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1. Company Snapshot

1.a. Company Description

Sixth Street Specialty Lending, Inc.(NYSE: TSLX) is a business development company.The fund provides senior secured loans (first-lien, second-lien, and unitranche), unsecured loans, mezzanine debt, and investments in corporate bonds and equity securities and structured products, non-control structured equity, and common equity with a focus on co-investments for organic growth, acquisitions, market or product expansion, restructuring initiatives, recapitalizations, and refinancing.


The fund invests in business services, software & technology, healthcare, energy, consumer & retail, manufacturing, industrials, royalty related businesses, education, and specialty finance.It seeks to finance and lending to middle market companies principally located in the United States.The fund invests in companies with enterprise value between $50 million and $1 billion or more and EBITDA between $10 million and $250 million.


The transaction size is between $15 million and $350 million.The fund invests across the spectrum of the capital structure and can arrange syndicated transactions of up to $500 million and hold sizeable positions within its credits.

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1.b. Last Insights on TSLX

Sixth Street Specialty Lending, Inc. faced challenges due to sector headwinds, including lower interest rates, which reduced income potential. The company's Q2 earnings revealed a decrease in EPS to $0.56 from $0.58 year-over-year. Despite maintaining strong fundamentals, TSLX's heavy floating-rate exposure poses risks if rates decline further. A recent downgrade by an analyst cites concerns over dividend sustainability amid a shifting sector focus. With a potential rate cut on the horizon, SOFR-linked assets, including TSLX, may face yield compression and dividend reductions.

1.c. Company Highlights

2. Strong Q3 Earnings with Adjusted Net Investment Income of $0.53 per Share

The company reported a robust financial performance in Q3, with adjusted net investment income of $0.53 per share, beating analyst estimates of $0.52. The annualized return on equity was 12.3%, and adjusted net income was $0.46 per share, representing an annualized return on equity of 10.8%. The Board approved a base quarterly dividend of $0.46 per share, payable on December 31. The company's net asset value per share adjusted for the impact of the supplemental dividend was $17.11, representing a growth of 1.9% since the start of the interest rate hiking cycle in early 2022.

Publication Date: Nov -19

📋 Highlights
  • Adjusted Net Investment Income (NII) Growth:: Q3 adjusted NII reached $0.53/share (12.3% ROE), up from $0.46/share (10.8% ROE) in the prior quarter, reflecting strong operational performance.
  • Net Asset Value (NAV) Outperformance:: NAV per share grew 1.9% since early 2022, outperforming the 8.5% average decline in public BDC peers through Q2, despite interest rate hikes.
  • Major Investment in Walgreens:: Acted as administrative agent on a $2.5B term loan for Walgreens’ U.S. retail financing, part of Sycamore’s $23.7B take-private deal, leveraging retail ABL expertise.
  • Liquidity and Capital Structure:: Maintained $1.1B in unfunded revolver capacity against $174M in commitments, with a debt-to-equity ratio of 1.1x and 67% unsecured debt funding.

Investment Activity and Portfolio Performance

The company continued to execute its disciplined investment strategy, providing total commitments of $388 million and total fundings of $352 million across 4 new investments, 5 upsizes to existing portfolio companies, and through selective deployment into structured credit investments. Notable investments included a $2.5 billion term loan to support the financing of Walgreens U.S. retail business and an investment in Velocity Clinical Research. The company's average debt-to-equity ratio was 1.1x, down from 1.2x in the prior quarter, and it had nearly $1.1 billion of unfunded revolver capacity at quarter end.

Valuation and Dividend Yield

The company's Price-to-Book Ratio (P/B) is 1.21, indicating that its stock price is relatively in line with its book value. The Dividend Yield is 9.91%, suggesting an attractive income stream for investors. With a Return on Equity (ROE) of 3201.65%, the company is generating significant returns for its shareholders.

Outlook and Guidance

The company expects adjusted Net Investment Income (NII) per share for the full year to be at the top end of its previously stated range of $1.97 to $2.14. The management team is confident in its ability to continue executing its investment strategy and generating returns for shareholders. As Ian Simmonds noted, "We believe retaining capital is the most appropriate way to generate value for shareholders, as it allows us to generate a return on retained capital that is in excess of the cost of that capital."

Credit Monitoring and Risk Management

The company has a strong track record in credit monitoring and risk management, with a team focused on understanding and monitoring ABL collateral. The management team is confident in its ability to manage collateral risk and navigate complexity in the middle market. As Bo Stanley emphasized, "Credit issues are behind us, but idiosyncratic issues will pop up. We are not especially concerned about any particular pockets of weakness, but pricing and supply of capital in the market are more of an issue."

3. NewsRoom

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A Rare Buying Opportunity: Blue-Chip 11-12% Yields Too Cheap To Ignore

Nov -24

Source: seekingalpha.com

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Don't Bury BDC Dividends Just Yet

Nov -17

Source: seekingalpha.com

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Advisors Capital Management LLC Grows Position in Sixth Street Specialty Lending, Inc. $TSLX

Nov -14

Source: defenseworld.net

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Sixth Street Specialty Lending: Q3 Earnings Indicate Continued Resilience

Nov -07

Source: seekingalpha.com

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Sixth Street Specialty Lending, Inc. (TSLX) Q3 2025 Earnings Call Transcript

Nov -05

Source: seekingalpha.com

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Sixth St (TSLX) Q3 Earnings: Taking a Look at Key Metrics Versus Estimates

Nov -05

Source: zacks.com

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Sixth Street (TSLX) Beats Q3 Earnings Estimates

Nov -05

Source: zacks.com

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Sixth Street Specialty Lending, Inc. Provides a Letter to Stakeholders in Conjunction with its Third Quarter Earnings Results

Nov -04

Source: businesswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (10.20%)

6. Segments

Investment and Related Activities

Expected Growth: 10.2%

Growing demand for customized financing solutions, increasing middle-market company growth, and expansion into new industries drive Sixth Street Specialty Lending's growth.

7. Detailed Products

Asset-Based Loans

Provides financing to businesses using their assets as collateral, offering flexible repayment terms and competitive interest rates.

Cash Flow Loans

Offers financing based on a company's cash flow, providing access to capital for businesses with a strong financial track record.

Unitranche Loans

Combines senior and subordinated debt into a single loan, providing a simplified and cost-effective financing solution.

Second Lien Loans

Provides additional financing to businesses with existing debt, offering a flexible and non-dilutive capital solution.

Equity Co-Investments

Partners with private equity firms to co-invest in portfolio companies, providing additional capital and expertise.

8. Sixth Street Specialty Lending, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Sixth Street Specialty Lending, Inc. operates in a niche market, providing specialty lending services to a specific client base. While there are some substitutes available, they are not as specialized, giving Sixth Street a competitive advantage.

Bargaining Power Of Customers

Sixth Street Specialty Lending, Inc.'s customers are largely dependent on the company's specialized lending services, giving them limited bargaining power.

Bargaining Power Of Suppliers

Sixth Street Specialty Lending, Inc. has a diversified supplier base, reducing the bargaining power of individual suppliers.

Threat Of New Entrants

While there are some barriers to entry in the specialty lending market, new entrants can still pose a threat to Sixth Street Specialty Lending, Inc.'s market share.

Intensity Of Rivalry

The specialty lending market is highly competitive, with several established players competing for market share, leading to a high intensity of rivalry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 54.33%
Debt Cost 5.92%
Equity Weight 45.67%
Equity Cost 9.14%
WACC 7.39%
Leverage 118.97%

11. Quality Control: Sixth Street Specialty Lending, Inc. passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
General American Investors Company

A-Score: 7.2/10

Value: 5.3

Growth: 2.8

Quality: 8.9

Yield: 9.0

Momentum: 7.0

Volatility: 10.0

1-Year Total Return ->

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Stock-Card
Sixth Street Specialty Lending

A-Score: 6.9/10

Value: 5.2

Growth: 4.3

Quality: 6.5

Yield: 10.0

Momentum: 6.0

Volatility: 9.7

1-Year Total Return ->

View Full Report
Stock-Card
Crescent Capital BDC

A-Score: 6.8/10

Value: 6.3

Growth: 7.4

Quality: 6.3

Yield: 10.0

Momentum: 1.5

Volatility: 9.3

1-Year Total Return ->

View Full Report
Stock-Card
Carlyle Secured Lending

A-Score: 6.6/10

Value: 5.7

Growth: 7.1

Quality: 6.1

Yield: 10.0

Momentum: 1.0

Volatility: 9.7

1-Year Total Return ->

View Full Report
Stock-Card
CION Investment

A-Score: 5.8/10

Value: 4.4

Growth: 4.9

Quality: 4.7

Yield: 10.0

Momentum: 2.0

Volatility: 9.0

1-Year Total Return ->

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Stock-Card
Oxford Square Capital

A-Score: 5.2/10

Value: 6.4

Growth: 3.9

Quality: 3.3

Yield: 10.0

Momentum: 0.0

Volatility: 7.7

1-Year Total Return ->

View Full Report

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

22.47$

Current Price

22.48$

Potential

-0.00%

Expected Cash-Flows