CSWC - Sixth Street Specialty Lending: A Top Notch BDC To Buy On A Pullback

2024-06-02 08:00:00 ET

Summary

• Sixth Street Specialty Lending has shown strong performance during the challenging economic backdrop, resulting in the BDC trading well above its NAV.
• The BDC has a high-quality portfolio with strong fundamentals and stable earnings, growing their Nll, Tll, and total investments year-over-year.
• The company has strong dividend coverage and a solid investment grade balance sheet with well-laddered debt maturities and ample liquidity.
• But with interest rates likely to drop in the near to medium term, I suspect TSLX's share price to decline as a result of its 100% floating rate debt portfolio.
• Management also anticipates Nll to decline as interest rates fall, which will likely lead to them eliminating the supplemental dividend.

Introduction

Sixth Street Specialty Lending ( TSLX ) is one of the few BDCs I haven't had the chance to cover here on Seeking Alpha, so I felt an analysis was long overdue. I keep tabs on most BDCs but keep a closer eye on the ones I hold within my portfolio. The BDC has performed well since the start of rate hikes like most of its peers, and as a result trades at a significant premium to its NAV....

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