Third Quarter Financial Results NOVEMBER 14, 2016

Transcription

1 Third Quarter 2016 Financial Results NOVEMBER 14, 2016

2 Certain infrmatin in this presentatin is frward-lking and related t anticipated financial perfrmance, events and strategies. When used in this cntext, wrds such as will, anticipate, believe, plan, intend, target and expect r similar wrds suggest future utcmes. Frward-lking statements relate t, amng ther things, ECN Capital Crp. s ( ECN Capital ) bjectives and strategy; future cash flws, financial cnditin, perating perfrmance, financial ratis, prjected asset base and capital expenditures; ECN Capital s anticipated dividend plicy; anticipated cash needs, capital requirements and need fr and cst f additinal financing; future assets; demand fr services; ECN Capital s cmpetitive psitin; and anticipated trends and challenges in ECN Capital s business and the markets in which it perates; and the plans, strategies and bjectives f ECN Capital fr the future. The frward-lking infrmatin and statements cntained in this presentatin reflect several material factrs and expectatins and assumptins f ECN Capital including, withut limitatin: that ECN Capital will cnduct its peratins in a manner cnsistent with its expectatins and, where applicable, cnsistent with past practice; the general cntinuance f current r, where applicable, assumed industry cnditins; the cntinuance f existing (and in certain circumstances, the implementatin f prpsed) tax and regulatry regimes; certain cst assumptins; the cntinued availability f adequate debt and/r equity financing and cash flw t fund its capital and perating requirements as needed; and the extent f its liabilities. ECN Capital believes the material factrs, expectatins and assumptins reflected in the frward-lking infrmatin and statements are reasnable but n assurance can be given that these factrs, expectatins and assumptins will prve t be crrect. By their nature, such frward-lking infrmatin and statements are subject t significant risks and uncertainties, which culd cause the actual results and experience t be materially different than the anticipated results. Such risks and uncertainties include, but are nt limited t, perating perfrmance, regulatry and gvernment decisins, cmpetitive pressures and the ability t retain majr custmers, rapid technlgical changes, availability and cst f financing, availability f labr and management resurces, the perfrmance f partners, cntractrs and suppliers. Readers are cautined nt t place undue reliance n frward-lking statements as actual results culd differ materially frm the plans, expectatins, estimates r intentins expressed in the frward-lking statements. Except as required by law, ECN Capital disclaims any intentin and assumes n bligatin t update any frward-lking statement, whether as a result f new infrmatin, future events r therwise. 2

3 Basis f Presentatin Separatin transactin clsed n Octber 3, 2016 ECN Capital started trading n the TSX n Separatin date under ticker TSX:ECN ECN Capital spun-ut f Element Financial Crpratin ( Element ) (nw knwn as Element Fleet Management Crp.) Cnvertible debt and preferred shares f Element remained with Element Separate and stand-alne USD $2.5 billin 3 year senir credit facility established fr ECN Capital at time f Separatin Investment grade rating received frm bth DBRS and Krll Financial results f ECN Capital reprted as Distributed Operatins inside financial cnslidated statements f Element as at and fr the quarter ended September 30, 2016; the infrmatin presented in this reprt namely the perating financial results, data and statistics are presented: On a carve-ut basis as if the business f ECN Capital had perated n a stand-alne basis fr the current and prir cmparative perids Reflects intercmpany expense allcatins made fr certain crprate functins, shared services and emplyee related csts made n a specific identificatin basis and applied n a cnsistent basis ECN Capital will start reprting n its wn effective n the date f Separatin ging frward 3

4 Q Analyst Cnference Call STRATEGY AND CORPORATE OVERVIEW OPERATING HIGHLIGHTS Summary Cmmercial & Vendr Finance Rail Finance Aviatin Finance CONSOLIDATED FINANCIAL SUMMARY CORPORATE INITIATIVES APPENDIX QUESTIONS 4

5 STRATEGY AND CORPORATE OVERVIEW Steven Hudsn Chief Executive Officer 5

6 Strategy Fr 30 years, ECN Capital s management has pursued a strategy f successfully deplying capital within asset classes that cmprise the specialty finance sectr. Strategy is cmprised f 4 key drivers 1. Building rbust specialty finance businesses that have grwn and prspered even in difficult cycles and acting pprtunistically within a specific framewrk t maximize returns thrugh the cycle 2. Originating, servicing and mnetizing prtflis f financial assets with yield, grwth and credit characteristics that have cnsistently delivered superir risk-adjusted returns t sharehlders 3. Scaling rbust businesses rganically and thrugh acquisitins that are cmpetitively psitined t cmplement banks and institutinal investrs 4. Designing ptimal capital structures that prvide brad access t varius debt and equity funding surces 6

7 Overview INITIATIVES AND ASSUMPTIONS Expected imprvement in ROAA frm: Reductin in senir management cmpensatin Eliminatin f sub-perfrming vendr prgrams (US wners/peratrs heavy duty trucking) Right size certain peratins Expand market reach and yields in C&V Canada Bk value f $4.42 with n sft assets Recent Rail and C&V transactins validate asset and equity values Aviatin run-ff prceeding ahead f frecast Aviatin and Rail pr-frma dn t include fees and returns frm future fund vehicles ANNUALIZED PRO-FORMA OPERATING STATISTICS ($MM) Finance Assets Wrking Capital Secured Debt Equity ($MM) Pre-Tax ROE Pre-Tax ROAA Rail $2,300.2 $117.7 $1,771.7 $ % 3.0% C&V US $1,418.6 $49.9 $1,161.1 $ % 2.4% C&V Canada $903.2 $74.1 $760.4 $ % 2.1% Aviatin $1,012.0 $103.4 $575.3 $ % 4.5% Cnslidated $5,634.0 $345.1 $4,268.5 $1, % 3.0% 7

8 OPERATING HIGHLIGHTS OVERVIEW Steven Hudsn Chief Executive Officer 8

9 Q3 Operating Highlights SUMMARY Investment grade rating received frm bth DBRS and Krll Establishment f stand-alne 3 year senir credit facility fr US $2.5 billin Intrductin f cmmn share dividends Originatins f $407.0 millin Cnslidated befre-tax adjusted perating incme return n average finance assets f 2.2% Average debt advance rate t average finance assets f 79.3% After-tax adjusted EPS f $0.07 Tangible leverage f 2.51:1 Significant access t capital fr bth rganic and acquisitive grwth 9

10 Operating Highlights ORIGINATIONS TOTAL EARNING ASSETS Cntinuing Operatins/Prgrams $ millins Q Q Q Q Q Q Cmmercial & Vendr (excl. Disc. Prgrams) , , ,302.0 Discntinued Operatins/Prgrams Rail Finance , , , , , ,598.2 Cmmercial & Vendr (Disc. Prgrams) Assets under Management Aviatin Finance , , ,032.8 Aviatin Fund , ,894.0 Ttal Earning Assets under Management , , ,

11 Gegraphic Diversificatin EARNING ASSETS BY REGION September 30, 2015 EARNING ASSETS BY REGION September 30, % 1% 26% 32% 65% 73% US Canada Other US Canada Other 11

12 COMMERCIAL & VENDOR FINANCE Jim Nikpuls Chief Operating Officer 12

13 Cmmercial &Vendr Finance Highlights KEY HIGHLIGHTS Originatins in U.S. decreased largely as a result f discntinued nn-fleet heavy duty trucking prgrams arising frm ur prgramby-prgram review Originatins up in Canada QQ (4.6%) as a result f rganic grwth ROAA was dwn frm Q2 due t lwer yielding assets and syndicatin activities and higher funding csts frm increased leverage and an increase in prvisin fr credit lsses frm discntinued prgrams ROAA pr-frma f 2.3% pst discntinued prgrams excluding lsses frm wner/peratr heavy duty trucking Prtfli perfrmance cntinues t perfrm well with minimal expsure t Oil & Gas sectr (2.3% f earning assets) Incme Statement Interest incme and rental revenue net less interest expense Q Q Q ,751 10,611 8,092 Syndicatin and ther incme 8,377 3,968 3,768 Operating expenses 10,848 7,012 10,010 Adjusted perating incme befre tax Key Ratis (1) 9,280 7,567 1,850 Q Q Q Average earning assets ($MM) 1,883 2,142 2,293 Financial revenue yield 7.2% 5.9% 5.5% Interest expense 2.9% 3.2% 3.4% Net interest margin yield 4.3% 2.7% 2.2% Adjusted OpEx rati 2.3% 1.3% 1.8% ROAA 2.0% 1.4% 0.3%/ 2.3% (1) Adjusted perating Incme n average earning assets (2) Average debt as a percent f average earning assets Actual debt advance rate (2) 78.9% 77.9% 81.6% 13

14 MAKING CAPITAL WORK Cmmercial & Vendr Finance Update Cre prgram initiatives have resulted in cntinued expansin f vendr relatinships Dsan prgram expanded t include Industrial Lift Truck Divisin (expecting up t $50 millin f additinal vlume in 2017) Wabash natinal prgram cntinues t expand in divisins served (first year riginatin vlume prjected at $60 millin) Panasnic awarded technlgy upgraded campaign with Big 3 autmaker (expected t generate up t $40 millin f new vlume in 2017) Cntinued t add new prgrams acrss verticals Manitex prgram exclusivity (cnstructin and material handling equipment) and access t natinal dealer distributin (expected first year riginatins f up t $25 millin) Dairy Queen awarded capital campaign fr menu expansin equipment fr future system (prject vlume expected up t $25 millin) Juniper Netwrks signed new prgram agreement (first year annual vlume expected at $25 millin+) Targeted flr-plan financing t incremental term vendr financials fr cre vendrs; Q1,

15 Cmmercial & Vendr Finance Update Yield initiatives Revised pricing matrix recently launched based upn integrated selling requirements (n average, 45 bps f yield imprvement) Transactin size lwered t include higher yielding smaller balance transactin within cre riginatin channels Undertk strategic review f C&V (US) Transprtatin prtfli Determined certain assets were fleet like and transferred t Element Fleet Decisin made t discntinue heavy duty trucking (Class 8) business due t increased cmpetitin and market cnditins Vcatinal trucks and trailer businesses t be retained 15

16 RAIL FINANCE David McKerrll President, Rail & Aviatin Finance 16

17 Rail Finance Update Despite headwinds in the rail market, ECN Capital s Rail business is well psitined INDUSTRY HEADWINDS Manufacturing versupply Decline in railcar ladings in 2016 t date Strng USD putting pressure n cmmdities and exprts Increased railcar velcity due t imprved infrastructure and less traffic Pressure n lease rates and utilizatin, particularly in the energy sectr Slwer than expected dmestic ecnmic grwth ECN CAPITAL POSITIONING Yung fleet f 4.6 years cmpared t industry average f ~19 years Large fleet diversified by car types, cmmdities carried, industries, lessees, and remaining lease terms Strng credits (high investment-grade lessee %) Lng remaining lease terms with limited nearterm repricing risk (~8% in 2017) Limited cal expsure (<2%) Few near term renewals and high utilizatin (97%) Risk Mitigatin Supply and demand f rail equipment cntinued t rebalance during the quarter as evidenced by a decrease in idle railcar equipment, an increase in car ladings and a reductin in new railcar rders and deliveries 17

18 Rail Finance Update Rail assets are highly sught after by large institutinal investrs seeking lng-life assets with sustainable returns thrugh the credit cycle Lw residual value risk and reliance n asset sales High samelessee renewal rates Stable, predictable cash flw thrugh lng lease terms RAIL ASSET VALUATIONS SUPPORTED BY ROBUST DEMAND Strng institutinal/bank interest cntinue t drive demand fr rail assets Secndary market activity cntinue t supprt leased railcar values due t cntinued institutinal demand fr leased railcars Essential-use assets that are imprtant fr lessees revenue Attractive Asset Class Histrically high utilizatin rates thrugh cycles Several new entrants t the railcar leasing industry underpinning asset valuatin: Riverside Rail Stnebriar Lw risk f technlgical bslescence Lng ecnmic useful lives Strng replacement demand expected as railcars age US Bank PNC Bank Instar ITE Management Redwd Rail UFJ 18

19 Rail Highlights KEY HIGHLIGHTS Originatins f $92.1 millin in Q3 as ECN Capital cntinues t be selective t maximize prtfli perfrmance Marginal decline in revenue yield was ffset by syndicatin and ther Incme Prtfli cntinues t perfrm well lng remaining lease term and limited near term lease renewals (8% in 2017) mitigate dwnside risk ECN Capital cntinues t wrk n fund develpment, and is targeting a rail fund clsing early 2017 ECN Capital has cmmitments fr the sale f ~$50 millin f rail cars at a premium f 15% ver bk Incme Statement Interest incme and rental revenue net less interest expense Q Q Q ,420 19,714 19,658 Syndicatin and ther incme (8) 31 3,282 Operating expenses 4,281 5,513 4,953 Adjusted perating incme befre tax Key Ratis (1) 16,131 14,232 17,987 Q Q Q Average earning assets ($MM) 1,753 2,209 2,309 Financial revenue yield 7.4% 6.6% 6.9% Interest expense 2.7% 3.0% 2.9% Net interest margin yield 4.7% 3.6% 4.0% Adjusted OpEx rati 1.0% 1.0% 0.9% ROAA 3.7% 2.6% 3.1% (1) Percent f average earning assets (2) Average debt as a percent f average earning assets Actual debt advance rate (2) 77.0% 81.7% 82.5% 19

20 AVIATION FINANCE David McKerrll President, Rail & Aviatin Finance 20

21 Aviatin Highlights KEY HIGHLIGHTS N riginatins during the quarter and wind dwn f prtfli cntinues as planned ROAA imprved due t higher syndicatin incme and lwer interest expense during the quarter ECN Capital cntinues t develp its Cmmercial Aviatin Fund prgram wrking with numerus institutinal investrs. ECN Capital nw expects t cmplete its next fund vehicle in early 2017 Incme Statement Interest incme and rental revenue net less interest expense Q Q Q ,633 10,574 10,220 Syndicatin and ther Incme 215 2,913 3,524 Operating expenses 3,281 2,390 2,494 Adjusted perating incme befre tax Key Ratis (1) 9,567 11,097 11,250 Q Q Q Average earning assets ($MM) 1,305 1,186 1,121 Financial revenue yield 6.1% 6.6% 6.7% Interest expense 2.2% 2.0% 1.8% Net interest margin yield 3.9% 4.6% 4.9% Adjusted OpEx rati 1.0% 0.8% 0.9% ROAA 2.9% 3.7% 4.0% (1) Percent f average earning assets (2) Average debt as a percent f average earning assets Actual debt advance rate (2) 61.8% 62.3% 67.8% 21

22 General Aviatin Wind Dwn KEY HIGHLIGHTS Dispsitins cmmenced in Q with cmmitments accelerating during the secnd and third quarters Accunt by accunt analysis t determine ptimal wind dwn strategy: sale, buyut r managed runff As at December 31, 2015 $1.43 billin f expsure is expected t be reduced t $500 millin by YE 2018 Prtfli Amrtizatin (M) Prtfli Run-Off September 30, 2016 $1,012.0 Cash Returned December 31, 2016 $900.0 $112.0 $59.8 December 31, 2017 $700.0 $200.0 $106.7 December 31, 2018 $500.0 $200.0 $106.7 December 31, 2019 $350.0 $150.0 $80.0 Thereafter $350.0 $186.8 Ttal $1,012.0 $

23 CONSOLIDATED FINANCIAL SUMMARY Michel Béland Chief Financial Officer 23

24 Balance Sheet KEY HIGHLIGHTS Opening balance sheet f ECN Capital frm separatin initiative Ttal assets f $6.1 billin Bk equity f $1.7 billin Financial leverage and tangible leverage rati cnsistent at 2.5:1 Driven by cntracted debt advance rate n specific assets Senir credit facility permits leverage f said facility fr up t 4:1 and nly achievable n aggregate advance rate f 80% n assets Q (in MM) Ttal assets $6,091 Ttal earning assets (1) $5,631 Bk equity $1,710 Financial leverage rati 2.50:1 Tangible leverage rati 2.51:1 (1) Ttal earning assets = Net investment in finance receivables + Equipment under perating leases 24

25 Cnslidated Incme Statement KEY HIGHLIGHTS Interest incme and rental revenue net f interest expense at $38.0 millin slightly lwer that $40.9 millin during previus quarter frm increased prvisin fr credit lsses frm the Separatin Syndicatin and ther incme slightly higher than previus quarter frm gain n sale f certain rail cars under lease Interest expense remains cnstant ver previus quarter at 2.9% f average finance assets Operating expenses slightly higher than Q2, 2016 which had ne-time reversal f staff perfrmance bnuses when targets were nt achieved Adjusted perating incme befre taxes slightly lwer than Q2, 2016 at $31.1 millin r a ROAA f 2.2% versus 2.4% in Q Debt advance rate (cmputed as average debt divided by average finance assets) f 79.3% slightly higher that 76.1% reprted at the end f Q2, 2016 based n decrease in Aviatin debt with lwer debt advance rate (1) Percent f average earning assets *FX Adjusted using current perid FX rates Incme Statement Interest incme and rental revenue net less interest expense Syndicatin and ther incme Q Q Q ,804 40,899 37,970 8,584 6,912 10,574 Adjusted perating expenses 18,410 14,915 17,457 Adjusted perating incme befre tax Key Ratis (1) Average earning assets ($MM) 34,978 32,896 31,087 Q Q Q ,940 5,537 5,723 Financial revenue yield 7.0% 6.4% 6.3% Interest expense 2.7% 2.9% 2.9% Net interest margin yield 4.3% 3.5% 3.4% Adjusted OpEx rati 1.5% 1.1% 1.2% ROAA 2.8% 2.4% 2.2% Actual average debt advance rate t average finance assets 73.7% 76.1% 79.3% 25

26 Return n Average Equity KEY HIGHLIGHTS Befre-tax adjusted perating incme ROAE f 7.6% fr the quarter cmpared t 8.6% during previus quarter ROAE fr 3 Mnths Ended Q Q Befre-tax adjusted perating incme return (1) 8.6% 7.6% After-tax adjusted perating incme return (1) 6.6% 6.7% (1) Reprted average perating incme n average f cmmn sharehlders equity 26

27 Per-Share Amunts KEY HIGHLIGHTS Pre-tax adjusted perating incme slightly lwer than reprted during Q2, 2016 frm: Reduced activities and asset base in Aviatin frm wind-dwn f the business Slightly lwer utilizatin rate in Rail vertical After-tax adjusted perating incme in line with Q2, 2016 frm reduced effective tax rate frm year-end adjustments recrded as part f the Separatin Bk value per share f $4.42 substantially abve current market f $2.70 Fr the 3 Mnths Ended and as at End f Perid Pre-tax adjusted perating incme (basic) After-tax adjusted perating incme (basic) Q Q $0.09 $0.08 $0.07 $0.07 Bk value $4.04 $

28 Lw Risk Assets/Minimal Credit Lsses KEY HIGHLIGHTS Nn-current delinquencies maintained current ver previus quarter Defaulted accunts shw a substantial reductin frm the re-pssessin f sme CHC helicpters which are nw being remarketed Allwance fr credit lss is maintained cnstant ver the perid Oil & Gas helicpters represent less than 3% f ttal assets Delinquencies as a % f Finance Receivables Q Q Nn-current (> 31 days) 0.68% 0.61% Defaulted 2.85% 0.22% Allwance fr credit lss (as a % f ttal finance assets) 0.56% 0.54% 28

29 CORPORATE INITIATIVES Steven Hudsn Chief Executive Officer 29

30 Asset Management Initiatives Rail External advisr hired and in phase II f fund develpment Established histry f institutinal rail car funds Significant institutinal investr interest in ECN Capital s inaugural rail fund Targeted clsing in Q1, 2017 Aviatin Wrk cntinues n ECAF II and ther Aviatin initiatives Middle Market Finance Wrk cntinues n bth existing platfrms and lift-ut teams Strng institutinal investr interest in this asset categry Right deal and the right time Significant surces f capital Business pprtunity summarized in Appendix 30

31 Surces f Capital Perpetual preferred shares Element has successfully accessed the preferred share market previusly as an attractive surce f nn-dilutive grwth financing Fur unrated preferred share issuances ver $500 millin frm Demand fr preferred shares has increased significantly with nn-traditinal buyers becming regular participants Ptential t raise up t $300 millin in perpetual preferred shares Aviatin prtfli run-ff Prtfli Amrtizatin (M) Prtfli Run-Off September 30, 2016 $1,012.0 Cash Returned December 31, 2016 $900.0 $112.0 $59.8 December 31, 2017 $700.0 $200.0 $106.7 December 31, 2018 $500.0 $200.0 $106.7 December 31, 2019 $350.0 $150.0 $80.0 Thereafter $350.0 $186.8 Ttal $1,012.0 $

32 Expense Reductins and Share Purchases Management and Bard cmmitment Reductin f $1.5 millin cmpensatin expenses and Bard fees (cmpleted) $4 millin in expense reductins t be cmpleted by end f Q4,

33 APPENDIX

34 ECN CAPITAL OVERVIEW U.S. Middle Market Finance 34

35 U.S. Middle Market Finance Represents a Large and Attractive Opprtunity NEARLY 33% OF PRIVATE SECTOR GDP WITH > $10T IN ANNUAL REVENUE REPRESENTS 1/3 OF ALL US JOBS ~200,000 MIDDLE MARKET BUSINESSES REQUIRE CAPITAL TO SUPPORT GROWTH ~ 62% f middle market firms plan t invest excess capital ver the next twelve mnths Other 5.0% 3 RD LARGEST GLOBAL ECONOMY (1) Acquisitins 13.0% #1 #2 ü #3 #4 $18.0T $11.4T $5.9T $4.1T $3.3T 7.2% vs. 1.2% Annual Revenue Grwth S&P 500 Revenue Grwth Human Resurces 19.0% Infrmatin Technlgy 19.0% Capital Expenditures 44.0% U.S. China U.S. Middle Market Japan Germany 4.4% vs. 2.3% Annual Emplyment Grwth Large Business Emplyment Grwth Surce: Natinal Center fr the Middle Market 2Q 2016 Middle Market Indicatr and 2015 CIA Wrld Factbk Nte: U.S. middle market defined as cmpanies with annual revenues ranging frm $10mm t $1B, representing nearly 200,000 businesses The U.S. Middle Market: An Engine f Grwth with an Intense Demand fr Capital (1) Glbal ecnmy ranked by 2015 estimated GDP nt adjusted fr purchasing pwer parity as per CIA Wrld Factbk. U.S. middle market GDP represents Natinal Center fr Middle Market estimate as per 2Q 2016 Middle Market 35

36 Secular Changes in the Banking Industry Create Significant Opprtunities Mre stringent regulatry versight and higher capital requirements driving changes in the cmmercial banking industry NEW REGULATORY SCRUTINY Ddd-Frank / Vlcker rule Basel III Leverage lending guidelines Slvency II tests Asset quality review IMPACT ON BANKS Risk-based capital rati / higher capital requirements Ttal leverage rati test Classified lan expansin Increased scrutiny underwriting leveraged transactins Liquidity tests Lwer ROE/ROA Significant pprtunity fr nn-bank capital prviders due t increased bank regulatin and reduced risk appetite. 36

37 Nn-Banks Filling the Vid as Banks Retrench LEVEL 3 ASSETS FOR CAPITAL MARKETS FIRMS (US$B) $681 CURRENT STATE OF BANK LENDERS FDIC-Insured Cmmercial Banks 12,000 10,000 8,000 6,000 4,000 Demand fr capital t utstrip supply Participatin in Levered Lan Market (%) Cmmercial Banks Bank Participatin in Levered Lan Market (%) LEVERAGED LOAN FUNDING BY ENTITY $197 29% 55% 82% 88% 88% 71% 45% 18% 12% 12% Dec. 31, 2007 Dec. 31, Freign/Dmestic Banks Nn-Bank Cmpanies and Funds A variety f recent bank regulatins have driven large financial firms t reduce leveraged lan assets. While nn-bank lenders have grwn significantly, they remain small relative t the cntractin f bank credit. Surce: Apll Investment Crpratin Investr Presentatin (March 9, 2016) and FDIC Histrical Statistics n Banking (2015) 37

38 BDC Valuatins Under Pressure P/B MULTIPLES P/E MULTIPLES 1.8x 1.6x 1.6x 1.4x 1.4x 1.3x 11.5x 11.7x 1.2x 1.2x 1.2x 1.1x 1.1x 1.1x 1.1x 1.1x 1.0x 1.0x Price / Bk 1.0x 0.8x 1.0x 1.0x 1.0x 0.9x 0.9x 0.9x 0.9x 0.9x 0.9x 0.9x 0.9x 0.9x 0.8x 0.8x 0.8x 0.8x 0.7x 1.0x 9.5x 9.6x 0.6x 0.4x 0.2x 0.0x Average P / E (2016E) P / B P / E (2017E) Jan Current BDCs, typically a key surce f financing fr the middle market, have experienced material valuatin cmpressin. This has limited their ability t raise grwth capital. Surce: Thmsn Reuters Nte: Frward multiples are calendarized 38

39 Establishing a U.S. Middle Market Finance Platfrm ECN Capital is uniquely psitined t partner with banks, asset managers, lifecs and pensin funds t establish a U.S. middle market finance platfrm Unprecedented demand fr yield frm institutinal investrs creating fund management pprtunities Ability t establish bth warehuse and permanent capital structures that leverage ECN Capital s investment grade rating and attractive cst f financing Pursue bth buy and build pprtunities Only target leading platfrms and prven management teams Currently reviewing three buy and tw build pprtunities (includes pprtunities in excess f $5 billin and as small as $500 millin; each management team has significant experience and has built successful businesses previusly) Disciplined acquisitin strategy; avid verpaying fr platfrms in current phase f the credit cycle Prudently deply capital in sectrs and asset structures where risk-adjusted returns are mst attractive Natural fit with ECN Capital s best-in-class asset riginatin, credit adjudicatin and risk management capabilities Target pre-tax ROE f» 17% 39

40 U.S. Middle Market Finance Landscape Middle Market Finance Cmpetitrs Secndary Primary $50MM Lans $50MM $150MM Lans $150MM $300MM Lans Significant pprtunities t capture market share in primary lending market where banks are rapidly reducing vlumes 40

41 ECN Capital s Deep Institutinal Relatinships ASSET MANAGERS AND PENSION FUNDS INSURANCE COMPANIES Strng institutinal relatinships acrss asset managers, pensin funds and insurance cmpanies 41

42 U.S. Middle Market Finance Indicative Structures PERMANENT CAPITAL VEHICLES (ECN Capital as Manager) PUBLIC CANADIAN-LISTED VEHICLE Senir Bank Debt (80%) BANK WAREHOUSE VEHICLE Senir Bank Debt (80%) Max single expsure (3%) Element ratings methdlgy t be used LIBOR + 170bps Equity (20%) ECN Capital (100%) $1 billin (1) Assets t be riginated subject t strict underwriting standards (max cncentratins limits and sectr diversificatin) Term matched Rated Tw debt tranches (if required) Equity (20%) ECN Capital (20%) Institutins + Retail (80%) INSTITUTIONAL INVESTOR PRIVATE FUND Single r Multiple Investrs Ptential fr levered r unlevered funds Levered funds Rated senir and junir ntes Equity tranche Clsed end $1-2 billin $1-2 billin 42

43 U.S. Middle Market Finance ILLUSTRATIVE ECONOMICS TO ECN CAPITAL (C$MM) Ttal Middle Market Finance Assets On- Balance Sheet (warehused) $900 30% Off- Balance Sheet (fund management) $2,100 70% $3, % Key Inputs Assumed Leverage (debt/equity) 4.0x Cst f Leverage 2.7% Grss Revenue (% f n- balance sheet assets) 7.25% Fees earned by ECN Capital n Managed Assets 1.25% Opex Rati (% f Ttal Assets) 1.25% Tax Rate 25.00% (C$MM) Illustrative Returns Grss Revenue (n- balance sheet assets) $65 Fee Incme (% f managed assets) $26 Incme Earned frm Retained Interest in Fund (1) $10 Ttal Revenue $102 Interest Expense (n- balance sheet assets) - $19 Net Revenue (incl. fee incme) $82 Operating Expenses - $38 Pre- Tax Incme $45 Tax - $11 Net Incme $33 ROA (% f n- balance sheet assets) Pre- Tax 5.0% Pst- Tax 3.7% ROE (% f equity invested) Pre- Tax 16.9% Pst- Tax 12.7% (1) Assumes that ECN Capital hlds 20% f the equity in the fund and earns a 12% pst-tax return n that equity 43

44 QUESTIONS