FS Specialty Lending Fund Reports Q2 2025 Financial Results with Decrease in Net Investment Income

FS Specialty Lending Fund reported its financial results for the second quarter of 2025, revealing a net investment income of $27.4 million, or $0.36 per share, compared to $28.2 million, or $0.37 per share, for the same period in 2024. For the six months ended June 30, 2025, the fund's net investment income totaled $54.5 million, or $0.72 per share, down from $74.7 million, or $0.98 per share, in the prior year. The total investment income for the second quarter was $51.0 million, slightly up from $50.3 million in the previous year, while the total for the first half of 2025 was $99.6 million, down from $119.5 million in 2024.

The fund's total assets decreased to $1.92 billion as of June 30, 2025, from $2.13 billion at the end of 2024. This decline was primarily attributed to a reduction in the fair value of investments, which fell to $1.65 billion from $1.84 billion. The decrease in total investments was driven by a combination of sales and repayments of long-term investments, which amounted to $827.2 million in the first half of 2025, compared to $520.2 million in the same period of 2024. The fund's cash and cash equivalents increased to $232.9 million from $202.1 million, reflecting a strategic focus on liquidity.

In terms of operational developments, FS Specialty Lending Fund completed a reverse share split on May 15, 2025, consolidating every six shares into one, resulting in 75.9 million shares outstanding. The fund also announced an enhanced cash distribution of $0.6195 per share for the second quarter of 2025, representing an annualized distribution rate of 12.5% based on the estimated net asset value of $19.82 per share. This distribution is part of the fund's strategy to provide liquidity to shareholders while maintaining compliance with regulatory requirements.

The fund's investment strategy continues to focus on generating current income through a diversified portfolio of secured and unsecured loans, bonds, and other credit instruments. As of June 30, 2025, the portfolio was primarily composed of senior secured loans, which represented 82% of the total investments. The fund's management indicated that it remains committed to adjusting its investment strategy in response to market conditions, with a focus on direct originations and opportunistic investments in broadly syndicated loans and bonds.

Looking ahead, FS Specialty Lending Fund anticipates continued volatility in its investment income due to market conditions and the performance of its portfolio companies. The management expressed confidence in the fund's ability to navigate these challenges while maintaining its distribution strategy. The board of trustees will continue to evaluate the fund's financial performance and distribution capabilities, with the aim of achieving a long-term liquidity event in the future.