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Reorg Radio
Michelle Handy of First Eagle Discusses Middle Market Direct Lending Trends
Apr 22, 2024
22:24
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Michelle Handy, Senior managing director and chief investment officer at First Eagle, discusses direct lending in the middle market, deal terms in private credit, and expectations for increased deal volume and a rate cut. Topics include shifts in M&A volume, impact of interest rate increases on enterprise value multiples, distinctions between cash flow financing and asset-based lending, and dialogue between private equity firms and LPs in the current environment.
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Quick takeaways
- Stabilization of interest rates and potential rate cuts are expected to drive increased LBO and recap activity.
- Regulatory changes post-2008 recession have heightened competition between private credit lenders and traditional banks in the BSL market.
Deep dives
Factors Impacting M&A Volumes
Higher interest rates and a decline in transaction enterprise values have contributed to muted M&A volumes in the past 12 to 24 months. The correlation between lower deal activity and interest rates suggests a significant impact on deal making. The decline in enterprise value multiples has made it challenging for buyers and sellers to align on valuations for transactions. With the stabilization of interest rates and potential rate reductions, an increase in LBO, refinance, and recap activity has been observed.
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