Blackstone Loan Regulatory News (BGLF)

25 August 2023

Blackstone Loan Financing Limited

(the "Company")

Proposed managed wind-down of the Company, associated amendments to the investment objective and policy and changes to the Company's share capital

Publication of Circular and Notice of Extraordinary General Meeting

As announced by the Company on 23 June 2023, and after extensive consultation with its advisers, the board of directors (the "Board") has decided to put forward proposals to shareholders for the implementation of a managed wind-down of the Company (the "Managed Wind-down").

A circular (the "Circular") to convene an extraordinary general meeting (the "Extraordinary General Meeting" or "EGM") containing details of the proposals in respect of the Managed Wind-down is expected to be published today and a copy of will be submitted to the National Storage Mechanism and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism. The Circular will also be available on the Company's website: https://www.blackstone.com/fund/bglfln-blackstone-loan-financing-limited/. This announcement provides a summary of the information set out in the Circular and Shareholders should refer to the Circular for full details of the Proposals.

Background to the Managed Wind-down

The performance of the Company has proved resilient over its nine-year life, which has spanned a variety of market conditions. Its strong performance has been supported by its underlying investments, which have provided shareholders with uninterrupted cashflows and high current income, despite experiencing many periods of volatility. Since inception to 30 June 2023, the Company's annualised total return on a NAV basis is 7.86 per cent.

However, in formulating the Managed Wind-down proposals, the Board took into account a number of factors, including the prevailing discount to Net Asset Value at which the company's ordinary shares (the "Shares") have been trading, the market capitalisation of the Company, the liquidity of the Shares and the Company's structure. Furthermore, while the Company's share price continues to trade at a discount to NAV per Share, reinvestment into the Blackstone Corporate Funding DAC ("BCF") portfolio at NAV is not accretive to BGLF Shareholders and the ability to grow through further share issuance is limited. The Board therefore determined that an orderly return of the net proceeds of the realisation of the Company's investments on an available funds basis and subject to certain applicable regulatory and contractual constraints (as further described in the Circular) will be in the best interest of its Shareholders as a whole.

In order to do this, the Company is seeking Shareholder approval by way of ordinary resolution (the "Resolution") to:

· amend the Investment Objective and Policy to facilitate the Managed Wind-down;

· convert the Shares into ordinary shares redeemable at the option of the Company ("Redeemable Shares"), to allow for the proceeds of realising assets in accordance with the Managed Wind-down to be returned to Shareholders by way of pro rata compulsory redemptions of the Redeemable Shares; and

· enable the issue of a share in a new non-redeemable share class in the Company with appropriately deferred rights (the "Deferred Share") to ensure compliance with a mandatory requirement of the Companies (Jersey) Law 1991,

(together, the "Proposals"). Further details relating to the Proposals outlined above are set out in the Circular published today.

Details of the proposed Managed Wind-down

The Company obtains its investment exposure via Blackstone Corporate Funding DAC ("BCF"). BCF is an Irish designated activity company established on 16 April 2014 which, amongst other things, provides risk retention capital solutions for certain European CLOs managed by Blackstone Ireland Limited (the "Investment Adviser") and US CLOs managed by Blackstone CLO Management LLC ("BCM").

BCF invests directly and indirectly in a portfolio predominantly made up of senior secured loans and bonds, CLO loan warehouses and CLO securities (including, in relation to the European CLOs for which BCF acts as "originator" and certain US CLOs for which BCM acts as "manager-originator", in each case for purposes of the EU/UK risk retention rules, up to 100 per cent. of the total CLO equity tranche and/or CLO securities in an amount equal to 5 per cent. of each tranche of the relevant CLO).

The funding sources of BCF include profit participating notes issued via a profit participating note issuing and purchase agreement dated 1 July 2014 (as amended and restated from time-to-time) between, amongst others, BCF, the Company and LuxCo (a wholly owned subsidiary of the Company) (the "LuxCo PPNIPA", and the profit participating notes issued thereunder, the "LuxCo PPNs"). The LuxCo PPNs rank subordinate to certain other obligations of BCF.

The LuxCo PPNs are subscribed for by LuxCo which, in turn, provides the Company with exposure to the portfolio of BCF through the issue of cash settlement warrants to the Company.

The Board proposes to implement the Managed Wind-down by returning to Shareholders the net proceeds from the realisation of the Company's investment in BCF in an orderly manner by way of the compulsory redemption of Redeemable Shares (in respect of proceeds received from BCF attributable to the early redemption, maturity or sale of underlying investments or pursuant to a disposal for cash of the LuxCo PPNs). The Company also intends to continue to pay dividends to Shareholders (in respect of any other amounts other than redemption proceeds deemed to be received from BCF) provided the Company generates sufficient income (see below for further information on dividends).

As part of the Managed Wind-down, the Company (through LuxCo) will deliver a redemption request in accordance with the terms of the LuxCo PPNs. Such redemption request will take effect only after expiry of the requisite notice period of at least 90 days as set out in the terms of the LuxCo PPNs. Consequently, BCF will continue its investment activity as normal (including by participating in the issue of new CLOs) during such period up until the redemption request takes effect (expected to be in late December 2023). At the expiry of the notice period, a pro rata portion of the assets and investments of BCF (including its indirect investments held through BCM) will be placed into a redemption pool (the "Redemption Pool"). As the assets in the Redemption Pool redeem or are realised, the proceeds thereof, net of any actual or reasonably anticipated liabilities, costs, expenses, debt service of BCF and BCM and LuxCo and any actual or reasonably anticipated costs, liabilities, margin or collateral requirements related to hedging transactions entered into by BCF, will be utilised to redeem the LuxCo PPNs.

The availability of such proceeds will be subject to, amongst other things, the regulatory and contractual risk retention requirements which apply to BCF and BCM (which include a requirement that BCF reserves capital for the purchase of assets which it will then transfer to invested CLOs in order to ensure, on an on-going basis, that it has provided the majority of the assets of each CLO, as required from a regulatory perspective) and the occurrence of the redemption of the CLO investments held by BCF and BCM, which will not occur until the final redemption or refinancing in whole (also known as a "CLO Reset") of the relevant CLOs. Shareholders should note that, upon a CLO Reset, BGLF will not instruct BCF to reinvest its capital in the Redemption Pool into the relevant CLO, regardless of any contractual entitlement it may have to do so.

Having consulted with the Investment Adviser, the Board anticipates that the redemption of the CLO investments held in BCF and BCM, which may include CLO investments held in excess of regulatory risk retention requirements, will require a period of at least 7 years. However, this is indicative only and it should not be considered a guarantee of the Company's actual portfolio liquidity profile. Due to the illiquid nature of the assets to which the Company is indirectly exposed, there can be no certainty of the length of time it may take to complete the Managed Wind-down. In certain circumstances there may be a CLO reset at an earlier date, providing proceeds for the redemption of the LuxCo PPNs. However, there is no guarantee as to this eventuality as it is based on, amongst other commercial factors, market conditions and the availability of refinancing capital.

Under the Resolution, the Board is seeking Shareholder approval to convert the Shares, which are currently non-redeemable, into Redeemable Shares, so as to better facilitate the return of capital to Shareholders pursuant to the Managed Wind-down.

Under the Proposals, the return to Shareholders of the net proceeds realised pursuant to the Managed Wind-down would be effected primarily by way of the compulsory redemptions of Redeemable Shares. In respect of each such round of redemptions, a given percentage of the Redeemable Shares in issue would be redeemed from all Shareholders (pro rata between the holders of such shares as at the relevant Redemption Record Time) on the applicable Redemption Date for the applicable Redemption Price per share, each as determined at the Directors' sole discretion.

Shareholders wishing to receive redemption payments in Sterling should note that a separate redemption currency election mandate form will need to be submitted in respect of each Redemption Date (please see the Circular published today for further details).

Shareholders should also note that, following the issuance of the Deferred Share, the Company will no longer meet the requirements for being an "excluded security" for the purposes of the FCA's definition of "non-mainstream pooled investments". Accordingly, the promotion of the Redeemable Shares will be subject to the FCA's restriction on the promotion of non-mass market investments.

Amendments to Investment Objective and Policy

For the Company to follow the Managed Wind-down process, it will be necessary to amend the Company's Investment Objective and Policy. If the Proposals are approved by Shareholders, the Company's revised Investment Objective will be to realise all existing assets in the Company's portfolio in an orderly manner, and the revised Investment Policy will be to effect an orderly realisation of its assets by redeeming and/or by disposing for cash the profit participating instruments issued by BCF and held by the Company (indirectly through a subsidiary). The full text of the proposed Investment Objective and Policy is in the Circular published today.

Dividends

If the Resolution is approved at the EGM (or any adjournment thereof):

· in respect of the financial year ending 31 December 2023, the Board intends to continue with the previously communicated dividend policy; and

· in respect of the financial year commencing 1 January 2024 and thereafter, the Board intends (following such consultation with its advisers as it may consider appropriate) to continue to distribute as dividends the interest payments (and any other amounts other than redemption proceeds) deemed to be received from BCF during the Managed Wind-down on a quarterly basis, having regard to any amounts which the Board deem prudent to retain. However, as the Company's underlying assets are realised over time and the Portfolio diminishes in size, the Board, in consultation with the Investment Adviser, may decide it is in the best interests of Shareholders to cease payments of dividends and to use all proceeds received from BCF for the redemption of the Redeemable Shares and the return of capital to shareholders.

Should the Managed Wind-down be approved by Shareholders, the Board intends to terminate the Company's dividend reinvestment plan ('DRIP'), with confirmation of such termination to be announced by the Company in due course.

Extraordinary General Meeting

To become effective, the Resolution must be approved by a simple majority of the votes cast by Shareholders who, being entitled to vote, are present in person or by proxy at the EGM. The Notice includes the full text of the Resolution.

The formal Notice convening the Extraordinary General Meeting, to be held at the offices of BNP Paribas S.A. Jersey Branch, IFC 1, The Esplanade, St Helier, Jersey JE1 4BP at 10 a.m. on 15 September 2023, is set out in Part II of the Circular. The Notice includes the full text of the Resolution.

 Action to be taken by Shareholders

Shareholders are requested to return a Proxy Appointment by one of the following methods: (i) in hard copy form by post, by courier or by hand to Link Group, Central Square, 29 Wellington St., Leeds, LS1 4DL; (ii) via the Registrar's app LinkVote+ which can be downloaded on the Apple App Store or Google Play; (iii) online via www.signalshares.com; or (iv) in the case of CREST members, by utilising the CREST electronic Proxy Appointment service, in each case so as to be received by Link Group as soon as possible and, in any event, not less than 48 hours before the time at which the Extraordinary General Meeting (or any adjournment thereof) is to begin. In calculating such 48 hour period, no account shall be taken of any part of a day that is not a Business Day. Completion of a Proxy Appointment will not preclude a Shareholder from attending, speaking and voting in person at the Extraordinary General Meeting.

Recommendation

The Board considers that the Proposals are in the best interests of the Shareholders taken as a whole and accordingly, the Board unanimously recommends that Shareholders vote in favour of the Resolution at the Extraordinary General Meeting. The members of the Board who are Shareholders intend to vote in favour of the Resolution at the Extraordinary General Meeting in respect of their own holdings of Ordinary Shares amounting to 791,593 Ordinary Shares in aggregate, representing approximately 0.1788 per cent. of the issued share capital of the Company. The Investment Adviser has conveyed to the Board that it is supportive of the proposals.

Expected timetable of events

The anticipated dates and sequence of events relating to the implementation of the Proposals are set out below:

Capitalised terms used but not defined in this announcement will have the same meaning as set out in the Circular.

Enquiries: