Blackstone Private Credit Fund Raises $1.5 Billion in Single-Day Bond Sale
Thursday, Nov 21, 2024 5:35 pm ET
2min read Blackstone Private Credit Fund (BCRED), a non-traded business development company (BDC) managed by Blackstone Credit, has successfully raised $1.5 billion in a single-day bond sale. The fund, which focuses on providing floating rate, senior secured loans to large, performing companies, tapped the investment-grade bond market to issue $1 billion of senior unsecured bonds and a $500.5 million collateralized loan obligation (CLO) backed by its own loans.
BCRED's strong credit rating and track record contributed to its ability to raise capital efficiently. Moody's assigned a first-time Baa3 rating to BCRED in September 2021, reflecting its robust earnings, asset quality, and optimized balance sheet. Additionally, BCRED's annualized distribution rate of 10.3% and total net return of 8.5% for Class I shares since inception indicate a solid performance track record.
The fund's strategic use of leverage and focus on senior secured debt have significantly contributed to its ability to attract investors. By maintaining an average monthly fund leverage of 0.8x and an average issuer loan-to-value of 44%, BCRED has demonstrated a conservative approach to risk management. This has likely appealed to investors seeking stable, income-generating investments. Furthermore, BCRED's heavy concentration in senior secured debt (97%) provides investors with a high degree of security, as these loans are typically prioritized in case of default. This focus on senior secured debt, coupled with a high proportion of floating rate loans (98%), allows BCRED to benefit from interest rate fluctuations, potentially enhancing returns for investors.
BCRED's bond issuance strategy aligns with its portfolio composition and risk management objectives. The fund's recent $1.5 billion issuance, comprising $1 billion of senior unsecured bonds and a $500.5 million CLO, reflects its preference for senior secured debt, which accounted for 97% of its portfolio as of March 31, 2024. This strategy helps BCRED maintain a conservative risk profile, with an average issuer loan-to-value ratio of 44% and a low average monthly fund leverage of 0.8x. By issuing senior unsecured bonds, BCRED can access cheaper financing costs, as seen in its 2.35% coupon for the 10-year bond, while the CLO provides additional diversification and risk mitigation.
BCRED's access to capital and scale, backed by Blackstone's $1.1T+ in AUM, enables it to secure favorable terms in bond issuances. In November 2021, BCRED issued $1.5 billion in bonds, pricing ~25% tighter than similar bonds issued by its non-traded peers (Number 3). Moody's upgraded BCRED's rating to Baa2, reflecting its strong performance and portfolio positioning (Number 3). This upgrade allows BCRED to lead in cost of financing versus its non-traded peers, maximizing earnings for investors.
In conclusion, BCRED's successful $1.5 billion bond issuance demonstrates the fund's ability to tap the debt market effectively, driven by its strong credit rating, track record, and strategic approach to risk management. The fund's bond issuance strategy aligns with its portfolio composition and risk management objectives, enabling it to maintain a conservative risk profile while securing favorable financing costs. BCRED's access to capital and scale, backed by Blackstone's extensive AUM, further enhances its ability to secure favorable terms in bond issuances.
BCRED's strong credit rating and track record contributed to its ability to raise capital efficiently. Moody's assigned a first-time Baa3 rating to BCRED in September 2021, reflecting its robust earnings, asset quality, and optimized balance sheet. Additionally, BCRED's annualized distribution rate of 10.3% and total net return of 8.5% for Class I shares since inception indicate a solid performance track record.
The fund's strategic use of leverage and focus on senior secured debt have significantly contributed to its ability to attract investors. By maintaining an average monthly fund leverage of 0.8x and an average issuer loan-to-value of 44%, BCRED has demonstrated a conservative approach to risk management. This has likely appealed to investors seeking stable, income-generating investments. Furthermore, BCRED's heavy concentration in senior secured debt (97%) provides investors with a high degree of security, as these loans are typically prioritized in case of default. This focus on senior secured debt, coupled with a high proportion of floating rate loans (98%), allows BCRED to benefit from interest rate fluctuations, potentially enhancing returns for investors.
BCRED's bond issuance strategy aligns with its portfolio composition and risk management objectives. The fund's recent $1.5 billion issuance, comprising $1 billion of senior unsecured bonds and a $500.5 million CLO, reflects its preference for senior secured debt, which accounted for 97% of its portfolio as of March 31, 2024. This strategy helps BCRED maintain a conservative risk profile, with an average issuer loan-to-value ratio of 44% and a low average monthly fund leverage of 0.8x. By issuing senior unsecured bonds, BCRED can access cheaper financing costs, as seen in its 2.35% coupon for the 10-year bond, while the CLO provides additional diversification and risk mitigation.
BCRED's access to capital and scale, backed by Blackstone's $1.1T+ in AUM, enables it to secure favorable terms in bond issuances. In November 2021, BCRED issued $1.5 billion in bonds, pricing ~25% tighter than similar bonds issued by its non-traded peers (Number 3). Moody's upgraded BCRED's rating to Baa2, reflecting its strong performance and portfolio positioning (Number 3). This upgrade allows BCRED to lead in cost of financing versus its non-traded peers, maximizing earnings for investors.
In conclusion, BCRED's successful $1.5 billion bond issuance demonstrates the fund's ability to tap the debt market effectively, driven by its strong credit rating, track record, and strategic approach to risk management. The fund's bond issuance strategy aligns with its portfolio composition and risk management objectives, enabling it to maintain a conservative risk profile while securing favorable financing costs. BCRED's access to capital and scale, backed by Blackstone's extensive AUM, further enhances its ability to secure favorable terms in bond issuances.
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