Debt & Capital Advisory

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2 Introduction to Debt & Capital Advisory 1

3 1 is a team of specialist providing independent financial advisory services to clients in debt financing or capital raising Carl-Wilhelm Levert Director - Head of Stockholm Christer Bois Director Stockholm Christoffer Adrian Senior Manager Stockholm Assist in competitive capital raising process Deal structuring Investment presentation Support in dialogue with debt and capital markets Quick process to market Competitive through wide range of financing sources Daniel Johansson Senior Manager Stockholm Henrik Borgfeldt Associate Stockholm 3

4 1 Borrowers may face financing situations such as Acquisition financing You are aiming to acquire a business and need additional capital to meet your acquisition aspiration. The acquisition can be new or a follow on acquisition Acquisition financing Cash out Cash out You want to recapitalize in order to pay out dividends. Additional proceeds raised through a debt raising process will be paid out to shareholders Expansion capital You have growth plans that for example include expansion or restructuring of operations, product development or entering a new market Expansion capital Buyouts Buy outs You are aiming to buy out one or more owners in a take-private transaction or to gain further control and ease decision making processes in the company Financing situations Refinancing You want to replace an existing debt obligation and attain a change in terms Refinancing Asset financing Asset financing You are aiming to finance large capital expenditure and seeking to obtain best possible terms and conditions on asset-backed financing Recapitalization You want to change the company s capital structure. The aim can for example be to stabilize or implement an exit strategy Recapitalization Procurement of financing Procurement of financing You are running a competitive financing process with various lenders and need support to manage process, maintain dialogue with financiers and compare and analyse offers 4

5 1 Questions we regularly hear from our clients and can help with I keep reading about alternative lenders and funds - who are they, what do they do and how do I reach them? I'm running close to covenants and my lenders are making noises - what's my best course of action? Would a credit rating help me access cheaper funding? How do I go about this? Should we fix interest at current rates? How do I know that I m getting the best deal? What is the most efficient way to fund growth in my business? My long-term relationship banks have hit their exposure limits - who should I go to now? What is the best way of returning capital to shareholders? How do I protect my business and best position it for future recovery? I've always sourced financing from the banks. Is it time to access the bond markets? 5

6 Swedish debt & alternative credit market 2

7 2 Swedish Debt Market Development in Swedish capital markets Strong corporate lending market New regulation Funding gap for SMEs Increased use of alternative lending Historically the majority of Swedish non-financial corporations debt financing from bank loans typically relationship lending Strong banking sector Basel III banking regulations are expected to increase the price on bank loans to corporations and to decrease the supply Swedish banks and financial institutions anticipate a growing demand for Swedish corporate bonds. Large corporates benefitting from attractive lending and strong demand in bond markets Reduced bank lending to SMEs due to stricter regulation Funding gap SMEs turning to new sources of financing and alternative debt financing options Growing direct lending market 7

8 bnsek 2 Swedish Debt Market Development in Swedish capital markets (cont.) 1 Strong relationship lending market in Sweden 2 Growing bond financing market Traditionally strong banking relationships/spheres of influence with designated house banks supplying funding at attractive terms to corporates Issuers on the Swedish bond market (bn SEK, ) Limited tradition of corporates (SMEs) seeking and obtaining credit rating Large Swedish multinationals have moved into the international bond markets directly Non-financial companies borrowing on the fixed-income market has increased to one-fifth of the non-financial companies loanbased funding Majority of funding (approximately 70%) still provided by commercial banks ,035 1, ,241 1,223 1,267 1,159 Corporate Funding Mix - Reliance on bank loans US EU Sweden Central government Mortgage institutions Low High Banks Non-financial corporates Municipalities & county councils Other credit market corporates Source: Swedish Central Bank, analysis 8

9 2 Swedish Debt Market Trends in the alternative credit market 01 Increased liquidity Credit funds and direct lenders supply liquidity back to mid-market Larger funds are increasingly able to operate in the upper mid-market Loan volumes are recovering Lenders are increasing their lending targets 02 Intensified competition The use of alternative lenders are increasing in Europe Competition increase between both lenders and debt products 03 Improved borrowing terms Increased competition between lenders improve borrowing terms and bring a range of new products to the market. Erosion of covenant packages Alternative debt products provides significantly more leverage 9

10 Debt Advisory 3

11 3 Debt Advisory can assist you in obtaining appropriate, long-term sustainable financing for your business We know how to frame the ask We have experience of presenting to lender credit committees. We know how lenders think Our expertise and resource allows you to run your business while we arrange your financing package We are a well resourced international team, providing us with the experience of driving a financing process and ensure we deliver the best terms, on time We will access the relevant sector experience in our global network to address your specific transaction issues and create value for you We consider all options available to drive the most appropriate funding options and solutions for you We have expertise across a range of products including senior and subordinated debt loans, hybrid products, high yield bonds, private placements and real estate We place high priority on developing sustainable financing structures that help you achieve your financing objectives within appropriate debt market parameters Why? We have access to a diverse investor community of over 200 global investors, which provides current market liquidity and pricing guidance We tailor our approach to the financing requirements of our clients and target the right lenders for each opportunity We find the best solution for you with no bias toward the product or financing parties to be used Our independence means we provide objective and expert advice on optimal debt structures 11

12 Investment lifecycle 3 Debt Advisory can assist you in every phase of the investment lifecycle Solve upcoming debt maturity issues Debt market assessment to optimise finance costs Identify and structure alternative non-bank sources of capital Sell-side staple finance raising Debt discovery exercise to confirm market appetite and underpin price Maturity Recapitalisation and equity release Growth Investment Realisation Realisation Our typical process Understand financing issues / need Acquisition debt finance raising Capital expenditure programme and working capital finance raising Construct financing solutions appropriate to the business and assets being funded Advice through public/private bond issuance, including rating advisory Identify best solution / product Identify appropriate lenders / investors Options assessment, liquidity solutions and covenant renegotiation Modelling of sustainable debt capacity in the business Stakeholder management and facilitation of consensual solutions Investigate alternative sources of fresh capital Restructure debt to stabilise the business and preserve value Run competitive debt process to optimise offers Distress/ restructure Analyse and advise you on optimum offer Negotiate commercial loan documentation ~1-2 weeks ~1-3 weeks ~3-6 weeks 12

13 3 Debt Advisory Helping clients to make confident debt decisions throughout the cycle Lifecycle stage Your objective How is able to support Growth/ Investment What is the most efficient way to fund growth in my business? Deliver a competitive financing process to get the best deal for you Raise finance for bolt-on or transformational acquisitions Raise capital expenditure or working capital facilities Leveraged buyout financing for financial sponsors Maturity How do I know that I m getting the best deal? Solve upcoming debt maturity issues Optimise finance costs Identify and structure alternative non-bank sources of capital Advise through public/private bond issuance and credit ratings process Realisation What is the best way of returning capital to shareholders? Optimise working capital, operating costs and EBITDA ready for sale Return of capital to shareholders via dividend recapitalisations Implement pre-arranged staple financing packages for potential buyers IPO financing packages Distress/ Restructure How do I protect my business and best position it for future recovery? Sustainable debt capacity and options analysis, including covenant renegotiation Stakeholder management and facilitation of consensual solutions Investigate alternative sources of new capital Restructure debt to stabilise the business and preserve value 13

14 3 Debt Advisory Overview of financing options Bank loan Bond/ Private placement Alternative credit market (mezzanine/unitranche) Convertible debt Preferred stock New share issue Large liquidity on the market Provides confidence to other lenders Demands amortization for highly leveraged businesses Relatively high demands on the borrowers financial position Lower regulatory demands on the issuer Lower interest Possibility of a longer maturity with fixed interest rate Control is kept within the company Interest rate is dependent on the credit rating of the bond Low flexibility in regards to interest payments Can lend to businesses not suited for bank loan Offers a high flexibility in the design of the instrument Can include restrictive covenant, that also could restrict how the capital is used More expensive than more senior loans Low coupon Interest rate tax deductible The debt disappears if converted Uncertain if convertibles are to be payed back or converted If converted, equity is diluted Has no maturity Classified as equity No voting rights contrary to common stock Can be bought back to a predetermined offer Dividend is made with taxed capital The company can not cancel dividends, unless it is also cancelled for common stock, and doing so entails a fee No interest rate payments Classified as equity Improves financial ratios With a directed issue the process can be simplified and faster Equity is diluted Can give the impression that the share price is over-valued If a directed issue, exclusion of investors 14

15 3 Debt Advisory has built an extensive network of financiers including Commercial banks Multilateral banks etc Bond arrangers Credit funds offers an extensive network of lenders. We maintain a close relationship with key market players enabling us to provide a competitive landscape for debt financing. By leveraging our extensive network of lenders as an independent advisor we ensure the most optimal financing solution for borrowers 15

16 3 Debt Advisory has an unrivalled global presence Owen Lewis Carl-Wilhelm Levert Soeren Kviewgaard Stephanie Hogue John Williams Hervé Colson Ard Burgers Daniel Judenhahn Stephen Oldfield Piotr Zdrojewski Shoichi Oka António Rodrigues Diego A. Martinez Gianandrea Perco Aykut Tasel Matthew Wilde Girish Sahajawalla Jose Braga Matthew Santoro has unrivalled global presence. Every local team has unique access to local liquidity but it is the interconnectivity within the global firm that makes it truly powerful when put to use for our clients 16

17 This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, Öhrlings PricewaterhouseCoopers AB, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it All rights reserved. refers to the network and/or one or more of its member firms, each of which is a separate legal entity. Please see for further details.