Credit Markets: Is It a Bubble?

Transcription

1 Credit Markets: Is It a Bubble? Dr. Edward Altman NYU Stern School of Business 2015 Luncheon Conference TMA, NY Chapter New York January 21,

2 Is It a Bubble? Focus on Default Rates in Credit Markets Length of Benign Credit Cycles Coincidence with Recessions: U.S. & European Scenarios Default Rates and Bankruptcy Filings Comparative Health of High-Yield Firms (2007 vs. 2012/2014) High-Yield and CCC New Issuance LBO Statistics and Trends Liquidity Concerns Potential Downgrades Far Exceed Upgrades (S&P) as of Beginning of 2015 Large Increase in the Distress Ratio Possible Timing of the Bubble Burst 2

3 Historical Default Rates Straight Bonds Only Excluding Defaulted Issues From Par Value Outstanding, (US$ millions), (1/15) Year Par Value Outstanding a ($) Par Value Defaults ($) Default Rates (%) 2015 (1/15) 1,540,308 12, ,496,814 31, ,392,212 14, ,212,362 19, ,354,649 17, ,221,569 13, ,152, , ,091,000 50, ,075,400 5, ,600 7, ,073,000 36, ,100 11, ,000 38, ,000 96, ,000 63, ,200 30, ,400 23, ,500 7, ,400 4, ,000 3, ,000 4, ,000 3, ,907 2, ,000 5, ,600 18, ,000 18, ,258 8, ,187 3, a Weighted by par value of amount outstanding for each year. Year Par Value Outstanding* ($) Par Value Defaults ($) Default Rates (%) ,557 7, , , , , , , , , , , , , , , , , Arithmetic Average Default Rate (%) Standard Deviation (%) 1971 to to to Weighted Average Default Rate (%)* 1971 to to to Median Annual Default Rate (%) 1971 to Source: Author s compilation and Citigroup/Credit Suisse estimates 3

4 Default Rates on High-Yield Bonds Quarterly Default Rate and Four-Quarter Moving Average (Preliminary) 6.0% 16.0% 5.0% 14.0% 12.0% Quarterly Default Rate 4.0% 3.0% 2.0% 1.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Quarter Moving Average 0.0% Quarterly Moving Source: Author s Compilations 4

5 Historical European High-Yield Default Rates 20% 33.91% 18% 17.28% Default Rate 16% 14% 12% 10% 8% 6% 12.43% 6.56% 4% 2% 2.35% 2.60% 1.20% 1.97% 0.97% 0.53% 1.00% 1.60% 1.06% 3.20% 0.97% 0.70% 0.89% 0% Source: Credit Suisse 5

6 Historical Default Rates and Recession Periods in the U.S. High-Yield Bond Market ( (Preliminary)) 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Periods of Recession: 11/73-3/75, 1/80-7/80, 7/81-11/82, 7/90-3/91, 4/01 12/01, 12/07-6/09 *All rates annual. Source: E. Altman (NYU Salomon Center) & National Bureau of Economic Research 6

7 Filings for Chapter 11 Number of Filings and Pre-petition Liabilities of Filing Companies (1/15) Pre- Petition Liabilities, in $ billions (left axis) Median Liabilities Number of Filings (right axis) Series3 $ $ $ Billion $600 $500 $400 $300 $ (1/15) 1 filings and liabilities of $0.3 billion 2015 (1/15) $ $ (1/15) 3 filings and liabilities of $20.2 billion Note: Minimum $100 million in liabilities Source: NYU Salomon Center Bankruptcy Filings Database Mean : 74 filings Median : 54 filings 7

8 Number of Public Company Chapter 11 Filings versus High-Yield Default Rate (Preliminary) No. of Filings Default Rate (%) No. of Filings Default Rate (%) Note: Correlation between number of filings and default rate for the period from 1990 through 2014 was Sources: The Bankruptcy Almanac, annually, Boston: New Generation Research and Altman-Kuehne Annual High-Yield Default Rates, NYU Salomon Center. 8

9 YTM & Option-Adjusted Spreads Between High Yield Markets & U.S. Treasury Notes June 01, 2007 January 15, ,700 Yield Spread (YTMS) OAS Average YTMS ( ) Average OAS ( ) 2,200 12/16/08 (YTMS = 2,046bp, OAS = 2,144bp) 1,700 1, YTMS = 540bp, OAS = 545bp 1/15/15 (YTMS = 544bp, OAS = 542bp) 200 6/12/07 (YTMS = 260bp, OAS = 249bp) 6/1/2007 7/27/2007 9/21/ /16/2007 1/15/2008 3/11/2008 5/6/2008 7/1/2008 8/26/ /21/ /16/2008 2/12/2009 4/9/2009 6/4/2009 7/30/2009 9/24/ /19/2009 1/18/2010 3/15/2010 5/10/2010 7/5/2010 8/30/ /25/ /20/2010 2/14/2011 4/11/2011 6/6/2011 8/1/2011 9/26/ /21/2011 1/18/2012 3/14/2012 5/9/2012 7/4/2012 8/29/ /24/ /19/2012 2/15/2013 4/12/2013 6/7/2013 8/2/2013 9/27/ /22/2013 1/21/2014 3/18/2014 5/13/2014 7/8/2014 9/2/ /28/ /23/2014 Sources: Citigroup Yieldbook Index Data and Bank of America Merrill Lynch. 9

10 Comparative Health of High-Yield Firms (2007 vs. 2012/2014) 10

11 Z-Score Component Definitions and Weightings Variable Definition Weighting Factor X 1 Working Capital 1.2 Total Assets X 2 Retained Earnings 1.4 Total Assets X 3 EBIT 3.3 Total Assets X 4 Market Value of Equity 0.6 Book Value of Total Liabilities X 5 Sales 1.0 Total Assets 11

12 Z Score Model for Manufacturers, Non-Manufacturer Industrials; Developed and Emerging Market Credits Z = 6.56X X X X X 1 = Current Assets - Current Liabilities X 2 = Total Assets Retained Earnings Total Assets X 3 = Earnings Before Interest and Taxes X 4 = Total Assets Book Value of Equity Total Liabilities 12

13 Average Z-Score by S&P Bond Rating Rating Average Z-Score Standard Deviation AAA AA A BBB BB B CCC D Source: E. Altman and E. Hotchkiss (2006), Corporate Financial Distress and Bankruptcy, John Wiley & Sons, pp.247/

14 Comparing Financial Strength of High-Yield Bond Issuers in 2007& 2012/2014 Year Average Z-Score/ (BRE)* Median Z-Score/ (BRE)* Average Z -Score/ (BRE)* Median Z -Score/ (BRE)* (B) 1.81 (B) 4.58 (B+) 4.61 (B+) (B) 1.59 (B) 4.60 (B+) 4.60 (B+) (B+) 1.80 (B) 4.67 (B+) 4.56 (B+) Difference in Means Test (2007 vs. 2012/2014) Model Average Difference (2012/2014) Number of Firms Z-Score Standard Deviation (2007/2012/2014) Z -Score t-test (2012/2014) Significance Level (2012/2014) Significant at.05? (2012/2014) Z-Score -0.23/ / 1.15/ / %/9.70% Yes /No Z -Score +0.02/ / 2.07/ / %/28.78% No/No *Bond Rating Equivalent Source: Authors calculations, data from Altman and Hotchkiss (2006) and S&P Capital IQ. 14

15 New Issuance: U.S. High-Yield Bond Market ($ millions) Ratings Source: Bank of America Merrill Lynch Annual Total BB B CCC (CCC % H.Y.) NR , , , ,750.9 (19.3%) 1, , , , ,319.2 (19.2%) 1, , , , ,627.6 (37.4%) 3, , , , ,034.4 (21.7%) 2, , , , ,248.4 (8.0%) , , , ,046.8 (15.3%) 3, , , , ,375.0 (11.6%) 3, , , , ,690.2 (17.4%) 6, (1Q) 73, , , ,480.0 (15.6%) (2Q) 62, , , ,790.0 (22.2%) (3Q) 73, , , ,196.6 (24.7%) 0.0 (4Q) 60, , , ,175.0 (23.3%) Totals 270, , , ,641.6 (21.3%) (1Q) 51, , , ,842.5 (15.2%) (2Q) 74, , , ,363.6 (25.9%) (3Q) 59, , , ,875.0 (18.2%) (4Q) 52, , , ,840.0 (3.5%) Totals 238, , , ,921.1 (16.7%) 1,

16 New Issuance: European High-Yield Bond Market Face Values (US$) Ratings Annual Total BB B CCC (CCC % HY) NR USD EUR GBP , , , ,936.6 (29.8%) , , , , , , ,020.5 (18.1%) , , , , , (3.0%) , , , , , , , , , , ,771.3 (11.5%) 1, , , , , , ,170.7 (3.8%) 3, , , , , , , ,108.7 (6.8%) 1, , , , , , , ,186.7 (11.0%) 2, , , , (1Q) 27, , , , , , , ,837.4 (2Q) 30, , , , , , ,074.0 (3Q) 16, , , , , , ,604.4 (4Q) 16, , , , , , , , Totals 91, , , ,972.9 (15.3%) 3, , , , (1Q) 27, , , ,230.0 (4.5%) 1, , , ,501.4 (2Q) 65, , , ,111.1 (6.2%) 2, , , ,096.7 (3Q) 15, , , ,241.3 (7.8%) , , ,744.6 (4Q) 10, , , (6.1%) 1, , , Totals 119, , , ,236.9 (5.1%) 6, , , ,342.7 Source: BoAML 16

17 U.S. & European High-Yield Bond Market: New Issuance ($ millions) 300, , , , , ,762.7 New Issuance ($ millions) 200, , ,000 50, , , , , , , , , , , , , , , , , U.S. Europe Source: Bank of America Merrill Lynch 17

18 U.S. & European High-Yield Bond Market: CCC Rated New Issuance (%) 40% 37.4% New Issuance Rated CCC (%) 30% 20% 10% 29.8% 21.7% 19.3% 19.2% 18.1% 3.0% 25.9% 21.3% 17.4% 18.2% 15.3% 15.3% 16.7% 15.2% 11.5% 11.6% 11.0% 8.0% 6.8% 6.2% 7.8% 6.1% 5.1% 3.8% 4.5% 3.5% 0% n/a Q Q Q Q 2014 U.S. Europe Source: Bank of America Merrill Lynch 18

19 New Issues Rated B- or Below, Based on the Dollar Amount of Issuance ( ) 70.00% 60.00% 50.00% 51.25% 40.00% 30.00% 20.00% 10.00% 0.00% 18.16% 23.35% 19.40% 21.48% 27.27% 40.75% 30.41% 32.97% 13.73% % 29.55% 39.06% 33.57% 33.00% Source: S&P Capital IQ LCD % 21.38% 26.73% % 31.95% 29.62% 29.22% 29.19% 27.04% 26.13% 12.13% Q 14 2Q 14 3Q14 4Q 14

20 Mortality Rates by Original Rating All Rated Corporate Bonds* (Preliminary) Years After Issuance *Rated by S&P at Issuance Based on 2,847 issues AAA Marginal 0.00% 0.00% 0.00% 0.00% 0.01% 0.02% 0.01% 0.00% 0.00% 0.00% Cumulative 0.00% 0.00% 0.00% 0.00% 0.01% 0.03% 0.04% 0.04% 0.04% 0.04% AA Marginal 0.00% 0.00% 0.22% 0.08% 0.02% 0.01% 0.01% 0.01% 0.02% 0.01% Cumulative 0.00% 0.00% 0.22% 0.30% 0.32% 0.33% 0.34% 0.35% 0.37% 0.38% A Marginal 0.01% 0.03% 0.13% 0.14% 0.11% 0.07% 0.02% 0.26% 0.08% 0.05% Cumulative 0.01% 0.04% 0.17% 0.31% 0.42% 0.49% 0.51% 0.77% 0.85% 0.90% BBB Marginal 0.34% 2.38% 1.28% 1.01% 0.51% 0.23% 0.27% 0.15% 0.15% 0.35% Cumulative 0.34% 2.71% 3.96% 4.93% 5.41% 5.63% 5.88% 6.03% 6.17% 6.50% BB Marginal 0.95% 2.03% 3.90% 1.97% 2.35% 1.53% 1.47% 1.13% 1.45% 3.15% Cumulative 0.95% 2.96% 6.75% 8.58% 10.73% 12.10% 13.39% 14.37% 15.61% 18.27% B Marginal 2.86% 7.74% 7.86% 7.81% 5.71% 4.46% 3.56% 2.09% 1.77% 0.76% Cumulative 2.86% 10.38% 17.42% 23.87% 28.22% 31.42% 33.86% 35.24% 36.39% 36.87% CCC Marginal 8.15% 12.44% 17.92% 16.35% 4.68% 11.53% 5.45% 4.86% 0.69% 4.30% Cumulative 8.15% 19.58% 33.99% 44.78% 47.37% 53.43% 55.97% 58.11% 58.40% 60.19% Source: Standard & Poor's (New York) and Author's Compilation 20

21 CCC New Bond Issuance by Purpose 2014 U.S. Europe Refinancing 32.58% 48% LBO 22.62% M&A 17.89% 21% Recap/Dividends 20.04% Corporate Purpose 5.43% 31% Project Financing 1.45% Total 100% 100% *Loans Only Source: Standard & Poor s LCD & Credit Suisse 21

22 Purchase Price Multiples Purchase Price Multiple excluding Fees for LBO Transactions 12x 10x 8x 6x x 2x N/A 0x (# obs.) 1998 (90) 1999 (133) 2000 (116) 2001 (51) 2002 (40) 2003 (66) 2004 (127) 2005 (134) 2006 (178) 2007 (207) 2008 (69) 2009 (23) 2010 (78) 2011 (87) 2012 (97) 2013 (95) 2014 (139) 4Q14 (31) Public-to-Private All Other Source: S&P Capital IQ LCD 22

23 Average Total Debt Leverage Ratio for LBO s: Europe and US with EBITDA of /$50M or More 7.0x x 5.0x 4.0x x 2.0x 1.0x 0.0x Europe US Source: S&P Capital IQ LCD 23

24 LBO Statistics & Ratios: 2007 vs M&A/LBO as a % of Total Issuance % 40% Direction of Change Purchase Multiple x x Debt to Inception EBITDA to Cash Interest Equity Contribution 6.2x 5.8x 2.1x 3.5x 31% 37% Source: Guggenheim Investments and S&P Capital IQ 24

25 Share of Large LBOs with Leverage More than 7x Q

26 Cumulative Default Experience by Initial Leverage Ratio 26

27 Average (EBITDA-capex)/Cash Interest of Large LBOs Q

28 Cumulative Default Experience by Initial Cash- Flow-Coverage Ratio 28

29 Lenders Leave the Lite On Q

30 Default Rate Forecasting 30

31 Method 1: Mortality Approach 31

32 New Issues Rated B- or Below, Based on the Dollar Amount of Issuance ( ) 70.00% 60.00% 50.00% 51.25% 40.00% 30.00% 20.00% 10.00% 0.00% 18.16% 23.35% 19.40% 21.48% 27.27% 40.75% 30.41% 32.97% 13.73% % 29.55% 39.06% 33.57% 33.00% Source: S&P Capital IQ LCD % 21.38% 26.73% % 31.95% 29.62% 29.22% 29.19% 27.04% 26.13% 12.13% Q 14 2Q 14 3Q14 4Q 14

33 Marginal and Cumulative Mortality Rate Actuarial Approach MMR (r,t) = total value of defaulting debt from rating (r) in year (t) total value of the population at the start of the year (t) MMR = Marginal Mortality Rate One can measure the cumulative mortality rate (CMR) over a specific time period (1,2,, T years) by subtracting the product of the surviving populations of each of the previous years from one (1.0), that is, CMR (r,t) = 1 - SR (r,t), t = 1 N r = AAA CCC here CMR (r,t) = Cumulative Mortality Rate of (r) in (t), SR (r,t) = Survival Rate in (r,t), 1 - MMR (r,t) 33

34 Default Lag After Issuance: B & CCC Rated Corporate Bonds Default Lag after Issuance for B Default Lag after Issuance for CCC Ratings Ratings Default Rate 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 7.74% 7.86% 7.81% 5.71% 4.46% 3.56% 2.86% 2.09% 1.77% 0.76% Default Rate 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 8.15% 12.44% 17.93% 16.35% 4.68% 11.53% 5.45% 4.86% 4.30% 0.69% Years after Issuance Years after Issuance Source: Altman Mortality Tables ( ) Source: Altman Mortality Tables ( ) 34

35 Mortality Rates by Original Rating All Rated Corporate Bonds* (Preliminary) Years After Issuance *Rated by S&P at Issuance Based on 2,847 issues AAA Marginal 0.00% 0.00% 0.00% 0.00% 0.01% 0.02% 0.01% 0.00% 0.00% 0.00% Cumulative 0.00% 0.00% 0.00% 0.00% 0.01% 0.03% 0.04% 0.04% 0.04% 0.04% AA Marginal 0.00% 0.00% 0.22% 0.08% 0.02% 0.01% 0.01% 0.01% 0.02% 0.01% Cumulative 0.00% 0.00% 0.22% 0.30% 0.32% 0.33% 0.34% 0.35% 0.37% 0.38% A Marginal 0.01% 0.03% 0.13% 0.14% 0.11% 0.07% 0.02% 0.26% 0.08% 0.05% Cumulative 0.01% 0.04% 0.17% 0.31% 0.42% 0.49% 0.51% 0.77% 0.85% 0.90% BBB Marginal 0.34% 2.38% 1.28% 1.01% 0.51% 0.23% 0.27% 0.15% 0.15% 0.35% Cumulative 0.34% 2.71% 3.96% 4.93% 5.41% 5.63% 5.88% 6.03% 6.17% 6.50% BB Marginal 0.95% 2.03% 3.90% 1.97% 2.35% 1.53% 1.47% 1.13% 1.45% 3.15% Cumulative 0.95% 2.96% 6.75% 8.58% 10.73% 12.10% 13.39% 14.37% 15.61% 18.27% B Marginal 2.86% 7.74% 7.86% 7.81% 5.71% 4.46% 3.56% 2.09% 1.77% 0.76% Cumulative 2.86% 10.38% 17.42% 23.87% 28.22% 31.42% 33.86% 35.24% 36.39% 36.87% CCC Marginal 8.15% 12.44% 17.92% 16.35% 4.68% 11.53% 5.45% 4.86% 0.69% 4.30% Cumulative 8.15% 19.58% 33.99% 44.78% 47.37% 53.43% 55.97% 58.11% 58.40% 60.19% Source: Standard & Poor's (New York) and Author's Compilation 35

36 All Rated Corporate Bonds* (Preliminary) *Rated by S&P at Issuance Based on 2,354 issues Mortality Losses by Original Rating Years After Issuance AAA Marginal 0.00% 0.00% 0.00% 0.00% 0.01% 0.01% 0.01% 0.00% 0.00% 0.00% Cumulative 0.00% 0.00% 0.00% 0.00% 0.01% 0.02% 0.03% 0.03% 0.03% 0.03% AA Marginal 0.00% 0.00% 0.02% 0.02% 0.01% 0.01% 0.00% 0.01% 0.01% 0.01% Cumulative 0.00% 0.00% 0.02% 0.04% 0.05% 0.06% 0.06% 0.07% 0.08% 0.09% A Marginal 0.00% 0.02% 0.05% 0.06% 0.06% 0.03% 0.02% 0.02% 0.05% 0.03% Cumulative 0.00% 0.02% 0.07% 0.13% 0.19% 0.22% 0.24% 0.26% 0.31% 0.34% BBB Marginal 0.24% 1.55% 0.77% 0.59% 0.27% 0.14% 0.16% 0.09% 0.09% 0.20% Cumulative 0.24% 1.79% 2.54% 3.12% 3.38% 3.51% 3.67% 3.76% 3.84% 4.03% BB Marginal 0.56% 1.18% 2.30% 1.12% 1.33% 0.73% 0.79% 0.49% 0.74% 1.11% Cumulative 0.56% 1.73% 3.99% 5.07% 6.33% 7.02% 7.75% 8.20% 8.88% 9.89% B Marginal 1.92% 5.41% 5.34% 5.22% 3.77% 2.45% 2.32% 1.16% 0.92% 0.52% Cumulative 1.92% 7.23% 12.18% 16.76% 19.90% 21.86% 23.68% 24.56% 25.26% 25.65% CCC Marginal 5.38% 8.70% 12.55% 11.50% 3.32% 8.65% 4.07% 3.40% 0.42% 2.75% Cumulative 5.38% 13.61% 24.45% 33.14% 35.36% 40.95% 43.36% 45.28% 45.51% 47.01% Source: Standard & Poor's (New York) and Author's Compilation 36

37 Methods 2 & 3: Market-Based Measures 37

38 Updated Market-Based Annual Default Rate Forecast Annual Default Rate (t+1) versus High-Yield Spreads (t) Default Rate (t+1) % Annual Default Rates (t+1) vs. Yield-Spreads (t) ( ) y = x R 2 = Yield-Spread (t) % The regression equation is Default Rate = * Spread Predictor Coef SE Coef T P Constant Spread S = R-Sq = 61.5% R-Sq(adj) = 60.4% Application Yield spread (12/30/2011) of 654bp, forecast P D for 2012 = 4.80% vs. actual of 1.62% Yield spread (12/31/2012) of 506bp, forecast P D for 12/31/2013 = 3.32% vs. actual of 1.04% Yield spread (12/31/2013) of 345bp, forecast P D for 12/31/2014 = 1.30% vs. actual of 2.11% Yield spread (12/31/2014) of 500bp, forecast PD for 12/31/2015 = 3.38% Sources: Slides 3 & 8 and authors compilations 38

39 Distress Ratio History Date Distress Ratio Annual Default Rate (t+1) Default Rate (t+1) /Distress Ratio (t) (%) 12/31/ /31/ /31/ /31/ /31/ /31/ /31/ /31/ /31/ /31/ /31/ /31/ /31/ /31/ /31/ n/a n/a Average Median Sources: Bank of America Merrill Lynch & NYU Salomon Center 39

40 Distress Ratio History /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/2014 Distress Ra o Median Distress Ra o Source: Bank of America Merrill Lynch 40

41 Estimated Size of the Distressed Bond Market Based on Distress Ratio HY Bond Mkt Distressed Bond Mkt $ Billions 1,650 1,500 1,350 1,200 1, Sources: Distress Ratio used in calculations from BofAML. HY Bond Market size from NYU Salomon Center estimates. 41

42 Updated Market-Based Annual Default Rate Forecast Annual Default Rate (t+1) versus Distressed Ratio (t) Default Rate (t+1) % Annual Default Rates (t+1) vs. Distress Ra os (t) ( ) y = x R 2 = Distress Ra o (t) % The regression equation is Default Rate = * Distress Ratio Predictor Coef SE Coef T P Constant Spread S = R-Sq = 76.5% R-Sq(adj) = 75.4% Application Distress ratio (12/30/2011) of 17.88%, forecast P D for 2012 = 3.93% vs. actual of 1.62% Distress ratio (12/31/2012) of 9.88%, forecast P D for 12/31/2013 = 2.65% vs. actual of 1.04% Distress ratio (12/31/2013) of 5.29%, forecast P D for 12/31/2014 = 1.61% vs. actual of 2.11% Distress ratio (12/31/2014) of 11.56%, forecast P D for 12/31/2015 = 2.52% Sources: Bank of America Securities and authors compilations 42

43 Default and Recovery Forecasts: Summary of Forecast Models Model 2013 (12/31) Default Rate Forecast as of 12/31/ (12/31) Default Rate Forecast as of 12/31/ (12/31) Default Rate Forecast as of 12/31/2014 Mortality Rate 3.73% 3.25% 3.95% Yield-Spread 3.32% a 1.30% c 3.38% e Distress Ratio 2.65% b 1.61% d 2.52% f Average of Models 3.23% 2.05% 3.28% Recovery Rates* 39.7% 44.5% 39.5% * Recovery rate based on the log Linear equation between default and recovery rates, see Altman, et al (2005) Journal of Business, November and Slide 80. a Based on Dec. 31, 2012 yield-spread of 505.8bp. b Based on Dec. 31, 2012 Distress Ratio of 9.88%. e Based on Dec.31, 2013 yieldspread of 344.6bp. d Based on Dec. 31, 2013 Distress Ratio of 5.29%. e Based on Dec. 31, 2014 yield-spread of 499.9bp. f Based on Dec. 31, 2014 Distress Ratio of 11.56%. Source: All Corporate Bond Issuance and Authors Estimates of Market Size in 2013, 2014 &