TSLX Sixth Street Specialty Lending Inc

Delaware

001-36364

27-3380000

(State or Other Jurisdiction

of Incorporation)

(Commission

File Number)

(I.R.S. Employer

Identification No.)

2100 McKinney Avenue, Suite 1500

Dallas, TX

75201

(Address of Principal Executive Offices)

(zip code)

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

TSLX

The New York Stock Exchange

Exhibit
Number

Description

99.1

Press Release, dated July 31, 2024

104

The cover page of this Current Report on Form 8-K, formatted in Inline XBRL

SIXTH STREET SPECIALTY LENDING, INC.

                    (Registrant)

Date: July 31, 2024

By:

/s/ Ian Simmonds

Ian Simmonds

Chief Financial Officer

NEW YORK — July 31, 2024 — Sixth Street Specialty Lending, Inc. (NYSE: TSLX, or the “Company”) today reported net investment income of $0.59 per share and net income of $0.51 per share for the second quarter ended June 30, 2024. These results correspond to an annualized return on equity (ROE) on net investment income and net income of 13.9% and 11.9%, respectively.

Both net investment income per share and net income per share include $0.01 per share of unwind of previously accrued capital gains incentive fee expenses that were accrued, but not paid or payable, related to cumulative unrealized capital gains in excess of cumulative net realized capital gains less any cumulative unrealized losses and capital gains incentive fees paid inception-to-date. Excluding the impact of the partial reversal or unwind of previously accrued capital gains incentive fee expenses, the Company’s adjusted net investment income and adjusted net income for the quarter ended June 30, 2024, were $53.8 million, or $0.58 per share, and $46.1 million, or $0.50 per share, respectively. These results correspond to an annualized return on equity (ROE) on adjusted net investment income and adjusted net income of 13.5% and 11.6%, respectively. The Company’s strong net investment income in the second quarter reflects continued strength of the core earnings power of its portfolio driven by higher interest rates.

Reported net asset value (NAV) per share was $17.19 at June 30, 2024 as compared to NAV per share of $17.17 or an adjusted NAV per share of $17.11 at March 31, 2024 (which accounts for the impact of the $0.06 per share first quarter 2024 supplemental dividend). The primary driver of this quarter’s NAV per share growth was the continued overearning of the Company’s base quarterly dividend.

The Company announced that its Board of Directors has declared a third quarter 2024 base dividend of $0.46 per share to shareholders of record as of September 16, 2024, payable on September 30, 2024, and a second quarter supplemental dividend of $0.06 per share to shareholders of record as of August 30, 2024, payable on September 20, 2024. Adjusted for the impact of the supplemental dividend related to this quarter’s earnings, the Company’s Q2 adjusted NAV per share was $17.13.

On April 1, 2024, the Company issued 600,000 shares of common stock pursuant to the overallotment option granted to underwriters related to the Company’s previously reported common stock issuance on March 5, 2024. Net of underwriting fees and offering costs, total cash proceeds to the Company, inclusive of the overallotment shares issued, were approximately $93.3 million.

On April 24, 2024, the Company completed an amendment to its Revolving Credit Facility, which, among other changes, (a) increased the aggregate commitments under the facility to $1.700 billion and (b) extended the stated maturity date to April 24, 2029 for $1.505 billion of commitments.

Net Investment Income Per Share

Q2 2024:

$0.59

Q2 2024 (adjusted):

$0.58

Net Income Per Share

Q2 2024:

$0.51

Q2 2024 (adjusted):

$0.50

Return on Equity

Q2 2024 (NII):

13.9%

Q2 2024 (NI):

11.9%

Q2 2024 (Adj. NII):

13.5%

Q2 2024 (Adj. NI):

11.6%

NAV

Q2 2024 ($MM):

$1,599.0

Q2 2024 (per share):

$17.19

Q2 2024 (per share, adj):

$17.13

Dividends Declared (per share)

Q2 2024 (Base):

$0.46

LTM Q2'24 (Base):

$1.84

LTM Q2'24 (Supplemental):

$0.27

LTM Q2'24 (Total):

$2.11

For the quarter ended June 30, 2024, new investment commitments totaled $231.0 million. This compares to $263.6 million for the quarter ended March 31, 2024.

For the quarter ended June 30, 2024, the principal amount of new investments funded was $163.6 million across eight new portfolio companies and five upsizes to existing portfolio companies. For this period, the Company had $290.3 million aggregate principal amount in exits and repayments. For the quarter ended March 31, 2024, the principal amount of new investments funded was $162.8 million across nine new portfolio companies and five upsizes to existing portfolio companies. For that period, the Company had $108.6 million aggregate principal amount in exits and repayments.

As of June 30, 2024 and March 31, 2024, the Company had investments in 1051 and 1002 portfolio companies, respectively, with an aggregate fair value of $3,317.1 million and $3,380.0 million, respectively. As of June 30, 2024, the average investment size in each portfolio company was $31.51 million based on fair value.

As of June 30, 2024, the Company’s portfolio based on fair value consisted of 92.8% first-lien debt investments, 0.8% second-lien debt investments, 0.2% structured credit investments, 1.3% mezzanine debt investments, and 4.9% equity and other investments. As of March 31, 2024, the Company’s portfolio based on fair value consisted of 92.3% first-lien debt investments, 0.8% second-lien debt investments, 0.9% structured credit investments, 1.2% mezzanine debt investments, and 4.8% equity and other investments.

As of June 30, 2024, 99.6% of debt investments3 based on fair value in the portfolio bore interest at floating rates with 100.0% of these subject to reference rate floors. The Company’s credit facilities also bear interest at floating rates. In connection with the Company’s Unsecured Notes, which bear interest at fixed rates, the Company has entered into fixed-to-floating interest rate swaps in order to align the nature of the interest rates of its liabilities with its investment portfolio.

As of June 30, 2024 and March 31, 2024, the weighted average total yield of debt and income-producing securities at fair value (which includes interest income and amortization of fees and discounts) was 13.8%, and the weighted average total yield of debt and income-producing securities at amortized cost (which includes interest income and amortization of fees and discounts) was 13.9% and 14.0% for the quarter ended June 30, 2024 and March 31, 2024, respectively.

As of June 30, 2024 and March 31, 2024, 1.1% of the portfolio at fair value was on non-accrual status. There were no new investments added to non-accrual status during the quarter.

Q2 2024 Origination Activity

Commitments:

$231.0MM

Fundings:

$163.6MM

Net Payoffs:

$126.7MM

Average Investment Size1

$31.5MM

(1.0% of the portfolio at fair value)

First Lien Debt Investments (% FV)

92.8%

Floating Rate Debt Investments3

(% FV)

99.6%

Weighted Average Yield of Debt and Incoming-Producing Securities

Yield at Fair Value:

13.8%

Yield at Amortized Cost:

13.9%

Total Investment Income

Total Investment Income

For the three months ended June 30, 2024 and 2023, investment income was $121.8 million and $107.6 million, respectively. The increase in investment income was largely the result of net funding activity and an increase in reference rates.

$121.8MM

Net Expenses

Net Expenses

Net expenses totaled $65.4 million and $57.9 million for the three months ended June 30, 2024 and 2023, respectively. The increase in net expenses was primarily due to the upward movement in reference rates which increased the Company’s weighted average interest rate on average debt outstanding.

$65.4MM

Debt and Capital Resources

As of June 30, 2024, the Company had $34.6 million in cash and cash equivalents (including $29.5 million of restricted cash), total principal value of debt outstanding of $1,785.0 million, and $1,209.5 million of undrawn capacity on its revolving credit facility, subject to borrowing base, outstanding letters of credit, asset coverage requirements and other limitations. The Company’s weighted average interest rate on debt outstanding was 7.7% and 7.6% for the three-month periods ended June 30, 2024 and March 31, 2024, respectively. At June 30, 2024, the Company’s debt to equity ratio was 1.12x, compared to 1.19x at March 31, 2024. Average debt to equity was 1.17x for the three-month period ended June 30, 2024, compared to 1.24x for the three-month period ended March 31, 2024.

Total Principal Debt Outstanding

$1,785.0MM

Debt-to-Equity Ratio

Q2 2024 Quarter End:

1.12x

Q2 2024 Average1:

1.17x

Revolving Credit Facility

Unfunded Commitment Activity

Revolver Capacity

$1,700

Unfunded Commitments (See Note 8 in 3/31/24 10-Q)

$364

Drawn on Revolver

($488)

Extinguished Unfunded Commitments

($21)

Unrestricted Cash Balance

$5

New Unfunded Commitments

$45

Issued Letters of Credit

($3)

Net Drawdown of Unfunded Commitments

($60)

Total Liquidity (Pre-Unfunded Commitments)

$1,215

Total Unfunded Commitments

$328

Available Unfunded Commitments1

($250)

Unavailable Unfunded Commitments1

($78)

Total Liquidity (Burdened for Unfunded Commitments)

$965

Available Unfunded Commitments1

$250

Three Months Ended

(unaudited)

June 30, 2024

December 31, 2023

June 30, 2023

Investments at Fair Value

$

3,317.1

$

3,283.1

$

3,089.0

Total Assets

$

3,387.0

$

3,343.8

$

3,141.2

Net Asset Value Per Share

$

17.19

$

17.04

$

16.74

Supplemental Dividend Per Share

$

0.06

$

0.08

$

0.06

Adjusted Net Asset Value Per Share (1)

$

17.13

$

16.96

$

16.68

Investment Income

$

121.8

$

119.5

$

107.6

Net Investment Income

$

55.1

$

54.7

$

48.8

Net Income

$

47.4

$

51.2

$

53.1

Accrued Capital Gains Incentive Fee Expense

$

(1.3

)

$

(0.7

)

$

0.7

Adjusted Net Investment Income (2)

$

53.8

$

54.0

$

49.5

Adjusted Net Income (2)

$

46.1

$

50.5

$

53.8

Net Investment Income Per Share

$

0.59

$

0.62

$

0.58

Net Income Per Share

$

0.51

$

0.58

$

0.63

Accrued Capital Gains Incentive Fee Expense Per Share

$

(0.01

)

$

(0.01

)

$

0.01

Adjusted Net Investment Income Per Share (2)

$

0.58

$

0.62

$

0.59

Adjusted Net Income Per Share (2)

$

0.50

$

0.58

$

0.64

Annualized Return on Equity (Net Investment Income) (3)

13.9

%

14.7

%

14.0

%

Annualized Return on Equity (Net Income) (3)

11.9

%

13.8

%

15.2

%

Annualized Return on Equity (Adjusted Net Investment Income) (2)(3)

13.5

%

14.5

%

14.2

%

Annualized Return on Equity (Adjusted Net Income) (2)(3)

11.6

%

13.6

%

15.4

%

Weighted Average Yield of Debt and Income Producing Securities at Fair Value

13.8

%

14.1

%

14.0

%

Weighted Average Yield of Debt and Income Producing Securities at Amortized Cost

13.9

%

14.2

%

14.1

%

Percentage of Debt Investment Commitments at Floating Rates

99.6

%

99.7

%

99.2

%

June 30,

December 31,

2024

2023

Assets

Investments at fair value

Non-controlled, non-affiliated investments (amortized cost of $3,221,394 and $3,172,853, respectively)

$

3,254,527

$

3,223,152

Controlled, affiliated investments (amortized cost of $83,169 and $78,159, respectively)

62,542

59,913

Total investments at fair value (amortized cost of $3,304,563 and $3,251,012, respectively)

3,317,069

3,283,065

Cash and cash equivalents (restricted cash of $29,527 and $23,979, respectively)

34,649

25,196

Interest receivable

30,738

27,969

Prepaid expenses and other assets

4,495

7,578

Total Assets

$

3,386,951

$

3,343,808

Liabilities

Debt (net of deferred financing costs of $27,262 and $21,930, respectively)

$

1,712,905

$

1,780,307

Management fees payable to affiliate

12,468

11,962

Incentive fees on net investment income payable to affiliate

11,414

11,451

Incentive fees on net capital gains accrued to affiliate

8,266

10,446

Other payables to affiliate

4,584

2,802

Other liabilities

38,279

30,465

Total Liabilities

1,787,916

1,847,433

Commitments and contingencies (Note 8)

Net Assets

Preferred stock, $0.01 par value; 100,000,000 shares authorized; no shares
   issued and outstanding

—

—

Common stock, $0.01 par value; 400,000,000 shares authorized, 93,681,455
   and 88,493,749 shares issued, respectively; and 93,017,205 and 87,829,499
   shares outstanding, respectively

937

885

Additional paid-in capital

1,510,345

1,405,173

Treasury stock at cost; 664,250 and 664,250 shares held, respectively

(10,459

)

(10,459

)

Distributable earnings

98,212

100,776

Total Net Assets

1,599,035

1,496,375

Total Liabilities and Net Assets

$

3,386,951

$

3,343,808

Net Asset Value Per Share

$

17.19

$

17.04

Three Months Ended

Six Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

Income

Investment income from non-controlled, non-affiliated investments:

Interest from investments

$

102,707

$

96,221

$

205,114

$

184,655

Paid-in-kind interest income

9,435

4,644

17,543

7,647

Dividend income

1,815

797

2,596

1,405

Other income

5,533

4,075

9,787

6,832

Total investment income from non-controlled, non-affiliated investments

119,490

105,737

235,040

200,539

Investment income from controlled, affiliated investments:

Interest from investments

2,320

1,867

4,551

3,570

Other income

5

1

8

2

Total investment income from controlled, affiliated investments

2,325

1,868

4,559

3,572

Total Investment Income

121,815

107,605

239,599

204,111

Expenses

Interest

39,234

32,442

78,266

60,928

Management fees

12,765

11,410

25,361

22,143

Incentive fees on net investment income

11,414

10,507

22,342

19,988

Incentive fees on net capital gains

(1,335

)

749

(2,179

)

2,506

Professional fees

2,115

1,749

3,866

3,505

Directors’ fees

207

174

428

357

Other general and administrative

1,343

1,188

2,627

2,203

Total expenses

65,743

58,219

130,711

111,630

Management and incentive fees waived (Note 3)

(297

)

(300

)

(694

)

(556

)

Net Expenses

65,446

57,919

130,017

111,074

Net Investment Income Before Income Taxes

56,369

49,686

109,582

93,037

Income taxes, including excise taxes

1,226

902

2,076

1,316

Net Investment Income

55,143

48,784

107,506

91,721

Unrealized and Realized Gains (Losses)

Net change in unrealized gains (losses):

Non-controlled, non-affiliated investments

(7,852

)

7,662

(17,166

)

19,416

Controlled, affiliated investments

—

(2,783

)

(2,381

)

(8,987

)

Translation of other assets and liabilities in foreign currencies

(1,641

)

(2,000

)

3,085

(3,004

)

Interest rate swaps

—

(57

)

—

174

Total net change in unrealized gains (losses)

(9,493

)

2,822

(16,462

)

7,599

Realized gains (losses):

Non-controlled, non-affiliated investments

1,630

1,623

3,863

6,436

Foreign currency transactions

121

(139

)

12

286

Total net realized gains (losses)

1,751

1,484

3,875

6,722

Total Net Unrealized and Realized Gains (Losses)

(7,742

)

4,306

(12,587

)

14,321

Increase (Decrease) in Net Assets Resulting from Operations

$

47,401

$

53,090

$

94,919

$

106,042

Earnings per common share—basic and diluted

$

0.51

$

0.63

$

1.04

$

1.28

Weighted average shares of common stock outstanding—basic and diluted

92,734,320

84,223,032

90,883,350

82,819,734

Three Months Ended

($ in millions)

June 30, 2024

June 30, 2023

New investment commitments:

Gross originations (1)

$

1,858.8

$

1,522.9

Less: Syndications/sell downs (1)

1,627.8

1,262.5

Total new investment commitments

$

231.0

$

260.4

Principal amount of investments funded:

First-lien

$

163.6

$

209.3

Second-lien

—

30.0

Mezzanine

—

—

Equity and other

—

0.7

Structured Credit

—

—

Total

$

163.6

$

240.0

Principal amount of investments sold or repaid:

First-lien

$

265.2

$

112.3

Second-lien

—

—

Mezzanine

—

—

Equity and other

25.1

1.7

Structured Credit

—

—

Total

$

290.3

$

114.0

Number of new investment commitments in
   new portfolio companies

8

6

Average new investment commitment amount in
   new portfolio companies

$

21.2

$

41.3

Weighted average term for new investment
   commitments in new portfolio companies
   (in years)

6.1

6.7

Percentage of new debt investment commitments
   at floating rates

100.0

%

100.0

%

Weighted average interest rate of new
   investment commitments

11.6

%

12.6

%

Weighted average spread over reference rate of new
   floating rate investment commitments

6.6

%

7.3

%

Weighted average interest rate on investments
   fully sold or paid down

13.4

%

15.6

%