M&A, DEBT & EQUITY CAPITAL MARKETS: 2015 UPDATE March 11, - - PowerPoint PPT Presentation

M&A, DEBT & EQUITY CAPITAL MARKETS: 2015 UPDATE

March 11, 2015

March 11, 2015 1

M&A, Debt and Equity Capital Markets: 2015 Update Welcome

Today, our panel will discuss trends, insights and ideas we hope you can use to create value for your companies, focusing on M&A and the Capital Markets in 2015. We’ll highlight a few topline findings of our annual middle market M&A Outlook research

• Why both the number and the focus of middle market firms in acquisition mode has

grown substantially

• How seller motivations are shaping the market today
• What changing demographics of middle market owners means for the M&A landscape

Our research also shows that smaller cap businesses are taking on an increasingly important role in M&A and affecting the balance of deal supply and demand. We’ll also share our perspectives on the state of M&A, equity and debt capital markets, and implications for middle market corporate finance strategies in 2015.

Bob Rubino Executive Vice President – Head of Corporate Finance & Capital Markets

March 11, 2015 2

M&A, Debt and Equity Capital Markets: 2015 Update

Buyers have reached a tipping point

The number of middle market firms currently involved in an acquisition or actively seeking

• pportunities is up—particularly among larger firms. The right acquisition offers acceleration
• ver today’s slow, but steady, market growth.

The number of buyers who have decided to put off acquisitions for at least a year has also

• increased. Formerly passive buyers have moved decisively to either postpone or pursue M&A.

Source: Citizens Commercial Banking Middle Market M&A Outlook 2015

March 11, 2015 3

M&A, Debt and Equity Capital Markets: 2015 Update

Sellers are less engaged today…but demographics forecast a change

In contrast to buyers, sellers are less active in pursuing transactions; only 1 in 8 sellers are currently involved in or actively seeking opportunities today compared to more than 1 in 3 buyers—now shifting the balance from a buyer’s to a seller’s market. However, the cresting wave of baby boomer retirement will dramatically increase the number of companies looking to sell over the next several years—enabling buyers to become more selective, and requiring sellers to be thoughtful in packaging and planning to achieve the best valuations. .

69%

My expected retirement timeframe has had a significant impact on the timing of the sale of my company (for Owners)

38%

I believe M&A activity in my industry will increase in 2015 as a result of a growing number of industry leaders nearing retirement

40%

The expected retirement timeframe(s) of my company’s leader(s) has had a significant impact on the timing of the sale of the business (for Non-Owner Executives)

62% 24%

7%

7% 60% 28%

6%

6%

9%

64% 21% 6%

2013 2014 2015

Currently involved Actively seeking

• pportunities

Passively receptive to opportunities Not likely to consider in the next 12 months Be acquired by or merge with another firm

CURRENT SELLER ACTIVITY BOOMER IMPACT ON FUTURE SALES

Source: Citizens Commercial Banking Middle Market M&A Outlook 2015

March 11, 2015 4

M&A, Debt and Equity Capital Markets: 2015 Update

Our Panel Jim Kuster

Managing Director, Head of M&A, Corporate Finance

Doug Cameron

Managing Director, Head of Equity Capital Markets

Ted Swimmer

Executive Vice President, Head of Debt Capital Markets

March 11, 2015 5

The State of M&A in 2015 Jim Kuster Managing Director, Head of M&A, Corporate Finance

Jim joined Citizens in August 2012 as the Managing Director

• f the M&A, Corporate Finance practice. Prior to Citizens, Jim was

the Head of Corporate Finance Americas at RBS Securities Inc. for 8 years, advising primarily multinational clients of RBS on numerous successful cross-boarder transactions. Before joining RBS, Jim was a partner of Crest Advisors, LLC for 5 years where he worked with domestic middle market companies on mergers, acquisitions, divestitures and capital raises. He also served on the board

• f directors of several public and private companies as a result of Crest’s

investing activities. Before Crest, Jim spent 13 years at Chase Securities,

• Inc. where he was responsible for corporate finance and advisory

transactions for many prominent companies in the Telecom, Media and Technology sectors.

March 11, 2015 6

The State of M&A, Debt & Equity Capital Markets in 2015

Macro Themes in M&A

Economic

• On February 24th, Federal Reserve Chairwoman, Janet Yellen,

addressed the U.S. Senate not only highlighting significant and critical progress made in the U.S. economy but also commenting on underemployment, stagnant wage growth and low inflation expectations as critical issues

• Consumer spending has been lifted by the slight improvements in the

labor market as well as by the increase in household purchasing power resulting from the sharp drop in oil prices

• Oil prices have declined by more than 50% driven by global supply

growth coupled with moderating demand

• Sales of new and existing U.S. single family homes fell 0.2% and 4.9%,

respectively in January but were offset by a 1.7% increase in pending home sales. Sales were likely held back by poor weather in the U.S. Northeast and shortage of supply

• Continued rising consumer confidence and declining unemployment

could help return positive momentum in housing

• Fed policy and market communication is evolving under Janet Yellen, as

she has reiterated that the central bank will be “patient” on raising interest rates

Political

• After the 2014 mid-tem elections, the Republicans now control both the

House and Senate, and with both parties focused on 2016, it is unlikely any major legislation will pass impacting economic or financial markets

Financial

• Debt markets remain accommodative, with low rates persisting, but

investors are becoming more selective on the edges

• Pressure on banks to reduce risk and improve capital positions is

continuing to benefit non-bank lenders, and shift the landscape of capital markets

• Equity markets have continued to reach new highs and remain generally

bullish and open to new issuance

Factors Influencing M&A Activity

• Continued favorable credit markets are enabling ample leverage levels
• Historically low interest rates with a long, gradual upward movement

projected

• A large number of private equity portfolio companies may seek liquidity

given strong prevailing market conditions

• Healthy stock market performance - the S&P 500 is up nearly 16%

since 1Q 2014

• Many industries are facing stagnant revenue growth but strong earnings

growth, highlighting that growth is being delivered through cost cutting and margin expansion rather than through top line expansion

Shareholder Activism Driving Activity

• Shareholder activism continues to be a theme, increasingly occupying

headlines in recent years and will continue to be a factor influencing M&A

• “Constructivist” investing is a recent theme adopted by activists as they

focus more on stimulating growth opportunities for target companies, as was seen with the Bill Ackman-backed Valeant /Allergan proposed transaction

Deal Activity

• U.S. M&A activity recorded its best performance in 5 years, there were

4,795 deals announced worth $1.4 trillion, a 22% increase in deal volume and a 57% increase in value

• 2014 witnessed 35 deals worth more than $10 billion
• Private equity exit values reached a five year high, as PE funds took full

advantage of the U.S. M&A rebound in 2014. Investors sold 962 companies worth $261.8 billion, an increase of 31% in volume and 70% in value compared to 2013

March 11, 2015 7

The State of M&A, Debt & Equity Capital Markets in 2015

Deal Statistics and Examples

Middle Market M&A1 $Volume (billions) Middle Market Sector Split Median Transaction Multiple

Sources: Dealogic, Thomson One, S&P Capital IQ, White & Case; 1. Deals valued at $50MM - $1BN

Commentary Selected 2014 Notable Transactions

• January 2014: XPO Logistics acquisition of Pacer International

($336 million)

• May 2014: Genstar Capital’s acquisition of Pretium Packaging

($500 million)

• June 2014: Endo International’s acquisition of DAVA

Pharmaceuticals ($600 million)

• June 2014: Bay Valley Foods’ acquisition of Flagstone Foods

($875 million)

• July 2014: E.W. Scripps’ acquisition of Journal Communications

($687 million)

• December 2014: Irving Place Capitals’ acquisition of American

Apparel ($500 million)

“Something has changed for buyers and sellers. The buyers are through their restructurings. They have done what they can on the cost side. Now they have lean, growing business operations, and they are ready to transform through acquisitions. The thing that has changed for sellers is that buyers are now willing to meet their price expectations – and when you have enthusiastic buyers (even at high prices), you get willing sellers and a highly charged M&A Market.” John Reiss, Global Head of M&A February 25, 2015

$377 $255 $158 $291 $298 $312 $337 $337 $100 $150 $200 $250 $300 $350 $400 2007 2008 2009 2010 2011 2012 2013 2014 7% 10% 21% 10% 11% 13% 12% 17% Business Services Consumer Energy & Minning Financial Healthcare Industrials Real Estate TMT 10.9x 9.8x 10.6x 10.2x 12.5x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Mining

March 11, 2015 8

Equity Capital Markets in 2015 Doug Cameron Managing Director, Head of Equity Capital Markets Oppenheimer & Co. Inc.

In 2006, Doug joined Oppenheimer & Co. Inc.’s (Oppenheimer) Equity Capital Markets as the Managing Director and Division Head,

• verseeing the underwriting of mid- and small-cap equity offerings, a

wide range of capital-raising methods, and both after-market advisory and execution services. Prior to Oppenheimer, Doug was the Head of Equity Capital Markets at WR Hambrecht + Co. and executed 10 Open IPO transactions for companies including Morningstar and New River Pharmaceuticals. Before WR Hambrecht, Doug originated equity transactions in the communications, systems, semiconductor, and consumer space in the Equity Capital Markets group at JPMorgan. During his career, he has worked on over 100 lead-managed transactions that have raised in excess of $12B for clients across a broad spectrum of industries.

March 11, 2015 9

The State of M&A, Debt & Equity Capital Markets in 2015

Equity Market Headlines: Markets setting record highs

• The markets continue to move higher since the beginning of 2015 with the Dow Jones Industrial Average

and the S&P 500 reaching record highs – Oil prices have dropped greatly in the last few months – Periodic market volatility as geopolitical issues arise – Housing starts declined 2.0% in January after a 7.1% jump the month before – Jobless claims fell a sizable 21K in the week of February 16th, moving from 304K to 283K – The industrial sector turned modestly positive in January with industrial production rebounding 0.2% after a December decrease of 0.3%

• Q1 2015 equity issuance on track with Q1 2014

– Monthly mutual fund flows have been net positive for 22 of the last 26 months (since January 2013)

20 40 60 80 100 120 140 Jan-2012 Sep-2012 May-2013 Jan-2014 Sep-2014 # of Transactions

Converts IPOs Follow-Ons

Feb-2015 Source: Dealogic, February 2015

March 11, 2015 10

The State of M&A, Debt & Equity Capital Markets in 2015

Equity Market Overview

Source: FactSet, Dealogic and AMG Data as of 2/20/15

Market Performance U.S. Equity Flows

Markets break all-time highs in 2015 Continued positive net mutual fund flows

CBOE Volatility Index (VIX) Equity and Equity-Linked Offerings

Volatility in line with 2014 Capital markets activity expected to remain robust

Nasdaq 4,956 DJIA 18,140 S&P 500 2,110

Jan-12 Jun-12 Nov-12 May-13 Oct-13 Mar-14 Sep-14 Feb-15 80 100 120 140 160 180 200

($30) ($20) ($10) $0 $10 $20 $30 $40 $50 Mar-2012 Oct-2012 May-2013 Dec-2013 Jul-2014 Feb-2015 $ Billions

20 of the past 24 months have seen net equity inflows 1 of the last 4 months experienced

• utflows

Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Oct-14 Feb-15 6 12 18 24 30 VIX 14.3

20 40 60 80 100 120 140 Jan-2012 Sep-2012 May-2013 Jan-2014 Sep-2014 # of Transactions

Converts IPOs Follow-Ons

Feb-2015

March 11, 2015 11

The State of M&A, Debt & Equity Capital Markets in 2015

2013 – 2014 YTD Issuance Summary

Source: Dealogic as of 2/20/15 Deal values ≥ $20M, market caps ≥ $50M; Excludes Closed End Funds and SPACs

By $ Amount Raised By # of Deals By $ Amount Raised By # of Deals

2015 YTD IPOs (22 deals, $3.9BN) 2014 IPOs (278 deals, $86.1BN)

Healthcare 22% Industrials 5% Real Estate 18% Technology 20% Energy & Utility 28% Consumer 3% Finance 4% Healthcare 55% Industrials 4% Real Estate 14% Technology 9% Energy & Utility 4% Consumer 5% Finance 9% Healthcare 11% Industrials 7% Real Estate 4% Technology 39% Telecom 1% Energy & Utility 14% Consumer 6% Finance 18% Healthcare 36% Industrials 9% Real Estate 3% Technology 18% Telecom 1% Energy & Utility 10% Consumer 11% Finance 12%

March 11, 2015 12

The State of M&A, Debt & Equity Capital Markets in 2015

2013 – 2014 YTD Issuance Summary

Source: Dealogic as of 2/20/15 Deal values ≥ $5M, Excludes Unit Transactions, Closed End Funds and SPACs

By $ Amount Raised By # of Deals By $ Amount Raised By # of Deals

2015 YTD Follow-ons (107 deals, $19.4BN) 2014 Follow-ons (622 deals, $137.1BN)

Healthcare 23% Industrials 14% Real Estate 17% Technology 13% Telecom 2% Energy & Utility 9% Consumer 10% Finance 12% Healthcare 13% Industrials 14% Media 1% Real Estate 16% Technology 12% Telecom 1% Energy & Utility 15% Consumer 16% Finance 12% Healthcare 28% Industrials 2% Media 1% Real Estate 18% Technology 6% Energy & Utility 18% Consumer 19% Finance 8% Healthcare 50% Industrials 6% Media 1% Real Estate 12% Technology 8% Telecom 1% Energy & Utility 11% Consumer 8% Finance 3%

March 11, 2015 13

The State of Debt Capital Markets Ted Swimmer Executive Vice President, Head of Debt Capital Markets

Ted has more than 20 years of broad financial services experience. He has been the head of the Capital Markets Group at Citizens Financial Group since 2010 and has since assumed responsibility for the Sponsor Finance Group. He joined Wachovia in 1998, after working in various positions at Chase Securities and its predecessor financial

• institutions. He holds an MBA in finance from Columbia University and

a BA in economics and history from Lafayette College. From 2008 to 2010, Ted managed all of Wachovia Securities’ Leveraged Finance origination activities. From 2004 to 2008, he ran Loan Syndicate and Sale for Wachovia. Prior to that, Ted was a Managing Director originating leveraged loans and bonds.

March 11, 2015 14

The State of M&A, Debt & Equity Capital Markets

Leverage Lending Environment

Loan volumes are expected to slightly decrease in 2015 from the ~$529BN exhibited in 2014 due to the following factors:

$1 $22 $59 $98 $155 $228 $228 $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 2015 2016 2017 2018 2019 2020 2021

Investor Technicals Regulatory Pressure Limited Refinancings

 For most of 2014, retail investors

experienced outflows that were mostly counterbalanced by new CLO

• formation. When retail outflows
• utpaced CLO formation, the market

experienced meaningful disruption, adding volatility to trading levels and primary market clearing prices

 We expect volatility to again be

driven by these technicals in 2015. The main catalyst for an improved environment would be near term rate increases which will improve retail fund flows as well as CLO formation – These circumstances will stress the importance of choosing arrangers with strong sales & trading capabilities and deep investor relationships

 Pressure on arrangers continues

from the Office of the Comptroller of the Currency (the “OCC”) and Federal Reserve (the “Fed”) who have implemented a low-tolerance policy for criticized underwritten transactions

 Strict repayment guidelines as a true

point of emphasis from regulators – Ability to repay (i) 50.0% of total debt or (ii) 100.0% of senior debt from cash flow within 7 years – Some banks are now requiring that payback periods be run as if a given transaction occurred at its widest terms including the free- and-clear incremental facility, resulting in restrictions on Senior / Total Leverage multiples

 Potential Increase in High Yield

Executions: With arrangers facing a more restrictive regulatory environment thus potentially affecting issuers’ ability to refinance existing credit facilities, issuers may be best suited utilizing the high yield market. Historically low interest rates provide ability to lock in a regulatory favorable capital structure going forward

 The OCC and Fed have indicated to

the market that simply lowering rates and / or extending maturities will not be considered, in and of themselves, “credit-improving” transactions

Source: S&P LCD and Citizens Capital Markets

Potential Shift to Other Long Term Capital

 Loan volume growth in 2015 will be

supported by event-driven financings given the loan maturity profile of the

• verall market as nearly 97.0% of

loans outstanding today mature in 2017 or later

 At the end of 2014, the forward

calendar stood at $33BN, of which $31.4BN was M&A-related, accounting for 95.0% of expected volume

As a result, issuers in 2015 can expect (i) intense competition among regulated arrangers for underwriting mandates, (ii) continued low-interest rate environment with increased market volatility, and (iii) increased scrutiny from arrangers driven by regulatory guidelines

Minimal Near Term Loan Maturities

($’s in Billions)

March 11, 2015 15

4.04% 5.31% 4.90% 6.20% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 BB 2-year Average B 2-year Average BB/BB- B+/B

The State of M&A, Debt & Equity Capital Markets

Fourth Quarter 2014 Loan Market Trends and Impact on 2015

The loan markets slowed in Q4 2014 and began to experience significant volatility, driven by adverse macroeconomic conditions and recent leverage loan investor trends…



Increase U.S. shale production coupled with substantially lower demand in Europe for oil has resulted in a surplus of oil driving down oil prices



Prices have fallen substantially and are currently trading below $50 per barrel



Leveraged loan market returns slumped compared to other investable markets resulting in net retail outflows



If 1Q 2015 is successful, many of the leading CLO fund managers are estimating a ~$75.0 - $85.0 million gross supply for 2015

Source: S&P LCD, ThomsonReuters LPC, and Citizens Capital Markets

Monthly New Issuance Yields CLO Issuance and Net Retail Outflows …resulting in a significant increase in pricing compared to the 1-year average and overall lower-than-anticipated leverage loan volumes Price of Crude Oil – WTI Given the uncertainty coming out of 2014, arrangers in 2015 are launching transactions at wider price levels and with more investor friendly terms while the market remained in a price discover phase during the first few weeks of the year Monthly Secondary Bid Levels

95.28 99.38 94.00 95.00 96.00 97.00 98.00 99.00 100.00 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15

• Avg. Bid Price

$8.9 $11.1 $12.3 $12.2 $13.8 $13.4 $11.3 $7.7 $11.2 $11.3 $8.3 $5.2 $5.0 $2.9 $2.2 $(1.3) $(1.3) $(2.6) $(2.2) $(4.0) $(5.6) $(5.9) $(1.2) $(6.2) $(2.1) $(0.4) $(10.0) $- $10.0 $20.0

Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15

CLO Issuance Net Retail Outflows ($ in billions) $94.06 $49.45 $40.0 $60.0 $80.0 $100.0 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Crude Oil - WTI

March 11, 2015 16

$41 $47 $43 $27 $44 $43 $7 $42 $17 $18 $8 $19 $12 $10 $18 $13 $11 $22 $15 $5 $21 $4 $12 $7 $16 $2 $- $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15

Institutional Pro Rata

The State of M&A, Debt & Equity Capital Markets

Current Loan Market Conditions – Institutional Market

Monthly New Institutional vs. Pro Rata Loan Issuance Volume

$27.5 $32.0 $28.5 $15.9 $26.3 $26.5 $3.4 $30.7 $9.4 $12.4 $3.3 $11.9 $9.4 68% 68% 67% 60% 60% 62% 48% 73% 55% 69% 40% 61% 76% 0% 10% 20% 30% 40% 50% 60% 70% 80% – $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Covenant-lite Volume as a % of Total Covenant-lite Volume ($ in billions)

Covenant-lite % of Total

Monthly Covenant-Lite Issuance Volume

($ in billions) LBO 49% Acquisition 35% Refinancing 5% Merger 4% Recap/Dividend 3%

• Corp. Purposes

2% Other 2% Refinancing 27% Acquisition 22% LBO 20% Recap/Dividend 12% Merger 9% Other 8%

• Corp. Purposes

2%

LBO and M&A activity has picked up significantly in the institutional market so far in 2015… CY 2014 Institutional Issuance by Use of Proceeds YTD 2015 Institutional Issuance by Use of Proceeds

CY 2014 Issuance YTD 2015 Issuance % of % of Purpose Total Purpose Total Refinancing 26.6% LBO 49.6% Acquisition 22.3% Acquisition 35.1% LBO 20.3% Refinancing 4.8% Recap/Dividend 11.6% Merger 4.1% Merger 9.0% Recap/Dividend 2.7% Other 8.1%

• Corp. Purposes

2.0%

• Corp. Purposes

2.1% Other 1.8%

Source: S&P Capital IQ LCD; Citizens Capital Markets

March 11, 2015 17

The State of M&A, Debt & Equity Capital Markets

Current Loan Market Conditions – Pro Rata Market

Average Pro Rata Spreads by Rating Pro Rata New Issue Volume by Purpose New Issue Volume by Purpose – 2015 YTD Pro Rata Lender Participations Pro Rata Lenders with > 10 Deals Pro Rata Volume & Share of Total Issuance

L+121 L+213 L+406 L+0 L+100 L+200 L+300 L+400 L+500 L+600 Feb-13 Jun-13 Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 BBB 2-year Avg. BB 2-year Avg. B 2-year Avg. BBB/BBB- BB/BB- B+/B 134 102 87 81 74 67 65 63 62

• 20

40 60 80 100 120 140 160 2 Deals 3 Deals 4 Deals 5 Deals 6 Deals 7 Deals 8 Deals 9 Deals 10 Deals + 52 58 60 81 72 33 25 48 55 61 59 62

• 10

20 30 40 50 60 70 80 90

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

$148.6 $82.0 $37.0 $74.9 $141.2 $169.8 $151.7 $150.7 $17.7

• $20.0

$40.0 $60.0 $80.0 $100.0 $120.0 $140.0 $160.0 $180.0 $200.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 Refinancing M&A (LBO + Acquisitions) Other Other 0.9% Recap/Dividend 18.4%

• Corp. Purposes

0.3% LBO 9.6% Refinancing 38.6% Acquisition 32.2% $38 $75 $144 $170 $151 $151 $17 $18 50% 32% 38% 37% 25% 29% 20% 36% 0% 10% 20% 30% 40% 50% 60%

• $20.0

$40.0 $60.0 $80.0 $100.0 $120.0 $140.0 $160.0 $180.0 2009 2010 2011 2012 2013 2014 YTD 2014 YTD 2015

Pro Rata % Share of Total Loan Issuance Pro Rata Volume ($ in Billions)

Over 400 lenders have participated in 5+ deals Source: S&P Capital IQ LCD; Citizens Capital Markets

March 11, 2015 18

Retail 15% Gaming & Hotel 11% Cable 10% Healthcare 9% Services & Leasing 9% Oil & Gas 7% All Other 39%

The State of M&A, Debt & Equity Capital Markets

Current High Yield / Fixed Income Market Conditions

450 5,900 4,800 8,075 7,100 9,285 $- $2,000 $4,000 $6,000 $8,000 $10,000 1/9/15 1/16/15 1/23/15 1/30/15 2/6/15 2/13/15 (922) 880 (241) 2,765 2,670 2,935 $(2,000) $(1,000) $- $1,000 $2,000 $3,000 $4,000 1/9/15 1/16/15 1/23/15 1/30/15 2/6/15 2/13/15

Source: Bloomberg Source: RBS Securities, The Yield Book

2015 YTD: $8,087mm in Inflows 2015 YTD: $35.6BN in USD Proceeds

Corporate credit markets continue to improve driven by positive US economic data, solid 4Q’14 earnings and the rise in the price of oil 10-Year Treasury HY Index Yield New Issuance Volumes ($ in billions) Fund Flows ($ in millions)

6.67% 6.27% 6.27% 5.86% 5.75% 6.00% 6.25% 6.50% 6.75% 7.00% 1/9/15 1/16/15 1/23/15 1/30/15 2/6/15 2/13/15 HY Cash Yield Ex-Energy 1.95% 2.01% 1.50% 1.75% 2.00% 2.25% 1/9/15 1/16/15 1/23/15 1/30/15 2/6/15 2/13/15

Decreased Activity Among Energy Issuers in 2015

Oil & Gas 17% Services & Leasing 15% Healthcare 9% Telecom 6% Cable 6% Computers & Electronics 5% All Other 42%

CY 2014 HY Issuance by Industry YTD 2015 HY Issuance by Industry

Recent volatility in oil prices has tapered activity in the high yield market among energy issuers

Source: S&P Capital IQ LCD Source: AMG/Lipper Source: AMG/Lipper

March 11, 2015 19

Questions?

March 11, 2015 20

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