Michelle Handy Discusses Middle Market Direct Lending Trends on Reorg: The Primary View

Seth Brumby, Deputy Managing Editor at Reorg sits down with Michelle Handy, a senior managing director and chief investment officer of direct lending at First Eagle, to discuss direct lending in the middle market, the evolution of deal terms in light of expanding private credit, and her expectations for increased deal volume and a rate cut in the back half of the year.

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DEFINITIONS

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.

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.

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.

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

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.

DISCLOSURES

Unless otherwise stated, all information contained in this material is as of March 23, 2024.

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.

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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.

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