Half-year Report

22 SEPTEMBER 2021

FOR IMMEDIATE RELEASE

RELEASED BY BNP PARIBAS SECURITIES SERVICES S.C.A., JERSEY BRANCH INTERIM RESULTS ANNOUNCEMENT

THE BOARD OF DIRECTORS OF BLACKSTONE LOAN FINANCING LIMITED ANNOUNCE INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2021

Blackstone Loan Financing Limited (formerly Blackstone / GSO Loan Financing Limited)

(the "Company" or "BGLF")

Half Yearly Financial Report for the six months ended 30 June 2021

A Note from our Chair

During the first half of 2021, the Company's performance continued to be positively impacted by reduced actual and expected investment downgrade and default expectations. The Company's return was also supported, through its investment in BCF, by the ability to take advantage of the technical strength in the CLO liability market to refinance and reset existing CLO investments.

As a result, the Company delivered a published NAV total return per Ordinary Share of 10.59% for the six month period ended 30 June 2021 and ended the period with a published NAV per share of €0.8875.

The Board's outlook for the remainder of 2021 is optimistic but remains uncertain as the race between COVID-19 inoculations and the spread of the Delta variant of the virus is at a key juncture. With this uncertain trajectory of the markets and global economy in the second half of 2021, the Board gains comfort from the disciplined investment approach of the Company's Portfolio Adviser that selects an underlying portfolio of high-quality companies supported by robust underlying protections.

Charlotte ValeurChair

21 September 2021 

Strategic Report

Strategic Report

Key Performance Indicators(1)

Further information on the reconciliation between the IFRS NAVs and the Published NAVs can be found below.

Performance

Reconciliation of IFRS NAV to Published NAV

At 30 June 2021, there was a difference between the NAV per Ordinary Share as disclosed in the Condensed Statement of Financial Position below, €0.8945 per Ordinary Share, ("IFRS NAV") and the published NAV, €0.8875 per Ordinary Share, which was released to the LSE on 21 July 2021 ("Published NAV"). A reconciliation is provided in Note 14 below. The difference between the two valuations is mainly due to the different valuation bases used.

Valuation Policy for the Published NAV

The Company publishes a NAV per Ordinary Share on a monthly basis in accordance with its Prospectus. The valuation process in respect of the Published NAV incorporates the valuation of the Company's CSWs and underlying PPNs (held by the Lux Subsidiary). These valuations are, in turn, based on the valuation of the BCF portfolio using a CLO intrinsic calculation methodology per the Company's Prospectus, which we refer to as a "mark to model" approach. As documented in the Prospectus, certain "Market Colour" (market clearing levels, market fundamentals, bids wanted in competition ("BWIC"), broker quotes or other indications) is not incorporated into this methodology. The Directors believe that this valuation process is the appropriate way of valuing the Company's holdings, and of tracking the long-term performance of the Company as the underlying portfolio of CLOs held by BCF are comparable to held to maturity instruments and the Company expects to receive the benefit of the underlying cash-flows over the CLOs' entire life cycle.

Valuation Policy for the IFRS NAV

For financial reporting purposes on an annual and semi-annual basis, to comply with IFRS as adopted by the EU, the valuation of BCF's portfolio is at fair value using models that incorporate Market Colour at the period end date, which we refer to as a "mark to market" approach. IFRS fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as at the measurement date, and is an "exit price" e.g. the price to sell an asset. An exit price embodies expectations about the future cash inflows and cash outflows associated with an asset or liability from the perspective of a market participant. IFRS fair value is a market-based measurement, rather than an entity-specific measurement, and so incorporates general assumptions that market participants are applying in pricing the asset or liability, including assumptions about risk.

Both the mark to model Published NAV and mark to market IFRS NAV valuation bases use modelling techniques and input from third-party valuation specialists. The small number of CLOs held directly by the Company, as a result of the Rollover Opportunity, are valued using a mark to market approach for both the Published NAV and IFRS NAV, consistent with the valuation methodology per the Company's Prospectus.

The Directors, as set out in the Prospectus, will continue to assess the performance of the Company using the Published NAV. Additional information and commentary on Market Colour, credit risk exposure and any material divergence from the different valuation bases referred to above will be communicated by the Directors and Portfolio Adviser if and when appropriate.

Dividend History

Whilst not forming part of the Company's investment objective or investment policy, it is currently intended that dividends are payable in respect of each calendar quarter, two months after the end of that quarter.

On 22 January 2021, the Board announced that the Company had adopted a revised Dividend Policy targeting a total 2021 annual dividend of between €0.07 and €0.08 per ordinary share, to consist of quarterly payments of €0.0175 per ordinary share for the first three quarters and a final quarter payment of a variable amount to be determined at that time. This revised Dividend Policy follows the changes made to the Company's Dividend Policy in 2020, to pay an annual dividend of between €0.06 and €0.07 per Ordinary Share, (the Company subsequently paid an annual dividend of €0.07, paying €0.015 for the first three quarters and €0.025 for the final quarter). The changes made in 2020 were pursuant to a review of the portfolio in light of COVID-19, and the subsequent changes announced in January 2021 reflect an improved outlook for both the portfolio and macro environment. These follow careful analysis and consideration by the Board in discussion with the Company's Investment Adviser. The Board continues to monitor the dividend policy throughout the year.

Period Highs and Lows

Schedule of Investments

Schedule of Significant Transactions

(1) Refer to the Glossary below for an explanation of the terms used above and elsewhere within this report

(2) Bloomberg closing price at period end

(3) Dividend Yield presented as €0.07 per annum, given the first three quarterly dividends of €0.015 per share and fourth quarter dividend of €0.025, and the share price as at 31 December 2020

(4) Source: Bloomberg

Chair's Statement

Company Returns and Net Asset Value (5) 

The Company delivered an IFRS NAV total return per Ordinary Share of 9.89% over the first six months of 2021, ending the period with a NAV of €0.8945. The return was composed of 5.02% of dividend income and 4.87% of net asset growth. 

On a Published NAV basis, the Company delivered a total return per Ordinary Share of 10.59% over the first six months of 2021, ending the period with a NAV of €0.8875. The return was composed of dividend income 5.06% and of net asset growth of 5.53%.

During the first half of 2021, the Company's performance continued to be positively impacted by reduced actual and expected investment downgrade and default expectations. The Company's return was also supported, through its investment in BCF, by the ability to take advantage of the technical strength in the CLO liability market to refinance and reset existing CLO investments.

Due to improved forward looking expectations, the Company was pleased to announce an increase to its stated dividend target to 7 to 8 cents per share for 2021. Consistent with this revised guidance, the Company paid two dividends to Ordinary Shareholders in respect of the six-month period ended 30 June 2021, totalling €0.0350 per share. Details of all dividend payments can be found within the Dividend History section at the front of this Half Yearly Financial Report.

Historical BGLF NAV and Share Price

The graph shows cumulative Published NAV and Ordinary Share price total returns and cumulative returns on European and US loans.

[Graphs and charts are included in the published Half Yearly Financial Report which is available on the Company's website at https://www.blackstone.com/fund/bglfln-blackstone-gso-loan-financing-limited/]

Market Conditions

Continuing the tone set from the end of 2020, financial markets performed strongly in the first half of 2021. Equity markets reached record levels and credit spreads continued to grind tighter, on the back of a repricing wave experienced in 1H 2021. The line‐of‐sight to reopening and recovery in most developed economies is becoming clearer, giving us cause for optimism even as we continue to closely monitor potential economic impacts of the COVID-19 Delta variant.

Ongoing monetary and fiscal support, accommodative capital markets, the rollout of mass vaccination programmes, and the reopening of major economies have all supported a move towards a normalisation in economic activity. Consequently, credit fundamentals have continued their improvement as evidenced by a strong 1Q 2021 reporting period, and GDP expectations for 2021 are a stark comparison to growth in 2020. Real GDP in the UK and US is set to grow by 6.7% and 6.6%, compared to a contraction of 10.1% and 3.5% in 2020, respectively(6).

At the year's mid-point, below investment grade credit is on its way to a full year of stable returns, with US interest rates now well below March's high and possibly poised to rise again. We believe loans will continue to perform well against other fixed income asset classes given their floating rate nature and our current view on relative value and the trajectory of interest rates. We also expect ongoing CLO creation and demand from investors searching for higher yielding assets to contribute positively to the balance of supply and demand and help absorb the healthy pipeline of new loan issuance expected for the second half of the year.

Discount Management

The share price discount to Published NAV narrowed from 20.57% at 31 December 2020 to 10.99% at 30 June 2021. As a Board, we regularly weigh the balance between paying dividends, reinvesting in BCF and seeking to ensure the Ordinary Shares trade as closely as possible to their intrinsic value(7). During 2021 year-to-date, the Company repurchased 9,772,007 shares for €7,420,732 at a weighted average discount of 12.11% using available cash with the goal of reducing the discount. As of 17 September 2021, the share price discount to Published NAV was 11.65%.

Brexit Update

The Board closely monitored the Brexit trade deal negotiations during 2020, which culminated with a deal being finalised on 30 December 2020. The potential implications to BGLF of a "hard Brexit" as a result of no trade deal being agreed before the year-end deadline, was evaluated across its service providers, including areas such as human resources, counterparty relationships, supply chains, macroeconomic, and regulatory policy, as well as with regards to its marketing registrations, and was deemed to have a negligible impact on the long-term sustainability of the Company. Since the UK left the EU, no material risks have crystallised.

COVID-19

The Directors continue to carefully monitor the ongoing developments regarding COVID-19, which continues to impact global commercial activity and contribute to volatility in financial markets. The global impact of the outbreak continues to evolve as new variants develop, however the rollout of vaccination programmes across the globe is encouraging and economic activity has shown signs of normalisation. Whilst COVID-19 still presents a level of uncertainty going forward, we are more informed as to its potential effects on portfolio asset performance and therefore feel better equipped to navigate this environment. Nevertheless, the potential direct and indirect risks to the Company, to the extent known, will be closely monitored and portfolio activity conducted in a way that is consistent with the Company's stated objectives and the Portfolio Advisor's investment philosophy of capital preservation.

ESG

The practice of responsible investing remains a key focus for investors. The Board regularly engages with the Company's Portfolio Adviser regarding their ESG policy. Blackstone has committed to being a responsible investor for over 35 years. This commitment is affirmed across the organisation and guides its approach to investing. A summary of Blackstone's responsible investing approach can be found below.

The Board

Good governance remains at the heart of our work as a Board and is taken very seriously. We believe that the Company maintains high standards of corporate governance. The Board was very active during the period, convening a total of 11 Board meetings and 14 Committee meetings (including 6 NAV Review Committee meetings). The Board also has a due diligence meeting scheduled with the Portfolio Adviser in September 2021, the agenda for which covers risk and compliance, risk oversight monitoring, finance and accounting and the wider market. The Board will also be meeting with the BCF board at the same time.

During the period, the Board and its advisers have met frequently, with the Company's advisers providing general updates as well as recommendations on pertinent matters such as the Company's share repurchase programme. The Board deems the careful consideration of such matters to be critical to ensuring the long-term success of the Company, particularly in light of the challenges and uncertainty faced since the start of 2020.

The work of the Board is also assisted by the Audit Committee, NAV Review Committee, Management Engagement Committee, the Remuneration and Nomination Committee, the Risk Committee and the Inside Information Committee.

The Company is a member of the Association of Investment Companies (the "AIC") and adheres to the AIC Code of Corporate Governance (the "AIC Code") which is endorsed by the Financial Reporting Council (the "FRC"), and meets the Company's obligations in relation to the UK Corporate Governance Code 2018 (the "UK Code").

Shareholder Communications

During 1H 2021, using our Portfolio Adviser and Brokers, we continued our programme of engagement with current and prospective Shareholders. We sincerely hope that you found the monthly factsheets, quarterly letters, quarterly update webcasts and market commentary valuable. We are always pleased to have contact with Shareholders, and we welcome any opportunity to meet with you and obtain your feedback.

Prospects and Opportunities in 2021

The Board's outlook for the remainder of 2021 is optimistic but remains uncertain as the race between COVID-19 inoculations and the spread of the Delta variant of the virus is at a key juncture. The line‐of‐sight to reopening and recovery in most developed economies is becoming clearer, giving us cause for optimism even as we continue to closely monitor potential economic impacts of the COVID-19 Delta variant. With this uncertain trajectory of the markets and global economy in the second half of 2021, the Board gains comfort from the disciplined investment approach of the Company's Portfolio Adviser that selects an underlying portfolio of high-quality companies supported by robust underlying protections.

The Board wishes to express its thanks for the support of the Company's Shareholders.

Charlotte ValeurChair

21 September 2021

(5) Past performance is not necessarily indicative of future results, and there can be no assurance that the Company will achieve comparable results, will meet its target returns, achieve its investment objectives, or be able to implement its investment strategy.

(6) Bloomberg, as of 30/06/2021. Data for 2021 represents consensus economic forecasts. 

(7) Represents the BGLF Euro share price.

Portfolio Adviser's Review

- Loan markets continued their momentum from 2020, with reopening themed sectors and lower rated assets leading the outperformance. US and European loans returned 3.48% and 2.91% year to date(8). Corporate fundamentals are showing signs of improvement and defaults continue to beat expectations. The last-twelve-month ("LTM") par-weighted default rate was 1.3% and 0.5% for US and European Loans, down from 4.4% and 1.2% at the end of 2020, respectively(9).

- Owing to favourable conditions for CLO creation and management, total year to date CLO activity is tracking at record pace, with refinancings and resets accounting for the majority. After trending towards multi-year tight spreads through 1H 2021, CLO liability spreads retreated from their lows under the pressure of heavy supply, however the arbitrage still remains favourable for equity investors.

- Trading activity in the CLO portfolio activity focused on opportunistically capturing the emerging recovery and increasing spread to preserve net interest margins. On the liability side, BCF took advantage of the technical strength in the CLO market to refinance three CLOs, reset seven CLOs, and issue four new CLOs, all whilst achieving very competitive debt pricing. Additionally, two CLOs were redeemed.

- Similarly to the fourth quarter of 2020, BCF benefitted from improved liquidity and equity valuations in the secondary market and sold down certain non-retention CLO income note positions, with executed prices that exceeded modelled marks as well as mark-to-market prices(10).

- CLO securitisations in BCF generated positive cashflow over 2021, supported by uninterrupted distributions from the underlying CLO portfolio. The weighted average annualised distribution rates for European and US CLO income notes were 15.6% and 21.7%, respectively, with strong contributions across vintages and an additional tailwind from CLO redemptions(11).

Bank Loan Market Overview

Leveraged loan markets started 2021 on strong footing as the rally in risk assets continued. Markets were buoyed by the continued global rollout of COVID-19 vaccinations, with an additional tailwind from global monetary and fiscal stimulus implemented in the prior year. Many market indicators pointed to a broad-based recovery which culminated in year to date returns of 2.91% and 3.48% for European and US leverage loans, respectively, notably surpassing the returns achieved throughout all of 2020(12).

Following the onset of the pandemic, the wave of CCC downgrades and defaults anticipated had been avoided in a meaningful manner. Concurrent with economic activity reverting to a more 'normalised' state, corporate fundamentals displayed a tangible improvement after a strong first quarter results period. Earnings for the second quarter, whilst not yet announced, are expected to show further improvement. Paired with slowing debt growth, we expect that corporate issues should be well equipped to grow into their higher levered capital structures brought forward from 2020.

The US loan last-twelve-month ("LTM") par-weighted default rate ended June 2021 at 1.3%, down from 4.4% at the end of 2020(13). Defaults for European Loans were lower at 0.5%, compared to 1.2% at the end of 2020. Whilst there has not been a revision for European Loans, J.P. Morgan lowered their US loan default expectations to 0.65% and 1.25% for the end of 2021 and 2022, respectively, just as the ratio of upgrades to downgrades for US loans reached 2:1 at the end of June(14).

Complementing improving corporate fundamentals was a well-balanced technical backdrop. Contributions from both debt refinancing and increased M&A activity led to an increased pace of European and US loan issuance. Year-to-date gross supply was €82 billion and $417 billion compared to €65 billion and $395 billion for the whole of 2020, respectively(15). Healthy demand for loans has resulted in the market being well bid despite the increased issuance, resulting in the average price for European and US indices increasing to €99.10 and $97.96 from €98.64 and $95.73 at the end of 2020, respectively(16). Similarly, European and US loan spreads (represented by 3-year discount margin) tightened by 19 bp and 43 bp over the same period to 403 bp and 443 bp, respectively(17). Record-setting Collateralised Loan Obligation ("CLO") creation(18), a search of yield in Europe, and demand for assets with an inflation and interest rate hedge contributed to healthy inflows, allaying concerns of oversupply.

The broader risk-on sentiment continued to drive outperformance of CCC-rated assets and COVID-19 impacted sectors. However, as we approached the end of June, signs of softening were starting to emerge due to a rise in the Delta variant, stoking concerns of another prolonged spike in COVID-19 cases across the globe, with implications for the real economy. Looking forward to the second half of 2021, we will continue to monitor any effects in the markets that we invest and position our portfolio appropriately.

CLO Market Overview

Momentum in the CLO market gathered pace through the year. CLO liability spreads trended towards multi-year tights and increased confidence in both underlying collateral quality and CLO structures themselves led to a sharp increase in CLO activity. Managers aiming to capitalise on the low cost of funding originated new CLOs, but more noticeably, those aiming to reduce the cost of debt or lock in longer reinvestment periods took to the market in earnest. As such, year-to-date total CLO volumes in Europe were €53.5 billion, which exceeded any full year activity ever recorded, and $220 billion in the US, which was nearly double that of 2020(19). Re-financings and resets dominated this activity, accounting for 72% and 63% of European and US volumes. This optionality is a key benefit for CLO equity investors who as a result would be afforded higher expected future cashflows in aggregate and an immediate increase in equity net asset value ("NAV") as a result.

In the first quarter, demand for CLO debt was broad based across tranches. After the rally in risk assets pushed global credit spreads tighter, CLO debt seemed increasingly attractive on a relative value basis given the low yield environment. However, as the second quarter progressed, US and European CLO liability spreads retreated from their lows under the pressure of heavy supply. We understand investors were full on allocations after investing heavily earlier in the year, ultimately leading to an upwards readjustment in CLO liability spreads as we moved towards June. In Europe, AAA-rated CLO spreads finished at 94 bp at the end of June after hitting lows in the high 70 bp region in March (compared to 105 bp at the end of 2020)(20). Similarly, US CLO AAA-rated spreads were 113 bp as of the end of June after reaching 100 bp in March 2021 (compared to 132 bp at the end of 2020)(21).

In tandem with improving collateral quality and robust loan market performance, CLO fundamentals improved in 2021. In Europe, CCC buckets fell from 6.4% at the end of 2020 to 5.0%, and defaulted assets to 0% from 0.3% over the same period. There was also an improvement in Weighted Average Rating Factor ("WARF") by 281 to 2,890 and an increase in junior overcollateralisation ("OC") cushions by 53 bp to 401 bp during the first half. Weighted Average Asset Price ("WAP") also increased by 1.1 to 99.0 and Weighted Average Spreads ("WAS") decreased by 7bp to 370bp. Notably, CLO equity market value NAVs increased by 12.6 to 63.4(22).

In the US, CCC buckets improved to 5.9% from 7.7%, defaulted assets fell to 0% from 0.5% and WARF metrics declined by 2014. Likewise, junior OC cushions increased by 107 bp to 384 bp over the same period. WAP also increased by 1.4 to 98.7 and WAS decreased by 6 bp to 371 bp. CLO equity NAV also posted an impressive gain of 17.3 to 61.6(23).

As we look forward, CLO supply is expected to grow further, albeit at a slightly slower pace experienced year to date. In Europe, total full year CLO supply is forecast to be €75-€90 billion, an increase of 31%-57% from the midyear point(24). Total US BSL CLO supply is expected to increase by 47-62% to $300-$330 billion over the same period, setting a full year record if achieved(25). Although liability spreads have recently widened, our belief is that the attractive relative value versus other fixed income asset classes may continue to attract investors and keep a ceiling on any material repricing. With global loan prices having largely returned close to par, focus for equity investors has reverted back to a natural spread arbitrage. As such, we expect supply to continue but again with refinancing and reset activity accounting of the majority.

Portfolio Update

BCF

Year to date trading activity continued to focus on protecting investor capital, proactive management of credit ratings but with flexibility for portfolio rotation to capture emerging trends. CLOs opportunistically added names to take advantage of the 'reopening trade' as visibility improved around the vaccine rollout and economic reopening. As the rally continued, it was evident valuations were becoming increasingly stretched as market participants were discounting an overly optimist forward looking view. As such, closer attention was paid to long-term corporate fundamental value to assess those names in which we had longer-term conviction. We also used the repricing wave in the first quarter to exit lower spread risk in an effort to preserve net interest margins. This became an ongoing theme, deploying capital in primary and secondary markets into higher spread assets with more compelling valuation profiles.

Consistent with the supportive conditions for CLO creation and management noted above, BCF has been very active in both new issuance and optimisation of its liability portfolio. Year to date, BCF has invested in two European and two US new issue CLOs(26), further diversifying the portfolio across both vintage and geography.

The portfolio was well positioned at to take advantage of the technical strength in the CLO liability market during the first six months of 2021. BCF refinanced three CLOs and reset seven CLOs year to date, in most cases reducing the weighted average cost of capital and extending the duration of cashflows received in the case of the resets, which is immediately accretive to the NAV of these CLOs.

It is also worth noting that Blackstone Credit achieved close to the lowest, if not the lowest, weighted average cost of capital at the time of pricing during the first half of the year, with further pricing differentiation between managers depending on their perceived 'tier'(27). Blackstone Credit was the second most active manager in the market when considering total CLO activity(28).

Compared to estimates at the initial onset of the COVID-19 pandemic, default rates have fared much better than expected. The year-to-date default loss rate for the BCF portfolio was 0.00%, compared to 0.07% for European loans and 0.32% for US loans. Taking in to account our in-house views of the current portfolio and the broader recovery, lower default and downgrade expectations have been fed into modelled valuations. This benefit was most pronounced in June's positive NAV valuation and we would expect further improvements in assumptions to contribute to the stability and growth of BCF's NAV going forward.

BCF also recycled parts of the portfolio during the first half of 2021. Similarly to the fourth quarter of 2020, BCF benefitted from improved liquidity and equity valuations in the secondary market and sold down certain non-retention CLO income note positions, with executed prices that exceeded modelled marks as well as mark-to-market prices(29). This included the full sale of Myers Park and Greenwood Park CLO equity, and a partial sale of Deer Park CLO equity, which held the record sale price for European CLO equity at the time of trade.

Additionally, two CLOs have been redeemed year to date. For Orwell Park, this outcome was economically favourable when compared with the option of a reset. In the case of Stratus 2020-2, a static CLO issued during the dislocation in 2020, Blackstone Credit purchased assets at a discount which were ultimately taken out at favourable levels, resulting in a realised IRR to date of 34.9%(30). Proceeds will ultimately be allocated towards more efficient uses to potentially enhance the return profile of the portfolio.

At the end of June, 38% of BCF's portfolio was composed of US CLO securities(31) and CLO warehouses (first loss positions), compared to 41% in December 2020. European CLO income notes decreased marginally to 40% from 41% at the end of 2020. Exposure to directly held loans, net of leverage, increased from 13% to 23%(32). The weighted average remaining reinvestment period for the portfolio's CLOs increased in the first six months to 2.0 years from 1.9 years, largely driven by the addition of new CLOs and resets of existing CLOs in Europe.

As of 30 June 2021, the weighted average asset coupon of the portfolio decreased to 3.68% from 3.74% since 31 December 2020, consistent with a general tightening of loan spreads over the period. The cost of liabilities narrowed to 1.70% from 1.82% over the same period, due in part to liability management of the CLO portfolio and refinancing of BCF's lending facility. The combined effect resulted in an increase to BCF's net interest margin of 5bp, to 1.97% in June (from 1.92% at the end of December 2020).

BCF has continued to generate uninterrupted cashflows from its CLO income note investments throughout 2021. As of 30 June 2021, the weighted average annualised distribution rates for European and US CLO income notes were 15.6% and 21.7%, respectively, with strong contributions across vintages and an additional tailwind from Orwell Park and Stratus 2020-2 redemptions. This is compared to 15.6% and 17.1% respectively for 2020.

Looking forward, we will continue actively evaluating those CLOs that are callable as the year progresses, weighing the relative merits of a refinancing, reset, redemption or sale, and which is most economically beneficial to that particular CLO.

CLO Portfolio Positions

As of 30 June 2021, the Fund was invested in accordance with its and BCF's investment policy and was diversified across 699 issuers through the directly held loans and CLO portfolio, and across 30 countries and 29 different industries. No individual borrower represented more than 2% of the overall portfolio at the end of June 2021.

Key Portfolio Statistics

Top 10 Industries

Top 5 Countries

Top 20 Issuers

Directly Held CLOs

The majority of the outstanding positions of Rollover Assets were sold within the first quarter of 2020. As of 30 June 2021, the market value of Rollover Assets had increased to €954,927 or 0.23% of NAV (31 December 2020: market value totalled €549,437 or 0.13% of NAV). This increase is solely due to market movements.

Subsequent to 30 June 2021, the Company disposed of the final Rollover Assets, being 2 Mezzanine Notes, for a total consideration of €1,411,355.

Regulatory Update

In Europe, the European Regulation on sustainability-related disclosures in the financial services sector ("SFDR") was published on 27 November 2019. With an effective date of 10 March 2021, SFDR requires certain firms, including private banks, wealth managers and advisers to comply with new rules on disclosure as regards sustainable investments and sustainability risks. Asset managers, including Blackstone Credit ("BX Credit") (formerly GSO Capital Partners LP), have been working to implement procedures which will allow us, where required, to comply with the SFDR when the regulatory reporting requirements come into effect. BX Credit continues to monitor regulatory developments with regards to SFDR, including the publication of additional Regulatory Technical Standards (which, with regards to the SFDR reporting requirements, are now expected in July 2022, recently extended from January 2022).

In connection with the Securitisation Regulation, widely anticipated secondary legislation setting out the prescribed form of reporting templates was published on 3 September 2020 and use of these reporting templates became mandatory to investors from 23 September 2020. BX Credit was well positioned to transition to the use of these formal reporting templates, and these reporting templates are used in respect of all in-scope CLOs.

Risk Management

Given the natural asymmetry of fixed income, our experienced credit team focuses on truncating downside risk and avoiding principal impairment and believes that the best way to control and mitigate risk is by remaining disciplined in all market cycles and by making careful credit decisions while maintaining adequate diversification. BCF's portfolio is managed to minimise default risk and credit related losses, which is achieved through in-depth fundamental credit analysis and diversified portfolios in order to avoid the risk of any one issuer or industry adversely impacting overall performance. As outlined in the Portfolio Update section, BCF is broadly diversified across issuers, industries, and countries.

BCF's base currency is denominated in Euro, though investments are also made and realised in other currencies. Changes in rates of exchange may have an adverse effect on the value, price, or income of the investments of BCF. BCF may utilise different financial instruments to seek to hedge against declines in the value of its positions as a result of changes in currency exchange rates.

Through the construction of solid credit portfolios and our emphasis on risk management, capital preservation, and fundamental credit research, we believe the Company's investment strategy will continue to be successful.

Blackstone Responsible Investing Approach

The Importance of Responsible Investing

For over 35 years, Blackstone has been committed to being a responsible investor. This commitment is affirmed across the organisation and guides our approach to investing. We believe that adequate consideration of environmental, social, and governance ("ESG") factors for each potential investment enhances our assessment of risk and also helps us identify opportunities for transformation at each company where we invest. Consequently, we believe that a comprehensive ESG program drives value and enhances returns. We also believe that understanding ESG factors helps us understand trends and how they will shape demand and markets in years to come. Our framework applies to all investment opportunities, though the exact application of that framework varies by asset class, investment objective and the unique characteristics of each investment.

Objectives

Blackstone's responsible investing objectives are outlined below:

§ Integration

Consider environmental, social, and governance issues when evaluating investment opportunities and when managing / monitoring portfolios and assets. Pursue high-quality sources of ESG data and intelligence; where appropriate, integrate that data into our research process and also use that data to enhance our understanding of markets and consumer trends. Actively use ESG considerations to transform our portfolio companies in ways that both manage risk and are value accretive for our investment portfolios. In addition, integrate ESG considerations into our business practices outside of the investment process.

§ Engagement

Work together with our portfolio entities, managers, transaction partners, peers, and other partners to advance principles of responsible investment and corporate social responsibility. Share our ESG philosophy broadly and use our leadership position to influence others and advance the dialogue of the importance of ESG integration in finance and for corporate actors generally.

§ Reporting

Be transparent with our investors and other stakeholders about Blackstone's responsible investing initiatives, successes, and goals.

Approach and Responsibilities

Across all of Blackstone's businesses, ESG is core to what we do. Our approach includes an evaluation of ESG considerations (pre- and post-investment decision making) as a standard part of the investment and the asset / portfolio management processes. Primary responsibility lies with our investment teams because these considerations support investment decisions. Together with Portfolio Operations and our asset management teams, the investment teams are also expected to continue to keep these issues front of mind through the life of the investment.

Blackstone's Chief Sustainability Officer supports the investment and asset management teams by driving initiatives that are aimed at improving operational and environmental performance across the portfolio. Other functional experts within Portfolio Operations (including Talent Management, Procurement and Healthcare Cost Containment) may consider ESG insights in delivering operating intervention capabilities across the portfolio.

Blackstone's ESG Steering Committee coordinates ESG initiatives across the firm to ensure consistency in approach and, with the assistance of the Legal & Compliance department, compliance with Blackstone's ESG policy. Additionally, BXC has an ESG Working Group that meets monthly and discusses a variety of ESG-related topics, including, as applicable: review of investments, investor requests, market trends and newly adopted or pending legislation, rules, and regulation, and revisions and/or amendments to BXC ESG Policy. Below is a visual of Blackstone's ESG leadership and integrated team approach. 

[Graphs and charts are included in the published Half Yearly Financial Report which is available on the Company's website at https://www.blackstone.com/fund/bglfln-blackstone-gso-loan-financing-limited/]

Blackstone Credit's Commitment to ESG

BX Credit's focus on ESG stems from our commitment to prudent investing and our culture that prioritizes robust corporate governance. Our investment team understands Blackstone's focus on corporate governance, including ESG, and that appreciation is reflected in the investments we make and how we engage with our portfolio companies after an investment is made. Review of ESG risks to investment performance is integrated into BX Credit's investment analysis and decision-making processes from pre-investment diligence to post-investment monitoring.

BX Credit recognises the value that incorporating ESG factors in our investment research creates both in terms of mitigating risk and enhancing long-term performance across our various investments. To that end, BX Credit integrates review and consideration of applicable ESG factors into its decision-making processes, as summarized below:

Comprehensive Due Diligence

Investment teams within BX Credit consider ESG factors that may impact investment performance during the due diligence phase of an investment. ESG due diligence will vary based on (i) the nature of BX Credit's investment, (ii) the transaction process and timeline, (iii) the level of access to information, specifically as it pertains to ESG factors, and (iv) the target portfolio company's (the "Target") sector or business model.  Investment teams will engage with target companies, sponsor partners, and review publicly available information to develop insights into the Target's business and operations. External ESG experts and legal counsel may also be engaged, as necessary. In 2020, BX Credit worked with a third party ESG consulting firm to create a sector-specific tool based on the Sustainability Accounting Standards Board ("SASB") that provides a framework to conduct ESG due diligence. The proprietary tool helps our teams identify the most material ESG risks that may impact a company's performance, so that we are able to focus our diligence on assessing these risks in a more targeted fashion. The tool includes industry-specific due diligence questions, KPIs to track, detailed guidance on considerations for evaluating the topic and resources for additional research. We will then compare the findings from our proprietary ESG research with the ESG due diligence from a sponsor partner (if applicable).

Investment Committee Engagement and Documentation

Material ESG considerations and risks arising from diligence are described in the appropriate investment committee materials and discussed in the relevant investment committee forum. If material ESG risks are identified, BX Credit may seek to remedy the situation via additional due diligence, the hiring of specialist advisors, further discussions with company management or decide not to move forward with the investment.

Active Post-Investment Monitoring

On an ongoing basis, investment teams monitor the performance of BX Credit's investments, which includes, but is not limited to, assessing financial, operational, industry-specific and ESG-related factors, as applicable. Periodically, BX Credit investment teams will update the investment committee on the performance of issuers and highlight any material ESG considerations or risks that warrant investment committee discussion, both in the context of the company's industry and on a stand-alone basis.

As a credit investor, BX Credit will have less control over portfolio companies than equity investors; however, we may seek to reinforce certain aspects of value-enhancing ESG compliance through contractual obligations and covenants in governing agreements with portfolio companies. Underwriting due diligence includes among other things, material environmental, public health, safety, social and governance issues associated with lending to a company.

At this time, BX Credit does not explicitly track exposure to climate risk or monitor the carbon footprint of an investment. In practice, we take the ESG factors that may impact investment performance into consideration and incorporate such factors into our initial evaluation of an investment and our ongoing investment monitoring process. Our evaluation criteria are based on the materiality of the ESG risk considering (a) whether it has a current impact or a potential future impact and (b) any mitigating actions the issuer undertakes to address the risk. In general, industries with a high carbon footprint face significant transition risk with regard to climate change, and that risk would need to be evaluated before making an investment decision.

Blackstone Ireland Limited

21 September 2021

(8) Credit Suisse Leveraged Loan Index, Credit Suisse Western European Leveraged Loan Index (Hedged to Euro), as of 30 June 2021.

(9) Credit Suisse Default Report, as of 30 June 2021.

(10) Based on mark to model modified bid prices as of the most recent month end prior to the transaction trade date and mark to market bid prices as of the day prior to transaction date. Modelled marks are only available on a mid basis, therefore a modified bid is calculated by incorporating the basis between mark to market bid and mid prices.

(11) Blackstone Credit, Intex. As at 7 January 2021.

(12) Credit Suisse, as of 30 June 2021.

(13) Credit Suisse, as of 30 June 2021.

(14) J.P. Morgan, Moody's, S&P Upgrades vs. Downgrades and LCD LLI Industry Weights and Total Returns, as of 30 June 2021.

(15) S&P LCD, as of 30 June 2021.

(16) Credit Suisse, as of 30 June 2021.

(17) Credit Suisse, as of 30 June 2021.

(18) As reported by S&P LCD during 1H 2021.

(19) S&P LCD CLO databank, as of 30 June 2021.

(20) Barclays, as of 30 June 2021. Data reflects generic top-tier manager CLO discount margins from longer reinvestment period CLOs.

(21) Barclays, as of 30 June 2021. Data reflects generic top-tier manager CLO discount margins from longer reinvestment period CLOs.

(22) Paragraph data source: Barclays, as of 30 June 2021. Data reflects median observations. Data as of latest trustee reports at month-end, including only reinvesting deals. Underlying data from Kanerai, Intex, Markit.

(23) Paragraph data source: Barclays, as of 30 June 2021. Data reflects median observations. Data as of latest trustee reports at month-end, including only reinvesting deals. Underlying data from Kanerai, Intex, Markit.

(24) Barclays, as of 16 July 2021.

(25) Barclays, as of 16 July 2021.

(26) Investment in Tallman park was through a vertical retention position financed by a repurchase agreement. BCF owns 5% of each tranche, including equity.

(27) As reported by Creditflux and S&P LCD.

(28) Creditflux.

(29) Based on mark to model modified bid prices as of the most recent month end prior to the transaction trade date and mark to market bid prices as of the day prior to transaction date. Modelled marks are only available on a mid basis, therefore a modified bid is calculated by incorporating the basis between mark to market bid and mid prices.

(30) Realised IRRs are reflective of distributions made to equity holders to date based on data available on Intex as of 7 July 2021. Stratus 2020-2 equity will be fully redeemed once all accrued interest been received and distributed.

(31) US CLO securities held by BCF are almost exclusively CLO income notes except for Tallman Park senior debt securities (part of the vertical retention investment).

(32) Portfolio percentages are based on BCF NAV as of 30 June 2021 and 31 December 2020.

Strategic Overview

Purpose

As an investment company, our purpose is to provide permanent capital to BCF, a company established by Blackstone Ireland Limited ("BIL") (formerly Blackstone/GSO Debt Funds Management Europe Limited) as part of its loan financing programme, with a view to generating stable and growing total returns for Shareholders through dividends and value growth.

We deliver our purpose through working in line with our values, which form the backbone of what the Company does and are an important part of our culture.

Values

Integrity and Trust - The Board seeks to act with integrity in everything it does and to be trustworthy. The Directors seek to uphold the highest standards of professionalism driven by our corporate governance processes.

Transparency - The Board aims to ensure all of the Company's activities are undertaken with the utmost transparency and openness to sustain trust.

Opportunity - The ability of the Board to identify and seize opportunities which are in the best interests of our shareholders.

Sustainability - The Company aims to maintain and deliver attractive and sustainable returns for its shareholders.

Principal Activities

The Company was incorporated on 30 April 2014 as a closed-ended investment company limited by shares under the laws of Jersey and is authorised as a listed fund under the Collective Investment Funds (Jersey) Law 1988. The Company continues to be registered and domiciled in Jersey. The Company's Ordinary Shares are quoted on the Premium Segment of the Main Market of the LSE.

The Company's share capital consists of an unlimited number of shares of any class. As at 30 June 2021, the Company's issued share capital was 469,787,075(33) Ordinary Shares. The Company also held 13,115,719(34) (31 December 2020: 5,879,463) ordinary shares in treasury.

The Company has a wholly-owned Luxemburg subsidiary, Blackstone / GSO Loan Financing (Luxembourg) S.à r.l. which has an issued share capital of 2,000,000 Class A shares and 1 Class B share. All of the Class A and Class B shares were held by the Company as at 30 June 2021 together with 275,438,217 class B CSWs issued by the Lux Subsidiary. The Lux Subsidiary invests in PPNs issued by BCF, which in turn invests in CLOs and loans. As at 30 June 2021, the Company also held CLO Mezzanine Notes which formed part of the Rollover Assets. These were subsequently disposed of on 8 September 2021.

The Company is a self-managed company. BIL acts as Portfolio Adviser to the Company and, pursuant to the Advisory Agreement, provides advice and assistance to the Company in connection with its investment in the CSWs. Blackstone Liquid Credit Strategies LLC ("BLCS") (formerly GSO/Blackstone Debt Funds Management LLC) acts as Portfolio Manager in relation to the Rollover Assets (as defined in the Company's Prospectus published on 23 November 2018). BNP Paribas Securities Services S.C.A., Jersey Branch acts as Administrator, Company Secretary, Custodian and Depositary to the Company.

Directors' Interests

The Directors held the following number of Ordinary Shares in the Company as at the period end and the date these condensed financial statements were approved:

Investment Objective

As outlined in the Company's Prospectus, the Company's investment objective is to provide Shareholders with stable and growing income returns, and to grow the capital value of the investment portfolio by exposure to floating rate senior secured loans and bonds directly and indirectly through CLO Securities and investments in Loan Warehouses. The Company seeks to achieve its investment objective through exposure (directly or indirectly) to one or more companies or entities established from time to time ("Underlying Companies"), such as BCF.

Investment Policy

Overview

As outlined in the Company's Prospectus, the Company's investment policy is to invest (directly, or indirectly through one or more Underlying Companies) in a diverse portfolio of senior secured loans (including broadly syndicated, middle market or other loans) (such investments being made by the Underlying Companies directly or through investments in Loan Warehouses), bonds and CLO Securities, and generate attractive risk-adjusted returns from such portfolios. The Company intends to pursue its investment policy by investing (through one or more subsidiaries) in profit participating instruments (or similar securities) issued by one or more Underlying Companies.

Each Underlying Company will use the proceeds from the issue of the profit participating instruments (or similar securities), together with the proceeds from other funding or financing arrangements it has in place currently or may have in the future, to invest in: (i) senior secured loans, bonds, CLO Securities and Loan Warehouses; or (ii) other Underlying Companies which, themselves, invest in senior secured loans, bonds, CLO Securities and Loan Warehouses. The Underlying Companies may invest in European or US senior secured loans, bonds, CLO Securities, Loan Warehouses and other assets in accordance with the investment policy of the Underlying Companies. Investments in Loan Warehouses, which are generally expected to be subordinated to senior finance provided by third-party banks, will typically be in the form of an obligation to purchase preference shares or a subordinated loan. There is no limit on the maximum US or European exposure. The Underlying Companies do not invest substantially directly in senior secured loans or bonds domiciled outside North America or Western Europe.

Investment Limits and Risk Diversification

The Company's investment strategy is to implement its investment policy by investing directly or indirectly through the Underlying Companies, in a portfolio of senior secured loans and bonds or in Loan Warehouses containing senior secured loans and bonds and, in connection with such strategy, to own debt and equity tranches of CLOs and, in the case of European CLOs and certain US CLOs, to be the risk retention provider in each.

The Underlying Companies may periodically securitise a portion of the loans, or a Loan Warehouse in which they invest, into CLOs which may be managed either by such Underlying Company itself, by BIL or DFM (or one of their affiliates), in their capacity as the CLO Manager.

Where compliance with the European Risk Retention Requirements is sought (which may include both EUR and US CLOs) the Underlying Companies will retain exposures of each CLO, which may be held as:

· CLO Income Notes equal to: (i) between 51% and 100% of the CLO Income Notes issued by each such CLO in the case of European CLOs; or (ii) CLO Income Notes representing at least 5% of the credit risk relating to the assets collateralising the CLO in the case of US CLOs (each of (i) and (ii), (the "horizontal strip"); or

· Not less than 5% of the principal amount of each of the tranches of CLO Securities in each such CLO (the "vertical strip").

To the extent attributable to the Company, the value of the CLO Income Notes retained by Underlying Companies in any CLO will not exceed 25% of the Published NAV of the Company at the time of investment.

Investments in CLO Income Notes and loan warehouses are highly leveraged. Gains and losses relating to underlying senior secured loans will generally be magnified. Further, to the extent attributable to the Company, the aggregate value of investments made by Underlying Companies in vertical strips of CLOs (net of any directly attributable financing) will not exceed 15% of the Published NAV of the Company at the time of investment. This limitation shall apply to Underlying Companies in aggregate and not to Underlying Companies individually.

Loan Warehouses may eventually be securitised into CLOs managed either by an Underlying Company itself or by BIL or DFM (or one of their affiliates), in their capacity as the CLO Manager. To the extent attributable to the Company, the aggregate value of investments made by Underlying Companies in any single externally financed warehouse (net of any directly attributable financing) shall not exceed 20% of the NAV of the Company at the time of investment, and in all externally financed warehouses taken together (net of any directly attributable financing) shall not exceed 30% of the NAV of the Company at the time of investment. These limitations shall apply to Underlying Companies in aggregate and not to Underlying Companies individually.

The following limits (the "Eligibility Criteria") apply to senior secured loans and bonds (and, to the extent applicable, other corporate debt instruments) directly held by any Underlying Company (and not through CLO Securities or Loan Warehouses):

For the purposes of these Eligibility Criteria, "gross asset value" shall mean gross assets, including any investments in CLO Securities and any undrawn commitment amount of any gearing under any debt facility. Further, for the avoidance of doubt, the "maximum exposures" set out in the Eligibility Criteria shall apply on a trade date basis.

Each of these Eligibility Criteria will be measured at the close of each Business Day on which a new investment is made, and there will be no requirement to sell down in the event the limits are breached at any subsequent point (for instance, as a result of movement in the gross asset value, or the sale or downgrading of any assets held by an Underlying Company).

In addition, each CLO in which an Underlying Company holds CLO Securities and each Loan Warehouse in which an Underlying Company invests will have its own eligibility criteria and portfolio limits. These limits are designed to ensure that: (i) the portfolio of assets within the CLO meets a prescribed level of diversity and quality as set by the relevant rating agencies that rate securities issued by such CLO, or (ii) in the case of a Loan Warehouse, that the warehoused assets will eventually be eligible for a rated CLO. The CLO Manager will seek to identify and actively manage assets which meet those criteria and limits within each CLO or Loan Warehouse. The eligibility criteria and portfolio limits within a CLO or Loan Warehouse may include the following:

· A limit on the weighted average life of the portfolio;

· A limit on the weighted average rating of the portfolio;

· A limit on the maximum amount of portfolio assets with a rating lower than B-/B3/B-; and

· A limit on the minimum diversity of the portfolio.

CLOs in which an Underlying Company may hold CLO Securities or Loan Warehouses in which an Underlying Company may invest also have certain other criteria and limits, which may include:

· A limit on the minimum weighted average of the prescribed rating agency recovery rate;

· A limit on the minimum amount of senior secured assets;

· A limit on the maximum aggregate exposure to second lien loans, high yield bonds, mezzanine loans and unsecured loans;

· A limit on the maximum portfolio exposure to covenant-lite loans;

· An exclusion of project finance loans;

· An exclusion of structured finance securities;

· An exclusion on investing in the debt of companies domiciled in countries with a local currency sub-investment grade rating; and

· An exclusion of leases.

This is not an exhaustive list of the eligibility criteria and portfolio limits within a typical CLO or Loan Warehouse and the inclusion or exclusion of such limits and their absolute levels are subject to change depending on market conditions. Any such limits applied shall be measured at the time of investment in each CLO or Loan Warehouse.

Changes to Investment Policy

Any material change to the investment policy of the Company would be made only with the approval of Ordinary Shareholders.

It is intended that the investment policy of each substantial Underlying Company will mirror the Company's investment policy, subject to such additional restrictions as may be adopted by a substantial Underlying Company from time to time. The Company will receive periodic reports from each substantial Underlying Company in relation to the implementation of such substantial Underlying Company's investment policy to enable the Company to have oversight of its activities.

If a substantial Underlying Company proposes to make any changes (material or otherwise) to its investment policy, the Directors will seek Ordinary Shareholder approval of any changes which are either material in their own right or, when viewed as a whole together with previous non-material changes, constitute a material change from the published investment policy of the Company. If Ordinary Shareholders do not approve the change in investment policy of the Company such that it is once again materially consistent with that of such substantial Underlying Company, the Directors will redeem the Company's investment in such substantial Underlying Company (either directly or, if the Company's investment in a subsidiary is invested by such subsidiary in such substantial Underlying Company (either directly or through one or more other Underlying Companies), by redeeming the securities held by the Company in such subsidiary and procuring that the subsidiary redeems its investment in such substantial Underlying Companies (either directly or through one or more other Underlying Companies)), as soon as reasonably practicable but at all times subject to the relevant legal, regulatory and contractual obligations.

The Board considers BCF to be a substantial Underlying Company.

Company Borrowing Limit

The Company will not utilise borrowings for investment purposes. However, the Directors are permitted to borrow up to 10% of the Company's Published NAV for day-to-day administration and cash management purposes. For the avoidance of doubt, this limit only applies to the Company and not the Underlying Companies.

In accordance with the Company's Prospectus, the Company may use hedging or derivatives (both long and short) for the purposes of efficient portfolio management. It is intended that up to 100% (as appropriate) of the Company's exposure to any non-Euro assets will be hedged, subject to suitable hedging contracts being available at appropriate times and on acceptable terms.

Investment Strategy

Whether the senior secured loans, bonds or other assets are held directly by an Underlying Company or via CLO Securities or Loan Warehouses, it is intended that, in all cases, the portfolios will be actively managed (by the Underlying Companies or the CLO Manager, as the case may be) to minimise default risk and potential loss through comprehensive credit analysis performed by the Underlying Companies or the CLO Manager (as applicable).

Vertical strips in CLOs in which Underlying Companies may invest are expected to be financed partly through term finance for investment-grade CLO Securities, with the balance being provided by the relevant Underlying Company investing in such CLO. This term financing may be full-recourse, non-mark to market, long-term financing which may, among other things, match the maturity of the relevant CLO or match the reinvestment period or non-call period of the relevant CLO. In particular, and although not forming part of the Company's investment policy, the following levels of, or limitations on, leverage are expected in relation to investments made by Underlying Companies:

· Senior secured loans and bonds may be levered up to 2.5x with term finance;

· Investments in "first loss" positions or the "warehouse equity" in Loan Warehouses will not be levered;

· CLO Income Notes will not be levered;

· Investments in CLO Securities rated B- and above at the time of issue may be funded entirely with term finance; and

· Investments in a vertical strip may be levered 6.0-7.0x, with term finance as described above.

To the extent that they are financed, vertical strips are anticipated to require less capital than horizontal strips, which is expected to result in more efficient use of the Underlying Companies' capital. In addition, since the return profile on financed vertical strips is different to retained CLO Income Notes, BIL believes that vertical strips may be more robust through a market downturn, although projected IRRs may be slightly lower. However, an investment in vertical strips is not expected to impact the Company's stated target return.

From time to time, as part of its ongoing portfolio management, the Underlying Companies may sell positions as and when suitable opportunities arise. Where not bound by risk retention requirements, it is the intention that the Underlying Companies would seek to maintain control of the call option of any CLOs securitised.

With respect to investments in CLO Securities, while the Underlying Companies maintain a focus on investing in newly issued CLOs, it will also evaluate the secondary market for sourcing potential investment opportunities in CLO Securities.

Whilst the intention is to pursue an active, non-benchmark total return strategy, the Company is cognisant of the positioning of the loan portfolios against relevant indices. Accordingly, the Underlying Companies will track the returns and volatility of such indices, while seeking to outperform them on a consistent basis. In-depth, fundamental credit research dictates name selection and sector over-weights/under-weights relative to the benchmark, backstopped by constant portfolio monitoring and risk oversight. The Underlying Companies will typically look to diversify their portfolios to avoid the risk that any one obligor or industry will adversely impact overall returns. The Underlying Companies also place an emphasis on loan portfolio liquidity to ensure that if their credit outlook changes, they are free to respond quickly and effectively to reduce or mitigate risk in their portfolio. The Company believes this investment strategy will be successful in the future as a result of its emphasis on risk management, capital preservation and fundamental credit research. The Directors believe the best way to control and mitigate risk is by remaining disciplined in market cycles, by making careful credit decisions and maintaining adequate diversification.

The portfolio of the Underlying Companies in which the Company invests (through its wholly-owned subsidiary) remains broadly divided between European CLOs and US CLOs.

The Company operates with Euro as its functional currency. The Rollover Assets and a significant proportion of the portfolio of assets held by Underlying Companies to which the Company has exposure may, from time to time, be denominated in currencies other than Euro. In accordance with the Company's investment policy, up to 100 per cent (as appropriate) of the Company's exposure to such non-Euro assets is hedged, subject to suitable hedging contracts being available at appropriate times and on acceptable terms.

  (33) Excludes Ordinary Shares repurchased of 267,756 and 28,000 as announced on the RNS on 29 June 2021 and 30 June 2021 respectively.

 (34) Includes Ordinary Shares repurchased of 267,756 and 28,000 as announced on the RNS on 29 June 2021 and 30 June 2021 respectively. 

Corporate Activity

EGM and Name Change

On 6 January 2021, the Company announced that at the Extraordinary General Meeting held on the same date a special resolution to change the Company's name from "Blackstone / GSO Loan Financing Limited" to "Blackstone Loan Financing Limited" had been duly passed.

On 13 January 2021, the Company announced that, further to the announcement made on 6 January 2021 and with effect from 11 January 2021 the Company's name had been changed accordingly.

Revised Dividend Policy

On 22 January 2021, the Board announced that the Company had adopted a revised Dividend Policy targeting a total 2021 annual dividend of between €0.07 and €0.08 per ordinary share, to consist of quarterly payments of €0.0175 per ordinary share for the first three quarters and a final quarter payment of a variable amount to be determined at that time.

Share Repurchase Programme

During the period ended 30 June 2021, the Company repurchased 7,236,256 of its Ordinary Shares at a weighted average price per share of €0.76 (including repurchase fees) as part of its discount management programme as further described below. The repurchased Ordinary Shares are held as treasury shares. Further details of the repurchases during the period are included below.

On 7 and 11 January 2021, and on 10 March 2021, the Company's Joint Brokers, on behalf of the Company, made three market share repurchases for a total of 125,000 shares at a weighted average price of €0.65 per share (including repurchase fees).

On 12 March 2021 the Company announced that it had appointed its Joint Brokers to manage a Share Repurchase Programme to repurchase Ordinary Shares within certain pre-set parameters, to begin on 12 March 2021 and run until 26 May 2021.

On 1 June 2021 the Company announced that the above-described Share Repurchase Programme had been renewed until 23 July 2021, being the date of the Company's Annual General Meeting, and that in order to commence the renewed Share Repurchase Programme the Company instructed its Joint Brokers to buy up to 5 million ordinary shares at a price of €0.75 per share. The Company invited any shareholders interested in selling their shares to contact their usual contact at Winterflood or N+1 Singer by no later than 2:00pm on 3 June.

On 3 June 2021 the Company repurchased 5 million shares at a price of €0.75 per share (including repurchase fees).

On 16 June 2021, a further market share repurchase was made under the Share Repurchase Programme for a total of 1,590,500 shares at a weighted average price of €0.765 per share (including repurchase fees).

On 15, 18, 22, 28, 29 and 30 June, six additional market share repurchases were made under the Share Repurchase Programme for a total of 520,756 shares at a weighted average price of €0.78 per share (including repurchase fees).

On 26 July 2021, the Company announced that the above-described Share Repurchase Programme had been renewed until 30 September 2021.

From 1 July 2021 to 21 September 2021 the Company repurchased 2,535,751 Ordinary Shares at a weighted average price per share of €0.78 (including repurchase fees).

Risk Overview

Each Director is aware of the risks inherent in the Company's business and understands the importance of identifying, evaluating and monitoring these risks. The Board has adopted procedures and controls to enable it to manage these risks within acceptable limits and to meet all of its legal and regulatory obligations.

The Board considers the process for identifying, evaluating and managing any significant risks faced by the Company on an ongoing basis and these risks are reported and discussed at Board meetings. It ensures that effective controls are in place to mitigate these risks and that a satisfactory compliance regime exists to ensure all applicable local and international laws and regulations are upheld.

Risk Appetite

The Board's strategic risk appetite is to balance the amount of income distributed by the Company by way of dividend with the opportunity to reinvest the returns received from the underlying CLO investments in further CLO equity through the structure. The Board seeks to ensure that the dividend policy is sustainable without eroding capital. Where the Company's share price is at a material discount to the NAV per share the Board may decide to repurchase shares in accordance with its share buyback policy instead of, or as well as, reinvestment into CLOs.

When considering other risks, the Board's risk appetite is effectively governed by a cost benefit analysis when assessing mitigation measures. However, at all times the Company will seek to follow best practice and remain compliant with all applicable laws, rules and regulations.

Principal Risks and Uncertainties

As recommended by the Risk Committee, the Board has adopted a risk management framework to govern how the Board: identifies existing and emerging risks; determines risk appetite; identifies mitigation and controls; assesses, monitors and measures risk; and reports on risks.

The Board reviews risks at least twice a year and receives deep-dive reports on specific risks as recommended by the Risk Committee. Throughout the period under review the Board considered 15 main risks which have a higher probability and a significant potential impact on performance, strategy, reputation, or operations (Category A risks). Of these, the five risks identified below were considered the principal risks faced by the Company where the combination of probability and impact was assessed as being most significant. During the period, ESG risk has been added as a Category A Risk, as it is a key current focus of the Board and the Portfolio Adviser. The Board also considered another 14 less significant existing or emerging risks (Category B risks) which are monitored on a watch list.

During the period, as the COVID-19 pandemic continued its course, the Board and the Risk Committee considered the impact that the situation was having on the Company's business and its service providers. Risks relating to Reliance on Service Providers and Business Continuity were initially heightened but then receded as service providers demonstrated adaptability and resilience. Due to the material impact that the epidemic is having on the Company, society and the economy, the five principal risks below are considered through the lens of COVID-19.

Going Concern

The Directors have considered the Company's investment objective, risk management and capital management policies, its assets and the expected income from its investments while factoring in the economic impact the outbreak of COVID-19 had during 2020 and continues to have through 2021, as discussed further in the Chair's Statement and the Portfolio Adviser's Review. The Directors are of the opinion that the Company is able to meet its liabilities and ongoing expenses as they fall due and they have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, these financial statements have been prepared on a going concern basis and the Directors believe it is appropriate to continue to adopt this basis for a period of at least 12 months from the date of approval of these financial statements.

Performance Analysis

IFRS NAV Performance Analysis for the Periods Ended 30 June 2021 and 31 December 2020 - Contributors to Change

[Graphs and charts are included in the published Half Yearly Financial Report which is available on the Company's website at https://www.blackstone.com/fund/bglfln-blackstone-gso-loan-financing-limited/]

Further commentary on the Company's performance is contained in the Chair's Statement and the Portfolio Adviser's Review.

Published NAV Performance Analysis for the Periods Ended 30 June 2021 and 31 December 2020 - Contributors to Change

[Graphs and charts are included in the published Half Yearly Financial Report which is available on the Company's website at https://www.blackstone.com/fund/bglfln-blackstone-gso-loan-financing-limited/]

Further commentary on the Company's performance is contained in the Chair's Statement and the Portfolio Adviser's Review.

Other Information

Valuation Methodology

As noted above, the Published NAV and the IFRS NAV may diverge because of different key assumptions used to determine the valuation of the BCF portfolio. Key assumptions which are different between the two bases as at 30 June 2021 are detailed below:

All of the assumptions above are based on weighted averages.

Certain assumptions, which underpin the period-end Published NAV, such as the default rate, reinvestment spread, the 6-month recovery lag on assumed defaulted assets and the discount rate contribute to the divergence between the IFRS NAV and Published NAV. The below table further explains the rationale regarding the differences in certain assumptions that significantly contributed to the valuation divergence as at 30 June 2021.

Source of the Company's Dividend - Ordinary Class

The Company through its investments in the Lux Subsidiary receives income, on a quarterly basis, on the PPNs held by the latter in BCF, which continues to generate positive cash flows from its CLO Income Note investments and from its portfolio of directly held and warehoused loans.

The Company redeems CSWs on a quarterly basis to transfer the income from the Lux Subsidiary. As detailed on above, the Company redeemed 19,354,587 CSWs in the Lux Subsidiary during the period with a fair value of €26,425,980 to fund the quarterly dividend.

Alternative Investment Fund Managers Directive

The AIFMD requires certain information to be made available to investors in AIFs before they invest and requires that material changes to this information be disclosed in the annual report of each AIF. There have been no material changes (other than those reflected in these financial statements) to this information requiring disclosure.

Alternative Performance Measures

In accordance with ESMA Guidelines on APMs, the Board has considered which APMs are included in the Half Yearly Financial Report and require further clarification. An APM is defined as a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework. APMs included in the financial statements, which are unaudited and outside the scope of IFRS, are detailed in the table below:

A reconciliation of the APMs to the most directly reconcilable line items presented in the financial statements for the six months ended 30 June 2021 and the year ended 31 December 2020 is presented below:

Published NAV total return per Ordinary Share

Refer to Note 14 for further details on the adjustments per Ordinary Share.

Published NAV per Ordinary Share

Refer to Note 14 for further details on the adjustments per Ordinary Share.

(Discount) / Premium per Ordinary Share

Refer to Note 14 for further details on the adjustments per Ordinary Share.

(35) The metric shown represents a time weighted average of a default vector which begins at the current portfolio default rate and ramps up to an assumed long term average default rate.

(36) Published NAV is an APM from which these metrics are derived.

(37) For the 6 month period to 30 June 2021

(38) Chair's Statement above.

Future Developments

Significant Events after the Reporting Period

On 21 July 2021, the Company declared a dividend of €0.0175 per Ordinary Share in respect of the period from 1 April 2021 to 30 June 2021. A total payment of €7,205,128 was made on 28 August 2021.

During the period from 1 July 2021 to 21 September 2021, the Company repurchased:

a) under the 2020 AGM authority, 1,080,000 of its Ordinary Shares of no par value at a total cost of €840,900 (excluding fees and commissions); and

b) under the 2021 AGM authority, 1,455,751 of its Ordinary Shares of no par value at a total cost of €1,125,660 (excluding fees and commissions).

On 8 September, the Company disposed of the final Rollover Assets, being 2 Mezzanine Notes, for total proceeds of €1,411,355.

Additionally, refer to Note 18 below for further details.

Outlook

It is the Board's intention that the Company will pursue its investment objective and investment policy as detailed above. Further comments on the outlook for the Company for the 2021 financial year and the main trends and factors likely to affects its future development, performance and position are contained within the Chair's Statement and the Portfolio Adviser's Review. 

Directors' Biographies

Directors' Biographies

The Directors appointed to the Board as at the date of approval of this Half Yearly Financial Report are:

Charlotte Valeur

Position: Chair of the Board (non-executive and independent director, resident in Jersey)

Date of appointment: 13 June 2014

Charlotte has over 35 years of experience in finance, primarily as an investment banker in Capital Markets in Denmark and the U.K. She is an experienced FTSE Chair, Non-Executive Director and corporate governance expert. Charlotte's current appointments include her roles as NED of listed company Digital 9 Infrastructure Plc, NED of NTR Plc and NED of Laing O'Rourke Construction Ltd.

Charlotte previously held roles as Chair of FTSE250 Kennedy Wilson Europe Real Estate Plc; Chair of DW Catalyst Fund Ltd; NED of Renewable Energy Generation Plc; NED of Phoenix Spree Deutschland Ltd, NED of

JPMorgan Convertibles Income Fund, and NED of FTSE250 3i Infrastructure Plc.

Charlotte is also a Trustee of the Institute of Neurodiversity and Chair and founder of Board Apprentice. She is a member of the London Stock Exchange Primary Markets Group, serves on the Advisory Board of the Moller Institute, Churchill College, University of Cambridge and is a visiting Professor in Governance at University of Strathclyde. Charlotte was previously the Chair of the UK Institute of Directors.

Gary Clark, ACA

Position: Chair of the Remuneration and Nomination Committee and NAV Review Committee; Senior Independent Director (non-executive and independent director, resident in Jersey)

Date of appointment: 13 June 2014

Gary Clark acts as an independent non-executive director for a number of investment managers including Emirates NBD, Aberdeen Standard Capital and ICG. Until 1 March 2011 he was a managing director at State Street and their head of Hedge Fund Services in the Channel Islands. Gary Clark, a Chartered Accountant, served as chairman of the Jersey Funds Association from 2004 to 2007 and was managing director at AIB Fund Administrators Limited when it was acquired by Mourant in 2006. This business was sold to State Street in 2010. Prior to this Gary Clark was managing director of the futures broker, GNI (Channel Islands) Limited in Jersey.

A specialist in alternative investment funds, Gary Clark was one of several practitioners involved in a number of significant changes to the regulatory regime for funds in Jersey, including the introduction of both Jersey's Expert Funds Guide and Jersey's Unregulated Funds regime.

As a Chartered Accountant with over 30 years' experience in financial services, including many years focused on running fund administration businesses in alternative asset classes, Gary Clark brings a wealth of highly relevant experience, at both board level and as an executive, in fund / asset management operations, including in particular valuation, accounting and administrative controls and processes.

(39) On November 9th, 2020, GSO Capital Partners changed its name to Blackstone Credit to reflect the business's longstanding integration with Blackstone.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Half Yearly Financial Report and condensed interim financial statements in accordance with applicable law and regulations.

The Directors confirm to the best of their knowledge that:

· the condensed interim financial statements within the Half Yearly Financial Report have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company as at 30 June 2021, as required by the UK's FCA's DTR 4.2.4R;

· the Chair's Statement, the Portfolio Adviser's Report, the Strategic Report and the notes to the condensed interim financial statements includes a fair review of the information required by:

i. DTR 4.2.7R, being an indication of important events that have occurred during the first six months, the financial period ended 30 June 2021 and their impact on the condensed interim financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

ii. DTR 4.2.8R, being related party transactions that have taken place in the first six months, the financial period ended 30 June 2021 and that have materially affected the financial position or performance of the Company during the period.

Independent Review Report to Blackstone / GSO Loan Financing Limited

Independent Review Report to Blackstone Loan Financing Limited

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2021 which comprises the condensed statement of comprehensive income, condensed statement of financial position, condensed statement of changes in equity, condensed statement of cash flows and related notes 1 to 18. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the company will be prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2021 is not prepared, in all material respects, in accordance with United Kingdom adopted International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Use of our report

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Deloitte LLP

St. Helier Jersey

21 September 2021

Condensed Statement of Financial Position

These financial statements were authorised and approved for issue by the Directors on 21 September 2021 and signed on their behalf by:

The accompanying notes below form an integral part of the condensed interim financial statements.

Condensed Statement of Comprehensive Income

The Company has no items of other comprehensive income/(loss), and therefore the profit/(loss) for the period is also the total comprehensive income/(loss).

All items in the above statement are derived from continuing operations. No operations were acquired or discontinued during the period.

The accompanying notes below form an integral part of the condensed interim financial statements.

Condensed Statement of Changes in Equity

Refer to below for details on the conversion of the Company's C Shares into Ordinary Shares.

The accompanying notes on below form an integral part of the condensed interim financial statements.

Condensed Statement of Cash Flows

The accompanying notes below form an integral part of the condensed interim financial statements.

1 General information

The Company is a closed-ended limited liability investment company domiciled and incorporated under the laws of Jersey with variable capital pursuant to the Collective Investment Funds (Jersey) Law 1988. It was incorporated on 30 April 2014 under registration number 115628. The Company's Ordinary Shares are quoted on the Premium Segment of the Main Market of the LSE and the Company has a premium listing on the Official List of the FCA. The Company's C Shares were quoted on the SFS of the Main Market of the LSE until 6 January 2020. On 6 January 2021, the Company announced that at the Extraordinary General Meeting held earlier that day a special resolution had been duly passed to change the name of the Company from 'Blackstone/GSO Loan Financing Limited' to 'Blackstone Loan Financing Limited'. On 13 January 2021, the Company announced that the name change had taken effect from and including 11 January 2021.

The Company's investment objective is to provide Shareholders with stable and growing income returns, and to grow the capital value of the investment portfolio by exposure to floating rate senior secured loans and bonds directly and indirectly through CLO Securities and investments in Loan Warehouses. The Company seeks to achieve its investment objective through exposure (directly or indirectly) to one or more companies or entities established from time to time.

As at 30 June 2021, the Company's stated capital comprised 469,787,075 Ordinary Shares of no par value (31 December 2020: 477,023,331), each carrying the right to 1 vote; 13,115,719 Ordinary Shares held in treasury (31 December 2020: 5,879,463).The Company may issue one or more additional classes of shares in accordance with the Articles of Association.

The Company has a wholly owned Luxemburg subsidiary, Blackstone / GSO Loan Financing (Luxembourg) S.à r.l., which has an issued share capital of 2,000,000 Class A shares and 1 Class B share held by the Company as at 30 June 2021. The Company also holds 275,438,217 Class B CSWs (31 December 2020: 284,879,854) issued by the Lux Subsidiary. The Company also holds 2 Mezzanine Notes (31 December 2020: 2 Mezzanine Notes held) which formed part of the Rollover Assets and were disposed of on 8 September 2021.

The Company's registered address is IFC 1, The Esplanade, St Helier, Jersey, JE1 4BP, Channel Islands.

2 Significant accounting policies

The Annual Report and Audited Financial Statements (the "Annual Report") are prepared in accordance with the Disclosure Guidance and Transparency Rules of the FCA and with IFRS as adopted by the EU as at 1 January 2021 which comprise standards and interpretations approved by the International Accounting Standards Board, and interpretations issued by the International Financial Reporting Standards and Standing Interpretations Committee as approved by the International Accounting Standards Committee which remain in effect. The Half Yearly Financial Report has been prepared in accordance with IAS 34 Interim Financial Reporting. The accounting policies adopted are consistent with those of the previous financial year and corresponding interim period, expect for new standards and interpretations adopted by the Company as set out below.

New standards, amendments and interpretations issued and effective for the financial year beginning 1 January 2021

Amendments to existing standards effective for annual periods beginning on or after 1 January 2021

The Company applies for the first time amendments regarding replacement issues in the context of the IBOR reform (Amendments to IFRS 9, IAS 39 and IFRS 7) which all became effective on 1 January 2021. The Directors do not expect that the adoption of the amendments to standards listed will have a material impact on the financial statements of the Company in future periods.

Several other amendments and interpretations apply for the first time in 2021, but these do not have an impact on the condensed financial statements.

The Half Yearly Financial Report has been prepared on a going concern basis. After reviewing the Company's budget and cash flow forecast for the next financial period and taking into consideration the economic impact the outbreak of COVID-19 continues to have in 2021, the Directors are satisfied that, at the time of approving the condensed interim financial statements, it is appropriate to adopt the going concern basis in preparing the condensed interim financial statements.

There have been no changes in accounting policies during the period.

The accounting policies in respect of financial instruments are set out in Note 2.2 below respectively due to the significance of financial instruments to the Company.

Investments and other financial assets

(i) Initial recognition

The Company recognises a financial asset or a financial liability in its Condensed Statement of Financial Position when, and only when, the Company becomes party to the contractual provisions of the instrument.

Purchases and sales of investments are recognised on the trade date - the date on which the Company commits to purchase or sell the investment.