Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The discussion and analysis contained in this section refers to our financial condition, results of operations and cash flows. The information contained in this section should be read in conjunction with the consolidated financial statements and notes thereto in Part II, Item 8 of this Form 10-K “Consolidated Financial Statements and Supplementary Data.” This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to those described in Part I, Item 1A of this Form 10-K “Risk Factors.” Our actual results could differ materially from those anticipated by such forward-looking information due to factors discussed under “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” appearing elsewhere in this Form 10-K.
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 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 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. 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. See “—Financial Condition, Liquidity and Capital Resources—Borrowings .”
On October 28, 2021, the Company priced its IPO, issuing 9,180,000 of its common shares of beneficial interest at a public offering price of $26.15 per share. Net of underwriting fees, the Company received net cash proceeds, before offering expenses, of $230.6 million. On November 4, 2021, the underwriters exercised their option to purchase an additional 1,377,000 shares of common shares, which resulted in net cash proceeds, before offering expenses, of $33.8 million. The Company’s common shares began trading on the NYSE under the symbol “BXSL” on October 28, 2021.
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 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. 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 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.
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In addition, we generate revenue from various fees in the ordinary course of business such as in the form of structuring, consent, waiver, amendment, syndication and other miscellaneous fees as well as fees for managerial assistance rendered by us.
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.
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.
Costs and expenses of the Administrator and the Adviser 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.
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 on behalf of us, 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 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 December 31, 2021 there were no unreimbursed Expense Payments remaining.
Portfolio and Investment Activity
For the year ended December 31, 2021, we acquired $8,378.7 million aggregate principal amount of investments (including $1,672.1 million of unfunded commitments), $8,189.5 million of which was first lien debt, $70.8 million of which was second lien debt, $52.5 million of which was unsecured debt and $65.9 million of which was equity.
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.
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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,
2021 2020 2019
Investments:
Total investments, beginning of period $ 5,575,482 $ 3,067,767 $ 548,753
New investments purchased 6,833,479 4,536,541 3,078,070
Net accretion of discount on investments 62,799 50,058 9,812
Net realized gain (loss) on investments 7,785 (4,378) 3,962
Investments sold or repaid (2,734,419) (2,074,506) (572,830)
Total investments, end of period $ 9,745,126 $ 5,575,482 $ 3,067,767
Amount of investments funded at principal:
First lien debt investments $ 6,672,961 $ 4,436,388 $ 3,104,807
Second lien debt investments 68,519 35,352 42,083
Unsecured debt 52,670 129,933 —
Equity investments 90,286 17,852 13,487
Total $ 6,884,436 $ 4,619,525 $ 3,160,377
Proceeds from investments sold or repaid:
First lien debt investments $ (2,632,926) $ (1,923,689) $ (558,149)
Second lien debt investments (48,024) (18,473) (14,681)
Unsecured debt (52,537) (131,629) —
Equity investments (932) (715) —
Total $ (2,734,419) $ (2,074,506) $ (572,830)
Number of portfolio companies 148 81 56
Number of new investment commitments in new portfolio companies 117 40 38
Average new investment commitment amount $ 58,841 $ 115,488 $ 83,168
Weighted average yield of new investment commitments
7.03 % 7.42 % 7.88 %
Weighted average yield on investments fully sold or paid down 7.45 % 7.81 % 7.44 %
Weighted average yield on debt and income producing investments, at amortized cost (1)(2)
7.25 % 7.70 % 8.64 %
Weighted average yield on debt and income producing investments, at fair value (1)(2)
7.21 % 7.68 % 8.57 %
Average loan to value (LTV) (3)
44.0 % 45.8 % 54.3 %
Percentage of debt investments bearing a floating rate 99.9 % 100.0 % 100.0 %
Percentage of debt investments bearing a fixed rate 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 December 31, 2021, 2020 and 2019, the weighted average total portfolio yield at cost was 7.16%, 7.65% and 8.60%, respectively. The weighted average total portfolio yield at fair value was 7.08%, 7.64% and 8.53%, respectively.
(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 assets. 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.
As of December 31, 2021, our portfolio companies had a weighted average annual revenue of $462 million and weighted average annual EBITDA of $116 million. These calculations include all private debt investments for which fair value is determined by the Board of Trustees in conjunction with a third-party valuation firm and excludes quoted assets. Amounts are weighted based on fair market value of each respective investment. Amounts were derived from the most recently available portfolio company financial statements, have not been independently by us, and may reflect a normalized or adjusted amount. Accordingly, we make no representation or warranty in respect of this information.
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Our investments consisted of the following (dollar amounts in thousands):
December 31, 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 $ 9,563,051 $ 9,621,939 97.63 % $ 5,493,561 $ 5,502,899 98.51 %
Second lien debt 62,445 63,175 0.64 48,979 50,199 0.90
Equity 119,630 170,265 1.73 32,942 32,844 0.59
Total $ 9,745,126 $ 9,855,379 100.00 % $ 5,575,482 $ 5,585,942 100.00 %
As of December 31, 2021 and December 31, 2020, no loans in the portfolio were on non-accrual status.
Results of Operations
The following table represents the operating results (dollar amounts in thousands):
For The Year Ended December 31,
2021 2020 2019
Total investment income $ 624,700 $ 389,641 $ 148,048
Net expenses 270,586 149,543 73,729
Net investment income before excise tax 354,114 240,098 74,319
Excise tax expense 2,438 517 465
Net investment income after excise tax 351,676 239,581 73,854
Net unrealized appreciation (depreciation) 104,178 (16,582) 28,329
Net realized gain (loss) 4,568 (4,361) 4,023
Net increase (decrease) in net assets resulting from operations $ 460,422 $ 218,638 $ 106,206
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):
For The Year Ended December 31,
2021 2020 2019
Interest income $ 610,508 $ 381,797 $ 146,380
Payment-in-kind interest income 8,188 7,119 988
Dividend income 219 — —
Fee income 5,785 725 680
Total investment income $ 624,700 $ 389,641 $ 148,048
Total investment income increased to $624.7 million for the year ended December 31, 2021 from $389.6 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 $9,855.4 million at December 31, 2021 from $5,585.9 million at December 31, 2020. Additionally, for the year ended December 31, 2021, we recorded $60.9 million of non-recurring interest income (e.g. prepayment premiums, accelerated accretion of upfront loan origination fees and unamortized discounts, etc.) as compared to $48.9 million in the prior year.
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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 recorded $48.9 million of non-recurring interest income (e.g. prepayment premiums, accelerated accretion of upfront loan origination fees and unamortized discounts, etc.) as compared to $3.7 million in the prior year.
As the impact of COVID-19 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.
Expenses
Expenses were as follows (dollar amounts in thousands):
For The Year Ended December 31,
2021 2020 2019
Interest expense $ 120,469 $ 65,949 $ 35,431
Management fees 62,401 32,874 12,635
Income based incentive fee 67,272 41,983 13,818
Capital gains incentive fee 16,312 (3,141) 4,218
Professional fees 2,925 1,999 1,338
Board of Trustees' fees 571 467 430
Administrative service fees 2,370 2,271 1,506
Other general and administrative 4,794 4,166 3,033
Amortization of offering costs — 1,509 1,090
Excise tax expense 2,438 517 465
Total expenses (including excise tax expense) 279,552 148,594 73,964
Management fees waived (4,195) — —
Incentive fees waived (2,333) — —
Expense support — — (570)
Recoupment of expense support — 1,466 800
Net expenses (including excise tax expense) $ 273,024 $ 150,060 $ 74,194
Interest Expense
Total interest expense (including unused fees and other debt financing expenses), increased to $120.5 million for the year ended December 31, 2021 from $65.9 million 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 $4,000.8 million for the year ended December 31, 2021 from $1,902.7 million in the prior year, partially offset by a decrease in our weighted average interest rate to 2.92% for the year ended December 31, 2021 from 3.26% 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.
Management Fees
Management fees increased to $62.4 million for the year ended December 31, 2021 from $32.9 million in the prior year primarily due to an increase in gross assets. The Adviser voluntarily waived management fees following the IPO such that the management fee will remain at 0.75% for a period of two years following the IPO (versus the contractual rate of 1.00%),
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which resulted in waivers of $4.2 million and $0.0 million for the year ended December 31, 2021 and December 31, 2020, respectively. Our total gross assets increased to $10,177.5 million at December 31, 2021 from $5,950.9 million at December 31, 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.
Income Based Incentive Fees
Income based incentive fees increased to $67.3 million for the year ended December 31, 2021 from $42.0 million in the prior year primarily due to our deployment of capital. The Adviser voluntarily waived incentive fees following the IPO such that the fee will remain at 15.0% for a period of two years following the IPO (versus the contractual rate of 17.5%), which resulted in waivers of $2.3 million and $0.0 million for the year ended December 31, 2021 and December 31, 2020, respectively. Pre-incentive fee net investment income increased to $432.9 million for the year ended December 31, 2021 from $279.9 million 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.
Capital Gains Incentive Fees
We accrued capital gains incentive fees of $16.3 million for the year ended December 31, 2021 compared to $(3.1) million for the prior year, none of which was payable under the Investment Advisory Agreement as of each respective year end. 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
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. Prior to the IPO, offering costs included costs associated with our private offering. Other general and administrative expenses include insurance, filing, research, our sub-administrator, subscriptions and other costs.
Total other expenses increased to $10.6 million for the year ended December 31, 2021 from $10.4 million in the prior year primarily driven by an increase in professional fees and certain general and administrative expenses, partially offset by a reduction in offering costs. The increase in costs was attributable to servicing a growing investment portfolio.
Total other expenses increased to $10.4 million for the year ended December 31, 2020 from $7.9 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, 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.
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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 years ended December 31, 2021, 2020 and 2019, we incurred $2.4 million, $0.5 million and $0.5 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):
For The Year Ended December 31,
2021 2020 2019
Net unrealized gain (loss) on investments $ 104,727 $ (16,593) $ 28,173
Net unrealized gain (loss) on forward purchase obligation — — 222
Net unrealized gain (loss) on translation of assets and liabilities in foreign currencies (549) 11 (66)
Net unrealized gain (loss) on investments $ 104,178 $ (16,582) $ 28,329
For the year ended December 31, 2021, the net unrealized gain was primarily driven by an increase in fair value of our debt investments as compared to December 31, 2020. The fair value of our debt investments as a percentage of principal increased by 1.0% as compared to a 0.6% decrease in fair value of our debt investments in the prior year. The unrealized gains were mainly driven by a recovery from the COVID-19 pandemic as credit spreads tightened, individual company fundamentals and the private and syndicated leverage loan markets significantly rebounded from the March 2020 lows.
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.
Net Realized Gain (Loss)
The realized gains and losses on fully exited and partially exited investments comprised of the following (dollar amounts in thousands):
For The Year Ended December 31,
2021 2020 2019
Net realized gain (loss) on investments $ 7,785 $ (4,378) $ 3,962
Net realized gain (loss) on foreign currency transactions (3,217) 17 61
Net realized gain (loss) on investments $ 4,568 $ (4,361) $ 4,023
For the year ended December 31, 2021, we generated realized gains of $18.2 million, respectively, partially offset by realized losses of $10.4 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, where 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.
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.
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As the impact of COVID-19 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
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 and/or private issuances of debt and/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 shares.
As of December 31, 2021 and December 31, 2020, we had four and four revolving credit facilities outstanding and we had five 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 least 150%. As of December 31, 2021 and December 31, 2020, we had an aggregate amount of $5,544.3 million and $2,514.6 million of senior securities outstanding and our asset coverage ratio was 180.2% 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 December 31, 2021, taken together with our $705.7 million of available capacity under our credit facilities (subject to borrowing base availability) is expected to be sufficient for our investing activities and to conduct our operations in the near term. Additionally, we held $354.1 million of Level 2 debt investments as of December 31, 2021, which could provide additional liquidity if necessary. Although we were able to issue unsecured debt during the year ended December 31, 2021, a continued 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 December 31, 2021, we had $102.9 million in cash and cash equivalents. During the year ended December 31, 2021, cash used in operating activities was $3,828.5 million, primarily as a result of funding portfolio investments of $6,824.3 million, partially offset by proceeds from sale of investments of $2,734.4 million . Cash provided by financing activities was $3,713.4 million during the period, which was primarily as a result of net borrowings on our credit facilities and our unsecured debt issuances of $2,998.8 million ; our proceeds from issuance of common shares of $981.1 million ; and partially offset by dividends paid in cash of $253.8 million.
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.
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Equity
On October 28, 2021, the Company priced its IPO, issuing 9,180,000 of its common shares of beneficial interest at a public offering price of $26.15 per share. Net of underwriting fees, the Company received net cash proceeds, before offering expenses, of $230.6 million. On November 4, 2021, the underwriters exercised their option to purchase an additional 1,377,000 shares of common shares, which resulted in net cash proceeds, before offering expenses, of $33.8 million. The Company’s common shares began trading on the NYSE under the symbol “BXSL” on October 28, 2021.
In connection with the listing of the Company’s common shares on the NYSE, the Board 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.
The following table summarizes the total shares issued and proceeds received related to capital drawdowns delivered pursuant to the Subscription Agreements and IPO for the year ended December 31, 2021 (dollar amounts in millions, except share amounts):
Common Share Issuance Date Number of Common Shares Issued Aggregate Offering Price
June 8, 2021 13,869,637 $ 357.0
September 8, 2021 13,723,035 356.3
November 2021 (1)
10,557,000 264.4
Total 38,149,672 $ 977.7
(1) Includes proceeds (net of any underwriting fees) from our initial public offering and the underwriter's exercise of the overallotment option.
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.
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, 2019 (dollar amounts in millions, except share amounts):
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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 10,474,169 271.1
Total 54,499,759 $ 1,393.8
Distributions and Dividend Reinvestment
The following table summarizes our distributions declared and payable for the year ended December 31, 2021 (dollar amounts 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
September 7, 2021 September 7, 2021 November 12, 2021 0.3750 54,250
September 7, 2021 September 30, 2021 November 12, 2021 0.1250 19,800
October 18, 2021 December 31, 2021 January 31, 2022 0.5300 89,715
Total distributions $ 2.0300 $ 295,792
On October 18, 2021, our Board also declared the following special distributions:
Record Date Payment Date Per Share Amount
January 18, 2022 May 13, 2022 $ 0.1000
March 16, 2022 May 13, 2022 0.1500
May 16, 2022 August 12, 2022 0.2000
July 18, 2022 November 14, 2022 0.2000
Total distributions $ 0.6500
The following table summarizes our distributions declared and payable for the year ended December 31, 2020 (dollars in thousands, except per share amounts):
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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
For the years ended December 31, 2021, 2020 and 2019, the percentage of total dividends paid that constituted interest-related dividends, was 85.2%, 77.9% and 100.0%, respectively.
For the years ended December 31, 2021, 2020 and 2019, the percentage of total dividends paid that constituted qualified short-term capital gain dividends, was 11.0%, 17.0% and 0.0%, respectively. Qualified short-term capital gain dividends are exempt from U.S. withholding tax applicable to non-U.S. shareholders.
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. Refer to Note 8 to the consolidated financial statements for more information on our dividend reinvestment program.
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, 2021 (dollars in thousands, except share amounts):
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Payment Date DRIP Shares Value DRIP Shares Issued
January 29, 2021 $ 11,179 443,639
May 14, 2021 8,674 339,398
August 13, 2021 9,142 352,656
November 12, 2021 9,944 327,082
Total distributions $ 38,939 1,462,775
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, 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
Share Repurchase Plan
On October 18, 2021, the Board approved a share repurchase plan (the “ Company 10b5-1 Plan ”) to acquire up to approximately $262 million (representing the net proceeds from the IPO) in the aggregate of the Company’s common shares at prices below 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. The Company put the 10b5-1 Plan in place because it believes that, in the current market conditions, if its common shares are trading below its then-current net asset value per share, it is in the best interest of the Company’s shareholders for the Company to reinvest in its portfolio. For the year ended December 31, 2021, the Company did not repurchase any of its shares under the Share Repurchase Plan.
Borrowings
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Our outstanding debt obligations were as follows (dollar amounts in thousands):
December 31, 2021
Aggregate Principal Committed Outstanding Principal Carrying Value Unused
Portion (1)
Amount Available (2)
Jackson Hole Funding Facility (3)
$ 400,000 $ 361,007 $ 361,007 $ 38,993 $ 38,993
Breckenridge Funding Facility 825,000 568,680 568,680 256,320 256,320
Big Sky Funding Facility 500,000 499,606 499,606 394 394
Revolving Credit Facility (4)
1,325,000 915,035 915,035 409,965 271,585
2023 Notes (5)
400,000 400,000 396,702 — —
2026 Notes (5)
800,000 800,000 792,757 — —
New 2026 Notes (5)
700,000 700,000 691,662 — —
2027 Notes (5)
650,000 650,000 635,860 — —
2028 Notes (5)
650,000 650,000 637,324 — —
Total $ 6,250,000 $ 5,544,328 $ 5,498,633 $ 705,672 $ 567,292
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
(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, 2021, the Company had borrowings denominated in Euros (EUR) of 23.3 million. As of December 31, 2020, the Company had borrowings denominated in Euros (EUR) of 23.5 million.
(4) Under the Revolving Credit Facility, the Company may borrow in U.S. dollars or certain other permitted currencies. As of December 31, 2021, the Company had borrowings denominated in Canadian Dollars (CAD), Euros (EUR) and British Pounds (GBP) of 256.3 million, 18.6 million and 49.8 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, New 2026 Notes, 2027 Notes and 2028 Notes is presented net of unamortized debt issuance costs of $3.3 million, $7.2 million, $8.3 million, $14.1 million and $12.7 million, respectively, as of December 31, 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.
For additional information on our debt obligations see "Item 8. Consolidated Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 6. Borrowings. ”
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. See “ Item 8. Consolidated Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 3. Agreements and Related Party Transactions. ”
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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 COVID-19 pandemic (including the restrictive measures taken in response thereto) has to date (i) created temporary 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 in previous periods. More recently, robust economic activity in the U.S. has supported a continued recovery, which nevertheless may remain uneven with dispersion across sectors and regions.
Although vaccines have been widely distributed in the U.S., new restrictions and delays in the reopening of establishments and businesses have occurred in some parts of the country. We believe the economy is continuing to rebound in certain respects, but 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.
Critical Accounting Estimates
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 and estimates should be read in connection with our risk factors described in “Item 1A. Risk Factors.”
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.
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:
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• 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 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.