LEVERAGED LOAN MONTHLY

Transcription

1 LEVERAGED LOAN MONTHLY THOMSON REUTERS LPC AUGUST 2013 Colm Doherty Director of Analytics Hugo Pereira Senior Market Analyst

2 THE LOAN MARKET EVENT OF THE YEAR 2

3 LEVERAGED LOAN MONTHLY Leveraged Loan Market Overview Slide 4 High Yield Bond Market Overview Slide 22 Investor Overview Slide 32 CLO Market Analysis Slide 38 Loan Fund Flows & Returns Slide CDS Market Snapshot Slide 81 3

4 LEVERAGED LOAN MARKET OVERVIEW

5 Jan-06 Mar-06 May-06 Jul-06 Sep-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Leveraged Loan Issuance ($ Bils.) LEVERAGED LOAN ISSUANCE U.S. LEVERAGED LOAN ISSUANCE Pro rata Institutional The leveraged loan market tacked on another $46 billion of issuance in July, bringing year to date issuance to $659 billion, up from $335 billion in the same period last year. Pro rata issuance has accounted for 39% of leveraged loan issuance so far this year. LEVERAGED LOAN MARKET OVERVIEW 5

6 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Issuance ($ Bils.) U.S. INSTITUTIONAL LOAN AND HY BOND ISSUANCE U.S. LOAN AND BOND ISSUANCE HY Bonds Inst. Loans Institutional loan issuance has totaled $408 billion in the first seven months of 2013 compared to $156 billion in the corresponding period last year, driven by refinancing volume High yield bond issuance totaled $20.1 billion in July, up from $13.8 billion in June, but was still below the levels seen in the January to May time period this year. YTD volume is now at $194 billion, up from $160 billion in the same period a year ago. LEVERAGED LOAN MARKET OVERVIEW 6

7 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Institutional loan issuance ($ Bils.) U.S. INSTITUTIONAL ISSUANCE: NEW MONEY VS. REFINANCING U.S. INSTITUTIONAL LOAN ISSUANCE New money Refinancing Refinancing/repricing activity has represented the majority of institutional loan issuance so far in 2013 as issuers have taken advantage of strong lender appetite for assets to cut spreads and extend maturities. YTD new money institutional issuance has amounted to $120 billion, only a 29% share of overall institutional loan volume. LEVERAGED LOAN MARKET OVERVIEW 7

8 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Leveraged M&A loan issuance ($ Bils.) LEVERAGED M&A LOAN ISSUANCE U.S. LEVERAGED M&A LOAN ISSUANCE LBOs Leveraged M&A (Non LBO) While lenders continue to hope for an increase in M&A deal flow, volume has yet to take off. Year to date, M&A leveraged loan issuance has amounted to $100 billion, with LBO activity accounting for $46 billion of this activity. LEVERAGED LOAN MARKET OVERVIEW 8

9 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Covenant-lite loan issuance ($ Bils.) COVENANT LITE LOAN ISSUANCE U.S. COVENANT-LITE LOAN ISSUANCE There was another $10 billion of covenant-lite loan issuance in July, bringing year to date issuance to $151 billion. This represents a massive increase from the $29 billion posted in the same period last year. LEVERAGED LOAN MARKET OVERVIEW 9

10 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Dividend recap loan volume ($Bils.) DIVIDEND RECAP VOLUME U.S. SPONSORED DIVIDEND RECAPITALIZATION LOAN VOLUME Given the lack of M&A activity and the strong lender appetite in the market, sponsors have availed of dividend recap financings in recent months. In turn, dividend recap loan volume is now at $34.5 billion through July. LEVERAGED LOAN MARKET OVERVIEW 10

11 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Middle market loan volume ($Bils.) MIDDLE MARKET LOAN ISSUANCE U.S. MIDDLE MARKET LOAN VOLUME Trad. MM* Large MM* *Traditional MM: Deal Size <=$100M, Large MM: Deal Size >$100M to $500M, For all: Borrower Sales <$500M Overall middle market lending has amounted to $106 billion this year through July, up from $90 billion in the same period last year. This has been comprised of $66 billion in large middle market volume and $24.5 billion in traditional middle market issuance. LEVERAGED LOAN MARKET OVERVIEW 11

12 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Issuance ($ Bils.) EUROPEAN LEVERAGED LOAN ISSUANCE EUROPEAN LEVERAGED LOAN ISSUANCE European leveraged loan issuance amounted to $13 billion in July, bringing YTD volume to $92 billion. Refinancing activity has represented roughly three-quarters of European leveraged loan volume this year. LEVERAGED LOAN MARKET OVERVIEW 12

13 1H04 2H04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q H10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 to date Average Equity Contributions LBO EQUITY CONTRIBUTIONS 60% 50% 40% 30% 20% 10% 0% LARGE CORPORATE LBO EQUITY CONTRIBUTIONS The average equity contribution in the large corporate market edged down to 27.5% in July, from 30% in 2Q13 and 32% in 1Q13. LEVERAGED LOAN MARKET OVERVIEW 13

14 Institutional loan pipeline ($ Bils.) INSTITUTIONAL LOAN PIPELINE U.S. INSTITUTIONAL LOAN PIPELINE Jan Feb Mar Apr May Jun Jul Jul Aug Sep Oct Nov Dec The institutional loan pipeline is at $46 billion as of the beginning of August, up from $27 billion in early July. M&A accounts for 41% of the pipeline volume, with refinancing/repricing representing 28% and the dividend recap share at 16%. LEVERAGED LOAN MARKET OVERVIEW 14

15 1Q10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Average yield PRIMARY MARKET YIELDS 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% U.S. PRIMARY MARKET INSTITUTIONAL LOAN YIELDS Large Corp. Middle Market Primary market loan yields in the large corporate market ticked up to 5.4% in July from 5.1% in June. In contrast, new issue middle market loan yields moved lower, averaging 6.3% in July, down from 6.8% in June. LEVERAGED LOAN MARKET OVERVIEW 15

16 01/03/11 02/03/11 03/03/11 04/03/11 05/03/11 06/03/11 07/03/11 08/03/11 09/03/11 10/03/11 11/03/11 12/03/11 01/03/12 02/03/12 03/03/12 04/03/12 05/03/12 06/03/12 07/03/12 08/03/12 09/03/12 10/03/12 11/03/12 12/03/12 01/03/13 02/03/13 03/03/13 04/03/13 05/03/13 06/03/13 07/03/13 Avg. Bid (% of par) U.S. SECONDARY MARKET BID LEVELS U.S. SECONDARY MARKET AVERAGE BID SMi100 Overall Market Loan bids recovered some of the ground lost in the prior month. Flow names rose 24 bps, with the SMi100 average bid at as of month-end July. The broader market (all multi-quote institutional term loans) finished July at 99.09, up nearly one-quarter of a point for the month, and up 149 bps this year. LEVERAGED LOAN MARKET OVERVIEW 16

17 12/31/10 1/31/11 2/28/11 3/31/11 4/30/11 5/31/11 6/30/11 7/31/11 8/31/11 9/30/11 10/31/11 11/30/11 12/31/11 1/31/12 2/29/12 3/31/12 4/30/12 5/31/12 6/30/12 7/31/12 8/31/12 9/30/12 10/31/12 11/30/12 12/31/12 1/31/13 2/28/13 3/31/13 4/30/13 5/31/13 6/30/13 7/31/13 Avg. Bid (% of par) SECONDARY MARKET BID LEVELS: U.S. VS. EUROPE SECONDARY MARKET AVERAGE BIDS U.S. SMi100 European Leveraged 40 European flow names, like their U.S. counterparts regained some of their lost ground in July but are still off their May highs, finishing the month at Overall this year, European flow names have gained roughly 132 bps. LEVERAGED LOAN MARKET OVERVIEW 17

18 1/12/11 2/12/11 3/12/11 4/12/11 5/12/11 6/12/11 7/12/11 8/12/11 9/12/11 10/12/11 11/12/11 12/12/11 1/12/12 2/12/12 3/12/12 4/12/12 5/12/12 6/12/12 7/12/12 8/12/12 9/12/12 10/12/ 11/12/12 12/12/12 1/12/13 2/12/13 3/12/13 4/12/13 5/12/13 6/12/13 7/12/13 Avg. Bid (% of par) SECONDARY MARKET BID LEVELS: COVENANT-LITE & SECOND-LIENS U.S. COV-LITE AND SECOND LIEN LOAN BIDS Cov-lite 2nd Lien TL SMi 100 The average bid on covenant-lite loans is now at Second-liens are at 95.77, up 373 bps this year. LEVERAGED LOAN MARKET OVERVIEW 18

19 7/11/11 8/11/11 9/11/11 10/11/ 11/11/11 12/11/ 1/11/12 2/11/12 3/11/12 4/11/12 5/11/12 6/11/12 7/11/12 8/11/12 9/11/12 10/11/ 11/11/ 12/11/ 1/11/13 2/11/13 3/11/13 4/11/13 5/11/13 6/11/13 7/11/13 Average yield (%) SECONDARY MARKET YIELD * Assuming three year life SMI100 SECONDARY MARKET YIELD* The average yield on the top 100 flow names has tightened to 4.75% as of month-end July, down from 4.8% in the early part of the month. LEVERAGED LOAN MARKET OVERVIEW 19

20 12/31/09 1/31/10 2/28/10 3/31/10 4/30/10 5/31/10 6/30/10 7/31/10 8/31/10 9/30/10 10/31/10 11/30/10 12/31/10 1/31/11 2/28/11 3/31/11 4/30/11 5/31/11 6/30/11 7/31/11 8/31/11 9/30/11 10/31/11 11/30/11 12/31/11 1/31/12 2/29/12 3/31/12 4/30/12 5/31/12 6/30/12 7/31/12 8/31/12 9/30/12 10/31/12 11/30/12 12/31/12 1/31/13 2/28/13 3/31/13 4/30/13 5/31/13 6/30/13 7/31/13 Share of loans bid >=100 PAR-PLUS MARKET SHARE 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% SMi 100 Overall Market U.S. PAR-PLUS SHARE: SMI100 & MULTI-QUOTE INSTITUTIONAL TERM LOANS The share of loans bid in the par-plus region rebounded in July. Par-plus loans now account for 66% of the broader secondary market (multi-quote institutional term loans), up from 40% at the start of July, but still down from a high of 79% in May. The par-plus share of flow names is now back up to 57%. LEVERAGED LOAN MARKET OVERVIEW 20

21 1/4/12 1/19/12 2/3/12 2/18/12 3/4/12 3/19/12 4/3/12 4/18/12 5/3/12 5/18/12 6/2/12 6/17/12 7/2/12 7/17/12 8/1/12 8/16/12 8/31/12 9/15/12 9/30/12 10/15/12 10/30/12 11/14/12 11/29/12 12/14/12 12/29/12 1/13/13 1/28/13 2/12/13 2/27/13 3/14/13 3/29/13 4/13/13 4/28/13 5/13/13 5/28/13 6/12/13 6/27/13 7/12/13 7/27/13 Share of loans bid >= PLUS MARKET SHARE 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% U.S. 101-PLUS SHARE: OVERALL MARKET The share of loans bid in the 101-plus region edged higher in July, though it remains well below the highs seen in May. The 101-plus share is now at 11%, up from 6% in early July. LEVERAGED LOAN MARKET OVERVIEW 21

22 HIGH YIELD BOND MARKET OVERVIEW

23 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Issuance ($ Bils.) HIGH YIELD BOND ISSUANCE U.S. HY BOND ISSUANCE After falling to $13.8 billion in June when a jump in treasury rates and related market volatility took its toll, high yield bond issuance increased to $20.1 billion in July, but was still below the levels seen in the January to May time period this year. YTD volume is now at $194 billion, up from $160 billion in the same period a year ago. HIGH YIELD BOND MARKET OVERVIEW 23

24 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Issuance ($ Bils.) SENIOR SECURED HY BOND ISSUANCE U.S. SENIOR SECURED HY BOND ISSUANCE Senior secured high yield bond issuance also bounced back in July, amounting to $5.3 billion, up from $1.9 billion in June. So far this year, $40 billion of senior secured bonds have been issued, 7% more than in the same period last year. HIGH YIELD BOND MARKET OVERVIEW 24

25 Repay Bank Loan or Bridge Financing Redeem Existing Bonds or Securities Tender Offer Merger and Acquisition General Purpose Leveraged Buyout Dividend or Distribution to Shareholders Capital Expenditure General Purpose/Refinance (blank) Property Expenditure (acquisition or development) Stock Repurchase General Purpose/Acquisition Aircraft & Ship finance General Purpose/Stock Repurchase Fund Pension Plans Repay Intercompany Debt Spinoff Working Capital Projects Expenditure (other than capital projects) General Purpose/Working Capital Issuance ($ Bils.) YEAR TO DATE HY BOND ISSUANCE BY PURPOSE U.S. HY BOND ISSUANCE BY PURPOSE Bond-for-loan takeout volume ($64 billion) has been the biggest use of bond proceeds so far in Next is bond redemptions at $37 billion and tender offers at $23 billion. M&A activity comes in at $19 billion and LBO volume is at $11 billion. HIGH YIELD BOND MARKET OVERVIEW 25

26 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-109 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Issuance ($ Bils.) HY BOND FOR LOAN TAKEOUTS U.S. HY BOND FOR LOAN TAKEOUTS Bond-for-loan takeout volume increased to $8.1 billion in July from to $4.2 billion in June. Year-to-date, $64 billion of bond proceeds have been designated to take out loans, compared to $48 billion in the same period a year ago. HIGH YIELD BOND MARKET OVERVIEW 26

27 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Issuance ($ Bils.) YEAR TO DATE HY BOND ISSUANCE BY RATING HY BOND ISSUANCE BY RATING BB B CCC NR B rated issues accounted for just over half (52%) of HY bond issuance in July, with BB rated issuance accounting for 33%. BB rated issues have led the way YTD representing 45% of issuance, versus a 42% share for B rated deals and 13% for CCC rated issues. HIGH YIELD BOND MARKET OVERVIEW 27

28 HY BOND FUND FLOWS MUTUAL FUND VS. ETF BREAKOUT HY BOND FUND FLOWS MUTUAL FUND VS. ETF BREAKOUT After a tough month of June when over $15 billion flowed out of high yield bond funds, money came back into these funds during July. Breaking out high yield bond fund flows, mutual funds saw inflows of $2.6 billion in July, while ETF inflows totaled $2.8 billion. YTD, outflows have amounted to $8.5 billion for HY bond mutual funds and $365 million for HY bond ETFs. HIGH YIELD BOND MARKET OVERVIEW 28

29 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Net Assets ($ Bils.) HY BOND & LOAN FUND NET ASSETS Loan Funds HY BOND & LOAN FUND NET ASSETS* HY Bond Funds * Does not include assets bought via leverage High yield bond fund net assets increased to $306 billion in July as inflows returned and asset prices moved higher. Despite this, the current net asset level is still below the $323 billion recorded in April. HIGH YIELD BOND MARKET OVERVIEW 29

30 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Average yield NEW ISSUE HY BOND YIELDS * Yield to maturity NEW ISSUE HY BOND YIELDS* The average new issue bond yield (YTM) fell to 7.26% in July as the market stabilized. New issue bond yields have averaged 6.72% overall in the January to July time period. HIGH YIELD BOND MARKET OVERVIEW 30

31 1/3/00 4/3/00 7/3/00 10/3/00 1/3/01 4/3/01 7/3/01 10/3/01 1/3/02 4/3/02 7/3/02 10/3/02 1/3/03 4/3/03 7/3/03 10/3/03 1/3/04 4/3/04 7/3/04 10/3/04 1/3/05 4/3/05 7/3/05 10/3/05 1/3/06 4/3/06 7/3/06 10/3/06 1/3/07 4/3/07 7/3/07 10/3/07 1/3/08 4/3/08 7/3/08 10/3/08 1/3/09 4/3/09 7/3/09 10/3/09 1/3/10 4/3/10 7/3/10 10/3/10 1/3/11 4/3/11 7/3/11 10/3/11 1/3/12 4/3/12 7/3/12 10/3/12 1/3/13 4/3/13 7/3/13 Yield (%) HY BOND YIELDS BARCLAYS U.S. HIGH YIELD BOND INDEX After climbing to 6.97% in late June, the yield on the Barclays U.S High Yield index has now retreated to 6.11% as of month-end July, as the market volatility seen in June has subsided. HIGH YIELD BOND MARKET OVERVIEW 31

32 INVESTOR OVERVIEW

33 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 CLO Aggregate Principal Balance ($Bils.) Number of CLOs U.S. CLO ASSETS UNDER MANAGEMENT CLO APB Number of CLOs in sample ASSETS UNDER MANAGEMENT INVESTOR OVERVIEW U.S. CLO assets under management is now at $284 billion (based on a universe of 721 CLOs in Thomson Reuters LPC Collateral). 33

34 Jan 2007 Apr 2007 Jul 2007 Oct 2007 Jan 2008 Apr 2008 Jul 2008 Oct 2008 Jan 2009 Apr 2009 Jul 2009 Oct 2009 Jan 2010 Apr 2010 Jul 2010 Oct 2010 Jan 2011 Apr 2011 Jul 2011 Oct 2011 Jan 2012 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Loan mutual fund & ETF AUM ($ Bils.) LOAN FUNDS AUM U.S. LOAN MUTUAL FUND & ETF ASSETS UNDER MANAGEMENT* INVESTOR OVERVIEW *Based on the most recent data available Thanks to continued inflows, loan mutual funds & ETFs had roughly $129 billion in net assets at the end of July, and when taking into account the leverage employed by closed-end funds, total assets are estimated to be approximately $136 billion. 34

35 INVESTOR SHARE OF INSTITUTIONAL LEVERAGED LOAN OUTSTANDINGS 43% 36% Other Loan Funds (mutual funds & ETFs) CLOs* SHARE OF U.S. LEVERAGED INSTITUTIONAL LOAN MARKET OUTSTANDINGS** INVESTOR OVERVIEW 20% *Based on a universe of 721 U.S. CLOs **Based on S&P/LSTA Leveraged Loan Index outstandings CLOs hold roughly 43% of institutional loan outstandings, while loan mutual funds & ETFs currently account for 20%. 35

36 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 $ Bils. CLO ISSUANCE VS. LOAN FUND FLOWS -MONTHLY MONTHLY CLO ISSUANCE VS. LOAN FUND FLOWS CLO Issuance Loan fund flows INVESTOR OVERVIEW CLO issuance dropped to $2.8 billion in July, bringing YTD issuance to $46.7 billion. Loan funds (mutual funds & ETFs) inflows amounted to $6.7 billion in July, pushing YTD inflows to over $39 billion. 36

37 CLO ISSUANCE VS. LOAN FUND FLOWS - ANNUAL ANNUAL CLO ISSUANCE VS. LOAN FUND FLOWS INVESTOR OVERVIEW Combined U.S. CLO issuance and loan fund inflows YTD through July have totaled $86 billion. 37

38 CLO MARKET ANALYSIS* *Based on the most recently available data in Thomson Reuters LPC Collateral

39 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 CLO Issuance ($Bils.) Average AAA spread (bps) CLO ISSUANCE AND AAA NEW ISSUE SPREADS CLO ISSUANCE AND AAA NEW ISSUE SPREADS Issuance Average AAA spread (excl. MM) CLO MARKET ANALYSIS AAA CLO spreads increased to 132 bps in July, up from 117 bps in the prior month. CLO issuance fell to $2.8 billion in July, down from $7.9 billion in June. It was the lowest monthly issuance level since the corresponding month last year. 39

40 Share of CLOs DISTRIBUTION OF NEW CLO SIZE DISTRIBUTION OF NEW U.S. CLO SIZE 50.0% Jan-Jul % 30.0% 20.0% 10.0% CLO MARKET ANALYSIS 0.0% <$300 $300 to <$350 $350 to $400 to <$400 <$450 CLO size ($Mils.) $450 to <$500 $500 to <$550 $550 to <$600 >=$600 The average size of new CLOs issued in July fell to $403 million, down from $493 million in June. The average size of the 96 new CLOs issued in the first seven months of 2013 was $486 million. Just under half (48%) of these new CLOs have exceeded $500 million in size. 40

41 CLO Aggregate Principal Balance ($USD/Euro bils.) CLO AGGREGATE PRINCIPAL BALANCE CLO AGGREGATE PRINCIPAL BALANCE: U.S & EUROPE 300 U.S. Europe CLO MARKET ANALYSIS 50 0 Jul-12 Aug-12 Sep-12 Oct-12 Nov- 12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May- 13 Jun-13 Jul-13 U.S. CLOs aggregate principal balance is now at $284 billion, European CLOs are at 77 billion euros (based on a universe of 721 U.S. CLOs and 226 European CLOs in Thomson Reuters LPC Collateral). 41

42 SHARE OF ASSETS HELD BY CLOS THAT ARE STILL IN / PAST THEIR STATED REINVESTMENT PERIOD 30% Still in Reinv Period 70% Post Reinv Period SHARE OF ASSETS HELD BY CLOS THAT ARE STILL IN THEIR STATED REINVESTMENT PERIOD U.S. CLOs 65% European CLOs 35% Still in Reinv Period Post Reinv Period CLO MARKET ANALYSIS Roughly 70% of U.S. CLO assets are held in CLOs that are still in their stated reinvestment period. For European CLOs, this figure is a much lower 35%. 42

43 BREAKDOWN OF U.S. CLO ASSETS 87% Loans Bonds SHARE OF U.S. CLO ASSETS* Structured Prod. Cash Reinv. end date <Aug 1, 2013 Reinv. end date >=Aug 1, % Loans Bonds Structured Prod. Cash CLO MARKET ANALYSIS *Based on a universe of 712 U.S. CLOs *Excludes newly issued CLOs not yet in TR LPC Collateral U.S. CLOs that are still in their stated reinvestment period have a higher share of their assets in loans (92%) compared to CLOs past their reinvestment date (87%), and have a corresponding lower share of cash, bonds, and structured products. 43

44 BREAKDOWN OF EUROPEAN CLO ASSETS 86% SHARE OF EUROPEAN CLO ASSETS Loans Bonds Structured Prod. Cash Reinv. end date <Aug 1, 2013 Reinv. end date >=Aug 1, % Loans Bonds Structured Prod. Cash CLO MARKET ANALYSIS European CLOs that are still in their stated reinvestment period have a similar share of their assets in loans (86%) as do CLOs past their reinvestment date. 44

45 $ Bils. U.S. CLO AGGREGATE PRINCIPAL BALANCE BY REINVESTMENT END DATE U.S. CLO AGGREGATE PRINCIPAL BALANCE BY REINVESTMENT END DATE CLO MARKET ANALYSIS <= Reinvestment end date The aggregate principal balance of U.S. CLOs reaching their reinvestment end data is $66 billion in 2013 and $57 billion in The APB of CLOs scheduled to reach their reinvestment end date from 2015 onwards is $112 billion. 45

46 <80 80 to <85 85 to <86 86 to <87 87 to <88 88 to <89 89 to <90 90 to <91 91 to <92 92 to <93 93 to <94 94 to <95 95 to <96 96 to <97 97 to <98 98 to <99 99 to <100 >=100 Share of CLOs WEIGHTED AVERAGE BIDS OF UNDERLYING CLO ASSETS: U.S. VS. EUROPE 35% 30% 25% 20% 15% 10% 5% 0% CLO WEIGHTED AVERAGE BID DISTRIBUTION U.S. Europe CLO MARKET ANALYSIS CLO weighted avg. bid Over half (58%) of U.S. CLOs have a weighted average bid (on their underlying assets) in the 99-plus range. European CLOs have lower weighted average bids, with the majority (56%) in the 92 to 96 range. 46

47 <90 90 to <91 91 to <92 92 to <93 93 to <94 94 to <95 95 to <96 96 to <97 97 to <98 98 to <99 99 to <100 >=100 Share of CLOs WEIGHTED AVERAGE BIDS OF UNDERLYING U.S. CLO ASSETS 40% 35% 30% 25% 20% 15% 10% 5% 0% U.S. CLO WEIGHTED AVERAGE BID DISTRIBUTION Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 CLO MARKET ANALYSIS CLO weighted avg. bid After slipping in June, the weighted average bid on CLO assets picked up again in July. 77% of U.S. CLOs now have a weighted average bid (on their underlying assets) in the 98-plus range, up from 72% a month earlier. Most visibly, the par-plus share increased from 3% to 28%. 47

48 <90 90 to <91 91 to <92 92 to <93 93 to <94 94 to <95 95 to <96 96 to <97 97 to <98 98 to <99 99 to <100 >=100 Share of CLOs WEIGHTED AVERAGE BIDS OF UNDERLYING U.S. CLO ASSETS BY REINVESTMENT DATE 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% U.S. CLO WEIGHTED AVERAGE BID DISTRIBUTION Reinv end date < Aug 1, 2013 Reinv end date >=Aug 1, 2013 CLO MARKET ANALYSIS CLO weighted avg. bid The weighted average bid of assets in U.S. CLOs still in their stated reinvestment period are higher than those past their reinvestment date. 91% of CLOs in their reinvestment period have a weighted average bid >=98 versus 58% of CLOs post reinvestment. At the upper end, 79% of CLOs still in their stated reinvestment period now have a weighted average bid >=99, up from 71% last month. 48

49 <80 80 to <85 85 to <86 86 to <87 87 to <88 88 to <89 89 to <90 90 to <91 91 to <92 92 to <93 93 to <94 94 to <95 >=95 Share of CLOs WEIGHTED AVERAGE BIDS OF UNDERLYING EUROPEAN CLO ASSETS 35% 30% 25% 20% 15% 10% 5% EUROPEAN CLO WEIGHTED AVERAGE BID DISTRIBUTION Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 CLO MARKET ANALYSIS 0% CLO weighted avg. bid European CLO asset prices moved higher in the last month as market volatility settled down. 28% of European CLOs now have a weighted average bid above 95, up from 14% in June, but marginally lower than the high of 30% recorded in May. 49

50 <80 80 to <85 85 to <86 86 to <87 87 to <88 88 to <89 89 to <90 90 to <91 91 to <92 92 to <93 93 to <94 94 to <95 95 to <96 96 to <97 97 to <98 98 to <99 99 to <100 >=100 Share of CLOs WEIGHTED AVERAGE BIDS OF UNDERLYING EUROPEAN CLO ASSETS BY REINVESTMENT DATE 25% 20% 15% 10% 5% EUROPEAN CLO WEIGHTED AVERAGE BID DISTRIBUTION Reinv end date <Aug 1, 2013 Reinv end date >=Aug 1, 2013 CLO MARKET ANALYSIS 0% CLO weighted avg. bid The weighted average bid of assets in European CLOs still in their stated reinvestment period are higher than those past their reinvestment date. 82% of CLOs in their reinvestment period have a weighted average bid >=93 versus 53% of CLOs past their stated reinvestment date. 50

51 Share of maturing loan volume CLO LOAN HOLDINGS BY MATURITY CLO LOAN MATURITIES 30.0% 25.0% 20.0% 15.0% 10.0% U.S. Europe CLO MARKET ANALYSIS 5.0% 0.0% >=2020 More than three-quarters (78%) of loans held by U.S. CLOs are scheduled to mature from 2017 onwards. For European CLOs, 58% of loan holdings are scheduled to mature from 2017 onwards. Looking at a longer time frame 30% of U.S. CLOs loan holdings are scheduled to mature from 2019 onwards. For European CLOs, the corresponding share is 16%. 51

52 Share of maturing loan volume U.S. CLO LOAN HOLDINGS BY MATURITY - DEC 2012 VS. JULY % 25.0% 20.0% 15.0% U.S. CLO LOAN MATURITIES Dec-12 Jul-13 CLO MARKET ANALYSIS 10.0% 5.0% 0.0% >=2019 Based on the most recent holdings data available, the maturity profile of U.S. CLO loan holdings has changed so far this year as refinancing activity and new deal flow have pushed out maturities. Over half (53%) of loan holdings mature from 2018 onwards, up from 32% at the end of last year. 52

53 Share of maturing loan volume EUROPEAN CLO LOAN HOLDINGS BY MATURITY- DEC 2012 VS. JULY % 25.0% 20.0% 15.0% EUROPEAN CLO LOAN MATURITIES Dec-12 Jul-13 CLO MARKET ANALYSIS 10.0% 5.0% 0.0% >=2019 The term to maturity of European CLO holdings has also lengthened. Over half (58%) of loan holdings are scheduled to mature from 2017 onwards, up from 44% at the end of last year. 53

54 Share of maturing loan volume LOAN HOLDINGS BY MATURITY & REINVESTMENT PERIOD: U.S. CLOS 30.0% 25.0% 20.0% 15.0% 10.0% Reinv end date <Aug 1, 2013 Reinv end date >=Aug 1, 2013 CLO LOAN MATURITIES CLO MARKET ANALYSIS 5.0% 0.0% >=2020 U.S. CLOs still in their stated reinvestment period hold longer dated loans. 63% of loans in CLOs still in their stated reinvestment period are scheduled to mature from 2018 onwards. The corresponding figure for loans in CLOs post their reinvestment date is 34%. 54

55 Share of maturing loan volume LOAN HOLDINGS BY MATURITY FOR U.S. CLOS STILL IN THEIR REINVESTMENT PERIOD: DEC 2012 VS. JULY % 35.0% 30.0% 25.0% 20.0% 15.0% Dec-12 CLO LOAN MATURITIES Jul-13 CLO MARKET ANALYSIS 10.0% 5.0% 0.0% >=2019 For U.S. CLOs still in their stated reinvestment period, 38% of loan holdings mature from 2019 onwards, up from 14% at the end of last year. 55

56 Share of maturing loan volume LOAN HOLDINGS BY MATURITY & REINVESTMENT PERIOD: EUROPEAN CLOS 30.0% 25.0% 20.0% 15.0% 10.0% CLO LOAN MATURITIES Reinv end date <Aug 1, 2013 Reinv end date >=Aug 1, 2013 CLO MARKET ANALYSIS 5.0% 0.0% >=2020 European CLOs still in their stated reinvestment period also hold longer dated loans, but this trend is less pronounced than in the U.S. 43% of loans in CLOs still in their reinvestment period are scheduled to mature from 2018 onwards, versus 31% of loans in CLOs past their stated reinvestment date. In the nearer term, 17% of loans in CLOs still in their reinvestment period are scheduled to mature prior to 2016, versus 23% of loans in CLOs post reinvestment date. 56

57 Share of CLO loan holdings CLO LOAN HOLDINGS BY RATING U.S. CLO LOAN HOLDINGS DISTRIBUTION BY RATING 35.0% 30.0% 25.0% 20.0% 15.0% CLO MARKET ANALYSIS 10.0% 5.0% 0.0% >=Baa3 Ba1 Ba2 Ba3 B1 B2 B3 Caa1 Caa2 <=Caa3 NR Loans rated Ba3 and above account for 19% of U.S. CLO loan holdings. 54% of underlying loans are rated B1 or B2. Loans rated B3 and below account for 19% of CLO loan holdings. 57

58 Share of CLO loan holdings U.S. CLO RATINGS BY REINVESTMENT PERIOD U.S. CLO LOAN HOLDINGS DISTRIBUTION BY RATING 35.0% Reinv end date <Aug 1, % Reinv end date >=Aug 1, % 20.0% 15.0% CLO MARKET ANALYSIS 10.0% 5.0% 0.0% >=Baa3 Ba1 Ba2 Ba3 B1 B2 B3 Caa1 Caa2 <=Caa3 NR The B1 and B2 rating categories are the most popular for both U.S. CLOs still in their stated reinvestment period (56% share) and those past it (51% share). Loans rated Ba3 and above account for a smaller share of assets for CLOs still in their reinvestment period (18%) versus those past their reinvestment end date (21%). 58

59 Cash balance ($ Bils.) Share of assets in cash U.S. CLO CASH BALANCE BY VINTAGE <= CLO vintage 2010 *Based on a universe of 685 U.S. CLOs **Excludes recently issued CLOs not yet in TR LPC Collateral CASH BALANCE BY CLO VINTAGE $ Cash Balance Cash Share ** 2013** 18.0% 16.0% 14.0% 12.0% 10.0% Based on the most recently available reports, U.S. CLOs have roughly 5.6% of their assets in cash. More recent vintage CLOs (which tend to still be in their reinvestment period) have a lower share of their assets in cash. For this sample of CLOs, cash balances amount to $15 billion. 8.0% 6.0% 4.0% 2.0% 0.0% CLO MARKET ANALYSIS 59

60 Share of U.S. CLOS (%) U.S. CLO CASH BALANCE DISTRIBUTION PRE VS. POST REINVESTMENT END DATE 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 0 to <1 1 to <2 2 to <3 CASH BALANCE PRE VS. POST REINVESTMENT END DATE 3 to <4 4 to <5 5 to <6 6 to <7 7 to <8 8 to <9 9 to <10 10 to <11 11 to <12 Reinv End Date <8/1/13 Reinv End Date >=8/1/13 12 to <13 13 to <14 14 to <15 15 to <16 16 to <17 17 to <18 18 to <19 19 to <20 >=20 CLO MARKET ANALYSIS *Based on a universe of 680 U.S. CLOs Cash Balance (%) 37% of U.S. CLOs past their reinvestment period have more than 10% of their assets in cash. The corresponding number for CLOs still in their reinvestment period is 12%. 42% of CLOs still in their reinvestment period have a cash balance that is less than 1% of assets. 60

61 Share of assets in cash U.S. CLO CASH BALANCE BY VINTAGE 1.0 VS. 2.0 CASH BALANCE BY CLO VINTAGE 10% 9% CLO 1.0 CLO 2.0 8% 7% 6% 5% 4% CLO MARKET ANALYSIS 3% 2% 1% 0% Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 CLOs 1.0s have a higher share of cash in their portfolios (7.6% approximately) compared to CLO 2.0s (2.3% approximately). Up until July, the cash share of CLO 2.0 assets had been increasing steadily since February. 61

62 Cash balance (Euro Bils.) Share of assets in cash EUROPEAN CLO CASH BALANCE BY VINTAGE CASH BALANCE BY CLO VINTAGE % $ Cash Balance 1.6 Cash Share 10.0% % % % CLO MARKET ANALYSIS <= *Based on a universe of 218 European CLOs CLO vintage 2.0% 0.0% Based on the most recently available reports, European CLOs have around 5.5% of their assets in cash. Cash balances amount to 4.1 billion euros. 62

63 Share of European CLOS (%) EUROPEAN CLO CASH BALANCE DISTRIBUTION PRE VS. POST REINVESTMENT END DATE 40% 35% 30% 25% 20% 15% CASH BALANCE PRE VS. POST REINVESTMENT END DATE Reinv End Date <8/1/13 Reinv End Date >=8/1/13 CLO MARKET ANALYSIS 10% 5% 0% 0 to <1 1 to <2 2 to <3 3 to <4 4 to <5 5 to <6 6 to <7 7 to <8 8 to <9 9 to <10 *Based on a universe of 210 European CLOs Cash Balance (%) 22% of U.S. CLOs past their reinvestment period have more than 10% of their assets in cash. The corresponding number for CLOs still in their reinvestment period is 7%. 10 to <11 11 to <12 12 to <13 13 to <14 14 to <15 15 to <16 63

64 Share of assets in cash EUROPEAN CLO CASH BALANCE EUROPEAN CLO CASH BALANCE 6% 5% 4% 3% 2% CLO MARKET ANALYSIS 1% 0% Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 The share of cash held by European CLOs has increased in recent months and is now around 5.5%. 64

65 Share of CLO loan assets CONTRACTUAL LOAN SPREADS BY REINVESTMENT END DATE U.S. CLOS 25.0% 20.0% 15.0% 10.0% CONTRACTUAL LOAN SPREADS BY REINVESTMENT END DATE IN U.S. CLOS Reinv end date <Aug 1, 2013 Reinv end date >=Aug 1, 2013 CLO MARKET ANALYSIS 5.0% 0.0% < to < to < to < to < to < to <500 Contractual spread (bps) 500 to < to < to < to <700 U.S. CLOs still in their stated reinvestment period hold more loans with higher spreads. CLOs still in their reinvestment period have a higher share (53%) of loans with contractual spreads in the 350-plus bps range. The corresponding share for CLOs past their stated reinvestment period is 46%. >=700 65

66 Share of CLO loan assets CONTRACTUAL LOAN SPREADS FOR U.S. CLOS STILL IN THEIR REINVEST PERIOD: DEC 2012 VS. JUL % 20.0% 15.0% 10.0% CONTRACTUAL LOAN SPREADS FOR U.S. CLOS Dec-12 Jul-13 CLO MARKET ANALYSIS 5.0% 0.0% < to < to < to < to < to < to <500 Contractual spread (bps) 500 to < to < to < to <700 >=700 U.S. CLOs have seen the contractual spreads on their loan holdings decline this year due to the spate of refinancings and repricings. 53% of loans held by CLOs still in their reinvestment period have a spread in the 350-plus bps range, down from 65% at the start of the year. 66

67 Share of CLO loan assets CONTRACTUAL LOAN SPREADS ALL U.S. CLOS VS. MIDDLE MARKET CLOS 25.0% 20.0% 15.0% 10.0% All U.S. CLOs CONTRACTUAL LOAN SPREADS ALL U.S. CLOS VS. MIDDLE MARKET CLOS U.S. Middle Market CLOs CLO MARKET ANALYSIS 5.0% 0.0% < to < to < to < to < to < to <500 Contractual spread (bps) 500 to < to < to < to <700 >=700 U.S. Middle Market CLOs have a higher share (53%) of loans with contractual spreads in the 400-plus bps range. The corresponding share for all U.S. CLOs is 33%. 67

68 Share of CLO loan assets CONTRACTUAL LOAN SPREADS BY REINVESTMENT END DATE EUROPEAN CLOS 25.0% 20.0% 15.0% 10.0% CONTRACTUAL LOAN SPREADS BY REINVESTMENT END DATE IN EUROPEAN CLOS Reinv end date <Aug 1, 2013 Reinv end date >=Aug 1, 2013 CLO MARKET ANALYSIS 5.0% 0.0% < to < to < to 350 to 400 to 450 to <350 <400 <450 <500 Contractual spread (bps) 500 to < to < to < to <700 Active European CLOs hold a slightly higher share of higher spread loans. >=700 Loans with a spread >=450 bps account for 33% of loan holdings for CLOs still in their reinvestment period versus 31% for CLOs post reinvestment date. 68

69 Share of loans with Libor floors SHARE OF LOANS IN CLOS THAT HAVE LIBOR FLOORS SHARE OF LOANS IN U.S. CLOS THAT HAVE LIBOR FLOORS 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% <= CLO Vintage % of loan assets in 2012 and 2013 vintage U.S. CLOs have LIBOR floors. Overall, 67% of loans in CLOs have LIBOR floors. CLO MARKET ANALYSIS 69

70 Share of cov-lite loans SHARE OF LOANS IN U.S. CLOS THAT ARE COV-LITE SHARE OF LOANS IN U.S. CLOS THAT ARE COV-LITE 50.0% 40.0% 30.0% 20.0% CLO MARKET ANALYSIS 10.0% 0.0% <= CLO Vintage 2010 Over 40% of loans in 2012 and 2013 vintage CLOs are cov-lite. 70

71 Value of assets in default ($Bils.) Share of U.S. CLO assets in default SHARE OF U.S. CLO ASSETS IN DEFAULT SHARE OF U.S. CLO ASSETS IN DEFAULT % 1.20 $ value of assets in default 30.0% 1.00 Share of assets in default 25.0% % % % CLO MARKET ANALYSIS % 0.00 <= CLO Vintage *Based on a universe of 685 U.S. CLOs **Excludes recently issued CLOs not yet in TR LPC Collateral 1.2% of U.S. CLO assets are in default. Older vintage CLOs hold a higher share of defaulted assets. For CLOs still in their stated reinvestment period, 0.7% of their assets are in default versus 2.4% for those CLOs past their reinvestment date. 0.0% 71

72 Value of assets in default ($Bils.) Share of European CLO assets in default SHARE OF EUROPEAN CLO ASSETS IN DEFAULT $ value of assets in default Share of assets in default <= CLO Vintage *Based on a universe of 218 European CLOs SHARE OF EUROPEAN CLO ASSETS IN DEFAULT 10.00% 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% 2.7% of European CLO assets are in default. For CLOs still in their stated reinvestment period, 1.7% of their assets are in default versus 3.2% for those CLOs past their reinvestment date. CLO MARKET ANALYSIS 72

73 Healthcare Technology Retail Gen Mfg. Bus. Services Services Telecom Fin. Services Broadcasting Chem & Plastics Auto Leisure & Ent. Utilities Wholesale Media Share of U.S. CLO loan assets TOP INDUSTRIES U.S. CLOS TOP INDUSTRIES U.S. CLOS 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% CLO MARKET ANALYSIS For U.S. CLOs, the top sector loan holdings are Healthcare (13.5%), Technology (10%), and Retail & Supermarkets (5.8%). The top 10 sectors account for 65% of overall U.S. CLO loan holdings. 73

74 Broadcasting Healthcare Gen Mfg. Telecom Retail Media Bus. Services Chem & Plastics Restaurants Wholesale Technology Leisure & Ent. Textiles & App. Share of European CLO loan assets Services Utilities TOP INDUSTRIES EUROPEAN CLOS TOP INDUSTRIES EUROPEAN CLOS 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% CLO MARKET ANALYSIS For European CLOs, the top sector loan holdings are Broadcasting (12%), Healthcare (11.4%), and General Manufacturing (9.4%). The top 10 sectors account for 70% of European CLO loan holdings. 74

75 LOAN MUTUAL FUND FLOWS & RETURNS

76 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Fund flows ($ Bils.) LOAN VS. HY BOND FUND FLOWS - MONTHLY MONTHLY LOAN VS. HY BOND FUND FLOWS HY bond fund flows Loan fund flows LOAN FUND FLOWS & RETURNS Loan funds continued to experience strong inflows in July, while HY bonds reversed course and added money after experiencing large outflows in June. Loan fund inflows amounted to $6.7 billion In July, while high yield bond fund inflows totaled $5.4 billion (despite an outflow of over $1 billion in the last week of July). 76

77 LOAN VS. HY BOND FUND FLOWS - ANNUAL ANNUAL LOAN VS. HY BOND FUND FLOWS LOAN FUND FLOWS & RETURNS Year to date through July, loan funds have pulled in $39.4 billion, while in contrast high yield bond funds have suffered outflows of $8.9 billion 77

78 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Fund flows ($ Bils.) LOAN FUND FLOWS MUTUAL FUND VS. ETF BREAKOUT LOAN FUND FLOWS MUTUAL FUND VS. ETF BREAKOUT Loan ETFs Loan Mutual Funds LOAN FUND FLOWS & RETURNS Breaking out loan fund flows into the mutual fund and ETF categories, we see that loan mutual funds have pulled in $35.6 billion year to date through July, while ETFs have added $3.9 billion. 78

79 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Returns (%) LOAN FUNDS VS. LOAN INDEX MONTHLY RETURNS MONTHLY FUND VS. INDEX RETURNS Open-end Loan Funds* S&P/LSTA Leveraged Loan Index LOAN FUND FLOWS & RETURNS *Based on a straight average of all open-end loan fund returns. Open-end loan funds returned an average of 1.10% in July, while the S&P/LSTA loan index returned 0.99%. Through July this year, open-end loan funds have returned 3.51% on average versus a gain of 3.4% for the S&P/LSTA loan index. 79

80 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Returns (%) LOAN VS. HY BOND FUNDS MONTHLY RETURNS MONTHLY FUND RETURNS Open-end Loan Funds* Open-end HY Bond Funds* LOAN FUND FLOWS & RETURNS *Based on a straight average of all open-end fund returns. HY bond funds bounced back from their loss in the prior month. Open-end HY bond funds gained 1.89% in July, compared to a return of 1.10% for loan funds. Year to date, open-end HY bond funds have gained 3.27% while loan fund returns are at 3.51%. 80

81 CDS MARKET SNAPSHOT

82 3/25/2008 6/25/2008 9/25/ /25/2008 3/25/2009 6/25/2009 9/25/ /25/2009 3/25/2010 6/25/2010 9/25/ /25/2010 3/25/2011 6/25/2011 9/25/ /25/2011 3/25/2012 6/25/2012 9/25/ /25/2012 3/25/2013 6/25/ /4/2009 3/4/2010 6/4/2010 9/4/ /4/2010 3/4/2011 6/4/2011 9/4/ /4/2011 3/4/2012 6/4/2012 9/4/ /4/2012 3/4/2013 6/4/2013 Spread (bps) Price (% of par) Spread (bps) CDS INDEX SPREADS CDX.NA.IG SPREAD CDX.NA.HY price / spread Price Spread CDS MARKET SNAPSHOT Spreads for the CDX IG Index moved lower in July finishing the month 12 bps tighter at 77 bps. Similarly, prices on the CDX HY index increased to the context, 2.3 points higher than a month ago, tightening the spread to 367 bps. 82

83 14-Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun-13 Avg. CDS Spread (bps) THOMSON REUTERS COUNTERPARTY DEFAULT INDEX COUNTERPARTY DEFAULT INDEX* CDS MARKET SNAPSHOT Average bank CDS spreads fell in July as market volatility subsided, ending the month at 123 bps, down from 145 bps a month earlier, and 161 bps in late June. *The index tracks counterparty risk as reflected by average spreads of 5 year CDS for the top CDS dealers that operate in the CDS market. 83