Lenders Cap Software Exposure at First Eagle BDC, Cut Facility Spread

First Eagle Private Credit Fund, a nontraded business development company, has amended its $350 million Morgan Stanley-led credit facility to cap how much of the collateral pool can come from software, IT services, and healthcare technology borrowers – even as its lenders cut the facility’s borrowing spread by 30 basis points.

Under the fourth amendment to the facility, dated Oct. 1, no more than 20% of the loans backing the facility may come from borrowers in those three industries, which the agreement groups together as “broad software.” The amendment also lowers the advance rate on recurring revenue loans to 50% from 60%. Those are loans underwritten to a borrower’s recurring revenue, including software-as-a-service subscription revenue, rather than its earnings, as defined in the agreement.

The pricing moved the other way. The margin on outstanding advances drops to 2.25% from 2.55% during the revolving period and to 2.75% from 3.05% during the amortization period, and the unused fee falls to 0.5% from 0.6%. The amendment extends the commitment termination date to Oct. 1, 2027, and the stated maturity to Oct. 1, 2029, from Sept. 22, 2028. It also adds a 1% prepayment premium if the fund terminates or reduces its commitments before April 1, 2027.

The amendment also brings in a second lender. Western Alliance Bank joins with a $100 million commitment, while Morgan Stanley Bank’s commitment drops to $250 million from $350 million, leaving the facility’s total size unchanged, according to the amended agreement the fund filed with the SEC. The fund’s summary of the amendment did not mention the lender change.

Other changes limit eligible currencies to U.S. and Canadian dollars, require underlying borrowers to be organized in the United States or Canada, add an event of default if the fund ceases to be a BDC, and expand voting protections for minority lenders, including widening the types of amendments that require consent from all lenders.

The software cap arrives as lenders and managers weigh the risk that artificial intelligence poses to software companies’ business models. Blue Owl Capital, in an Oct. 2 shareholder letter for its technology-focused nontraded BDC, Blue Owl Technology Income Corp., referred to “the market’s fears of AI disintermediating software.”

First Eagle Private Credit Fund’s portfolio-wide exposure to the three industries sat below the new limit as of June 30. Software accounted for 3.39% of the portfolio at fair value, IT services 3.74%, and healthcare technology 5.56%, according to the fund’s second-quarter report. Software was down from 6.23% at the end of 2025. The fund had $253.1 million borrowed under the Morgan Stanley facility as of June 30, net assets of $295.6 million, and a net asset value of $23.79 per share, down from $24.23 at Dec. 31.

The financing changes come a month after Victory Capital Holdings Inc. agreed to acquire First Eagle Investments for about $7 billion. As AltsWire reported, that deal will automatically terminate the fund’s advisory and subadvisory agreements at closing, requiring board and shareholder approval of new agreements. Victory expects the deal to close by the end of the first quarter of 2027.

First Eagle Private Credit Fund is a nontraded BDC managed by First Eagle Investments.

Visit the AltsWire directory page.