Sixth Street Specialty Lending, Inc.

Q2 2026 net investment income was $0.43 per share and net income was $0.43 per share, both implying annualized ROE of 10.6% and 10.5%, respectively. Total investment income was $97.8 million, up from $93.4 million in Q1, while net expenses were $55.7 million, up from $52.4 million. NAV per share was $16.24, flat sequentially; net assets were $1.5 billion, total investments were $3.3 billion, and principal debt outstanding was $2.0 billion. The company generated $0.08 per share of activity-based fees, had $0.43 per share of NII against a $0.42 dividend, and ended with 3 nonaccruals representing 1.3% of the portfolio at fair value. For guidance, management said annualized ROE is expected to be about 10% to 10.5% if full-year portfolio turnover stays below 20%, and above 10.5% if turnover is higher. They also said activity-based fee income should improve in the second half of the year relative to the first half, and that Q3 should show some funding activity with a more marked pickup in Q4.

Bo Stanley said the quarter reflected stable portfolio quality, disciplined underwriting, and limited fair value impact from market inputs after Q1’s spread widening. He emphasized that stable nonaccruals, improving interest coverage, and consistent revenue/EBITDA trends support durable core earnings power and the ability to earn ROEs above the cost of equity. His tone was constructive on the back half of the year, citing early signs of a pickup in transaction activity and a more favorable M&A backdrop.

Ian Simmonds highlighted $97.8 million of total investment income, $55.7 million of net expenses, and $0.43 per share of both NII and net income. He noted that average debt-to-equity was 1.24x, ending debt-to-equity was 1.27x, and net leverage excluding quarter-end cash was 1.17x; the company also had about $1.1 billion of unfunded revolver capacity at quarter end and about $966 million after the subsequent note repayment. He said the company issued $300 million of 5-year notes at Treasury plus 180 basis points, swapped them to floating at SOFR plus 185 basis points, and repaid the $300 million unsecured notes that matured on August 1, 2026, reducing prospective debt costs. He also reported roughly $500,000 of common stock repurchased under the 10b5-1 program at an average price of $16.17 and said undistributed income was approximately $1.12 per share at quarter end.

Analysts focused on what is driving normalization in activity-based fees, and management said refinancing activity should remain muted because spreads are still better for deploying capital, while M&A activity is starting to thaw and should drive more payoffs. Questions also centered on origination quality, structured credit JV ramp pace, and whether the company can maintain attractive spreads; management said spreads are generally 25 to 50 basis points wider, documentation and diligence are better, and the JV ramp is proceeding in line with expectations, with $154 million of equity called through June. Analysts also asked about the forward curve and credit risk from possible rate hikes; management said interest coverage improved to 2.4x and they are not concerned so far about credit deterioration from higher rates.