With interest rates looking like they’ll remain higher for longer, you may want to consider researching income vehicles which capitalize on higher rates.
The Blackstone Senior Floating Rate 2027 Term Fund (NYSE:BSL) is one such vehicle – it offers a monthly distribution, and yields 9.76%.
Fund Profile:
The Fund’s primary investment objective is to seek high current income, with a secondary objective to seek preservation of capital, consistent with its primary goal of high current income. Under normal market conditions, the Fund will invest at least 80% of its Managed Assets in senior loans.
The Fund is a diversified closed-end fund (“CEF”) management investment company with a limited term, and, absent shareholder approval to extend the life of the Fund, the Fund will dissolve on or about May 31, 2027.
BSL has $282M in assets, with 529 holdings, and an average daily volume of 41K. It uses 31.94% in leverage, and has an expense ratio of 4.69%, which includes Interest expense of 2.76%:
Dividends:
As this is a floating rate CEF, its monthly payouts will vary. They’re currently at $.1140 – management already declared these payouts for July and August.
BSL has a 5-year distribution growth rate of 4.53%, mainly due to its big jump in 2023, from $.856 in 2022, to $1.44.
NII increased 27% in 2023, to $17.81M, and Net Realized Losses shrank to $5.6M, vs. $13.6M in 2022. 2023 also saw Unrealized Gains swing to a $14.68M gain, vs. a $19.57M loss in 2022:
Holdings:
BSL’s portfolio holds $91 in 1st Lien Loans, followed by 5.3% in CLO’s, 2.2% in Bonds, and 2.1% in 2nd Lien Loans:
The top 5 Industry exposures account for ~36% of the portfolio. As compared to the Morningstar LSTA US index, BSL was slightly underexposed to Software, and overexposed to Financial Services, Professional Services, Healthcare Providers & Services, and Commercial Services, as of 3/31/24:
BSL’s top 10 issuers comprise just 8.4% of its portfolio, with weightings from 0.7% to 1.0%. Scientific and Industrial instrument maker Coherent (COHR) and Caesar’s (CZR) are 2 familiar names in the group:
T~67% of the portfolio holdings are rated B1 – B3, “highly speculative” by Moody’s, with B2 being the largest rating tranche.
The biggest maturity tranche is 3–5 years, at ~50%, followed by 5–7 years, at ~32%, with 1–3 years at 13%:
Performance:
BSL outperformed the Morningstar US CEF Senior Loan category on an NAV and price basis in 2016-2017, 2021, 2023, and in 2024, as of 5/31/24.
Valuations:
Buying CEF’s like BSL at a deeper discount than its historical average discounts/premiums ca be a useful strategy, due to mean reversion. CEFs’ daily NAV/share valuations are calculated after the market close.
At its 6/27/24 closing price of $14.00, BSL was swelling at a 5.34% discount, which isn’t as deep of a discount as its 1-, 3-, and 5-year average discounts of -8%, -6.88%, and -6.5%, respectively.
Parting Thoughts:
BSL has ranged in price over the past year from $12.50 to $14.56 – it’s ~4% below its 52-week-high, and ~12% above its 52-week low.
As noted above, the current 5.3% discount is not as deep as historic averages, but it’s not that far away from the 6.9% and 6.5% 3- and 5-year averages. (The 8% 1-year average was due to a big dip in November 2023.)
The other issue to keep in mind is that there is currently no plan to extend BSL’s term after 5/31/2027. We’re going to pass for now, but, if Blackstone Senior Floating Rate 2027 Term Fund took a big dip into a deeper discount over the next few months, we would treat it as a trading vehicle, not a long-term holding, due to its limited future.
All tables furnished by Hidden Dividend Stocks Plus, unless otherwise noted.
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