Capital gains incentive fee payable

     12,171     (4,218

Interest payable

     20,781     (1,912

Accrued expenses and other liabilities

     (401     (215
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (1,515,548     (951,416
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Borrowings of debt

     2,236,851     801,141

Repayments of debt

     (979,659     (546,895

Deferred financing costs paid

     (3,737     (6,610

Debt issuance costs paid

     (993     —    

Dividends paid in cash

     (131,836     (58,622

Proceeds from issuance of common shares

     358,624     770,830
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     1,479,250     959,844
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     (36,298     8,428

Effect of foreign exchange rate changes on cash and cash equivalents

     (52     —    

Cash and cash equivalents, beginning of period

     217,993     65,495
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 181,643     73,923
  

 

 

   

 

 

 

 

F-61


Table of Contents
     Six Months Ended June 30,  
     2021     2020  

Supplemental information and non-cash activities:

 

Interest paid during the period

   $ 24,512   $ 30,948

Subscription receivable

   $ 1,808   $ 10

Distribution payable

   $ 66,976   $ 47,583

Reinvestment of distributions during the period

   $ 19,853   $ 7,126

Non-cash deferred financing costs activity

   $ (64   $ (1,413

Accrued but unpaid debt issuance costs

   $ 190   $ —  

Excise taxes paid

   $ 131   $ —  

The accompanying notes are an integral part of these consolidated financial statements.

 

F-62


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

June 30, 2021

(in thousands)

(Unaudited)

 

Investments (1)

 

Reference Rate
and Spread

  Interest
Rate (2)
    Maturity
Date
    Par
Amount/
Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 

Investments - non-controlled/non-affiliated

             
First Lien Debt                                        

Aerospace & Defense

             

Corfin Holdings, Inc. (4)(11)

  L + 6.00%     7.00%       2/5/2026     $ 272,752   $ 268,270   $ 272,070     7.27

MAG DS Corp. (11)

  L + 5.50%     6.50%       4/1/2027       87,168     79,843     85,533     2.29

Maverick Acquisition, Inc. (4)(7)(11)

  L + 6.00%     7.00%       6/1/2027       21,000     20,500     20,493     0.55

TCFI AEVEX, LLC (4)(7)(11)

  L + 6.00%     7.00%       3/18/2026       113,086     110,935     111,644     2.98
         

 

 

   

 

 

   

 

 

 
            479,548     489,740     13.09

Air Freight & Logistics

             

AGI-CFI Holdings, Inc. (4)(7)(10)

  L + 5.50%     6.25%       6/11/2027       95,158     93,198     93,180     2.49

AGI-CFI Holdings, Inc. - Revolving Term Loan (4)(5)(7)(14)

  L + 4.50%     6.25%       6/11/2027       6,513     6,513     6,513     0.17

Livingston International, Inc. (4)(6)(11)

  L + 5.75%     6.75%       4/30/2026       121,518     118,184     121,670     3.25

Mode Purchaser, Inc. (4)(11)

  L + 6.25%     7.25%       12/9/2026       176,096     173,359     171,694     4.59

Omni Intermediate Holdings, LLC - Revolving Term Loan (4)(5)(7)(11)

  L + 5.00%     6.00%       12/30/2025       132     119     132     0.00  

Omni Intermediate Holdings, LLC (4)(5)(7)(11)

  L + 5.00%     6.00%       12/30/2026       7,531     7,367     7,531     0.20

R1 Holdings, LLC (4)(7)(11)

  L + 6.00%     7.00%       1/2/2026       57,377     56,729     57,377     1.53

SEKO Global Logistics Network, LLC (4)(5)(7)(11)

  L + 5.00%     6.00%       12/30/2026       5,080     4,996     5,060     0.14
         

 

 

   

 

 

   

 

 

 
            460,466     463,156     12.37

Building Products

             

Fencing Supply Group Acquisition, LLC (4)(5)(7)(11)

  L + 6.00%     7.00%       2/26/2027       57,653     56,417     56,938     1.52

Jacuzzi Brands, LLC (4)(11)

  L + 6.50%     7.50%       2/25/2025       94,817     93,715     94,817     2.53

 

F-63


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

June 30, 2021

(in thousands)

(Unaudited)

 

Investments (1)

 

Reference Rate
and Spread

  Interest
Rate (2)
    Maturity
Date
    Par
Amount/
Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 
First Lien Debt (continued)                                        

Latham Pool Products, Inc. (8)

  L + 6.00%     6.10%       6/18/2025       47,513     46,588     47,736     1.28

Lindstrom, LLC (4)(11)

  L + 6.25%     7.25%       4/7/2025       122,712     121,244     122,712     3.28

The Wolf Organization, LLC (4)(11)

  L + 6.50%     7.50%       9/3/2026       89,167     87,854     92,734     2.48

Windows Acquisition Holdings, Inc. (4)(5)(11)

  L + 6.50%     7.50%       12/29/2026       55,698     54,658     55,420     1.48
         

 

 

   

 

 

   

 

 

 
            460,475     470,356     12.57

Chemicals

             

DCG Acquisition Corp. (4)(5)(8)

  L + 4.50%     4.59%       9/30/2026       34,913     34,661     35,000     0.94

NIC Acquisition Corp. (5)(10)

  L + 3.75%     4.50%       12/29/2027       733     730     733     0.02

Polymer Additives, Inc. (8)

  L + 6.00%     6.18%       7/31/2025       29,302     28,368     28,086     0.75

USALCO, LLC (4)(7)(12)

  L + 7.25%     8.50%       6/1/2026       165,915     162,283     167,706     4.48

USALCO, LLC (4)(12)

  L + 6.50%     7.75%       6/1/2026       35,514     34,869     34,804     0.93

VDM Buyer, Inc. (4)(8)

  L + 6.75%     6.94%       4/22/2025     23,901     26,563     27,494     0.73

VDM Buyer, Inc. (4)(8)

  L + 6.75%     6.94%       4/22/2025       62,769     61,972     60,886     1.63
         

 

 

   

 

 

   

 

 

 
            349,447     354,709     9.48

Commercial Services & Supplies

             

Bazaarvoice, Inc. (4)(7)(8)

  L + 5.75%     5.83%       5/7/2028       248,111     248,111     248,111     6.63

JSS Holdings, Inc. (4)(11)

  L + 6.25%     7.25%       12/17/2027       290,266     286,269     288,815     7.72

Sciens Building Solutions, LLC (4)(7)(11)

  L + 5.75%     6.75%       5/21/2027       24,413     23,816     23,788     0.64

The Action Environmental Group, Inc. (4)(12)

  L + 6.00%     7.25%       1/16/2026       117,678     115,867     112,971     3.02

Veregy Consolidated, Inc. (11)

  L + 6.00%     7.00%       11/2/2027       21,205     20,671     21,364     0.57
         

 

 

   

 

 

   

 

 

 
            694,734     695,049     18.58

 

F-64


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

June 30, 2021

(in thousands)

(Unaudited)

 

Investments (1)

 

Reference Rate
and Spread

  Interest
Rate (2)
    Maturity
Date
    Par
Amount/
Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 
First Lien Debt (continued)                                        

Construction & Engineering

             

COP Home Services TopCo IV, Inc. (4)(5)(7)(11)

  L + 5.00%     6.00%       12/31/2027       17,906     17,269     17,662     0.47

IEA Energy Services, LLC (8)

  L + 6.75%     6.90%       9/25/2024       30,517     29,684     30,352     0.81
         

 

 

   

 

 

   

 

 

 
            46,953     48,013     1.28

Distributors

             

Bution Holdco 2, Inc. (4)(11)

  L + 6.25%     7.25%       10/17/2025       102,461     100,995     100,412     2.68

Dana Kepner Company, LLC (4)(7)(11)

  L + 6.25%     7.25%       12/29/2026       64,268     63,090     63,946     1.71

EIS Buyer, LLC (4)(13)

  L + 6.25%     7.75%       9/30/2025       83,895     82,693     81,798     2.19

Fastlane Parent Company, Inc. (8)

  L + 4.50%     4.60%       2/4/2026       7,443     7,254     7,422     0.20

NDC Acquisition Corp. (4)(11)

  L + 5.75%     6.75%       3/9/2027       22,444     21,859     21,827     0.58

NDC Acquisition Corp.—Revolving Term Loan (4)(5)(7)(11)

  L + 5.75%     6.75%       3/9/2027       1,156     1,067     1,062     0.03

PSS Industrial Group Corp. (13)

  L + 8.00% (incl. 2.00% PIK)     9.50%       4/10/2025       53,894     51,383     44,261     1.18

Tailwind Colony Holding Corporation (4)(5)(7)(11)

  L + 7.50%     8.50%       11/13/2024       32,691     32,393     32,038     0.86

Unified Door & Hardware Group, LLC (4)(11)

  L + 6.25%     7.25%       6/30/2025       90,602     89,124     90,602     2.42
         

 

 

   

 

 

   

 

 

 
            449,858     443,367     11.85

Diversified Financial Services

             

Barbri Holdings, Inc. (4)(7)(10)

  L + 5.75%     6.50%       4/30/2028       62,000     60,790     60,760     1.62

SelectQuote, Inc. (4)(10)

  L + 5.00%     5.75%       11/5/2024       59,714     58,354     59,714     1.60
         

 

 

   

 

 

   

 

 

 
            119,144     120,474     3.22

Electric Utilities

             

Qualus Power Services Corp. (4)(7)(11)

  L + 5.50%     6.50%       3/26/2027       42,643     41,439     41,383     1.11

 

F-65


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

June 30, 2021

(in thousands)

(Unaudited)

 

Investments (1)

 

Reference Rate
and Spread

  Interest
Rate (2)
    Maturity
Date
    Par
Amount/
Units
    Cost (3)     Fair
Value
    Percentage
of Net Assets
 
First Lien Debt (continued)                                        

Electrical Equipment

             

Shoals Holdings, LLC (4)(11)

  L + 3.25%     4.25%       11/25/2026       84,787     82,844     85,211     2.28

Electronic Equipment, Instruments & Components

             

Albireo Energy, LLC (4)(5)(7)(11)

  L + 6.00%     7.00%       12/23/2026       107,686     105,434     106,779     2.85

ConvergeOne Holdings, Inc. (8)

  L + 5.00%     5.10%       1/4/2026       14,543     14,157     14,414     0.39
         

 

 

   

 

 

   

 

 

 
            119,591     121,193     3.24

Energy Equipment & Services

             

Abaco Energy Technologies, LLC (4)(13)

  L + 7.00%     8.50%       10/4/2024       49,145     48,184     46,073     1.23

Tetra Technologies, Inc. (4)(6)(11)

  L + 6.25%     7.25%       9/10/2025       20,098     20,003     19,796     0.53
         

 

 

   

 

 

   

 

 

 
            68,187     65,869     1.76

Health Care Providers & Services

             

ADCS Clinics Intermediate Holdings, LLC (4)(7)(11)

  L + 6.25%     7.25%       5/7/2027       12,361     12,058     12,050     0.32

Canadian Hospital Specialties Ltd. (4)(5)(6)(7)(11)

  L + 4.50%     5.50%       4/14/2028     C$ 27,120       21,276     21,575     0.58

Cross Country Healthcare, Inc. (4)(10)

  L + 5.75%     6.50%       6/8/2027       29,750     29,161     29,155     0.78

DCA Investment Holdings, LLC (4)(7)(10)

  L + 6.25%     7.00%       3/12/2027       22,090     21,730     21,711     0.58

Epoch Acquisition, Inc. (4)(11)

  L + 6.75%     7.75%       10/4/2024       24,687     24,501     24,687     0.66

Healthcomp Holding Company, LLC (4)(5)(7)(11)

  L + 6.00%     7.00%       10/27/2026       77,414     75,466     76,767     2.05

Jayhawk Buyer, LLC (4)(7)(11)

  L + 5.00%     6.00%       10/15/2026       142,944     139,803     141,157     3.77

 

F-66


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

June 30, 2021

(in thousands)

(Unaudited)

 

Investments (1)

 

Reference Rate
and Spread

  Interest
Rate (2)
    Maturity
Date
    Par
Amount/
Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 
First Lien Debt (continued)                                        

Monroe Capital Holdings, LLC (4)(7)(11)

  L + 6.25%     7.25%       9/8/2026       129,404     127,127     132,988     3.55

Odyssey Holding Company, LLC (4)(11)

  L + 5.75%     6.75%       11/16/2025       17,989     17,799     17,989     0.48

Snoopy Bidco, Inc. (4)(7)(10)

  L + 6.00%     6.75%       6/1/2028       124,100     119,444     119,389     3.19

SpecialtyCare, Inc. (4)(5)(7)(11)

  L + 5.75%     6.75%       6/18/2028       12,351     11,935     11,934     0.32

The GI Alliance Management, LLC (4)(11)

  L + 6.25%     7.25%       11/4/2024       273,730     268,169     269,624     7.21

WHCG Purchaser III, Inc. (4)(5)(7)(10)

  L + 5.75%     6.50%       6/22/2028       45,370     44,114     44,110     1.18
         

 

 

   

 

 

   

 

 

 
            912,584     923,135     24.68

Health Care Technology

             

Edifecs, Inc. (4)(11)

  L + 7.00%     8.00%       9/21/2026       222,515     217,670     224,740     6.01

NMC Crimson Holdings, Inc. (4)(7)(10)

  L + 6.00%     6.75%       3/1/2028       71,173     68,692     69,101     1.85

Project Ruby Ultimate Parent Corp. (10)

  L + 3.25%     4.00%       3/3/2028       8,590     8,549     8,575     0.23
         

 

 

   

 

 

   

 

 

 
            294,911     302,416     8.08

Hotels, Restaurants & Leisure

             

Excel Fitness Holdings, Inc. (11)

  L + 5.25%     6.25%       10/7/2025       32,884     31,828     32,076     0.86

Industrial Conglomerates

             

Tailwind Smith Cooper Intermediate Corporation (8)

  L + 5.00%     5.11%       5/28/2026       27,535     26,772     27,500     0.74

Insurance

             

High Street Buyer, Inc. (4)(5)(7)(10)

  L + 6.00%     6.75%       4/14/2028       16,856     16,348     16,191     0.43

Integrity Marketing Acquisition, LLC (4)(5)(7)(11)

  L + 5.75%     6.75%       8/27/2025       58,025     57,139     57,010     1.52

Jones Deslauriers Insurance Management, Inc. (4)(5)(6)(7)(10)

  L + 4.25%     5.00%       3/28/2028     C$ 68,375       53,409     55,338     1.48

 

F-67


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

June 30, 2021

(in thousands)

(Unaudited)

 

Investments (1)

 

Reference Rate
and Spread

  Interest
Rate (2)
  Maturity
Date
  Par
Amount/
Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 
First Lien Debt (continued)                                    

SG Acquisition, Inc. (4)(9)

  L + 5.00%   5.50%   1/27/2027     111,867     110,270     110,189     2.95

Westland Insurance Group LTD (4)(5)(6)(7)(11)

  L + 7.00%   8.00%   1/5/2027   C$ 78,073       56,615     61,382     1.64

Westland Insurance Group LTD (4)(5)(6)(11)

  L + 7.00%   8.00%   1/5/2027     42,483     38,933     40,040     1.07
         

 

 

   

 

 

   

 

 

 
            332,714     340,150     9.09

Interactive Media & Services

             

Bungie, Inc. (4)(11)

  L + 6.25%   7.25%   8/28/2024     47,200     46,753     47,200     1.26

Internet & Direct Marketing Retail

             

Donuts, Inc. (4)(11)

  L + 6.00%   7.00%   12/29/2026     327,405     321,407     325,768     8.71

Shutterfly, LLC (11)

  L + 6.00%   7.00%   9/25/2026     26,457     24,666     26,559     0.71

Shutterfly, LLC (11)

  L + 6.50%   7.50%   9/25/2026     13,550     13,647     13,606     0.36
         

 

 

   

 

 

   

 

 

 
            359,719     365,934     9.78

IT Services

             

Park Place Technologies, LLC (11)

  L + 5.00%   6.00%   11/10/2027     44,888     43,252     45,101     1.21

Red River Technology, LLC (4)(7)(11)

  L + 6.00%   7.00%   5/26/2027     100,800     99,065     99,036     2.65
         

 

 

   

 

 

   

 

 

 
            142,317     144,137     3.85

Leisure Products

             

Lew’s Intermediate Holdings, LLC (4)(10)

  L + 5.00%   5.75%   1/26/2028     6,584     6,521     6,616     0.18

Machinery

             

Apex Tool Group, LLC (12)

  L + 5.25%   6.50%   8/1/2024     27,934     27,288     28,087     0.75

Oil, Gas & Consumable Fuels

             

Eagle Midstream Canada Finance, Inc. (4)(6)(13)

  L + 6.25%   7.75%   11/26/2024     150,862     149,321     150,485     4.02

Paper & Forest Products

             

Pixelle Specialty Solutions, LLC (11)

  L + 6.50%   7.50%   10/31/2024     6,929     6,831     6,947     0.19

 

F-68


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

June 30, 2021

(in thousands)

(Unaudited)

 

Investments (1)

 

Reference Rate
and Spread

  Interest
Rate (2)
  Maturity
Date
  Par
Amount/
Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 
First Lien Debt (continued)                                    

Personal Products

             

Paula’s Choice Holdings, Inc. (4)(11)

  L + 6.25%   7.25%   11/17/2025     54,313     53,003     54,313     1.45

Professional Services

             

ALKU, LLC (4)(10)

  L + 5.25%   6.00%   3/1/2028     110,044     108,996     109,494     2.93

APFS Staffing Holdings, Inc. (8)

  L + 4.75%   4.85%   4/15/2026     18,108     17,860     18,090     0.48

ASP Endeavor Acquisition, LLC (4)(5)(9)

  L + 6.50%   7.00%   5/3/2027     24,000     23,533     23,520     0.63

BPPH2 Limited (4)(5)(6)(8)

  L + 6.75%   6.75%   3/2/2028   £ 25,500     34,324     35,227     0.94

Titan Investment Company, Inc. (4)(5)(8)

  L + 5.75%   5.88%   3/20/2027     42,676     40,772     42,889     1.15

Trinity Air Consultants Holdings Corp. (4)(7)(10)

  L + 5.25%   6.00%   6/29/2027     64,425     62,729     62,771     1.68

VT Topco, Inc. (8)

  L + 3.25%   3.35%   8/1/2025     4,841     4,573     4,814     0.13
         

 

 

   

 

 

   

 

 

 
            292,787     296,805     7.93

Real Estate Management & Development

             

Cumming Group, Inc. (4)(7)(11)

  L + 6.00%   7.00%   5/26/2027     60,958     59,650     59,627     1.59

Progress Residential PM Holdings, LLC (4)(7)(10)

  L + 6.25%   7.00%   2/16/2028     55,898     54,575     55,200     1.48
         

 

 

   

 

 

   

 

 

 
            114,224     114,827     3.07

Software

             

Diligent Corporation (4)(11)

  L + 5.75%   6.75%   8/4/2025     59,850     59,061     59,102     1.58

Episerver, Inc. (4)(5)(7)(11)

  L + 5.50%   6.50%   4/9/2026     9,791     9,615     9,613     0.26

GraphPAD Software, LLC (4)(7)(11)

  L + 5.50%   6.50%   4/27/2027     13,125     12,903     12,896     0.34

LD Lower Holdings, Inc. (4)(7)(11)

  L + 6.50%   7.50%   2/8/2026     119,575     117,371     118,380     3.16

MRI Software, LLC (4)(5)(7)(11)

  L + 5.50%   6.50%   2/10/2026     25,690     25,482     25,718     0.69

PaySimple, Inc. (4)(8)

  L + 5.50%   5.61%   8/23/2025     61,400     59,886     61,093     1.63

 

F-69


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

June 30, 2021

(in thousands)

(Unaudited)

 

Investments (1)

 

Reference Rate
and Spread

  Interest
Rate (2)
    Maturity
Date
    Par
Amount/
Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 
First Lien Debt (continued)                                        

Relativity ODA, LLC (4)(7)(11)

  L + 7.50% PIK     8.50%       5/12/2027       28,184     27,420     27,397     0.73

Spitfire Parent, Inc. (4)(7)(11)

  L + 5.50%     6.50%       3/11/2027       44,000     43,025     42,972     1.15

Spitfire Parent, Inc. (4)(5)(11)

  L + 5.50%     6.50%       3/11/2027     10,500     12,448     12,203     0.33

Triple Lift, Inc. (4)(7)(10)

  L + 5.75%     6.50%       5/6/2028       49,000     47,891     47,866     1.28
         

 

 

   

 

 

   

 

 

 
            415,101     417,239     11.15

Specialty Retail

             

CustomInk, LLC (4)(11)

  L + 6.21%     7.21%       5/3/2026       133,125     131,324     130,463     3.49

Spencer Spirit Holdings, Inc. (8)

  L + 6.00%     6.10%       6/19/2026       44,924     43,023     44,873     1.20
         

 

 

   

 

 

   

 

 

 
            174,347     175,336     4.69

Technology Hardware, Storage & Peripherals

             

Deliver Buyer, Inc. (4)(11)

  L + 6.25%     7.25%       5/1/2024       49,625     48,515     49,904     1.33

Electronics For Imaging, Inc. (8)

  L + 5.00%     5.10%       7/23/2026       17,945     17,036     17,148     0.47

Lytx, Inc. (4)(7)(11)

  L + 6.25%     7.25%       2/28/2026       68,964     68,009     69,393     1.85
         

 

 

   

 

 

   

 

 

 
            133,560     136,445     3.66

Trading Companies & Distributors

             

Porcelain Acquisition Corp. (4)(7)(11)

  L + 6.00%     7.00%       4/30/2027       47,795     45,786     45,816     1.22

The Cook & Boardman Group, LLC (11)

  L + 5.75%     6.75%       10/17/2025       49,976     49,644     48,851     1.31
         

 

 

   

 

 

   

 

 

 
            95,430     94,667     2.53

Transportation Infrastructure

             

Capstone Logistics, LLC (7)(11)

  L + 4.75%     5.75%       11/12/2027       5,433     5,391     5,459     0.15

Frontline Road Safety, LLC (4)(7)(10)

  L + 5.75%     6.50%       5/3/2027       83,090     81,473     81,428     2.18

Roadsafe Holdings, Inc. (4)(7)(11)

  L + 5.75%     6.75%       10/19/2027       42,197     41,104     41,070     1.10

Spireon, Inc. (4)(11)

  L + 6.50%     7.50%       10/4/2024       22,847     22,690     22,847     0.61
         

 

 

   

 

 

   

 

 

 
            150,658     150,804     4.03
         

 

 

   

 

 

   

 

 

 

Total First Lien Debt

          $ 7,139,358   $ 7,213,639     192.82
         

 

 

   

 

 

   

 

 

 

 

F-70


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

June 30, 2021

(in thousands)

(Unaudited)

 

Investments (1)

 

Reference Rate
and Spread

  Interest
Rate (2)
    Maturity
Date
    Par
Amount/
Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 
Second Lien Debt                                        

Chemicals

             

NIC Acquisition Corp. (5)(10)

  L + 7.75%     8.50%       12/29/2028     $ 3,500   $ 3,450   $ 3,526     0.09

Construction & Engineering

             

COP Home Services TopCo IV, Inc. (4)(5)(11)

  L + 8.75%     9.75%       12/31/2028       6,061     5,933     6,061     0.16

Health Care Providers & Services

             

Canadian Hospital Specialties Ltd. (4)(5)(6)(8)

  8.75%     8.75%       4/15/2029     C$ 10,533       8,248     8,336     0.22

Jayhawk Buyer, LLC (4)(11)

  L + 8.75%     9.75%       10/15/2027       5,183     5,081     5,080     0.14
         

 

 

   

 

 

   

 

 

 
            13,329     13,416     0.36

Insurance

             

Jones Deslauriers Insurance Management, Inc. (4)(5)(6)(7)(9)

  L + 7.50%     8.00%       3/26/2029     C$ 25,495       19,749     20,723     0.55

Software

             

Episerver, Inc. (5)(11)

  L + 7.75%     8.75%       7/31/2028       11,186     11,038     11,588     0.31
         

 

 

   

 

 

   

 

 

 

Total Second Lien Debt

          $ 53,499   $ 55,314     1.48
         

 

 

   

 

 

   

 

 

 

Unsecured Debt

             

Commercial Services & Supplies

             

Garda World Security Corp. (5)(6)(8)

  6.00%     6.00%       6/1/2029     $ 2,674   $ 2,674   $ 2,657     0.07

Communications Equipment

             

Plantronics, Inc. (5)(6)(8)

  4.75%     4.75%       3/1/2029       4,748     4,748     4,720     0.13

IT Services

             

Endure Digital, Inc. (5)(8)

  6.00%     6.00%       2/15/2029       3,125     3,125     3,098     0.08
         

 

 

   

 

 

   

 

 

 

Total Unsecured Debt

          $ 10,547   $ 10,475     0.28
         

 

 

   

 

 

   

 

 

 

 

F-71


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

June 30, 2021

(in thousands)

(Unaudited)

 

Investments (1)

 

Reference Rate
and Spread

  Interest
Rate (2)
    Maturity
Date
    Par
Amount/
Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 

Warrants

             

Software

             

Mermaid EquityCo L.P. - Class B Units (4)

          4,550,697   $ 865   $ 2,821     0.08
         

 

 

   

 

 

   

 

 

 

Total Warrants

          $ 865   $ 2,821     0.08
         

 

 

   

 

 

   

 

 

 

Equity

             

Aerospace & Defense

             

Corfin Holdco, Inc. - Common Stock (4)

          2,137,866   $ 4,767   $ 5,131     0.14

Air Freight & Logistics

             

AGI Group Holdings LP - A2 Common Units (4)

          902     902     902     0.02

Mode Holdings, L.P. - Class A-2 Common Units (4)

          5,486,923     5,487     5,487     0.15
         

 

 

   

 

 

   

 

 

 
            6,389     6,389     0.17

Distributors

             

EIS Acquisition Holdings, LP - Class A Common Units (4)

          7,519     1,773     1,873     0.05

Health Care Providers & Services

             

Jayhawk Holdings, LP - A-1 Common Units (4)

          2,201     392     392     0.01

Jayhawk Holdings, LP - A-2 Common Units (4)

          1,185     211     211     0.01
         

 

 

   

 

 

   

 

 

 
            603     603     0.02

Professional Services

             

OHCP V TC COI, LP. - LP Interest (4)

          3,500,000     3,500     3,500     0.09

Software

             

Mermaid Equity Co. L.P. - Class A-2 Common Units (4)

          14,849,355     14,849     22,423     0.60

 

F-72


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

June 30, 2021

(in thousands)

(Unaudited)

 

Investments (1)

 

Reference Rate
and Spread

  Interest
Rate (2)
    Maturity
Date
    Par
Amount/
Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 

Equity (continued)

             

Specialty Retail

             

CustomInk, LLC - Series A Preferred Units (4)

          384,520     5,200     5,003     0.13

Transportation Infrastructure

             

Frontline Road Safety Investments, LLC - Class A Common Units (4)

          26,666     2,800     2,800     0.07
         

 

 

   

 

 

   

 

 

 

Total Equity Investments

          $ 39,881   $ 47,720     1.28
         

 

 

   

 

 

   

 

 

 

Total Investments - non- controlled/non-affiliated

          $ 7,244,149   $ 7,329,969     195.93
         

 

 

   

 

 

   

 

 

 

Investments - non-controlled/affiliated

             

Equity

             

Insurance

             

Blackstone Donegal Holdings LP - LP Interests (Westland Insurance Group LTD) (4)(5)(6)(15)

          $ 26,163   $ 26,671     0.71
         

 

 

   

 

 

   

 

 

 

Total Equity

          $ 26,163   $ 26,671     0.71
         

 

 

   

 

 

   

 

 

 

Total Investments - non-controlled/affiliated

          $ 26,163   $ 26,671     0.71
         

 

 

   

 

 

   

 

 

 

Total Investment Portfolio

          $ 7,270,312   $ 7,356,640     196.64
         

 

 

   

 

 

   

 

 

 

Cash and Cash Equivalents

             

Other Cash and Cash Equivalents

          $ 181,643   $ 181,643     4.86
         

 

 

   

 

 

   

 

 

 

Total Cash and Cash Equivalents

          $ 181,643   $ 181,643     4.86
         

 

 

   

 

 

   

 

 

 

Total Portfolio Investments, Cash and Cash Equivalents

          $ 7,451,955   $ 7,538,283     201.50
         

 

 

   

 

 

   

 

 

 

 

(1)

Unless otherwise indicated, issuers of debt and equity investments held by the Company (which such term “Company” shall include the Company’s consolidated subsidiaries for purposes of this Consolidated Schedule of Investments) are denominated in dollars. All debt investments are income producing unless otherwise indicated. All equity investments are non-income producing unless otherwise noted. Certain portfolio company investments are subject to contractual restrictions on sales. The total par amount is

 

F-73


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

June 30, 2021

(in thousands)

(Unaudited)

 

  presented for debt investments, while the number of shares or units owned is presented for equity investments. Each of the Company’s investments is pledged as collateral, under one or more of its credit facilities unless otherwise indicated.
(2)

Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to either LIBOR (“L”) or an alternate base rate (commonly based on the Federal Funds Rate (“F”) or the U.S. Prime Rate (“P”)), which generally resets periodically. For each loan, the Company has indicated the reference rate used and provided the spread and the interest rate in effect as of June 30, 2021. As of June 30, 2021, the reference rates for our variable rate loans were the 30-day L at 0.10%, the 90-day L at 0.15% and the 180-day L at 0.16% and P at 3.25%. Variable rate loans typically include an interest reference rate floor feature, which is generally 1.00%. As of June 30, 2021, 89.1% of the portfolio at fair value had a base rate floor above zero.

(3)

The cost represents the original cost adjusted for the amortization of discounts and premiums, as applicable, on debt investments using the effective interest method in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

(4)

These investments were valued using unobservable inputs and are considered Level 3 investments. Fair value was determined in good faith by or under the direction of the Board of Trustees (the “Board”) (see Note 2 and Note 5), pursuant to the Company’s valuation policy.

(5)

These debt investments are not pledged as collateral under any of the Company’s credit facilities. For other debt investments that are pledged to the Company’s credit facilities, a single investment may be divided into parts that are individually pledged as collateral to separate credit facilities.

(6)

The investment is not a qualifying asset under Section 55(a) of the 1940 Act. The Company may not acquire any non-qualifying asset unless, at the time of acquisition, qualifying assets represent at least 70% of the Company’s total assets. As of June 30, 2021, non-qualifying assets represented 8.9% of total assets as calculated in accordance with regulatory requirements.

(7)

Position or portion thereof is an unfunded loan commitment, and no interest is being earned on the unfunded portion, although the investment may be subject to unused commitment fees. Negative cost and fair value results from unamortized fees, which are capitalized to the investment cost. The unfunded loan commitment may be subject to a commitment termination date that may expire prior to the maturity date stated. See below for more information on the Company’s unfunded commitments (all commitments are first lien, unless otherwise noted):

 

Investments—non-controlled/non-affiliated

  Commitment Type     Commitment
Expiration Date
    Unfunded
Commitment
    Fair
Value
 

First and Second Lien Debt

       

ADCS Clinics Intermediate Holdings, LLC

    Delayed Draw Term Loan       5/7/2023     $ 3,756   $ —  

ADCS Clinics Intermediate Holdings, LLC

    Revolver       5/7/2027       1,301     (26

AGI-CFI Holdings, Inc.

    Delayed Draw Term Loan       6/11/2023       22,700     —    

AGI-CFI Holdings, Inc.

    Revolver       6/11/2027       9,770     —    

Albireo Energy, LLC

    Delayed Draw Term Loan       6/23/2022       36,817     —    

Barbri, Inc.

    Delayed Draw Term Loan       4/28/2023       18,834     —    

Bazaarvoice, Inc.

    Delayed Draw Term Loan       11/7/2022       38,288     —    

Bazaarvoice, Inc.

    Revolver       5/7/2026       28,662     —    

Canadian Hospital Specialties Ltd.

    Delayed Draw Term Loan       4/14/2023       5,754     —    

Canadian Hospital Specialties Ltd.

    Revolver       4/14/2027       2,877     —    

Capstone Logistics, LLC

    Delayed Draw Term Loan       11/12/2027       547     —    

COP Home Services TopCo IV, Inc.

    Delayed Draw Term Loan       12/31/2022       1,650     —    

 

F-74


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

June 30, 2021

(in thousands)

(Unaudited)

 

Investments—non-controlled/non-affiliated

  Commitment Type   Commitment
Expiration Date
    Unfunded
Commitment
    Fair
Value
 

COP Home Services TopCo IV, Inc.

  Revolver     12/31/2025       1,830     —    

Cumming Group, Inc.

  Delayed Draw Term Loan     5/26/2027       13,522     —    

Cumming Group, Inc.

  Revolver     5/26/2027       5,593     (112

Dana Kepner Company, LLC

  Delayed Draw Term Loan     12/29/2021       26,920     —    

DCA Investment Holdings, LLC

  Delayed Draw Term Loan     3/12/2023       6,391     (48

Episerver, Inc.

  Revolver     4/9/2026       2,064     (31

Fencing Supply Group Acquisition, LLC

  Delayed Draw Term Loan     2/26/2023       13,776     (138

Frontline Road Safety, LLC—A

  Delayed Draw Term Loan     5/3/2027       11,836     —    

Frontline Road Safety, LLC—B

  Delayed Draw Term Loan     5/3/2022       26,351     —    

GI Consilio Parent, LLC

  Revolver     5/14/2026       4,200     —    

GraphPAD Software, LLC

  Revolver     4/27/2027       2,124     —    

Healthcomp Holding Company, LLC

  Delayed Draw Term Loan     4/27/2022       20,754     (259

High Street Buyer, Inc.—A

  Delayed Draw Term Loan     11/4/2021       51     —    

High Street Buyer, Inc.—B

  Delayed Draw Term Loan     4/16/2028       14,089     (282

High Street Buyer, Inc.

  Revolver     4/16/2027       2,254     (45

Integrity Marketing Acquisition, LLC

  Delayed Draw Term Loan     8/27/2025       11,658     —    

Jayhawk Buyer, LLC

  Delayed Draw Term Loan     10/15/2021       6,652     —    

Jones Deslauriers Insurance Management, Inc.

  Delayed Draw Term Loan     3/28/2022       15,248     —    

Jones Deslauriers Insurance Management, Inc. (2nd Lien)

  Delayed Draw Term Loan     3/28/2022       2,441     —    

LD Lower Holdings, Inc.

  Delayed Draw Term Loan     2/8/2023       19,979     —    

Lytx, Inc.

  Delayed Draw Term Loan     2/28/2022       16,761     —    

Maverick Acquisition, Inc.

  Delayed Draw Term Loan     6/1/2023       8,715     (87

Monroe Capital Holdings, LLC

  Delayed Draw Term Loan     6/8/2022       8,282     —    

Monroe Capital Holdings, LLC

  Delayed Draw Term Loan     6/8/2022       44,592     —    

MRI Software, LLC

  Delayed Draw Term Loan     1/31/2022       621     —    

MRI Software, LLC

  Delayed Draw Term Loan     1/31/2022       1,946     (8

MRI Software, LLC

  Revolver     1/31/2022       1,516     —    

NDC Acquisition Corp.

  Revolver     3/9/2027       2,269     —    

NMC Crimson Holdings, Inc.

  Delayed Draw Term Loan     3/1/2023       31,400     (471

Omni Intermediate Holdings, LLC

  Delayed Draw Term Loan     12/30/2021       1,950     —    

Omni Intermediate Holdings, LLC

  Revolver     12/30/2025       424     —    

Porcelain Acquisition Corp.

  Delayed Draw Term Loan     4/30/2022       22,627     (665

Progress Residential PM Holdings, LLC

  Delayed Draw Term Loan     2/16/2022       16,623     —    

Qualus Power Services Corp.

  Delayed Draw Term Loan     3/26/2023       15,545     (194

R1 Holdings, LLC

  Delayed Draw Term Loan     4/19/2022       12,341     —    

Red River Technology, LLC

  Delayed Draw Term Loan     5/26/2023       31,888     —    

Relativity ODA, LLC

  Revolver     5/12/2027       3,292     (82

Roadsafe Holdings, Inc.

  Delayed Draw Term Loan     10/19/2021       28,317     (283

Sciens Building Solutions, LLC

  Delayed Draw Term Loan     5/21/2027       19,688     —    

Sciens Building Solutions, LLC

  Revolver     5/21/2027       5,850     —    

SEKO Global Logistics Network, LLC

  Delayed Draw Term Loan     12/30/2022       800     (11

SEKO Global Logistics Network, LLC

  Revolver     12/30/2026       197     —    

Snoopy Bidco, Inc.

  Delayed Draw Term Loan     6/1/2023       65,900     (19

 

F-75


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

June 30, 2021

(in thousands)

(Unaudited)

 

Investments—non-controlled/non-affiliated

  Commitment Type     Commitment
Expiration Date
    Unfunded
Commitment
    Fair
Value
 

SpecialtyCare, Inc.

    Delayed Draw Term Loan       9/18/2021       1,260     —    

SpecialtyCare, Inc.

    Revolver       6/18/2026       922     —    

Spitfire Parent, Inc.

    Delayed Draw Term Loan       9/4/2022       14,755     (148

Tailwind Colony Holding Corporation

    Delayed Draw Term Loan       2/10/2022       10,644     —    

TCFI AEVEX, LLC

    Delayed Draw Term Loan       12/31/2021       1,579     —    

TCFI AEVEX, LLC

    Delayed Draw Term Loan       12/31/2021       30,445     (295

Trinity Air Consultants Holdings Corp.

    Delayed Draw Term Loan       6/29/2023       24,085     (241

Trinity Air Consultants Holdings Corp.

    Revolver       6/29/2027       6,262     —    

Triple Lift, Inc.

    Revolver       5/6/2028       7,698     (154

USALCO, LLC

    Delayed Draw Term Loan       6/1/2022       11,295     (282

Westland Insurance Group LTD

    Delayed Draw Term Loan       7/5/2022       24,459     —    

WHCG Purchaser III, Inc.

    Delayed Draw Term Loan       6/22/2023       21,890     (219

WHCG Purchaser III, Inc.

    Revolver       6/22/2026       6,723     (134
     

 

 

   

 

 

 

Total Unfunded Commitments

      $ 882,250   $ (4,234
     

 

 

   

 

 

 

 

(8)

There are no interest rate floors on these investments.

(9)

The interest rate floor on these investments as of June 30, 2021 was 0.50%.

(10)

The interest rate floor on these investments as of June 30, 2021 was 0.75%.

(11)

The interest rate floor on these investments as of June 30, 2021 was 1.00%.

(12)

The interest rate floor on these investments as of June 30, 2021 was 1.25%.

(13)

The interest rate floor on these investments as of June 30, 2021 was 1.50%.

(14)

The interest rate floor on these investments as of June 30, 2021 was 1.75%.

(15)

Under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “1940 Act”), the Company would be deemed to “control” a portfolio company if the Company owned more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. As of June 30, 2021, the Company does not “control” any of these portfolio companies. Under the 1940 Act, the Company would be deemed an “affiliated person” of a portfolio company if the Company owns 5% or more of the portfolio company’s outstanding voting securities. As of June 30, 2021, the Company’s non-controlled/affiliated investments were as follows:

 

    Fair value
as of December 31,
2020
    Gross Additions     Gross Reductions     Change in
Unrealized Gains
(Losses)
    Fair value
as of June 30,
2021
    Dividend and Interest
Income
 

Non-controlled/Affiliated Investments

           

Blackstone Donegal Holdings LP

  $   $ 26,163   $     $ 508   $ 26,671   $  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $     $ 26,163     $     $ 508     $ 26,671     $  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-76


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

December 31, 2020

(in thousands)

 

Investments—non-controlled/
non-affiliated (1)

  Reference
Rate
and Spread
    Interest
Rate (2)
    Maturity
Date
    Par
Amount/Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 
First Lien Debt                                          

Aerospace & Defense

             

Corfin Holdings, Inc. (4)(9)

    L + 6.00%       7.00%       2/5/2026     $ 203,463   $ 200,008   $ 202,954     6.21

MAG DS Corp (9)

    L + 5.50%       6.50%       4/1/2027       87,607     79,610     83,884     2.57

TCFI AEVEX, LLC (4)(7)(9)

    L + 6.00%       7.00%       3/18/2026       102,020     100,089     100,868     3.09
         

 

 

   

 

 

   

 

 

 
            379,707     387,706     11.87

Air Freight & Logistics

             

Livingston International Inc. (4)(6)(9)

    L + 5.75%       6.75%       4/30/2026       122,138     118,447     121,527     3.72

Mode Purchaser, Inc. (4)(9)

    L + 6.25%       7.25%       12/9/2026       176,988     173,986     171,235     5.24

Omni Intermediate Holdings, LLC (4)(5)(7)(9)

    L + 5.00%       6.00%       12/30/2026       5,000     4,875     4,875     0.15

Omni Intermediate Holdings, LLC – Revolving Term Loan (4)(5)(7)(9)

    L + 5.00%       6.00%       12/30/2025       42     28     28     —    

R1 Holdings, LLC (4)(7)(9)

    L + 6.00%       7.06%       1/2/2026       57,669     56,856     57,093     1.75
         

 

 

   

 

 

   

 

 

 
            354,192     354,758     10.86

Building Products

             

Jacuzzi Brands, LLC (4)(9)

    L + 6.50%       7.50%       2/25/2025       99,228     97,922     95,755     2.93

Latham Pool Products, Inc. (8)

    L + 6.00%       6.15%       6/18/2025       49,193     47,888     49,117     1.50

Lindstrom, LLC (4)(9)

    L + 6.25%       7.25%       4/7/2025       129,650     127,891     127,057     3.89

The Wolf Organization, LLC (4)(9)

    L + 6.50%       7.50%       9/3/2026       95,750     94,204     96,707     2.96

Windows Acquisition Holdings, Inc. (4)(5)(9)

    L + 6.50%       7.50%       12/29/2026       62,996     61,737     61,736     1.89

Windows Acquisition Holdings, Inc.– Revolving Term Loan (4)(5)(7)(9)

    L + 6.50%       7.50%       12/29/2025       4,620     4,620     4,620     0.14
         

 

 

   

 

 

   

 

 

 
            434,262     434,992     13.31

Capital Markets

             

Advisor Group Holdings, Inc. (8)

    L + 5.00%       5.15%       7/31/2026       6,430     5,981     6,390     0.20

 

F-77


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

December 31, 2020

(in thousands)

 

Investments—non-controlled/
non-affiliated (1)

  Reference
Rate
and Spread
    Interest
Rate (2)
    Maturity
Date
    Par
Amount/Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 
First Lien Debt (continued)                                          

Chemicals

             

DCG Acquisition Corp. (4)(7)(9)

    L + 7.50%       8.50%       9/30/2026       39,800     38,886     39,402     1.21

LSF11 Skyscraper US Bidco 2, LLC (4)(6)(9)

    L + 5.50%       6.50%       9/29/2027       106,878     101,786     106,344     3.25

LSF11 Skyscraper Holdco S.à r.l, LLC (4)(6)(9)

    L + 5.50%       6.50%       9/29/2027       335     319     334     0.01

Polymer Additives,
Inc. (8)

    L + 6.00%       6.21%       7/31/2025       29,452     28,400     24,726     0.76

USALCO, LLC (4)(7)(10)

    L + 7.25%       8.50%       6/1/2026       166,751     162,734     168,553     5.16

USALCO, LLC (4)(9)

    L + 6.50%       7.50%       6/1/2026       35,693     34,979     34,979     1.07

VDM Buyer, Inc. (4)(8)

    L + 6.75%       6.97%       4/22/2025     24,023     26,651     28,512     0.87

VDM Buyer, Inc. (4)(8)

    L + 6.75%       6.97%       4/22/2025       63,089     62,184     61,197     1.87
         

 

 

   

 

 

   

 

 

 
            455,939     464,046     14.20

Commercial Services & Supplies

             

Veregy Consolidated,
Inc. (9)

    L + 6.00%       7.00%       11/3/2027       20,000     19,413     19,850     0.61

JSS Holdings, Inc. (4)(9)

    L + 6.25%       7.25%       12/17/2027       327,174     322,295     322,266     9.86

The Action Environmental Group, Inc. (4)(7)(10)

    L + 6.00%       7.25%       1/16/2026       118,275     116,101     113,544     3.47
         

 

 

   

 

 

   

 

 

 
            457,809     455,660     13.94

Construction & Engineering

             

Brand Industrial Services, Inc. (9)

    L + 4.25%       5.25%       6/21/2024       7,884     7,317     7,706     0.24

COP Home Services TopCo IV, Inc. (4)(5)(7)(9)

    L + 5.00%       6.00%       12/31/2027       16,162     15,482     15,482     0.47

IEA Energy Services,
LLC (8)

    L + 6.75%       7.00%       9/25/2024       30,517     29,556     30,466     0.93
         

 

 

   

 

 

   

 

 

 
            52,355     53,654     1.64

Distributors

             

Bution Holdco 2, Inc. (4)(9)

    L + 6.25%       7.25%       10/17/2025       123,438     121,467     120,969     3.70

Dana Kepner Company, LLC (4)(7)(9)

    L + 6.25%       7.25%       12/29/2026       71,667     70,236     70,234     2.15

 

F-78


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

December 31, 2020

(in thousands)

 

Investments—non-controlled/
non-affiliated (1)

  Reference
Rate
and Spread
    Interest
Rate (2)
    Maturity
Date
    Par
Amount/Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 
First Lien Debt (continued)                                          

EIS Buyer, LLC (4)(11)

    L + 6.25%       7.75%       9/30/2025       81,984     80,687     79,524     2.43

Fastlane Parent Company, Inc. (8)

    L + 4.50%       4.65%       2/4/2026       12,481     12,285     12,450     0.38

PSS Industrial Group Corp. (11)

    L + 6.00%       7.50%       4/10/2025       56,162     53,161     39,875     1.22

SEKO Global Logistics Network, LLC (4)(5)(7)(9)

    L + 5.00%       6.00%       12/30/2026       4,700     4,609     4,608     0.14

Tailwind Colony Holding Corporation (4)(9)

    L + 7.50%       8.50%       11/13/2024       33,045     32,698     31,971     0.98

Unified Door & Hardware Group, LLC (4)(9)

    L + 6.25%       7.25%       6/30/2025       91,063     89,440     91,063     2.79
         

 

 

   

 

 

   

 

 

 
            464,583     450,695     13.79

Diversified Financial Services

             

SelectQuote, Inc. (4)(9)

    L + 6.00%       7.00%       11/5/2024       59,714     58,153     60,311     1.85

Electrical Equipment

             

Shoals Holdings, LLC (4)(9)

    L + 3.25%       4.25%       11/25/2026       149,687     145,982     145,944     4.47

Electronic Equipment, Instruments & Components

             

Albireo Energy, LLC (4)(5)(7)(9)

    L + 6.00%       7.00%       12/23/2026       111,978     108,911     108,899     3.34

Convergeone Holdings, Inc. (8)

    L + 5.00%       5.15%       1/4/2026       14,617     14,187     13,849     0.42
         

 

 

   

 

 

   

 

 

 
            123,098     122,748     3.76

Energy Equipment & Services

             

Abaco Energy Technologies, LLC (4)(11)

    L + 7.00%       8.50%       10/4/2024       58,246     56,934     53,877     1.65

Tetra Technologies, Inc. (4)(6)(9)

    L + 6.25%       7.25%       9/10/2025       23,296     23,174     21,666     0.66
         

 

 

   

 

 

   

 

 

 
            80,108     75,543     2.31

Health Care Equipment & Supplies

             

Lifescan Global Corporation (8)

    L + 6.00%       6.23%       10/1/2024       5,797     5,633     5,537     0.17

Surgical Specialties Corp (US) Inc. (4)(6)(8)

    L + 5.00%       5.25%       5/7/2025       32,998     32,036     32,997     1.01
         

 

 

   

 

 

   

 

 

 
            37,669     38,535     1.18

 

F-79


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

December 31, 2020

(in thousands)

 

Investments—non-controlled/
non-affiliated (1)

  Reference
Rate
and Spread
    Interest
Rate (2)
    Maturity
Date
    Par
Amount/Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 
First Lien Debt (continued)                                          

Health Care Providers & Services

             

Epoch Acquisition, Inc. (4)(9)

    L + 6.75%       7.75%       10/4/2024       24,813     24,598     24,689     0.76

Healthcomp Holding Company, LLC (4)(5)(7)(9)

    L + 6.00%       7.00%       10/27/2026       87,300     84,901     84,827     2.60

Jayhawk Buyer, LLC (4)(7)(9)

    L + 5.75%       6.75%       10/15/2026       107,884     105,283     105,187     3.22

Monroe Capital Holdings, LLC (4)(7)(9)

    L + 6.75%       7.75%       9/8/2026       107,359     105,317     106,286     3.25

Odyssey Holding Company, LLC (4)(9)

    L + 5.75%       6.75%       11/16/2025       18,898     18,680     18,898     0.58

The GI Alliance Management, LLC (4)(7)(9)

    L + 6.25%       7.25%       11/4/2024       189,409     184,953     180,127     5.51
         

 

 

   

 

 

   

 

 

 
            523,732     520,014     15.92

Health Care Technology

             

Edifecs, Inc. (4)(9)

    L + 7.50%       8.50%       9/21/2026       263,008     256,739     259,063     7.93

Project Ruby Ultimate Parent Corp (4)(9)

    L + 4.25%       5.25%       2/9/2024       30,000     29,550     30,075     0.92
         

 

 

   

 

 

   

 

 

 
            286,289     289,138     8.85

Hotels, Restaurants & Leisure

             

Excel Fitness Holdings, Inc (9)

    L + 5.25%       6.25%       10/7/2025       46,588     44,918     42,939     1.31

Industrial Conglomerates

             

Tailwind Smith Cooper Intermediate Corporation (8)

    L + 5.00%       5.15%       5/28/2026       30,682     29,746     29,190     0.89

Insurance

             

Integrity Marketing Acquisition, LLC (4)(5)(7)(9)

    L + 6.25%       7.25%       8/27/2025       32,651     31,962     31,902     0.98

SG Acquisition, Inc. (4)(8)

    L + 5.75%       5.90%       1/27/2027       102,895     101,111     101,352     3.10
         

 

 

   

 

 

   

 

 

 
            133,073     133,254     4.08

Interactive Media & Services

             

Bungie, Inc. (4)(9)

    L + 6.25%       7.25%       8/28/2024       47,200     46,683     47,200     1.44

Internet & Direct Marketing Retail

             

Shutterfly, Inc. (9)

    L + 6.00%       7.00%       9/25/2026       26,457     24,488     26,386     0.81

 

F-80


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

December 31, 2020

(in thousands)

 

Investments—non-controlled/
non-affiliated (1)

  Reference
Rate
and Spread
    Interest
Rate (2)
    Maturity
Date
    Par
Amount/Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 
First Lien Debt (continued)                                          

Donuts, Inc. (4)(7)(9)

    L + 6.00%       7.00%       12/29/2026       381,538     373,918     373,908     11.44
         

 

 

   

 

 

   

 

 

 
            398,405     400,294     12.25

IT Services

             

Ahead Data Blue, LLC (9)

    L + 5.00%       6.00%       10/13/2027       13,207     12,180     13,025     0.40

Park Place Technologies, LLC (9)

    L + 5.00%       6.00%       11/10/2027       45,000     43,232     43,350     1.33
         

 

 

   

 

 

   

 

 

 
            55,412     56,375     1.73

Machinery

             

Apex Tool Group, LLC (10)

    L + 5.25%       6.50%       8/1/2024       53,301     52,194     52,845     1.62

Oil, Gas & Consumable Fuels

             

Eagle Midstream Canada Finance, Inc (4)(6)(11)

    L + 6.25%       7.75%       11/26/2024       150,862     149,099     148,599     4.55

Paper & Forest Products

             

Pixelle Specialty Solutions, LLC (9)

    L + 6.50%       7.50%       10/31/2024       14,380     14,146     14,373     0.44

Personal Products

             

Paula’s Choice Holdings, Inc. (4)(9)

    L + 6.25%       7.25%       11/17/2025       55,000     53,523     53,488     1.64

Professional Services

             

APFS Staffing Holdings, Inc. (8)

    L + 4.75%       4.90%       4/15/2026       18,201     17,922     17,916     0.55

GI Revelation Acquisition LLC (8)

    L + 5.00%       5.15%       4/16/2025       32,163     29,987     31,681     0.97

Minotaur Acquisition, Inc. (8)

    L + 5.00%       5.15%       3/27/2026       33,180     31,782     32,641     1.00

Titan Investment Company, Inc. (4)(5)(8)

    L + 5.75     5.99     3/20/2027       42,892     40,812     42,356     1.30

VT Topco, Inc. (8)

    L + 3.50     3.65     8/1/2025       4,866     4,562     4,811     0.15
         

 

 

   

 

 

   

 

 

 
            125,065     129,405     3.97

Software

             

LD Intermediate Holdings, Inc. (4)(9)

    L + 5.88%       6.88%       12/9/2022       17,105     16,633     17,041     0.52

MRI Software, LLC (4)(5)(7)(9)

    L + 5.50%       6.50%       2/10/2026       22,329     22,081     22,220     0.68

PaySimple, Inc. (4)(7)(8)

    L + 5.50%       5.65%       8/23/2025       53,058     51,710     51,824     1.58

Vero Parent, Inc. (9)

    L + 6.00%       7.00%       8/16/2024       45,528     41,661     45,598     1.40
         

 

 

   

 

 

   

 

 

 
            132,085     136,683     4.18

 

F-81


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

December 31, 2020

(in thousands)

 

Investments—non-controlled/
non-affiliated (1)

  Reference
Rate
and Spread
    Interest
Rate (2)
    Maturity
Date
    Par
Amount/Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 
First Lien Debt (continued)                                          

Specialty Retail

             

CustomInk, LLC (4)(9)

    L + 6.21%       7.21%       5/3/2026       133,125     131,139     130,130     3.98

Spencer Spirit Holdings, Inc. (8)

    L + 6.00%       6.15%       6/19/2026       45,037     42,941     44,896     1.38
         

 

 

   

 

 

   

 

 

 
            174,080     175,026     5.36

Technology Hardware, Storage & Peripherals

             

Deliver Buyer, Inc. (4)(9)

    L + 6.25%       7.25%       5/1/2024       49,875     48,564     50,187     1.54

Electronics For Imaging, Inc. (8)

    L + 5.00%       5.15%       7/23/2026       34,650     32,723     29,788     0.90

Lytx, Inc. (4)(7)(9)

    L + 6.00     7.00     2/28/2026       69,313     68,327     69,146     2.12
         

 

 

   

 

 

   

 

 

 
            149,614     149,121     4.56

Trading Companies & Distributors

             

The Cook & Boardman Group, LLC (9)

    L + 5.75%       6.75%       10/17/2025       50,233     49,859     48,035     1.47

Transportation Infrastructure

             

Capstone Logistics, LLC (5)(7)(9)

    L + 4.75%       5.75%       11/12/2027       3,053     3,020     3,094     0.09

Spireon, Inc. (4)(9)

    L + 6.50%       7.50%       10/4/2024       22,961     22,780     22,847     0.70
         

 

 

   

 

 

   

 

 

 
            25,800     25,941     0.79
         

 

 

   

 

 

   

 

 

 

Total First Lien Debt

          $ 5,493,561   $ 5,502,899     168.40
         

 

 

   

 

 

   

 

 

 

Second Lien Debt

             

Construction & Engineering

             

COP Home Services TopCo IV, Inc. (4)(5)(9)

    L + 8.75     9.75     12/31/2028     $ 6,061   $ 5,925   $ 5,925     0.18

Health Care Technology

             

Project Ruby Ultimate Parent Corp (4)(5)(9)

    L + 8.25     9.25     2/10/2025       17,900     17,542     18,079     0.55

IT Services

             

WEB.COM Group, Inc. (8)

    L + 7.75     7.90     10/9/2026       15,098     14,485     14,488     0.45

Software

             

Epicor Software Corp. (5)(9)

    L + 7.75     8.75     7/31/2028       11,186     11,027     11,707     0.36
         

 

 

   

 

 

   

 

 

 

Total Second Lien Debt

          $ 48,979   $ 50,199     1.54
         

 

 

   

 

 

   

 

 

 

Warrants

             

Software

             

Mermaid EquityCo L.P.—Class B Units (4)

          4,550,697   $ 865   $ 865     0.03
         

 

 

   

 

 

   

 

 

 

Total Warrants

          $ 865   $ 865     0.03
         

 

 

   

 

 

   

 

 

 

 

F-82


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

December 31, 2020

(in thousands)

 

Investments—non-controlled/
non-affiliated (1)

  Reference
Rate
and Spread
    Interest
Rate (2)
    Maturity
Date
    Par
Amount/Units
    Cost (3)     Fair
Value
    Percentage
of Net
Assets
 

Equity

             

Aerospace & Defense

             

Corfin Holdco, Inc. - Common Stock (4)

          2,137,866   $ 4,767   $ 4,767     0.15

Air Freight & Logistics

             

Mode Holdings, L.P. - Class A-2 Common Units (4)

          5,486,923     5,487     5,487     0.17

Distributor

             

EIS Acquisition Holdings, LP - Class A Common Units (4)

          7,519     1,773     1,873     0.06

Software

             

Mermaid EquityCo L.P. - Class A-2 Common Units (4)

          14,849,355     14,850     14,849     0.45

Specialty Retail

             

CustomInk, LLC - Series A Preferred Units (4)

          384,520     5,200     5,003     0.15
         

 

 

   

 

 

   

 

 

 

Total Equity Investments

          $ 32,077   $ 31,979     0.98
         

 

 

   

 

 

   

 

 

 

Total Investment Portfolio

          $ 5,575,482   $ 5,585,942     170.94
         

 

 

   

 

 

   

 

 

 

Cash and Cash Equivalents

             

State Street Institutional U.S. Government Money Market Fund

          $ 29,427   $ 29,427     0.90

Other Cash and Cash Equivalents

            188,566     188,566     5.77
         

 

 

   

 

 

   

 

 

 

Total Cash and Cash Equivalents

          $ 217,993   $ 217,993     6.67
         

 

 

   

 

 

   

 

 

 

Total Portfolio Investments, Cash and Cash Equivalents

          $ 5,793,475     $ 5,803,935       177.61
         

 

 

   

 

 

   

 

 

 

 

(1)

Unless otherwise indicated, issuers of debt and equity investments held by the Company (which such term “Company” shall include the Company’s consolidated subsidiaries for purposes of this Consolidated Schedule of Investments) are denominated in dollars. All debt investments are income producing unless otherwise indicated. All equity investments are non-income producing unless otherwise noted. Certain portfolio company investments are subject to contractual restrictions on sales. Under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “1940 Act”), the Company would be deemed to “control” a portfolio company if the Company owned more than 25% of its outstanding voting securities and/or held the power to exercise control over the management or policies of the portfolio company. As of December 31, 2020, the Company does not “control” any of

 

F-83


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

December 31, 2020

(in thousands)

 

  these portfolio companies. Under the 1940 Act, the Company would be deemed an “affiliated person” of a portfolio company if the Company owns 5% or more of the portfolio company’s outstanding voting securities. As of December 31, 2020, the Company is not an “affiliated person” of any of its portfolio companies. The total par amount is presented for debt investments, while the number of shares or units owned is presented for equity investments. Each of the Company’s investments is pledged as collateral, under one or more of its credit facilities unless otherwise indicated.
(2)

Variable rate loans to the portfolio companies bear interest at a rate that is determined by reference to either LIBOR (“L”) or an alternate base rate (commonly based on the Federal Funds Rate (“F”) or the U.S. Prime Rate (“P”)), which generally resets periodically. For each loan, the Company has indicated the reference rate used and provided the spread and the interest rate in effect as of December 31, 2020. As of December 31, 2020, the reference rates for our variable rate loans were the 30-day L at 0.14%, the 90-day L at 0.24% and the 180-day L at 0.26% and P at 3.25%. Variable rate loans typically include an interest reference rate floor feature, which is generally 1.00%. As of December 31, 2020, 88.0% of the debt portfolio at fair value had an interest rate floor above zero.

(3)

The cost represents the original cost adjusted for the amortization of discounts and premiums, as applicable, on debt investments using the effective interest method in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

(4)

These investments were valued using unobservable inputs and are considered Level 3 investments. Fair value was determined in good faith by or under the direction of the Board (see Note 2 and Note 5), pursuant to the Company’s valuation policy.

(5)

These debt investments are not pledged as collateral under any of the Company’s credit facilities. For other debt investments that are pledged to the Company’s credit facilities, a single investment may be divided into parts that are individually pledged as collateral to separate credit facilities.

(6)

The investment is not a qualifying asset under Section 55(a) of the 1940 Act. The Company may not acquire any non-qualifying asset unless, at the time of acquisition, qualifying assets represent at least 70% of the Company’s total assets. As of December 31, 2020, non-qualifying assets represented 9.7% of total assets as calculated in accordance with regulatory requirements.

(7)

Position or portion thereof is an unfunded loan commitment, and no interest is being earned on the unfunded portion, although the investment may be subject to unused commitment fees. Negative cost and fair value results from unamortized fees, which are capitalized to the investment cost. The unfunded loan commitment may be subject to a commitment termination date that may expire prior to the maturity date stated. See below for more information on the Company’s unfunded commitments:

 

Investments—non-controlled/non-affiliated

   Commitment Type      Commitment
Expiration
Date
     Unfunded
Commitment
     Fair
Value
 

First Lien Debt

           

Albireo Energy, LLC—Delayed Draw A

     Delayed Draw Term Loan        2/21/2021      $ 25,404    $ (254

Albireo Energy, LLC—Delayed Draw B

     Delayed Draw Term Loan        6/23/2022        45,043      (450

Albireo Energy, LLC

     Revolver        12/23/2026        9,009      (135

Capstone Logistics, LLC

     Delayed Draw Term Loan        11/12/2027        547      —    

COP Home Services TopCo IV, Inc.

     Delayed Draw Term Loan        12/31/2022        3,328      (92

COP Home Services TopCo IV, Inc.

     Revolver        12/31/2025        1,941      (63

Dana Kepner Company, LLC

     Delayed Draw Term Loan        12/29/2021        29,861      —    

DCG Acquisition Corporation

     Delayed Draw Term Loan        6/30/2021        50,000      —    

Donuts, Inc.

     Revolver        12/29/2026        10,598      —    

Healthcomp Holding Company, LLC

     Delayed Draw Term Loan        4/27/2022        23,280      (291

 

F-84


Table of Contents

Blackstone Secured Lending Fund

Consolidated Schedule of Investments

December 31, 2020

(in thousands)

 

Investments—non-controlled/non-affiliated

   Commitment Type      Commitment
Expiration
Date
     Unfunded
Commitment
     Fair
Value
 

Integrity Marketing Acquisition, LLC

     Delayed Draw Term Loan        2/7/2022        17,267      —    

Jayhawk Buyer, LLC

     Delayed Draw Term Loan        10/15/2021        25,173      —    

Lytx, Inc.

     Delayed Draw Term Loan        2/28/2022        16,761      (168

Monroe Capital Holdings, LLC

     Delayed Draw Term Loan        6/8/2022        22,269      —    

MRI Software, LLC

     Delayed Draw Term Loan        1/31/2022        6,055      (15

MRI Software, LLC

     Revolver        2/10/2026        1,516      (38

Omni Intermediate Holdings, LLC

     Delayed Draw Term Loan        12/30/2021        3,250      —    

Omni Intermediate Holdings, LLC

     Revolver        12/30/2025        514      —    

PaySimple, Inc.

     Delayed Draw Term Loan        8/23/2025        8,652      —    

R1 Holdings, LLC

     Delayed Draw Term Loan        1/2/2021        6,851      —    

SEKO Global Logistics Network, LLC

     Delayed Draw Term Loan        12/30/2022        800      (12

SEKO Global Logistics Network, LLC

     Revolver        12/30/2026        600      (9

TCFI AEVEX, LLC

     Delayed Draw Term Loan        12/31/2021        13,158      (132

The Action Environmental Group, Inc.

     Delayed Draw Term Loan        4/16/2021        7,992      —    

The GI Alliance Management, LLC

     Delayed Draw Term Loan        5/3/2022        85,236      (852

USALCO, LLC

     Delayed Draw Term Loan        6/1/2022        11,295      (282

Windows Acquisition Holdings, Inc.

     Revolver        12/29/2025        5,880      —    
        

 

 

    

 

 

 

Total First Lien Debt Unfunded Commitments

         $ 432,280    $ (2,793
        

 

 

    

 

 

 

 

(8)

There are no interest rate floors on these investments.

(9)

The interest rate floor on these investments as of December 31, 2020 was 1.00%.

(10)

The interest rate floor on these investments as of December 31, 2020 was 1.25%.

(11)

The interest rate floor on these investments as of December 31, 2020 was 1.50%.

The accompanying notes are an integral part of these consolidated financial statements.

 

F-85


Table of Contents

Blackstone Secured Lending Fund

Notes to Consolidated Financial Statements

(Unaudited)

(in thousands, except per share data, percentages and as otherwise noted)

Note 1. Organization

Blackstone Secured Lending Fund (together with its consolidated subsidiaries, the “Company”), is a Delaware statutory trust formed on March 26, 2018, and structured as an externally managed, non-diversified closed-end investment company. On October 26, 2018, the Company elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, the Company elected to be treated for U.S. federal income tax purposes, as a regulated investment company (“RIC”), as defined under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). The Company also intends to continue to comply with the requirements prescribed by the Code in order to maintain tax treatment as a RIC.

The Company’s investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. The Company seeks to achieve its investment objective primarily through originated loans and other securities, including syndicated loans, of private U.S. companies, specifically small and middle market companies, typically in the form of first lien senior secured and unitranche loans (including first out/last out loans), and to a lesser extent, second lien, third lien, unsecured and subordinated loans and other debt and equity securities.

The Company is externally managed by Blackstone Credit BDC Advisors LLC (the “Adviser”). Blackstone Alternative Credit Advisors LP (the “Administrator” and, collectively with its affiliates in the credit-focused business of Blackstone Inc. (“Blackstone”), “Blackstone Credit,” which, for the avoidance of doubt, excludes Harvest Fund Advisors LLC and Blackstone Insurance Solutions) provides certain administrative and other services necessary for the Company to operate pursuant to an administration agreement (the “Administration Agreement”). Blackstone Credit is part of the credit-focused platform of Blackstone and is the primary part of its credit reporting segment.

The Company previously conducted a private offering (the “Private Offering”) of its common shares of beneficial interest (i) to accredited investors, as defined in Regulation D under the Securities Act of 1933, as amended (the “1933 Act”), and (ii) in the case of shares sold outside the United States, to persons that are not “U.S. persons,” as defined in Regulation S under the 1933 Act, in reliance on exemptions from the registration requirements of the 1933 Act. At each closing of the Private Offering, each investor made a capital commitment (“Capital Commitment”) to purchase shares of the beneficial interest of the Company pursuant to a subscription agreement entered into with the Company. Investors are required to fund drawdowns to purchase the Company’s shares up to the amount of their Capital Commitments on as as-needed basis each time the Company delivers a notice to investors.

On October 31, 2018, the Company began its initial period of closing of capital commitments (“Initial Closing Period”) which ended on October 31, 2020. The Company commenced its loan origination and investment activities on November 20, 2018, the date of receipt of the initial drawdown from investors in the Private Offering (the “Initial Drawdown Date”).

Effective on December 10, 2020, the Company changed its name from “Blackstone / GSO Secured Lending Fund” to “Blackstone Secured Lending Fund”.

Note 2. Significant Accounting Policies

Basis of Presentation

The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with U.S. GAAP. As an investment company, the Company applies the accounting and reporting guidance in

 

F-86


Table of Contents

Accounting Standards Codification (“ASC”) Topic 946, Financial Services – Investment Companies (“ASC 946”) issued by the Financial Accounting Standards Board (“FASB”). U.S. GAAP for an investment company requires investments to be recorded at fair value.

The interim consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 6 of Regulation S-X. Accordingly, certain disclosures accompanying the annual consolidated financial statements prepared in accordance with U.S. GAAP are omitted. In the opinion of management, all adjustments, consisting solely of normal recurring accruals considered necessary for the fair presentation of the consolidated financial statements for the interim period presented, have been included. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the fiscal year ending December 31, 2021. All intercompany balances and transactions have been eliminated.

Certain prior period information has been reclassified to conform to the current period presentation.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Such amounts could differ from those estimates and such differences could be material. Assumptions and estimates regarding the valuation of investments involve a higher degree of judgment and complexity and these assumptions and estimates may be significant to the consolidated financial statements.

Consolidation

As provided under ASC 946, the Company will not consolidate its investment in a company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the results of the Company’s wholly-owned subsidiaries.

As of June 30, 2021, the Company’s consolidated subsidiaries were BGSL Jackson Hole Funding LLC (“Jackson Hole Funding”), BGSL Breckenridge Funding LLC (“Breckenridge Funding”), BGSL Big Sky Funding LLC (“Big Sky Funding”) and BGSL Investments LLC (“BGSL Investments”).

Cash and Cash Equivalents

Cash and cash equivalents consist of demand deposits and highly liquid investments, such as money market funds, with original maturities of three months or less. Cash and cash equivalents are carried at cost, which approximates fair value. The Company deposits its cash and cash equivalents with financial institutions and, at times, may exceed the Federal Deposit Insurance Corporation insured limit.

Investments

Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds received (excluding prepayment fees, if any) and the amortized cost basis of the investment using the specific identification method without regard to unrealized gains or losses previously recognized, and include investments charged off during the period, net of recoveries. The net change in unrealized gains or losses primarily reflects the change in investment values, including the reversal of previously recorded unrealized gains or losses with respect to investments realized during the period.

The Company is required to report its investments for which current market values are not readily available at fair value. The Company values its investments in accordance with FASB ASC 820, Fair Value Measurements

 

F-87


Table of Contents

(“ASC 820”), which defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the applicable measurement date. ASC 820 prioritizes the use of observable market prices derived from such prices over entity-specific inputs. Due to the inherent uncertainties of valuation, certain estimated fair values may differ significantly from the values that would have been realized had a ready market for these investments existed, and these differences could be material. See “– Note 5. Fair Value Measurements.

Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. The Company utilizes mid-market pricing (i.e., mid-point of average bid and ask prices) to value these investments. These market quotations are obtained from independent pricing services, if available; otherwise from at least two principal market makers or primary market dealers. To assess the continuing appropriateness of pricing sources and methodologies, the Adviser regularly performs price verification procedures and issues challenges as necessary to independent pricing services or brokers, and any differences are reviewed in accordance with the valuation procedures. The Adviser does not adjust the prices unless it has a reason to believe market quotations are not reflective of the fair value of an investment. Examples of events that would cause market quotations to not reflect fair value could include cases when a security trades infrequently or not at all, causing a quoted purchase or sale price to become stale, or in the event of a “fire sale” by a distressed seller. All price overrides require approval from the Board.

Where prices or inputs are not available or, in the judgment of the Board, not reliable, valuation techniques based on the facts and circumstances of the particular investment will be utilized. Securities that are not publicly traded or for which market prices are not readily available are valued at fair value as determined in good faith by the Board, based on, among other things, the input of the Adviser, the Audit Committee of the Board (the “Audit Committee”) and independent valuation firms engaged on the recommendation of the Adviser and at the direction of the Board. These valuation approaches involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the investments or market and the investments’ complexity.

The Company’s Board undertakes a multi-step valuation process each quarter in connection with determining the fair value of the Company’s investments for which reliable market quotations are not readily available, or are available but deemed not reflective of the fair value of an investment, which includes, among other procedures, the following:

 

   

The valuation process begins with each investment being preliminarily valued by the Adviser’s valuation team in conjunction with the Adviser’s investment professionals responsible for each portfolio investment;

 

   

In addition, independent valuation firms engaged by the Board prepare quarter-end valuations of such investments except de minimis investments, as determined by the Adviser. The independent valuation firms provide a final range of values on such investments to the Board and the Adviser. The independent valuation firms also provide analyses to support their valuation methodology and calculations;

 

   

The Adviser’s Valuation Committee reviews each valuation recommendation to confirm they have been calculated in accordance with the valuation policy and compares such valuations to the independent valuation firms’ valuation ranges to ensure the Adviser’s valuations are reasonable;

 

   

The Adviser’s Valuation Committee makes valuation recommendations to the Audit Committee;

 

   

The Audit Committee reviews the valuation recommendations made by the Adviser’s Valuation Committee, including the independent valuation firms’ quarterly valuations, and once approved, recommends them for approval by the Board; and

 

   

The Board reviews the valuation recommendations of the Audit Committee and determines the fair value of each investment in the portfolio in good faith based on the input of the Audit Committee, the

 

F-88


Table of Contents
 

Adviser’s Valuation Committee and, where applicable, the independent valuation firms and other external service providers.

Valuation of each of our investments will generally be made as described above as of the end of each fiscal quarter. In cases where the Company determines its net asset value (“NAV”) at times other than a quarter end, the Company updates the value of securities with market quotations to the most recent market quotation. For securities without market quotations, non-quarterly valuations will generally be the most recent quarterly valuation unless the Adviser determines that a significant observable change has occurred since the most recent quarter end with respect to the investment (which determination may be as a result of a material event at a portfolio company, material change in market spreads, secondary market transaction in the securities of an investment or otherwise). If the Adviser determines such a change has occurred with respect to one or more investments, the Adviser will determine whether to update the value for each relevant investment using a range of values from an independent valuation firm, where applicable, in accordance with the Company’s valuation policy, pursuant to authority delegated by the Board.

As part of the valuation process, the Board takes into account relevant factors in determining the fair value of the Company’s investments for which reliable market quotations are not readily available, many of which are loans, including and in combination, as relevant, of: (i) the estimated enterprise value of a portfolio company, (ii) the nature and realizable value of any collateral, (iii) the portfolio company’s ability to make payments based on its earnings and cash flow, (iv) the markets in which the portfolio company does business, (v) a comparison of the portfolio company’s securities to any similar publicly traded securities, and (vi) overall changes in the interest rate environment and the credit markets that may affect the price at which similar investments may be made in the future. When an external event such as a purchase transaction, public offering or subsequent equity or debt sale occurs, the Board considers whether the pricing indicated by the external event corroborates its valuation. See “—Note 5. Fair Value Measurements.”

The Board has and will continue to engage independent valuation firms to provide assistance regarding the determination of the fair value of the Company’s portfolio securities for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment each quarter, and the Board may reasonably rely on that assistance. However, the Board is responsible for the ultimate valuation of the portfolio investments at fair value as determined in good faith pursuant to the Company’s valuation policy and a consistently applied valuation process.

Receivables/Payables From Investments Sold/Purchased

Receivables/payables from investments sold/purchased consist of amounts receivable to or payable by the Company for transactions that have not settled at the reporting date. As of June 30, 2021 and December 31, 2020, the Company had $67.7 million and $114.5 million, respectively, of receivables for investments sold. As of June 30, 2021 and December 31, 2020, the Company had $3.0 million and $48.6 million, respectively, of payables for investments purchased.

Derivative Instruments

The Company recognizes all derivative instruments as assets or liabilities at fair value in its consolidated financial statements. Derivative contracts entered into by the Company are not designated as hedging instruments, and as a result the Company presents changes in fair value through current period gains or losses.

In the normal course of business, the Company has commitments and risks resulting from its investment transactions, which may include those involving derivative instruments. Derivative instruments are measured in terms of the notional contract amount and derive their value based upon one or more underlying instruments. While the notional amount gives some indication of the Company’s derivative activity, it generally is not exchanged, but is only used as the basis on which interest and other payments are exchanged. Derivative

 

F-89


Table of Contents

instruments are subject to various risks similar to non-derivative instruments including market, credit, liquidity, and operational risks. The Company manages these risks on an aggregate basis as part of its risk management process.

Foreign Currency Transactions

Amounts denominated in foreign currencies are translated into U.S. dollars on the following basis: (i) investments and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates effective on the last business day of the period; and (ii) purchases and sales of investments, borrowings and repayments of such borrowings, income, and expenses denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates prevailing on the transaction dates.

The Company includes net changes in fair values on investments held resulting from foreign exchange rate fluctuations in translation of assets and liabilities in foreign currencies on the Consolidated Statements of Operations, if any. Foreign security and currency translations may involve certain considerations and risks not typically associated with investing in U.S. companies and U.S. government securities. These risks include, but are not limited to, currency fluctuations and revaluations and future adverse political, social and economic developments, which could cause investments in foreign markets to be less liquid and prices more volatile than those of comparable U.S. companies or U.S. government securities.

Revenue Recognition

Interest Income

Interest income is recorded on an accrual basis and includes the accretion of discounts and amortizations of premiums. Discounts from and premiums to par value on debt investments purchased are accreted/amortized into interest income over the life of the respective security using the effective interest method. The amortized cost of debt investments represents the original cost, including loan origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion of discounts and amortization of premiums, if any. Upon prepayment of a loan or debt security, any prepayment premiums, unamortized upfront loan origination fees and unamortized discounts are recorded as interest income in the current period. For the three and six months ended June 30, 2021, the Company recorded $6.2 million and $24.6 million, respectively, in non-recurring interest income (e.g. prepayment premiums, accelerated accretion of upfront loan origination fees and unamortized discounts). For the three and six months ended June 30, 2020, the Company recorded $2.0 million and $5.1 million, respectively, in non-recurring interest income.

PIK Income

The Company has loans in its portfolio that contain payment-in-kind (“PIK”) provisions. PIK represents interest that is accrued and recorded as interest income at the contractual rates, increases the loan principal on the respective capitalization dates, and is generally due at maturity. Such income is included in payment-in-kind interest income in the Consolidated Statements of Operations. If at any point the Company believes PIK is not expected to be realized, the investment generating PIK will be placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest is generally reversed through interest income. To maintain the Company’s status as a RIC, this non-cash source of income must be paid out to shareholders in the form of dividends, even though the Company has not yet collected cash. For the three and six months ended June 30, 2021, the Company recorded PIK income of $0.4 million and $2.3 million, respectively. For the three and six months ended June 30, 2020, the Company recorded PIK income of $2.6 million and $5.2 million, respectively.

Dividend Income

Dividend income on preferred equity securities is recorded on the accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common

 

F-90


Table of Contents

equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly-traded portfolio companies.

Fee Income

The Company may receive various fees in the ordinary course of business such as structuring, consent, waiver, amendment, syndication and other miscellaneous fees as well as fees for managerial assistance rendered by the Company to the portfolio companies. Such fees are recognized as income when earned or the services are rendered. For the three and six months ended June 30, 2021, the Company recorded fee income of $4.0 million and $4.8 million, respectively. For the three and six months ended June 30, 2020, the Company recorded fee income of $0.0 million and $0.0 million, respectively.

Non-Accrual Income

Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected in full. Accrued interest is generally reversed when a loan is placed on non-accrual status. Additionally, any original issue discount and market discount are no longer accreted to interest income as of the date the loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid current and, in management’s judgment, are likely to remain current. Management may make exceptions to this treatment and determine to not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection.

Organization Expenses and Offering Expenses

Costs associated with the organization of the Company were expensed as incurred, subject to the limitations discussed below. These expenses consist primarily of legal fees and other costs of organizing the Company.

Costs associated with the offering of the Company’s shares are capitalized as “deferred offering costs” on the Consolidated Statements of Assets and Liabilities and amortized over a twelve-month period from incurrence, subject to the limitation below. These expenses consist primarily of legal fees and other costs incurred in connection with the Company’s continuous Private Offering of its shares. Upon the expiration of the Initial Closing Period, the Company expensed the remaining deferred offering costs.

The Company will not bear more than an amount equal to 0.10% of the aggregate Capital Commitments of the Company for organization and offering expenses in connection with the offering of shares. If actual organization and offering costs incurred exceed 0.10% of the Company’s total Capital Commitments, the Adviser or its affiliate will bear the excess costs. To the extent the Company’s Capital Commitments later increase, the Adviser or its affiliates may be reimbursed for past payments of excess organization and offering costs made on the Company’s behalf provided that the total organization and offering costs borne by the Company do not exceed 0.10% of total Capital Commitments and provided further that the Adviser of its affiliates may not be reimbursed for payment of excess organization and offering expenses that were incurred more than three years prior to the proposed reimbursement. For the three and six months ended June 30, 2021, the Company did not accrue any organization costs or offering costs. For the three and six months ended June 30, 2020, the Company accrued offering costs of $0.2 million and $0.5 million, respectively.

Deferred Financing Costs and Debt Issuance Costs

Deferred financing and debt issuance costs represent fees and other direct incremental costs incurred in connection with the Company’s borrowings. These expenses are deferred and amortized into interest expense over the life of the related debt instrument using the straight-line method. Deferred financing costs related to revolving credit facilities are presented separately as an asset on the Company’s Statements of Assets and Liabilities. Debt issuance costs related to any issuance of installment debt or notes are presented net against the outstanding debt balance of the related security.

 

F-91


Table of Contents

Income Taxes

The Company has elected to be treated as a BDC under the 1940 Act. The Company also has elected to be treated as a RIC under the Code. So long as the Company maintains its status as a RIC, it generally will not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that it distributes at least annually to its shareholders as dividends. Rather, any tax liability related to income earned and distributed by the Company would represent obligations of the Company’s investors and would not be reflected in the consolidated financial statements of the Company.

The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof.

To qualify for and maintain qualification as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements. In addition, to qualify for RIC tax treatment, the Company must distribute to its shareholders, for each taxable year, at least 90% of the sum of (i) its “investment company taxable income” for that year (without regard to the deduction for dividends paid), which is generally its ordinary income plus the excess, if any, of its realized net short-term capital gains over its realized net long-term capital losses and (ii) its net tax-exempt income.

In addition, based on the excise tax distribution requirements, the Company is subject to a 4% nondeductible federal excise tax on undistributed income unless the Company distributes in a timely manner in each taxable year an amount at least equal to the sum of (i) 98% of its ordinary income for the calendar year, (ii) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (iii) any income realized, but not distributed, in prior years. For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate income tax is considered to have been distributed.

For the three and six months ended June 30, 2021, the Company incurred $0.0 million and $(0.3) million, respectively, of U.S. federal excise tax. For the three and six months ended June 30, 2020, the Company incurred $0.0 million and $0.1 million, respectively, of U.S. federal excise tax.

Distributions

To the extent that the Company has taxable income available, the Company intends to make quarterly distributions to its shareholders. Distributions to shareholders are recorded on the record date. All distributions will be paid at the discretion of the Board and will depend on the Company’s earnings, financial condition, maintenance of the Company’s tax treatment as a RIC, compliance with applicable BDC regulations and such other factors as the Board may deem relevant from time to time.

Recent Accounting Pronouncements

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848),” which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848), which expanded the scope of Topic 848 to include

 

F-92


Table of Contents

derivative instruments impacted by discounting transition. ASU 2020-04 and ASU 2021-01 are effective for all entities through December 31, 2022. The expedients and exceptions provided by the amendments do not apply to contract modifications and hedging relationships entered into or evaluated after December 31, 2022, except for hedging transactions as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Company is currently evaluating the impact of the adoption of ASU 2020-04 and 2021-01 on its consolidated financial statements.

Note 3. Agreements and Related Party Transactions

Investment Advisory Agreement

On October 1, 2018, the Company entered into an investment advisory agreement with the Adviser (the “Investment Advisory Agreement”), pursuant to which the Adviser manages the Company on a day-to-day basis. The Adviser is responsible for originating prospective investments, conducting research and due diligence investigations on potential investments, analyzing investment opportunities, negotiating and structuring the Company’s investments and monitoring its investments and portfolio companies on an ongoing basis.

The Company pays the Adviser a fee for its services under the Investment Advisory Agreement consisting of two components: a management fee and an incentive fee. The cost of both the management fee and the incentive fee is borne by the shareholders. The initial term of the Investment Advisory Agreement was two years from October 1, 2018, and on May 6, 2020 and May 6, 2021, it was renewed and approved by the Board, including a majority of trustees who are not parties to the Investment Advisory Agreement or “interested persons” (as such term is defined in Section 2(a)(19) of the 1940 Act) (the “Independent Trustees”), for a one-year period. Unless earlier terminated, the Investment Advisory Agreement will renew automatically for successive annual periods, provided that such continuance is specifically approved at least annually by the vote of the Board and by the vote of a majority of the Independent Trustees.

Base Management Fee

The management fee is payable quarterly in arrears at an annual rate of (i) prior to a quotation or listing of the Company’s securities on a national securities exchange (including through an initial public offering) or a sale of all or substantially all of its assets to, or a merger or other liquidity transaction with, an entity in which the Company’s shareholders receive shares of a publicly-traded company which continues to be managed by the Adviser or an affiliate thereof (“Exchange Listing”), 0.75%, and (ii) following an Exchange Listing, 1.0%, in each case of the average value of the Company’s gross assets at the end of the two most recently completed calendar quarters. For purposes of the Investment Advisory Agreement, gross assets means the Company’s total assets determined on a consolidated basis in accordance with U.S. GAAP, excluding undrawn commitments but including assets purchased with borrowed amounts. For the first calendar quarter in which the Company had operations, gross assets were measured as the average of gross assets at the Initial Drawdown Date and at the end of such first calendar quarter. If an Exchange Listing occurs on a date other than the first day of a calendar quarter, the management fee will be calculated for such calendar quarter at a weighted rate calculated based on the fee rates applicable before and after the Exchange Listing based on the number of days in such calendar quarter before and after the Exchange Listing.

For the three and six months ended June 30, 2021, base management fees were $13.3 million and $24.9 million, respectively. For the three and six months ended June 30, 2020, base management fees were $7.5 million and $14.0 million, respectively. As of June 30, 2021 and December 31, 2020, $13.3 million and $10.3 million, respectively, was payable to the Adviser relating to management fees.

 

F-93


Table of Contents

Incentive Fees

The incentive fee consists of two components that are determined independently of each other, with the result that one component may be payable even if the other is not. One component is based on income and the other component is based on capital gains, each as described below:

(i) Income based incentive fee:

The first part of the incentive fee, an income based incentive fee, is calculated and payable quarterly in arrears based on the Company’s pre-incentive fee net investment income as defined in the Investment Advisory Agreement. Pre-incentive fee net investment income means, as the context requires, either the dollar value of, or percentage rate of return on the value of the Company’s net assets at the end of the immediately preceding quarter from, interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies) accrued during the calendar quarter, minus the Company’s operating expenses accrued for the quarter (including the management fee, expenses payable under the Administration Agreement, and any interest expense or fees on any credit facilities or outstanding debt and dividends paid on any issued and outstanding preferred shares, but excluding the incentive fee. Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with PIK interest and zero coupon securities)), accrued income that the Company has not yet received in cash. Pre-incentive fee net investment income excludes any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. The Company excludes the impact of expense support payments and recoupments from pre-incentive fee net investment income.

The Company pays its Adviser an income based incentive fee with respect to the Company’s pre-incentive fee net investment income in each calendar quarter as follows:

 

   

No income based incentive fee if the Company’s pre-incentive fee net investment income, expressed as a return on the value of our net assets at the end of the immediately preceding calendar quarter, does not exceed the hurdle rate of 1.5%;

 

   

100% of the Company’s pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than or equal to 1.76% (7.06% annualized) prior to an Exchange Listing, or 1.82% (7.27% annualized) following an Exchange Listing, of the value of the Company’s net assets. This “catch-up” portion is meant to provide the Adviser with approximately 15% prior to an Exchange Listing, or 17.5% following an Exchange Listing, of the Company’s pre-incentive fee net investment income as if a hurdle rate did not apply if the “catch up” is achieved; and

 

   

15% prior to an Exchange Listing, or 17.5% following an Exchange Listing, of the Company’s pre-incentive fee net investment income, if any, that exceeds the rate of return of 1.76% (7.06% annualized) prior to an Exchange Listing, or 1.82% (7.27% annualized) following an Exchange Listing.

These calculations are prorated for any period of less than three months and adjusted for any share issuances or repurchases during the relevant quarter. If an Exchange Listing occurs on a date other than the first day of a calendar quarter, the income based incentive fee with respect to the Company’s pre-incentive fee net investment income shall be calculated for such calendar quarter at a weighted rate calculated based on the fee rates applicable before and after the Exchange Listing based on the number of days in such calendar quarter before and after the Exchange Listing.

(ii) Capital gains incentive fee:

The second part of the incentive fee, a capital gains incentive fee, will be determined and payable in arrears as of the end of each calendar year in an amount equal to 15% prior to an Exchange Listing, or 17.5% following an Exchange Listing, of realized capital gains, if any, on a cumulative basis from inception through the end of

 

F-94


Table of Contents

each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees as calculated in accordance with U.S. GAAP. The Company will accrue, but will not pay, a capital gains incentive fee with respect to unrealized appreciation because a capital gains incentive fee would be owed to the Adviser if the Company were to sell the relevant investment and realize a capital gain.

For the three and six months ended June 30, 2021, the Company accrued income based incentive fees of $13.8 million and $28.1 million, respectively. For the three and six months ended June 30, 2020, the Company accrued income based incentive fees of $8.6 million and $16.9 million, respectively. As of June 30, 2021 and December 31, 2020, $13.8 million and $15.3 million, respectively, was payable to the Adviser for income based incentive fees.

For the three and six months ended June 30, 2021, the Company accrued capital gains incentive fees of $6.8 million and $12.2 million, respectively. For the three and six months ended June 30, 2020, the Company accrued capital gains incentive fees of $0.0 million and $(4.2) million, respectively. As of June 30, 2021 and December 31, 2020, the Company had accrued capital gains incentive fees of $13.2 million and $1.1 million, respectively, none of which was payable on such dates under the Investment Advisory Agreement.

Administration Agreement

On October 1, 2018, the Company entered into an Administration Agreement with the Administrator. Under the terms of the Administration Agreement, the Administrator provides, or oversees the performance of, administrative and compliance services, including, but not limited to, maintaining financial records, overseeing the calculation of NAV, compliance monitoring (including diligence and oversight of the Company’s other service providers), preparing reports to shareholders and reports filed with the United States Securities and Exchange Commission (“SEC”), preparing materials and coordinating meetings of the Company’s Board, managing the payment of expenses and the performance of administrative and professional services rendered by others and providing office space, equipment and office services. The Administrator may also offer to provide, on the Company’s behalf, managerial assistance to the Company’s portfolio companies. The initial term of the agreement was two years from October 1, 2018, and on May 6, 2020 and May 6, 2021 it was renewed and approved by the Board and a majority of the Independent Trustees for one-year periods. Unless earlier terminated, the Administration Agreement will renew automatically for successive annual periods, provided that such continuance is approved at least annually by (i) the vote of the Board or by a majority vote of the outstanding voting securities of the Company and (ii) the vote of a majority of the Independent Trustees.

For providing these services, the Company will reimburse the Administrator for its costs, expenses and allocable portion of overhead (including rent, office equipment and utilities) and other expenses incurred by the Administrator in performing its administrative obligations under the Administration Agreement, including but not limited to: (i) the Company’s chief compliance officer, chief financial officer and their respective staffs; (ii) investor relations, legal, information technology, operations and other non-investment professionals at the Administrator that perform duties for the Company; and (iii) any internal audit group personnel of Blackstone or any of its affiliates. The Administrator has elected to forgo any reimbursement for rent and other occupancy costs for the three and six months ended June 30, 2021 and 2020.

For the three and six months ended June 30, 2021, the Company incurred $0.6 million and $1.1 million, respectively, in expenses under the Administration Agreement, which were recorded in administrative service expenses in the Company’s Consolidated Statements of Operations. For the three and six months ended June 30, 2020, the Company incurred $0.5 million and $1.1 million, respectively, in expenses under the Administration Agreement, which were recorded in administrative service expenses in the Company’s Consolidated Statements of Operations. As of June 30, 2021 and December 31, 2020, $0.7 million and $1.1 million, respectively, was unpaid and included in “due to affiliates” in the Consolidated Statements of Assets and Liabilities.

 

F-95


Table of Contents

Sub-Administration and Custody Agreement

On October 1, 2018, the Administrator entered into a sub-administration agreement (the “Sub-Administration Agreement”) with State Street Bank and Trust Company (the “Sub-Administrator”) under which the Sub-Administrator provides various accounting and administrative services to the Company. The Sub-Administrator also serves as the Company’s custodian (the “Custodian”). The initial term of the Sub-Administration Agreement is two years from the effective date and after expiration of the initial term and the Sub-Administration Agreement shall automatically renew for successive one-year periods, unless a written notice of non-renewal is delivered prior to 120 days prior to the expiration of the initial term or renewal term.

Expense Support and Conditional Reimbursement Agreement

On December 12, 2018, the Company entered into an Expense Support and Conditional Reimbursement Agreement (the “Expense Support Agreement”) with the Adviser. The Adviser may elect to pay certain expenses of the Company on the Company’s behalf (each, an “Expense Payment”), provided that no portion of the payment will be used to pay any interest of the Company. Any Expense Payment that the Adviser has committed to pay must be paid by the Adviser to the Company in any combination of cash or other immediately available funds no later than forty-five days after such commitment was made in writing, and/or offset against amounts due from the Company to the Adviser or its affiliates.

Following any calendar quarter in which Available Operating Funds (as defined below) exceed the cumulative distributions accrued to the Company’s shareholders based on distributions declared with respect to record dates occurring in such calendar quarter (the amount of such excess being hereinafter referred to as “Excess Operating Funds”), the Company shall pay such Excess Operating Funds, or a portion thereof, to the Adviser until such time as all Expense Payments made by the Adviser to the Company within three years prior to the last business day of such calendar quarter have been reimbursed. Any payments required to be made by the Company shall be referred to herein as a “Reimbursement Payment.” Available Operating Funds means the sum of (i) the Company’s net investment company taxable income (including net short-term capital gains reduced by net long-term capital losses), (ii) the Company’s net capital gains (including the excess of net long-term capital gains over net short-term capital losses) and (iii) dividends and other distributions paid to the Company on account of investments in portfolio companies (to the extent such amounts listed in clause (iii) are not included under clauses (i) and (ii) above).

No Reimbursement Payment for any calendar quarter shall be made if the annualized rate of regular cash distributions declared by the Company on record dates in the applicable calendar quarter of such Reimbursement Payment is less than the annualized rate of regular cash distributions declared by the Company on record dates in the calendar quarter in which the Expense Payment was committed to which such Reimbursement Payment relates. The Company’s obligation to make a Reimbursement Payment shall automatically become a liability of the Company on the last business day of the applicable calendar quarter.

The following table presents a summary of Expense Payments and the related Reimbursement Payments since the Company’s commencement of operations:

 

For the Quarters Ended

   Expense
Payments
by Adviser
     Reimbursement
Payments to
Adviser
    Unreimbursed
Expense
Payments
 

December 31, 2018

   $ 1,696    $ (1,696   $ —  

March 31, 2019

     570      (570     —  
  

 

 

    

 

 

   

 

 

 

Total

   $ 2,266    $ (2,266   $ —  
  

 

 

    

 

 

   

 

 

 

As of June 30, 2021 there was no unreimbursed Expense Payments remaining. For the three and six months ended June 30, 2020, the Company made Reimbursement Payments related to Expense Payments by the Adviser of $0.4 million and $0.8 million, respectively.

 

F-96


Table of Contents

Note 4. Investments

The composition of the Company’s investment portfolio at cost and fair value was as follows:

 

     June 30, 2021     December 31, 2020  
     Cost      Fair Value      % of Total
Investments at
Fair Value
    Cost      Fair Value      % of Total
Investments at
Fair Value
 

First lien debt

   $ 7,139,358    $ 7,213,639      98.06   $ 5,493,561    $ 5,502,899      98.51

Second lien debt

     53,499      55,314      0.75     48,979      50,199      0.90

Unsecured debt

     10,547      10,475      0.14     —        —        —  

Equity investments

     66,908      77,212      1.05     32,942      32,844      0.59
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total

   $ 7,270,312    $ 7,356,640      100.00   $ 5,575,482    $ 5,585,942      100.00
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

The industry composition of investments at fair value was as follows:

 

     June 30,
2021
    December 31,
2020
 

Aerospace & Defense

     6.73     7.03

Air Freight & Logistics

     6.38     6.44

Building Products

     6.39     7.79

Capital Markets

     —       0.11

Chemicals

     4.87     8.31

Commercial Services & Supplies

     9.48     8.16

Communications Equipment

     0.06     —  

Construction & Engineering

     0.74     1.07

Distributors

     6.05     8.10

Diversified Financial Services

     1.64     1.08

Electrical Equipment

     1.16     2.61

Electronic Equipment, Instruments & Components

     1.65     2.19

Electric Utilities

     0.56     —  

Energy Equipment & Services

     0.90     1.35

Health Care Equipment & Supplies

     —       0.69

Health Care Providers & Services

     12.74     9.31

Health Care Technology

     4.11     5.50

Hotels, Restaurants & Leisure

     0.44     0.77

Industrial Conglomerates

     0.37     0.52

Insurance

     5.27     2.39

Interactive Media & Services

     0.64     0.84

Internet & Direct Marketing Retail

     4.97     7.17

IT Services

     2.00     1.27

Leisure Products

     0.09     —  

Machinery

     0.38     0.95

Oil, Gas & Consumable Fuels

     2.05     2.66

Paper & Forest Products

     0.09     0.26

Personal Products

     0.74     0.96

Professional Services

     4.08     2.32

Real Estate Management & Development

     1.56     —  

Software

     6.17     2.94

Specialty Retail

     2.45     3.22

Technology Hardware, Storage & Peripherals

     1.85     2.67

Trading Companies & Distributors

     1.29     0.86

Transportation Infrastructure

     2.10     0.46
  

 

 

   

 

 

 

Total

     100.00     100.00
  

 

 

   

 

 

 

 

F-97


Table of Contents

The geographic composition of investments at cost and fair value was as follows:

 

     June 30, 2021  
     Cost      Fair Value      % of Total
Investments at
Fair Value
    Fair Value
as % of
Net Assets
 

United States

   $ 6,783,022    $ 6,855,233      93.18     183.24

Canada

     452,966      466,180      6.34     12.46

United Kingdom

     34,324      35,227      0.48     0.94
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 7,270,312    $ 7,356,640      100.00     196.64
  

 

 

    

 

 

    

 

 

   

 

 

 
     December 31, 2020  
     Cost      Fair Value      % of Total
Investments at
Fair Value
    Fair Value
as % of
Net Assets
 

United States

   $ 5,205,832    $ 5,209,138      93.25     159.41

Canada

     267,544      270,126      4.84     8.27

Germany

     102,106      106,678      1.91     3.26
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 5,575,482    $ 5,585,942      100.00     170.94
  

 

 

    

 

 

    

 

 

   

 

 

 

As of June 30, 2021 and December 31, 2020, no loans in the portfolio were on non-accrual status.

As of June 30, 2021 and December 31, 2020, on a fair value basis, approximately 99.7% and 100.0%, respectively, of our performing debt investments bore interest at a floating rate and approximately 0.3% and 0.0%, respectively, of our performing debt investments bore interest at a fixed rate.

Note 5. Fair Value Measurements

The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the applicable measurement date.

The fair value hierarchy under ASC 820 prioritizes the inputs to valuation methodology used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these securities. The three levels of the fair value hierarchy are as follows:

 

   

Level 1: Inputs to the valuation methodology are quoted prices available in active markets for identical instruments as of the reporting date. The types of financial instruments included in Level 1 include unrestricted securities, including equities and derivatives, listed in active markets.

 

   

Level 2: Inputs to the valuation methodology are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date. The types of financial instruments in this category include less liquid and restricted securities listed in active markets, securities traded in other than active markets, government and agency securities and certain over-the-counter derivatives where the fair value is based on observable inputs.

 

   

Level 3: Inputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in this category include debt and equity investments in privately held entities, collateralized loan obligations (“CLOs”) and certain over-the-counter derivatives where the fair value is based on unobservable inputs.

 

F-98


Table of Contents

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the overall fair value measurement. The Adviser’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfer occurs.

In addition to using the above inputs in investment valuations, the Company applies the valuation policy approved by its Board that is consistent with ASC 820. Consistent with the valuation policy, the Company evaluates the source of the inputs, including any markets in which its investments are trading (or any markets in which securities with similar attributes are trading), in determining fair value. When an investment is valued based on prices provided by reputable dealers or pricing services (that is, broker quotes), the Company subjects those prices to various criteria in making the determination as to whether a particular investment would qualify for treatment as a Level 2 or Level 3 investment.

In the absence of independent, reliable market quotes, an enterprise value analysis is typically performed to determine the value of equity investments, control debt investments and non-control debt investments that are credit-impaired, and to determine if debt investments are credit impaired. Enterprise value (“EV”) means the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. When an investment is valued using an EV analysis, the EV of a portfolio company is first determined and allocated over the portfolio company’s securities in order of their preference relative to one another (i.e. “waterfall” allocation).

If debt investments are credit-impaired, which occurs when there is insufficient coverage under the EV analysis through the respective investment’s position in the capital structure, the Adviser uses the enterprise value “waterfall” approach or a recovery method (if a liquidation or restructuring is deemed likely) to determine fair value. For debt investments that are not determined to be credit-impaired, the Adviser uses a market interest rate yield analysis (discussed below) to determine fair value.

The Adviser will generally utilize approaches including the market approach, the income approach or both approaches, as appropriate, when calculating EV. The primary method for determining EV for non-control investments, and control investments without reliable projections, uses a multiple analysis whereby appropriate multiples are applied to the portfolio company’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) or another key financial metric (e.g. such as revenues, cash flows or net income) (“Performance Multiple”). Performance Multiples are typically determined based upon a review of publicly traded comparable companies and market comparable transactions, if any. The second method for determining EV (and primary method for control investments with reliable projections) uses a discounted cash flow analysis whereby future expected cash flows and the anticipated terminal value of the portfolio company are discounted to determine a present value using estimated discount rates. The income approach is generally used when the Adviser has visibility into the long term projected cash flows of a portfolio company, which is more common with control investments.

Subsequently, for non-control debt investments that are not credit-impaired, and where there is an absence of available market quotations, fair value is determined using a yield analysis. To determine fair value using a yield analysis, the expected cash flows are projected based on the contractual terms of the debt security and discounted back to the measurement date based on a market yield. A market yield is determined based upon an assessment of current and expected market yields for similar investments and risk profiles. The Company considers the current contractual interest rate, the maturity and other terms of the investment relative to risk of the company and the specific investment. A key determinant of risk, among other things, is the leverage through the investment relative to the enterprise value of the portfolio company. As debt investments held by the Company are substantially illiquid with no active transaction market, the Company depends on primary market data, including newly funded transactions, as well as secondary market data with respect to high yield debt

 

F-99


Table of Contents

instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable. The fair value of loans with call protection is generally capped at par plus applicable prepayment premium in effect at the measurement date.

The following table presents the fair value hierarchy of financial instruments:

 

     June 30, 2021  
     Level 1      Level 2      Level 3      Total  

First lien debt

   $ —      $ 607,587    $ 6,606,052    $ 7,213,639

Second lien debt

     —        15,115      40,199      55,314

Unsecured debt

     —        10,475      —        10,475

Equity investments

     —        —        77,212      77,212
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ —      $ 633,177    $ 6,723,463    $ 7,356,640
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     December 31, 2020  
     Level 1      Level 2      Level 3      Total  

First lien debt

   $ —      $ 774,421    $ 4,728,478    $ 5,502,899

Second lien debt

     —        26,196      24,003      50,199

Equity investments

     —        —        32,844      32,844
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ —      $ 800,617    $ 4,785,325    $ 5,585,942
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents changes in the fair value of financial instruments for which Level 3 inputs were used to determine the fair value:

 

     Three Months Ended June 30, 2021  
     First Lien 
Debt
    Second Lien 
Debt
     Equity
Investments
     Total
Investments
 

Fair value, beginning of period

   $ 5,334,707   $ 26,588    $ 59,892    $ 5,421,187

Purchases of investments

     1,447,878     13,192      8,322      1,469,392

Proceeds from principal repayments and sales of investments

     (200,564     —          —          (200,564

Accretion of discount/amortization of premium

     6,883     30      —          6,913

Net realized gain (loss)

     1,767     —          —          1,767

Net change in unrealized appreciation (depreciation)

     34,446     389      8,998      43,833

Transfers into Level 3 (1)

     111,555     —          —          111,555

Transfers out of Level 3 (1)

     (130,620     —          —          (130,620
  

 

 

   

 

 

    

 

 

    

 

 

 

Fair value, end of period

   $ 6,606,052   $ 40,199    $ 77,212    $ 6,723,463
  

 

 

   

 

 

    

 

 

    

 

 

 

Net change in unrealized appreciation (depreciation) included in earnings related to financial instruments still held as of June 30, 2021

   $ 38,751   $ 389    $ 8,998    $ 48,138
  

 

 

   

 

 

    

 

 

    

 

 

 

 

F-100


Table of Contents
     Six Months Ended June 30, 2021  
     First Lien 
Debt
    Second Lien 
Debt
    Equity
Investments
     Total
Investments
 

Fair value, beginning of period

   $ 4,728,478   $ 24,003   $ 32,844    $ 4,785,325

Purchases of investments

     2,379,464     33,053     33,966      2,446,483

Proceeds from principal repayments and sales of investments

     (577,753     (17,900     —          (595,653

Accretion of discount/amortization of premium

     21,453     392     —          21,845

Net realized gain (loss)

     2,391     —         —          2,391

Net change in unrealized appreciation (depreciation)

     52,019     651     10,402      63,072

Transfers into Level 3 (1)

     —         —         —          —    

Transfers out of Level 3 (1)

     —         —         —          —    
  

 

 

   

 

 

   

 

 

    

 

 

 

Fair value, end of period

   $ 6,606,052   $ 40,199   $ 77,212    $ 6,723,463
  

 

 

   

 

 

   

 

 

    

 

 

 

Net change in unrealized appreciation (depreciation) included in earnings related to financial instruments still held as of June 30, 2021

   $ 58,881   $ 1,188   $ 10,402    $ 70,471
  

 

 

   

 

 

   

 

 

    

 

 

 

 

     Three Months Ended June 30, 2020  
     First Lien 
Debt
    Second Lien
Debt
     Equity
Investments
    Total
Investments
 

Fair value, beginning of period

   $ 2,842,666   $ —        $ 15,754   $ 2,858,420

Purchases of investments

     255,823     —          —         255,823

Proceeds from principal repayments and sales of investments

     (26,685     —          (716     (27,401

Accretion of discount/amortization of premium

     3,884     —          —         3,884

Net realized gain (loss)

     (5     —          —         (5

Net change in unrealized appreciation (depreciation)

     110,693     —          697     111,390

Transfers into Level 3 (1)

     30,333     —          —         30,333

Transfers out of Level 3 (1)

     (58,418     —          —         (58,418
  

 

 

   

 

 

    

 

 

   

 

 

 

Fair value, end of period

   $ 3,158,291   $ —        $ 15,735   $ 3,174,026
  

 

 

   

 

 

    

 

 

   

 

 

 

Net change in unrealized appreciation (depreciation) included in earnings related to financial instruments still held as of June 30, 2020

   $ 110,704   $ —        $ 697   $ 111,401
  

 

 

   

 

 

    

 

 

   

 

 

 
     Six Months Ended June 30, 2020  
     First Lien 
Debt
    Second Lien
Debt
     Equity
Investments
    Total
Investments
 

Fair value, beginning of period

   $ 2,241,393   $ —        $ 13,920   $ 2,255,313

Purchases of investments

     1,002,358     —          4,455     1,006,813

Proceeds from principal repayments and sales of investments

     (100,627     —          (715     (101,342

Accretion of discount/amortization of premium

     7,972     —          —         7,972

Net realized gain (loss)

     —         —          —         —    

Net change in unrealized appreciation (depreciation)

     (112,388     —          (1,925     (114,313

Transfers into Level 3 (1)

     178,308     —          —         178,308

Transfers out of Level 3 (1)

     (58,725     —          —         (58,725
  

 

 

   

 

 

    

 

 

   

 

 

 

Fair value, end of period

   $ 3,158,291   $ —        $ 15,735   $ 3,174,026
  

 

 

   

 

 

    

 

 

   

 

 

 

Net change in unrealized appreciation (depreciation) included in earnings related to financial instruments still held as of June 30, 2020

   $ (112,390   $ —        $ (1,925   $ (114,315
  

 

 

   

 

 

    

 

 

   

 

 

 

 

(1)

For the three and six months ended June 30, 2021 and 2020, transfers into or out of Level 3 were primarily due to decreased or increased price transparency, respectively.

 

F-101


Table of Contents

The following table presents quantitative information about the significant unobservable inputs of the Company’s Level 3 financial instruments. The table is not intended to be all-inclusive but instead captures the significant unobservable inputs relevant to the Company’s determination of fair value.

 

     June 30, 2021  
                    Range    

 

 
     Fair Value    

Valuation Technique

 

Unobservable Input

   Low     High     Weighted
Average (1)
 

Investments in first lien debt

   $ 6,040,624  

Yield analysis

 

Discount rate

     4.02     10.82     7.74
     565,428  

Market quotations

 

Broker quoted price

     98.50       100.56       99.67  
  

 

 

            
     6,606,052           

Investments in second lien debt

     19,476  

Yield analysis

 

Discount rate

     9.42     10.59     9.94
     20,723  

Market quotations

 

Broker quoted price

     100.75       100.75       100.75  
  

 

 

            
     40,199           

Investment in
warrant

     2,821  

Option pricing model

 

Expected volatility

     25.00     25.00     25.00

Investments in equity

     74,391  

Market approach

 

Performance multiple

     7.75x       17.00x       11.87x  
  

 

 

            

Total

   $ 6,723,463           
  

 

 

            
     December 31, 2020  
                    Range    

 

 
     Fair Value    

Valuation Technique

 

Unobservable Input

   Low     High     Weighted
Average (1)
 

Investments in first lien debt

   $ 4,255,348  

Yield analysis

 

Discount rate

     5.85     10.98     7.79
     468,483  

Market quotations

 

Broker quoted price

     98.00       100.63       99.05  
     4,647  

Recent transaction

 

Recent transaction

     97.50       100.00       99.99  
  

 

 

            
     4,728,478           

Investments in second lien debt

     5,924  

Yield analysis

 

Discount rate

     10.26     10.26     10.26
     18,079  

Market quotations

 

Broker quoted price

     101.00       101.00       101.00  
  

 

 

            
     24,003           

Investments in warrant

     865  

Option pricing model

 

Expected volatility

     25.00     25.00     25.00

Investments in equity

     31,979  

Market approach

 

Performance multiple

     9.17x       13.25x       10.60x  
  

 

 

            

Total

   $ 4,785,325           
  

 

 

            

 

(1)

Weighted averages are calculated based on fair value of investments.

The significant unobservable input used in the yield analysis is the discount rate based on comparable market yields. The significant unobservable input used for market quotations are broker quoted prices provided by independent pricing services. The significant unobservable input used under the market approach is the performance multiple. Significant increases in discount rates would result in a significantly lower fair value measurement. Significant decreases in quoted prices or performance multiples would result in a significantly lower fair value measurement.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period.

 

F-102


Table of Contents

Additionally, the fair value of the Company’s investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that the Company may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If the Company was required to liquidate a portfolio investment in a forced or liquidation sale, it could realize significantly less than the value at which the Company has recorded it. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected in the valuations currently assigned.

Financial Instruments Not Carried at Fair Value

Debt

The fair value of the Company’s credit facilities, which would be categorized as Level 3 within the fair value hierarchy, as of June 30, 2021 and December 31, 2020, approximates their carrying value as the credit facilities have variable interest based on selected short term rates.

The fair value of the Company’s 2023 Notes, 2026 Notes and New 2026 Notes (as defined in Note 6), which would be categorized as Level 2 within the fair value hierarchy, as of June 30, 2021 was $417.2 million, $848.9 million and $709.9 million, respectively, based on vendor pricing received by the Company. As of December 31, 2020, the fair value of the Company’s 2023 Notes and 2026 Notes was $416.2 million and $823.2 million, respectively.

Other

The carrying amounts of the Company’s assets and liabilities, other than investments at fair value and the 2023 Notes, the 2026 Notes and the New 2026 Notes (as defined in Note 6), approximate fair value. These financial instruments are categorized as Level 3 within the hierarchy.

Note 6. Borrowings

In accordance with the 1940 Act, with certain limitations, the Company is allowed to borrow amounts such that its asset coverage, as defined in the 1940 Act, is at least 150% after such borrowing. As of June 30, 2021 and December 31, 2020, the Company’s asset coverage was 198.9% and 230.0%, respectively.

The following wholly-owned subsidiaries of the Company have entered into secured financing facilities, as described below: Jackson Hole Funding, Breckenridge Funding and Big Sky Funding which are collectively referred to as the “SPVs”, and such secured financing facilities described below are collectively referred to as the “SPV Financing Facilities”.

The obligations of each SPV to the lenders under the applicable SPV Financing Facility are secured by a first priority security interest in all of the applicable SPV’s portfolio investments and cash. The obligations of each SPV under the applicable SPV Financing Facility are non-recourse to the Company, and the Company’s exposure to the credit facility is limited to the value of its investment in the applicable SPV.

In connection with the SPV Financing Facilities, the applicable SPV has made certain customary representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar facilities. Each SPV Financing Facility contains customary events of default for similar financing transactions, including if a change of control of the applicable SPV occurs. Upon the occurrence and during the continuation of an event of default, the lenders under the applicable SPV Financing Facility may declare the outstanding advances and all other obligations under the applicable SPV Financing Facility immediately due and payable. The occurrence of an event of default (as described above) triggers a requirement that the applicable SPV obtain the consent of the lenders under the applicable SPV Financing Facility prior to entering into any sale or disposition with respect to portfolio investments.

 

F-103


Table of Contents

As of June 30, 2021 and December 31, 2020, the Company was in compliance with all covenants and other requirements of the SPV Financing Facilities.

Jackson Hole Funding Facility

On November 16, 2018, Jackson Hole Funding, the Company’s wholly-owned subsidiary that holds primarily originated loan investments, entered into a senior secured revolving credit facility (which was subsequently amended on February 6, 2019, September 20, 2019 and July 28, 2020 and as further amended from time to time, the “Jackson Hole Funding Facility”) with JPMorgan Chase Bank, National Association (“JPM”). JPM serves as administrative agent, Citibank, N.A., serves as collateral agent and securities intermediary, Virtus Group, LP serves as collateral administrator and the Company serves as portfolio manager under the Jackson Hole Funding Facility.

Advances under the Jackson Hole Funding Facility bear interest at a per annum rate equal to the three-month LIBOR in effect, plus the applicable margin of 2.375% per annum. Effective January 16, 2019, Jackson Hole Funding pays a commitment fee of 0.60% per annum (or 0.375% per annum until March 20, 2020) on the average daily unused amount of the financing commitments until the third anniversary of the Jackson Hole Funding Facility.

The initial maximum commitment amount of the Jackson Hole Funding Facility was $300 million. Effective September 20, 2019, the maximum commitment amount of the Jackson Hole Funding Facility was increased to $600 million and effective July 28, 2020, the maximum commitment amount of the Jackson Hole Funding Facility was reduced to $400 million. The Jackson Hole Funding Facility has an accordion feature, subject to the satisfaction of various conditions, which could bring total commitments under the Jackson Hole Funding Facility to up to $900 million. Proceeds from borrowings under the Jackson Hole Funding Facility may be used to fund portfolio investments by Jackson Hole Funding and to make advances under delayed draw term loans where Jackson Hole Funding is a lender. The period during which Jackson Hole Funding may make borrowings under the Jackson Hole Funding Facility expires on November 16, 2021 and the Jackson Hole Funding Facility is scheduled to mature on May 16, 2023.

Breckenridge Funding Facility

On December 21, 2018, Breckenridge Funding, the Company’s wholly owned subsidiary that holds primarily syndicated loan investments, entered into a senior secured revolving credit facility (which was subsequently amended on June 11, 2019, August 2, 2019, September 27, 2019 and April 13, 2020, and as further amended from time to time, the “Breckenridge Funding Facility”) with BNP Paribas (“BNP”). BNP serves as administrative agent, Wells Fargo Bank, National Association serves as collateral agent and the Company serves as servicer under the Breckenridge Funding Facility.

Advances under the Breckenridge Funding Facility bear interest at a per annum rate equal to the three-month LIBOR (or other Base Rate) in effect, plus an applicable margin of 1.75%, 2.00% or 2.22% per annum, as applicable, depending on the nature of the advances being requested under the facility. Breckenridge Funding will pay a commitment fee of 0.70% per annum if the unused facility amount is greater than 50% or 0.35% per annum if the unused facility amount is less than or equal to 50% and greater than 25%, based on the average daily unused amount of the financing commitments until December 21, 2022, in addition to certain other fees as agreed between Breckenridge Funding and BNP.

The initial maximum commitment amount of the Breckenridge Funding Facility was $400 million. Effective June 11, 2019, the maximum commitment amount of the Breckenridge Funding Facility was increased to $575 million; effective September 27, 2019, the maximum commitment amount of the Breckenridge Funding Facility was increased to $875 million and on April 13, 2020, the maximum commitment amount of the Breckenridge Funding Facility was increased to $1,125 through April 13, 2021 and $825 million thereafter.

 

F-104


Table of Contents

Proceeds from borrowings under the Breckenridge Funding Facility may be used to fund portfolio investments by Breckenridge Funding and to make advances under delayed draw and revolving loans where Breckenridge Funding is a lender. The period during which Breckenridge Funding may make borrowings under the Breckenridge Funding Facility for the remaining commitment amounts expires on December 21, 2021 (or such later date as may be agreed by Breckenridge Funding, BNP, as administrative agent, and the lenders under the Breckenridge Funding Facility), except for $300 million of outstanding principal which expired on September 27, 2020. The Breckenridge Funding Facility is scheduled to mature on December 21, 2023.

Big Sky Funding Facility

On December 10, 2019, Big Sky Funding, the Company’s wholly-owned subsidiary, entered into a senior secured revolving credit facility (which was subsequently amended on December 30, 2020, and as further amended from time to time, the (“Big Sky Funding Facility”) with Bank of America, N.A. (“Bank of America”). Bank of America serves as administrative agent, Wells Fargo Bank, N.A. serves as collateral administrator and the Company serves as manager under the Big Sky Funding Facility.

Advances under the Big Sky Funding Facility bear interest at a per annum rate equal to the one-month or three-month London Interbank Offered Rate in effect, plus the applicable margin of 1.60% per annum. Big Sky Funding is required to utilize a minimum percentage of the financing commitments (the “Minimum Utilization Amount”), which amount increases in three-month intervals from 20% six months after the closing date of the Big Sky Funding Facility to 80% 15 months after the closing date of the Revolving Credit Facility and thereafter. Unused amounts below the Minimum Utilization Amount accrue a fee at a rate of 1.60% per annum. In addition, Big Sky Funding will pay an unused fee of 0.45% per annum on the daily unused amount of the financing commitments in excess of the Minimum Utilization Amount, commencing three months after the closing date of the Big Sky Funding Facility.

The initial maximum commitment amount of the Big Sky Funding Facility is $400 million. Effective May 14, 2020, Big Sky Funding exercised its accordion feature under the Big Sky Funding Facility, which increased the maximum commitment amount to $500 million. Effective December 30, 2020, the maximum commitment amount of the Big Sky Funding Facility was reduced to $400 million. Proceeds from borrowings under the Big Sky Funding Facility may be used to fund portfolio investments by Big Sky Funding and to make advances under revolving loans or delayed draw term loans where Big Sky Funding is a lender. All amounts outstanding under the Big Sky Funding Facility must be repaid by December 10, 2022.

Revolving Credit Facility

On June 15, 2020, the Company entered into a senior secured revolving credit facility (which was subsequently amended on June 29, 2020 and June 30, 2021 and as further amended from time to time, the “Revolving Credit Facility”) with Citibank, N.A. (“Citi”). Citi serves as administrative agent and collateral agent.

The Revolving Credit Facility provides for borrowings in U.S. dollars and certain agreed upon foreign currencies in an initial aggregate amount of up to $550 million. Effective June 29, 2020, the maximum commitment amount of the Revolving Credit Facility increased to $650 million. Effective November 3, 2020, the maximum commitment amount of the Revolving Credit Facility increased to $745 million. Effective June 30, 2021, the maximum commitment amount of the Revolving Credit Facility increased to $1,275 million. Borrowings under the Revolving Credit Facility are subject to compliance with a borrowing base. The Revolving Credit Facility has an accordion feature, subject to the satisfaction of various conditions, which could bring total commitments under the Revolving Credit Facility to up to $2,275 million. The Revolving Credit Facility provides for the issuance of letters of credit on behalf of the Company in an aggregate face amount not to exceed $100 million. Proceeds from the borrowings under the Revolving Credit Facility may be used for general corporate purposes of the Company and its subsidiaries in the ordinary course of business. Availability of the

 

F-105


Table of Contents

revolver under the Revolving Credit Facility will terminate on June 15, 2024 and all amounts outstanding under the Revolving Credit Facility must be repaid by June 15, 2025 pursuant to an amortization schedule.

Loans under the Revolving Credit Facility bear interest at a per annum rate equal to, (x) for loans for which the Company elects the base rate option, the “alternate base rate” (which is the greatest of (a) the prime rate as publicly announced by Citi, (b) the sum of (i) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System plus (ii) 0.5%, and (c) one month LIBOR plus 1% per annum) plus (A) if the gross borrowing base is equal to or greater than 1.6 times the combined revolving debt amount, 0.75%, or (B) if the gross borrowing base is less than 1.6 times the combined revolving debt amount, 0.875%, and (y) for loans for which the Company elects the Eurocurrency option, the applicable LIBOR Rate for the related Interest Period for such Borrowing plus (A) if the gross borrowing base is equal to or greater than 1.6 times the combined revolving debt amount, 1.75%, or (B) if the gross borrowing base is less than 1.6 times the combined revolving debt amount, 1.875%. The Company will pay an unused fee of 0.375% per annum on the daily unused amount of the revolver commitments. The Company will pay letter of credit participation fees and a fronting fee on the average daily amount of any lender’s exposure with respect to any letters of credit issued under the Revolving Credit Facility.

The Company’s obligations to the lenders under the Revolving Credit Facility are secured by a first priority security interest in substantially all of the Company’s assets.

In connection with the Revolving Credit Facility, the Company has made certain customary representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar facilities. In addition, the Company must comply with the following financial covenants: (a) the Company must maintain a minimum shareholders’ equity, measured as of each fiscal quarter end; and (b) the Company must maintain at all times a 150% asset coverage ratio.

The Revolving Credit Facility contains customary events of default for similar financing transactions. Upon the occurrence and during the continuation of an event of default, Citi may terminate the commitments and declare the outstanding advances and all other obligations under the Revolving Credit Facility immediately due and payable.

As of June 30, 2021, the Company was in compliance with all covenants and other requirements of the Revolving Credit Facility.

2023 Notes

On July 15, 2020, the Company issued $400 million aggregate principal amount of 3.650% notes due 2023 (the “2023 Notes”) pursuant to an indenture (the “Base Indenture”) and a supplemental indenture, each dated as of July 15, 2020 (and together with the Base Indenture, the “2023 Notes Indenture”), between the Company and U.S. Bank National Association (the “Trustee”).

The 2023 Notes will mature on July 14, 2023 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the 2023 Notes Indenture. The 2023 Notes bear interest at a rate of 3.650% per year payable semi-annually on January 14 and July 14 of each year, commencing on January 14, 2021. The 2023 Notes are general unsecured obligations of the Company that rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the 2023 Notes, rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank effectively junior to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries, financing vehicles or similar facilities.

 

F-106


Table of Contents

The 2023 Notes Indenture contains certain covenants, including covenants requiring the Company to comply with the asset coverage requirements of Section 18(a)(1)(A) as modified by Section 61(a)(1) and (2) of the 1940 Act, whether or not it is subject to those requirements, and to provide financial information to the holders of the 2023 Notes and the Trustee if the Company is no longer subject to the reporting requirements under the Exchange Act. These covenants are subject to important limitations and exceptions that are described in the 2023 Notes Indenture.

In addition, on the occurrence of a “change of control repurchase event,” as defined in the 2023 Notes Indenture, the Company will generally be required to make an offer to purchase the outstanding 2023 Notes at a price equal to 100% of the principal amount of such 2023 Notes plus accrued and unpaid interest to the repurchase date.

As of June 30, 2021, the Company was in compliance with all covenants and other requirements of the 2023 Notes.

2026 Notes

On October 23, 2020 and December 1, 2020, the Company issued $500 million aggregate principal amount and $300 million aggregate principal amount, respectively, of 3.625% notes due 2026 (the “2026 Notes”) pursuant to a supplemental indenture, dated as of October 23, 2020 (and together with the Base Indenture, the “2026 Notes Indenture”), to the Base Indenture between the Company and the Trustee.

The 2026 Notes will mature on January 15, 2026 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the 2026 Notes Indenture. The 2026 Notes bear interest at a rate of 3.625% per year payable semi-annually on January 15 and July 15 of each year, commencing on July 15, 2021. The 2026 Notes are general unsecured obligations of the Company that rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the 2026 Notes, rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank effectively junior to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company secures) to the extent of the value of the assets securing such indebtedness, and rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries, financing vehicles or similar facilities.

The 2026 Notes Indenture contains certain covenants, including covenants requiring the Company to comply with the asset coverage requirements of Section 18(a)(1)(A) as modified by Section 61(a)(1) and (2) of the 1940 Act, whether or not it is subject to those requirements, and to provide financial information to the holders of the Notes and the Trustee if the Company is no longer subject to the reporting requirements under the Exchange Act. These covenants are subject to important limitations and exceptions that are described in the 2026 Notes Indenture.

In addition, on the occurrence of a “change of control repurchase event,” as defined in the 2026 Notes Indenture, the Company will generally be required to make an offer to purchase the outstanding Notes at a price equal to 100% of the principal amount of such Notes plus accrued and unpaid interest to the repurchase date.

As of June 30, 2021, the Company was in compliance with all covenants and other requirements of the 2026 Notes.

New 2026 Notes

On March 16, 2021 and April 27, 2021, the Company issued $400 million aggregate principal amount and $300 million aggregate principal amount, respectively, of 2.750% notes due 2026 (the “New 2026 Notes”) pursuant to a supplemental indenture, dated as of July 15, 2020 (and together with the Base Indenture, the “New 2026 Notes Indenture”), to the Base Indenture between the Company and the Trustee.

 

F-107


Table of Contents

The New 2026 Notes will mature on September 16, 2026 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the Indenture. The New 2026 Notes bear interest at a rate of 2.750% per year payable semi-annually on March 16 and September 16 of each year, commencing on September 16, 2021. The New 2026 Notes are general unsecured obligations of the Company that rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the New 2026 Notes, rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank effectively junior to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries, financing vehicles or similar facilities.

The Indenture contains certain covenants, including covenants requiring the Company to comply with the asset coverage requirements of Section 18(a)(1)(A) as modified by Section 61(a)(1) and (2) of the 1940 Act, whether or not it is subject to those requirements, and to provide financial information to the holders of the New 2026 Notes and the New 2026 Notes Trustee if the Company is no longer subject to the reporting requirements under the Exchange Act. These covenants are subject to important limitations and exceptions that are described in the Indenture.

In addition, on the occurrence of a “change of control repurchase event,” as defined in the Indenture, the Company will generally be required to make an offer to purchase the outstanding New 2026 Notes at a price equal to 100% of the principal amount of such New 2026 Notes plus accrued and unpaid interest to the repurchase date.

As of June 30, 2021, the Company was in compliance with all covenants and other requirements of the New 2026 Notes.

The Company’s outstanding debt obligations were as follows:

 

     June 30, 2021  
     Aggregate
Principal
Committed
     Outstanding
Principal
     Carrying
Value
     Unused
Portion (1)
     Amount
Available (2)
 

Jackson Hole Funding Facility(3)

   $ 400,000    $ 401,286    $ 401,286    $ —        $ —    

Breckenridge Funding Facility

     825,000      538,280      538,280      286,720      286,720

Big Sky Funding Facility

     400,000      354,506      354,506      45,494      45,494

Revolving Credit Facility(4)

     1,275,000      588,373      588,373      686,627      686,627

2023 Notes(5)

     400,000      400,000      395,612      —          —    

2026 Notes(5)

     800,000      800,000      791,854      —          —    

New 2026 Notes(5)

     700,000      700,000      690,783      —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 4,800,000    $ 3,782,445    $ 3,760,694    $ 1,018,841    $ 1,018,841
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     December 31, 2020  
     Aggregate
Principal
Committed
     Outstanding
Principal
     Carrying
Value
     Unused
Portion (1)
     Amount
Available (2)
 

Jackson Hole Funding Facility (3)

   $ 400,000    $ 362,316    $ 362,316    $ 37,684    $ 37,684

Breckenridge Funding Facility

     825,000      569,000      569,000      256,000      256,000

Big Sky Funding Facility

     400,000      200,346      200,346      199,654      117,599

Revolving Credit Facility (4)

     745,000      182,901      182,901      562,099      562,099

2023 Notes(5)

     400,000      400,000      394,549      —          —    

2026 Notes(5)

     800,000      800,000      791,281      —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 3,570,000    $ 2,514,563    $ 2,500,393    $ 1,055,437    $ 973,382
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

F-108


Table of Contents

 

(1)

The unused portion is the amount upon which commitment fees, if any, are based.

(2)

The amount available reflects any limitations related to each respective credit facility’s borrowing base.

(3)

Under the Jackson Hole Funding Facility, the Company may borrow in U.S. dollars or certain other permitted currencies. As of June 30, 2021 and December 31, 2020, the Company had borrowings denominated in Euros (EUR) of 23.4 million and 23.5 million, respectively. The Jackson Hole Funding Facility carrying value was in excess of aggregate outstanding principal at June 30, 2021 due to unrealized losses on foreign denominated debt balances.

(4)

Under the Revolving Credit Facility, the Company may borrow in U.S. dollars or certain other permitted currencies. As of June 30, 2021, the Company had borrowings denominated in Canadian Dollars (CAD), Euros (EUR) and British Pounds (GBP) of 237.5 million, 8.0 million and 24.7 million, respectively. As of December 31, 2020, the Company had borrowings denominated in Canadian Dollars (CAD) of 138.1 million.

(5)

The carrying value of the Company’s 2023 Notes, 2026 Notes, and New 2026 Notes is presented net of unamortized debt issuance costs of $4.4 million, $8.1 million, and $9.2 million, respectively, as of June 30, 2021. The carrying value of the Company’s 2023 Notes and 2026 Notes is presented net of unamortized debt issuance costs of $5.5 million and $8.7 million, respectively, as of December 31, 2020.

As of June 30, 2021 and December 31, 2020, $35.1 million and $14.1 million, respectively, of interest expense and $0.4 million and $0.6 million, respectively, of unused commitment fees were included in interest payable. For the three and six months ended June 30, 2021, the weighted average interest rate on all borrowings outstanding was 3.06% and 3.06% (including unused fees and accretion of net discounts on unsecured debt), respectively, and the average principal debt outstanding was $3,451.2 million and $3,068.1 million, respectively. For the three and six months ended June 30, 2020, the weighted average interest rate on all borrowings outstanding was 3.36% and 3.59% (including unused fees and accretion of net discounts on unsecured debt), respectively, and the average principal debt outstanding was $1,644.3 million and $1,634.1 million, respectively.

The components of interest expense were as follows:

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2021      2020      2021      2020  

Borrowing interest expense

   $ 24,627    $ 13,073    $ 43,390    $ 28,318

Facility unused fees

     583      723      1,394      1,005

Amortization of financing costs and debt issuance costs

     722      645      1,399      1,189

Accretion of original issue discount

     1,235      —          2,130      —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Interest Expense

   $ 27,167    $ 14,441    $ 48,313    $ 30,512
  

 

 

    

 

 

    

 

 

    

 

 

 

Cash paid for interest expense

   $ 9,322    $ 15,225    $ 24,512    $ 30,948

Note 7. Commitments and Contingencies

Portfolio Company Commitments

The Company’s investment portfolio may contain debt investments which are in the form of lines of credit or delayed draw commitments, which require us to provide funding when requested by portfolio companies in accordance with underlying loan agreements. As of June 30, 2021 and December 31, 2020, the Company had unfunded delayed draw term loans and revolvers in the aggregate principal amount of $882.2 million and $432.3 million, respectively.

Additionally, from time to time, the Adviser and its affiliates may commit to an investment on behalf of the funds it manages. Certain terms of these investments are not finalized at the time of the commitment and each

 

F-109


Table of Contents

respective fund’s allocation may change prior to the date of funding. In this regard, as of June 30, 2021 and December 31, 2020, the Company estimates that $1,244.1 million and $0.0 million, respectively, of investments that were committed but not yet funded.

Other Commitments and Contingencies

From time to time, the Company may become a party to certain legal proceedings incidental to the normal course of its business. At June 30, 2021 and December 31, 2020, management is not aware of any pending or threatened material litigation.

Note 8. Net Assets

Subscriptions and Drawdowns

In connection with its formation, the Company has the authority to issue an unlimited number of shares at $0.001 per share par value.

Since commencement of operations on November 20, 2018, the Company entered into additional subscription agreements (the “Subscription Agreements”) with investors providing for the private placement of the Company’s shares. Under the terms of the Subscription Agreements, investors are required to fund drawdowns to purchase the Company’s shares up to the amount of their respective Capital Commitment on an as-needed basis each time the Company delivers a drawdown notice to its investors. As of June 30, 2021 and December 31, 2020, the Company had received Capital Commitments totaling $3,926.3 million ($356.3 million remaining undrawn as of June 30, 2021), of which $80.0 million ($0.0 million remaining undrawn as of June 30, 2021) were from affiliates of the Adviser.

The following table summarizes the total shares issued and proceeds received related to the Company’s capital drawdowns delivered pursuant to the Subscription Agreements for the six months ended June 30, 2021 (dollars in millions except share amounts):

 

Common Share Issuance Date

   Number of
Common
Shares
Issued
     Aggregate
Offering
Proceeds
 

June 8, 2021 (1)

     13,869,637    $ 357.0
  

 

 

    

 

 

 

Total

     13,869,637    $ 357.0
  

 

 

    

 

 

 

 

(1)

On May 24, 2021, the Company issued a capital call and delivered capital drawdown notices totaling $357.0 million, of which $1.8 million was received subsequent to June 30, 2021 recorded as a subscription receivable on the Consolidated Statements of Assets and Liabilities.

The following table summarizes the total shares issued and proceeds received related to the Company’s capital drawdowns delivered pursuant to the Subscription Agreements for the six months ended June 30, 2020 (dollars in millions except share amounts):

 

Common Share Issuance Date

   Number of
Common
Shares
Issued
     Aggregate
Offering
Proceeds
 

January 30, 2020

     16,864,983    $ 440.9

April 8, 2020

     14,864,518      324.0
  

 

 

    

 

 

 

Total

     31,729,501    $ 764.9
  

 

 

    

 

 

 

On June 30, 2020, the Company issued a capital call and delivered capital drawdown notices totaling $125.6 million, which was due on July 15, 2020. Subscribed but unissued shares are presented in equity with a

 

F-110


Table of Contents

deduction of subscriptions receivable until cash is received for a subscription. No cash was received related to this capital call as of June 30, 2020.

Distributions

The following table summarizes the Company’s distributions declared and payable for the six months ended June 30, 2021 (dollars in thousands except per share amounts):

 

Date Declared

  

Record Date

  

Payment Date

   Per Share
Amount
     Total
Amount
 

February 24, 2021

   March 31, 2021    May 14, 2021    $ 0.5000    $ 65,052

June 7, 2021

   June 7, 2021    August 13, 2021      0.3736      48,734

June 7, 2021

   June 30, 2021    August 13, 2021      0.1264      18,241
        

 

 

    

 

 

 

Total distributions

         $ 1.0000    $ 132,027
        

 

 

    

 

 

 

The following table summarizes the Company’s distributions declared and payable for the six months ended June 30, 2020 (dollars in thousands except per share amounts):

 

Date Declared

  

Record Date

  

Payment Date

   Per Share
Amount
     Total
Amount
 

January 29, 2020

   January 29, 2020    May 15, 2020    $ 0.1593    $ 10,241

February 26, 2020

   March 31, 2020    May 15, 2020      0.3407      27,688

April 7, 2020

   April 7, 2020    August 14, 2020      0.0385      3,129

June 29, 2020

   June 30, 2020    August 14, 2020      0.4615      44,454
        

 

 

    

 

 

 

Total distributions

         $ 1.0000    $ 85,512
        

 

 

    

 

 

 

Dividend Reinvestment

The Company has adopted a dividend reinvestment plan (“DRIP”), pursuant to which it reinvests all cash dividends declared by the Board on behalf of its shareholders who do not elect to receive their dividends in cash. As a result, if the Board and the Company declares, a cash dividend or other distribution, then the Company’s shareholders who have not opted out of its dividend reinvestment plan will have their cash distributions automatically reinvested in additional shares as described below, rather than receiving the cash dividend or other distribution. Distributions on fractional shares will be credited to each participating shareholder’s account to three decimal places. A participating shareholder will receive an amount of shares equal to the amount of the distribution on that participant’s shares divided by the most recent quarter-end NAV per share that is available on the date such distribution was paid (unless the Board determines to use the NAV per share as of another time). Shareholders who receive distributions in the form of shares will generally be subject to the same U.S. federal, state and local tax consequences as if they received cash distributions; however, since their cash distributions will be reinvested, those shareholders will not receive cash with which to pay any applicable taxes. The Company intends to use newly issued shares to implement the plan. Shares issued under the dividend reinvestment plan will not reduce outstanding Capital Commitments.

The following table summarizes the amounts received and shares issued to shareholders who have not opted out of the Company’s DRIP during the six months ended June 30, 2021 (dollars in thousands except share amounts):

 

Payment Date

   DRIP Shares
Value
     DRIP Shares
Issued
 

January 29, 2021

   $ 11,179      443,639

May 14, 2021

     8,674      339,398
  

 

 

    

 

 

 

Total distributions

   $ 19,853      783,037
  

 

 

    

 

 

 

 

F-111


Table of Contents

The following table summarizes the amounts received and shares issued to shareholders who have not opted out of the Company’s DRIP during the six months ended June 30, 2020 (dollars in thousands except share amounts):

 

Payment Date

   DRIP Shares
Value
     DRIP Shares
Issued
 

January 30, 2020

   $ 2,882      112,302

May 15, 2020

     4,244      194,694
  

 

 

    

 

 

 

Total distributions

   $ 7,126      306,996
  

 

 

    

 

 

 

Note 9. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:

 

     Three Months Ended June 30,      Six Months Ended June 30,  
     2021      2020      2021      2020  

Net increase (decrease) in net assets resulting from operations

   $ 116,695    $ 228,977    $ 228,462    $ (78,483

Weighted average shares outstanding (basic and diluted)

     133,789,760      95,088,676      131,889,042      85,472,680

Earnings (loss) per common share (basic and diluted)

   $ 0.87    $ 2.41    $ 1.73    $ (0.92

Note 10. Financial Highlights

The following are the financial highlights for the six months ended June 30, 2021 and 2020:

 

     Six Months Ended June 30,  
     2021     2020  

Per Share Data:

    

Net asset value, beginning of period

   $ 25.20   $ 26.02

Net investment income (1)

     1.12     1.16

Net unrealized and realized gain (loss) (2)

     0.60     (2.50
  

 

 

   

 

 

 

Net increase (decrease) in net assets resulting from operations

     1.72     (1.34

Distributions declared (3)

     (1.00     (1.00
  

 

 

   

 

 

 

Total increase (decrease) in net assets

     0.72     (2.34
  

 

 

   

 

 

 

Net asset value, end of period

   $ 25.92   $ 23.68
  

 

 

   

 

 

 

Shares outstanding, end of period

     144,314,260       96,326,239  

Total return based on NAV (4)

     6.89     (4.95 )% 

Ratios:

    

Ratio of net expenses to average net assets (5)

     6.97     6.23

Ratio of net investment income to average net assets (5)

     8.67     9.91

Portfolio turnover rate

     14.52     11.51

Supplemental Data:

    

Net assets, end of period

   $ 3,741,102     $ 2,281,145  

Total capital commitments, end of period

   $ 3,926,295     $ 3,766,197  

Ratios of total contributed capital to total committed capital, end of period

     90.93     63.67

Asset coverage ratio

     198.9     233.5

 

F-112


Table of Contents

 

(1)

The per share data was derived by using the weighted average shares outstanding during the period.

(2)

For the six months ended June 30, 2021 and 2020, the amount shown does not correspond with the aggregate amount for the period as it includes a $(0.02) and $(0.42) impact, respectively, from the effect of the timing of capital transactions.

(3)

The per share data for distributions was derived by using the actual shares outstanding at the date of the relevant transactions (refer to Note 8).

(4)

Total return (not annualized) is calculated as the change in NAV per share during the period, plus distributions per share (assuming dividends and distributions are reinvested in accordance with the Company’s dividend reinvestment plan) divided by the beginning NAV per share. Total return does not include sales load.

(5)

Amounts are annualized except for expense support amounts relating to organizational costs. For the six months ended June 30, 2021 and 2020, the ratio of total operating expenses to average net assets was 6.97% and 6.15%, respectively, on an annualized basis, excluding the effect of expense support/(recoupment) by the Adviser which represented 0.00% and (0.08%), respectively, of average net assets.

Note 11. Subsequent Events

The Company’s management evaluated subsequent events through the date of issuance of the consolidated financial statements. There have been no subsequent events that occurred during such period that would require disclosure in, or would be required to be recognized in, the consolidated financial statements as of June 30, 2021, except as discussed below.

Pursuant to a Registration Statement on Form N-14, on July 15, 2021, the Company closed an exchange offer in which holders of the 2023 Notes, 2026 Notes and New 2026 Notes (collectively the “Notes”), which were all issued in a private placement, were exchanged for new registered notes with substantially identical terms.

On July 23, 2021, the Company issued $650 million aggregate principal amount of 2.125% notes due in 2027 (the “2027 Notes”) pursuant to a supplemental indenture, dated as of July 23, 2021 (and together with the Base Indenture, the “2027 Notes Indenture”), to the Base Indenture between the Company and the Trustee. The 2027 Notes will mature on February 15, 2027 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the 2027 Notes Indenture. The 2027 Notes bear interest at a rate of 2.125% per year payable semi-annually on February 15 and August 15 of each year, commencing on February 15, 2022. The 2027 Notes are general unsecured obligations of the Company that rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the 2027 Notes, rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank effectively junior to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries, financing vehicles or similar facilities.

On August 4, 2021, the Board appointed Kate Rubenstein as Chief Operating Officer of the Company, effective immediately.

 

F-113


Table of Contents

 

 

 

BLACKSTONE SECURED LENDING FUND

 

7,650,000 Common Shares

 

 

 

 

PRELIMINARY PROSPECTUS

 

 

 

 

Joint Book Running Managers

 

BofA Securities     Citigroup     Goldman Sachs & Co. LLC       Morgan Stanley       Wells Fargo Securities  
Barclays     J.P. Morgan     RBC Capital Markets     Keefe, Bruyette & Woods       Raymond James       UBS Investment Bank  
        A Stifel Company      

Co-Managers

 

Blackstone Capital Markets

   BNP PARIBAS    Deutsche Bank Securities    Compass Point

Janney Montgomery Scott

   MUFG    SMBC Nikko    SOCIETE GENERALE

Academy Securities

   Blaylock Van, LLC    R. Seelaus & Co., LLC    Ramirez & Co. Inc.

 

 

 

 

, 2021

 

 

 

 


Table of Contents

Blackstone Secured Lending Fund

PART C

Other Information

 

Item 25.

Financial Statements and Exhibits

(1) Financial Statements

The following financial statements of Blackstone Secured Lending Fund are provided in Part A of this Registration Statement:

 

AUDITED FINANCIAL STATEMENTS   

Report of Independent Registered Public Accounting Firm

     F-2  

Consolidated Statements of Assets and Liabilities as of December  31, 2020 and December 31, 2019

     F-4  

Consolidated Statements of Operations for the years ended December  31, 2020, 2019 and 2018

     F-5  

Consolidated Statements of Changes in Net Assets for the years ended December 31, 2020, 2019 and 2018

     F-6  

Consolidated Statements of Cash Flows for the years ended December  31, 2020, 2019 and 2018

     F-7  

Consolidated Schedules of Investments as of December  31, 2020 and December 31, 2019

     F-9  

Notes to Consolidated Financial Statements

     F-25  
INTERIM FINANCIAL STATEMENTS   

Consolidated Statements of Assets and Liabilities as of June  30, 2021 (Unaudited) and December 31, 2020

     F-57  

Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 (Unaudited)

     F-58  

Consolidated Statements of Changes in Net Assets for the three and six months ended June 30, 2021 and 2020 (Unaudited)

     F-59  

Consolidated Statements of Cash Flows for the six months ended June  30, 2021 and 2020 (Unaudited)

     F-61  

Consolidated Schedules of Investments as of June  30, 2021 (Unaudited) and December 31, 2020

     F-63  

Notes to Consolidated Financial Statements (Unaudited)

     F-86  

(2) Exhibits

 

Exhibit
Number

 

Description of Exhibits

(a)(1)   Fourth Amended and Restated Agreement and Declaration of Trust.*
(a)(2)   Certificate of Amendment to Certificate of Trust, effective December  10, 2020 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on December 10, 2020).
(b)   Amended and Restated Bylaws, dated October 18, 2021.*
(c)   Not applicable.
(d)(1)   Form of Subscription Agreement (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form 10 filed on October 1, 2018).


Table of Contents

Exhibit
Number

 

Description of Exhibits

(d)(2)   Indenture, dated as of July  15, 2020, by and between the Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on July  17, 2020).
(d)(3)   First Supplemental Indenture, dated as of July 15, 2020, relating to the 3.650% Notes due 2023, by and between the Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on July 17, 2020).
(d)(4)   Second Supplemental Indenture, dated as of October 23, 2020, relating to the 3.625% Notes due 2026, by and between the Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on October 27, 2020).
(d)(5)   Third Supplemental Indenture, dated as of March 16, 2021, relating to the 2.750% Notes due 2026, by and between the Fund and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on March 18, 2021).
(d)(6)   Fourth Supplemental Indenture, dated as of July 23, 2021, relating to the 2.125% Notes due 2027, by and between the Fund and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on July 27, 2021).
(d)(7)   Form of 3.650% Notes Due 2023 (included as part of Exhibit 4.2) (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on July 17, 2020).
(d)(8)   Form of 3.625% Notes due 2026 (included as part of Exhibit 4.2) (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on October 27, 2020).
(d)(9)   Form of 2.750% Notes due 2026 (incorporated by reference to Exhibit 4.2) (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on March 18, 2021).
(d)(10)   Form of 2.750% Notes due 2026 (incorporated by reference to Exhibit 4.2) (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on April 29, 2021).
(d)(11)   Form of 2.125% Notes due 2027 (incorporated by reference to Exhibit 4.2) (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on July 27, 2021).
(e)   Amended and Restated Dividend Reinvestment Plan (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 18, 2018).
(f)   Not applicable.
(g)   Amended and Restated Investment Advisory Agreement between the Company and the Adviser, dated October 18, 2021.*
(h)   Form of Underwriting Agreement.*
(i)   Not applicable.
(j)(1)   Custody Agreement between the Adviser and UMB Bank, n.a., dated September  14, 2018 (incorporated by reference to Exhibit 10.4 to the Company’s Registration Statement on Form 10 filed on October 1, 2018).
(j)(2)   Custodian Agreement between the Company and State Street Bank and Trust Company, dated October  1, 2018 (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-K filed on March 18, 2019).
(k)(1)   Administration Agreement between the Company and the Administrator, dated October  1, 2018 (incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form 10 filed on October 1, 2018).


Table of Contents

Exhibit
Number

 

Description of Exhibits

(k)(2)   Revolving Credit Agreement between the Company, Bank of America, N.A. and the other lender parties thereto, dated November  6, 2018 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 13, 2018).
(k)(3)   First Amendment to Revolving Credit Agreement between the Company, Bank of America, N.A. and the other lender parties thereto, dated September 16, 2019 (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on November 14, 2019).
(k)(4)   Loan and Security Agreement between BGSL Jackson Hole Funding LLC, the Company, the lenders party thereto, Citibank, N.A., Virtus Group, LP and JPMorgan Chase Bank, National Association, dated November 16, 2018 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 21, 2018).
(k)(5)   First Amendment to Loan and Security Agreement between BGSL Jackson Hole Funding LLC, the Company, the lenders party thereto, Citibank, N.A., Virtus Group, LP and JPMorgan Chase Bank, National Association, dated February 6, 2019 (incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K filed on March 18, 2019).
(k)(6)   Commitment Increase Request and Second Amendment to Loan and Security Agreement between BGSL Jackson Hole Funding LLC, the Company, the lenders party thereto, Citibank, N.A., Virtus Group, LP and JPMorgan Chase Bank, National Association, dated September 20, 2019 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on November 14, 2019).
(k)(7)   Third Amendment to Loan and Security Agreement between BGSL Jackson Hole Funding LLC, the Company, the lenders party thereto, Citibank, N.A., Virtus Group, LP and JPMorgan Chase Bank, National Association, dated July 28, 2020 (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on July 29, 2020).
(k)(8)   Expense Support and Conditional Reimbursement Agreement, dated December  12, 2018 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 18, 2018).
(k)(9)   Agency Agreement between the Company and DST Systems, Inc., dated September  10, 2018 (incorporated by reference to Exhibit 10.5 to the Company’s Registration Statement on Form 10 filed on October 1, 2018).
(k)(10)   Revolving Credit Facility between BGSL Breckenridge Funding LLC , the lenders party thereto, BNP Paribas, the Company and Wells Fargo Bank, National Association, dated December 21, 2018 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 28, 2018).
(k)(11)   First Amendment to the Revolving Credit Agreement between BGSL Breckenridge Funding LLC, the lenders party thereto, BNP Paribas, the Company and Wells Fargo Bank, National Association, dated June 11, 2019 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on August 13, 2019).
(k)(12)   Second Amendment to the Revolving Credit Agreement between BGSL Breckenridge Funding LLC, the lenders party thereto, BNP Paribas, the Company and Wells Fargo Bank, National Association, dated August 2, 2019 (incorporated by reference to Exhibit 10.10.2 to the Company’s Quarterly Report on Form 10-K filed on February 28, 2020).
(k)(13)   Third Amendment to the Revolving Credit Agreement between BGSL Breckenridge Funding LLC, the lenders party thereto, BNP Paribas, the Company and Wells Fargo Bank, National Association, dated September 27, 2019 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on November 14, 2019).


Table of Contents

Exhibit
Number

 

Description of Exhibits

(k)(14)   Fourth Amendment to the Revolving Credit Agreement between BGSL Breckenridge Funding LLC, the lenders party thereto, BNP Paribas, the Company and Wells Fargo Bank, National Association, dated April 13, 2020 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on May 7, 2020).
(k)(15)   Credit Agreement among BGSL Big Sky Funding LLC, the lender parties hereto, Bank of America, N.A., BOFA Securities, Inc., the Company and Wells Fargo Bank, National Association, dated December 10, 2019 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 16, 2019).
(k)(16)   First Amendment to the Credit Agreement among BGSL Big Sky Funding LLC, the lender parties hereto, Bank of America, N.A., BOFA Securities, Inc., the Company and Wells Fargo Bank, National Association, dated December 30, 2020 (incorporated by reference to Exhibit 10.11.1 to the Company’s Annual Report on Form 10-K filed March 4, 2021).
(k)(17)   Senior Secured Credit Agreement, dated as of June 15, 2020 (incorporated by reference to Exhibit  10.1 to the Company’s Current Report on Form 8-K filed on June 19, 2020).
(k)(18)   Amendment No. 1, dated as of June 29, 2020, to the Senior Secured Credit Agreement, dated as of June  15, 2020, by and among the Company, each of the lenders from time to time party thereto and Citibank, N.A., as administrative agent (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed July 29, 2020).
(k)(19)   Incremental Assumption Agreement, dated as of November  3, 2020, by and among the Company, each of the lenders from time to time party thereto and Citibank, N.A., as administrative agent (incorporated by reference to Exhibit 10.12.2 to the Company’s Annual Report on Form  10-K filed March 4, 2021).
(k)(20)   Registration Rights Agreement between the Company and Universities Superannuation Scheme Limited, dated November  20, 2018 (incorporated by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K filed on March 18, 2019).
(k)(21)   Registration Rights Agreement, dated as of June  18, 2020, by and among the Company and QIA FIG Holding LLC (incorporated by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q filed on July 30, 2020).
(k)(22)   Registration Rights Agreement, dated as of July 23, 2021, by and among the Company and Citigroup Global Markets Inc., Goldman Sachs & Co. LLC and Wells Fargo Securities, LLC, as the representatives of the Initial Purchasers (incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on July 27, 2021).
(k)(23)   Waiver Letter Agreement between the Company and the Adviser, dated October 18, 2021.*
(l)   Opinion and Consent of Richards, Layton & Finger, PA.*
(n)(1)   Consent of Deloitte & Touche LLP.*
(n)(2)   Report of Deloitte  & Touche LLP, Independent Registered Accounting Firm, with respect to the “Senior Securities” table (incorporated by reference to Exhibit (n)(2) to the Company’s Registration Statement on Form N-2 filed on October 1, 2021).
(o)   Not applicable.
(p)   Not applicable.
(q)   Not applicable.


Table of Contents

Exhibit
Number

 

Description of Exhibits

(r)   Code of Ethics (incorporated by reference to Exhibit 14 to the Company’s Annual Report on Form 10-K filed on March 18, 2019).
(s)(1)   Powers of Attorney for Daniel H. Smith, Jr., Robert Bass, Tracy Collins, Vicki L. Fuller and James  F. Clark (incorporated by reference to Exhibit (s) to the Company’s Registration Statement on Form N-2 filed on October 1, 2021).
(s)(2)   Power of Attorney for Vikrant Sawhney.*

*Filed herewith.

 

Item 26.

Marketing Arrangements

The information contained under the heading “Underwriting” in this Registration Statement is incorporated herein by reference.

 

Item 27.

Other Expenses of Issuance and Distribution

 

     Amount
in thousands
 

U.S. Securities and Exchange Commission registration fee

   $ 21,326  

New York Stock Exchange listing fees

   $ 20,000  

Financial Industry Regulatory Authority fees

   $ 35,000  

Printing expenses(1)

   $ 250,000  

Accounting fees and expenses(1)

   $ 150,000  

Legal fees and expenses(1)

   $ 1,500,000  

Miscellaneous(1)

   $ 523,674  
  

 

 

 

Total(1)

   $ 2,500,000  
  

 

 

 

 

(1)

These amounts are estimates.

All of the expenses set forth above shall be borne by the Registrant.

 

Item 28.

Persons Controlled by or Under Common Control

The information contained under the headings “The Company,” “Management” and “Control Persons and Principal Shareholders” in this Registration Statement is incorporated herein by reference.

The following table sets forth the Company’s consolidated subsidiaries.

 

BGSL Jackson Hole Funding (Delaware)

     100

BGSL Breckenridge Funding LLC (Delaware)

     100

BGSL Big Sky Funding LLC (Delaware)

     100

BGSL Investments LLC (Delaware)

     100

 

Item 29.

Number of Holders of Securities

The following table sets forth the approximate number of record holders of our common shares as of October 12, 2021.

 

Title of Class

   Number of
Record Holders
 

Common Shares of Beneficial Interest

     11,661  


Table of Contents
Item 30.

Indemnification

The Registrant’s Declaration of Trust provides that, to the fullest extent permitted by applicable law, none of the Registrant’s officers, trustees or employees (each, an “Indemnified Person”) will be liable to the Registrant or to any shareholder for any act or omission performed or omitted by any such Indemnified Person (including any acts or omissions of or by another Indemnified Person), in the absence of willful misfeasance, gross negligence, bad faith, reckless disregard of the duties involved in the conduct of such Indemnified Person’s respective position or criminal wrongdoing on its part (“Indemnified Person Disabling Conduct”).

The Registrant will indemnify each Indemnified Person for any loss or damage incurred by it in connection with any matter arising out of, or in connection with, the Registrant, including the operations of the Registrant and the offering of shares, except for losses incurred by an Indemnified Person arising solely from the Indemnified Person’s own Indemnified Person Disabling Conduct.

Under the indemnification provision of the Declaration of Trust, expenses (including attorneys’ fees) incurred by each Indemnified Person in defending any action, suit or proceeding for which they may be entitled to indemnification shall be paid in advance of the final disposition of the action, suit or proceeding. However, any such indemnification or payment or reimbursement of expenses will be subject to the applicable requirements of the 1940 Act.

So long as the Registrant is regulated under the 1940 Act, the above indemnification and limitation of liability is limited by the 1940 Act or by any valid rule, regulation or order of the SEC thereunder. The 1940 Act provides, among other things, that a company may not indemnify any trustee or officer against liability to it or its security holders to which he or she might otherwise be subject by reason of his or her willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office. In addition, the Fund has obtained liability insurance for its officers and trustees.

The Adviser and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with it (the “Indemnified Parties”) shall not be liable for any error of judgment or mistake of law or for any act or omission or any loss suffered by the Registrant in connection with the matters to which the Investment Agreement relates, provided that the Adviser shall not be protected against any liability to the Fund or its shareholders to which the Adviser would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or by reason of the reckless disregard of its duties and obligations (“disabling conduct”). Absent disabling conduct, the Registrant will indemnify the Indemnified Parties against, and hold them harmless from, any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of the Adviser’s services under the Investment Advisory Agreement or otherwise as adviser for the Registrant. The Indemnified Parties shall not be liable under the Investment Advisory Agreement or otherwise for any loss due to the mistake, action, inaction, negligence, dishonesty, fraud or bad faith of any broker or other agent; provided, that such broker or other agent shall have been selected, engaged or retained and monitored by the Adviser in good faith, unless such action or inaction was made by reason of disabling conduct, or in the case of a criminal action or proceeding, where the Adviser had reasonable cause to believe its conduct was unlawful.

The Registrant has agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act.

Insofar as indemnification for liability arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the


Table of Contents

question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

 

Item 31.

Business and Other Connections of Investment Advisor.

A description of any other business, profession, vocation or employment of a substantial nature in which the Adviser, and each managing director, director or executive officer of the Adviser, is or has been during the past two fiscal years, engaged in for his or her own account or in the capacity of director, officer, employee, partner or trustee, is set forth in this Registration Statement in the sections entitled “The Company,” “Management” and “Management and Other Agreements.” Additional information regarding the Adviser and its officers is set forth in its Form ADV, filed with the SEC (SEC File No. 801-113393), and is incorporated herein by reference.

 

Item 32.

Location of Accounts and Records.

All accounts, books and other documents required to be maintained by Section 31(a) of the 1940 Act, and the rules thereunder are maintained at the offices of:

 

(1)

The Registrant, 345 Park Avenue, 31st Floor, New York, NY 10154;

 

(2)

The custodian, State Street Bank and Trust Company, 100 Summer Street, Floor 5, Boston, Massachusetts 02110;

 

(3)

The transfer agent, DST Systems, Inc., 333 West 11th Street, 5th Floor, Kansas City, Missouri 64105-1594; and

 

(4)

The Adviser, 345 Park Avenue, 31st Floor, New York, NY 10154.

Item 33. Management Services

Not Applicable.

Item 34. Undertakings

 

(1)

We undertake to suspend the offering of shares until the prospectus is amended if (1) subsequent to the effective date of its registration statement, the net asset value declines more than 10% from its net asset value as of the effective date of the registration statement; or (2) the net asset value increases to an amount greater than the net proceeds as stated in the prospectus.

 

(2)

Not applicable.

 

(3)

Not applicable.

 

(4)

We undertake that:

 

  (a)

For the purpose of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by us pursuant to Rule 424(b)(1) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

 

  (b)

For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.


Table of Contents
(5)

Not applicable.

 

(6)

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the “Securities Act”), may be permitted to trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

 

(7)

Registrant undertakes to send by first class mail or other means designed to ensure equally prompt delivery, within two business days of receipt of a written or oral request, any prospectus or Statement of Additional Information.


Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed on behalf of the registrant, in New York, New York on the 18th day of October 2021.

 

BLACKSTONE SECURED LENDING FUND
By:  

/s/ Brad Marshall

  Brad Marshall
  Chief Executive Officer and Trustee

As required by the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates indicated:

 

SIGNATURE

  

TITLE

 

DATE

/s/ Brad Marshall

   Chief Executive Officer and Trustee (Principal Executive Officer)   October 18, 2021

Brad Marshall

/s/ Stephan Kuppenheimer

   Chief Financial Officer (Principal Financial Officer)   October 18, 2021

Stephan Kuppenheimer

/s/ Robert W. Busch

   Chief Accounting Officer and Treasurer (Principal Accounting Officer)   October 18, 2021

Robert W. Busch

/s/ Daniel H. Smith, Jr.*

   Trustee   October 18, 2021

Daniel H. Smith, Jr.

/s/ Vikrant Sawhney*

   Trustee   October 18, 2021

Vikrant Sawhney

/s/ Robert Bass*

   Trustee   October 18, 2021

Robert Bass

/s/ Tracy Collins*

   Trustee   October 18, 2021

Tracy Collins

/s/ Vicki L. Fuller*

   Trustee   October 18, 2021

Vicki L. Fuller

/s/ James F. Clark*

   Trustee   October 18, 2021

James F. Clark

 

*By:

 

/s/ Brad Marshall

 

Brad Marshall

 

As Agent or Attorney-in-Fact

October 18, 2021

The original powers of attorney authorizing Brad Marshall, Stephan Kuppenheimer, Robert W. Busch, Beth Chartoff, Marisa J. Beeney, Carlos Whitaker and Katherine Rubenstein to execute the Registration Statement, and any amendments thereto, for the trustees of the Registrant on whose behalf this Registration Statement is filed, are filed as exhibits to this Registration Statement.

Exhibit (a)(1)

BLACKSTONE SECURED LENDING FUND

FOURTH AMENDED AND RESTATED

AGREEMENT AND DECLARATION OF TRUST

Dated as of October 18, 2021


TABLE OF CONTENTS

 

          Page  
   ARTICLE I   

The Trust

     1  
Section 1.1    Name      1  
Section 1.2    Trust Purpose      2  
Section 1.3    Definitions      2  
   ARTICLE II   

Board of Trustees

     4  
Section 2.1   

Number and Qualification

     4  
Section 2.2   

Term and Election

     4  
Section 2.3   

Resignation and Removal

     4  
Section 2.4   

Vacancies

     5  
Section 2.5   

Meetings

     5  
Section 2.6   

Trustee Action by Written Consent

     6  
Section 2.7   

Officers

     6  
Section 2.8   

Principal Transactions

     6  
   ARTICLE III   

Powers and Duties of Trustees

     7  
Section 3.1   

General

     7  
Section 3.2   

Investments

     7  
Section 3.3   

Legal Title

     7  
Section 3.4   

Issuance and Repurchase of Shares

     7  
Section 3.5   

Borrow Money or Utilize Leverage

     7  
Section 3.6   

Delegation; Committees

     8  
Section 3.7   

Collection and Payment

     8  
Section 3.8   

By-Laws

     8  
Section 3.9   

Miscellaneous Powers

     8  
Section 3.10   

Further Powers

     9  
Section 3.11   

Sole Discretion; Good Faith; Corporate Opportunities of Adviser

     9  
   ARTICLE IV   

Fees and Expenses; Advisory, Management and Distribution Arrangements

     10  
Section 4.1   

Expenses

     10  
Section 4.2   

Advisory and Management Arrangements

     10  
Section 4.3   

Distribution Arrangements

     10  

 

 

i


Section 4.4   

Parties to Contract

     11  
   ARTICLE V   

Limitations of Liability and Indemnification

     11  
Section 5.1   

No Personal Liability of Shareholders, Trustees, etc

     11  
Section 5.2   

Mandatory Indemnification

     11  
Section 5.3   

No Bond Required of Trustees

     13  
Section 5.4   

No Duty of Investigation; No Notice in Trust Instruments, etc

     13  
Section 5.5   

Reliance on Experts, etc

     13  
   ARTICLE VI   

Shares of Beneficial Interest

     13  
Section 6.1   

Beneficial Interest

     13  
Section 6.2   

Other Securities

     14  
Section 6.3   

Rights of Shareholders

     14  
Section 6.4   

Trust Only

     14  
Section 6.5   

Issuance of Shares

     14  
Section 6.6   

Register of Shares

     15  
Section 6.7   

Transfer Agent and Registrar

     15  
Section 6.8   

Transfer of Shares

     15  
Section 6.9   

Notices

     16  
Section 6.10   

Derivative Actions

     16  
   ARTICLE VII   

Custodians

     16  
Section 7.1   

Appointment and Duties

     16  
Section 7.2   

Central Certificate System

     17  
   ARTICLE VIII      17  
Redemption         17  
Section 8.1   

Redemptions

     17  
Section 8.2   

Disclosure of Holding

     17  
Section 8.3   

Redemption by Trust

     17  
   ARTICLE IX   

Net Asset Value and Distributions

     18  
Section 9.1   

Net Asset Value

     18  

 

ii


Section 9.2   

Distributions to Shareholders

     18  
Section 9.3   

Power to Modify Foregoing Procedures

     19  
   ARTICLE X   

Shareholders

     19  
Section 10.1   

Meetings of Shareholders

     19  
Section 10.2   

Voting

     19  
Section 10.3   

Notice of Meeting and Record Date

     20  
Section 10.4   

Quorum and Required Vote

     20  
Section 10.5   

Proxies, etc

     20  
Section 10.6   

Reports

     21  
Section 10.7   

Inspection of Records

     21  
Section 10.8   

Delivery by Electronic Transmission or Otherwise

     21  
Section 10.9   

Shareholder Action by Written Consent

     21  
   ARTICLE XI   

Wind Down; Amendment; Mergers, Etc.

     21  
Section 11.1   

Wind Down

     22  
Section 11.2   

Amendment Procedure

     22  
Section 11.3   

[Intentionally omitted]

     23  
Section 11.4   

Subsidiaries

     23  
Section 11.5   

Certain Transactions

     23  
   ARTICLE XII      24  

The Delaware Trustee

     24  
Section 12.1   

Purpose of Appointment

     24  
Section 12.2   

Duties

     24  
Section 12.3   

Removal

     24  
Section 12.4   

Merger

     25  
Section 12.5   

Liability

     25  
Section 12.6   

Successors

     26  
Section 12.7   

Compensation and Reimbursement of Expenses

     26  
   ARTICLE XIII   

Miscellaneous

     27  
Section 13.1   

Filing

     27  
Section 13.2   

Governing Law

     27  
Section 13.3   

Exclusive Delaware Jurisdiction

     28  
Section 13.4   

Counterparts

     28  
Section 13.5   

Reliance by Third Parties

     28  
Section 13.6   

Provisions in Conflict with Law or Regulation

     29  

 

 

iii


BLACKSTONE SECURED LENDING FUND

FOURTH AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST

FOURTH AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST made as of the 18th day of October 2021, by the Board of Trustees hereunder and Wilmington Trust, National Association, as Delaware trustee.

WHEREAS, this Trust has been formed to carry on business as set forth more particularly hereinafter;

WHEREAS, this Trust is authorized to issue an unlimited number of its shares of beneficial interest all in accordance with the provisions hereinafter set forth;

WHEREAS, pursuant to Section 12.2(b) of that certain Third Amended and Restated Agreement and Declaration of Trust, this Declaration amends and restates in its entirety that certain Third Amended and Restated Agreement and Declaration of Trust dated as of August 13, 2021, and shall be effective upon an Exchange Listing (as defined herein);

WHEREAS, the Trustees have agreed to manage all property coming into their hands as Trustees of a Delaware statutory trust in accordance with the provisions hereinafter set forth; and

WHEREAS, the parties hereto intend that the Trust shall constitute a statutory trust under the Delaware Statutory Trust Statute and that this Declaration and the Amended and Restated By-laws shall constitute the governing instrument of such statutory trust.

NOW, THEREFORE, the Trustees hereby declare that they will hold all cash, securities, and other assets which they may from time to time acquire in any manner as Trustees hereunder IN TRUST to manage and dispose of the same upon the following terms and conditions for the benefit of the holders from time to time of shares of beneficial interest in this Trust as hereinafter set forth.

ARTICLE I

The Trust

Section 1.1    Name. This Trust shall be known as the “Blackstone Secured Lending Fund,” and the Trustees shall conduct the business of the Trust under that name or any other name or names as they may from time to time determine. Any name change shall become effective upon the execution by a majority of the then Trustees of an instrument setting forth the new name and the filing of a certificate of amendment pursuant to Section 3810(b) of the Delaware Statutory Trust Statute (as defined below). Any such instrument shall not require the approval of the Shareholders, but shall have the status of an amendment to this Declaration. The name of the Trust was changed from “Blackstone / GSO Secured Lending Fund” to “Blackstone Secured Lending Fund” by a certificate of amendment filed with the Secretary of State of the State of Delaware on December 10, 2020.


Section 1.2    Trust Purpose. The purpose of the Trust is to conduct, operate and carry on the business of a business development company within the meaning of the 1940 Act (as defined below). In furtherance of the foregoing, it shall be the purpose of the Trust to do everything necessary, suitable, convenient or proper for the conduct, promotion and attainment of any businesses and purposes which at any time may be incidental or may appear conducive or expedient for the accomplishment of the business of a business development company regulated under the 1940 Act and which may be engaged in or carried on by a trust organized under the Delaware Statutory Trust Statute, and in connection therewith the Trust shall have the power and authority to engage in the foregoing and may exercise all of the powers conferred by the laws of the State of Delaware upon a Delaware statutory trust.

Section 1.3    Definitions. As used in this Declaration, the following terms shall have the following meanings:

The “1940 Act” refers to the Investment Company Act of 1940 and the rules and regulations promulgated thereunder and exemptions granted therefrom, as amended from time to time.

The terms “Affiliated Person”, “Assignment”, “Commission”, “Interested Person” and “Principal Underwriter” shall have the meanings given them in the 1940 Act.

Adviser” shall mean Blackstone Credit BDC Advisors LLC or an affiliated successor in interest thereto. If the Adviser no longer serves as the investment adviser to the Trust, the rights of the Adviser in this Declaration will become the rights of the Trustees.

Board of Trustees” shall mean the Trustees collectively.

By-Laws” shall mean the Amended and Restated By-Laws of the Trust as amended from time to time by the Trustees.

Code” shall mean the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

Commission” shall mean the U.S. Securities and Exchange Commission.

Continuing Trustee” shall mean any member of the Board of Trustees who either (a) has been a member of the Board of Trustees for a period of at least thirty-six months (or since the date hereof, if less than thirty-six months) or (b) was nominated to serve as a member of the Board of Trustees by a majority of the Continuing Trustees then members of the Board of Trustees.

Declaration” shall mean this Fourth Amended and Restated Agreement and Declaration of Trust, as amended, supplemented or amended and restated from time to time.

Delaware General Corporation Law” means the Delaware General Corporation Law, 8 Del. C. § 100, et seq., as amended from time to time.

Delaware Statutory Trust Statute” shall mean the provisions of the Delaware Statutory Trust Act, 12 Del. C. § 3801, et seq., as such Act may be amended from time to time.

 

2


Delaware Trustee” shall mean Wilmington Trust, National Association, a national banking association (including any successor trustee appointed in accordance with Section 12.6 of this Declaration.

Exchange Listing” shall mean the quotation or listing of the Trust’s securities on a national securities exchange (including through an initial public offering) or a sale of all or substantially all of our assets to, or a merger or other liquidity transaction with, an entity in which the Trust’s Shareholders receive shares of a publicly traded company which continues to be managed by the Adviser or an affiliate thereof.

Majority Shareholder Vote” shall mean a vote of “a majority of the outstanding voting securities” (as such term is defined in the 1940 Act) of the Trust with each class and series of Shares voting together as a single class, except to the extent otherwise required by the 1940 Act or this Declaration with respect to any one or more classes or series of Shares, in which case the applicable proportion of such classes or series of Shares voting as a separate class or series, as the case may be, also will be required.

Person” shall mean and include individuals, corporations, partnerships, trusts, limited liability companies, associations, joint ventures and other entities, whether or not legal entities, and governments and agencies and political subdivisions thereof.

Securities Act” shall mean the Securities Act of 1933, as amended.

Shareholders” shall mean as of any particular time the holders of record of outstanding Shares of the Trust, at such time.

Shares” shall mean the transferable units of beneficial interest into which the beneficial interest in the Trust shall be divided from time to time and includes fractions of Shares as well as whole Shares. In addition, Shares also means any preferred shares or preferred units of beneficial interest which may be issued from time to time, as described herein. All references to Shares shall be deemed to be Shares of any or all series or classes as the context may require.

Trust” shall mean the trust governed by this Declaration and the By-laws, as amended from time to time, inclusive of each such amendment.

Trust Property” shall mean as of any particular time any and all property, real or personal, tangible or intangible, which at such time is owned or held by or for the account of the Trust or the Trustees in such capacity.

Trustees” shall mean the signatories to this Declaration (but for purposes of this Declaration shall not be deemed to include the Delaware Trustee), so long as they shall continue in office in accordance with the terms hereof, and all other persons who at the time in question have been duly elected or appointed and have qualified as trustees in accordance with the provisions hereof and are then in office.

 

3


ARTICLE II

Board of Trustees

Section 2.1    Number and Qualification. As of the date hereof, the number of Trustees shall be seven and the Trustees, as of the date hereof, shall be the signatories hereto. Thereafter, the number of Trustees shall be determined by a written instrument signed by a majority of the Trustees then in office, provided that the number of Trustees shall be no less than two or more than fifteen. No reduction in the number of Trustees shall have the effect of removing any Trustee from office prior to the expiration of his term. An individual nominated as a Trustee shall be at least 21 years of age and not older than 80 years of age at the time of nomination and not under legal disability. Trustees need not own Shares and may succeed themselves in office.

Section 2.2    Term and Election; Classification of the Board of Trustees. Except as may be provided in a resolution or resolutions of the Board of Trustees providing for any series of preferred shares with respect to any Trustees elected (or to be elected) by the holders of such series and except as otherwise required by applicable law, the Trustees shall be divided into three classes, designated as Class I, Class II and Class III, as nearly equal in number as possible. Trustees already in office shall be assigned to each class at the time such classification becomes effective, in accordance with a resolution or resolutions adopted by the Board of Trustees. Class I Trustees shall initially serve for a term expiring at the first annual meeting of shareholders following the time at which the initial classification of the Board of Trustees becomes effective, Class II Trustees shall initially serve for a term expiring at the second annual meeting of shareholders following the time at which the initial classification of the Board of Trustees becomes effective and Class III Trustees shall initially serve for a term expiring at the third annual meeting of shareholders following the time at which the initial classification of the Board of Trustees becomes effective. At each annual meeting of shareholders commencing with the first annual meeting of shareholders following the time at which the initial classification of the Board of Trustees becomes effective, the Trustees of the class to be elected at each annual meeting of shareholders shall be elected for a three-year term. If the total number of such Trustees is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of Trustees in each class as nearly equal as possible, and any such additional Trustees of any class elected to fill a newly created Trusteeship resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case shall a decrease in the total number of Trustees remove or shorten the term of any incumbent Trustee. Notwithstanding the foregoing provisions of this Section, each Trustee shall be elected at an annual meeting of the Shareholders or special meeting in lieu thereof called for that purpose, except as provided in Section 2.3 of this Article, and shall serve until his or her successor is duly elected and qualified or until his or her death, resignation, disqualification, retirement, or removal.

Section 2.3    Resignation and Removal. Any of the Trustees may resign their trust (without need for prior or subsequent accounting) by an instrument in writing signed by such Trustee and delivered or mailed to the Trustees or the Chairman, if any, the President or the Secretary and such resignation shall be effective upon such delivery, or at a later date according to the terms of the instrument. Any of the Trustees may be removed (provided the aggregate number of Trustees after such removal shall not be less than the minimum number required by Section 2.1 hereof) for cause only, and not without cause, and only by action taken by a majority of the

 

4


remaining Trustees (or in the case of the removal of a Trustee that is not an “interested person” as defined in the 1940 Act a majority of the remaining Trustees that are not “interested persons” as defined in the 1940 Act) and by the holders of at least a majority of the Shares then entitled to vote in an election of such Trustee. Upon the resignation or removal of a Trustee, each such resigning or removed Trustee shall execute and deliver such documents as the remaining Trustees shall require for the purpose of conveying to the Trust or the remaining Trustees any Trust Property held in the name of such resigning or removed Trustee. Upon the incapacity or death of any Trustee, such Trustee’s legal representative shall execute and deliver on such Trustee’s behalf such documents as the remaining Trustees shall require as provided in the preceding sentence. Except to the extent expressly provided in a written agreement with the Trust, no Trustee resigning and no Trustee removed shall have any right to any compensation for any period following the effective date of his resignation or removal, or any right to damages on account of a removal.    

Section 2.4    Vacancies. Whenever a vacancy in the Board of Trustees shall occur, the remaining Trustees may fill such vacancy by appointing an individual having the qualifications described in this Article by a written instrument signed by a majority of the Trustees then in office or may leave such vacancy unfilled or may reduce the number of Trustees; provided the aggregate number of Trustees after such reduction shall not be less than the minimum number required by Section 2.1 hereof; provided, further, that if the Shareholders of any class or series of Shares are entitled separately to elect one or more Trustees, a majority of the remaining Trustees or the sole remaining Trustee elected by that class or series may fill any vacancy among the number of Trustees elected by that class or series. Any vacancy created by an increase in Trustees may be filled by the appointment of an individual having the qualifications described in this Article made by a written instrument signed by a majority of the Trustees then in office. No vacancy shall operate to annul this Declaration or to revoke any existing agency created pursuant to the terms of this Declaration. Whenever a vacancy in the number of Trustees shall occur, until such vacancy is filled as provided herein, the Trustees in office, regardless of their number, shall have all the powers granted to the Trustees and shall discharge all the duties imposed upon the Trustees by this Declaration.

Section 2.5    Meetings. Meetings of the Trustees shall be held from time to time upon the call of the Chairman, if any, or the President or any two Trustees. Regular meetings of the Trustees may be held without call or notice at a time and place fixed by the By-Laws, the Chairman or by resolution or consent of the Trustees. Notice of any other meeting shall be given by the Secretary and shall be delivered to the Trustees orally or via electronic transmission not less than 24 hours, or in writing not less than 72 hours, before the meeting, but may be waived in writing by any Trustee either before or after such meeting. The attendance of a Trustee at a meeting shall constitute a waiver of notice of such meeting except where a Trustee attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting has not been properly called or convened. Any time there is more than one Trustee, a quorum for all meetings of the Trustees shall be one-third, but not less than two, of the Trustees. Unless provided otherwise in this Declaration and except as required under the 1940 Act, any action of the Trustees may be taken at a meeting by vote of a majority of the Trustees present (a quorum being present) or without a meeting by written consent of a majority of the Trustees.

 

5


Any committee of the Trustees, including an executive committee, if any, may act with or without a meeting. A quorum for all meetings of any such committee shall be one-third, but not less than two, of the members thereof. Unless provided otherwise in this Declaration, any action of any such committee may be taken at a meeting by vote of a majority of the members present (a quorum being present) or without a meeting by written consent as provided in Section 2.6.

With respect to actions of the Trustees and any committee of the Trustees, Trustees who are Interested Persons in any action to be taken may be counted for quorum purposes under this Section and shall be entitled to vote to the extent not prohibited by the 1940 Act.

All or any one or more Trustees may participate in a meeting of the Trustees or any committee thereof by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other; participation in a meeting pursuant to any such communications system shall constitute presence in person at such meeting.

Section 2.6    Trustee Action by Written Consent. Any action which may be taken by Trustees by vote may be taken without a meeting if that number of the Trustees, or members of a committee, as the case may be, required for approval of such action at a meeting of the Trustees or of such committee consent to the action in writing and the written consents are filed with the records of the meetings of Trustees. Such consent shall be treated for all purposes as a vote taken at a meeting of Trustees.

Section 2.7    Officers. The Trustees shall elect a Chief Executive Officer, a Secretary and a Chief Financial Officer and may elect a Chairman who shall serve at the pleasure of the Trustees or until their successors are elected. The Trustees may elect or appoint or may authorize the Chairman, if any, or Chief Executive Officer to appoint such other officers or agents with such powers as the Trustees may deem to be advisable. A Chairman shall, and the Chief Executive Officer, Secretary and Chief Financial Officer may, but need not, be a Trustee. All officers shall owe to the Trust and its Shareholders the same fiduciary duties (and only such fiduciary duties) as owed by officers of corporations to such corporations and their stockholders under the Delaware General Corporation Law.

Section 2.8    Principal Transactions. Except to the extent prohibited by applicable law, the Trustees may, on behalf of the Trust, buy any securities from or sell any securities to, or lend any assets of the Trust to, any Trustee or officer of the Trust or any firm of which any such Trustee or officer is a member acting as principal, or have any such dealings with any Affiliated Person of the Trust, investment adviser, investment sub-adviser, distributor or transfer agent for the Trust or with any Interested Person of such Affiliated Person or other person; and the Trust may employ any such Affiliated Person or other person, or firm or company in which such Affiliated Person or other person is an Interested Person, as broker, legal counsel, registrar, investment advisor, investment sub-advisor, distributor, transfer agent, dividend disbursing agent, custodian or in any other capacity upon customary terms.

 

6


ARTICLE III

Powers and Duties of Trustees

Section 3.1    General. The Trustees shall owe to the Trust and its Shareholders the same fiduciary duties (and only such fiduciary duties) as owed by directors of corporations to such corporations and their stockholders under the Delaware General Corporation Law. The Trustees may perform such acts as in their sole discretion are proper for conducting the business of the Trust. The enumeration of any specific power herein shall not be construed as limiting the aforesaid power. Such powers of the Trustees may be exercised without order of or resort to any court.

Section 3.2    Investments. Unless otherwise determined by the Board of Trustees, the investment objective of the Trust will be to generate current income and, to a lesser extent, long-term capital appreciation. The Trustees shall have power with respect to the Trust to manage, conduct, operate and carry on the business of a business development company.

Section 3.3    Legal Title. Legal title to all the Trust Property shall be vested in the Trust as a separate legal entity except that the Trustees shall have power to cause legal title to any Trust Property to be held by or in the name of one or more of the Trustees, or in the name of any other Person as nominee, custodian or pledgee, on such terms as the Trustees may determine, provided that the interest of the Trust therein is appropriately protected.

To the extent any Trust Property is titled in the name of one or more Trustees, the right, title and interest of such Trustees in the Trust Property shall vest automatically in each person who may hereafter become a Trustee upon his due election and qualification. Upon the ceasing of any person to be a Trustee for any reason, such person shall automatically cease to have any right, title or interest in any of the Trust Property, and the right, title and interest of such Trustee in the Trust Property shall vest automatically in the remaining Trustees. Such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered.

Section 3.4    Issuance and Repurchase of Shares. The Trustees shall have the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell, reissue, dispose of, transfer, and otherwise deal in, Shares, including Shares in fractional denominations, and, subject to the more detailed provisions set forth in Article VIII, to apply to any such repurchase, redemption, retirement, cancellation or acquisition of Shares any funds or property. The Trustees may establish, from time to time, a program or programs by which the Trust voluntarily repurchases Shares from the Shareholders; provided, however, that such repurchases do not impair the capital or operations of the Trust.

Section 3.5    Borrow Money or Utilize Leverage. The Trustees shall have the power to cause the Trust to borrow money or otherwise obtain credit or utilize leverage to the maximum extent permitted by law or regulation as such may be needed from time to time and to secure the same by mortgaging, pledging or otherwise subjecting as security the assets of the Trust, including the lending of portfolio securities, and to endorse, guarantee, or undertake the performance of any obligation, contract or engagement of any other person, firm, association or corporation. In addition and notwithstanding any other provision of this Declaration, the Trust is hereby

 

7


authorized to borrow funds, incur indebtedness and guarantee obligations of any Person, and in connection therewith, to the fullest extent permitted by law, the Trustees, on behalf of the Trust, are hereby authorized to pledge, hypothecate, mortgage, assign, transfer or grant security interests in or other liens on (i) the Shareholders’ subscription agreements, and the Shareholders’ obligations to make capital contributions thereunder, subject to the terms hereof and thereof, and (ii) any other assets, rights or remedies of the Trust or of the Trustees hereunder or under the subscription agreements, including without limitation, the right to issue capital call notices and to exercise remedies upon a default by a Shareholder in the payment of its capital contributions and the right to receive capital contributions and other payments, subject to the terms hereof and thereof. Notwithstanding any provision in this Declaration, (i) the Trust may borrow funds, incur indebtedness and enter into guarantees together with one or more Persons on a joint and several basis or on any other basis that the Board of Trustees, in its sole discretion, determines is fair and reasonable to the Trust, and (ii) in connection with any borrowing, indebtedness or guarantee by the Trust, all capital contributions shall be payable to the account of the Trust designated by the Board of Trustees, which may be pledged to any lender or other credit party of the Trust. All rights granted to a lender pursuant to this Section 3.5 shall apply to its agents and its successors and permitted assigns.

Section 3.6    Delegation; Committees. The Trustees shall have the power to delegate from time to time to such of their number or to officers, employees or agents of the Trust the doing of such things, including any matters set forth in this Declaration, and the execution of such instruments either in the name of the Trust or the names of the Trustees or otherwise as the Trustees may deem expedient. The Trustees may designate one or more committees which shall have all or such lesser portion of the authority of the entire Board of Trustees as the Trustees shall determine from time to time except to the extent action by the entire Board of Trustees or particular Trustees is required by the 1940 Act.

Section 3.7    Collection and Payment. The Trustees shall have power to collect all property due to the Trust; to pay all claims, including taxes, against the Trust Property or the Trust, the Trustees or any officer, employee or agent of the Trust; to prosecute, defend, compromise or abandon any claims relating to the Trust Property or the Trust, or the Trustees or any officer, employee or agent of the Trust; to foreclose any security interest securing any obligations, by virtue of which any property is owed to the Trust; and to enter into releases, agreements and other instruments.

Section 3.8    By-Laws. The Trustees shall have the exclusive authority to adopt and from time to time amend or repeal By-Laws for the conduct of the business of the Trust.

Section 3.9    Miscellaneous Powers. Without limiting the general or further powers of the Trustees, they shall have the power to: (a) employ or contract with such Persons as the Trustees may deem desirable for the transaction of the business of the Trust; (b) enter into joint ventures, partnerships and any other combinations or associations; (c) purchase, and pay for out of Trust Property, insurance policies insuring the Shareholders, Trustees, officers, employees, agents, investment advisors, distributors, selected dealers or independent contractors of the Trust against all claims arising by reason of holding any such position or by reason of any action taken or omitted by any such Person in such capacity, whether or not constituting negligence, or whether or not the Trust would have the power to indemnify such Person against such liability; (d) establish pension,

 

8


profit-sharing, share purchase, and other retirement, incentive and benefit plans for any Trustees, officers, employees and agents of the Trust; (e) make donations, irrespective of benefit to the Trust, for charitable, religious, educational, scientific, civic or similar purposes; (f) to the extent permitted by law, indemnify any Person with whom the Trust has dealings, including without limitation any advisor, administrator, manager, transfer agent, custodian, distributor or selected dealer, or any other person as the Trustees may see fit to such extent as the Trustees shall determine; (g) guarantee indebtedness or contractual obligations of others; and (h) determine and change the fiscal year of the Trust and the method in which its accounts shall be kept.

Section 3.10    Further Powers. The Trustees shall have the power to conduct the business of the Trust and carry on its operations in any and all of its branches and maintain offices both within and without the State of Delaware, in any and all states of the United States of America, in the District of Columbia, and in any and all commonwealths, territories, dependencies, colonies, possessions, agencies or instrumentalities of the United States of America and of foreign governments, and to do all such other things and execute all such instruments as they deem necessary, proper or desirable in order to promote the interests of the Trust although such things are not herein specifically mentioned. Any determination as to what is in the interests of the Trust made by the Trustees in good faith shall be conclusive. In construing the provisions of this Declaration, the presumption shall be in favor of a grant of power to the Trustees.

Section 3.11    Sole Discretion; Good Faith; Corporate Opportunities of Adviser.

(a)    Notwithstanding any other provision of this Declaration or otherwise applicable law, whenever in this Declaration the Trustees are permitted or required to make a decision:

(i)    in their “discretion” or under a grant of similar authority, the Trustees shall be entitled to consider such interests and factors as they desire, including their own interest, and, to the fullest extent permitted by applicable law, shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or

(ii)    in their “good faith” or under another express standard, the Trustees shall act under such express standard and shall not be subject to any other or different standard.

(b)    Unless expressly provided otherwise herein or in the Trust’s private placement memorandum or other offering document (as may be amended from time to time), the Adviser and any Affiliated Person of the Adviser may engage in or possess an interest in other profit-seeking or business ventures of any nature or description, independently or with others, whether or not such ventures are competitive with the Trust and the doctrine of corporate opportunity, or any analogous doctrine. To the extent that the Adviser acquires knowledge of a potential transaction, agreement, arrangement or other matter that may be an opportunity for the Trust, it shall not have any duty to communicate or offer such opportunity to the Trust, subject to the requirements of the 1940 Act, the Investment Advisers Act of 1940, as amended, and any applicable co-investment order issued by the Commission, and the Adviser shall not be liable to the Trust or to the Shareholders for breach of any fiduciary or other duty by reason of the fact that the Adviser pursues or acquires for, or directs such opportunity to, another Person or does not communicate such opportunity or information to the Trust. Neither the Trust nor any Shareholder

 

9


shall have any rights or obligations by virtue of this Declaration or the trust relationship created hereby in or to such independent ventures or the income or profits or losses derived therefrom, and the pursuit of such ventures, even if competitive with the activities of the Trust, shall not be deemed wrongful or improper.

ARTICLE IV

Fees and Expenses; Advisory, Management and Distribution Arrangements

Section 4.1    Expenses.

(a)    The Trustees shall have power to incur and pay out of the assets or income of the Trust any expenses which in the opinion of the Trustees are necessary or incidental to carry out any of the purposes of this Declaration, and the business of the Trust, and to pay reasonable compensation from the funds of the Trust to themselves as Trustees. The Trustees shall fix the compensation of all officers, employees and Trustees. The Trustees may pay themselves such compensation for special services, including legal, underwriting, syndicating and brokerage services, as they in good faith may deem reasonable and reimbursement for expenses reasonably incurred by themselves on behalf of the Trust.

(b)    The Trust shall bear and be responsible for all costs and expenses of the Trust’s operations, administration and transactions, including, but not limited to fees and expenses paid for investment advisory, administrative or other services and all other expenses of its operations and transactions.

Section 4.2    Advisory and Management Arrangements. Subject to the requirements of applicable law as in effect from time to time, the Trustees may in their discretion from time to time enter into advisory, administration or management contracts (including, in each case, one or more sub-advisory, sub-administration or sub-management contracts) whereby the other party to any such contract shall undertake to furnish such advisory, administrative and management services with respect to the Trust as the Trustees shall from time to time consider desirable and all upon such terms and conditions as the Trustees may in their discretion determine. Notwithstanding any provisions of this Declaration, the Trustees may authorize any advisor, administrator or manager (subject to such general or specific instructions as the Trustees may from time to time adopt) to exercise any of the powers of the Trustees, including to effect investment transactions with respect to the assets on behalf of the Trust to the full extent of the power of the Trustees to effect such transactions or may authorize any officer, employee or Trustee to effect such transactions pursuant to recommendations of any such advisor, administrator or manager (and all without further action by the Trustees) Any such investment transaction shall be deemed to have been authorized by all of the Trustees.

Section 4.3    Distribution Arrangements. Subject to compliance with the 1940 Act, the Trustees may retain underwriters, distributors and/or placement agents to sell Shares and other securities of the Trust. The Trustees may in their discretion from time to time enter into one or more contracts, providing for the sale of securities of the Trust, whereby the Trust may either agree

 

10


to sell such securities to the other party to the contract or appoint such other party its sales agent for such securities. In either case, the contract shall be on such terms and conditions as the Trustees may in their discretion determine not inconsistent with the provisions of this Article IV or the By-Laws; and such contract may also provide for the repurchase or sale of securities of the Trust by such other party as principal or as agent of the Trust and may provide that such other party may enter into selected dealer agreements and servicing and similar agreements to further the purposes of the distribution or repurchase of the securities of the Trust.

Section 4.4    Parties to Contract. Any contract of the character described in Sections 4.2 and 4.3 of this Article IV or in Article VII hereof may be entered into with any Person, although one or more of the Trustees, officers or employees of the Trust may be an officer, director, trustee, shareholder, or member of such other party to the contract, and no such contract shall be invalidated or rendered voidable by reason of the existence of any such relationship, nor shall any Person holding such relationship be liable merely by reason of such relationship for any loss or expense to the Trust under or by reason of said contract or accountable for any profit realized directly or indirectly therefrom, provided that the contract when entered into was reasonable and fair and not inconsistent with the provisions of this Article IV or the By-Laws. The same Person may be the other party to contracts entered into pursuant to Sections 4.2 and 4.3 above or Article VII, and any individual may be financially interested or otherwise affiliated with Persons who are parties to any or all of the contracts mentioned in this Section 4.4.

ARTICLE V

Limitations of Liability and Indemnification

Section 5.1    No Personal Liability of Shareholders, Trustees, etc. No Shareholder of the Trust shall be subject in such capacity to any personal liability whatsoever to any Person in connection with Trust Property or the acts, obligations or affairs of the Trust. Shareholders shall have the same limitation of personal liability as is extended to stockholders of a private corporation for profit incorporated under the Delaware General Corporation Law. No Trustee or officer of the Trust shall be subject in such capacity to any personal liability whatsoever to any Person, save only liability to the Trust or its Shareholders arising from bad faith, willful misconduct, gross negligence or reckless disregard for his duty to such Person; and, subject to the foregoing exception, all such Persons shall look solely to the Trust Property for satisfaction of claims of any nature arising in connection with the affairs of the Trust. If any Shareholder, Trustee or officer, as such, of the Trust, is made a party to any suit or proceeding to enforce any such liability, subject to the foregoing exception, he shall not, on account thereof, be held to any personal liability. Any repeal or modification of this Section 5.1 shall not adversely affect any right or protection of a Trustee or officer of the Trust existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification.

Section 5.2    Mandatory Indemnification.

(a)    The Trust hereby agrees to indemnify each person who at any time serves as a Trustee, officer or employee of the Trust (each such person being an “indemnitee”) against any liabilities and expenses, including amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and reasonable counsel fees reasonably incurred by such indemnitee in

 

11


connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, before any court or administrative or investigative body in which he may be or may have been involved as a party or otherwise or with which he may be or may have been threatened, while acting in any capacity set forth in this Article V by reason of his having acted in any such capacity, except with respect to any matter as to which he shall not have acted in good faith in the reasonable belief that his action was in the best interest of the Trust or, in the case of any criminal proceeding, as to which he shall have had reasonable cause to believe that the conduct was unlawful, provided, however, that no indemnitee shall be indemnified hereunder against any liability to any person or any expense of such indemnitee arising by reason of (i) willful misconduct, (ii) bad faith, (iii) gross negligence, or (iv) reckless disregard of the duties involved in the conduct of his position (the conduct referred to in such clauses (i) through (iv) being sometimes referred to herein as “disabling conduct”). Notwithstanding the foregoing, with respect to any action, suit or other proceeding voluntarily prosecuted by any indemnitee as plaintiff, indemnification shall be mandatory only if the prosecution of such action, suit or other proceeding by such indemnitee (1) was authorized by a majority of the Trustees or (2) was instituted by the indemnitee to enforce his or her rights to indemnification hereunder in a case in which the indemnitee is found to be entitled to such indemnification. The rights to indemnification set forth in this Declaration shall continue as to a person who has ceased to be a Trustee or officer of the Trust and shall inure to the benefit of his or her heirs, executors and personal and legal representatives. No amendment or restatement of this Declaration or repeal of any of its provisions shall limit or eliminate any of the benefits provided to any person who at any time is or was a Trustee or officer of the Trust or otherwise entitled to indemnification hereunder in respect of any act or omission that occurred prior to such amendment, restatement or repeal.

(b)    Notwithstanding the foregoing, no indemnification shall be made hereunder unless there has been a determination (i) by a final decision on the merits by a court or other body of competent jurisdiction before whom the issue of entitlement to indemnification hereunder was brought that such indemnitee is entitled to indemnification hereunder or, (ii) in the absence of such a decision, by (1) a majority vote of a quorum of those Trustees who are neither Interested Persons of the Trust (as defined in Section 2(a)(19) of the 1940 Act) nor parties to the proceeding (“Disinterested Non-Party Trustees”), that the indemnitee is entitled to indemnification hereunder, or (2) if such quorum is not obtainable or even if obtainable, if such majority so directs, independent legal counsel in a written opinion concludes that the indemnitee should be entitled to indemnification hereunder. All determinations to make advance payments in connection with the expense of defending any proceeding shall be authorized and made in accordance with the immediately succeeding paragraph (c) below.

(c)    The Trust shall make advance payments in connection with the expenses of defending any action with respect to which indemnification might be sought hereunder if the Trust receives a written affirmation by the indemnitee of the indemnitee’s good faith belief that the standards of conduct necessary for indemnification have been met and a written undertaking to reimburse the Trust unless it is subsequently determined that the indemnitee is entitled to such indemnification and if a majority of the Trustees determine that the applicable standards of conduct necessary for indemnification appear to have been met. In addition, at least one of the following conditions must be met: (i) the indemnitee shall provide adequate security for his undertaking, (ii) the Trust shall be insured against losses arising by reason of any lawful advances, or (iii) a majority of a quorum of the Disinterested Non-Party Trustees, or if a majority vote of such quorum so direct,

 

12


independent legal counsel in a written opinion, shall conclude, based on a review of readily available facts (as opposed to a full trial-type inquiry), that there is substantial reason to believe that the indemnitee ultimately will be found entitled to indemnification.

(d)    The rights accruing to any indemnitee under these provisions shall not exclude any other right which any person may have or hereafter acquire under this Declaration, the By-Laws of the Trust, any statute, agreement, vote of Shareholders or Trustees who are not Interested Persons or any other right to which he or she may be lawfully entitled.

(e)    Subject to any limitations provided by the 1940 Act and this Declaration, the Trust shall have the power and authority to indemnify and provide for the advance payment of expenses to employees, agents and other Persons providing services to the Trust or serving in any capacity at the request of the Trust or provide for the advance payment of expenses for such Persons, provided that such indemnification has been approved by a majority of the Trustees.

Section 5.3    No Bond Required of Trustees. No Trustee shall, as such, be obligated to give any bond or other security for the performance of any of his duties hereunder.

Section 5.4    No Duty of Investigation; No Notice in Trust Instruments, etc. No purchaser, lender, transfer agent or other person dealing with the Trustees or with any officer, employee or agent of the Trust shall be bound to make any inquiry concerning the validity of any transaction purporting to be made by the Trustees or by said officer, employee or agent or be liable for the application of money or property paid, loaned, or delivered to or on the order of the Trustees or of said officer, employee or agent. Every obligation, contract, undertaking, instrument, certificate, Share, other security of the Trust, and every other act or thing whatsoever executed in connection with the Trust shall be conclusively taken to have been executed or done by the executors thereof only in their capacity as Trustees under this Declaration or in their capacity as officers, employees or agents of the Trust. The Trustees may maintain insurance for the protection of the Trust Property, the Shareholders, Trustees, officers, employees and agents in such amount as the Trustees shall deem adequate to cover possible tort liability, and such other insurance as the Trustees in their sole judgment shall deem advisable or is required by the 1940 Act.

Section 5.5    Reliance on Experts, etc. Each Trustee and officer or employee of the Trust shall, in the performance of its duties, be fully and completely justified and protected with regard to any act or any failure to act resulting from reliance in good faith upon the books of account or other records of the Trust, upon an opinion of counsel, or upon reports made to the Trust by any of the Trust’s officers or employees or by any advisor, administrator, manager, distributor, selected dealer, accountant, appraiser or other expert or consultant selected with reasonable care by the Trustees, officers or employees of the Trust, regardless of whether such counsel or expert may also be a Trustee.

ARTICLE VI

Shares of Beneficial Interest

Section 6.1    Beneficial Interest. The beneficial interest in the Trust shall be divided into an unlimited number of shares of beneficial interest, par value $0.001 per share. Such Shares of

 

13


beneficial interest may be issued in different classes and/or series of beneficial interests. All Shares issued in accordance with the terms hereof, including, without limitation, Shares issued in connection with a dividend in Shares or a split of Shares, shall be fully paid and nonassessable when the consideration determined by the Trustees (if any) therefor shall have been received by the Trust.

Section 6.2    Other Securities. The Trustees may, subject to the requirements of the 1940 Act, authorize and issue such other securities of the Trust as they determine to be necessary, desirable or appropriate, having such terms, rights, preferences, privileges, limitations and restrictions as the Trustees see fit, including preferred interests, debt securities or other senior securities. To the extent that the Trustees authorize and issue preferred shares of any class or series, they are hereby authorized and empowered to amend or supplement this Declaration as they deem necessary or appropriate, including to comply with the requirements of the 1940 Act or requirements imposed by the rating agencies or other Persons, all without the approval of Shareholders. Any such supplement or amendment shall be filed as is necessary. In addition, any such supplement or amendment may set forth the rights, powers, preferences and privileges of such preferred shares and any such supplement or amendment shall operate either as additions to or modifications of the rights, powers, preferences and privileges of any such preferred shares under this Declaration. To the extent the provisions set forth in such supplement or amendment conflict with the provisions of this Declaration with respect to any such rights, powers and privileges of the preferred shares, such amendment or supplement shall control. Except as contemplated by the immediately preceding sentence, this Declaration shall control as to the Trust generally and the rights, powers, preferences and privileges of the other Shareholders of the Trust. The Trustees are also authorized to take such actions and retain such persons as they see fit to offer and sell such securities.

Section 6.3    Rights of Shareholders. The Shares shall be personal property giving only the rights in this Declaration specifically set forth. The ownership of the Trust Property of every description and the right to conduct any business herein before described are vested exclusively in the Trust, and the Shareholders shall have no interest therein other than the beneficial interest conferred by their Shares, and they shall have no right to call for any partition or division of any property, profits, rights or interests of the Trust nor can they be called upon to share or assume any losses of the Trust or suffer an assessment of any kind by virtue of their ownership of Shares. The Shares shall not entitle the holder to preference, preemptive, appraisal, conversion or exchange rights (except as specified by the Trustees when creating the Shares, as in preferred shares).

Section 6.4    Trust Only. It is the intention of the Trustees to create only the relationship of Trustee and beneficiary between the Trustees and each Shareholder from time to time. It is not the intention of the Trustees to create a general partnership, limited partnership, joint stock association, corporation, bailment or any form of legal relationship other than a Delaware statutory trust. Nothing in this Declaration shall be construed to make the Shareholders, either by themselves or with the Trustees, partners or members of a joint stock association.

Section 6.5    Issuance of Shares. The Trustees, in their discretion, may from time to time without vote of the Shareholders issue Shares including preferred shares that may have been established pursuant to Section 6.2, in addition to the then issued and outstanding Shares and Shares held in the treasury, to such party or parties and for such amount and type of consideration,

 

14


including cash or property, at such time or times, and on such terms as the Trustees may determine, and may in such manner acquire other assets (including the acquisition of assets subject to, and in connection with the assumption of, liabilities) and businesses. The Trustees may from time to time, without a vote of the Shareholders, divide, reclassify or combine the Shares into a greater or lesser number without thereby changing the proportionate beneficial interest in such Shares. Issuances and redemptions of Shares may be made in whole Shares and/or 1/1,000ths of a Share or multiples thereof as the Trustees may determine.

Section 6.6    Register of Shares. A register shall be kept at the offices of the Trust or any transfer agent duly appointed by the Trustees under the direction of the Trustees which shall contain the names and addresses of the Shareholders and the number of Shares held by them respectively and a record of all transfers thereof. Separate registers shall be established and maintained for each class or series of Shares. Each such register shall be conclusive as to who are the holders of the Shares of the applicable class or series of Shares and who shall be entitled to receive dividends or distributions or otherwise to exercise or enjoy the rights of Shareholders. No Shareholder shall be entitled to receive payment of any dividend or distribution, nor to have notice given to him as herein provided, until he has given his address to a transfer agent or such other officer or agent of the Trustees as shall keep the register for entry thereon. It is not contemplated that certificates will be issued for the Shares; however, the Trustees, in their discretion, may authorize the issuance of share certificates and promulgate appropriate fees therefore and rules and regulations as to their use.

Section 6.7    Transfer Agent and Registrar. The Trustees shall have power to employ a transfer agent or transfer agents, and a registrar or registrars, with respect to the Shares. The transfer agent or transfer agents may keep the applicable register and record therein, the original issues and transfers, if any, of the said Shares. Any such transfer agents and/or registrars shall perform the duties usually performed by transfer agents and registrars of certificates of stock in a corporation, as modified by the Trustees.

Section 6.8    Transfer of Shares. Except as otherwise provided by the Trustees, Shares shall be transferable on the records of the Trust only by the record holder thereof or by its agent thereto duly authorized in writing, upon delivery to the Trustees or a transfer agent of the Trust of a duly executed instrument of transfer, together with such evidence of the genuineness of each such execution and authorization and of other matters (including compliance with any securities laws and contractual restrictions) as may reasonably be required. Upon such delivery the transfer shall be recorded on the applicable register of the Trust. Until such record is made, the Shareholder of record shall be deemed to be the holder of such Shares for all purposes hereof and neither the Trustees nor any transfer agent or registrar nor any officer, employee or agent of the Trust shall be affected by any notice of the proposed transfer.

Any person becoming entitled to any Shares in consequence of the death, bankruptcy, or incompetence of any Shareholder, or otherwise by operation of law, shall be recorded on the applicable register of Shares as the holder of such Shares upon production of the proper evidence thereof to the Trustees or a transfer agent of the Trust, but until such record is made, the Shareholder of record shall be deemed to be the holder of such for all purposes hereof, and neither the Trustees nor any transfer agent or registrar nor any officer or agent of the Trust shall be affected by any notice of such death, bankruptcy or incompetence, or other operation of law.

 

15


Section 6.9    Notices. Any and all notices to which any Shareholder hereunder may be entitled and any and all communications shall be deemed duly served or given if mailed, postage prepaid, addressed to any Shareholder of record at his last known address as recorded on the applicable register of the Trust.

Section 6.10    Derivative Actions.

(a)    No person, other than a Trustee, who is not a Shareholder shall be entitled to bring any derivative action, suit or other proceeding on behalf of the Trust. No Shareholder may maintain a derivative action on behalf of the Trust unless holders of at least ten percent (10%) of the outstanding Shares join in the bringing of such action.

(b)    In addition to the requirements set forth in Section 3816 of the Delaware Statutory Trust Statute, a Shareholder may bring a derivative action on behalf of the Trust only if the following conditions are met: (i) the Shareholder or Shareholders must make a pre-suit demand upon the Trustees to bring the subject action unless an effort to cause the Trustees to bring such an action is not likely to succeed; and a demand on the Trustees shall only be deemed not likely to succeed and therefore excused if a majority of the Trustees, or a majority of any committee established to consider the merits of such action, is composed of Trustees who are not “independent trustees” (as that term is defined in the Delaware Statutory Trust Statute); and (ii) unless a demand is not required under clause (i) of this paragraph, the Trustees must be afforded a reasonable amount of time to consider such Shareholder request and to investigate the basis of such claim; and the Trustees shall be entitled to retain counsel or other advisors in considering the merits of the request and may require an undertaking by the Shareholders making such request to reimburse the Trust for the expense of any such advisors in the event that the Trustees determine not to bring such action. For purposes of this Section 6.10, the Trustees may designate a committee of one or more Trustees to consider a Shareholder demand.

(c)    This Section 6.10 shall not apply to any claims brought under federal securities law, or the rules and regulations thereunder.

ARTICLE VII

Custodians

Section 7.1    Appointment and Duties. The Trustees may employ a custodian or custodians meeting the qualifications for custodians for portfolio securities of investment companies contained in the 1940 Act, as custodian with respect to the assets of the Trust. Any custodian shall have authority as agent of the Trust as determined by the custodian agreement or agreements, but subject to such restrictions, limitations and other requirements, if any, as may be contained in the By-Laws of the Trust and the 1940 Act, including without limitation authority:

(i)    to hold the securities owned by the Trust and deliver the same upon written order;

 

16


(ii)    to receive any receipt for any moneys due to the Trust and deposit the same in its own banking department (if a bank) or elsewhere as the Trustees may direct;

(iii)    to disburse such funds upon orders or vouchers;

(iv)    if authorized by the Trustees, to keep the books and accounts of the Trust and furnish clerical and accounting services; and

(v)    if authorized to do so by the Trustees, to compute the net income or net asset value of the Trust;

all upon such basis of compensation as may be agreed upon between the Trustees and the custodian.

The Trustees may also authorize each custodian to employ one or more sub-custodians from time to time to perform such of the acts and services of the custodian and upon such terms and conditions, as may be agreed upon between the custodian and such sub-custodian and approved by the Trustees, provided that in every case such sub-custodian shall meet the qualifications for custodians contained in the 1940 Act.

Section 7.2    Central Certificate System. Subject to such rules, regulations and orders as the Commission may adopt, the Trustees may direct the custodian to deposit all or any part of the securities owned by the Trust in a system for the central handling of securities established by a national securities exchange or a national securities association registered with the Commission under the Securities Exchange Act of 1934, as amended, or such other Person as may be permitted by the Commission, or otherwise in accordance with the 1940 Act, pursuant to which system all securities of any particular class of any issuer deposited within the system are treated as fungible and may be transferred or pledged by bookkeeping entry without physical delivery of such securities, provided that all such deposits shall be subject to withdrawal only upon the order of the Trust.

ARTICLE VIII

Redemption

Section 8.1    Redemptions. Holders of Shares of the Trust shall not be entitled to require the Trust to repurchase or redeem Shares of the Trust.

Section 8.2    Disclosure of Holding. The holders of Shares or other securities of the Trust shall upon demand disclose to the Trustees in writing such information with respect to direct and indirect ownership of Shares or other securities of the Trust as the Trustees deem necessary to comply with the provisions of the Code, the 1940 Act or other applicable laws or regulations, or to comply with the requirements of any other taxing or regulatory authority.

Section 8.3    Redemption by Trust. Each Share is subject to redemption (out of the assets of the Trust) by the Trust at the redemption price equal to the then current net asset value per Share of the Trust determined in accordance with Section 9.1 at any time if the Trustees determine in their sole discretion that a Shareholder has breached any of its representations or warranties

 

17


contained in such Shareholder’s subscription agreement with the Trust, and upon such redemption the holders of the Shares so redeemed shall have no further right with respect thereto other than to receive payment of such redemption price.

ARTICLE IX

Net Asset Value and Distributions

Section 9.1    Net Asset Value. The net asset value of each outstanding Share of the Trust shall be determined at such time or times on such days as the Trustees may determine, in accordance with the 1940 Act. The method of determination of net asset value shall be determined by the Trustees. The power and duty to make the net asset value calculations may be delegated by the Trustees.

Section 9.2    Distributions to Shareholders.

(a)    The Trustees may from time to time distribute ratably among the Shareholders of any class of Shares, or any series of any such class, in accordance with the number of outstanding full and fractional Shares of such class or any series of such class, such proportion of the net profits, surplus (including paid-in surplus), capital, or assets held by the Trust as the Trustees may deem proper or as may otherwise be determined in accordance with this Declaration. Any such distribution may be made in cash or property (including without limitation any type of obligations of the Trust or any assets thereof) or Shares of any class or series or any combination thereof, and the Trustees may distribute ratably among the Shareholders of any class of shares or series of any such class, in accordance with the number of outstanding full and fractional Shares of such class or any series of such class, additional Shares of any class or series in such manner, at such times, and on such terms as the Trustees may deem proper or as may otherwise be determined in accordance with this Declaration. The Trustees may cause the Trust to enter into a distribution reinvestment program with terms and conditions as agreed to by the Trustees from time to time.

(b)    Distributions pursuant to this Section 9.2 may be among the Shareholders of record of the applicable class or series of Shares at the time of declaring a distribution or among the Shareholders of record at such later date as the Trustees shall determine and specify.

(c)    The Trustees may always retain from the net profits such amount as they may deem necessary to pay the debts or expenses of the Trust or to meet obligations of the Trust, or as they otherwise may deem desirable to use in the conduct of its affairs or to retain for future requirements or extensions of the business.

(d)    Inasmuch as the computation of net income and gains for Federal income tax purposes may vary from the computation thereof on the books, the above provisions shall be interpreted to give the Trustees the power in their discretion to distribute for any fiscal year as ordinary dividends and as capital gains distributions, respectively, additional amounts sufficient to enable the Trust to avoid or reduce liability for taxes.

 

18


Section 9.3    Power to Modify Foregoing Procedures. Notwithstanding any of the foregoing provisions of this Article IX, the Trustees may prescribe, in their absolute discretion except as may be required by the 1940 Act, such other bases and times for determining the per share asset value of the Trust’s Shares or net income, or the declaration and payment of dividends and distributions as they may deem necessary or desirable for any reason, including to enable the Trust to comply with any provision of the 1940 Act, or any securities exchange or association registered under the Securities Exchange Act of 1934, as amended, or any order of exemption issued by the Commission, all as in effect now or hereafter amended or modified.

ARTICLE X

Shareholders

Section 10.1    Meetings of Shareholders. A special meeting of the Shareholders may be called at any time by a majority of the Trustees or the Chief Executive Officer and shall be called by any Trustee for any proper purpose upon written request of Shareholders of the Trust holding in the aggregate not less than thirty-three and one-third percent (3313%) of the outstanding Shares of the Trust, such request specifying the purpose or purposes for which such meeting is to be called, provided that in the case of a meeting called by any Trustee at the request of Shareholders for the purpose of electing Trustees or removing the Adviser, written request of Shareholders of the Trust holding in the aggregate not less than fifty-one percent (51%) of the outstanding Shares of the Trust or class or series of Shares having voting rights on the matter shall be required. For a special Shareholder meeting to be called for a proper purpose (as used in the preceding sentence), it is not a requirement that such purpose relate to a matter on which Shareholders are entitled to vote, provided that if such meeting is called for a purpose for which Shareholders are not entitled to vote, no vote will be taken at such meeting. Any shareholder meeting, including a special meeting, may be held within or without the State of Delaware on such day and at such time as the Trustees shall designate or may be held virtually.

Section 10.2    Voting. Shareholders shall have no power to vote on any matter except matters on which a vote of Shareholders is required by the 1940 Act, this Declaration or resolution of the Trustees or, after an Exchange Listing, by any applicable stock exchange. This Declaration expressly provides that no matter for which voting, consent or other approval is required by the Delaware Statutory Trust Statute in the absence of the contrary provision in the Declaration shall require any vote. Except as otherwise provided herein, any matter required to be submitted to Shareholders and affecting one or more classes or series of Shares shall require approval by the required vote of all the affected classes and series of Shares voting together as a single class; provided, however, that as to any matter with respect to which a separate vote of any class or series of Shares is required by the 1940 Act, such requirement as to a separate vote by that class or series of Shares shall apply in addition to a vote of all the affected classes and series voting together as a single class. Shareholders of a particular class or series of Shares shall not be entitled to vote on any matter that affects only one or more other classes or series of Shares. Each whole Share shall be entitled to one vote as to any matter on which it is entitled to vote and each fractional Share shall be entitled to a proportionate fractional vote. There shall be no cumulative voting in the election or removal of Trustees. Trustees shall be elected by a plurality of votes.

 

19


Section 10.3    Notice of Meeting and Record Date. Any and all notices to which any Shareholder hereunder may be entitled and any and all communications shall be deemed duly served or given if presented personally to a Shareholder, left at his or her residence or usual place of business or sent via United States mail or by electronic transmission to a Shareholder at his or her address as it is registered with the Trust. If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the Shareholder at his or her address as it is registered with the Trust with postage thereon prepaid. Notice of all meetings of Shareholders, stating the time, place and purposes of the meeting, shall be given by the Trustees by mail to each Shareholder of record entitled to vote thereat at its registered address, mailed at least 10 days and not more than 90 days before the meeting or otherwise in compliance with applicable law. Only the business stated in the notice of the meeting shall be considered at such meeting. Any meeting of Shareholders, whether or not a quorum is present, may be adjourned for any lawful purpose by the Chairman, the Trustees (or their designees) or a majority of the votes properly cast upon the question of adjourning a meeting. Any adjourned meeting may be held as adjourned one or more times without further notice not later than 120 days after the record date. For the purposes of determining the Shareholders who are entitled to notice of and to vote at any meeting the Trustees may, without closing the transfer books, fix a date not more than 90 nor less than 10 days prior to the date of such meeting of Shareholders as a record date for the determination of the Persons to be treated as Shareholders of record for such purposes.

Section 10.4    Quorum and Required Vote. (a) Unless otherwise required by the 1940 Act, the holders of one third of the Shares entitled to vote on any matter at a meeting present in person or by proxy shall constitute a quorum at such meeting of the Shareholders for purposes of conducting business on such matter. The absence from any meeting, in person or by proxy, of a quorum of Shareholders for action upon any given matter shall not prevent action at such meeting upon any other matter or matters which may properly come before the meeting, if there shall be present thereat, in person or by proxy, a quorum of Shareholders in respect of such other matters.

(b)    Subject to any provision of applicable law, this Declaration or a resolution of the Trustees specifying a greater or a lesser vote requirement for the transaction of any item of business at any meeting of Shareholders, (i) the affirmative vote of a majority of the Shares present in person or represented by proxy and entitled to vote on the subject matter shall be the act of the Shareholders with respect to such matter, and (ii) where a separate vote of one or more classes or series of Shares is required on any matter, the affirmative vote of a majority of the Shares of such class or series of Shares present in person or represented by proxy at the meeting shall be the act of the Shareholders of such class or series with respect to such matter.

Section 10.5    Proxies, etc. At any meeting of Shareholders, any holder of Shares entitled to vote thereat may vote by properly executed or authorized proxy, provided that no proxy shall be voted at any meeting unless it shall have been placed on file with the Secretary, or with such other officer or agent of the Trust as the Secretary may direct, for verification prior to the time at which such vote shall be taken. Pursuant to a resolution of a majority of the Trustees, proxies may be solicited in the name of one or more Trustees or one or more of the officers or employees of the Trust. No proxy shall be valid after the expiration of 11 months from the date thereof, unless otherwise provided in the proxy. Only Shareholders of record shall be entitled to vote. Each full Share shall be entitled to one vote and fractional Shares shall be entitled to a vote of such fraction. When any Share is held jointly by several persons, any one of them may vote at any meeting in

 

20


person or by proxy in respect of such Share, but if more than one of them shall be present at such meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Share. A proxy purporting to be executed or authorized by or on behalf of a Shareholder shall be deemed valid unless challenged at or prior to its exercise and the burden of proving invalidity shall rest on the challenger. If the holder of any such Share is a minor or a person of unsound mind, and subject to guardianship or to the legal control of any other person as regards the charge or management of such Share, he may vote by his guardian or such other person appointed or having such control, and such vote may be given in person or by proxy.

Section 10.6    Reports. The Trustees shall cause to be prepared at least annually and more frequently to the extent and in the form required by law, regulation or any exchange on which Trust Shares are listed a report of operations containing a balance sheet and statement of income and undistributed income of the Trust prepared in conformity with generally accepted accounting principles and an opinion of an independent public accountant on such financial statements. Copies of such reports shall be mailed to all Shareholders of record within the time required by the 1940 Act, and in any event within a reasonable period preceding the meeting of Shareholders. The Trustees shall, in addition, furnish to the Shareholders at least semi-annually to the extent required by law, interim reports containing an unaudited balance sheet of the Trust as of the end of such period and an unaudited statement of income and surplus for the period from the beginning of the current fiscal year to the end of such period.

Section 10.7    Inspection of Records. The records of the Trust shall be open to inspection by Shareholders to the extent permitted by Section 3819 of the Delaware Statutory Trust Statute but subject to such reasonable regulation as the Trustees may determine.

Section 10.8    Delivery by Electronic Transmission or Otherwise. Notwithstanding any provision in this Declaration to the contrary, any notice, proxy, vote, consent, report, instrument or writing of any kind or any signature referenced in, or contemplated by, this Declaration or the By-laws may, in the sole discretion of the Trustees, be given, granted or otherwise delivered by electronic transmission (within the meaning of the Delaware Statutory Trust Statute), including via the internet, or in any other manner permitted by applicable law.

Section 10.9    Shareholder Action by Written Consent. Any action required or permitted to be taken at any meeting of the Shareholders may be taken without a meeting, without a prior notice and without a vote if the consent, setting forth the action to be taken is given in writing or by electronic transmission by the Shareholders having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all Shareholders entitled to vote thereon were present and voted.

 

21


ARTICLE XI

Wind Down; Amendment; Mergers, Etc.

Section 11.1    Wind Down.

(a)    If the Trust has not consummated an Exchange Listing by the earlier of (i) the five year anniversary of the end of the Initial Drawdown Period, as may be extended for up to an additional one-year period pursuant to the Adviser’s recommendation with the approval of the Trustees and (ii) the ten year anniversary of the date of the initial closing, the Trustees (subject to market conditions and any necessary Shareholder approvals and applicable requirements of the 1940 Act) will use their commercially reasonable efforts to wind down, sell and/or liquidate and dissolve the Fund in an orderly manner and all of the powers of the Trustees under this Declaration shall continue until the affairs of the Trust shall have been wound up as contemplated by Section 3808(e) of the Delaware Statutory Trust Statute. The Trustees may, to the extent they deem appropriate, adopt a plan of liquidation at any time preceding the anticipated dissolution date, which plan of liquidation may set forth the terms and conditions for implementing the dissolution and liquidation of the Trust under this Article XI. Shareholders of the Trust shall not be entitled to vote on the adoption of any such plan or the dissolution and liquidation of the Trust under this Article XII except to the extent required by the 1940 Act. After an Exchange Listing, the Trust may be dissolved by the affirmative vote or consent of at least a majority of the Trustees and 75% of the Continuing Trustees, without the vote of the Shareholders.

(b)    After the winding up and liquidation of the Trust, including the distribution to the Shareholders of any assets of the Trust, a majority of the Trustees shall execute and lodge among the records of the Trust an instrument in writing setting forth the fact of such termination and shall execute and file a certificate of cancellation with the Secretary of State of the State of Delaware. Upon termination of the Trust, the Trustees shall thereupon be discharged from all further liabilities and duties hereunder, and the rights and interests of all Shareholders shall thereupon cease.

Section 11.2    Amendment Procedure.

(a)     Except as provided in subsection (c) of this Section 11.2, the Trustees may, without Shareholder vote, amend or otherwise supplement this Declaration. Shareholders shall have the right to vote: (i) on any amendment which would eliminate their right to vote granted in this Declaration, (ii) on any amendment to this Section 11.2(a), (iii) on any amendment that would adversely affect the powers, preferences or special rights of the Shares as determined by the Trustees in good faith and (iv) on any amendment submitted to them by the Trustees.

(b)    In connection with an Exchange Listing, the Trustees may without the approval or vote of the Shareholders, amend or supplement this Declaration in any manner, including, without limitation to classify the Board of Trustees, to permit annual meetings of Shareholders, to impose advance notice provisions for the bringing of Shareholder nominations or proposals, to impose super-majority approval for certain types of transactions and to otherwise add provisions that may be deemed to adverse to Shareholders.

(c)    An amendment duly adopted by the requisite vote of the Board of Trustees and, if required, the Shareholders as aforesaid, shall become effective at the time of such adoption or at such other time as may be designated by the Board of Trustees or Shareholders, as the case may be. A certification in recordable form signed by a majority of the Trustees setting forth an amendment and reciting that it was duly adopted by the Trustees and, if required, the Shareholders as aforesaid, or a copy of the Declaration, as amended, in recordable form, and executed by a majority of the Trustees, shall be conclusive evidence of such amendment when lodged among the records of the Trust or at such other time designated by the Board.

 

22


(d)    Any amendment to this Declaration that adversely affects the Delaware Trustee shall require its consent, which consent shall not be unreasonably withheld.

Section 11.3     [Intentionally omitted].

Section 11.4    Subsidiaries. Without approval or vote by Shareholders, the Trustees may cause to be organized or assist in organizing one or more corporations, trusts, partnerships, associations or other organizations to take over all of the Trust Property or to carry on any business in which the Trust shall directly or indirectly have any interest and to sell, convey, and transfer all or a portion of the Trust Property to any such corporation, trust, limited liability company, association or organization in exchange for the shares or securities thereof, or otherwise, and to lend money to, subscribe for the shares or securities of and enter into any contracts with any such corporation, trust, limited liability company, partnership, association or organization, or any corporation, partnership, trust, limited liability company, association or organization in which the Trust holds or is about to acquire shares or any other interests.

Section 11.5    Certain Transactions.

(a)     Except as otherwise provided in paragraph (b) of this Section the affirmative vote or consent of at least seventy-five percent (75%) of the Trustees of the Trust and at least seventy-five percent (75%) of the Shares outstanding and entitled to vote thereon shall be necessary to authorize any of the following actions:

(i)    The merger, conversion, consolidation or share exchange of the Trust or any series or class of Shares with or into any other person or company (including, without limitation, a partnership, corporation, joint venture, statutory or business trust, common law trust or any other business organization) or of any such person or company with or into the Trust or any series or class of Shares.

(ii)    The issuance or transfer by the Trust or any series or class of Shares (in one or more series of transactions in any twelve-month period) of any securities of the Trust or such series or class to any other person or entity for cash, securities or other property (or combination thereof) having an aggregate fair market value of $1,000,000 or more, excluding (x) sales of any securities of the Trust or a series or class in connection with a public offering thereof, (y) issuance of securities of the Trust or a series or class pursuant to a dividend reinvestment plan adopted by the Trustees and (z) issuances of securities of the Trust or a series or class upon the exercise of any stock subscription rights distributed by the Trust or a series or class.

(iii)    The sale, lease, exchange, mortgage, pledge, transfer or other disposition by the Trust or any series or class of Shares (in one or a series of transactions in any twelve-month period) to or with any person of any assets of the Trust or such series or class having an aggregate fair market value of $1,000,000 or more, except for transactions in securities effected by the Trust or a series or class in the ordinary course of business.

 

23


(iv)    Any Shareholder proposal as to specific investment decisions made or to be made with respect to the assets of the Trust or a series or class of Shares.

(b)    Notwithstanding anything to the contrary in paragraph (a) of this Section 11.5, so long as each action is approved by both a majority of the entire Board of Trustees and seventy-five percent (75%) of the Continuing Trustees, and so long as all other conditions and requirements, if any, provided for in the Bylaws and applicable law have been satisfied, then no Shareholder vote or consent shall be necessary or required to approve any of the actions listed in paragraphs (a)(i), (a)(ii), (a)(iii) or (a)(iv) of this Section 11.5, except to the extent such Shareholder vote or consent is required by the 1940 Act or other federal law.

ARTICLE XII

The Delaware Trustee

The trustee, pursuant to Section 3807 of the Delaware Statutory Trust Statute, of the Trust in the State of Delaware shall be Wilmington Trust, National Association, a national banking association (including any successor trustee appointed in accordance with Section 12.6 of this Declaration, the “Delaware Trustee”). The street address of the principal office of Wilmington Trust, National Association, is, 1100 North Market Street, Wilmington, Delaware 19890. Any reference to “Trustee” or “Board of Trustees” in this Declaration and the Bylaws of the Trust shall not be deemed to include or refer to the Delaware Trustee.

Section 12.1    Purpose of Appointment. The Delaware Trustee is appointed to serve as the trustee of the Trust in the State of Delaware for the sole purpose of satisfying the requirements of Section 3807(a) of the Delaware Statutory Trust Statute that the Trust have at least one trustee with a principal place of business in the State of Delaware. It is understood and agreed by the parties hereto that the Delaware Trustee shall have none of the duties, obligations or liabilities of any other Person, including, without limitation, the Board of Trustees. The Delaware Trustee shall satisfy the requirements of Section 3807(a) of the Delaware Statutory Trust Statute.

Section 12.2    Duties. The duties of the Delaware Trustee shall be limited to (i) accepting legal process served on the Trust in the State of Delaware and (ii) the execution of any certificates required to be filed with the Delaware Secretary of State which the Delaware Trustee is required to execute under Section 3811 of the Delaware Statutory Trust Statute. Except for the purpose of the foregoing sentence, the Delaware Trustee shall not be deemed a trustee, shall not be a member of the board of trustees and shall have no management responsibilities or owe any fiduciary duties to the Trust or the shareholders. To the extent that, at law or in equity, the Delaware Trustee has duties (including fiduciary duties) and liabilities relating thereto to the Trust or the shareholders, it is hereby understood and agreed by the other parties hereto that such duties and liabilities are replaced by the duties and liabilities of the Delaware Trustee expressly set forth in this Declaration. The Delaware Trustee shall have no liability for the acts or omissions of any other Person, including, without limitation, the board of trustees and the Adviser.

Section 12.3    Removal. The Delaware Trustee may be removed by the board of trustees upon 30 days’ prior written notice to the Delaware Trustee. The Delaware Trustee may resign upon 30 days’ prior written notice to the board of trustees. No resignation or removal of the Delaware

 

24


Trustee shall be effective except upon the appointment of a successor Delaware Trustee appointed by the board of trustees or a court of competent jurisdiction. If no successor Delaware Trustee has been appointed within such 30 day period, the Delaware Trustee may, at the expense of the Trust, petition a court of competent jurisdiction to appoint a successor Delaware Trustee.

Section 12.4    Merger. Any Person into which the Delaware Trustee may be merged or with which it may be consolidated, or any Person resulting from any merger or consolidation to which the Delaware Trustee shall be a party, or any Person which succeeds to all or substantially all of the corporate trust business of the Delaware Trustee, shall be the successor Delaware Trustee under this Declaration without the execution, delivery or filing of any paper or instrument or further act to be done on the part of the parties hereto, except as may be required by applicable law.

Section 12.5    Liability.

(a)    The Delaware Trustee shall be entitled to all of the same rights, protections, indemnities and immunities under this Declaration and with respect to the Trust and the shareholders as the board of trustees. No amendment or waiver of any provision of this Declaration which adversely affects the Delaware Trustee shall be effective against it without its prior written consent.

(b)    The Delaware Trustee shall not be liable for supervising or monitoring the performance and the duties and obligations of any other Person, including, without limitation, the board of trustees or the Adviser or the Trust under this Declaration or any related document. The Delaware Trustee shall not be personally liable under any circumstances, except for its own willful misconduct, bad faith or gross negligence. In particular, but not by way of limitation:

 

  (i)

the Delaware Trustee shall not be personally liable for any error of judgment made in good faith;

 

  (ii)

no provision of this Declaration shall require the Delaware Trustee to expend or risk its personal funds or otherwise incur any financial liability in the performance of its rights or powers hereunder, if the Delaware Trustee shall have reasonable grounds for believing that the payment of such funds or adequate indemnity against such risk or liability is not reasonably assured or provided to it;

 

  (iii)

under no circumstances shall the Delaware Trustee be personally liable for any representation, warranty, covenant, agreement or indebtedness of the Trust;

 

  (iv)

the Delaware Trustee shall not be personally responsible for or in respect of the validity or sufficiency of this Declaration or for the due execution hereof by any other party hereto;

 

  (v)

the Delaware Trustee shall incur no liability to anyone in acting upon any signature, instrument, notice, resolution, request, consent, order, certificate, report, opinion, bond or other document or paper reasonably believed by it to be genuine and reasonably believed by it to be signed by the proper party or parties. The Delaware Trustee may accept a certified copy of a resolution of the board of directors or other governing body of any corporate party as conclusive evidence that such resolution has been duly adopted by such body and that the same is in full force and effect. As

 

25


  to any fact or matter the manner of ascertainment of which is not specifically prescribed herein, the Delaware Trustee may for all purposes hereof rely on a certificate or resolution, signed by the board of trustees or an officer of the Trust as to such fact or matter, and such certificate shall constitute full protection to the Delaware Trustee for any action taken or omitted to be taken by it in good faith in reliance thereon;

 

  (vi)

in the exercise or administration of the Trust hereunder, the Delaware Trustee (A) may act directly or through agents or attorneys pursuant to agreements entered into with any of them, and the Delaware Trustee shall not be liable for the default or misconduct of such agents or attorneys if such agents or attorneys shall have been selected by the Delaware Trustee in good faith and (B) may consult with counsel, accountants and other skilled persons to be selected by it in good faith and employed by it, and it shall not be liable for anything done, suffered or omitted in good faith by it in accordance with the advice or opinion of any such counsel, accountants or other skilled persons;

 

  (vii)

in accepting and performing its express duties hereunder the Delaware Trustee acts solely as Delaware Trustee hereunder and not in its individual capacity, and all persons having any claim against the Delaware Trustee by reason of the transactions contemplated by this Declaration shall look only to the Trust for payment or satisfaction thereof; and

 

  (viii)

the Delaware Trustee shall incur no liability if, by reason of any provision of any present or future law or regulation thereunder, or by any force majeure event, including but not limited to natural disaster, act of war or terrorism, or other circumstances beyond its reasonable control, the Delaware Trustee shall be prevented or forbidden from doing or performing any act or thing which the terms of this Declaration provide shall or may be done or performed, or by reason of any exercise of, or failure to exercise, any discretion provided for in this Declaration.

Section 12.6    Successors. In the event of the appointment of a successor Delaware Trustee, such successor shall cause an amendment to the certificate of trust of the Trust to be filed with the Secretary of State of Delaware in accordance with Section 3810 of the Delaware Statutory Trust Statute, indicating the change of the Delaware Trustee’s identity.

Section 12.7    Compensation and Reimbursement of Expenses. The Trust hereby agrees to (i) compensate the Delaware Trustee in accordance with a separate fee agreement with the Delaware Trustee, (ii) reimburse the Delaware Trustee for all reasonable expenses (including reasonable fees and expenses of counsel and other experts) and (iii) indemnify, defend and hold harmless the Delaware Trustee and any of the officers, directors, employees and agents of the Delaware Trustee (the “Indemnified Persons”) from and against any and all losses, damages, liabilities, claims, actions, suits, costs, expenses, disbursements (including the reasonable fees and expenses of counsel), taxes and penalties of any kind and nature whatsoever (collectively, “Expenses”), to the extent that such Expenses arise out of or are imposed upon or asserted at any time against such Indemnified Persons with respect to the performance of any duties contemplated by this Declaration, the creation, operation or termination of the Trust or the transactions contemplated hereby; provided, however, that the Trust shall not be required to indemnify any Indemnified Person for any Expenses which are a result of the willful misconduct, bad faith or gross negligence of such Indemnified Person. To the fullest extent

 

26


permitted by law, Expenses to be incurred by an Indemnified Person shall, from time to time, be advanced by, or on behalf of, the Trust prior to the final disposition of any matter upon receipt by the Trust of an undertaking by, or on behalf of, such Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified under this Declaration.

ARTICLE XIII

Miscellaneous

Section 13.1    Filing.

(a)    This Declaration and any amendment or supplement hereto shall be filed in such places as may be required or as the Trustees deem appropriate. Each amendment or supplement shall be accompanied by a certificate signed and acknowledged by a Trustee stating that such action was duly taken in a manner provided herein, and shall, upon insertion in the Trust’s minute book, be conclusive evidence of all amendments contained therein. A restated Declaration, containing the original Declaration and all amendments and supplements theretofore made, may be executed from time to time by a majority of the Trustees and shall, upon insertion in the Trust’s minute book, be conclusive evidence of all amendments and supplements contained therein and may thereafter be referred to in lieu of the original Declaration and the various amendments and supplements thereto.

(b)    The Trustees hereby ratify the previous filing of the Certificate of Trust with the Office of the Secretary of State of the State of Delaware in accordance with the Delaware Statutory Trust Statute.

Section 13.2    Governing Law. The trust set forth in this instrument is made in the State of Delaware, and the Trust and this Declaration, and the rights and obligations of the Trustees and Shareholders hereunder, are to be governed by and construed and administered according to the Delaware Statutory Trust Statute and the laws of said State; provided, however, that there shall not be applicable to the Trust, the Trustees or this Declaration (a) the provisions of Sections 3540 and 3561 of Title 12 of the Delaware Code or (b) any provisions of the laws (statutory or common) of the State of Delaware (other than the Delaware Statutory Trust Statute) pertaining to trusts which relate to or regulate: (i) the filing with any court or governmental body or agency of trustee accounts or schedules of trustee fees and charges, (ii) affirmative requirements to post bonds for trustees, officers, agents or employees of a trust, (iii) the necessity for obtaining court or other governmental approval concerning the acquisition, holding or disposition of real or personal property, (iv) fees or other sums payable to trustees, officers, agents or employees of a trust, (v) the allocation of receipts and expenditures to income or principal, (vi) restrictions or limitations on the permissible nature, amount or concentration of trust investments or requirements relating to the titling, storage or other manner of holding of trust assets, or (vii) the establishment of fiduciary or other standards or responsibilities or limitations on the acts or powers of trustees, which are inconsistent with the limitations or liabilities or authorities and powers of the Trustees set forth or referenced in this Declaration. The Trust shall be of the type commonly called a “statutory trust”, and without limiting the provisions hereof, the Trust may exercise all powers which are ordinarily exercised by such a trust under Delaware law. The Trust specifically reserves the right to exercise any of the powers or privileges afforded to trusts or actions that may be

 

27


engaged in by trusts under the Delaware Statutory Trust Statute, and the absence of a specific reference herein to any such power, privilege or action shall not imply that the Trust may not exercise such power or privilege or take such actions.

Section 13.3    Exclusive Delaware Jurisdiction. Each Trustee, each officer and each Person legally or beneficially owning a Share or an interest in a Share of the Trust (whether through a broker, dealer, bank, trust company or clearing corporation or an agent of any of the foregoing or otherwise), to the fullest extent permitted by law, including Section 3804(e) of the Delaware Statutory Trust Statute, (i) irrevocably agrees that any claims, suits, actions or proceedings asserting a claim governed by the internal affairs (or similar) doctrine or arising out of or relating in any way to the Trust, the Delaware Statutory Trust Statute, this Declaration or the Bylaws (including, without limitation, any claims, suits, actions or proceedings to interpret, apply or enforce (A) the provisions of this Declaration or the Bylaws, or (B) the duties (including fiduciary duties), obligations or liabilities of the Trust to the Shareholders or the Trustees, or of officers or the Trustees to the Trust, to the Shareholders or each other, or (C) the rights or powers of, or restrictions on, the Trust, the officers, the Trustees or the Shareholders, or (D) any provision of the Delaware Statutory Trust Statute or other laws of the State of Delaware pertaining to trusts made applicable to the Trust pursuant to Section 3809 of the Delaware Statutory Trust Statute, or (E) any other instrument, document, agreement or certificate contemplated by any provision of the Delaware Statutory Trust Statute, the Declaration or the Bylaws relating in any way to the Trust (regardless, in each case, of whether such claims, suits, actions or proceedings (x) sound in contract, tort, fraud or otherwise, (y) are based on common law, statutory, equitable, legal or other grounds, or (z) are derivative or direct claims)), shall be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, any other court in the State of Delaware with subject matter jurisdiction, (ii) irrevocably submits to the exclusive jurisdiction of such courts in connection with any such claim, suit, action or proceeding, (iii) irrevocably agrees not to, and waives any right to, assert in any such claim, suit, action or proceeding that (A) it is not personally subject to the jurisdiction of such courts or any other court to which proceedings in such courts may be appealed, (B) such claim, suit, action or proceeding is brought in an inconvenient forum, or (C) the venue of such claim, suit, action or proceeding is improper, (iv) consents to process being served in any such claim, suit, action or proceeding by mailing, certified mail, return receipt requested, a copy thereof to such party at the address in effect for notices hereunder, and agrees that such service shall constitute good and sufficient service of process and notice thereof; provided, nothing in clause (iv) hereof shall affect or limit any right to serve process in any other manner permitted by law, and (v) irrevocably waives any and all right to trial by jury in any such claim, suit, action or proceeding. This Section 13.3 shall not apply to any claims brought under federal securities law, or the rules and regulations thereunder.

Section 13.4    Counterparts. This Declaration may be simultaneously executed in several counterparts, each of which shall be deemed to be an original, and such counterparts, together, shall constitute one and the same instrument, which shall be sufficiently evidenced by any such original counterpart.

Section 13.5    Reliance by Third Parties. Any certificate executed by an individual who, according to the records of the Trust, or of any recording office in which this Declaration may be recorded, appears to be a Trustee hereunder, certifying to: (a) the number or identity of Trustees

 

28


or Shareholders, (b) the name of the Trust, (c) the due authorization of the execution of any instrument or writing, (d) the form of any vote passed at a meeting of Trustees or Shareholders, (e) the fact that the number of Trustees or Shareholders present at any meeting or executing any written instrument satisfies the requirements of this Declaration, (f) the form of any By-Laws adopted by or the identity of any officers elected by the Trustees, or (g) the existence of any fact or facts which in any manner relate to the affairs of the Trust, shall be conclusive evidence as to the matters so certified in favor of any person dealing with the Trustees and their successors.

Section 13.6    Provisions in Conflict with Law or Regulation. (a) The provisions of this Declaration are severable, and if the Trustees shall determine, with the advice of counsel, that any of such provisions is in conflict with the 1940 Act, the regulated investment company provisions of the Internal Revenue Code or with other applicable laws and regulations, the conflicting provision shall be deemed never to have constituted a part of this Declaration; provided, however, that such determination shall not affect any of the remaining provisions of this Declaration or render invalid or improper any action taken or omitted prior to such determination.

(b)    If any provision of this Declaration shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall attach only to such provision in such jurisdiction and shall not in any manner affect such provision in any other jurisdiction or any other provision of this Declaration in any jurisdiction.

[SIGNATURE PAGE FOLLOWS]

 

29


IN WITNESS WHEREOF, the undersigned have caused this Declaration to be executed as of the day and year first above written.

 

/s/ Brad Marshall

Brad Marshall, as Trustee

/s/ Daniel H. Smith, Jr.

Daniel H. Smith, Jr., as Trustee

/s/ Vikrant Sawhney

Vikrant Sawhney, as Trustee

/s/ Robert Bass

Robert Bass, as Trustee

/s/ Tracy Collins

Tracy Collins, as Trustee

/s/ Vicki L. Fuller

Vicki L. Fuller, as Trustee

/s/ James F. Clark

James F. Clark, as Trustee


Wilmington Trust, National Association, as

Delaware Trustee

By:   /s/ David B. Young
  Name: David B. Young
  Title: Vice President

 

2

Exhibit (b)

AMENDED AND RESTATED

BLACKSTONE SECURED LENDING FUND

BY-LAWS

Dated as of October 18, 2021

 

 


TABLE OF CONTENTS

 

          Page  
ARTICLE I      
Shareholder Meetings      1  

1.1

   Chairman      1  

1.2

   Inspectors of Election      1  

1.3

   Records at Shareholder Meetings      1  

1.4

   Notice of Shareholder Business and Nominations      2  

ARTICLE II

     
Trustees      5  

2.1

   Regular Meetings      5  

2.2

   Chairman      5  
ARTICLE III      
Officers      5  

3.1

   Officers of the Trust      5  

3.2

   Election and Tenure      6  

3.3

   Removal of Officers      6  

3.4

   Bonds and Surety      6  

3.5

   Chief Executive Officer      6  

3.6

   Secretary      6  

3.7

   Chief Financial Officer and Treasurer      7  

3.8

   Other Officers and Duties      7  
ARTICLE IV         7  

Committees

     7  

4.1

   Appointment      7  

4.2

   Powers      7  

 

i


ARTICLE V            
Miscellaneous         8  
5.1    Depositories      8  
5.2    Signatures      8  
5.3    Seal      8  
ARTICLE VI      

Stock Transfers

     8  
6.1    Transfer Agents, Registrars and the Like      8  
6.2    Transfer of Shares      8  
6.3    Registered Shareholders      8  
ARTICLE VII      

Amendment of By-Laws

     9  
7.1    Amendment and Repeal of By-Laws      9  

 

ii


BLACKSTONE SECURED LENDING FUND

AMENDED AND RESTATED BY-LAWS

These Amended and Restated By-Laws are made and adopted pursuant to Section 3.8 of the Fourth Amended and Restated Agreement and Declaration of Trust governing Blackstone Secured Lending Fund (the “Trust”) dated as of October 18, 2021, as from time to time amended (hereinafter called the “Declaration”). These Amended and Restated By-Laws amend and restate the prior by-laws of the Trust dated as of July 31, 2018 and shall be effective upon an Exchange Listing (as defined in the Declaration). All words and terms capitalized in these By-Laws shall have the meaning or meanings set forth for such words or terms in the Declaration.

ARTICLE I

Shareholder Meetings

1.1    Chairman. The Chairman, if any, shall act as chairperson at all meetings of the Shareholders; in the Chairman’s absence, the Trustee or Trustees present at each meeting may elect a temporary chairperson for the meeting, who may be one of themselves.

1.2    Inspectors of Election. In advance of any meeting of Shareholders, the Trustees may appoint Inspectors of Election to act at the meeting or any adjournment thereof. If Inspectors of Election are not so appointed, the Chairman, if any, of any meeting of Shareholders may, and on the request of any Shareholder or Shareholder proxy shall, appoint Inspectors of Election of the meeting. The number of Inspectors of Election shall be either one or three. If appointed at the meeting on the request of one or more Shareholders or proxies, a majority of Shares present shall determine whether one or three Inspectors of Election are to be appointed, but failure to allow such determination by the Shareholders shall not affect the validity of the appointment of Inspectors of Election. In case any person appointed as Inspector of Election fails to appear or fails or refuses to act, the vacancy may be filled by appointment made by the Trustees in advance of the convening of the meeting or at the meeting by the person acting as Chairman. The Inspectors of Election shall determine the number of Shares outstanding, the Shares represented at the meeting, the existence of a quorum, the authenticity, validity and effect of proxies, shall receive votes, ballots or consents, shall hear and determine all challenges and questions in any way arising in connection with the right to vote, shall count and tabulate all votes or consents, determine the results, and do such other acts as may be proper to conduct the election or vote with fairness to all Shareholders. If there are three Inspectors of Election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. On request of the Chairman, if any, of the meeting, or of any Shareholder or Shareholder proxy, the Inspectors of Election shall make a report in writing of any challenge or question or matter determined by them and shall execute a certificate of any facts found by them.

1.3    Records at Shareholder Meetings. At each meeting of the Shareholders, there shall be made available for inspection at a convenient time and place during normal business hours, if requested by Shareholders, the minutes of the last previous Annual or Special Meeting of Shareholders of the Trust and a list of the Shareholders of the Trust, as of the record date of the meeting or the date of closing of transfer books, as the case may be. Such list of Shareholders shall contain the name and the address of each Shareholder in alphabetical order and the number of Shares owned by such Shareholder. Shareholders shall have such other rights and procedures of inspection of the books and records of the Trust as are granted to shareholders of a Delaware business corporation.


1.4    Notice of Shareholder Business and Nominations.

(A)     Annual Meetings of Shareholders.

(1)     Nominations of persons for election as a Trustee of the Trust and the proposal of other business to be considered by the Shareholders may be made at an annual meeting of Shareholders only (a) pursuant to the Trust’s notice of meeting (or any supplement thereto), (b) by or at the direction of the Board of Trustees or any committee thereof or (c) by any Shareholder of the Trust who was a Shareholder of record of the Trust at the time the notice provided for in this Section 1.4 is delivered to the Secretary of the Trust, who is entitled to vote upon nominations or proposals at the meeting and who complies with the notice procedures set forth in this Section 1.4.

(2)     For any nominations or other business to be properly brought before an annual meeting by a Shareholder pursuant to clause (c) of paragraph (A) (1) of this Section 1.4, the Shareholder must have given timely notice thereof in writing to the Secretary of the Trust and any such proposed business (other than the nominations of persons for election to the Trust) must constitute a proper matter for Shareholder action. To be timely, a Shareholder’s notice shall be delivered to the Secretary of the Trust at the principal executive offices of the Trust not later than the close of business on the one hundred twentieth (120th) day, nor earlier than the close of business on the one hundred fiftieth (150th) day, prior to the first anniversary of the preceding year’s annual meeting (provided, however, that in the event that the date of the annual meeting is more than thirty (30) days before or more than seventy (70) days after such anniversary date, notice by the Shareholder must be so delivered not earlier than the close of business on the one hundred fiftieth (150th) day prior to such annual meeting and not later than the close of business on the later of the one hundred twentieth (120th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the Trust). In no event shall the public announcement of an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for the giving of a Shareholder’s notice as described above. Such Shareholder’s notice shall set forth: (a) as to each person whom the Shareholder proposes to nominate for election as a Trustee (i) all information relating to such person that is required to be disclosed in solicitations of proxies for election of Trustees in an election contest, or is otherwise required, in each case pursuant to and in accordance with Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations promulgated thereunder and (ii) such person’s written consent to being named in the proxy statement as a nominee and to serving as a Trustee if elected; (b) as to any other business that the Shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration), the reasons for conducting such business at the meeting and any material interest in such business of such Shareholder and the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the Shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such Shareholder, as they appear on the Trust’s books, and of such beneficial owner, (ii) the class or series and number of Shares which are owned beneficially and of record by such

 

2


Shareholder and such beneficial owner, (iii) a description of any agreement, arrangement or understanding with respect to the nomination or proposal between or among such Shareholder and such beneficial owner, any of their respective affiliates or associates, and any others acting in concert with any of the foregoing, including, in the case of a nomination, the nominees, (iv) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the Shareholder’s notice by, or on behalf of, such Shareholder and such beneficial owners, whether or not such instrument or right shall be subject to settlement in underlying Shares, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such Shareholder or such beneficial owner, with respect to Shares of the Trust, (v) a representation that the Shareholder is a holder of record of Shares of the Trust entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination, (vi) a representation whether the Shareholder or the beneficial owner, if any, intends or is part of a group which intends (a) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Trust’s outstanding Shares required to approve or adopt the proposal or elect the nominee and/or (b) otherwise to solicit proxies or votes from Shareholders in support of such proposal or nomination and (vii) any other information relating to the Shareholder and beneficial owner, if any, required to be disclosed in a proxy statement or other filings required to be made in connection with the solicitations of proxies for, as applicable, the proposal and/or for the election of Trustees in an election contest pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder. The foregoing notice requirements of paragraph (A) of this Section 1.4 shall be deemed satisfied by a Shareholder with respect to business other than a nomination if the Shareholder has notified the Trust of his, her or its intention to present a proposal at an annual meeting in compliance with applicable rules and regulations promulgated under the Exchange Act and such Shareholder’s proposal has been included in a proxy statement that has been prepared by the Trust to solicit proxies for such annual meeting. The Trust may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as a Trustee of the Trust.

(3)     Notwithstanding anything in the second sentence of paragraph (A)(2) of this Section 1.4 to the contrary, in the event that the number of Trustees to be elected to the Board of Trustees of the Trust at the annual meeting is increased effective after the time period for which nominations would otherwise be due under paragraph (A)(2) of this Section 1.4 and there is no public announcement by the Trust naming the nominees for the additional trusteeships at least one hundred (100) days prior to the first anniversary of the preceding year’s annual meeting, a Shareholder’s notice required by this Section 1.4 shall also be considered timely, but only with respect to nominees for the additional trusteeships, if it shall be delivered to the Secretary of the Trust at the principal executive offices of the Trust not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the Trust.

(B)     Special Meetings of Shareholders. Special meetings of Shareholders shall be called only as contemplated by Section 10.1 of the Declaration. Only such business shall be conducted at a special meeting of Shareholders as shall have been brought before the meeting pursuant to the Trust’s notice of meeting. Nominations of persons for election to the Board of Trustees may be made at a special meeting of Shareholders at which Trustees are to be elected

 

3


pursuant to the Trust’s notice of meeting (1) by or at the direction of the Board of Trustees or any committee thereof or (2) provided that the Board of Trustees has determined that Trustees shall be elected at such meeting, by any Shareholder of the Trust who is a Shareholder of record at the time the notice provided for in this Section 1.4 is delivered to the Secretary of the Trust, who is entitled to vote upon persons for election as Trustees at the meeting and who complies with the notice procedures set forth in this Section 1.4. In the event a special meeting of Shareholders is called pursuant to Section 10.1 of the Declaration for the purpose of electing one or more Trustees to the Board of Trustees, any such Shareholder entitled to vote in such election of Trustees may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Trust’s notice of meeting, if the Shareholder’s notice required by paragraph (A)(2) of this Section 1.4 shall be delivered to the Secretary at the principal executive offices of the Trust not earlier than the close of business on the one hundred twentieth (120th) day prior to such special meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such special meeting or the tenth (10th) day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Trustees to be elected at such meeting. In no event shall the public announcement of an adjournment or postponement of a special meeting commence a new time period (or extend any time period) for the giving of a Shareholder’s notice as described above.

(C)    General.

(1)     Only such persons who are nominated in accordance with the procedures set forth in this Section 1.4 shall be eligible to be elected at an annual or special meeting of Shareholders of the Trust to serve as Trustees and only such business shall be conducted at a meeting of Shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 1.4. Except as otherwise provided by law, the chairman of the meeting shall have the power and duty (a) to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 1.4 (including whether the Shareholder or beneficial owner, if any, on whose behalf the nomination or proposal is made solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies or votes in support of such Shareholder’s nominee or proposal in compliance with such Shareholder’s representation as required by clause (A)(2)(c)(vi) of this Section 1.4) and (b) if any proposed nomination or business was not made or proposed in compliance with this Section 1.4, to declare that such nomination shall be disregarded or that such proposed business shall not be transacted. Notwithstanding the foregoing provisions of this Section 1.4, unless otherwise required by law, if the Shareholder (or a qualified representative of the Shareholder) does not appear at the annual or special meeting of Shareholders of the Trust to present a nomination or proposed business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Trust.    For purposes of this Section 1.4, to be considered a qualified representative of the Shareholder, a person must be a duly authorized officer, manager or partner of such Shareholder or must be authorized by a writing executed by such Shareholder or an electronic transmission delivered by such Shareholder to act for such Shareholder as proxy at the meeting of Shareholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of Shareholders.

 

4


(2)    For purposes of this Section 1.4, “public announcement” shall include disclosure in a press release reported by the Dow Jones News Service, Associated Press or other national news service or in a document publicly filed by the Trust with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder.

(3)    Notwithstanding the foregoing provisions of this Section 1.4, a Shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder with respect to the matters set forth in this Section 1.4; provided however, that any references in these By-laws to the Exchange Act or the rules and regulations promulgated thereunder are not intended to and shall not limit any requirements applicable to nominations or proposals as to any other business to be considered pursuant to this Section 1.4 (including paragraphs A(1)(c) and B hereof), and compliance with paragraphs A(1)(c) and B of this Section 1.4 shall be the exclusive means for a Shareholder to make nominations or submit other business (other than, as provided in the penultimate sentence of A(2), business other than nominations brought properly under and in compliance with Rule 14a-8 of the Exchange Act, as may be amended from time to time). Nothing in this Section 1.4 shall be deemed to affect any rights of Shareholders to request inclusion of proposals or nominations in the Trust’s proxy statement pursuant to applicable rules and regulations promulgated under the Exchange Act.

ARTICLE II

Trustees

2.1    Regular Meetings. Meetings of the Trustees shall be held from time to time upon the call of the Chairman, if any, the President, the Secretary or any two Trustees. Regular meetings of the Trustees may be held without call or notice and shall generally be held quarterly. Neither the business to be transacted at, nor the purpose of, any meeting of the Board of Trustees need be stated in the notice or waiver of notice of such meeting, and no notice need be given of action proposed to be taken by unanimous written consent.

2.2    Chairman. The Trustees shall have the power to appoint from among the members of the Board of Trustees a Chairman. Such appointment shall be by majority vote of the Trustees. Such Chairman shall serve until his or her successor is appointed or until his or her earlier death, resignation or removal. When present he or she shall preside at the meetings of the Shareholders and of the Trustees. The Chairman shall, subject to the control of the Trustees, perform such other powers and duties as may be from time to time assigned to him or her by the Trustees or prescribed by the Declaration or these By-Laws, consistent with his or her position. The Chairman need not be a Shareholder.

ARTICLE III

Officers

3.1    Officers of the Trust. The officers of the Trust shall consist of a President, a Secretary, a Treasurer and such other officers or assistant officers as may be elected or authorized by the Trustees. Subject to any applicable provisions of the Declaration, the compensation of the

 

5


officers and Trustees shall be fixed from time to time by the Trustees or, in the case of officers, by any Committee or officer upon whom such power may be conferred by the Trustees. No officer shall be prevented from receiving such compensation as such officer by reason of the fact that he or she is also a Trustee. Any two or more of the offices may be held by the same Person. No officer of the Trust need be a Trustee.

3.2    Election and Tenure. At the initial organization meeting, the Trustees shall elect the Chairman, if any, Chief Executive Officer, Secretary, Treasurer and such other officers as the Trustees shall deem necessary or appropriate in order to carry out the business of the Trust. Such officers shall serve at the pleasure of the Trustees or until their successors have been duly elected and qualified. The Trustees may fill any vacancy in office or add any additional officers at any time.

3.3    Removal of Officers. Any officer may be removed at any time, with or without cause, by action of a majority of the Trustees. This provision shall not prevent the making of a contract of employment for a definite term with any officer and shall have no effect upon any cause of action which any officer may have as a result of removal in breach of a contract of employment. Any officer may resign at any time by notice in writing signed by such officer and delivered or mailed to the Chairman, if any, President, or Secretary, and such resignation shall take effect immediately upon receipt by the Chairman, if any, President, or Secretary, or at a later date according to the terms of such notice in writing.

3.4    Bonds and Surety. Any officer may be required by the Trustees to be bonded for the faithful performance of such officer’s duties in such amount and with such sureties as the Trustees may determine.

3.5    Chief Executive Officer. The Chief Executive Officer, subject to the control of the Trustees, shall have general supervision, direction and control of the business of the Trust and of its employees and shall exercise such general powers of management as are usually vested in the office of Chief Executive Officer of a corporation. Unless otherwise directed by the Trustees, the Chief Executive Officer shall have full authority and power, on behalf of all of the Trustees, to attend and to act and to vote, on behalf of the Trust at any meetings of business organizations in which the Trust holds an interest, or to confer such powers upon any other persons, by executing any proxies duly authorizing such persons. The Chief Executive Officer shall have such further authorities and duties as the Trustees shall from time to time determine. In the absence or disability of the Chief Executive Officer, the Board of Trustees may by resolution delegate the powers and duties of the Chief Executive Officer to any other officer or to any Trustee, or to any other person whom it may select. Such delegates shall perform all of the duties of the Chief Executive Officer, and when so acting shall have all the powers of and be subject to all of the restrictions upon the Chief Executive Officer.

3.6    Secretary. The Secretary shall maintain the minutes of all meetings of, and record all votes of, Shareholders, Trustees and the Executive Committee, if any. The Secretary shall be custodian of the seal of the Trust, if any, and the Secretary (and any other person so authorized by the Trustees) shall affix the seal, or if permitted, facsimile thereof, to any instrument executed by the Trust which would be sealed by a Delaware business corporation executing the same or a similar instrument and shall attest the seal and the signature or signatures of the officer or officers

 

6


executing such instrument on behalf of the Trust. The Secretary shall also perform any other duties commonly incident to such office in a Delaware business corporation, and shall have such other authorities and duties as the Trustees shall from time to time determine.

3.7    Chief Financial Officer and Treasurer. Except as otherwise directed by the Trustees, the Chief Financial Officer and Treasurer shall have the general supervision of the monies, funds, securities, notes receivable and other valuable papers and documents of the Trust, and shall have and exercise under the supervision of the Trustees and of the Chief Executive Officer all powers and duties normally incident to the office. The Chief Financial Officer and Treasurer may endorse for deposit or collection all notes, checks and other instruments payable to the Trust or to its order. The Chief Financial Officer and Treasurer shall deposit all funds of the Trust in such depositories as the Trustees shall designate. The Chief Financial Officer and Treasurer shall be responsible for such disbursement of the funds of the Trust as may be ordered by the Trustees or the Chief Executive Officer. The Treasurer shall keep accurate account of the books of the Trust’s transactions which shall be the property of the Trust, and which together with all other property of the Trust in the Chief Financial Officer and Treasurer’s possession, shall be subject at all times to the inspection and control of the Trustees. Unless the Trustees shall otherwise determine, the Chief Financial Officer and Treasurer shall be the principal accounting officer of the Trust and shall also be the principal financial officer of the Trust. The Chief Financial Officer and Treasurer shall have such other duties and authorities as the Trustees shall from time to time determine. Notwithstanding anything to the contrary herein contained, the Trustees may authorize any adviser, administrator, manager or transfer agent to maintain bank accounts and deposit and disburse funds of any series of the Trust on behalf of such series.

3.8    Other Officers and Duties. The Trustees may elect such other officers and assistant officers as they shall from time to time determine to be necessary or desirable in order to conduct the business of the Trust. Assistant officers shall act generally in the absence of the officer whom they assist and shall assist that officer in the duties of the office. Each officer, employee and agent of the Trust shall have such other duties and authority as may be conferred upon such person by the Trustees or delegated to such person by the President.

ARTICLE IV

Committees

4.1    Appointment. The Board of Trustees may appoint from its members an Audit Committee, a Nominating Committee and other committees, composed of one or more trustees, to serve at the pleasure of the Board of Trustees.

4.2    Powers. The Board of Trustees may delegate to committees appointed under Section 4.1 any of the powers of the Board of Trustees, except as prohibited by law.

 

7


ARTICLE V

Miscellaneous

5.1    Depositories. In accordance with Section 7.1 of the Declaration, the funds of the Trust shall be deposited in such custodians as the Trustees shall designate and shall be drawn out on checks, drafts or other orders signed by such officer, officers, agent or agents (including the adviser, administrator or manager), as the Trustees may from time to time authorize.

5.2    Signatures. All contracts and other instruments shall be executed on behalf of the Trust by its authorized officers, agent or agents, as provided in the Declaration or By-Laws or as the Trustees may from time to time by resolution provide.

5.3    Seal. The Trust is not required to have any seal, and the adoption or use of a seal shall be purely ornamental and be of no legal effect. The seal, if any, of the Trust may be affixed to any instrument, and the seal and its attestation may be lithographed, engraved or otherwise printed on any document with the same force and effect as if it had been imprinted and affixed manually in the same manner and with the same force and effect as if done by a Delaware business corporation. The presence or absence of a seal shall have no effect on the validity, enforceability or binding nature of any document or instrument that is otherwise duly authorized, executed and delivered.

ARTICLE VI

Stock Transfers

6.1    Transfer Agents, Registrars and the Like. As provided in Section 6.7 of the Declaration, the Trustees shall have authority to employ and compensate such transfer agents and registrars with respect to the Shares of the Trust as the Trustees shall deem necessary or desirable. In addition, the Trustees shall have power to employ and compensate such dividend disbursing agents, warrant agents and agents for the reinvestment of dividends as they shall deem necessary or desirable. Any of such agents shall have such power and authority as is delegated to any of them by the Trustees.

6.2    Transfer of Shares. The Shares of the Trust shall not be transferrable except as permitted in the Declaration. The Trust, or its transfer agents, shall be authorized to refuse any transfer unless and until presentation of such evidence as may be reasonably required to show that the requested transfer is proper.

6.3    Registered Shareholders. The Trust may deem and treat the holder of record of any Shares as the absolute owner thereof for all purposes and shall not be required to take any notice of any right or claim of right of any other person.

 

8


ARTICLE VII

Amendment of By-Laws

7.1    Amendment and Repeal of By-Laws. In accordance with Section 3.8 of the Declaration, the Trustees shall have the exclusive power to amend or repeal the By-Laws or adopt new By-Laws at any time. Action by the Trustees with respect to the By-Laws shall be taken by an affirmative vote of a majority of the Trustees. The Trustees shall in no event adopt By-Laws which are in conflict with the Declaration, and any apparent inconsistency shall be construed in favor of the related provisions in the Declaration.

 

9

Exhibit (g)

AMENDED AND RESTATED

INVESTMENT ADVISORY AGREEMENT

This Amended and Restated Investment Advisory Agreement, dated and effective as of October 18, 2021, is made by and between Blackstone Secured Lending Fund, a Delaware statutory trust (herein referred to as the “Fund”) and Blackstone Credit BDC Advisors LLC, a Delaware limited liability company (herein referred to as the “Adviser”) (this “Agreement”).

1. Appointment of Adviser. The Adviser hereby undertakes and agrees, upon the terms and conditions herein set forth, to provide overall investment advisory services for the Fund and in connection therewith to, in accordance with the Fund’s investment objective, policies and restrictions as in effect from time to time:

(i)    determining the composition of the Fund’s portfolio, the nature and timing of the changes to the Fund’s portfolio and the manner of implementing such changes in accordance with the Fund’s investment objective, policies and restrictions;

(ii)    identifying investment opportunities and making investment decisions for the Fund, including negotiating the terms of investments in, and dispositions of, portfolio securities and other instruments on the Fund’s behalf;

(iii)    monitoring the Fund’s investments;

(iv)    performing due diligence on prospective portfolio companies;

(v)    exercising voting rights in respect of portfolio securities and other investments for the Fund;

(vi)    serving on, and exercising observer rights for, boards of directors and similar committees of the Fund’s portfolio companies;

(vii)    negotiating, obtaining and managing financing facilities and other forms of leverage; and

(viii)    providing the Fund with such other investment advisory and related services as the Fund may, from time to time, reasonably require for the investment of capital, which may include, without limitation:

 

  a.

making, in consultation with the Fund’s board of trustees (the “Board of Trustees”), investment strategy decisions for the Fund;

 

  b.

reasonably assisting the Board of Trustees and the Fund’s other service providers with the valuation of the Fund’s assets;

 

  c.

directing investment professionals of the Adviser or non-investment professionals of the Administrator (as defined below) to provide managerial assistance to portfolio companies of the Fund as requested by the Fund, from time to time; and

 

  d.

exercising voting rights in respect of the Fund’s portfolio securities and other investments.


Subject to the supervision of the Board of Trustees, the Adviser shall have the power and authority on behalf of the Fund to effectuate its investment decisions for the Fund, including the execution and delivery of all documents relating to the Fund’s investments, the placing of orders for other purchase or sale transactions on behalf of the Fund and causing the Fund to pay investment-related expenses. In the event that the Fund determines to acquire debt financing, the Adviser will arrange for such financing on the Fund’s behalf. If it is necessary or appropriate for the Adviser to make investments on behalf of the Fund through a special purpose vehicle, the Adviser shall have authority to create or arrange for the creation of such special purpose vehicle and to make such investments through such special purpose vehicle (in accordance with the Investment Company Act of 1940, as amended (the “1940 Act”)).

Subject to the prior approval of a majority of the Board of Trustees, including a majority of the Board of Trustees who are not “interested persons” of the Fund and, to the extent required by the 1940 Act and the rules and regulations thereunder, subject to any applicable guidance or interpretation of the Securities and Exchange Commission (“SEC”) or its staff, by the shareholders of the Fund, as applicable, the Adviser may, from time to time, delegate to a sub-adviser or other service provider any of the Adviser’s duties under this Agreement, including the management of all or a portion of the assets being managed. The Fund acknowledges that the Adviser makes no warranty that any investments made by the Adviser hereunder will not depreciate in value or at any time not be affected by adverse tax consequences, nor does it give any warranty as to the performance or profitability of the assets or the success of any investment strategy recommended or used by the Adviser.

2. Expenses. In connection herewith, the Adviser agrees to maintain a staff within its organization to furnish the above services to the Fund. The Adviser shall bear all expenses arising out of its duties hereunder, except as provided in this Section 2.

Except as specifically provided below and above in Section 1 hereof, the Fund anticipates that all investment professionals and staff of the Adviser, when and to the extent engaged in providing investment advisory services to the Fund, and the base compensation, bonus and benefits, and the routine overhead expenses, of such personnel allocable to such services, will be provided and paid for by the Adviser. The Fund will bear all other costs and expenses of the Fund’s operations, administration and transactions, including, but not limited to:

(a) investment advisory fees, including management fees and incentive fees, to the Adviser, pursuant to this Agreement;

(b) the Fund’s allocable portion of compensation, overhead (including rent, office equipment and utilities) and other expenses incurred by Blackstone Alternative Credit Advisors LP (the “Administrator”) in performing its administrative obligations under the administration agreement between the Fund and the Administrator (the “Administration Agreement”), including but not limited to: (i) the Fund’s chief compliance officer, chief financial officer and their respective staffs; (ii) investor relations, legal, operations and other non-investment professionals at the Administrator that perform duties for the Fund; and (iii) any internal audit group personnel of Blackstone Inc. or any of its affiliates; and

(c) all other expenses of the Fund’s operations and transactions including, without limitation, those relating to:

(i) the cost of the Fund’s organization and offering, subject to a cap of 0.10% of the Fund’s total capital commitments (“Capital Commitments”);

(ii) the cost of calculating the Fund’s net asset value, including the cost of any third-party valuation services;


(iii) the cost of effecting any sales and repurchases of the Fund’s common shares of beneficial interest (“Shares”) and other securities;

(iv) fees and expenses payable under any dealer manager and placement agent agreements, if any;

(v) debt service (including interest, fees and expenses) and other costs arising out of all borrowings, leverage, guarantees or other financing arrangements, including, but not limited to, the arranging thereof;

(vi) all fees, costs and expenses of any loan servicers and other service providers and of any custodians, lenders, investment banks and other financing sources;

(vii) costs incurred in connection with the formation or maintenance of entities or vehicles to hold the Fund’s assets for tax or other purposes;

(viii) costs of derivatives and hedging;

(ix) expenses, including travel, entertainment, lodging and meal expenses, incurred by the Adviser, or members of its investment team, or payable to third parties, in evaluating, developing, negotiating, structuring and performing due diligence on prospective portfolio companies, including such expenses related to potential investments that were not consummated, and, if necessary, enforcing the Fund’s rights;

(x) expenses (including the allocable portions of compensation and out-of-pocket expenses such as travel expenses) or an appropriate portion thereof of employees of the Adviser to the extent such expenses relate to attendance at meetings of the Board of Trustees or any committees thereof;

(xi) all fees, costs and expenses, if any, incurred by or on behalf of the Fund in developing, negotiating and structuring prospective or potential investments that are not ultimately made, including without limitation any legal, tax, administrative, accounting, travel and entertainment, advisory, consulting and printing expenses, reverse termination fees and any liquidated damages, forfeited deposits or similar payments;

(xii) the allocated costs incurred by the Adviser and the Administrator in providing managerial assistance to those portfolio companies that request it;

(xiii) all brokerage costs, prime brokerage fees, custodial expenses, agent bank and other bank service fees; private placement fees, appraisal fees, commitment fees, underwriting costs and commissions, including commissions and other compensation payable to brokers or dealers; costs and expenses of any lenders, investment banks and other financing sources, and other investment costs, fees and expenses actually incurred in connection with evaluating, making, holding, settling, monitoring or disposing of actual investments (including, without limitation, travel, entertainment, lodging and meal expenses, any costs or expenses relating to currency conversion in the case of investments denominated in a currency other than U.S. dollars) and expenses arising out of trade settlements (including any delayed compensation expenses);

(xiv) investment costs, including all fees, costs and expenses incurred in evaluating, developing, negotiating, structuring, trading, settling, monitoring and holding actual investments including, without limitation, any financing, legal, filing, auditing, tax, accounting, compliance, loan administration, advisory, consulting, engineering and other professional fees, costs and expenses in


connection therewith (to the extent the Adviser is not reimbursed by a prospective or actual issuer of the applicable investment or other third parties or capitalized as part of the acquisition price of the transaction) and any costs and expenses associated with vehicles through which the Fund directly or indirectly participate in investments;

(xv) transfer agent, dividend agent and custodial fees;

(xvi) fees and expenses associated with marketing efforts;

(xvii) federal and state registration fees, franchise fees, any stock exchange listing fees and fees payable to rating agencies;

(xviii) independent trustees’ fees and expenses including reasonable travel, entertainment, lodging and meal expenses, and any legal counsel or other advisors retained by, or at the discretion or for the benefit of, the independent trustees;

(xix) costs of preparing financial statements and maintaining books and records, costs of Sarbanes-Oxley Act of 2002 compliance and attestation and costs of preparing and filing reports or other documents with the SEC, Financial Industry Regulatory Authority, U.S. Commodity Futures Trading Commission (“CFTC”) and other regulatory bodies and other reporting and compliance costs, including registration and exchange listing and the costs associated with reporting and compliance obligations under the 1940 Act and any other applicable federal and state securities laws, and the compensation of professionals responsible for the foregoing;

(xx) all fees, costs and expenses associated with the preparation and issuance of the Fund’s periodic reports and related statements (e.g., financial statements and tax returns) and other printing and reporting-related expenses (including other notices and communications) in respect of the Fund and its activities (including internal expenses, charges and/or related costs incurred, charged or specifically attributed or allocated by the Fund or the Adviser or its affiliates in connection with such provision of services thereby);

(xxi) the costs of any reports, proxy statements or other notices to shareholders (including printing and mailing costs) and the costs of any Shareholder or trustee meetings;

(xxii) proxy voting expenses;

(xxiii) costs associated with an Exchange Listing (defined below);

(xxiv) costs of registration rights granted to certain investors;

(xxv) any taxes and/or tax-related interest, fees or other governmental charges (including any penalties incurred where the Adviser lacks sufficient information from third parties to file a timely and complete tax return) levied against the Fund and all expenses incurred in connection with any tax audit, investigation, litigation, settlement or review of the Fund and the amount of any judgments, fines, remediation or settlements paid in connection therewith;

(xxvi) all fees, costs and expenses of any litigation involving the Fund or its portfolio companies and the amount of any judgments or settlements paid in connection therewith, trustees and officers, liability or other insurance (including costs of title insurance) and indemnification (including advancement of any fees, costs or expenses to persons entitled to indemnification) or extraordinary expense or liability relating to the Fund’s affairs;


(xxvii) all fees, costs and expenses associated with the Fund’s information, technology, communication, market data and research (including news and quotation equipment and services and including costs allocated by the Adviser’s or its affiliates internal research group (which are generally based on time spent, assets under management, usage rates, proportionate holdings, or a combination thereof or other reasonable methods determined by the Administrator)), reporting costs (which includes notices and other communications and internally allocated charges), and dues and expenses incurred in connection with membership in industry or trade organizations;

(xxviii) the costs of specialty and custom software for monitoring risk, compliance and the overall portfolio, including any development costs incurred prior to the filing of the Fund’s election to be treated as a business development company (“BDC”);

(xxix) costs associated with individual or group shareholders;

(xxx) fidelity bond, trustees and officers errors and omissions liability insurance and other insurance premiums;

(xxxi) direct costs and expenses of administration, including printing, mailing, long distance telephone, copying and secretarial and other staff;

(xxxii) fees, costs and expenses of winding up and liquidating the Fund’s assets;

(xxxiii) extraordinary expenses (such as litigation or indemnification);

(xxxiv) all fees, costs and expenses related to compliance-related matters (such as developing and implementing specific policies and procedures in order to comply with certain regulatory requirements) and regulatory filings related to the Fund’s activities (including, without limitation, expenses relating to the preparation and filing of reports to be filed with the CFTC, reports, disclosures, filings and notifications prepared in connection with the laws and/or regulations of jurisdictions in which the Fund engages in activities, including any notices, reports and/or filings required under The Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and any applicable legislation implemented by an EEA Member state in connection with such Directive, in all cases as amended from time to time and any related regulations, and other regulatory filings, notices or disclosures of the Adviser relating to the Fund and its activities) and/or other regulatory filings, notices or disclosures of the Adviser and its affiliates relating to the Fund and its activities;

(xxxv) costs and expenses (including travel) in connection with the diligence and oversight of the Fund’s service providers; and

(xxxvi) all other expenses incurred by the Administrator in connection with administering the Fund’s business.

With respect to 2(c)(i) above, if actual organization and offering costs incurred exceed 0.10% of the Fund’s total Capital Commitments, the Adviser or its affiliates will bear the excess costs. To the extent the Fund’s Capital Commitments later increase, the Adviser or its affiliates may be reimbursed for past payments of excess organization and offering costs made on the Fund’s behalf provided that the total organization and offering costs borne by the Fund do not exceed 0.10% of total Capital Commitments and provided further that the Adviser or its affiliates may not be reimbursed for payment of excess organization and offering expenses that were incurred more than three years prior to the proposed reimbursement. Any sales load, platform fees, servicing fees or similar fees or expenses charged directly to an investor in an offering by a placement agent or similar party will not be considered organization or offering expenses of the Fund for purposes of the Fund’s cap on organization and offering expenses.


From time to time, the Adviser, the Administrator or their affiliates may pay third-party providers of goods or services. The Fund will reimburse the Adviser, the Administrator or such affiliates thereof for any such amounts paid on the Fund’s behalf. From time to time, the Adviser or the Administrator may defer or waive fees and/or rights to be reimbursed for expenses. All of the foregoing expenses will ultimately be borne by the Fund’s shareholders, subject to the cap on organization and offering expenses described above.

Costs and expenses of the Administrator and the Adviser that are eligible for reimbursement by the Fund will be reasonably allocated to the Fund on the basis of time spent, assets under management, usage rates, proportionate holdings, a combination thereof or other reasonable methods determined by the Administrator.

3. Transactions with Affiliates. The Adviser is authorized on behalf of the Fund, from time to time when deemed to be in the best interests of the Fund and to the extent permitted by applicable law, to purchase and/or sell securities in which the Adviser or any of its affiliates underwrites, deals in and/or makes a market and/or may perform or seek to perform investment banking services for issuers of such securities. The Adviser is further authorized, to the extent permitted by applicable law, to select brokers (including any brokers affiliated with the Adviser) for the execution of trades for the Fund.

4. Best Execution; Research Services. The Adviser is authorized, for the purchase and sale of the Fund’s portfolio securities, to employ such dealers and brokers as may, in the judgment of the Adviser, implement the policy of the Fund to obtain the best results, taking into account such factors as price, including dealer spread, the size, type and difficulty of the transaction involved, the firm’s general execution and operational facilities and the firm’s risk in positioning the securities involved. Consistent with this policy, the Adviser is authorized to direct the execution of the Fund’s portfolio transactions to dealers and brokers furnishing statistical information or research deemed by the Adviser to be useful or valuable to the performance of its investment advisory functions for the Fund. It is understood that in these circumstances, as contemplated by Section 28(e) of the Securities Exchange Act of 1934, as amended, the commissions paid may be higher than those which the Fund might otherwise have paid to another broker if those services had not been provided. Information so received will be in addition to and not in lieu of the services required to be performed by the Adviser. It is understood that the expenses of the Adviser will not necessarily be reduced as a result of the receipt of such information or research. Research services furnished to the Adviser by brokers who effect securities transactions for the Fund may be used by the Adviser in servicing other investment companies, entities or funds and accounts which it manages. Similarly, research services furnished to the Adviser by brokers who effect securities transactions for other investment companies, entities or funds and accounts which the Adviser manages may be used by the Adviser in servicing the Fund. It is understood that not all of these research services are used by the Adviser in managing any particular account, including the Fund.

The Adviser and its affiliates may aggregate purchase or sale orders for the assets with purchase or sale orders for the same security for other clients’ accounts of the Adviser or of its affiliates, the Adviser’s own accounts and hold proprietary positions in accordance with its current aggregation and allocation policy (collectively, the “Advisory Clients”), but only if (x) in the Adviser’s reasonable judgment such aggregation results in an overall economic or other benefit to the assets taking into consideration the advantageous selling or purchase price, brokerage commission and other expenses and factors and (y) the Adviser’s actions with respect to aggregating orders for multiple Advisory Clients, as well as the Fund, are consistent with applicable law. However, the Adviser is under no obligation to aggregate any such orders under any circumstances.


5. Remuneration.

The Fund agrees to pay, and the Adviser agrees to accept, as compensation for the services provided by the Adviser hereunder, a base management fee and an incentive fee as hereinafter set forth. The Fund shall make any payments due hereunder to the Adviser or to the Adviser’s designee as the Adviser may otherwise direct.

(a)    Management Fee. The management fee is payable quarterly in arrears at an annual rate of (i) prior to the Fund’s Shares being listed on a national securities exchange (including through an initial public offering) or a sale of all or substantially all of the Fund’s assets to, or a merger or other liquidity transaction with, an entity in which the Fund’s shareholders receive shares of a publicly traded company which continues to be managed by the Adviser or an affiliate thereof (an “Exchange Listing”), 0.75%, and (ii) following an Exchange Listing, 1.0%, in each case of the average value of the Fund’s gross assets at the end of the two most recently completed calendar quarters. For the first calendar quarter in which the Fund has operations, gross assets will be measured as the average of gross assets at the date of the initial drawdown from investors and at the end of such first calendar quarter. For purposes of this Agreement, gross assets means the Fund’s total assets determined on a consolidated basis in accordance with generally accepted accounting principles in the United States (“GAAP”), excluding undrawn commitments but including assets purchased with borrowed amounts. If an Exchange Listing occurs on a date other than the first day of a calendar quarter, the management fee shall be calculated for such calendar quarter at a weighted rate calculated based on the fee rates applicable before and after the Exchange Listing based on the number of days in such calendar quarter before and after the Exchange Listing.

(b)    Incentive Fee. The incentive fee will consist of two components that are independent of each other, with the result that one component may be payable even if the other is not. A portion of the incentive fee is based on a percentage of the Fund’s income and a portion is based on a percentage of the Fund’s capital gains, each as described below.

(i)    Incentive Fee on Pre-Incentive Fee Net Investment Income. The portion based on the Fund’s income is based on Pre-Incentive Fee Net Investment Income Returns. “Pre-Incentive Fee Net Investment Income Returns” means, as the context requires, either the dollar value of, or percentage rate of return on the value of the Fund’s net assets at the end of the immediate preceding quarter from, interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that the Fund receives from portfolio companies) accrued during the calendar quarter, minus the Fund’s operating expenses accrued for the quarter (including the management fee, expenses payable under the Administration Agreement, and any interest expense or fees on any credit facilities or outstanding debt and dividends paid on any issued and outstanding preferred shares, but excluding the incentive fee).

Pre-Incentive Fee Net Investment Income Returns include, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with pay-in-kind interest and zero coupon securities), accrued income that the Fund has not yet received in cash. Pre-Incentive Fee Net Investment Income Returns do not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.

Pre-Incentive Fee Net Investment Income Returns, expressed as a rate of return on the value of the Fund’s net assets at the end of the immediate preceding quarter, is compared to a “hurdle rate” of return of 1.5% per quarter (6.0% annualized).

Prior to an Exchange Listing, the Fund will pay the Adviser an incentive fee quarterly in arrears with respect to the Fund’s Pre-Incentive Fee Net Investment Income Returns in each calendar quarter as follows:


   

no incentive fee based on Pre-Incentive Fee Net Investment Income Returns in any calendar quarter in which the Fund’s Pre-Incentive Fee Net Investment Income Returns do not exceed the hurdle rate of 1.5%;

 

   

100% of the dollar amount of the Fund’s Pre-Incentive Fee Net Investment Income Returns with respect to that portion of such Pre-Incentive Fee Net Investment Income Returns, if any, that exceeds the hurdle rate but is less than a rate of return of 1.76% (7.06% annualized); and

 

   

15% of the dollar amount of the Fund’s Pre-Incentive Fee Net Investment Income Returns, if any, that exceed a rate of return of 1.76% (7.06% annualized).

Following an Exchange Listing, the Fund will pay the Adviser an income based incentive fee quarterly in arrears based on the amount by which (x) its aggregate Pre-Incentive Fee Net Investment Income Returns, from the calendar quarter then ending (including the quarter in which an Exchange Listing occurs) and the eleven preceding calendar quarters (including the quarters prior to the Exchange Listing) (such period, the “Trailing Twelve Quarters”) exceeds (y) the Preferred Return Amount (as defined below) in respect of the Trailing Twelve Quarters. The Preferred Return Amount will be determined on a quarterly basis, and will be calculated by multiplying 1.50% by the Fund’s net asset value at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters. Subject to the Incentive Fee Cap (as defined below), the amount of the income based incentive fee that will be paid to the Adviser for a particular quarter will equal the excess of the incentive fee on Pre-Incentive Fee Net Investment Income Returns as calculated below less the aggregate incentive fee on Pre-Incentive Fee Net Investment Income Returns that were paid to the Adviser in the preceding eleven calendar quarters (or portion thereof) comprising the relevant Trailing Twelve Quarters.

The calculation of incentive fee on Pre-Incentive Fee Net Investment Income Returns for each quarter is as follows:

 

   

No incentive fee on Pre-Incentive Fee Net Investment Income Returns shall be payable to the Adviser in any calendar quarter in which the Fund’s Pre-Incentive Fee Net Investment Income Returns for the Trailing Twelve Quarters does not exceed the Preferred Return Amount.

 

   

100% of the Fund’s Pre-Incentive Fee Net Investment Income Returns for the Trailing Twelve Quarters, if any, that exceeds the Preferred Return Amount but is less than or equal to an amount (the “Catch-Up Amount”) determined on a quarterly basis by multiplying 1.76% (7.06% annualized) for periods prior to the Exchange Listing, or 1.82% (7.27% annualized) for periods following the Exchange Listing, by the Fund’s net asset value at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters. The Catch-Up Amount is intended to provide the Adviser with an incentive fee of 15.0% or 17.5%, as applicable, on all of the Fund’s Pre-Incentive Fee Net Investment Income Returns when the Fund’s Pre-Incentive Fee Net Investment Income Returns reaches 1.76% (7.06% annualized) or 1.82% per quarter (7.27% annualized), as applicable, during the Trailing Twelve Quarters.

 

   

For any quarter in which the Fund’s Pre-Incentive Fee Net Investment Income Returns for the Trailing Twelve Quarters exceeds the Catch-Up Amount, the incentive fee on Pre-Incentive Fee Net Investment Income Returns shall equal 15.0% prior to an Exchange Listing or 17.5% following


 

the Exchange Listing of the amount of the Fund’s Pre-Incentive Fee Net Investment Income Returns for such Trailing Twelve Quarters, as the Preferred Return Amount and Catch-Up Amount will have been achieved.

The incentive fee on Pre-Incentive Fee Net Investment Income Returns is subject to a cap (the “Incentive Fee Cap”). The Incentive Fee Cap in any quarter is an amount equal to (a) 15.0% for periods prior to the Exchange Listing or 17.5% for periods following the Exchange Listing, as applicable, of the Cumulative Pre-Incentive Fee Net Return (as defined below) during the relevant Trailing Twelve Quarters less (b) the aggregate incentive fee on Pre-Incentive Fee Net Investment Income Returns that were paid to the Adviser in the preceding eleven calendar quarters (or portion thereof) comprising the relevant Trailing Twelve Quarters. For this purpose, “Cumulative Pre-Incentive Fee Net Return” during the relevant Trailing Twelve Quarters means (x) Pre-Incentive Fee Net Investment Income Returns in respect of the Trailing Twelve Quarters less (y) any Net Capital Loss, if any, in respect of the Trailing Twelve Quarters. If, in any quarter, the Incentive Fee Cap is zero or a negative value, the Fund shall pay no incentive fee on Pre-Incentive Fee Net Investment Income Returns to the Adviser in that quarter. If, in any quarter, the Incentive Fee Cap is a positive value but is less than the incentive fee on Pre-Incentive Fee Net Investment Income Returns calculated in accordance with the quarterly calculation above, the Fund shall pay the Adviser the Incentive Fee Cap for such quarter. If, in any quarter, the Incentive Fee Cap is equal to or greater than the incentive fee on Pre-Incentive Fee Net Investment Income Returns calculated in accordance with quarterly calculation above, the Fund shall pay the Adviser the incentive fee on Pre-Incentive Fee Net Investment Income Returns for such quarter.

“Net Capital Loss” in respect of a particular period means the difference, if positive, between (i) aggregate capital losses, whether realized or unrealized, in such period and (ii) aggregate capital gains, whether realized or unrealized, in such period.

These calculations are prorated for any period of less than three months and adjusted for any share issuances or repurchases during the relevant quarter. If the consummation of the Exchange Listing occurs on a date other than the first day of a calendar quarter, the incentive fee on Pre-Incentive Fee Net Investment Income Returns shall be calculated for such calendar quarter at a weighted rate calculated based on the fee rates applicable before and after the Exchange Listing based on the number of days in such calendar quarter before and after the Exchange Listing.

In no event will the Adviser receive greater cumulative income based incentive fees under this Agreement than it would have under its prior Investment Advisory Agreement by and between the Fund and the Adviser, dated as of October 1, 2018.

(ii)    Incentive Fee Based on Capital Gains. The second component of the incentive fee, the capital gains incentive fee, is payable at the end of each calendar year (or at the time of an Exchange Listing) in arrears.

Prior to an Exchange Listing, the amount payable equals:

 

   

15% of cumulative realized capital gains from inception through the end of such calendar year (or upon an Exchange Listing), computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fee on capital gains as calculated in accordance with GAAP.

Following an Exchange Listing, the amount payable equals:

 

   

17.5% of cumulative realized capital gains from inception through the end of such calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fee on capital gains as calculated in accordance with GAAP.


If an Exchange Listing occurs on a date other than the first day of a fiscal year, a capital gains incentive fee shall be calculated as of the day before the Exchange Listing, with such capital gains incentive fee paid to the Adviser following the end of the fiscal year in which the Exchange Listing occurred. For the avoidance of doubt, such capital gains incentive fee shall be equal to 15% of the Fund’s realized capital gains on a cumulative basis from inception through the day before the Exchange Listing, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gains incentive fees. Solely for purposes of calculating the capital gains incentive fee after an Exchange Listing, the Fund will be deemed to have previously paid capital gains incentive fees prior to an Exchange Listing equal to the product obtained by multiplying (a) the actual aggregate amount of previously paid capital gains incentive fees for all periods prior to an Exchange Listing by (b) the percentage obtained by dividing (x) 17.5% by (y) 15%.

Each year, the fee paid for the capital gains incentive fee is net of the aggregate amount of any previously paid capital gains incentive fee for all prior periods. The Fund will accrue, but will not pay, a capital gains incentive fee with respect to unrealized appreciation because a capital gains incentive fee would be owed to the Adviser if the Fund were to sell the relevant investment and realize a capital gain. In no event will the capital gains incentive fee payable pursuant to this Agreement be in excess of the amount permitted by the Investment Advisers Act of 1940, as amended (the “Advisers Act”), including Section 205 thereof.

The fees that are payable under this Agreement for any partial period will be appropriately prorated.

6. Representations and Warranties. The Adviser represents and warrants that it is duly registered and authorized as an investment adviser under the Advisers Act and the Adviser agrees to maintain effective all material requisite registrations, authorizations and licenses, as the case may be, until the termination of this Agreement.

7. Services Not Deemed Exclusive. The Fund and the Board of Trustees acknowledge and agree that:

(a)    the services provided hereunder by the Adviser are not to be deemed exclusive, and the Adviser and any of its affiliates or related persons are free to render similar services to others and to use the research developed in connection with this Agreement for other Advisory Clients or affiliates. The Fund agrees that the Adviser may give advice and take action with respect to any of its other Advisory Clients which may differ from advice given or the timing or nature of action taken with respect to any client or account so long as it is the Adviser’s policy, to the extent practicable, to allocate investment opportunities to the client or account on a fair and equitable basis relative to its other Advisory Clients. It is understood that the Adviser shall not have any obligation to recommend for purchase or sale any loans which its principals, affiliates or employees may purchase or sell for its or their own accounts or for any other client or account if, in the opinion of the Investment Adviser, such transaction or investment appears unsuitable, impractical or undesirable for the Fund. Nothing herein shall be construed as constituting the Adviser an agent of the Fund; and

(b)    the Adviser and its affiliates may face conflicts of interest as described in the Fund’s Private Placement Memorandum and/or the Fund’s periodic filings with the SEC (as such disclosures may be updated from time to time) and such disclosures have been provided, and any updates will be provided, to the Board of Trustees in connection with its consideration of this Agreement and any future renewal of this Agreement.


8. Limit of Liability. The Adviser and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with it (the “Indemnified Parties”) shall not be liable for any error of judgment or mistake of law or for any act or omission or any loss suffered by the Fund in connection with the matters to which this Agreement relates, provided that the Adviser shall not be protected against any liability to the Fund or its shareholders to which the Adviser would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or by reason of the reckless disregard of its duties and obligations (“disabling conduct”). An Indemnified Party may consult with counsel and accountants in respect of the Fund’s affairs and shall be fully protected and justified in any action or inaction which is taken in accordance with the advice or opinion of such counsel and accountants; provided, that such counsel or accountants were selected with reasonable care. Absent disabling conduct, the Fund will indemnify the Indemnified Parties against, and hold them harmless from, any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of the Adviser’s services under this Agreement or otherwise as adviser for the Fund. The Indemnified Parties shall not be liable under this Agreement or otherwise for any loss due to the mistake, action, inaction, negligence, dishonesty, fraud or bad faith of any broker or other agent; provided, that such broker or other agent shall have been selected, engaged or retained and monitored by the Adviser in good faith, unless such action or inaction was made by reason of disabling conduct, or in the case of a criminal action or proceeding, where the Adviser had reasonable cause to believe its conduct was unlawful.

Indemnification shall be made only following: (i) a final decision on the merits by a court or other body before which the proceeding was brought that the Indemnified Party was not liable by reason of disabling conduct or (ii) in the absence of such a decision, a reasonable determination, based upon a review of the facts, that the Indemnified Party was not liable by reason of disabling conduct by (a) the vote of a majority of a quorum of trustees of the Fund who are neither “interested persons” of the Fund nor parties to the proceeding (“disinterested non-party trustees”) or (b) an independent legal counsel in a written opinion.

An Indemnified Party shall be entitled to advances from the Fund for payment of the reasonable expenses (including reasonable counsel fees and expenses) incurred by it in connection with the matter as to which it is seeking indemnification in the manner and to the fullest extent permissible under law. Prior to any such advance, the Indemnified Party shall provide to the Fund a written affirmation of its good faith belief that the standard of conduct necessary for indemnification by the Fund has been met and a written undertaking to repay any such advance if it should ultimately be determined that the standard of conduct has not been met. In addition, at least one of the following additional conditions shall be met: (a) the Indemnified Party shall provide a security in form and amount acceptable to the Fund for its undertaking; (b) the Fund is insured against losses arising by reason of the advance; or (c) a majority of a quorum of disinterested non-party trustees or independent legal counsel, in a written opinion, shall have determined, based on a review of facts readily available to the Fund at the time the advance is proposed to be made, that there is reason to believe that the Indemnified Party will ultimately be found to be entitled to indemnification.

9. Duration and Termination.

(a)    This Agreement shall become effective as of the date first written above. This Agreement may be terminated at any time, without the payment of any penalty, on 60 days’ written notice, by the vote of a majority of the outstanding voting securities of the Fund or by the vote of the Fund’s trustees or by the Adviser. The provisions of Section 8 of this Agreement shall remain in full force and effect, and the Adviser shall remain entitled to the benefits thereof, notwithstanding any termination of this Agreement. Further, notwithstanding the termination or expiration of this Agreement as aforesaid, the Adviser shall be entitled to any amounts owed under Sections 2 or 5 through the date of termination or expiration, and Section 8 shall continue in force and effect and apply to the Adviser and its representatives as and to the extent applicable.


(b)    This Agreement shall continue in effect until May 31, 2022, and thereafter shall continue automatically for successive annual periods, provided that such continuance is specifically approved at least annually by (i) the vote of the Board, or by the vote of a majority of the outstanding voting securities of the Fund and (ii) the vote of a majority of the Fund’s Board of Trustees who are not parties to this Agreement or “interested persons” (as such term is defined in Section 2(a)(19) of the 1940 Act) of any such party, in accordance with the requirements of the 1940 Act.

(c)    This Agreement will automatically terminate in the event of its “assignment” (as such term is defined for purposes of Section 15(a)(4) of the 1940 Act).

10. Governing Law. This Agreement shall be governed, construed and interpreted in accordance with the laws of the State of New York, provided, however, that nothing herein shall be construed as being inconsistent with the 1940 Act.

11. Notices. Any notice hereunder shall be in writing and shall be delivered in person or by telex or facsimile (followed by delivery in person) to the parties at the addresses set forth below.

If to the Fund:

Blackstone Secured Lending Fund

345 Park Avenue, 31st Floor

New York, New York 10154

Attn:    Chairman, President, Chief Executive Officer and Trustee

If to the Adviser:

Blackstone Credit BDC Advisors LLC

345 Park Avenue, 31st Floor

New York, New York 10154

Attn:    Marisa Beeney, General Counsel

or to such other address as to which the recipient shall have informed the other party in writing.

Unless specifically provided elsewhere, notice given as provided above shall be deemed to have been given, if by personal delivery, on the day of such delivery, and, if by facsimile and mail, on the date on which such facsimile or mail is sent.

12. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

[Remainder of Page Intentionally Left Blank.]


IN WITNESS WHEREOF, the parties hereto caused their duly authorized signatories to execute this Agreement as of the day and year first written above.

 

BLACKSTONE SECURED LENDING FUND

By:  

/s/ Marisa J. Beeney

Name:   Marisa J. Beeney
Title:   Chief Legal Officer, Chief Compliance Officer and Secretary
BLACKSTONE CREDIT BDC ADVISORS LLC
By:  

/s/ Marisa J. Beeney

Name:   Marisa J. Beeney
Title:   Authorized Signatory

[Signature page to the Amended and Restated Investment Advisory Agreement]

Exhibit (h)

BLACKSTONE SECURED LENDING FUND

(a Delaware statutory trust)

[●] Common Shares of Beneficial Interest

UNDERWRITING AGREEMENT

Dated: October [●], 2021


BLACKSTONE SECURED LENDING FUND

(a Delaware statutory trust)

[●] Common Shares of Beneficial Interest

UNDERWRITING AGREEMENT

October [●], 2021

BofA Securities, Inc.

One Bryant Park

New York, New York 10036

Morgan Stanley & Co. LLC

1585 Broadway

New York, New York 10036

Wells Fargo Securities, LLC

550 South Tryon Street, 5th Floor

Charlotte, NC 28202

Citigroup Global Markets Inc.

388 Greenwich Street

New York, NY 10013

Goldman Sachs & Co. LLC

200 West Street

New York, NY 10282

As Representatives of the

several Underwriters named

in Schedule A hereto

Ladies and Gentlemen:

Blackstone Secured Lending Fund, a Delaware statutory trust (the “Company”), confirms its agreement with BofA Securities, Inc. (“BofA”), Morgan Stanley & Co. LLC (“Morgan Stanley”), Wells Fargo Securities, LLC (“Wells Fargo”), Citigroup Global Markets Inc. (“Citigroup”), Goldman Sachs & Co. LLC (“Goldman Sachs”) and each of the underwriters named in Schedule A hereto (collectively, the “Underwriters,” which term shall also include any underwriter substituted as hereinafter provided in Section 10 hereof), for whom BofA, Morgan Stanley, Wells Fargo, Citigroup and Goldman Sachs are acting as Representatives (in such capacity, the “Representatives”), with respect to (i) the sale by the Company and the purchase by the Underwriters, acting severally and not jointly, of the respective numbers of common shares of beneficial interest, par value $0.001 per share, of the Company (“Common Stock”) set forth in Schedule A hereto and (ii) the grant by the Company to the Underwriters, acting severally and not jointly, of the option described in Section 2(b) hereof to purchase all or any part of [●] additional shares of Common Stock. The aforesaid [●] shares of Common Stock (the “Initial Securities”) to be purchased by the Underwriters and all or any part of the [●] shares of Common Stock subject to the option described in Section 2(b) hereof (the “Option Securities”) are herein called, collectively, the “Securities.” The shares of Common Stock of the Company to be outstanding after giving effect to the sale of the Securities are referred to herein as the “Stock.”

The Company understands that the Underwriters propose to make a public offering of the Securities as soon as the Representatives deem advisable after this Underwriting Agreement (this “Agreement”) has been executed and delivered.

 

2


The Company has filed with the Securities and Exchange Commission (the “Commission”) a registration statement on Form N-2 (File No. [●]), including the related preliminary prospectus or prospectuses, covering the registration of the sale of the Securities under the Securities Act of 1933, as amended (the “Act”). Promptly after execution and delivery of this Agreement, the Company will prepare and file a prospectus in accordance with the provisions of Rule 430A (“Rule 430A”) of the rules and regulations of the Commission under the Act (the “Act Regulations”) and paragraph (b) of Rule 424 (“Rule 424(b)”) of the Act Regulations. The information included in such prospectus that was omitted from such registration statement at the time it became effective but that is deemed to be part of such registration statement at the time it became effective pursuant to Rule 430A(b) is herein called the “Rule 430A Information.” Such registration statement, including the amendments thereto, the exhibits thereto and any schedules thereto, at the time it became effective, and including the Rule 430A Information and the information (if any) deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 424(b), is herein called the “Registration Statement.” Any registration statement filed pursuant to Rule 462(b) of the Act Regulations is herein called the “Rule 462(b) Registration Statement” and, after such filing, the term “Registration Statement” shall include the Rule 462(b) Registration Statement. Each prospectus used prior to the effectiveness of the Registration Statement in the form furnished to the Underwriters for use in connection with the offering of the Securities, and each prospectus that omitted the Rule 430A Information that was used after such effectiveness and prior to the execution and delivery of this Agreement is herein called a “preliminary prospectus.” The final prospectus filed with the Commission pursuant to Rule 424(b), in the form first furnished to the Underwriters for use in connection with the offering of the Securities, is herein called the “Prospectus.” Any “issuer free writing prospectus” (as defined in Rule 433 under the Act) relating to the offering of the Securities contemplated by this Agreement is hereinafter called an “Issuer Free Writing Prospectus.” Any press releases or similar written materials meeting the definition of an “advertisement” as set forth in Rule 482 under the Act, the use of which has been consented to by each of the Representatives, is herein called “Rule 482 Material.” For purposes of this Agreement, all references to the Registration Statement, any preliminary prospectus, the Rule 482 Material, the Prospectus, any Issuer Free Writing Prospectus or any amendment or supplement to any of the foregoing shall be deemed to include the copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system or any successor system (“EDGAR”).

A Form N-54A Notification of Election to be Subject to Sections 55 through 65 of the Investment Company Act of 1940 Filed Pursuant to Section 54(a) of the Investment Company Act (File No. 814-01180) (the “Notification of Election”) was filed with the Commission on October 26, 2018 under the Investment Company Act of 1940, as amended, and the rules and regulations and any applicable guidance and/or interpretation of the Commission or its staff thereunder (the “Investment Company Act”).

The Company has entered into an Investment Advisory Agreement, dated as of October 1, 2018 (the “Investment Advisory Agreement”), with Blackstone Credit BDC Advisors LLC, a Delaware limited liability company registered as an investment adviser (the “Adviser”) under the Investment Advisers Act of 1940, as amended, and the rules and regulations promulgated thereunder (collectively, the “Advisers Act”). The Company has also entered into an Administration Agreement, dated as of October 1, 2018 (the “Administration Agreement”), with Blackstone Alternative Credit Advisors LP, a Delaware limited partnership (the “Administrator”).

As used in this Agreement:

“Applicable Time” means [●] [A.M./P.M.], New York City time, on October [●], 2021 or such other time as agreed by the Company and the Representatives.

“General Disclosure Package” means (i) the preliminary prospectus, dated October [●], 2021, (ii) any Issuer Free Writing Prospectuses, and (iii) the information included on Schedule B hereto.

“Testing-the-Waters Communication” means any oral or written communication with potential investors undertaken in reliance on Section 5(d) of the Act.

“Written Testing-the-Waters Communication” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Act.

 

3


SECTION 1. Representations and Warranties.

(a) Representations and Warranties of the Company. The Company represents and warrants to each Underwriter as of the date hereof, the Applicable Time, the Closing Time (as defined below) and any Date of Delivery (as defined below), and agrees with each Underwriter, as follows:

(i) the Company is eligible to use Form N-2. Each of the Registration Statement and any amendment thereto has become effective under the Act. No stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued under the Act, no order preventing or suspending the use of any preliminary prospectus or the Prospectus has been issued and no proceedings for any of those purposes or pursuant to Section 8A of the Act against the Company or related to the offering of Securities have been instituted or are pending or, to the Company’s knowledge, contemplated. The Company has complied with each request (if any) from the Commission for additional information in connection with the Registration Statement.

Each of the Registration Statement and any post-effective amendment thereto, at the time it became effective, complied in all material respects with the requirements of the Act, the Act Regulations and the Investment Company Act. Each preliminary prospectus, the Rule 482 Material, the Prospectus and any amendment or supplement thereto, at the time each was filed with the Commission, complied in all material respects with the requirements of the Act, the Act Regulations and the Investment Company Act. Each preliminary prospectus delivered to the Underwriters for use in connection with this offering, the Rule 482 Material that is required to be filed with the Commission pursuant to Rule 482 of the Act and the Prospectus was or will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T; Rule 482 Material, as of its issue date and at all subsequent times through the completion of this offering and sale of the Securities, did not, does not and will not include any information that conflicts with the information contained in the Registration Statement, each preliminary prospectus or the Prospectus that has not been superseded or modified;

(ii) neither the Registration Statement nor any amendment thereto, at its effective time, at the Closing Time or at any Date of Delivery, contained, contains or will contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, not misleading. As of the Applicable Time, none of (A) the General Disclosure Package, (B) any individual preliminary prospectus, when considered together with the General Disclosure Package, (C) any individual Free Writing Prospectus, nor (D) the Rule 482 Material, when considered together with the General Disclosure Package, included, includes or will include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation or warranty with respect to any statements or omissions made in reliance upon and in conformity with information furnished to the Company in writing by an Underwriter through the Representatives expressly for use in the Registration Statement, General Disclosure Package or Prospectus. For purposes of this Agreement, the only information so furnished shall be the information in the first and third sentences of the third paragraph under the heading “Underwriting,” the information in the first sentence of the eleventh paragraph under the heading “Underwriting,” and the information in the first sentence of the twelfth paragraph under the heading “Underwriting,” in each case contained in the Prospectus (collectively, the “Underwriter Information”). Neither the Prospectus nor any amendment or supplement thereto, as of their respective date(s), at the time of any filing with the Commission pursuant to Rule 424(b), at the Closing Time or at any Date of Delivery, included, includes or will include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation or warranty with respect to any statements or omissions made in reliance upon and in conformity with Underwriter Information furnished to the Company in writing by an Underwriter through the Representatives expressly for use in the General Disclosure Package or such Marketing Materials;

 

4


(iii) (A) the Company shall furnish to the Representatives for review, a reasonable amount of time prior to the proposed time of filing or use thereof, a copy of each proposed Issuer Free Writing Prospectus or any amendment or supplement thereto prepared by or on behalf of, used by, or referred to by the Company, and the Company shall not file, use or refer to any proposed Issuer Free Writing Prospectus or any amendment or supplement thereto without the Representatives’ prior written consent. The Company shall furnish to the Representatives, without charge, as many copies of any Issuer Free Writing Prospectus prepared by or on behalf of, used by or referred to by the Company as the Representatives may reasonably request. If at any time when a prospectus is required by the Act to be delivered (whether physically or through compliance with Rule 172 under the Act or any similar rule) in connection with sales of the Securities (but in any event if at any time through and including the Closing Time) there occurred an event or development as a result of which any Issuer Free Writing Prospectus prepared by or on behalf of, used by, or referred to by the Company conflicted with the information contained in the Registration Statement, the preliminary prospectus or the Prospectus or included an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at such time, not misleading, the Company shall promptly amend or supplement such Issuer Free Writing Prospectus to eliminate or correct such conflict so that the statements in such Issuer Free Writing Prospectus as so amended or supplemented will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at such time, not misleading, as the case may be; provided, that prior to amending or supplementing any such Issuer Free Writing Prospectus, the Company shall furnish to the Representatives for review, a reasonable amount of time prior to the proposed time of filing or use thereof, a copy of such proposed amended or supplemented Issuer Free Writing Prospectus, and the Company shall not file, use or refer to any such amended or supplemented Issuer Free Writing Prospectus without the Representatives’ prior written consent; (B) no Issuer Free Writing Prospectus conflicts with the information contained in the Registration Statement, the preliminary prospectus or the Prospectus that has not been superseded or modified; and (C) the Company represents and agrees that, without the prior consent of the Representatives, it has not made and shall not make any offer relating to the Securities that could constitute an Issuer Free Writing Prospectus; any such Issuer Free Writing Prospectus the use of which has been consented to by the Company and the Representatives is listed on Schedule B hereto;

(iv) the Company (i) has not alone engaged in any Testing-the-Waters Communications other than Testing-the-Waters Communications with the consent of the Representatives (x) with entities that are qualified institutional buyers (“QIBs”) within the meaning of Rule 144A under the Act or institutions that are accredited investors within the meaning of Rule 501(a)(1), (a)(2), (a)(3), (a)(7), (a)(8), (a)(9), (a)(12) or (a)(13) under the Act (“IAIs”) and otherwise in compliance with the requirements of Section 5(d) of the Act or (y) with entities that the Company reasonably believed to be QIBs or IAIs and otherwise in compliance with the requirements of Rule 163B under the Act and (ii) has not authorized anyone other than the Representatives to engage in Testing-the-Waters Communications. The Company reconfirms that the Representatives have been authorized to act on its behalf in undertaking Testing-the-Waters Communications. The Company has not distributed or approved for distribution any Written Testing-the-Waters Communications other than those listed on Exhibit C-1 hereto. The Company has not distributed or approved for distribution the Rule 482 Material other than those listed on Exhibit C-2 hereto. Any individual Written Testing-the-Waters Communication does not conflict with the information contained in the Registration Statement or the General Disclosure Package, complied in all material respects with the Act, and when taken together with the General Disclosure Package as of the Applicable Time, did not, and, as of the Closing Time and as of the Date of Delivery, as the case may be, will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;

(v) at the time of filing the Registration Statement and any post-effective amendment thereto, at the earliest time thereafter that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the Act Regulations) of the Securities and at the date hereof, the Company was not and is not an “ineligible issuer,” as defined in Rule 405, without taking account of any determination by the Commission pursuant to Rule 405 that it is not necessary that the Company be considered an ineligible issuer;

 

5


(vi) the Company has been duly formed and is validly existing as a statutory trust in good standing under the laws of the State of Delaware, and has full power and authority to conduct its business as described in the Registration Statement, the General Disclosure Package and the Prospectus and has or had full power and authority to execute and deliver this Agreement, the Investment Advisory Agreement and the Administration Agreement; and the Company is duly qualified to do business as a foreign entity and is in good standing in each jurisdiction where the conduct of its business requires such qualification, except where the failure to be so qualified and in good standing would not have a material adverse effect on the business, financial condition or results of operation of the Company and its subsidiaries listed on Schedule D hereto (each a “Subsidiary” and collectively the “Subsidiaries”) taken as a whole (a “Material Adverse Effect”);

(vii) the Company does not own any real property; the Company has no subsidiary (as defined in the Act) other than the Subsidiaries; each of the Subsidiaries has been duly organized, is validly existing as a limited liability company or a corporation, as the case may be, is in good standing under the laws of its jurisdiction of organization, has the power and authority to conduct its business as described in the Registration Statement, the General Disclosure Package and the Prospectus, as applicable; the Company, either directly or through a wholly-owned subsidiary, owns all of the outstanding equity interests of the Subsidiaries free and clear of any liens, charges or encumbrances in favor of any third parties; the Subsidiaries are duly qualified to do business as a foreign entity and are in good standing in each jurisdiction where the conduct of its business requires such qualification, except where the failure to be so qualified and in good standing would not have a Material Adverse Effect;

(viii) the authorized, issued and outstanding common shares of beneficial interest of the Company are as set forth in the Registration Statement, the General Disclosure Package and the Prospectus in the column entitled “Actual” under the caption “Capitalization.” The outstanding common shares of beneficial interest of the Company have been duly authorized and validly issued and are fully paid and non-assessable. None of the outstanding common shares of beneficial interest of the Company were issued in violation of the preemptive or other similar rights of any securityholder of the Company. The Common Stock conforms to all statements relating thereto contained in the Registration Statement, the General Disclosure Package and the Prospectus and such description conforms to the rights set forth in the instruments defining the same;

(ix) this Agreement, the Investment Advisory Agreement and the Administration Agreement have been duly authorized, executed and delivered by the Company and constitute the valid and legally binding agreements of the Company, enforceable against the Company, in accordance with their respective terms, provided, however, that each of the Company, the Adviser and the Administrator makes no representation or warranty with respect to the validity or enforceability of any provision hereunder or thereunder relating to rights to indemnity and/or contribution or to enforceability of any obligations that may be limited by the applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors’ rights generally and to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or law) (collectively, the “Enforceability Exceptions”).

(x) except for terms contained in the registration rights agreements attached as exhibits to the Registration Statement, no person has the right to require the Company to register any securities for sale under the Act by reason of the filing of the Registration Statement with the Commission or the issuance and sale of the Securities.

(xi) neither the Company nor any Subsidiary is (A) in violation of its charter, by-laws, certificate of formation, limited liability company operating agreement, or other organizational documents of the Company or any Subsidiary, as applicable, (B) in breach of (nor has any event occurred that, with notice or lapse of time or both, would reasonably be expected to result in any breach or violation) any indenture, mortgage, deed of trust, bank loan, credit agreement or other evidence of indebtedness, or other agreement or instrument to which the Company or any Subsidiary, as the case may be, is a party or (C) in contravention of any law, regulation or rule or any decree, judgment or order applicable to the Company or any Subsidiary, as applicable, except, with respect to clause (B) and (C), to the extent that any such breach, violation or contravention would not reasonably be expected to have a Material Adverse Effect;

 

6


(xii) the execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby and in the Registration Statement, the General Disclosure Package and the Prospectus (including the issuance and sale of the Securities and the use of the proceeds from the sale of the Securities as described therein under the caption “Use of Proceeds”) will not (i) violate the charter, by-laws or other organizational documents of the Company, or (ii) result in any breach of (nor has any event occurred that, with notice, lapse of time or both, would reasonably be expected to result in any breach or violation) any indenture, mortgage, deed of trust, bank loan, credit agreement or other evidence of indebtedness, or other agreement or instrument to which the Company or any Subsidiary, as the case may be, is a party or (iii) contravene any law, regulation or rule or any decree, judgment or order applicable to the Company or any Subsidiary, as applicable, except, with respect to clause (ii) and (iii), to the extent that any such breach or violation would not reasonably be expected to have a Material Adverse Effect and, with respect to clause (iii), to the extent such violation would not reasonably be expected to have a Material Adverse Effect on the ability of the Company to consummate the offering or any transaction contemplated by this Agreement, the Registration Statement, the General Disclosure Package and the Prospectus;

(xiii) no approval, authorization, consent or order of or filing with any governmental or regulatory body or agency is required in connection with the performance by the Company of its obligations under this Agreement, in connection with the offering, issuance or sale of the Securities hereunder or the consummation of the transactions contemplated by this Agreement, except (A) such as have been made or obtained and such as may be required under the Act, the Act Regulations, the Investment Company Act, the rules of the New York Stock Exchange (“NYSE”), state securities laws or the rules of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and (B) as set forth in the Registration Statement, General Disclosure Package and the Prospectus, (i) no person has the right to act as an underwriter or as a financial adviser to the Company in connection with the offer and sale of Securities, and (ii) there are no contracts, agreements or understandings between the Company and any person that would grant such person the right to require the Company to describe or include as exhibits such agreement in the Registration Statement, General Disclosure Package or the Prospectus if the offering of the Securities was pursuant to a registration under the Act;

(xiv) each of the Company and each of the Subsidiaries has all necessary licenses, authorizations, consents and approvals (collectively, the “Consents”) and has made all necessary filings required under any federal, state, local or foreign law, regulation or rule, and has obtained all necessary Consents from other persons, in order to conduct its business, except where the failure to obtain such Consents or make such filings would not reasonably be expected to have a Material Adverse Effect; neither the Company nor any Subsidiary is in violation of, or in default under, or has received notice of any proceedings relating to revocation or modification of any such Consent or any federal, state, local or foreign law, regulation or rule or any decree, order or judgment applicable to the Company or any Subsidiary, except where such revocation or modification would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect;

(xv) all legal proceedings, government proceedings known to the Company, affiliate transactions, consents, licenses, agreements or documents that would be required to be described in the Registration Statement, General Disclosure Package or the Prospectus or that would be required to be filed as exhibits to the Registration Statement, General Disclosure Package or the Prospectus if the Securities were offered pursuant to a registration under the Act, have been so described in the Registration Statement, General Disclosure Package or the Prospectus;

(xvi) except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, there are no legal actions, suits, claims, proceedings, or to the Company’s knowledge, investigations pending or threatened to which the Company or the Subsidiaries, or, to the Company’s knowledge, any of their respective trustees or directors, managing members or officers, is a party or of which any of their respective properties is or would be subject at law or in equity, before or by any federal, state, local or foreign governmental or regulatory commission, board, body, authority or agency, except any such action, suit, claim, investigation or proceeding which would not if determined adversely to the Company or the Subsidiaries, as the case may be, have a Material Adverse Effect or prevent consummation of the transactions contemplated hereby;

 

7


(xvii) (A) The Company has duly elected to be treated by the Commission under the Investment Company Act as a business development company, such election is effective and the Company has not withdrawn such election and, to the Company’s knowledge, the Commission has not ordered such election to be withdrawn nor, to the Company’s knowledge have proceedings to effectuate such withdrawal been initiated or threatened by the Commission; (B) the provisions of the corporate charter and by-laws of the Company and the investment objectives, policies and restrictions of the Company described in the Prospectus, assuming they are implemented as described, comply in all material respects with the requirements of the Investment Company Act; and (C) the operations of the Company are in compliance in all material respects with the provisions of the Act and the Investment Company Act applicable to business development companies and the rules and regulations promulgated thereunder, except as is not reasonably expected to result, individually or in the aggregate, in a Material Adverse Effect;

(xviii) Deloitte & Touche LLP (“Deloitte”), whose reports on the audited consolidated financial statements of the Company are filed with the Commission and included in the Prospectus, is an independent registered public accounting firm as required by the Act;

(xix) the consolidated financial statements of the Company and the Subsidiaries included in the Registration Statement, General Disclosure Package and Prospectus, together with the related notes, present fairly in all material respects the financial position and results of operations of the Company and the Subsidiaries as of the dates indicated and for the indicated periods (except that the unaudited financial statements were or are subject to normal year-end adjustments which were not, or are not expected to be, material in amount to the Company); such financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”), consistently applied throughout the periods presented except as noted in the notes thereon (except, in each case, as may be permitted by the rules and regulations of the Commission); and the financial highlights information included in the Registration Statement, General Disclosure Package and Prospectus presents fairly in all material respects the information shown therein and has been compiled on a basis consistent with the financial statements presented therein; there are no financial statements that are required to be included in the Registration Statement, General Disclosure Package and Prospectus that are not included as required; the Company does not have any material liabilities or obligations, direct or, to the Company’s knowledge, contingent (including any off balance sheet obligations), not disclosed in the Registration Statement, General Disclosure Package and Prospectus; and all disclosures contained in the Registration Statement, General Disclosure Package and Prospectus regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission), if any, comply with Regulation G of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Item 10 of Regulation S-K under the Act, to the extent applicable. Subsequent to the date of the most recent financial statements contained in the Registration Statement, the General Disclosure Package or the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement), there has not been any material adverse change, or any development involving a prospective material adverse change, in the business, management, financial condition, prospects or results of operations of the Company or the Subsidiaries;

(xx) each of the Company and of the Subsidiaries is not and, after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in the Registration Statement, the General Disclosure Package and the Prospectus, will not be required to register as an “investment company” as such term is used in the Investment Company Act;

(xxi) each of the Company and the Subsidiaries owns, or has obtained valid and enforceable licenses for or other rights to use, the inventions, patent applications, patents, trademarks (both registered and unregistered), tradenames, copyrights, trade secrets and other proprietary information described in the Registration Statement, the General Disclosure Package and the Prospectus as being licensed by it or which are necessary for the conduct of its businesses (collectively, “Intellectual Property”), except where the failure to own, license or have such rights would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; except as disclosed in the Registration Statement, the General

 

8


Disclosure Package or the Prospectus, neither the Company nor any Subsidiary has received written notice or is otherwise aware of any infringement of, or conflict with, asserted rights of third parties with respect to any Intellectual Property or of any facts or circumstances which would render any Intellectual Property invalid or inadequate to protect the interest of the Company or of any Subsidiary, as the case may be, therein, and which infringement or conflict (if the subject of any unfavorable decision, ruling or finding) or invalidity or inadequacy, would reasonably be expected to result in a Material Adverse Effect;

(xxii) the Company maintains insurance covering its operations, personnel and businesses as the Company deems adequate; such insurance insures against such losses and risks to an extent which is adequate in accordance with customary industry practice to protect the Company and its business; all such insurance is fully in force on the date hereof and the Company reasonably expects such insurance will be fully in force on the Closing Time;

(xxiii) the Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorization and the applicable requirements of the Investment Company Act and the Internal Revenue Code of 1986, as amended (the “Code”); (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company’s “internal control over financial reporting” (as such term is defined in Rule 13a-15(f) under the Exchange Act) is effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and the Company is not aware of any material weaknesses in its internal control over financial reporting;

(xxiv) the Company has established and maintains “disclosure controls and procedures” (as such term is defined in Rules 13a-15 and 15d-15 promulgated under the Exchange Act); such disclosure controls and procedures are designed to ensure that material information relating to the Company, including material information pertaining to the Company’s operations and assets managed by the Adviser, is made known to the Company’s Chief Executive Officer and Chief Financial Officer by others within the Company and the Adviser, and such disclosure controls and procedures are effective to perform the functions for which they were established;

(xxv) neither the Company nor, to the Company’s knowledge, any of its respective trustees, officers, affiliates or controlling persons has taken, directly or indirectly, any action designed, or which has constituted or might reasonably be expected to cause or result in, under the Exchange Act, the stabilization or manipulation of the price of any security of the Company to facilitate the sale of the Securities; provided, that any action in connection with the Company’s distribution reinvestment plans will not be deemed a violation of this paragraph;

(xxvi) the statistical and market-related data included in the Registration Statement, the General Disclosure Package and the Prospectus are based on or derived from sources that the Company believes to be reliable and accurate and the Company has obtained the written consent to the use of such data in the Registration Statement, the General Disclosure Package and the Prospectus from such sources to the extent required;

(xxvii) to the Company’s knowledge, there are no affiliations or associations between any member of FINRA and any of the Company’s officers or trustees, except as set forth in the Registration Statement, the General Disclosure Package and the Prospectus;

(xxviii) (A) the terms of the Investment Advisory Agreement, including compensation terms, comply in all material respects with all applicable provisions of the Investment Company Act and the Advisers Act and the applicable published rules and regulations promulgated thereunder, and (B) the approvals by the board of trustees and the stockholders of the Company of the Investment Advisory Agreement have been made to the extent required by Section 15 of the Investment Company Act applicable to companies that have elected to be regulated as business development companies under the Investment Company Act;

 

9


(xxix) except as disclosed in the Registration Statement and the Prospectus (A) no person is serving or acting as an officer, trustee or investment adviser of the Company, except in accordance with the provisions of the Investment Company Act applicable to business development companies and the Advisers Act and the applicable published rules and regulations promulgated thereunder, and (B) to the knowledge of the Company, no trustee of the Company is an “affiliated person” (as defined in the Investment Company Act) of any of the Underwriters;

(xxx) the Company and, to its knowledge, its trustees and officers (in such capacity) are in compliance in all material respects with the applicable provisions of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), and the Commission’s published rules promulgated thereunder;

(xxxi) (i) each of the Company and of the Subsidiaries has filed all foreign, federal, state and local tax returns that are required to be filed or has requested extensions thereof (except in any case in which the failure so to file would not have a Material Adverse Effect) and has paid all taxes required to be paid by it and any other assessment, fine or penalty levied against it, to the extent that any of the foregoing is due and payable, except for any such assessment, fine or penalty that is currently being contested in good faith or as would not have a Material Adverse Effect and (ii) has elected to be treated, and operates its business so as to qualify, as a regulated investment company under Subchapter M of the Code;

(xxxii) the operations of the Company and each of the Subsidiaries are and have been conducted at all times in compliance in all material respects with all applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transaction Reporting Act of 1970 (otherwise known as the Bank Secrecy Act), as amended, and the applicable anti-money laundering statutes of jurisdictions where the Company and each of the Subsidiaries conducts business, and the rules and regulations promulgated thereunder and any related or similar applicable rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Anti-Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of the Subsidiaries with respect to Anti-Money Laundering Laws is pending or, to the best knowledge of the Company or any of the Subsidiaries, threatened;

(xxxiii) neither the Company nor any of its Subsidiaries, nor any director, officer, employee or controlled affiliate thereof, nor, to the Company’s knowledge, any agent or representative thereof is aware of or has taken any action, directly or indirectly, that would result in a violation by such entities or persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations promulgated thereunder (the “FCPA”) or of the U.K. Bribery Act 2010 and the rules and regulations promulgated thereunder (the “U.K. Bribery Act”), including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment, giving or receipt of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA, the U.K. Bribery Act or other applicable anti-corruption laws, and the Company, its Subsidiaries and their affiliates have conducted their businesses in compliance with the FCPA, the U.K. Bribery Act and other applicable anti-corruption laws and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance with applicable anti-corruption laws; and neither the Company nor any of the Subsidiaries will use, directly or indirectly, the proceeds of the offering in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any person in violation of any applicable anti-corruption laws;

(xxxiv) neither the Company nor any of its Subsidiaries, nor any trustee, officer, employee or controlled affiliate thereof, nor, to the knowledge of the Company, any representative or agent thereof (i) is, or is controlled or 50% or more owned by or is acting on behalf of, an individual or entity that is currently the subject of any sanctions administered by the United States (including any administered or enforced by

 

10


the Office of Foreign Assets Control of the U.S. Department of Treasury (“OFAC”), the U.S. Department of State or the Bureau of Industry and Security of the U.S. Department of Commerce), the United Nations Security Council (“UNSC”), the European Union, the United Kingdom (including sanctions administered or enforced by Her Majesty’s Treasury (“HMT”)) or other relevant sanctions authority (collectively, “Sanctions” and such persons, “Sanctioned Persons” and each such person, a “Sanctioned Person”), (ii) is located, organized or resident in a country or territory that is, or whose government is, the subject of Sanctions (collectively, “Sanctioned Countries” and each, a “Sanctioned Country”) or (iii) will directly or knowingly indirectly (which shall not include anything done with any such proceeds after they have been received by any affiliate of the Underwriters) use the proceeds of the offering of Securities hereunder, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other person or entity in any manner to fund or facilitate any activities of or business with any Sanctioned Person or vessel that is the subject of Sanctions or in any Sanctioned Country, at the time of such funding or facilitation or that would result in a violation of any Sanctions by, or could result in the imposition of Sanctions against, any individual or entity (including any individual or entity participating in the offering, whether as an underwriter, adviser, investor or otherwise). Neither the Company nor any of its Subsidiaries have knowingly engaged in any dealings or transactions with or for the benefit of a Sanctioned Person, or with or in a Sanctioned Country, nor does the Company or any of its Subsidiaries have any plans to increase its dealings or transactions with or for the benefit of Sanctioned Persons, or with or in Sanctioned Countries;

(xxxv) the Company and the Subsidiaries’ information technology assets and equipment, computers, systems, networks, hardware, software, websites, applications, and databases (collectively, “IT Systems”) provided by the Adviser and the Administrator are adequate for, and operate and perform in all material respects as required in connection with the operation of the business of the Company and the Subsidiaries as currently conducted, free and clear of all material bugs, errors, defects, Trojan horses, time bombs, malware and other corruptants, except, in each case, as would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect. The Company and the Subsidiaries have implemented and maintained commercially reasonable controls, policies, procedures, and safeguards to maintain and protect their material confidential information and the integrity, continuous operation, redundancy and security of all IT Systems and data (including all personal, personally identifiable, sensitive, confidential or regulated data (“Personal Data”)) used in connection with their businesses, and there have been no breaches, violations, outages or unauthorized uses of or accesses to same, except, in each case, as would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect. The Company and the Subsidiaries are presently in material compliance with all applicable laws or statutes and all judgments, orders, rules and regulations of any court or arbitrator or governmental or regulatory authority, internal policies and contractual obligations relating to the privacy and security of IT Systems and Personal Data and to the protection of such IT Systems and Personal Data from unauthorized use, access, misappropriation or modification, except, in each case, as would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect; and

(xxxvi) there are no contracts or documents which are required to be described in the Registration Statement, the General Disclosure Package or the Prospectus or to be filed as exhibits to the Registration Statement which have not been so described and filed as required.

(b) Representations and Warranties of the Adviser and the Administrator. Each of the Adviser and the Administrator, as applicable, represents and warrants to each Underwriter as of the date hereof, the Applicable Time, the Closing Time (as defined below) and any Date of Delivery (as defined below), and agrees with each Underwriter, as follows:

(i) the Adviser has been duly formed and is validly existing as a Delaware limited liability company and in good standing under the laws of the State of Delaware and the Administrator has been duly formed and is validly existing as a Delaware limited partnership and in good standing under the laws of the State of Delaware, each with full power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement, the General Disclosure Package and the Prospectus and to execute and deliver this Agreement; each of the Adviser and the Administrator had full power and authority to execute and deliver the Investment Advisory Agreement and the Administration

 

11


Agreement, as applicable; and each of the Adviser and Administrator is duly qualified to do business as a foreign entity and is in good standing in each jurisdiction where the ownership or leasing of its properties or the conduct of its business requires such qualification, except where the failure to be so qualified and in good standing would not, individually or in the aggregate, have a material adverse effect on the business, financial condition, capitalization or regulatory status of such entity, or otherwise reasonably be expected to prevent such entity from carrying out its obligations under the Investment Advisory Agreement or the Administration Agreement, as applicable (collectively, an “Adviser Material Adverse Effect” or “Administrator Material Adverse Effect”, respectively);

(ii) the Adviser is duly registered with the Commission as an investment adviser under the Advisers Act and is not prohibited by the Advisers Act, the Investment Company Act or the applicable published rules and regulations promulgated thereunder from acting under the Investment Advisory Agreement for the Company as contemplated by the Registration Statement, the General Disclosure Package and the Prospectus. There does not exist any proceeding or, to the Adviser’s knowledge, any facts or circumstances the existence of which could lead to any proceeding which might adversely affect the registration of the Adviser with the Commission;

(iii) there are no actions, suits, claims, proceedings or, to the Adviser’s or Administrator’s knowledge, investigations pending or, to the knowledge of the Adviser or the Administrator, threatened to which the Adviser or the Administrator or, to the knowledge of the Adviser or the Administrator, any of their respective officers, partners, or members are or would be a party, or of which any of its properties are or would be subject at law or in equity, or before or by any federal, state, local or foreign governmental or regulatory commission, board, body, authority or agency, except any such action, suit, claim, investigation or proceeding which would not if determined adversely to the Adviser or the Administrator, (A) have, individually or in the aggregate, an Adviser Material Adverse Effect or Administrator Material Adverse Effect, respectively, or (B) prevent the consummation of the transactions contemplated hereby;

(iv) neither the Adviser nor the Administrator is (A) in violation of its limited liability company operating agreement or limited partnership operating agreement, respectively, or (B) in breach of (nor has any event occurred that, with notice or lapse of time or both, would reasonably be expected to result in any breach or violation) any indenture, mortgage, deed of trust, bank loan, credit agreement or other evidence of indebtedness, or other agreement or instrument to which the Adviser or the Administrator is a party, or (C) in contravention of any law, regulation or rule or any decree, judgment or order applicable to the Adviser or the Administrator, except, with respect to clause (B) and (C), to the extent that any such breach, violation or contravention would not reasonably be expected to have an Adviser Material Adverse Effect or Administrator Material Adverse Effect, respectively;

(v) the execution, delivery and performance of this Agreement, the Investment Advisory Agreement and the Administration Agreement, the consummation of the transactions contemplated hereby and thereby and the Registration Statement, the General Disclosure Package and the Prospectus (including the issuance and sale of the Securities and the use of the proceeds from the sale of the Securities as described therein under the caption “Use of Proceeds”) will not (i) violate the limited liability company operating agreement of the Adviser or the limited partnership operating agreement of the Administrator, or (ii) result in any breach of (nor has any event occurred that, with notice, lapse of time or both, would reasonably be expected to result in any breach or violation) any indenture, mortgage, deed of trust, bank loan, credit agreement or other evidence of indebtedness, or other agreement or instrument to which the Adviser or the Administrator is a party or (iii) contravene any law, regulation or rule or any decree, judgment or order applicable to the Adviser or the Administrator, except, with respect to clause (ii) and (iii), to the extent that any such breach or violation or contravention would not reasonably be expected to have an Adviser Material Adverse Effect or Administrator Material Adverse Effect, respectively; and the execution, delivery and performance of this Agreement, the Investment Advisory Agreement and the Administration Agreement and consummation of the transactions contemplated hereby and thereby, will not conflict with, result in any breach or violation of or constitute a default under (nor constitute any event which with notice, lapse of time or both would reasonably be expected to result in any breach or violation of or constitute a default under) (i) the Adviser’s limited liability company operating agreement or the Administrator’s limited partnership operating agreement, (ii) other organizational documents of the Adviser

 

12


or the Administrator, (iii) any indenture, mortgage, deed of trust, bank loan, credit agreement or other evidence of indebtedness, or other agreement or instrument to which the Adviser or the Administrator is a party or (iv) any law, regulation, rule or any decree, judgment or order applicable to the Adviser or the Administrator, except, with respect to clauses (iii) and (iv), to the extent that any such breach, violation or contravention would not reasonably be expected to have an Adviser Material Adverse Effect or Administrator Material Adverse Effect, respectively;

(vi) this Agreement, the Investment Advisory Agreement and the Administration Agreement have been duly authorized, executed and delivered by the Adviser or the Administrator, as applicable; this Agreement, the Investment Advisory Agreement and the Administration Agreement constitute valid and legally binding agreements of the Adviser and the Administrator, as applicable, provided, however, that the Adviser and the Administrator make no representations or warranties with respect to the validity or enforceability of any provision hereunder or thereunder relating to rights to indemnity and/or contribution or enforceability of any obligations that may be limited by the Enforceability Exceptions;

(vii) the descriptions of the Adviser and the Administrator contained in the Registration Statement, the General Disclosure Package and the Prospectus are true, accurate and complete in all material respects;

(viii) each of the Adviser and the Administrator has the financial resources available to it necessary for the performance of its services and obligations as contemplated in the Registration Statement, General Disclosure Package and the Prospectus and under this Agreement and with respect to the Investment Advisory Agreement and the Administration Agreement, as applicable;

(ix) subsequent to the date of the most recent financial statements contained in the Registration Statement, General Disclosure Package and the Prospectus, there has not been any material adverse change, or any development involving a prospective material adverse change, in the business, financial condition, capitalization, prospects, or regulatory status of the Adviser or Administrator, respectively;

(x) each of the Adviser and the Administrator has all Consents and has made all necessary filings required under any federal, state, local or foreign law, regulation or rule, and has obtained all necessary Consents from other persons, in order to conduct its business, except where the failure to obtain such Consents or make such filings would not reasonably be expected to have an Adviser Material Adverse Effect or Administrator Material Adverse Effect, respectively; the Adviser and the Administrator are not in violation of, or in default under, nor have the Adviser or the Administrator received notice of any proceedings relating to revocation or modification of any such Consent or any federal, state, local or foreign law, regulation or rule or any decree, order or judgment applicable to the Adviser or the Administrator, except where such revocation or modification would not, individually or in the aggregate, reasonably be expected to have an Adviser Material Adverse Effect or Administrator Material Adverse Effect, respectively;

(xi) neither the Adviser nor the Administrator, nor, to the knowledge of the Adviser or the Administrator, any of their respective partners, officers, affiliates or controlling persons has taken, directly or indirectly, any action designed, under the Exchange Act, to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale of the Securities;

(xii) the Adviser and the Administrator are not aware that (i) any executive, key employee or significant group of employees of the Company, if any, or the Adviser or the Administrator, plans to terminate employment with the Company, the Adviser or the Administrator or (ii) any such executive, key employee or significant group of employees is subject to any noncompete, nondisclosure, confidentiality, employment, consulting or similar agreement that would be violated by the present or proposed business activities of the Company, the Adviser or the Administrator, except where such termination or violation would not reasonably be expected to have an Adviser Material Adverse Effect or Administrator Material Adverse Effect, respectively;

(xiii) the Adviser maintains a system of internal controls sufficient to provide reasonable assurance that (i) transactions effectuated by it under the Investment Advisory Agreement are executed in accordance with its management’s general or specific authorization; and (ii) access to the Company’s assets is permitted only in accordance with its management’s general or specific authorization;

 

13


(xiv) the Administrator maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions for which it has bookkeeping and record keeping responsibility under the Administration Agreement are recorded as necessary to permit preparation of the Company’s financial statements in conformity with GAAP and to maintain accountability for the Company’s assets and (ii) the recorded accountability for such assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences;

(xv) the operations of the Adviser and the Administrator are and have been conducted at all times in compliance in all material respects with all applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transaction Reporting Act of 1970 (otherwise known as the Bank Secrecy Act), as amended, and the applicable anti-money laundering statutes of jurisdictions where the Adviser or Administrator conduct business, and the rules and regulations promulgated thereunder and any related or similar applicable rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Adviser and Administrator Anti-Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Adviser or the Administrator with respect to Adviser and Administrator Anti-Money Laundering Laws is pending or, to the knowledge of the Adviser and the Administrator, threatened;

(xvi) neither the Adviser nor the Administrator, nor any director, officer or employee thereof, nor, to the knowledge of the Adviser or the Administrator, any controlled affiliate, agent or representative thereof is aware of or has taken any action, directly or indirectly, that would result in a violation by such entities or persons of the FCPA or of the U.K. Bribery Act, including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment, giving or receipt of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA, the U.K. Bribery Act or other applicable anti-corruption laws, and the Adviser and the Administrator and any affiliate of the Adviser or the Administrator have conducted their businesses in compliance with the FCPA, the U.K. Bribery Act and other applicable anti-corruption laws and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance with applicable anti-corruption laws; and

(xvii) neither the Adviser nor the Administrator, nor any director, officer or employee thereof, nor, to the Adviser’s or the Administrator’s knowledge, any or controlled affiliate, representative or agent thereof (i) is, or is controlled or 50% or more owned by or is acting on behalf of, a Sanctioned Person, (ii) is located, organized or resident in a Sanctioned Country or (iii) will directly or knowingly indirectly (which shall not include anything done with any such proceeds after they have been received by any affiliate of the Underwriters) use the proceeds of the offering of Securities hereunder, or lend, contribute or otherwise make available such proceeds to any joint venture partner or other person or entity in any manner to fund or facilitate any activities of or business with any Sanctioned Person or any Sanctioned Country, at the time of such funding or facilitation or that would result in a violation of any Sanctions by, or could result in the imposition of Sanctions against, any individual or entity (including any individual or entity participating in the offering, whether as an underwriter, adviser, investor or otherwise). Neither the Adviser nor the Administrator has knowingly engaged in any dealings or transactions with or for the benefit of a Sanctioned Person, or with or in a Sanctioned Country, nor does the Adviser or the Administrator have any plans to increase its dealings or transactions with or for the benefit of Sanctioned Persons, or with or in Sanctioned Countries.

Except as has been disclosed to the Underwriters or is not material to the analysis under any Sanctions, neither the Adviser nor the Administrator, nor any of the Adviser or the Administrator’s subsidiaries has engaged in any dealings or transactions with or for the benefit of a Sanctioned Person, or with or in a Sanctioned Country, nor does the Adviser or any of its subsidiaries have any plans to increase its dealings or transactions with or for the benefit of Sanctioned Persons, or with or in Sanctioned Countries.

 

14


SECTION 2. Sale and Delivery to Underwriters; Closing.

(a) Initial Securities. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company agrees to sell to each Underwriter, severally and not jointly, and each Underwriter, severally and not jointly, agrees to purchase from the Company, at the price per share set forth in Schedule A, that number of Initial Securities set forth in Schedule A opposite the name of such Underwriter, plus any additional number of Initial Securities which such Underwriter may become obligated to purchase pursuant to the provisions of Section 10 hereof, subject, in each case, to such adjustments among the Underwriters as the Representatives in their sole discretion shall make to eliminate any sales or purchases of fractional shares.

(b) Option Securities. In addition, on the basis of the representations, warranties and agreements set forth herein and subject to the terms and conditions set forth herein, the Company hereby grants an option to the Underwriters, severally and not jointly, to purchase up to an additional [●] shares of Common Stock, as may be necessary to cover overallotments made in connection with the offering of the Initial Securities, at the price per share set forth in Schedule A, less an amount per share equal to any dividends or distributions declared by the Company and payable on the Initial Securities but not payable on the Option Securities. The option hereby granted may be exercised for thirty (30) days after the date hereof and may be exercised in whole or in part at any time from time to time upon notice by the Representatives to the Company setting forth the number of Option Securities as to which the several Underwriters are then exercising the option and the time and date of payment and delivery for such Option Securities. Any such time and date of delivery (a “Date of Delivery”) shall be determined by the Representatives, and may be the same date as the Closing Time, but shall not be later than seven (7) full business days after the exercise of said option, nor in any event prior to the Closing Time (unless such time and date are postponed in accordance with Section 10 hereof). If the option is exercised as to all or any portion of the Option Securities, each of the Underwriters, acting severally and not jointly, will purchase that proportion of the total number of Option Securities then being purchased which the number of Initial Securities set forth in Schedule A opposite the name of such Underwriter bears to the total number of Initial Securities, subject, in each case, to such adjustments as the Representatives in their sole discretion shall make to eliminate any sales or purchases of fractional shares.

(c) Payment. Payment of the initial public offering price for the Initial Securities (less the underwriting discount) by the Underwriters to the Company (in the amount set forth in Schedule A), and delivery of the Initial Securities, shall be made at the offices of Ropes & Gray LLP, 1211 Avenue of the Americas, New York, NY 10036 or at such other place as shall be agreed upon by the Representatives and the Company, at 9:00 A.M. (New York City time) on the second (third, if the pricing occurs after 4:30 P.M. (New York City time) on any given day) business day after the date hereof (unless postponed in accordance with the provisions of Section 10), or such other time not later than five business days after such date as shall be agreed upon by the Representatives and the Company (such time and date of payment and delivery being herein called “Closing Time”).

In addition, in the event that any or all of the Option Securities are purchased by the Underwriters, payment of the initial public offering price for the Option Securities (less the underwriting discount) by the Underwriters to the Company (in the amount set forth in Schedule A), and delivery of the Option Securities, shall be made at the above-mentioned offices, or at such other place as shall be agreed upon by the Representatives and the Company, on each Date of Delivery as specified in the notice from the Representatives to the Company.

Payment of the initial public offering price (less the underwriting discount) shall be made to the Company by wire transfer of immediately available funds to a bank account designated by the Company against delivery to the Representatives through the facilities of the Depository Trust Company for the respective accounts of the Underwriters of the Securities to be purchased by them. It is understood that each Underwriter has authorized the Representatives, for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Initial Securities and the Option Securities, if any, which it has agreed to purchase. The Representatives may (but shall not be obligated to) make payment of the purchase price for the Initial Securities or the Option Securities, if any, to be purchased by any Underwriter whose funds have not been received by the Closing Time or the relevant Date of Delivery, as the case may be, but such payment shall not relieve such Underwriter from its obligations hereunder.

 

15


SECTION 3. Covenants of the Company. The Company covenants with each Underwriter as follows:

(a) Compliance with Securities Regulations and Commission Requests. The Company, subject to Section 3(b), will comply with the requirements of Rule 430A, will file any Issuer Free Writing Prospectus to the extent required by Rule 433 under the Act, and will notify the Representatives immediately, and confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement shall become effective or any amendment or supplement to the Prospectus shall have been filed, (ii) of the receipt of any comments from the Commission, (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Rule 482 Material, Prospectus, or for additional information, (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment or of any order preventing or suspending the use of any preliminary prospectus, the Rule 482 Material or the Prospectus, or of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes or pursuant to Section 8A of the Act or of any examination pursuant to Section 8(d) or 8(e) of the Act concerning the Registration Statement and (v) if the Company becomes the subject of a proceeding under Section 8A of the Act in connection with the offering of the Securities. The Company will effect all filings required under Rule 424(b) within the time period required by Rule 424(b), and will take such steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. The Company will use its commercially reasonable efforts to prevent the issuance of any stop order, prevention or suspension and, if any such order is issued, to obtain the lifting thereof at the earliest possible moment.

(b) Continued Compliance with Securities Laws. The Company will use its commercially reasonable efforts to comply with the Act and the Act Regulations so as to permit the completion of the distribution of the Securities as contemplated in this Agreement and in the Registration Statement, the General Disclosure Package and the Prospectus. If at any time when a prospectus relating to the Securities is required by the Act to be delivered in connection with sales of the Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the Underwriters or for the Company, to (i) amend the Registration Statement in order that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) amend or supplement the Rule 482 Material, General Disclosure Package or the Prospectus in order that the Rule 482 Material, General Disclosure Package or the Prospectus, as the case may be, will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser or (iii) amend the Registration Statement or amend or supplement the Rule 482 Material, General Disclosure Package or the Prospectus, as the case may be, in order to comply with the requirements of the Act or the Act Regulations, the Company will promptly (A) give the Representatives notice of such event, (B) prepare any amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement, the Rule 482 Material, the General Disclosure Package or the Prospectus comply with such requirements and, a reasonable amount of time prior to any proposed filing or use, furnish the Representatives with copies of any such amendment or supplement and (C) file with the Commission any such amendment or supplement; provided that the Company shall not file or use any such amendment or supplement to which the Representatives or counsel for the Underwriters shall reasonably object. The Company will furnish to the Underwriters such number of copies of such amendment or supplement as the Underwriters may reasonably request. The Company has given the Representatives notice of any filings made pursuant to the Exchange Act or the rules and regulations of the Commission under the Exchange Act (the “Exchange Act Regulations”) within 48 hours prior to the Applicable Time; the Company will give the Representatives notice of its intention to make any such filing from the Applicable Time to the Closing Time and will furnish the Representatives with copies of any such documents a reasonable amount of time prior to such proposed filing or use, as the case may be, and will not file or use any such document to which the Representatives or counsel for the Underwriters shall reasonably object.

 

16


(c) Delivery of Commission Filings. The Company has furnished or, upon written request of the Representatives, will deliver to the Representatives and counsel for the Underwriters, without charge, conformed copies of (i) the Notification of Election and (ii) the Registration Statement, each as originally filed, and of each amendment thereto (including exhibits filed therewith) and conformed copies of all consents and certificates of experts, and will also deliver to the Representatives, without charge, a conformed copy of the Notification of Election and the Registration Statement as originally filed and of each amendment thereto (without exhibits) for each of the Underwriters. The copies of the Notification of Election and Registration Statement and each amendment thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.

(d) Delivery of Prospectuses. The Company has delivered to each Underwriter, without charge, as many copies of each preliminary prospectus as such Underwriter reasonably requested, and the Company hereby consents to the use of such copies for purposes permitted by the Act. The Company will furnish to each Underwriter, without charge, during the period when a prospectus relating to the Securities is required to be delivered under the Act, such number of copies of the Rule 482 Material, the Prospectus (as amended or supplemented) and each Issuer Free Writing Prospectus as such Underwriter may reasonably request. The Rule 482 Material, the Prospectus and any amendments or supplements thereto and each Issuer Free Writing Prospectus furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.

(e) Blue Sky Qualifications. The Company will use its commercially reasonable efforts, in cooperation with the Underwriters, to qualify the Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Representatives may designate and to maintain such qualifications in effect so long as reasonably required to complete the distribution of the Securities; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.

(f) Rule 158. The Company will make generally available to its securityholders as soon as practicable an earnings statement that satisfies the provisions of Section 11(a) of the Act and Rule 158 of the Commission promulgated thereunder covering a period of at least twelve (12) months beginning with the first fiscal quarter of the Company occurring after the “effective date” (as defined in Rule 158) of the Registration Statement; provided that the Company will be deemed to have complied with such request by filing such an earnings statement on EDGAR.

(g) Use of Proceeds. The Company will apply the net proceeds from the sale of the Securities in all material respects as described in each of the Registration Statement, the General Disclosure Package and the Prospectus under the heading “Use of Proceeds.

(h) Listing. The Company will use its commercially reasonable efforts to effect and maintain the listing of the Common Stock (including the Securities) on the NYSE.

(i) Restriction on Sale of Securities. For a period of 180 days after the date of the Prospectus, the Company will not, and will not publicly disclose the intention to, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, or submit to, or file with, the Commission a registration statement under the Act relating to, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Common Stock or any such other securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise, without the prior written consent of the Representatives, other than the Securities to be sold hereunder.

For the avoidance of doubt, the restrictions described above shall not apply to (i) the issuance of shares of Common Stock or securities convertible into or exercisable for shares of Common Stock pursuant to the conversion or exchange of convertible or exchangeable securities or the exercise of warrants or options (including net exercise) or the settlement of restricted stock units (including net settlement) (“RSUs”), in each case outstanding on the date of this Agreement and referred to in the Registration Statement, the General Disclosure Package or the Prospectus; (ii) shares of Common Stock issued pursuant to any dividend reinvestment plan referred to in the Registration

 

17


Statement, the General Disclosure Package and the Prospectus or (iii) grants of stock options, stock awards, restricted stock, RSUs, or other equity awards and the issuance of shares of Common Stock or securities convertible into or exercisable or exchangeable for shares of stock (whether upon the exercise of stock options or otherwise) to the Company’s employees, officers, trustees, advisers, or consultants pursuant to the terms of an equity compensation plan in effect as of the Closing Time and referred to in the Registration Statement, the General Disclosure Package or the Prospectus, provided that such recipients enter into a lock-up agreement with the Underwriters.

(j) Reporting Requirements. The Company has filed and will file all documents required to be filed with the Commission pursuant to the Exchange Act within the time periods required by the Exchange Act and the Exchange Act Regulations.

(k) Business Development Company Status. The Company, during a period of twenty-four (24) months from the effective date of the Company’s Registration Statement, will use commercially reasonable efforts to maintain its status as a business development company under the Investment Company Act; provided, however, that the Company may change the nature of its business so as to cease to be, or withdraw its election to be treated as, a business development company with the approval of the board of trustees and a vote of stockholders as required by Section 58 of the Investment Company Act or any successor provision.

(l) Regulated Investment Company Status. The Company will use its commercially reasonable efforts to maintain its qualification as a regulated investment company under Subchapter M of the Code for each full fiscal year during which it is a business development company under the Investment Company Act.

(m) Annual Compliance Reviews. The Company will retain qualified accountants and qualified tax experts to (i) test procedures and conduct annual compliance reviews designed to determine compliance with the regulated investment company provisions of the Code and (ii) otherwise assist the Company in monitoring appropriate accounting systems and procedures designed to determine compliance with the regulated investment company provisions of the Code.

(n) Accounting Controls. The Company has established and will use commercially reasonable efforts to maintain a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management’s authorization; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (C) access to the Company’s consolidated assets is permitted only in accordance with management’s authorization; (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences; (E) material information relating to the Company and the assets managed by the Adviser is promptly made known to the officers responsible for establishing and maintaining the system of internal accounting controls; and (F) any significant deficiencies or weaknesses in the design or operation of internal accounting controls that could adversely affect the Company’s ability to record, process, summarize and report financial data, and any fraud whether or not material that involves management or other employees who have a significant role in internal controls, are adequately and promptly disclosed to the Company’s independent auditors and the audit committee of the Company’s board of trustees.

(o) Disclosure Controls. The Company will use commercially reasonable efforts to establish and employ disclosure controls and procedures that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and is accumulated and communicated to the Company’s management, including its principal executive officer or officers and principal financial officer or officers, as appropriate to allow timely decisions regarding disclosure.

(p) Transfer Restriction. Without the consent of the Representatives, neither the Company nor the Adviser shall amend or waive any of the restrictions set forth in the transfer restriction and lock-up agreements entered into by holders of the Company’s common shares as described in the Registration Statement, the General Disclosure Package and the Prospectus.

 

18


SECTION 4. Payment of Expenses.

(a) Expenses. The Company will pay or cause to be paid all expenses incident to the performance of its obligations hereunder, including (i) the preparation, printing and filing of the Registration Statement (including financial statements and exhibits) as originally filed and each amendment thereto, (ii) the preparation, printing and delivery to the Underwriters of copies of each preliminary prospectus, the Rule 482 Material, the Prospectus, any Issuer Free Writing Prospectus and any amendments or supplements thereto and any costs associated with electronic delivery of any of the foregoing by the Underwriters to investors, (iii) the preparation, issuance and delivery of the certificates for the Securities to the Underwriters, including any stock or other transfer taxes and any stamp or other duties payable upon the sale, issuance or delivery of the Securities to the Underwriters, (iv) the fees and disbursements of the Company’s and the Adviser’s counsel, accountants and other advisers, (v) the qualification of the Securities under securities laws in accordance with the provisions of Section 3(e) hereof, (vi) the fees and expenses of any transfer agent or registrar for the Securities, (vii) the costs and expenses of the Company relating to investor presentations on any “road show” undertaken in connection with the marketing of the Securities, including without limitation, reasonable and documented expenses associated with travel, the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations, provided, however, that the Underwriters shall be responsible for 50% of the costs of any chartered private aircraft incurred in connection with such road show, (viii) the filing fees incident to, and the reasonable fees and disbursements of counsel to the Underwriters in connection with, the review by FINRA of the terms of the sale of the Securities (such fees and expenses pursuant to this clause (viii) and clause (v), in the aggregate, shall not exceed $25,000), (ix) the fees and expenses incurred in connection with the listing of the Securities on the NYSE and (x) the costs and expenses (including, without limitation, any damages or other amounts payable in connection with legal or contractual liability) associated with the reforming of any contracts for sale of the Securities made by the Underwriters caused by a breach of the representation contained in the third sentence of Section 1(a)(ii). It is, however, understood that except as provided in this Section of the Agreement, the Underwriters shall pay all of their own costs and expenses, including, without limitations, the fees and disbursements of their counsel, any advertising expenses connected with any offers they make and 50% of the costs of any chartered private aircraft incurred in connection with the road show and all travel, lodging and other expenses of the Underwriters incurred by them in connection with any road show.

(b) Termination of Agreement. If (i) this Agreement is terminated pursuant to Section 9, (ii) the Company for any reason fails to tender the Securities for delivery to the Underwriters or (iii) the Underwriters decline to purchase the Securities for any reason permitted under this Agreement, the Company agrees to reimburse the Underwriters for all out-of-pocket costs and expenses (including the fees and expenses of their counsel) reasonably incurred by the Underwriters in connection with this Agreement and the offering contemplated hereby.

SECTION 5. Conditions of Underwriters’ Obligations. The obligations of the several Underwriters hereunder are subject to the accuracy of the representations and warranties of the Company and the Adviser contained herein or in certificates of any officer of the Company or the Adviser delivered pursuant to the provisions hereof, to the performance by the Company and the Adviser of their respective covenants and other obligations hereunder, and to the following further conditions:

(a) Effectiveness of Registration Statement; Rule 430A Information. The Registration Statement, including any Rule 462(b) Registration Statement, has become effective and, at the Closing Time, no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued under the Act, no order preventing or suspending the use of any preliminary prospectus or the Prospectus has been issued and no proceedings for any of those purposes or pursuant to Section 8A under the Act have been instituted or are pending or, to the Company’s knowledge, contemplated; and the Company has complied with each request (if any) from the Commission for additional information in connection with the Registration Statement. A prospectus containing the Rule 430A Information shall have been filed with the Commission in accordance with Rule 424(b) or a post-effective amendment providing such information shall have been filed with, and declared effective by, the Commission in accordance with the requirements of Rule 430A.

(b) Opinions of Counsel for Company. At the Closing Time, the Representatives shall have received the favorable opinions, dated as of the Closing Time, of Simpson Thacher and Bartlett LLP, counsel for the Company, Adviser and Administrator, and Richard, Layton & Finger, P.A., Delaware counsel for the Company, Adviser and Administrator, in each case, in form and substance reasonably satisfactory to counsel for the Underwriters, together with signed or reproduced copies of such letters for each of the other Underwriters to the effect set forth in

 

19


Exhibits A-1, A-2 and A-3 hereto and to such further effect as counsel to the Underwriters may reasonably request. Such counsels may state that insofar as such opinions involve factual matters, they have relied upon certificates of officers of the Company and certificates of public officials.

(c) Opinion of Counsel for Underwriters. At the Closing Time, the Representatives shall have received the favorable opinion, dated as of the Closing Time, of Ropes & Gray LLP, counsel for the Underwriters, together with signed or reproduced copies of such letter for each of the other Underwriters with respect to the sale of the Securities and other related matters as the Representatives may require. In giving such opinion such counsel may rely, as to all matters governed by the laws of jurisdictions other than the law of the State of New York and the federal securities laws of the United States, upon the opinions of counsel satisfactory to the Representatives. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers and other representatives of the Company and certificates of public officials.

(d) Officers’ Certificates.

(i) At the Closing Time, there shall not have been, since the date hereof or since the respective dates as of which information is given in the Registration Statement, the General Disclosure Package or the Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company, whether or not arising in the ordinary course of business, and the Representatives shall have received a certificate of (i) the chief executive officer or the president of the Company and (ii) the chief financial or chief accounting officer of the Company, dated the Closing Time, to the effect that (A) there has been no such material adverse change, (B) the representations and warranties of the Company in Section 1(a) of this Agreement are true and correct with the same force and effect as though expressly made at and as of the Closing Time, (C) the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Time, and (D) no stop order suspending the effectiveness of the Registration Statement under the Act has been issued, no order preventing or suspending the use of any preliminary prospectus or the Prospectus has been issued and no proceedings for any of those purposes have been instituted or are pending or, to their knowledge, contemplated by the Commission.

(ii) At the Closing Time, there shall not have been, since the date hereof or since the respective dates as of which information is given in the Prospectus, an Adviser Material Adverse Effect, and the Representatives shall have received a certificate of the chief executive officer or the president and the chief financial or chief accounting officer of the Adviser, dated the Closing Time, to the effect that (A) there has been no such Adviser Material Adverse Effect, (B) the representations and warranties of the Adviser in Section 1(b) of this Agreement are true and correct with the same force and effect as though expressly made at and as of the Closing Time and (C) the Adviser has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Time.

(iii) At the time of the execution of this Agreement, the Representatives shall have received from the Chief Financial Officer at the Company, dated such date, a certificate representing to certain financial and other matters in substantially the form attached as Exhibit A-4 hereto.

(iv) At the Closing Time, the Representatives shall have received from the Chief Financial Officer at the Company, dated as of the Closing Time, a certificate reaffirming the statements made in the certificate delivered at the time of execution of this Agreement.

(e) Accountant’s Comfort Letter. At the time of the execution of this Agreement, the Representatives shall have received from Deloitte a letter, dated such date, in form and substance reasonably satisfactory to the Representatives, together with signed or reproduced copies of such letter for each of the other Underwriters containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement, the General Disclosure Package and the Prospectus.

(f) Bring-down Comfort Letter. At the Closing Time, the Representatives shall have received from Deloitte a letter, dated as of the Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (e) of this Section, except that the specified date referred to shall be a date not more than three (3) business days prior to the Closing Time.

 

20


(g) Approval of Listing. At the Closing Time, the Securities shall have been approved for listing on the NYSE, subject only to official notice of issuance.

(h) No Objection. FINRA has confirmed that it has not raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements relating to the offering of the Securities.

(i) Lock-up Agreements. At the date of this Agreement, the Representatives shall have received an agreement substantially in the form of Exhibit B hereto signed by the persons listed on Schedule C hereto.

(j) Conditions to Purchase of Option Securities. In the event that the Underwriters exercise their option provided in Section 2(b) hereof to purchase all or any portion of the Option Securities, the representations and warranties of the Company and the Adviser contained herein and the statements in any certificates furnished by the Company and the Adviser hereunder shall be true and correct as of each Date of Delivery and, at the relevant Date of Delivery, the Representatives shall have received:

(i) Officers’ Certificates.

(A) A certificate, dated such Date of Delivery, of the chief executive officer or the president or a vice president of the Company and of the chief financial or chief accounting officer of the Company confirming that the certificate delivered at the Closing Time pursuant to Section 5(d)(i) hereof remains true and correct as of such Date of Delivery.

(B) A certificate, dated such Date of Delivery, of the chief executive officer or the president or a vice president and the chief financial or chief accounting officer of the Adviser confirming that the certificates delivered at the Closing Time pursuant to Section 5(d)(ii) hereof remain true and correct as of such Date of Delivery.

(C) A certificate, dated such Date of Delivery, from the Chief Financial Officer at the Company substantially in the same form and substance as the letter furnished to the Representatives pursuant to Section 5(d)(iv) hereof.

(ii) Opinions of Counsel for Company. If requested by the Representatives, the favorable opinions of Simpson Thacher and Bartlett LLP, counsel for the Company, and Richards, Layton & Finger, P.A., Delaware counsel for the Company, in each case, in form and substance reasonably satisfactory to counsel for the Underwriters, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinions required by Section 5(b) hereof.

(iii) Opinion of Counsel for Underwriters. If requested by the Representatives, the favorable opinion of Ropes & Gray LLP, counsel for the Underwriters, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(c) hereof.

(iv) Bring-down Comfort Letter. If requested by the Representatives, a letter from Deloitte, in form and substance reasonably satisfactory to the Representatives and dated such Date of Delivery, substantially in the same form and substance as the letter furnished to the Representatives pursuant to Section 5(f) hereof, except that the “specified date” in the letter furnished pursuant to this paragraph shall be a date not more than three business days prior to such Date of Delivery.

(k) Additional Documents. At the Closing Time and at each Date of Delivery (if any) counsel for the Underwriters shall have been furnished with such documents and opinions as they may reasonably require for the purpose of enabling them to pass upon the issuance and sale of the Securities as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein

 

21


contained; and all proceedings taken by the Company and the Adviser in connection with the issuance and sale of the Securities as herein contemplated shall be satisfactory in form and substance to the Representatives and counsel for the Underwriters.

(l) Termination of Agreement. If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement, or, in the case of any condition to the purchase of Option Securities on a Date of Delivery which is after the Closing Time, the obligations of the several Underwriters to purchase the relevant Option Securities, may be terminated by the Representatives by written notice to the Company at any time at or prior to Closing Time or such Date of Delivery, as the case may be, and such termination shall be without liability of any party to any other party except as provided in Section 4 and except that Sections 1, 6, 7, 8, 14, 15 and 16 survive any such termination and remain in full force and effect.

SECTION 6. Indemnification.

(a) Indemnification of Underwriters by the Company and the Adviser. The Company and the Adviser, severally and not jointly, agree to indemnify and hold harmless each Underwriter, its affiliates (as such term is defined in Rule 501(b) under the Act (each, an “Affiliate”)), its selling agents and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Act or Section 20 of the Exchange Act as follows:

(i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including any Rule 430A Information, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in (A) any preliminary prospectus, Rule 482 Material, the General Disclosure Package, any Issuer Free Writing Prospectus, any Testing-the-Waters Communication or the Prospectus (or any amendment or supplement thereto), or (B) any road show as defined in Rule 433(h) under the Act (a “road show”), or the omission or alleged omission in any preliminary prospectus, the Prospectus, any Issuer Free Writing Prospectus, any Testing-the-Waters Communication, any road show or the General Disclosure Package of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;

(ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever arising out of or based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 6(d) below) any such settlement is effected with the written consent of the Company;

(iii) against any and all expense whatsoever, as incurred (including the reasonably incurred and documented fees and disbursements of counsel chosen by the Representatives), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever arising out of or based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above;

provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of or based upon any untrue statement or omission or alleged untrue statement or omission made in the Registration Statement (or any amendment thereto), including any Rule 430A Information, any preliminary prospectus, the General Disclosure Package or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with the Underwriter Information, and provided, further, that the Adviser’s indemnity agreement shall only apply to statements described in (i) above regarding the Adviser.

 

22


(b) Indemnification of Company, Trustees, Directors, Officers and Adviser. Each Underwriter severally agrees to indemnify and hold harmless the Company, the Adviser, their trustees or directors, as applicable, each of the Company’s officers who signed the Registration Statement and each person, if any, who controls the Company or the Adviser within the meaning of Section 15 of the Act or Section 20 of the Exchange Act to the same extent as the indemnity set forth in subsection (a) of this Section, as incurred, but only with respect to any losses, liabilities, claims, damages and expenses that arise out of, or are based upon, any untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto), including any Rule 430A Information, the General Disclosure Package, any Issuer Free Writing Prospectus any Testing-the-Waters Communication, Rule 482 Material or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with the Underwriter Information.

(c) Actions against Parties; Notification. Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent that it has not been materially prejudiced (including through the forfeiture of substantive rights and defenses) as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 6(a) above, counsel to the indemnified parties shall be selected by the Representatives, and, in the case of parties indemnified pursuant to Section 6(b) above, counsel to the indemnified parties shall be selected by the Company. An indemnifying party shall not have the right to direct the defense of any direction in any proceeding on behalf of the indemnified party or parties. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the contrary; (ii) the indemnifying party has failed within a reasonable time to retain counsel reasonably satisfactory to the indemnified party; (iii) the indemnified party shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the indemnifying party; or (iv) the named parties in any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. In no event shall the indemnifying parties be liable for the reasonably incurred and documented fees and expenses of more than one (1) counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of or based upon the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 6 or Section 7 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of or based upon such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.

(d) Settlement without Consent if Failure to Reimburse. If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a)(ii) effected without its written consent if (i) such settlement is entered into more than forty-five (45) days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least thirty (30) days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.

SECTION 7. Contribution. If the indemnification provided for in Section 6 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount paid or payable by such indemnified party as a result of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Adviser, on the one hand, and the Underwriters, on the other hand, from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but

 

23


also the relative fault of the Company and the Adviser, on the one hand, and of the Underwriters, on the other hand, in connection with the statements or omissions that resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. For the avoidance of doubt, the Adviser’s contribution agreement shall only apply to instances in which the Adviser has an indemnity obligation as described above in Section 6(a).

The relative benefits received by the Company and the Adviser, on the one hand, and the Underwriters, on the other hand, in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Securities pursuant to this Agreement (before deducting expenses) received by the Company (and net of the portion of the underwriting discount paid by the Adviser), on the one hand, and the total underwriting discount received by the Underwriters, on the other hand, in each case as set forth on the cover of the Prospectus, bear to the aggregate initial public offering price of the Securities as set forth on the cover of the Prospectus.

The relative fault of the Company and the Adviser, on the one hand, and the Underwriters, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company and the Adviser or by the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

The Company, the Adviser and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Underwriters were treated as one (1) entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to above in this Section 7. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission.

Notwithstanding the provisions of this Section 7, no Underwriter shall be required to contribute any amount in excess of the underwriting commissions received by such Underwriter in connection with the Securities underwritten by it and distributed to the public.

No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

Notwithstanding anything in this Agreement to the contrary, any indemnification and contribution by the Company shall be subject to the requirements and limitations of Section 17(i) of the Investment Company Act and any applicable guidance from the Commission or its staff thereunder.

For purposes of this Section 7, each person, if any, who controls an Underwriter within the meaning of Section 15 of the Act or Section 20 of the Exchange Act and each Underwriter’s Affiliates and selling agents shall have the same rights to contribution as such Underwriter, and each trustee of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company or the Adviser within the meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Company or the Adviser, as the case may be. The Underwriters’ respective obligations to contribute pursuant to this Section 7 are several in proportion to the number of Initial Securities set forth opposite their respective names in Schedule A hereto and not joint.

SECTION 8. Representations, Warranties and Agreements to Survive. All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company, the Adviser or any of the Adviser’s subsidiaries submitted pursuant hereto, shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of the Underwriters or its Affiliates or selling agents, any person controlling any Underwriter, its officers or trustees or any person controlling the Company and (ii) delivery of and payment for the Securities.

 

24


SECTION 9. Termination of Agreement.

(a) Termination. The Representatives may terminate this Agreement, by written notice to the Company, at any time at or prior to the Closing Time (i) if there has been, in the judgment of the Representatives, since the time of execution of this Agreement or since the respective dates as of which information is given in the Registration Statement, the General Disclosure Package or the Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company or the Adviser, whether or not arising in the ordinary course of business, or (ii) if there has occurred any material adverse change in the financial markets in the United States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of the Representatives, impracticable or inadvisable to proceed with the completion of the offering or to enforce contracts for the sale of the Securities, or (iii) if trading in any securities of the Company has been suspended or materially limited by the Commission or the NYSE, or (iv) if trading generally on the NYSE MKT or the NYSE or in the Nasdaq Global Market has been suspended or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by order of the Commission, FINRA or any other governmental authority, or (v) a material disruption has occurred in commercial banking or securities settlement or clearance services in the United States or with respect to Clearstream or Euroclear systems in Europe, or (vi) if a banking moratorium has been declared by either Federal or New York authorities.

(b) Liabilities. If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Section 4 hereof, and provided further that Sections 1, 6, 7, 8, 14, 15 and 16 shall survive such termination and remain in full force and effect.

SECTION 10. Default by One or More of the Underwriters. If one or more of the Underwriters shall fail at the Closing Time or a Date of Delivery to purchase the Securities which it or they are obligated to purchase under this Agreement (the “Defaulted Securities”), the Representatives shall have the right, within twenty-four (24) hours thereafter, to make arrangements for one or more of the non-defaulting Underwriters, or any other underwriters, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, the Representatives shall not have completed such arrangements within such 24-hour period, then:

(i) if the number of Defaulted Securities does not exceed 10% of the number of Securities to be purchased on such date, each of the non-defaulting Underwriters shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting Underwriters, or

(ii) if the number of Defaulted Securities exceeds 10% of the number of Securities to be purchased on such date, this Agreement or, with respect to any Date of Delivery which occurs after the Closing Time, the obligation of the Underwriters to purchase, and the Company to sell, the Option Securities to be purchased and sold on such Date of Delivery shall terminate without liability on the part of any non-defaulting Underwriter.

No action taken pursuant to this Section shall relieve any defaulting Underwriter from liability in respect of its default.

In the event of any such default which does not result in a termination of this Agreement or, in the case of a Date of Delivery which is after the Closing Time, which does not result in a termination of the obligation of the Underwriters to purchase and the Company to sell the relevant Option Securities, as the case may be, either the (i) Representatives or (ii) the Company shall have the right to postpone Closing Time or the relevant Date of Delivery, as the case may be, for a period not exceeding seven (7) days in order to effect any required changes in the Registration Statement, the General Disclosure Package or the Prospectus or in any other documents or arrangements. As used herein, the term “Underwriter” includes any person substituted for an Underwriter under this Section 10.

 

25


SECTION 11. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Underwriters shall be directed to (i) BofA Securities, Inc., One Bryant Park, New York, NY 10036, Attention: Syndicate Department (email: dg.ecm_execution_services@bofa.com), with a copy to ECM Legal, Attention: ECM Legal (email: dg.ecm_legal@bofa.com); (ii) Morgan Stanley & Co. LLC at 1585 Broadway, NY, New York 10036, attention of Equity Syndicate Desk, with a copy to Legal Department; (iii) Wells Fargo Securities, LLC, 550 South Tryon Street, 5th Floor, Charlotte, NC 28202, Attention: [Equity Syndicate Department, facsimile: (212) 214-5918]; (iv) Citigroup Global Markets Inc., 388 Greenwich Street, New York, NY 10013, attention of General Counsel, facsimile: (646) 291-1469; and (v) Goldman Sachs & Co. LLC, 200 West Street, New York, NY 10282-2198, Attn: Registration Department; and a copy, which shall not constitute notice, to Ropes & Gray LLP, 1211 Avenue of the Americas, New York, NY 10036, attention of Paul Tropp, Esq.; notices to the Company and the Adviser shall be directed to them at 345 Park Avenue, 31st Floor, New York, NY 10154, attention of Marisa Beeney; and a copy, which shall not constitute notice, to Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, NY 10017, Attention: Benjamin Wells, Esq.

SECTION 12. No Advisory or Fiduciary Relationship. The Company acknowledges and agrees that (a) the purchase and sale of the Securities pursuant to this Agreement, including the determination of the initial public offering price of the Securities and any related discounts and commissions, is an arm’s-length commercial transaction between the Company, on the one hand, and the several Underwriters, on the other hand, (b) in connection with the offering of the Securities and the process leading thereto, each Underwriter is and has been acting solely as a principal and is not the agent or fiduciary of the Company or its respective stockholders, creditors, employees or any other party, (c) no Underwriter has assumed or will assume an advisory or fiduciary responsibility in favor of the Company with respect to the offering of the Securities or the process leading thereto (irrespective of whether such Underwriter has advised or is currently advising the Company or any of its subsidiaries on other matters) and no Underwriter has any obligation to the Company with respect to the offering of the Securities except the obligations expressly set forth in this Agreement, (d) the Underwriters and their respective affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Company and (e) the Underwriters have not provided any legal, accounting, regulatory or tax advice with respect to the offering of the Securities and the Company has consulted its own respective legal, accounting, regulatory and tax advisers to the extent it deemed appropriate.

SECTION 13. Parties. This Agreement shall each inure to the benefit of and be binding upon the Underwriters and the Company and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Underwriters, the Company and the Adviser and their respective successors and the controlling persons and officers and trustees and directors referred to in Sections 6 and 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Underwriters, the Company and the Adviser and their respective successors, and said controlling persons and officers and trustees and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Securities from any Underwriter shall be deemed to be a successor by reason merely of such purchase.

SECTION 14. Compliance with USA Patriot Act. In accordance with the requirements of the USA Patriot Act, the Underwriters are required to obtain, verify and record information that identifies their respective clients, including the Company, which information may include the name and address of their respective clients, as well as other information that will allow the Underwriters to properly identify their respective clients.

SECTION 15. Trial by Jury. The Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) and each of the Underwriters hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

SECTION 16. GOVERNING LAW. THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS CHOICE OF LAW PROVISIONS.

 

26


SECTION 17. Recognition of the U.S. Special Resolution Regimes.

(i) In the event that any Underwriter that is a Covered Entity becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer from such Underwriter of this Agreement, and any interest and obligation in or under this Agreement, will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if this Agreement, and any such interest and obligation, were governed by the laws of the United States or a state of the United States.

(ii) In the event that any Underwriter that is a Covered Entity or a BHC Act Affiliate of such Underwriter becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under this Agreement that may be exercised against such Underwriter are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if this Agreement were governed by the laws of the United States or a state of the United States.

As used in this Section 16(g):

“BHC Act Affiliate” has the meaning assigned to the term “affiliate” in, and shall be interpreted in accordance with, 12 U.S.C. § 1841(k).

“Covered Entity” means any of the following:

(i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b);

(ii) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or

(iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).

“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.

“U.S. Special Resolution Regime” means each of (i) the Federal Deposit Insurance Act and the regulations promulgated thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.

SECTION 18. Consent to Jurisdiction; Waiver of Immunity. Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby shall be instituted in (i) the federal courts of the United States of America located in the City and County of New York, Borough of Manhattan or (ii) the courts of the State of New York located in the City and County of New York, Borough of Manhattan (collectively, the “Specified Courts”), and each party irrevocably submits to the exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of a judgment of any such court, as to which such jurisdiction is non-exclusive) of such courts in any such suit, action or proceeding. Service of any process, summons, notice or document by mail to such party’s address set forth above shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such suit, action or other proceeding brought in any such court has been brought in an inconvenient forum.

SECTION 19. TIME. TIME SHALL BE OF THE ESSENCE OF THIS AGREEMENT. EXCEPT AS OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.

 

27


SECTION 20. Counterparts. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including any electronic signature complying with the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act or other applicable law, e.g., www. Docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

SECTION 21. Regulation BI. The Company acknowledges that in connection with the offering of the Securities: none of the activities of the Underwriters in connection with the transactions contemplated herein constitutes a recommendation, investment advice, or solicitation of any action by the Underwriters with respect to any entity or natural person. The Company waives to the full extent permitted by applicable law any claims it may have against the Underwriters arising from an alleged breach of fiduciary duty in connection with the offering of the Securities.

SECTION 22. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof.

[SIGNATURE PAGE FOLLOWS]

 

28


If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the Underwriters, the Company, the Adviser and the Administrator in accordance with its terms.

 

Very truly yours,
BLACKSTONE SECURED LENDING FUND
By:  

 

  Name:
  Title:
BLACKSTONE CREDIT BDC ADVISORS LLC
By:  

 

  Name:
  Title:
BLACKSTONE ALTERNATIVE CREDIT ADVISORS LP
By:  

 

  Name:
  Title:

 

29


CONFIRMED AND ACCEPTED,

as of the date first above written:

 

By:   BOFA SECURITIES, INC.
By:  

 

  Name:
  Title:
By:   MORGAN STANLEY & CO. LLC
By:  

 

  Name:
  Title:
By:   WELLS FARGO SECURITIES, LLC
By:  

 

  Name:
  Title:
By:   CITIGROUP GLOBAL MARKETS INC.
By:  

 

  Name:
  Title:
By:   GOLDMAN SACHS & CO., LLC
By:  

 

  Name:
  Title:

For themselves and as Representatives of the other Underwriters named in Schedule A hereto.

 

30


SCHEDULE A

 

Name of Underwriter

  

Number of Initial Securities

  

Number of Option

Securities to be

Purchased if Maximum

Option Exercised

BofA Securities, Inc.

   [●]    [●]

Morgan Stanley & Co. LLC

   [●]    [●]

Wells Fargo Securities, LLC

   [●]    [●]

Citigroup Global Markets Inc.

   [●]    [●]

Goldman Sachs & Co. LLC

   [●]    [●]

Barclays Capital Inc.

   [●]    [●]

J.P. Morgan Securities LLC

   [●]    [●]

RBC Capital Markets, LLC

   [●]    [●]

Keefe, Bruyette & Woods, Inc.

   [●]    [●]

Raymond James & Associates, Inc.

   [●]    [●]

UBS Securities LLC

   [●]    [●]

Blackstone Securities Partners, L.P.

   [●]    [●]

BNP Paribas Securities Inc.

   [●]    [●]

Deutsche Bank Securities Inc.

   [●]    [●]

Compass Point Research & Trading, LLC

   [●]    [●]

Janney Montgomery Scott LLC

   [●]    [●]

MUFG Securities Americas Inc.

   [●]    [●]

SMBC Nikko Securities America, Inc.

   [●]    [●]

SG Americas Securities, LLC

   [●]    [●]

Academy Securities, Inc.

   [●]    [●]

Blaylock Van, LLC

   [●]    [●]

R. Seelaus & Co., LLC

   [●]    [●]

Samuel A. Ramirez & Company, Inc.

   [●]    [●]

 

31


Schedule B

PRICING INFORMATION:

 

Security being sold in the Offering    Common Shares of
Beneficial Interest
 

Offering price per share

   $ [ ●] 

Number of Shares being sold in the Offering

     [ ●] 

ISSUER FREE WRITING PROSPECTUSES:

[To come]

 

32


Schedule C

 

1) Robert Bass

2) Tracy Collins

3) Vicki L. Fuller

4) James F. Clark

5) Daniel H. Smith, Jr.

6) Brad Marshall

7) Stephan Kuppenheimer

8) Robert W. Busch

9) Beth Chartoff

10) Marisa J. Beeney

11) Katherine Rubenstein

12) Carlos Whitaker

 

33


Schedule D

 

BGSL Jackson Hole Funding LLC

   Delaware

BGSL Breckenridge Funding LLC

   Delaware

BGSL Big Sky Funding LLC

   Delaware

BGSL Investments LLC

   Delaware

 

34


EXHIBIT B

FORM OF LOCK-UP AGREEMENT

October [●], 2021

BofA Securities, Inc.

One Bryant Park

New York, New York 10036

Morgan Stanley & Co. LLC

1585 Broadway

New York, New York 10036

Wells Fargo Securities, LLC

550 South Tryon Street, 5th Floor

Charlotte, NC 28202

Citigroup Global Markets Inc.

388 Greenwich Street

New York, NY 10013

Goldman Sachs & Co. LLC

200 West Street

New York, NY 10282

as Representatives of the

several Underwriters named

in Schedule A of the Underwriting Agreement

Re:    Proposed Public Offering by Blackstone Secured Lending Fund

Dear Ladies and Gentlemen:

The undersigned, a stockholder and an officer and/or trustee of Blackstone Secured Lending Fund, a Delaware statutory trust (the “Company”), understands that BofA Securities, Inc., Morgan Stanley & Co. LLC, Wells Fargo Securities, LLC, Citigroup Global Markets Inc., and Goldman Sachs & Co. LLC (collectively, the “Representatives”) propose to enter into an Underwriting Agreement (the “Underwriting Agreement”) with the Company providing for the public offering (“Public Offering”) of shares of the Company’s common shares of beneficial interest, par value $0.001 per share (the “Common Stock”). In recognition of the benefit that such an offering will confer upon the undersigned as a stockholder and an officer and/or trustee of the Company, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned agrees with each underwriter to be named in the Underwriting Agreement that, during the period beginning on the date hereof and ending on the date that is 180 days from the date of the Underwriting Agreement (the “Lock-Up Period”), the undersigned will not and will not publicly disclose an intention to, without the prior written consent of the Representatives, (i) directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of any shares of the Company’s Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock, whether now owned or hereafter acquired by the undersigned or with respect to which the undersigned has or hereafter acquires the power of disposition (collectively, the “Lock-Up Securities”), or exercise any right with respect to the registration of any of the Lock-up Securities, or file, cause to be filed or cause to be confidentially submitted any registration statement in connection therewith, under the Securities Act of 1933, as amended, or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Lock-Up Securities, whether any such swap or transaction is to be settled by delivery of Common Stock or other securities, in cash or otherwise.

 

38


Notwithstanding the foregoing, and subject to the conditions below, the undersigned may transfer the Lock-Up Securities without the prior written consent of the Representatives, provided that (1) each Representative receives a signed lock-up agreement for the balance of the lockup period from each donee, trustee, distributee, or transferee, as the case may be, (2) any such transfer shall not involve a disposition for value, (3) such transfers are not required to be reported with the Securities and Exchange Commission on Form 4 in accordance with Section 16 of the Securities Exchange Act of 1934, as amended, and (4) the undersigned does not otherwise voluntarily effect any public filing or report regarding such transfers:

 

  (i)

as a bona fide gift or gifts; or

 

  (ii)

to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned (for purposes of this lock-up agreement, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin); or

 

  (iii)

as a distribution to limited partners or stockholders of the undersigned; or

 

  (iv)

to the undersigned’s affiliates or to any investment fund or other entity controlled or managed by the undersigned.

Furthermore, the undersigned may sell shares of Common Stock of the Company purchased by the undersigned on the open market following the Public Offering if and only if (i) such sales are not required to be reported in any public report or filing with the Securities and Exchange Commission, or otherwise and (ii) the undersigned does not otherwise voluntarily effect any public filing or report regarding such sales.

The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of the Lock-Up Securities except in compliance with the foregoing restrictions. Furthermore, the undersigned may, if permitted by the Company, establish a written trading plan meeting the requirements of Rule 10b5-1 under the Exchange Act; provided that the establishment of such plan does not give rise to any filing or public announcement and that no sales or other transfers occur under such plan during the Lock-Up Period referred to above.

The undersigned acknowledges and agrees that the Underwriters have not provided any recommendation or investment advice nor have the Underwriters solicited any action from the undersigned with respect to the Public Offering of shares of the Company’s Common Stock and the undersigned has consulted their own legal, accounting, financial, regulatory and tax advisers to the extent deemed appropriate. The undersigned further acknowledges and agrees that, although the Underwriters may provide certain Regulation Best Interest and Form CRS disclosures or other related documentation to you in connection with the Public Offering, the Underwriters are not making a recommendation to you to participate in the Public Offering, and nothing set forth in such disclosures or documentation is intended to suggest that any Underwriter is making such a recommendation. The undersigned further acknowledges and agrees that none of the Underwriters has made any recommendation or provided any investment or other advice to the undersigned with respect to this agreement or the subject matter hereof, and the undersigned has consulted its own legal, accounting, financial, regulatory, tax and other advisers with respect to this agreement and the subject matter hereof to the extent the undersigned has deemed appropriate.

 

Very truly yours,

    

 

Signature:

 

 

 

Print Name:

 

 

 

39


EXHIBIT C-1

WRITTEN TESTING-THE-WATERS COMMUNICATIONS

 

40


EXHIBIT C-2

RULE 482 MATERIAL

[None]

 

41

Exhibit (k)(23)

Blackstone Credit BDC Advisors LLC

345 Park Avenue

New York, NY 10154

October 18, 2021

Blackstone Secured Lending Fund

345 Park Avenue, 31st Floor

New York, NY 10154

Re: Fee Waiver

Ladies and Gentlemen:

Blackstone Credit BDC Advisors LLC (the “Adviser”) and Blackstone Secured Lending Fund (the “Company”) are parties to that certain Amended and Restated Investment Advisory Agreement, dated as of October 18, 2021 (as may be amended from time to time, the “Investment Advisory Agreement”), pursuant to which, following an Exchange Listing (as such term is defined in the Investment Advisory Agreement), the Company is obligated to pay to the Adviser, among other things, a base management fee, calculated at the annualized rate of 1.0% of the average value of the Company’s gross assets at the end of the two most recently completed calendar quarters, and an income based and capital gains based incentive fee of 17.5% (together with the base management fee, the “Advisory Fees”). Capitalized terms used but not defined herein have the meanings ascribed to them in the Investment Advisory Agreement.

This letter agreement (this “Agreement”) confirms the temporary waiver by the Adviser of a portion of the Advisory Fees payable by the Company, as follows:

The Adviser hereby agrees to temporarily reduce its: (1) base management fee to an annualized rate of 0.75% of the average value of the Company’s gross assets at the end of the two most recently completed calendar quarters, (2) income based incentive fee to 15%, instead of 17.5% and (3) capital gains based incentive fee to 15%, instead of 17.5%, in each case calculated in accordance with the Investment Advisory Agreement, effective from the date of the Exchange Listing until the second anniversary of the Exchange Listing (the “Waiver Period”). With respect to the capital gains based incentive fee, if the Waiver Period terminates on a date other than the first day of a fiscal year, such fee will be calculated as of the day before the expiration of the Waiver Period, with such capital gains incentive fee paid to the Adviser following the end of the fiscal year in which the Waiver Period ended. For the avoidance of doubt, such capital gains incentive fee will be equal to 15% of the Company’s realized capital gains on a cumulative basis from inception through the end of the Waiver Period, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gains incentive fees. Solely for purposes of calculating the capital gains incentive fee after the Waiver Period, the Company will be deemed to have previously paid capital gains incentive fees prior to the end of the Waiver Period equal to the product obtained by multiplying (a) the actual aggregate amount of previously paid capital gains incentive fees for all periods prior to the end of the Waiver Period by (b) the percentage obtained by dividing (x) 17.5% by (y) 15%.

Amounts waived by the Adviser are not subject to recoupment by the Adviser.

This Agreement shall be governed by and construed in accordance with the substantive laws of the State of New York which are applicable to contracts made and entirely to be performed therein, without regard to the place of performance hereunder.

The Adviser understands and intends that the Company will rely on this undertaking in preparing and filing a prospectus and other documents for the Company with the Securities and Exchange Commission, in accruing the Company’s expenses for purposes of calculating its net asset value per share, and for other purposes as expressly permitted by the Adviser.


Blackstone Credit BDC Advisors LLC
By:  

/s/ Marisa J. Beeney

Name:   Marisa J. Beeney
Title:   Authorized Signatory

 

Agreed and Accepted:

Blackstone Secured Lending Fund

 

By:  

/s/ Marisa J. Beeney

Name:   Marisa J. Beeney
Title:   Chief Legal Officer, Chief Compliance
Officer and Secretary

Exhibit (l)

 

 

 

LOGO

October 18, 2021

Blackstone Secured Lending Fund

345 Park Avenue, 31st Floor

New York, New York 10154

Re:    Blackstone Secured Lending Fund

Ladies and Gentlemen:

We have acted as special Delaware counsel for Blackstone Secured Lending Fund (formerly known as Blackstone / GSO Secured Lending Fund), a Delaware statutory trust (the “Trust”), in connection with the matters set forth herein. At your request, this opinion is being furnished to you.

We have examined and relied upon such records, documents, certificates and other instruments as in our judgment are necessary or appropriate to enable us to render the opinions expressed below, including the following documents:

 

  (a)

The certificate of trust of the Trust, as filed with the office of the Secretary of State of the State of Delaware (the “Secretary of State”) on March 26, 2018, as amended by the Certificate of Amendment to Certificate of Trust, as filed in the office of the Secretary of State on December 10, 2020 (the “Certificate of Trust”);

 

  (b)

The Initial Declaration of Trust, dated as of March 26, 2018, between Brad Marshall, as trustee, and Wilmington Trust, National Association, as Delaware trustee (the “Initial Declaration of Trust”);

 

  (c)

The Fourth Amended and Restated Agreement and Declaration of Trust, dated as of October 18, 2021, by the trustees of the trust named therein (together with the Initial Declaration of Trust, the “Trust Agreement”);

 

LOGO


Blackstone Secured Lending Fund

October 18, 2021

Page 2

 

  (d)

The Amended and Restated By-Laws of the Trust, dated as of October 18, 2021 (the “By-Laws”);

 

  (e)

A certificate of the Secretary of the Trust, dated the date hereof, and attaching copies of resolutions adopted by the Board of Trustees (the forgoing are collectively referred to as the “Resolutions” and, together with the Trust Agreement and the By-Laws, are collectively referred to as the “Trust Documents”);

 

  (f)

The Registration Statement (the “Registration Statement”) on Form N-2, as amended, including a prospectus dated as of October 18, 2021 (the “Prospectus”), with respect to the issuance of shares of beneficial interest in the Trust, par value $0.001 per share (the “Shares”), filed by the Trust with the United States Securities and Exchange Commission; and

 

  (g)

A Certificate of Good Standing for the Trust, dated October 15, 2021, obtained from the Secretary of State.

Initially capitalized terms used herein and not otherwise defined are used as defined in the Trust Documents.

As to various questions of fact material to our opinion, we have relied upon the representations made in the foregoing documents and upon certificates of officers of the Trust.

With respect to all documents examined by us, we have assumed (i) the authenticity of all documents submitted to us as authentic originals, (ii) the conformity with the originals of all documents submitted to us as copies or forms, and (iii) the genuineness of all signatures.

For purposes of this opinion, we have assumed (i) that the Trust Documents constitute the entire agreement among the parties thereto with respect to the subject matter thereof, including with respect to the formation, operation and termination of the Trust, and that the Trust Documents and the Certificate of Trust are in full force and effect and will not be amended, (ii) except to the extent provided in paragraph 1 below, the due organization or due formation, as the case may be, and valid existence in good standing of each party to the documents examined by us under the laws of the jurisdiction governing its organization or formation, (iii) the legal capacity of natural persons who are parties to the documents examined by us, (iv) that each of the parties (other than the Trust) to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (v) except to the extent provided in paragraph 2 below, the due authorization, execution and delivery by all parties thereto of all documents examined by us, (vi) the payment by each Person to whom a Share has been or is to be issued by the Trust (collectively, the “Shareholders”) for such Share, in accordance with the Trust Documents and as contemplated by the Registration Statement, and (vii) that the Shares will be issued and sold to the Shareholders in accordance with the Trust Documents and as contemplated by the Registration Statement. We have not participated in the preparation of the Registration Statement (other than this opinion) and assume no responsibility for its contents except for this opinion.


Blackstone Secured Lending Fund

October 18, 2021

Page 3

 

This opinion is limited to the laws of the State of Delaware (excluding the securities laws of the State of Delaware), and we have not considered and express no opinion on the laws of any other jurisdiction, including federal laws and rules and regulations relating thereto. Our opinions are rendered only with respect to Delaware laws and rules, regulations and orders thereunder which are currently in effect.

Based upon the foregoing, and upon our examination of such questions of law and statutes of the State of Delaware as we have considered necessary or appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that:

1.    The Trust has been duly formed and is validly existing in good standing as a statutory trust under the Delaware Statutory Trust Act, 12 Del. C. § 3801, et. seq.

2.    The Shares of the Trust have been duly authorized and, when issued, will be validly issued, fully paid and nonassessable beneficial interests in the Trust.

We consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement. We also consent to the use of our name under the heading “Legal Matters” in the Prospectus. In giving the foregoing consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder.

Very truly yours,

/s/ Richards Leighton & Finger, P.A.

Exhibit (n)(1)

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the use in this Registration Statement on Form N-2 of our report dated March 3, 2021, relating to the consolidated financial statements of Blackstone Secured Lending Fund and subsidiaries, appearing in this Registration Statement, and of our report dated March 3, 2021, relating to information of Blackstone Secured Lending Fund set forth under the heading “Senior Securities” appearing in the Registration Statement.

We also consent to the reference to us under the headings “Financial Highlights”, “Senior Securities” and “Experts” in such Registration Statement.

/S/ DELOITTE & TOUCHE LLP

New York, New York

October 18, 2021

Exhibit (s)(2)

POWER OF ATTORNEY

The person whose signature appears below hereby makes, constitutes and appoints each of Brad Marshall, Steve Kuppenheimer, Robert Busch, Marisa J. Beeney, Katherine Rubenstein, and Carlos Whitaker with full power to act without the other, as his agent and attorney-in-fact for the purpose of executing in his name, in his capacity as a Trustee of Blackstone Private Credit Fund and Blackstone Secured Lending Fund, (i) the registration statement on Form N-2 or any other appropriate form (including amendments or supplements thereto) to be filed with the United States Securities and Exchange Commission (“SEC”) pursuant to the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder, as applicable, (ii) any statement of beneficial ownership on Form 3, 4 or 5 or any amendment thereto to be filed with the SEC, or (iii) any and all other documents that may be necessary or appropriate in connection with or in furtherance of any of the foregoing, including, without limitation, any application for EDGAR access codes, Form ID, or any amendments thereto, and any other documents necessary or appropriate to obtain codes and passwords enabling the undersigned to make electronic filings with the SEC of reports required pursuant to Section 13(d) or Section 16(a) of the Securities Exchange Act of 1934, as amended, or any rule or regulation of the SEC, such power and authority to extend to any form or forms adopted by the SEC in lieu of or in addition to any of the foregoing; in each case, as determined by such attorney-in-fact to be necessary or appropriate.

All past acts of an attorney-in-fact in furtherance of the foregoing are hereby ratified and confirmed.

This Power of Attorney shall be valid from the date hereof until revoked by me.

IN WITNESS HEREOF I have executed this instrument as of the 15th day of October, 2021.

 

/s/ Vikrant Sawhney

Vikrant Sawhney

Trustee, Blackstone Private Credit Fund

Trustee, Blackstone Secured Lending Fund