Retail 30-Day Post-Default First-Lien Bid Prices Slump Retail Defaults Defaults Defaults

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1 Fitch U.S. Leveraged Loan Default Insight U.S. Leveraged Loan July TTM Retail Rate Surpasses % Special Report U.S. Leveraged Loan Default Rate Breakdown /17 TTM 217F All Issuers Energy Retail F Forecast Source: Fitch U.S. Leveraged Loan Default Index. Related Research Fitch U.S. High Yield Default Insight (July HY TTM Default Rate Dips Below 2%; Energy Rate Lowest Since August 2) (July 217) Gymboree Filing Lifts US Retail Loan Default Rate to 2.7% (June 217) Healthcare, Food Beverage and Consumer Bankruptcy Enterprise Values and Creditor Recoveries (Fitch Case Studies 14th Edition) (June 217) The Annual Manual (U.S. Leveraged Finance Primer) (May 217) Bridging the Refinancing Cliff Update (Funding Gap Minimal; Refinancings Push Maturities to 22 and Beyond) (February 217) Energy, Power and Commodities Bankruptcy Enterprise Valuations and Creditor Recoveries (Fitch Case Studies 12th Edition) (January 217) U.S. Leveraged Finance: Road to Recovery Ratings (December 216) Retail Bankruptcy Enterprise Value and Creditor Recoveries (Fitch Case Studies 1th Edition) (September 216) Analysts Eric Rosenthal eric.rosenthal@fitchratings.com Michael Paladino, CFA michael.paladino@fitchratings.com Sharon Bonelli sharon.bonelli@fitchratings.com John Kempf, CFA john.kempf@fitchratings.com Brendan Hoelmer brendan.hoelmer@fitchratings.com Corporates Leveraged Finance / U.S.A. Retail Drives July Defaults: The July TTM U.S. institutional leveraged loan retail default rate climbed above % from 2.8% at June 3. True Religion Apparel Inc. s bankruptcy and J.Crew Group Inc. s distressed debt exchange (DDE) add over $1.8 billion to the total. Five retail defaults tallied nearly $3.8 billion so far this year. The sector default rate is well above the nonrecessionary retail average of 1.4% and is approaching the previous high of.7% in 29. Default Forecasts: Fitch Ratings forecasts a 9% year-end retail default rate, though the timing for Sears Holdings Corp. ($2. billion loans outstanding) may alter the projections. A Sears default would add more than 3% to the projected retail default rate. We anticipate the overall market default rate for 217 at 2.%. The July TTM rate is 1.9%, and the rate has stabilized at 1.7% 2% this year. iheartcommunications Inc., which extended its DDE offer for a ninth time to Aug. 4, is a likely bankruptcy filer and would propel the default rate to 2.6%. Energy Update: The July energy default rate slips to 17% from 2.2% at June 3, as $1. billion rolled off the TTM default universe. Fitch forecasts an 18% year-end sector rate, equating to more than $8 billion of defaults. Seadrill Ltd. and Pacific Drilling SA remain likely near-term default candidates and together would add $3.6 billion of volume. CLO Retail Exposure: For July s defaults, J.Crew and True Religion were held in 73 and two Fitch-rated CLOs as of June 3, respectively. Portfolio concentration to J.Crew ranged between.1% and 1.2%. For the retail names from Fitch s Loans of Concern list, David s Bridal Inc. is held in 49 CLOs followed by Nine West Holdings Inc. (3), Vince, LLC (16), Charming Charlie LLC and Everest Holdings LLC (13 each) and Charlotte Russe Inc. (12). Sears is held in just six CLOs. The default rate for the overall Fitch-rated CLO index is.% at June 3. Sagging Retail Post-Default Prices: Retail s 3-day post-default par-weighted bid prices for first-lien loans, at 42% of par, are very similar to the energy sample from In fact, both retail and energy produced lower post-default average bid levels than seen in the last recession (see chart below). While the retail default sample is small, the first-lien post-default prices are well below June s TTM broad market of 7%. Loan Universe: The institutional leveraged loan universe reached $1.3 trillion at June 3. The top three sectors, services/miscellaneous, technology and healthcare/pharmaceuticals, account for 36% of the total. According to Thomson Reuters LPC, $494 billion was issued through first-half 217. Robust refinancing activity contributed to the 27% rise versus last year. 217 issuance is on pace to topple the record $62 billion in 213. Retail 3-Day Post-Default First-Lien Bid Prices Slump Par Average Energy Defaults 217 Retail Defaults Defaults Defaults a defaults exclude energy and retail 217 defaults. July 2, 217 Median a

2 Top Five Loans of Concern Industries % of Leveraged Loan Industry Outstanding Energy 27 Broadcasting & Media 26 Retail 8 Banking & Finance 3 Transportation 2 Note: Percentage of institutional leveraged loans outstanding takes the amount outstanding from the Loans of Concern list divided by the amount outstanding within each industry. Source: Fitch U.S. Leveraged Loan Default Index. Loans of Concern Issuer Amount Outstanding ($ Mil.) Industry iheartcommunications Inc. 6,3. Broadcasting & Media Fieldwood Energy LLC 3,164. Energy Seadrill Ltd. 2,86.7 Energy Sears Holdings Corp. 2,2. Retail Getty Images Inc. 1,89. Broadcasting & Media Cumulus Media Inc. 1,81.3 Broadcasting & Media Checkout Holding Corp. 1,1. Broadcasting & Media Walter Investment Management Corp. 1,416. Banking & Finance Concordia International Corp. 1,82.1 Healthcare & Pharmaceutical Harvey Gulf International Marine Corp. 87. Transportation Nine West Holdings Inc. 74. Retail Pacific Drilling SA 721. Energy ExGen Texas Power LLC 69.6 Utilities, Power & Gas Millennium Health LLC 6. Healthcare & Pharmaceutical 99 Cents Only Stores LLC 92.3 Retail David s Bridal Inc Retail Pinnacle Holdco Sarl 48. Services & Miscellaneous Proserv Global Inc. 48. Energy J.G. Wentworth Inc Banking & Finance Triple Point Technology 43. Technology HCR Healthcare LLC 381. Healthcare & Pharmaceutical W&T Offshore Inc. 37. Energy Velocity Pooling Vehicle LLC 37. Automotive Azure Midstream Energy LLC 36.6 Energy Reddy Ice Corp. 34. Services & Miscellaneous Caelus Energy Alaska O3 LLC 3. Energy RGL Reservoir Management Inc Energy Dixie Electric LLC 28. Energy Cactus Wellhead LLC 27. Energy Prowler Acquisition Corp. 27. Energy Isola AG 2. Chemicals Larchmont Resources LLC 2. Energy Everest Holdings LLC 22. Retail Express Energy Services 22. Energy Charlotte Russe Inc. 2. Retail Abaco Energy Technologies LLC 17. Energy Charming Charlie LLC. Retail Production Resource Group. Leisure & Entertainment NYDJ Apparel LLC 1. Retail Valitas Health Services Inc. 1. Healthcare & Pharmaceutical Vince, LLC 4. Retail Total 34,217.7 Note: Names above reflect our view of the most concerning issuers in the institutional leveraged loan market. Sorted by amount outstanding based on SEC Filings or available market information. Source: Fitch U.S. Leveraged Loan Default Index. Fitch U.S. Leveraged Loan Default Insight 2 July 2, 217

3 Institutional Leveraged Loan Defaults on TTM Basis Month Issuer Par Value ($ Mil.) Default Date Default Source Industry July 216 FTS International Inc /1/16 Distressed Exchange Energy Transtar Holding Co. 4. 7/8/16 Missed Payment Automotive C&J Energy Services Ltd. 1,49.4 7/2/16 Chapter 11 Filing Energy Atinum Midcon I LLC 1. 7/22/16 Chapter 11 Filing Energy Atlas Resource Partners LP/Atlas Energy LP 3. 7/27/16 Chapter 11 Filing Energy Subtotal 2,.6 August 216 Templar Energy LLC 1,4. 8//16 Missed Payment Energy Stallion Oilfield Holding Inc /14/16 Missed Payment Energy Foresight Energy LP /3/16 Restructuring Metals & Mining Subtotal 2,7.8 September 216 No Default Activity October 216 Tervita Corp /18/16 Chapter Filing Services & Miscellaneous Key Energy Services Inc /24/16 Chapter 11 Filing Energy Performance Sports Group Ltd /31/16 Chapter 11 Filing Consumer Products Subtotal November 216 Bennu Oil & Gas LLC /3/16 Chapter 7 Filing Energy Subtotal 487. December 216 TwentyEighty Inc //16 Missed Payment Services & Miscellaneous La Paloma Generating Co. LLC /6/16 Chapter 11 Filing Utilities, Power & Gas Cumulus Media Inc /3/16 Distressed Exchange Broadcasting & Media Subtotal January 217 Shelf Drilling Holdings Ltd. 3. 1/11/17 Distressed Exchange Energy Avaya Inc. 3, /19/17 Chapter 11 Filing Telecommunications Subtotal 3,97.8 February 217 No Default Activity March 217 Answers Corp.. 3/3/17 Chapter 11 Filing Technology EXCO Resources Inc //17 Distressed Exchange Energy Montco Offshore Inc. 7. 3/17/17 Chapter 11 Filing Transportation SquareTwo Financial Corp /19/17 Chapter 11 Filing Banking & Finance Ocean Rig UDW Inc. 3,19. 3/27/17 Chapter Filing Energy Subtotal 4,14.4 April 217 Payless Inc /4/17 Chapter 11 Filing Retail Sprint Industrial Holdings LLC 22. 4/13/17 Distressed Exchange Transportation Panda Temple Power LLC 38. 4/17/17 Chapter 11 Filing Utilities, Power & Gas AFGlobal Corp /3/17 Chapter 11 Filing Industrial/Manufacturing Subtotal 1,927.1 May 217 rue21, Inc. 21. //17 Chapter 11 Filing Retail Mood Media Corp /22/17 Chapter Filing Leisure & Entertainment Total Safety US Inc. 4. /22/17 Distressed Exchange Services & Miscellaneous 21st Century Oncology Inc /2/17 Chapter 11 Filing Healthcare & Pharmaceutical Subtotal 1,76.9 June 217 Ignite Restaurant Group Inc /6/17 Chapter 11 Filing Gaming, Lodging & Restaurants Ascent Resources - Marcellus LLC 1,6. 6/7/17 Missed Payment Energy The Gymboree Corp /11/17 Chapter 11 Filing Retail Subtotal 1,931.9 Note: Defaults in the pipeline as of July 24 include True Religion and J.Crew Group. Source: Fitch U.S. Leveraged Loan Default Index. Fitch U.S. Leveraged Loan Default Insight 3 July 2, 217

4 Exhibits Index Institutional Leveraged Loan Market Profile Institutional Leveraged Loan Market Profile... 4 Default Statistics Profile of Institutional Leveraged Loan Defaults: Secondary Leveraged Loan Market Profile Credit Availability Indicators... 2 Appendix A Institutional Leveraged Loan Post-Default Price Data Appendix B Institutional Leveraged Loan Emergence Prices... 2 Fitch U.S. Institutional Leveraged Loan Default Index This index comprises rated and unrated, active institutional leveraged loans with a minimum deal size of $1 million. The loan facilities are all denominated in U.S. dollars and are comprised of institutional terms loans, drawn acquisition facilities, and bridge loans. Rated issuers in the index encompass companies with senior debt ratings from Fitch, Moody s, or S&P. Unrated issuers are included based on spread and leverage statistics. Broadly syndicated loans (BSLs) are defined as loans with a total deal size in excess of $ million, while large middle market (LMM) consists of loans with deal value of $1 million $ million. Those LMM loans with revenue of at least $ million are classified as BSL. Traditional middle market deals (under $1 million) are not included. A default is recorded when an index company: 1) files for bankruptcy protection, 2) after a 3-day grace period expires for a missed bond payment or a five-day grace period expires for a missed loan payment without a forbearance, or 3) there is a distressed exchange, which affects the loan facilities. The default rate is calculated by dividing the par value of affected loans by the average size of the market over a stated time horizon. Source: Fitch Ratings, Thomson Reuters LPC, Bloomberg, SEC Filings. Institutional Leveraged Loan Industry Composition Industry Amount Outstanding ($ Bil.) No. Issuers % of Industry Average Issue Size First Second ($ Mil.) BSL LMM Lien Lien Sponsored Cov- Lite Automotive Banking & Finance Broadcasting & Media Building & Materials Cable Chemicals Consumer Products Energy Food, Beverage & Tobacco Gaming, Lodging & Restaurants Healthcare & Pharmaceutical Industrial/Manufacturing Insurance Leisure & Entertainment Metals & Mining Paper & Containers Real Estate Retail Services & Miscellaneous Supermarkets & Drug Stores Technology Telecommunications Transportation Utilities, Power & Gas Total 1, , BSL Broadly syndicated loans. LMM Large middle market. Thomson Reuters LPC, Bloomberg. 92% of Outstanding Fitch-Rated and Credit Opinion Institutional Loans Bid Above Bid 7/21/16 Bid 7/21/17 93% of Outstanding Fitch-Rated and Credit Opinion Institutional Loans Bid Above 9, Excluding Energy, Metals/Mining Bid 7/21/16 Bid 7/21/17 Note: Sample based on 324 Fitch Ratings and Credit Opinions completed over the past year that includes issuers with institutional term loans with available secondary pricing. Advantage Data, Note: Sample based on 3 Fitch Ratings and Credit Opinions completed over the past year that includes issuers with institutional term loans with available secondary pricing. Advantage Data, Fitch U.S. Leveraged Loan Default Insight 4 July 2, 217

5 1% of Outstanding Overall Institutional Loans Bid Under Bid 7/21/16 Bid 7/21/17 1% 9% of Outstanding Overall Institutional Loans Excluding Energy, Metals/Mining Bid Under Bid 7/21/16 Bid 7/21/17 9% Advantage Data, Advantage Data, 3% of Outstanding Energy, Metals/Mining Institutional Loans Bid Under Bid 7/21/16 Bid 7/21/17 3% 38% of Outstanding Retail Institutional Loans Bid Under Bid 7/21/16 Bid 7/21/17 38% Advantage Data, Advantage Data, 7% of Outstanding Healthcare/ Pharmaceutical Institutional Loans Bid Under Bid 7/21/16 Bid 7/21/17 7% 14% of Outstanding TMT Institutional Loans Bid Under Bid 7/21/16 Bid 7/21/17 14% Advantage Data, TMT Technology, Media and Telecommunications. Advantage Data, Fitch U.S. Leveraged Loan Default Insight July 2, 217

6 1% of Outstanding Overall BSL Institutional Loans Bid Under 9 Bid /18/16 Bid 6/16/ Average bid: % of Outstanding Overall LMM Institutional Loans Bid Under Bid /18/16 Bid 6/16/17 Average bid: 97.1 BSL Broadly syndicated loans. Advantage Data, Rating of First-Lien Institutional Loans CCC 6% BBB 3% BB 34% LMM Large middle market. Advantage Data, Rating of First-Lien Energy and Metals/Mining Institutional Loans CCC 28% BB 2% B 7% Note: Based on 1,112 issues rated by at least one of three rating agencies. Advantage Data, Rating of First-Lien BSL Institutional Loans CCC 6% BBB 3% B 2% Note: Based on 74 issues rated by at least one of three rating agencies. Advantage Data, Rating of First-Lien LMM Institutional Loans CCC, 1% BBB 1% BBB, 1% BB 37% B 4% B 8% BSL Broadly syndicated loans. Note: Based on 813 issues rated by at least one of three rating agencies. Advantage Data, LMM Large middle market. Note: Based on 299 issues rated by at least one of three rating agencies. Advantage Data, Rating of First-Lien Sponsored Institutional Loans CCC 7% BBB 2% BB % Rating of First-Lien Non- Sponsored Institutional Loans B 33% CCC 4% BBB % B 74% Note: Based on 687 issues rated by at least one of three rating agencies. Advantage Data, BB 8% Note: Based on 42 issues rated by at least one of three rating agencies. Advantage Data, Fitch U.S. Leveraged Loan Default Insight 6 July 2, 217

7 Rating of First-Lien Loans by Industry % of Sector Rated BB % of Sector Rated B % of Sector Rated CCC Through C Automotive 38 7 Banking & Finance a Broadcasting & Media Building & Materials Cable a Chemicals Consumer Products a Energy Food, Beverage & Tobacco Gaming, Lodging & Restaurants a 44 1 Healthcare & Pharmaceutical a 39 7 Industrial/Manufacturing Insurance Leisure & Entertainment a Metals & Mining Paper & Containers Real Estate Retail a Services & Miscellaneous a Supermarkets & Drug Stores Technology a Telecommunications Transportation a Utilities, Power & Gas Total a a Issues rated BBB are included in percent of Sector Rated BB. Thomson Reuters LPC, Bloomberg. Monthly Institutional Covenant-Lite Issuance Covenant-Lite Covenants Note: Covenant-lite is defined as deals that do not have maintenance covenants. Thomson Reuters LPC, Bloomberg. Outstanding Covenant-Lite Constitutes 67% of BSL Market Covenant-Lite Covenants ($ Bil.) 1, 67% 8 6 7% % 74% 46% 64% Pre June 217 Total BSL Broadly syndicated loans. Note: Covenant-lite percentages shown. Outstanding institutional leveraged loan market profile at end of June. Years reflect the vintage of current loans outstanding and not total issuance. Covenant-lite is defined as deals that do not have maintenance covenants. Thomson Reuters LPC, Bloomberg. Fitch U.S. Leveraged Loan Default Insight 7 July 2, 217

8 Institutional Leveraged Loan Maturities Shrink ($ Bil.) June 216 June Only $83 billion due through Thomson Reuters LPC, Bloomberg. Institutional Leveraged Loan Maturity Schedule by Industry ($ Bil.) Automotive Banking & Finance Broadcasting & Media Building & Materials Cable Chemicals Consumer Products Energy Food, Beverage & Tobacco Gaming, Lodging & Restaurants Healthcare & Pharmaceutical Industrial/Manufacturing Insurance Leisure & Entertainment Metals & Mining Paper & Containers Real Estate Retail Services & Miscellaneous Supermarkets & Drug Stores Technology Telecommunications Transportation Utilities, Power & Gas Total Thomson Reuters LPC, Bloomberg. Fitch U.S. Leveraged Loan Default Insight 8 July 2, 217

9 Institutional Leveraged Loan Maturity Schedule by Industry BSL ($ Bil.) Automotive Banking & Finance Broadcasting & Media Building & Materials Cable Chemicals Consumer Products Energy Food, Beverage & Tobacco Gaming, Lodging & Restaurants Healthcare & Pharmaceutical Industrial/Manufacturing Insurance Leisure & Entertainment Metals & Mining Paper & Containers Real Estate Retail Services & Miscellaneous Supermarkets & Drug Stores Technology Telecommunications Transportation Utilities, Power & Gas Total Thomson Reuters LPC, Bloomberg. Institutional Leveraged Loan Maturity Schedule by Industry LMM ($ Bil.) Automotive Banking & Finance Broadcasting & Media Building & Materials Cable Chemicals Consumer Products Energy Food, Beverage & Tobacco Gaming, Lodging & Restaurants Healthcare & Pharmaceutical Industrial/Manufacturing Insurance Leisure & Entertainment Metals & Mining Paper & Containers Real Estate Retail Services & Miscellaneous Supermarkets & Drug Stores Technology Telecommunications Transportation Utilities, Power & Gas Total Thomson Reuters LPC, Bloomberg. Fitch U.S. Leveraged Loan Default Insight 9 July 2, 217

10 Market Size and Growth Rate Market Size (LHS) Growth Rate (RHS) ($ Bil.) 1,2 1, June 217 Thomson Reuters LPC, Bloomberg (2) (4) Institutional Loan and High-Yield Bond Issuance ($ Bil.) Institutional Loans Refinancings drove 494 new issuance June 216 Source: Fitch Ratings, Thomson Reuters LPC, Bloomberg. Cross-Market Trends Size and Growth Rate 62 High-Yield Bonds Refinancing activity increased again. June 217 Loans (LHS) High Yield (LHS) ($ Bil.) Loans Growth Rate (RHS) High-Yield Growth Rate (RHS) 1, 6 1, June 217 Note: June 217 growth rate year over year. Thomson Reuters LPC, Bloomberg. 4 2 (2) (4) BSL Versus LMM Size and Growth Rate BSL (LHS) LMM (LHS) BSL Growth Rate (RHS) LMM Growth Rate (RHS) ($ Bil.) 1, June 217 BSL Broadly syndicated loans. LMM Large middle market. Note: June 217 growth rate year over year. Thomson Reuters LPC, Bloomberg. 4 3 () (3) Fitch U.S. Leveraged Loan Default Insight 1 July 2, 217

11 Institutional Leveraged Loan 3-Day Post-Default Prices a First Lien First Second Cov Bond and Loan Lien Lien BSL LMM Lite Issuers Loan Only Issuers Sponsored Non- Sponsored June 217 TTM Observations ($ Bil.) June 217 TTM a Par-weighted and based on market prices post-default. The year above is specific to defaulted loans with price data (see pages for more details). BSL Broadly syndicated loans. LMM Large middle market. Institutional Leveraged Loan Emergence Prices a First Lien First Second Cov Bond and Loan Loan Only Non- Lien Lien BSL LMM Lite Issuers Issuers Sponsored Sponsored Observations ($ Bil.) a Par-weighted and based on market prices at emergence. The year above is specific to issuers that have emerged from bankruptcy with loan-price data (See pages 2 27 for more details). BSL Broadly syndicated loans. LMM Large middle market. Fitch U.S. Leveraged Loan Default Insight 11 July 2, 217

12 Default Statistics Institutional Leveraged Loan Default Rate Thomson Reuters LPC, Bloomberg. Institutional Leveraged Loan Default Rate: BSL Versus LMM BSL June 217 TTM BSL Broadly syndicated loans. LMM Large middle market. Thomson Reuters LPC, Bloomberg. Institutional Leveraged Loan Default Rate: Sponsored Versus Non-Sponsored Sponsored LMM Non-Sponsored June 217 TTM Thomson Reuters LPC, Bloomberg. Fitch-Rated CLO Index 2. Institutional Loan Default Rate Fitch-Rated CLO Index Default Rate /16 7/16 8/16 9/16 1/16 11/16 12/16 1/17 2/17 3/17 4/17 /17 6/17 Source: Fitch Ratings. Fitch U.S. Leveraged Loan Default Insight 12 July 2, 217

13 Institutional Leveraged Loan Industry Default Rates June 217 TTM Automotive Banking & Finance Broadcasting & Media Building & Materials Cable Chemicals Consumer Products Energy Food, Beverage & Tobacco Gaming, Lodging & Restaurants Healthcare & Pharmaceutical Industrial/Manufacturing Insurance Leisure & Entertainment Metals & Mining Paper & Containers Real Estate Retail Services & Miscellaneous Supermarkets & Drug Stores Technology Telecommunications Transportation Utilities, Power & Gas Total Index Thomson Reuters LPC, Bloomberg. Fitch U.S. Leveraged Loan Default Insight 13 July 2, 217

14 Institutional Leveraged Loan Default Profile ($ Bil.) 216 June 217 TTM Issuance Year Pre Total Default Volume Default Source Bankruptcy Missed Payment Distressed Exchanges and Non-Bankruptcy Restructurings Market Share BSL LMM Covenant Status Covenants Covenant Lite Priority First Lien Second Lien Capital Structure Loans and Bond Issuers Loan Only Issuers BSL Broadly syndicated loans. LMM Large middle market. Thomson Reuters LPC, Bloomberg, SEC filings. Time to Default (Years) Cumulative Default Rates by Vintage Note: average: 2.9 years. Default time measured from date of issuance. Thomson Reuters LPC, Bloomberg. Thomson Reuters LPC, Bloomberg. Fitch U.S. Leveraged Loan Default Insight 14 July 2, 217

15 Fitch U.S. Leveraged Loan Default, Post-Default Prices and Loss Rates by Industry Default Rate Post- Default Prices Loss Rate Default Rate Post- Default Prices Loss Rate Default Rate Post- Default Prices Automotive Banking & Finance Broadcasting & Media Building & Materials Cable Chemicals Consumer Products Energy Food, Beverage & Tobacco Gaming, Lodging & Restaurants Healthcare & Pharmaceutical Industrial/Manufacturing Insurance Leisure & Entertainment Metals & Mining Paper & Containers Real Estate Retail Services & Miscellaneous Supermarkets & Drug Stores Technology Telecommunications Transportation Utilities, Power & Gas Total Market Note: Post-default prices based on price of defaulted issues 3 days after default. Includes first and second lien issues. Loss Rate = Default Rate x (1-Post-Default Prices). Thomson Reuters LPC, Bloomberg. Loss Rate Fitch U.S. Leveraged Loan Default Insight July 2, 217

16 Institutional Leveraged Loan 3-Day Post-Default Prices a First Lien 216 First Lien Second Lien BSL LMM Cov-Lite Bond and Loan Issuers Loan Only Issuers Sponsored Non- Sponsored Consumer Products Technology Supermarket & Drug Stores Automotive Services & Miscellaneous Chemicals Energy Banking & Finance Leisure & Entertainment Metals & Mining Broadcasting & Media Paper & Containers Retail Utilities, Power & Gas 47.1 ($ Bil.) June 217 TTM Leisure & Entertainment Consumer Products Healthcare & Pharmaceutical Metals & Mining Utilities, Power & Gas Services & Miscellaneous Transportation Telecommunications Energy Automotive Broadcasting & Media Industrial/Manufacturing Technology Retail a Par weighted and based on market prices post-default. BSL Broadly syndicated loans. LMM Large middle market. Thomson Reuters LPC, Bloomberg. Fitch U.S. Leveraged Loan Default Insight 16 July 2, 217

17 Profile of Institutional Leveraged Loan Defaults: Default Volume and Issuer Count Volume (LHS) Number of Issuer Deals (RHS) ($ Bil.) (Count) Default Source Missed Payment 17% Distressed Exchanges and Non- Bankruptcy Restructurings 6% Bankruptcy 77% Thomson Reuters LPC, Bloomberg. Market Share Thomson Reuters LPC, Bloomberg. Covenant Status BSL 86% LMM 14% Covenant Lite 13% Covenants 87% BSL Broadly syndicated loans. LMM Large middle market. Thomson Reuters LPC, Bloomberg. Thomson Reuters LPC, Bloomberg. Priority Second Lien 14% Unsecured 1% Capital Structure Loan Only 41% First Lien 8% Loan and Bond Issuers 9% Thomson Reuters LPC, Bloomberg. Thomson Reuters LPC, Bloomberg. Fitch U.S. Leveraged Loan Default Insight 17 July 2, 217

18 Industry Profile of High Yield and Institutional Leveraged Loan Defaults ($ Bil.) Industry Loans Bonds Total % of Total Energy Banking & Finance Broadcasting & Media Utilities, Power & Gas Gaming, Lodging & Restaurants Metals & Mining Chemicals Paper & Containers Automotive Cable Service & Miscellaneous Telecommunications Retail Building & Materials Leisure & Entertainment Transportation Healthcare & Pharmaceutical Technology Real Estate Consumer Products Food, Beverage & Tobacco Industrial/Manufacturing Supermarkets & Drug Stores Insurance.... Total Thomson Reuters LPC, Bloomberg. Institutional Leveraged Loan Versus High Yield Average Annual Industry Default Rates: Utilities, Power & Gas Broadcasting & Media Chemicals Real Estate Building & Materials Gaming, Lodging & Restaurants Metals & Mining Paper & Containers Banking & Finance Cable Energy Leisure & Entertainment Automotive Consumer Products Retail Transportation Telecommunications Services & Miscellaneous Healthcare & Pharmaceutical Supermarkets & Drug Stores Industrial/Manufacturing Technology Food, Beverage & Tobacco Insurance Total Market Institutional Leveraged Loan Default Rate High Yield Default Rate Note: Ranked by highest to lowest loan default rate. Thomson Reuters LPC, Bloomberg. Fitch U.S. Leveraged Loan Default Insight 18 July 2, 217

19 Secondary Leveraged Loan Market Profile Historical Secondary Trading Volume ($ Bil.) Source: LSTA. Monthly Secondary Trading Volume ($ Bil.) Source: LSTA. Fitch U.S. Leveraged Loan Default Insight 19 July 2, 217

20 Credit Availability Indicators U.S. CLO Issuance U.S. CLO Issuance (LHS) Count (RHS) ($ Bil.) (Count) Source: Federal Reserve Senior Loan Officer Survey Percentage of Banks Tightening Standards on C&I Loans (2) (4) C&I Commercial and industrial. Source: The Federal Reserve. Commercial and Industrial Loans Bank Delinquency Rates Source: The Federal Reserve Board. Commercial and Industrial Loans Bank Charge-Off Rates Source: The Federal Reserve Board. Fitch U.S. Leveraged Loan Default Insight 2 July 2, 217

21 Primary Market Spreads Term Loan B BB BB/B B (TLB Drawn Spreads bps) Source: High Yield Bond and Bank Loan Mutual Fund Flows ($ Bil.) (2) (4) (6) High Yield Bonds Bank Loans Source: Lipper FMI. Fitch U.S. Leveraged Loan Default Insight 21 July 2, 217

22 Appendix A Institutional Leveraged Loan Post-Default Price Data The tables and charts on pages show 3-day post-default prices of loans broken down into five categories: 1. Seniority First-lien Loans Second-lien Loans 2. Market Type First-lien broadly syndicated loans First-lien large middle market 3. Capital Structure Issuers of loans and bonds Issuers of loans only 4. Covenant-Lite Loans. Sponsored First-lien sponsored First-lien non-sponsored These tables and charts can be compared to similar data based on emergence prices, which is located on pages Day Post-Default Prices First Lien ($137.7 Bil.) Median Tranches Day Post-Default Prices Second Lien ($13.8 Bil.) Median Tranches Day Post-Default Prices First-Lien BSL ($12.9 Bil.) Median Tranches BSL Broadly syndicated loans Average 6.7%, Median 63.3% Average 32.%, Median.1% Average 61.3%, Median 66.% Fitch U.S. Leveraged Loan Default Insight 22 July 2, 217

23 3-Day Post-Default Prices First-Lien LMM ($16.8 Bil.) Median Tranches LMM Large middle market. 3-Day Post-Default Prices First-Lien Loans and Bonds ($83.6 Bil.) Median Tranches Day Post-Default Prices First-Lien Loans Only ($4.1 Bil.) Median Tranches Average 6.4%, Median 4.8% Average 64.4%, Median 71.8% Average.1%, Median 6.6% Fitch U.S. Leveraged Loan Default Insight 23 July 2, 217

24 3-Day Post-Default Prices First-Lien Covenant Lite ($19.3 Bil.) Median Tranches Day Post-Default Prices First-Lien Sponsored ($79.2 Bil.) Median Tranches Day Post-Default Prices First-Lien Non-Sponsored ($8. Bil.) Median Tranches Average 43.8%, Median 39.% Average 8.7%, Median 6.8% Average 63.4%, Median 62.% Fitch U.S. Leveraged Loan Default Insight 24 July 2, 217

25 Appendix B Institutional Leveraged Loan Emergence Prices The tables and charts on pages 2 27 show emergence prices of loans broken down into five categories: 1. Seniority First-lien Loans Second-lien Loans 2. Market Type First-lien broadly syndicated loans First-lien large middle market 3. Capital Structure Issuers of loans and bonds Issuers of loans only 4. Covenant-Lite Loans. Sponsored First-lien sponsored First-lien non-sponsored Emergence Prices First Lien ($79.3 Bil.) Median Tranches Average 71.4%, Median 74.7% Emergence Prices Second Lien ($7.3 Bil.) Median Tranches Average 27.%, Median.% Emergence Prices First-Lien BSL ($71. Bil.) Median Tranches BSL Broadly syndicated loans Average 72.7%, Median 76.4% Fitch U.S. Leveraged Loan Default Insight 2 July 2, 217

26 Emergence Prices First-Lien LMM ($7.8 Bil.) Default Year Median Tranches LMM Large middle market Average 9.7%, Median 6.3% Emergence Prices First-Lien Loans and Bonds ($.9 Bil.) Median Tranches Average 81.%, Median 92.% Emergence Prices First-Lien Loans Only ($28.3 Bil.) Median Tranches Average 3.3%, Median 2.% Fitch U.S. Leveraged Loan Default Insight 26 July 2, 217

27 Emergence Prices First-Lien Covenant Lite ($11.2 Bil.) Median Tranches Average 66.%, Median 8.3% Emergence Prices First-Lien Sponsored ($3.2 Bil.) Median Tranches Average 63.3%, Median 6.3% Emergence Prices First-Lien Non-Sponsored ($44.1 Bil.) Median Tranches Average 77.9%, Median 88.3% Fitch U.S. Leveraged Loan Default Insight 27 July 2, 217

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