First Eagle Academy

Credit Selection: What Makes a Business Attractive?

Direct lending, also known as private credit, offers distinct advantages. However, middle market companies seeking loans often times lack formal credit ratings, leaving the onus on private lenders to assess the risk. Tune into this video to learn the five C’s that are critical considerations for private lenders when evaluating direct lending investment opportunities.

 

 

The opinions expressed are not necessarily those of the firm. These materials are provided for informational purposes only. 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 to buy, hold or sell, or the solicitation or an offer to buy or sell any fund or security.

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. 

A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of credit worthiness of an issuer with respect to debt obligations, including specific securities, money market instruments, or other bonds. Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest); ratings are subject to change without notice. Not Rated (NR) indicates that the debtor was not rated and should not be interpreted as indicating low quality.

Direct lending refers to a loan agreement negotiated between a borrower and single or small group of nonbank lenders. Direct lending can also be referred to as “private credit” or “private lending.”

FEF Distributors, LLC (Member SIPC) distributes certain First Eagle products; it does not provide services to investors. As such, when FEF Distributors, LLC presents a strategy or product to an investor, FEF Distributors, LLC does not determine whether the investment is in the best interests of, or is suitable for, the investor. Investors should exercise their own judgment and/or consult with a financial professional prior to investing in any First Eagle 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 and Napier Park are brand names for the two subsidiary investment advisers engaged in the alternative credit business.

©2025 First Eagle Investment Management, LLC. All rights reserved.