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Item 2 — Management's Discussion and Analysis
Blackstone Secured Lending Fund · 10-Q · Q2 FY2026 · Period ended Jun 30, 2026
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The information contained in this section should be read in conjunction with “Item 1. Financial Statements” hereto and “Part II, Item 8—Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the year ended December 31, 2025, as updated from time to time by the Company’s periodic filings with the SEC. This discussion contains forward-looking statements and involves numerous risks, uncertainties, and other factors outside of the Company’s control, including, but not limited to, those set forth in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025, as updated from time to time by the Company’s periodic filings with the SEC.
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 elected to be treated as a RIC under the Code. We are managed by our Advisers. The Administrators 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 and 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. In limited instances, we may retain the “last out” portion of a first-lien loan. In such cases, the “first out” portion of the first lien loan would receive priority with respect to payment over our “last out” position. In exchange for the higher risk of loss associated with such “last out” portion, we would earn a higher rate of interest than the “first out” position. We do not currently focus on investments in issuers that are distressed or in need of rescue financing.
Key Components of Our Results of Operations
Investments
We focus primarily on loans and securities, including syndicated loans, of private U.S. companies, which includes larger 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. 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 SOFR, SONIA, etc. In some instances, we receive payments on our debt investments based on scheduled amortization of the outstanding balances. In 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 payment-in-kind (“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 from various fees in the ordinary course of business such as in the form of commitment, loan origination, structuring, consent, waiver, amendment, syndication and other miscellaneous fees, as well as fees for providing managerial assistance to our portfolio companies.
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Expenses
Except as specifically provided below, all investment professionals and staff of the Advisers, 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 Advisers. We bear all other costs and expenses of our operations, administration and transactions, including (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 Administrators in performing their administrative obligations under the Administration Agreements, including: (i) our chief compliance officer, chief financial officer and their respective staffs; (ii) investor relations, legal, operations and other non-investment professionals (including information technology professionals) at the Administrators 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.
From time to time, the Advisers, the Administrators or their respective affiliates may pay third-party providers of goods or services on our behalf. We will reimburse the Adviser, the Administrator or such affiliates thereof, the Adviser will reimburse the Sub-Adviser, the Administrator or such affiliates thereof, and the Administrator will reimburse the Sub-Administrator or such affiliates thereof, in each case, for any such amounts. From time to time, the Advisers or the Administrators may defer or waive fees or rights to be reimbursed. Pursuant to the Administration Agreement, the Company’s allocable portion of the Administrator’s rent and other occupancy costs are expenses of the Company. However, the Administrator and the Prior Administrator have not historically, and the Administrator does not currently, calculate the amount of rent and other occupancy costs allocable to the Company and the Administrator and Prior Administrator have not indicated an intention to seek reimbursement from the Company for such costs. Thus, the Company, the Administrator and the Prior Administrator, as applicable, treat any such rights to any reimbursement for rent and other occupancy costs for prior periods as having been waived pursuant to the terms of the Administration Agreement and the Prior Administration Agreement, as applicable, including for the three and six months ended June 30, 2026 and 2025. Additionally, since the Company, the Administrator and the Prior Administrator treat any such right to reimbursement for rent and occupancy costs as having been waived pursuant to the terms of the Administration Agreement and the Prior Administration Agreement, as applicable, the Administrator and the Prior Administrator cannot recoup any such expenses. However, in future periods, the Administrator may choose to establish an allocation methodology to calculate these costs and seek reimbursement from the Company, in which case the Company will accrue and reimburse the Administrator for such costs for that period. All of the foregoing expenses will ultimately be borne by our shareholders.
Costs and expenses of the Administrators and the Advisers that are eligible for reimbursement by us will be reasonably allocated 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.
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Portfolio and Investment Activity
For the three months ended June 30, 2026, we made $154.3 million aggregate principal amount of new investment commitments (including $13.5 million of which remained unfunded as of June 30, 2026), $151.4 million of which was first lien debt and $2.9 million of which was equity.
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,
2026 2025
Investments:
Total investments, beginning of period $ 14,296,921 $ 12,952,035
New investments purchased 311,827 530,481
Payment-in-kind interest capitalized 20,121 20,350
Net accretion of discount on investments 13,202 11,135
Net realized security and foreign currency gain (loss) on investments (31,519) (1,232)
Investments sold or repaid (753,962) (185,410)
Total investments, end of period $ 13,856,590 $ 13,327,359
Amount of investments funded at principal:
First lien debt $ 310,425 $ 538,575
Second lien debt — 434
Equity 2,859 1,477
Total $ 313,284 $ 540,486
Proceeds from investments sold or repaid:
First lien debt $ (745,049) $ (184,518)
Second lien debt (540) (662)
Equity (8,373) (230)
Total $ (753,962) $ (185,410)
Number of new investments in new portfolio companies 5 15
Average new investment commitment amount $ 39,161 $ 22,520
Weighted average yield of new investments 9.2 % 9.8 %
Weighted average yield on investments fully sold or paid down 9.3 % 10.3 %
June 30, 2026 December 31, 2025
Number of portfolio companies 313 316
Weighted average yield on performing debt and income producing investments, at amortized cost (1)(2) 9.2 % 9.5 %
Weighted average yield on performing debt and income producing investments, at fair value (1)(2) 9.4 % 9.6 %
Average loan-to-value (LTV) (3) 51.9 % 50.5 %
Percentage of performing debt investments bearing a floating rate (4) 99.3 % 99.6 %
Percentage of performing debt investments bearing a fixed rate (4) 0.7 % 0.4 %
Percentage of assets on non-accrual, at amortized cost (5) 3.6 % 0.6 %
Percentage of assets on non-accrual, at fair value (5) 1.8 % 0.5 %
(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 amortized 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, 2026 and December 31, 2025, the weighted average total portfolio yield at amortized cost was 8.8% and 9.4%, respectively. As of June 30, 2026 and December 31, 2025, the weighted average total portfolio yield at fair value was 9.1% and 9.5%, respectively.
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(3)Includes all private debt investments for which fair value is determined by our Board in conjunction with a third-party valuation firm and excludes quoted investments and asset-based investments. 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.
(4)As a percentage of total fair value of performing debt investments. As of June 30, 2026 and December 31, 2025, performing debt investments bearing a floating rate represented 96.3% and 98.4%, respectively, of total investments at fair value.
(5)As a percentage of total amortized cost or fair value of investments.
As of June 30, 2026 and June 30, 2025, our portfolio companies had a weighted average annual revenue of $866 million and $848 million, respectively, and weighted average annual EBITDA of $221 million and $219 million, respectively. These calculations include all private debt investments for which fair value is determined by the Board in conjunction with a third-party valuation firm and excludes quoted investments and asset-based investments. Amounts are weighted based on the fair market value of each respective investment. Amounts were derived from the most recently available portfolio company financial statements, have not been independently verified by us, and may reflect a normalized or adjusted amount. Accordingly, we make no representation or warranty in respect of this information.
For additional information on our investments, see “Item 1. Financial Statements—Notes to Condensed Consolidated Financial Statements—Note 4. Investments.”
Results of Operations
The following table represents the operating results (dollar amounts in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Total investment income $ 320,469 $ 344,803 $ 645,940 $ 702,567
Total expenses before tax expense 142,268 165,103 284,733 329,904
Net investment income before tax expense 178,201 179,700 361,207 372,663
Excise and other tax expense 4,416 3,798 8,506 7,966
Net investment income after tax expense 173,785 175,902 352,701 364,697
Net change in unrealized appreciation (depreciation), net of income tax (provision) benefit (136,502) (11,300) (291,397) (55,174)
Net realized gain (loss), net of tax expense (27,797) (9,560) (26,572) (4,672)
Net increase (decrease) in net assets resulting from operations $ 9,486 $ 155,042 $ 34,732 $ 304,851
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,
2026 2025 2026 2025
Interest income $ 298,816 $ 321,083 $ 601,033 $ 656,769
Payment-in-kind interest income 21,092 22,173 42,627 43,526
Dividend income — 49 20 49
Other income 561 1,498 2,260 2,223
Total investment income $ 320,469 $ 344,803 $ 645,940 $ 702,567
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Total investment income decreased to $320.5 million for the three months ended June 30, 2026, a decrease of $24.3 million, or 7%, compared to the three months ended June 30, 2025. The decrease was primarily attributable to a lower weighted average yield on the portfolio, partially offset by an increase in average investments, compared to the three months ended June 30, 2025. Average investments at fair value increased by 5% to $13,653.2 million for the three months ended June 30, 2026, compared to $13,043.5 million for the three months ended June 30, 2025.
Total investment income decreased to $645.9 million for the six months ended June 30, 2026, a decrease of $56.6 million, or 8%, compared to the six months ended June 30, 2025. The decrease was primarily attributable to a lower weighted average yield on the portfolio, partially offset by an increase in the average investments, compared to the six months ended June 30, 2025. Average investments at fair value increased by 6% to $13,837.9 million for the six months ended June 30, 2026, compared to $13,059.8 million for the six months ended June 30, 2025.
Additionally, for the three months ended June 30, 2026, we recorded $4.4 million of non-recurring interest income (e.g., prepayment premiums, accelerated accretion of upfront loan origination fees and unamortized discounts, etc.), compared to $1.7 million for the same period in the prior year, primarily due to increased prepayments. For the six months ended June 30, 2026, we recorded $6.8 million of non-recurring interest income (e.g., prepayment premiums, accelerated accretion of upfront loan origination fees and unamortized discounts, etc.), compared to $14.6 million for the same period in the prior year, primarily due to decreased prepayments.
For the three months ended June 30, 2026 and 2025, Payment-in-kind (“PIK”) interest income represented 6.6% and 6.4% of total investment income, respectively, and 12.1% and 12.6% of net investment income, respectively. For the six months ended June 30, 2026 and 2025, PIK interest income represented 6.6% and 6.2% of total investment income, respectively, and 12.1% and 11.9% of net investment income, respectively. We expect that PIK interest income will vary based on the elections of certain borrowers.
We expect that investment income will vary based on a variety of factors including the pace of our originations, repayments, and changes in interest rates.
Elevated interest rates continued to favorably impact our investment income for the three and six months ended June 30, 2026. Despite gradual decreases in interest rates during 2025, inflation has remained above the U.S. Federal Reserve’s target level, and interest rates remain elevated. Following three consecutive rate cuts in 2025, the U.S. Federal Reserve held interest rates steady since December 2025 and for the first half of 2026 and noted, among other matters, that it would continue to assess and monitor incoming information in considering additional adjustments. Future decreases in benchmark interest rates may adversely impact our investment income. Conversely, future increases in benchmark interest rates and the resulting impacts to cost of capital have the potential to negatively impact the free cash flow and credit quality of certain borrowers which could impact their ability to make principal and interest payments. If such interest rate fluctuations occur concurrently with a period of economic weakness or a slowdown in growth, our borrowers’ and our portfolio performance may be negatively impacted. Further, significant market dislocation as a result of changing economic conditions could limit the liquidity of certain assets traded in the credit markets, and this could impact our ability to sell such assets at attractive prices or in a timely manner.
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Expenses
Expenses were as follows (dollar amounts in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Interest expense $ 101,070 $ 92,285 $ 201,239 $ 185,263
Management fees 35,282 34,600 71,648 68,901
Income based incentive fees 1,690 34,718 3,983 69,019
Capital gains based incentive fees — — — —
Professional fees 1,043 1,243 2,260 2,129
Board of Trustees’ fees 311 293 601 599
Administrative service expenses 1,057 744 2,182 1,710
Other general and administrative expenses 1,815 1,220 2,820 2,283
Total expenses before tax expense 142,268 165,103 284,733 329,904
Net investment income before tax expense 178,201 179,700 361,207 372,663
Excise and other tax expense 4,416 3,798 8,506 7,966
Net investment income after tax expense $ 173,785 $ 175,902 $ 352,701 $ 364,697
Interest Expense
Total interest expense increased to $101.1 million for the three months ended June 30, 2026, an increase of $8.8 million, or 10%, compared to the same period in the prior year. The increase was primarily driven by a higher average principal amount of debt outstanding, partially offset by a lower weighted average interest rate on our borrowings relative to the same period in the prior year.
The average principal amount of debt outstanding increased to $7,920.9 million for the three months ended June 30, 2026, from $7,155.4 million for the same period in the prior year.
Our weighted average interest rate (including unused fees, amortization of debt issuance costs (including premiums and discounts), and the impact of the application of hedge accounting and excluding amortization of deferred financing costs) decreased to 4.95% for the three months ended June 30, 2026, from 5.03% for the same period in the prior year. Our weighted average all-in cost of debt (including unused fees, amortization of debt issuance costs (including premiums and discounts), amortization of deferred financing costs, and the impact of the application of hedge accounting) decreased to 5.05% for the three months ended June 30, 2026, from 5.10% for the same period in the prior year.
Total interest expense increased to $201.2 million for the six months ended June 30, 2026, an increase of $16.0 million, or 9%, compared to the same period in the prior year. The increase was primarily driven by a higher average principal amount of debt outstanding, partially offset by a lower weighted average interest rate on our borrowings relative to the same period in the prior year.
The average principal amount of debt outstanding increased to $8,046.2 million for the six months ended June 30, 2026, from $7,234.0 million for the same period in the prior year.
Our weighted average interest rate (including unused fees, amortization of debt issuance costs (including premiums and discounts), and the impact of the application of hedge accounting and excluding amortization of deferred financing costs) decreased to 4.89% for the six months ended June 30, 2026, from 5.02% for the same period in the prior year. Our weighted average all-in cost of debt (including unused fees, amortization of debt issuance costs (including premiums and discounts), amortization of deferred financing costs, and the impact of the application of hedge accounting) decreased to 4.97% for the six months ended June 30, 2026, from 5.09% for the same period in the prior year.
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Management Fees
Management fees increased to $35.3 million for the three months ended June 30, 2026, an increase of $0.7 million, or 2%, compared to the same period in the prior year, primarily due to an increase in average quarter-end gross assets. For the three months ended June 30, 2026, our average quarter-end gross assets increased to $14,112.6 million, from $13,839.9 million for the three months ended June 30, 2025.
Management fees increased to $71.6 million for the six months ended June 30, 2026, an increase of $2.7 million, or 4%, compared to the same period in the prior year, primarily due to an increase in average quarter-end gross assets. For the six months ended June 30, 2026, our average quarter-end gross assets increased to $14,293.9 million from $13,717.3 million for the six months ended June 30, 2025.
Income Based Incentive Fees
Income based incentive fees decreased to $1.7 million for the three months ended June 30, 2026, a decrease of $33.0 million, or 95%, compared to the same period in the prior year, primarily due to the Incentive Fee Cap, which limits the total incentive fee payable to the Adviser for the three months ended June 30, 2026. Pre-incentive fee net investment income decreased to $175.5 million for the three months ended June 30, 2026 from $210.6 million for the three months ended June 30, 2025.
Income based incentive fees decreased to $4.0 million for the six months ended June 30, 2026, a decrease of $65.0 million, or 94%, compared to the same period in the prior year, primarily due to the Incentive Fee Cap, which limits the total incentive fee payable to the Adviser for the six months ended June 30, 2026. Pre-incentive fee net investment income decreased to $356.7 million for the six months ended June 30, 2026 from $433.7 million for the six months ended June 30, 2025.
See “Item 1. Financial Statements—Notes to Condensed Consolidated Financial Statements —Note 3. Agreements and Related Party Transactions” for further information on the Advisory Agreements.
Capital Gains Based Incentive Fees
We accrued no capital gains based incentive fees for the three and six months ended June 30, 2026 and June 30, 2025.
The accrual for any capital gains based incentive fee under 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
Total other expenses increased to $4.2 million for the three months ended June 30, 2026, an increase of $0.7 million or 21%, compared to the same period in the prior year. This was primarily due to an increase in other general and administrative expenses.
Total other expenses increased to $7.9 million for the six months ended June 30, 2026, an increase of $1.1 million or 17%, compared to the same period in the prior year. This was primarily due to increases in other general and administrative expenses and Administrative service expenses.
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 Administrators in performing their obligations under the Administration Agreements, 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, expenses payable to the State Street Sub-Administrator, subscriptions and other costs.
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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 and maintain 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 (without regard to the deduction for dividends paid), and net tax-exempt income for that taxable year.
Depending on the level of taxable income earned in a tax year, we may carry forward taxable income (including net capital gains, if any) in excess of current year dividend distributions from the current tax year into the next tax year and pay a nondeductible 4% U.S. federal excise tax on such taxable income, as required. To the extent that we determine that our estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such income, we will accrue excise tax on estimated excess taxable income.
For the three months ended June 30, 2026 and 2025, we accrued $4.4 million and $3.8 million, respectively, of U.S. federal excise tax.
For the six months ended June 30, 2026 and 2025, we accrued $8.4 million and $8.0 million, respectively, of U.S. federal excise tax.
BGSL Investments LLC (“BGSL Investments”), a wholly-owned and consolidated subsidiary that was formed in 2019, is a Delaware limited liability company which has elected to be treated as a corporation for U.S. tax purposes. As such, BGSL Investments is subject to certain U.S. federal, state and local taxes. For the three months ended June 30, 2026 and 2025, BGSL Investments recorded an income tax provision of $1.2 million and $0.3 million, respectively. For the six months ended June 30, 2026 and 2025, BGSL Investments recorded an income tax provision of $0.7 million and $1.8 million, respectively.
As of June 30, 2026 and 2025, BGSL Investments recorded a deferred tax liability of $4.7 million and $3.4 million, respectively, which is included within Accrued expenses and other liabilities in the Condensed Consolidated Statements of Assets and Liabilities.
For the three and six months ended June 30, 2026, BGSL Investments recorded a current tax expense of $0.2 million and $0.2 million, respectively, which was substantially related to realized gains associated with the sale of an investment in a partnership interest and is included in the current tax expense on realized gains in the Condensed Consolidated Statements of Operations.
For the three and six months ended June 30, 2025, BGSL Investments recorded a current tax expense of $0.1 million and $0.7 million, respectively, which was substantially related to realized gains associated with the sale of an investment in a partnership interest and is included in the current tax expense on realized gains in the Condensed Consolidated Statements of Operations.
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Net Unrealized Gain (Loss)
Net change in unrealized gain (loss) was comprised of the following (dollar amounts in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Net change in unrealized gain (loss) on investments $ (133,383) $ (8,318) $ (290,994) $ (49,073)
Net change in unrealized gain (loss) on derivative instruments (1,777) (3,126) 1,166 (5,047)
Net change in unrealized gain (loss) on translation of assets and liabilities in foreign currencies (148) 438 (883) 720
Income tax (provision) benefit (1,194) (294) (686) (1,774)
Net change in unrealized appreciation (depreciation), net of income tax (provision) benefit $ (136,502) $ (11,300) $ (291,397) $ (55,174)
For the three months ended June 30, 2026, the net change in unrealized depreciation, net of income tax provision, was $136.5 million, compared to $11.3 million for the same period in the prior year. The increase in losses was primarily driven by net unrealized losses on investments of $133.4 million, which were mainly attributable to declines in the fair value of certain debt investments. The fair value of our debt investments as a percentage of principal, decreased by 1.0% for the three months ended June 30, 2026, driven primarily by changes in certain portfolio company fundamentals and broader economic conditions.
In addition, we recorded net unrealized losses of $1.8 million on derivative instruments, primarily resulting from fluctuations in the CAD and GBP exchange rates vs. USD.
For the six months ended June 30, 2026, the net change in unrealized depreciation, net of income tax provision, was $291.4 million, compared to $55.2 million for the same period in the prior year. The increase in losses was primarily driven by net unrealized losses on investments of $291.0 million, which were mainly attributable to declines in the fair value of certain debt investments. The fair value of our debt investments as a percentage of principal, decreased by 2.0% for the six months ended June 30, 2026, driven primarily by changes in certain portfolio company fundamentals and broader economic conditions.
In addition, we recorded net unrealized losses of $0.9 million on translation of assets and liabilities in foreign currencies, primarily attributable to fluctuations in the EUR and GBP exchange rates vs. USD.
Partially offsetting this depreciation for the six months ended June 30, 2026 were net unrealized gains of $1.2 million on derivative instruments, primarily resulting from fluctuations in the CAD, SEK and GBP exchange rates vs. USD.
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,
2026 2025 2026 2025
Net realized gain (loss) on investments $ (41,447) $ (1,230) $ (40,286) $ 7,295
Net realized gain (loss) on derivative instruments 3,554 (7,673) 5,396 (9,727)
Net realized gain (loss) on foreign currency transactions 10,244 (541) 8,466 (1,528)
Current tax expense on realized gains (148) (116) (148) (712)
Net realized gain (loss), net of tax expense $ (27,797) $ (9,560) $ (26,572) $ (4,672)
For the three months ended June 30, 2026, the net realized loss, net of tax expense, was $27.8 million, compared to $9.6 million for the same period in the prior year. The decrease was primarily driven by net realized losses on investments of $41.4 million for the three months ended June 30, 2026, compared to $1.2 million for the same period in the prior year, mainly driven by the restructuring of certain debt investments and full or partial sales and repayments of investments.
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Partially offsetting these losses for the three months ended June 30, 2026 were realized gains of $10.2 million and $3.6 million on foreign currency transactions and derivative instruments, respectively. The net realized gains on foreign currency transactions were primarily driven by fluctuations in the EUR exchange rate vs. USD and the net realized gains on derivative instruments were primarily a result of the settlement of foreign currency derivative transactions, mainly USD vs. CAD and GBP forwards.
For the six months ended June 30, 2026, the net realized loss, net of tax expense, was $26.6 million, compared to $4.7 million for the same period in the prior year. The decrease was primarily driven by realized losses on investments of $40.3 million for the six months ended June 30, 2026, compared to a $7.3 million gain for the same period in the prior year, mainly driven by the restructuring of certain debt investments, the full or partial sales and repayments of investments.
Partially offsetting these losses for the six months ended June 30, 2026 were net realized gains of $8.5 million and $5.4 million on foreign currency transactions and derivative instruments, respectively. The net realized gains on foreign currency transactions were primarily driven by fluctuations in the EUR and GBP exchange rates vs. USD and the net realized gains on derivative instruments were primarily a result of the settlement of foreign currency derivative transactions, mainly USD vs. EUR and CAD forwards.
Financial Condition, Liquidity and Capital Resources
Our liquidity and capital resources are generated primarily from cash flows from interest, dividends and fees earned from our investments and principal repayments, our credit facilities, debt securitization transactions, and other secured and unsecured debt. We may also generate cash flow from operations, future borrowings and future offerings of securities including public or private issuances of debt or equity securities through both registered offerings and private offerings. 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 Common Shares.
To facilitate public issuances of debt or equity securities, in July 2022, we filed a shelf registration statement with the SEC that was effective for a term of three years. In July 2025, we filed a new shelf registration statement with the SEC that is effective for a term of three years and expires in July 2028. The amount of securities to be issued pursuant to the shelf registration statement filed in July 2025 was not specified when it was filed and there is no specific dollar limit on the amount of securities we may issue. The securities covered by the registration statement filed in July 2025 include: (i) Common Shares; (ii) preferred shares; (iii) debt securities; (iv) subscription rights; and (v) warrants. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering.
As of June 30, 2026 and December 31, 2025, our debt consisted of asset based leverage facilities, a revolving credit facility, unsecured note issuances and debt securitizations. We have and will continue to, 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 least 150%. As of June 30, 2026 and December 31, 2025, we had an aggregate amount of $7.6 billion and $8.1 billion of senior securities outstanding, respectively, and our asset coverage ratio was 178.0% and 177.1%, 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 expect to be required to fund. From time to time we may also repurchase our outstanding debt. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors. The amounts involved in any such purchase transactions, individually or in the aggregate, may be material.
Cash and cash equivalents (excluding restricted cash) of $183.4 million as of June 30, 2026, taken together with our $2.8 billion of unused capacity under our credit facilities (subject to borrowing base availability, $2.6 billion is available to borrow) is expected to be sufficient for our investing activities and to conduct our operations in the near term. Additionally, we held $81.5 million of Level 1 and Level 2 investments as of June 30, 2026.
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Although we have historically been able to obtain sufficient borrowing capacity, a deterioration in economic conditions or any other negative economic developments 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 previously obtained. These factors may limit our ability to make new investments and adversely impact our results of operations.
As of June 30, 2026, we had $267.2 million in cash and cash equivalents (including restricted cash). During the six months ended June 30, 2026, cash provided by operating activities was $810.2 million, primarily due to proceeds from sales of investments and principal repayments of $1.2 billion and the adjustment for net unrealized depreciation of investments to net assets resulting from operations of $291.0 million, partially offset by purchases of investments of $636.6 million. Cash used in financing activities was $828.1 million during the period, which was primarily as a result of dividends paid in cash of $340.6 million and net repayments on debt of $481.8 million.
Equity
We also access liquidity through our “at-the-market” offering program (the “ATM Program”), pursuant to which we may sell, from time to time, additional Common Shares. No Common Shares were issued for the six months ended June 30, 2026, other than those issued through the Company's dividend reinvestment plan (the “DRIP”). As of June 30, 2026, $557.4 million of Common Shares were available for issuance under the ATM Program.
For additional information on our ATM Program, see “Item 1. Financial Statements—Notes to Condensed Consolidated Financial Statements —Note 9. Net Assets.”
Distributions
The following table summarizes our distributions declared and payable for the six months ended June 30, 2026 (dollar amounts in thousands, except per share amounts):
Date Declared Record Date Payment Date Per Share Amount Total Amount
February 25, 2026 March 31, 2026 April 24, 2026 $ 0.7700 $ 178,855
May 7, 2026 June 30, 2026 July 24, 2026 0.7700 179,142
Total distributions $ 1.5400 $ 357,997
With respect to distributions, we have adopted an “opt out” DRIP 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 DRIP 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.
For additional information on our distributions and DRIP, see “Item 1. Financial Statements—Notes to Condensed Consolidated Financial Statements —Note 9. Net Assets.”
Share Repurchase Plan
In February 2026, our Board authorized a share repurchase plan, under which we are authorized to repurchase up to $250.0 million in the aggregate of our outstanding Common Shares in the open market at prices below our NAV per share for a one-year term, in accordance with the guidelines specified in Rule 10b-18 of the Exchange Act (the “10b-18 Plan”). The timing, manner, price and amount of any share repurchases under the 10b-18 Plan will be determined by us, in our sole discretion, based upon the evaluation of economic and market conditions, stock price, applicable legal and regulatory requirements and other factors.
For the three and six months ended June 30, 2026, the Company did not repurchase any of its Common Shares under the 10b-18 Plan.
For additional information on our share repurchase plan, see “Item 1. Financial Statements—Notes to Condensed Consolidated Financial Statements —Note 9. Net Assets.”
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Borrowings
As of June 30, 2026 and December 31, 2025, we had an aggregate principal amount of $7.6 billion and $8.1 billion, respectively, of debt outstanding.
For additional information on our debt obligations, see “Item 1. Financial Statements—Notes to Condensed Consolidated Financial Statements —Note 7. Borrowings.”
Interest Rate Swaps
We use interest rate swaps to mitigate interest rate risk associated with our fixed rate liabilities, and have designated certain interest rate swaps to be in a hedge accounting relationship.
See “Item 1. Financial Statements—Notes to Condensed Consolidated Financial Statements—Note 2. Significant Accounting Policies—Derivative Instruments” and “Item 1. Financial Statements—Notes to Condensed Consolidated Financial Statements— Note 6. Derivatives” for additional disclosure regarding our derivative instruments designated in a hedge accounting relationship.
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, 2026 and December 31, 2025, we had unfunded commitments, including delayed draw term loans and revolvers with an aggregate principal amount of $1.4 billion and $1.8 billion, respectively.
Additionally, from time to time, the Advisers and their affiliates may commit to an investment on behalf of the investment vehicles they manage, including the Company. Certain terms of these investments are not finalized at the time of the commitment and each respective investment vehicle’s allocation may change prior to the date of funding. In this regard, as of June 30, 2026 and December 31, 2025, we estimate that $98.3 million and $151.8 million, respectively, of investments were committed but not yet funded.
Other Commitments and Contingencies
From time to time, we may become a party to certain legal proceedings incidental to the normal course of our business. As of June 30, 2026, management is not aware of any material pending legal proceedings.
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 Sub-Advisory Agreement; and
•the Administration Agreement.
In addition to the aforementioned agreements, we, Blackstone, our Advisers and certain of their affiliates have been granted exemptive relief by the SEC to co-invest with other funds managed by our Advisers, Blackstone or their affiliates in a manner consistent with our investment objectives, positions, policies, strategies and restrictions, as well as regulatory requirements and other pertinent factors.
See “Item 1. Financial Statements—Notes to Condensed Consolidated Financial Statements—Note 3. Agreements and Related Party Transactions.”
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Recent Developments
Macroeconomic Environment
The six months ended June 30, 2026 were characterized by volatility and uncertainty in global markets, driven by investor concerns over inflation, elevated interest rates, and ongoing political and regulatory uncertainty, as well as geopolitical instability stemming from the conflicts in Ukraine and Iran and escalating conflicts in other parts of the Middle East.
Despite ongoing uncertainty relating to geopolitical conditions, the path of interest rates and artificial intelligence disruption in certain sectors, the economic backdrop has remained constructive. Nevertheless, inflation has remained above the U.S. Federal Reserve’s target level and interest rates remain elevated relative to the interest rate environment prior to the inflationary spike in 2022-2023. Following three consecutive rate cuts in 2025, the U.S. Federal Reserve held interest rates steady since December 2025 and for the first half of 2026 and noted, among other matters, that it would continue to assess and monitor incoming information in considering additional adjustments. While our business model benefits from elevated interest rates which, all else being equal, correlate to increases in our net income, higher borrowing costs may strain our existing portfolio companies, potentially leading to nonperformance. Rising interest rates can dampen consumer spending and slow corporate profit growth, negatively impacting our portfolio companies, particularly those vulnerable to economic downturns or recessions. While further interest rate hikes are not expected at this time, any renewed increases could lead to a rise in non-performing assets and decline in portfolio value if investment write-downs become necessary. Additionally, adverse economic conditions may erode the value of collateral securing some of our loans and reduce the value of our equity investments. It remains difficult to predict the full impact of recent and any future changes with respect to interest rates or inflation.
Further contributing to economic uncertainty, the current U.S. presidential administration has taken substantial actions with respect to international trade policy, including seeking to renegotiate certain existing bilateral or multi-lateral trade agreements and treaties with foreign countries. In February 2026, the U.S. Supreme Court ruled that many of the tariffs recently imposed by the U.S. government exceeded its authority, thereby invalidating many, but not all, of such tariffs. Subsequent to the U.S. Supreme Court’s ruling, the U.S. presidential administration raised potential alternative means through which the administration could impose tariffs and has imposed new tariffs in July 2026. Such uncertainty and/or tariffs or counter-measures could further increase costs, decrease margins, reduce the competitiveness of products and services offered by our portfolio companies and adversely affect the revenues and profitability of our portfolio companies whose businesses rely on imported goods. Meanwhile, substantial reductions in government spending could negatively affect certain of our portfolio companies that rely on government contracts, destabilize the U.S. government contracting market and harm our ability to generate expected returns. Additionally, changes in the regulation or enforcement of bank lending and capital requirements could have material and adverse effects on the private credit market. In light of these developments, there can be no assurances that political and regulatory conditions will not worsen and adversely affect the Company, its portfolio companies or their respective financial performance.
Critical Accounting Estimates
The preparation of the condensed 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 and estimates, including those relating to the valuation of our investment portfolio, are described in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 25, 2026, and elsewhere in our filings with the SEC. There have been no material changes in our critical accounting policies and practices.
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