High Yield Highlights - week 2. Ontex IV - SELL 2018/HOLD We lower our recommendation for both issues. Surprisingly strong upward revision

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1 High Yield Highlights - week 2 Ontex IV - SELL 218/HOLD 219 Frigoglass - BUY We lower our recommendation for both issues 7,5 % 218 is reduced to SELL (HOLD) and 9 % 219 is reduced to HOLD (BUY) We expect Ontex IV to redeem the 218 issue in April, which leaves investors with a limited upside and therefore we reduce our rating to SELL. Furthermore the 9 % 219 issue has increased in price to a level that no longer justifies a BUY recommendation and this makes us lower our recommendation to HOLD. With regards to the companys financials our opinion on Ontex us unchanged (positive). Click here to view the full analysis Moody's changes outlook on Frigoglass to negative, current rating unchanged For the same reasons that S&P changed their outlook to negative in December, Moody's has announced that they change their outlook to negative as well The reason is a weak Q3 as well as an expectation of continued pressure on the development of the company's operations in Q4 and the first part of 214. Furthermore Moody's emphasise that Frigoglass may have some challenges with regards to satisfy some financial bank clauses in relation to the 213 result. We have talked to the company concerning these clauses and they see no problem in satisfying the clauses. Vestas - HOLD Surprisingly strong upward revision Vestas announced an upward revision thursday afternoon and expect the free cash flow to increase from EUR 5-7 mn. to around EUR 1 bn. The revision indicates high activity levels in Q4 and good working capital management. We are positively surprised by the size of the upward revision. Our recommendation is still HOLD, since the improved liquidity situation is already reflected in the pricing of the bond. Dong - BUY Click here to view the full analysis Possibility of DONG split Børsen reports of political debate on splitting DONG into a production part (subject to competition) and a transmission part (monopoly) The subject is debated in connection with the sale of shares to Goldman Sachs, ATP and PFA. It is difficult to determine whether the debate will lead to actual changes, changes that could lead to cancellation of the ongoing sale of shares. There is however no doubt that DONG will receive a capital injection nomatter the outcome of the political discussion, which has increased lately. Reseach team: Jens Houe Thomsen Bo Andersen Rasmus Justesen Disclaimer & Disclosure: Please see the last page jht@jyskebank.dk boandersen@jyskebank.dk rasmus.justesen@jyskebank.dk

2 Spread Developments Change Change Spread/Rate 1 Week 1 Month 3 Month Ytd Spread/Rate 1 Week 1 Month 3 Month Ytd EUR High Yield non. Fin (HEAD) 363 bp. -6 bp. -32 bp bp. US High Yield non. Fin (HNF) 41 bp. -9 bp. -25 bp. -69 bp. -1 bp. EUR High Yield (HE) 349 bp. -6 bp. -27 bp bp. -7 bp. US High Yield (HA) 388 bp. -1 bp. -27 bp. -73 bp. -12 bp. itraxx Xover (Generic) 285 bp. 1 bp. -35 bp. -99 bp. -3 bp. CDX High Yield 18 bp. bp. 1 bp. 3 bp. bp. EUR Invest. Grade non. Fin. (EN) 13 bp. -3 bp. -8 bp. -21 bp. -3 bp. US Invest. Grade non. Fin. (CFX) 127 bp. -2 bp. -14 bp. -24 bp. -3 bp. EUR Invest. Grade (ER) 113 bp. -2 bp. -9 bp. -25 bp. -3 bp. US Invest. Grade (CA) 124 bp. -3 bp. -14 bp. -27 bp. -3 bp. itraxx Europe Invest. Grade 71 bp. 2 bp. -7 bp. -25 bp. 1 bp. CDX Invest. Grade 65 bp. 2 bp. -3 bp. -13 bp. 2 bp. itraxx Sr Financial 86 bp. 3 bp. -9 bp. -44 bp. 1 bp. US 1Y 2.97% -3 bp. 16 bp. 28 bp. -2 bp. itraxx Sub Financial 133 bp. 6 bp. -8 bp. -57 bp. 5 bp. German 1Y 1.92%. -3 bp. 8 bp. 5 bp. -3 bp. bp 2,5 2, 1,5 1, 5 EUR HY vs. US HY Spread development Difference (rhs) EUR HY (HEAD) US HY (HNF) bp bp EUR IG vs. US IG Spread development Difference (rhs) EUR HG (EN) US HG (CFX) bp Source: Bloomberg & Merrill Lynch & Jyske Bank

3 High Yield Bond Outperformers and Underperformers - Spread to Worst 1 Week Outperformers 1 Month Outperformers Ticker Coupon Maturity Rating Price STW Change Ticker Coupon Maturity Rating Price STW Change WINDIM B NSINO CCC , NSINO CCC , NSINO CCC , NSINO CCC , YIOULA CC 89. 1, ECOBAT B AGROK B NWORLD CCC ,5-163 NOVASP CC 48. 4, ICECR CCC NWORLD CCC ,5-295 YIOULA CC 89. 1, ECOBAT B LWSN CCC KPERST CCC PAJFP B , SUNCOM B XELLA B ARGID CCC MATTER CCC WINDIM B TPORT CCC ICECR CCC Week Underperformers 1 Month Underperformers Ticker Coupon Maturity Rating Price STW Change Ticker Coupon Maturity Rating Price STW Change KERLIN CCC CODERE C ,249 1,43 CODERE C , CODERE C , CIRSA B KERLIN CCC INEGRP CCC CEMEX B BEZINC B COFP BB CODERE C , TNETBB BB ONTEX B ONTEX B BOPRLN B IDEABB CC ,47 85 TNETBB BB TNETBB BB STYRO B KINOVE B SIEMNS CCC ICECR B FDCSJ B TAKKO B Source: Merrill Lynch & Jyske Bank

4 High Yield Bond Outperformers and Underperformers - Price 1 Week Outperformers 1 Month Outperformers Ticker Coupon Maturity Rating STW Price Change Ticker Coupon Maturity Rating STW Price Change NSINO CCC3 2, NSINO CCC3 2, NSINO CCC3 2, NSINO CCC3 2, PAJFP B3 1, YIOULA CC 1, NWORLD CCC3 2, LECTA B ABGSM B NWORLD B3 1, EMPARK B PAJFP B3 1, HECKKO CCC ABGSM B COMHSS CCC NWORLD CCC3 2, SNAIM CCC NUMCAB B YIOULA CC 1, TITIM BB ZAGHLD B1 1, TVNPW B TVNPW B NHHSM B Week Underperformers 1 Month Underperformers Ticker Coupon Maturity Rating STW Price Change Ticker Coupon Maturity Rating STW Price Change FIAT BB CODERE C 6, FIAT BB CODERE C 5, CODERE C 6, TAKKO B WMG BB SOFTBK BB FIAT BB IDEABB CC 2, FIAT BB WINDIM B3 1, SOFTBK BB KINOVE B FIAT BB KUGR B FIAT BB EOFP B CIRSA B HDDGR CCC BEZINC B ONTEX B SIEMNS CCC LEVI BB Source: Merrill Lynch & Jyske Bank

5 Issuance - EUR bn. 6 Issuance EUR High Yield ex. fin. No. 16 No. Issues EUR High Yield ex. Fin Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec bn. Issuance EUR High Yield incl. fin % 2% 15% 1% 5% EUR High Yield Rating distribution Issuance Jan Feb Mar Apr Maj Jun Jul Aug Sep Okt Nov Dec % BB1 BB2 BB3 B1 B2 B3 CCC1 CCC Source: Merrill Lynch & Jyske Bank

6 European Issuance - EUR, USD & GBP bn EUR issuances excl. fin. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec No No. of EUR issuances excl. fin. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec bn. LTM Issuances in EUR, GBP & USD excl. fin USD GBP EUR No No. of issuances on rating excl. fin. BB1 BB2 BB3 B1 B2 B3 CCC1 CCC2 CC D Source: Merrill Lynch & Jyske Bank

7 Spread vs. GDP US GDP Growth & High Yield Spread bp. % -1 2,1-8 1, , High Yield Spread (HA) US GDP YoY (rhs, inverted) Bloomberg consensus EUR High Yield Spread vs. GDP Growth bp. % -6 2,1-4 1,6-2 1, High Yield Spread (HEAD) Euro GDP YoY (rhs, inverted) bp. 2, 1,5 GDP Growth & High Yield (since 25) y = e -.99x R² =.3447 bp. 2,5 2, High Yield vs. GDP Growth next Quarter (since 25) y = 683.1e -.177x R² = , 1,5 1, % 8 % 6 % 4 % 2 % % 2 % 4 % 6 % 8 % US GDP YoY Q4'13E GDP Growth Q2'13 GDP Growth 6 % 4 % 2 % % 2 % 4 % 6 % Euro GDP YoY Q1'14E GDP growth Q3'13 GDP Growth Source: Bloomberg, Merrill Lynch & Jyske Bank

8 Rating Drift High Yield Rating Drift US & EUR 6% 4% 2% % -2% -4% -6% -8% -1% Europe US EUR High Yield and High Grade Rating Drift 4% 2% % -2% -4% -6% -8% -1% High Grade High Yield EUR High Yield Rating Drift vs. Default Rate 4% -1% -6% -11% -16% % 5% 1% 15% 2% Moody's High Yield Rating Drift (lhs) European Default Rate High Yield Rating Drift vs. PMI PMI Output Index (lhs) EUR HY RATING DRIFT 5M Lag (rhs) 15% -5% -25% -45% -65% -85% Source: Moodys & Jyske Bank

9 Disclaimer & Disclosure Jyske Bank s corporate bond recommendations current breakdown Jyske Bank is supervised by the Danish Financial Supervisory Authority. The research report is based on information which Jyske Bank finds reliable, but Jyske Bank does not assume any responsibility for the correctness of the material nor any liability for transactions made on the basis of the information or the estimates of the report. The estimates and recommendations of the research report may be changed without notice. The report is for the personal use of Jyske Bank's customers and may not be copied. This report is an investment research report. Conflicts of interest Jyske Bank has prepared procedures to prevent and preclude conflicts of interest thus ensuring that research reports are being prepared in an objective manner. These procedures have been incorporated in the business procedures covering the research activities of Jyske Markets, a business unit of Jyske Bank. Jyske Bank's corporate-bond analysts may not hold positions in the instruments for which they prepare research reports. If an analyst takes over for the responsible analyst in connection with illness, business travels, etc. this analyst cannot trade in the relevant corporate bond on the day of publication of the research report and the following day. Jyske Bank may, however, hold positions, have interests in or business relations with the companies that are analysed. The research report has not been presented to the company prior to its release. Analysts receive no payment from persons interested in individual research reports. Read more about Jyske bank's policy on conflicts of interest at Jyske Bank's corporate bond recommendations - current breakdown Breakdown of recomendations, corporate bonds (number) STRONG BUY BUY HOLD SELL

10 Financial models Jyske Bank models the expected development of the analysed company s income statement and balance sheet. A number of key figures for the company is calculated on the basis of these models, and the key figures are compared with those of comparable companies and the company s past performance. From this we infer the spread at which the bonds will trade for the period ahead. The recommendation and the price target are moreover adjusted for the expected news flow and the market sentiment based on knowledge of the industry and company-specific circumstances. Jyske Bank s recommendations take into account the expected development in the corporate-bond market, the various sectors and company-specific circumstances. Risk Investment in this corporate bond is associated with risk. The risk can be measured directly via the spread at which the bond trades relative to a risk free investment with the same maturity. The spread reflects the probability of default, the recovery rate, and the liquidity of the corporate bond. Movements in the credit market, the sector and/or news flows, etc. regarding the company may affect the price of the bond. See the front page of the research report for our view of the risk associated with the corporate bond. The risk on the corporate bond is stated as Very Low, Low, Medium, High or Very High and is relative to the high-yield market for corporate bonds. The risk factors stated and/or calculations of sensitivities in the research report are not to be considered all-encompassing. If the corporate bond is denominated in a currency other than the investor s base currency, the investor accepts an FX risk. Update of the research report The planned update of the report will be prepared immediately upon the release of the company s financial statements. In addition, there may be prepared research reports on special themes specifically for the company or research reports where the company is part of the special theme. These research reports are published on an ad-hoc basis. See the front page for the initial date of publication of the report. The prices stated are the latest prices quoted by Jyske Bank before the publication of the research report, unless otherwise stated. Recommendation concepts Our recommendations are based on market developments and an assessment of the expected return within the next twelve months. A BUY recommendation or a Strong BUY recommendation is based on expectations that investment in the bond will generate a return above that of the general corporate-bond market. On the other hand, a SELL recommendation implies that we expect investment in the bond to generate a return below that of the general corporate-bond market.

11 Contacts for Institutional Customers Morten Storgaard Andersen Vice President, Head of Corporate Bonds Sales Nicolaj Brask Christiansen Senior Sales Manager, Corporate Bonds Sales René Søndergaard Vinther Sales Manager, Corporate Bonds Sales