Larry Holzenthaler joins Bill Brewster on the "Business Brew" podcast

Private Credit Risks and Opportunities

Larry Holzenthaler was featured on the podcast Business Brew with Bill Brewster, where he spoke about why we believe private credit is such a compelling investment opportunity and discussed the difference among investment structures, why First Eagle Alternative Credit prefers to work with private equity sponsors and how the team seeks to manage and mitigate risks.

Listen to podcast - Business Brew

DEFINITIONS:
A syndicated loan is financing offered by a group of lenders—called a syndicate—who work together to provide funds for a borrower.

Broadly-syndicated loans (BSL) are the most common form of leveraged bank loans, i.e., loans supported by cash flows to finance mergers, acquisitions, and recapitalizations.

Middle market lending are loans to typically U.S. companies with annual revenues above $100 million and below $3 billion and with more than 100 and less than 2,000 employees.

Private credit or private debt investments are debt-like, non-publicly traded instruments provided by non-bank entities, such as private credit funds or business development companies (BDCs), to fund private businesses.

Direct lending is a form of corporate debt provision in which lenders other than banks make loans to companies without intermediaries such as an investment bank, a broker, or a private equity firm. 

EBITDA is earnings before interest, taxes, depreciation, and amortization and may be used as a measure of a company’s health.

Delayed Draw Term Loan or “DDTL” is a term loan structured to be drawn at a later date with defined use of proceeds, typically covenant terms are tied to access of the loan.

Leveraged buyout (LBO) is the acquisition of one company by another using a significant amount of borrowed money or debt to meet the cost of acquisition.

Payment-in-kind (PIK) bond refers to a type of bond that pays interest in additional bonds rather than in cash during the initial period.

BDC or a business development company is a special closed-end investment vehicle that is registered under the Investment Company Act of 1940 (“1940 Act”) and used to facilitate capital formation by smaller U.S. companies.

An interval fund is a type of closed-end fund with shares that do not trade on the secondary market.

Asset-based lending is the business of loaning money in an agreement that is secured by collateral. An asset-based loan is typically secured by inventory, accounts receivable, equipment, or other property owned by the borrower.

Senior secured first lien loans are debt secured by the assets or other collateral of a company and can include liens and claims on certain assets. First lien debt has the first claim on collateral.

DISLCOSURES:
Unless otherwise stated, all information contained in this material is as of February 3, 2025. 

The opinions expressed are not necessarily those of the firm and are subject to change based on market and other conditions. These opinions are not intended to be a forecast of future events, a guarantee of future results, or investment advice. Any statistics contained herein have been obtained from sources believed to be reliable, but the accuracy of this information cannot be guaranteed. The views expressed herein may change at any time subsequent to the date of issue hereof. The information provided is not to be construed as a recommendation or an offer to buy or sell or the solicitation of an offer to buy or sell any security.

This material and the information contained herein is provided for informational purposes only, does not constitute and is not intended to constitute an offer of securities, and accordingly should not be construed as such. The information in this piece is not intended to provide and should not be relied on for accounting, legal, and tax advice. 

Past performance does not guarantee future results.

All investing involves risk including the possible loss of principal.

Important Risk Information 
Alternative investments can be speculative and are not suitable for all investors. Investing in alternative investments is only intended for experienced and sophisticated investors who are willing and able to bear the high economic risks associated with such an investment. Investors should carefully review and consider potential risks before investing. Certain of these risks include:
•    Loss of all or a substantial portion of the investment;
•    Lack of liquidity in that there may be no secondary market or interest in the strategy and none is expected to develop;
•    Volatility of returns;
•    Interest rate risk;
•    Restrictions on transferring interests in a private investment strategy;
•    Potential lack of diversification and resulting higher risk due to concentration within one of more sectors, industries, countries or regions;
•    Absence of information regarding valuations and pricing;
•    Complex tax structures and delays in tax reporting;
•    Less regulation and higher fees than mutual funds;
•    Use of leverage which magnifies the potential for gain or loss on amounts invested and is generally considered a speculative investment technique and increases the risks associated with investing in the strategy;
•    Carried interest which may cause the strategy to make more speculative, higher risk investments that would be the case in absence of such arrangements; and
•    Below investment-grade loans which may default and adversely affect returns.

FEF Distributors, LLC (“FEFD”) (SIPC), a limited purpose broker-dealer, distributes certain First Eagle products. FEFD does not provide services to any investor, but rather provides services to its First Eagle affiliates. As such, when FEFD presents a fund, strategy or other product to a prospective investor, FEFD and its representatives do not determine whether an investment in the fund, strategy or other product is in the best interests of, or is otherwise beneficial or suitable for, the investor. No statement by FEFD should be construed as a recommendation. Investors should exercise their own judgment and/or consult with a financial professional to determine whether it is advisable for the investor to invest in any First Eagle fund, strategy, or product.

First Eagle Investments is the brand name for First Eagle Investment Management, LLC and its subsidiary investment advisers. First Eagle Alternative Credit is the brand name for the subsidiary investment adviser engaged in the alternative credit business. 

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