A Debtwire Middle Market Special Report 2Q17 BDC QTA...Debtwire.com An Acuris Company 2Q17 BDC...

Debtwire.com

An Acuris Company2Q17

BDC Quarterly Trends and Analysis An Acuris Company

A Debtwire Middle Market Special Report

2Q17

BDC Quarterly Trends and Analysis

Debtwire.com

Quarterly Overview of Alternative Lenders to the Middle Market

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2Q17 | Primary Issuance Overview

1AINV 22TCRD2ARCC 23TICC3BKCC 24TSLX4CPTA 25TCAP

5FDUS 26WHF

6FSC 27MRCC

7FSIC 28ABDC

8GARS 29GBDC9GLAD 30TPVG

10GSBD 31PFLT11HCAP 32FSFR12HTGC 33SUNS

13HRZN 34CSWC

14KCAP 35OHAI

15MAIN 36SCM16MCC 37CMFN17NMFC 38OFS18PNNT 39ACSF19PSEC 40GAIN

20SLRC 41 CGBD21TCPC

BDCs Under Coverage as of 2Q17CONTENTS

METHODOLOGY: 3

FIRST LIEN QUARTERLY TRENDS, CHARTS AND ANALYSIS: 4-5

SUBORDINATE QUARTERLY TRENDS, CHARTS AND ANALYSIS: 6-7

UNITRANCHE QUARTERLY TRENDS, CHARTS AND ANALYSIS: 8-9

INDUSTRY BREAKDOWN AND ANALYSIS: 10-13

CONTACT INFO: 14

APPENDIX2Q17 PRIMARY ISSUANCE WATCH (2Q17 ENTRANCE AND EXITS OF ALL BDCS UNDER COVERAGE)

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2Q17


Methodology

Debtwire Middle Market’s BDC Trends and Analysis reportcalculates average spreads and tenor, on a quarterly basis,for the leveraged loans issued by ~40 BDCs under coverage.

BDCs are permanent capital vehicles that return 90% of theirnet operating income to shareholders in the form of adividend in exchange for no corporate tax. There areestimated to be roughly 57 public BDCs, of which we track~40 that have the most heavily trafficked marketcapitalization.

The BDCs we track tend to define their loans differently,but we’ve grouped them into three categories—first lien loans,subordinated debt and unitranche—and tracked both theaverage spread and tenor in all three groups. The

subordinated debt basically encompasses second lien,mezzanine and unsecured debt. Each BDC either originatedthe loan, was the sole holder of the loan or participated in alarger loan issuance underwritten by a third party.

The first two charts under each of the three categoriesencompass the average first lien coupon on all of theissuances and exits over the last eight quarters. The loans aregrouped by applicable margin above LIBOR, cash interest,applicable margin above prime and applicable margin abovethe base rate. The second group of charts shows the averagefirst lien issuance price and the average first lien exit price.The last two charts show total deals issued per quarter andtotal exits.

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Debtwire.com


AVERAGE FIRST LIEN ISSUANCE PRICE

Source: Debtwire, SEC filings

AVERAGE FIRST LIEN EXIT PRICE


AVERAGE FIRST LIEN RATE FOR EXITS


AVERAGE FIRST LIEN COUPON


2Q17 | First Lien

ISSUANCES EXITS

7.0%

Avg L +

6.8%6.9%

Avg cash int

8.5%

5.2%

Avg P+

6.4%5.9%

Avg B+

4.3%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

9.5%

10.0%

10.5%

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

Inte

res

t R

ate

/ C

ou

po

n (%

, Qo

Q)

Average First Lien Coupon For Exits Avg cash int Avg P+ Avg B+

95.2%

Average First Lien Exit Price

96.6%

89.0%

91.0%

93.0%

95.0%

97.0%

99.0%

101.0%

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

Pri

ce

(%, Q

oQ

)

6.9% Avg L+

6.4%

8.2%

Avg cash int

8.1%

6.8%

Avg P+

6.7%

6.4%

Avg B+

7.5%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

9.5%

10.0%

10.5%

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

Inte

rest

Rat

e /

Co

up

on

(%, Q

oQ

)

Avg L+ Avg cash int Avg P+ Avg B+

97.9%

Average First Lien Issuance Price 98.3%

92.0%

93.0%

94.0%

95.0%

96.0%

97.0%

98.0%

99.0%

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

Pri

ce

(%, Q

oQ

)

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Debtwire.com


FIRST LIEN EXITS & AMOUNT EXITED


FIRST LIEN PRIMARY DEALS & PRINCIPAL AMOUNT


2Q17 | First Lien

ISSUANCES EXITS

FIRST LIEN OVERVIEW:

In 2Q17, the average first lien cash coupon increased 35 basis points QoQ to 8.1%. The increase comes after 4 straight

quarters of tightening in the average cash coupon.

Deal volume remains very heavy as of 2Q17. Nonetheless, there was a net outflow in first lien deals amongst the

BDCs. Total entrances and exits were both up significantly YoY, illustrating the high level of activity in the current

market.

The total count of first lien issuances (212) decreased slightly QoQ, but the USD 2.3bn in total deal value was the

highest over the last 8 quarter period. Total deal value continues to climb sequentially. The average price (fair

value/principal) for first lien entrances increased QoQ to 98.3%, from 96.7% in 1Q17.

The average price at exit increased by 68 basis points QoQ to 96.6%.

1,606,597

Total amount exited (left axis),

3,700,298

903,482

1,341,601 1,205,718

1,633,1621,386,460

2,398,218161

Total exits (right axis)

377

104

150130

193

215 220

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

0

50

100

150

200

250

300

350

400

To

tal e

xits

To

tal a

mo

un

t (U

SD

00

0's

)

Total amo unt exited (left axis ) Total exits (right axis)

1,383,258

Total amount (left axis)

2,010,7141,615,206 1,251,197

1,727,8951,980,898

2,238,116 2,302,125

119

Total primary deals (right axis)

178

100

155 178 188

225 212

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

0

50

100

150

200

250

300

350

400

To

tal

pri

ma

ry d

ea

ls

To

tal a

mo

un

t (U

SD

00

0's

)

Total amount (left axis) Total primary deals (right axis)

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AVERAGE SUBORDINATE ISSUANCE PRICE


AVERAGE SUBORDINATE EXIT PRICE


AVERAGE SUBORDINATE COUPON FOR EXITS


AVERAGE SUBORDINATE COUPON


2Q17 | Subordinated Loans

ISSUANCES EXITS

97.5%

Average Subordinate Issuance Price

100.2%

92.5%

93.5%

94.5%

95.5%

96.5%

97.5%

98.5%

99.5%

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

Pri

ce

(%, Q

oQ

)

8.9%

Avg L+

8.4%

10.7%

Avg cash int

9.8%

8.0%

8.5%

9.0%

9.5%

10.0%

10.5%

11.0%

11.5%

12.0%

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

Inte

res

t R

ate

/ C

ou

po

n (

%,

Qo

Q) Avg L+ Avg cash int

8.8%Avg L+ 8.9%

10.9% Avg cash int 10.9%

14.2%Avg PIK only

11.7%

6.5%

8.5%

10.5%

12.5%

14.5%

16.5%

18.5%

20.5%

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

Inte

rest

ate

/ c

ou

po

n (%

, Qo

Q)

Avg L+ Avg cash in t Avg PIK only

89.5%

Average Subordinate Exit Price

90.7%

85.0%

87.0%

89.0%

91.0%

93.0%

95.0%

97.0%

99.0%

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

Pri

ce

(%, Q

oQ

)

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SUBORDINATE EXITS & AMOUNT EXITED


SUBORDINATE PRIMARY DEALS & PRINCIPAL AMOUNT



ISSUANCES EXITS

SUBORDINATED LIENS OVERVIEW:

The quantity of subordinated loan entrances continue to increase QoQ, and significantly YoY, to 68 deals for USD 827m in

total value in 2Q17. However, there was a net outflow, as the BDCs exited 76 positions for USD 968m in value.

Average cash coupon and LIBOR spread continued its decline on both a QoQ and YoY basis, to 9.8% and 8.4%,

respectively in 2Q17.

The average issuance price increased significantly QoQ to 100.2%, after remaining relatively unchanged last quarter. On

the contrary, the average price at exit decreased considerably QoQ to 90.7%, the lowest since 1Q16.

553,516


641,767

488,767

477,314

642,462

974,892

630,792

826,94938 40 Total primary

deals (right axis)

28

36 40

74

60

68

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

0

10

20

30

40

50

60

70

80

To

tal p

rim

ary

dea

ls

To

tal a

mo

un

t U

SD

(00

0's

) Total amount (left axis) Total primary deals (right axis)

508,093

Total amount exited (left axis)

821,821

659,024

823,469

1,002,153872,205

964,340

968,01839


55

39

49

59

70

56

76

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

0

10

20

30

40

50

60

70

80

To

tal e

xit

s

To

tal a

mo

un

t (U

SD

00

0's

)

Total amount exited (left axis) Total exits (right axis)

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Debtwire.com


AVERAGE UNITRANCHE ISSUANCE PRICE


AVERAGE UNITRANCHE EXIT PRICE


AVERAGE UNITRANCHE COUPON FOR EXITS


AVERAGE UNITRANCHE COUPON


2Q17 | Unitranche Loans

ISSUANCES EXITS

97.3%

Average Unitranche Issuance Price

97.3%

93.0%

94.0%

95.0%

96.0%

97.0%

98.0%

99.0%

100.0%

101.0%

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

Pri

ce

(%, Q

oQ

)

100.0%

Average Unitranche Exit Price

99.1%

84.0%

86.0%

88.0%

90.0%

92.0%

94.0%

96.0%

98.0%

100.0%

102.0%

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

Pri

ce (%

, Qo

Q)

9.1%

Avg L+ 6.7%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

9.5%

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

Pri

ce (%

, Qo

Q)

7.4%

10.8%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

9.5%

10.0%

10.5%

11.0%

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

Inte

rest

Rat

e /

Coup

on (

%, Q

oQ)

Avg Cash Int.

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Debtwire.com


UNITRANCHE EXITS & AMOUNT EXITED


UNITRANCHE PRIMARY DEALS & PRINCIPAL AMOUNT



ISSUANCES EXITS

UNITRANCHE LOANS OVERVIEW:

After seeing minimal unitranche activity in 1Q17, we observed an uptick in transactions, amongst the BDCs, this quarter.

We tracked 16 entrances, for a total principal value of USD 125.9m. There was also a surge in unitranche exits (15).

Average price for issuances decreased QoQ to 97.3%, while the average price of exits increased QoQ to 99.1%.

In 2Q17, the average LIBOR spread on unitranche entrances tightened 56 basis points QoQ to 6.7%


27,500

28,65318,499

100,434

22,655 25,860 14,697 125,8951

5

Total primary deals (right axis)

4

33

4 4 4

16

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

0

5

10

15

20

25

30

35

To

tal p

rim

ary

dea

ls

To

tal a

mo

un

t (U

SD 0

00'

s)

Total amount (left axis) Total primary deals (righ t axis)

41,698

Total amount exited (left axis)

57,14435,005

45,140 36,02017,053

0

100,769

6

7

4


11

7

5

0

15

0

20,000

40,000

60,000

80,000

100,000

120,000

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

0

2

4

6

8

10

12

14

16

To

tal e

xit

s

To

tal a

mo

un

t e

xit

ed

Total amount exited (left axis) Total exits (right axis)

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Debtwire.com


INDUSTRY BREAKDOWN OF ENTRANCES AND EXITS


2Q17 | Industry Breakdown

INDUSTRY BREAKDOWN OVERVIEW:

The graph above illustrates the total volume and fair value of entrances and exits per industry (top 10 shown), as classifiedbyDebtwire, for the BDCs under our coverage in 2Q17.

In 2Q17, the services (other), healthcare and computer services industries had the highest amount of total fair value ofentrances (USD 1.6bn total).

We continue to see BDCs express a cautious approach to retail and energy. Retail sector inflows continued to declineQoQ to USD 105m, from USD 118m last quarter. In retail, we saw more than twice as much outflow (of total fair value)for exits when compared to entrances (USD 136m net outflow). Energy sector deal flow decreased to 13 entrances, from19 last quarter.

718

519

388

175 175

105

190

128 102 104

551

350

414

253

187

240

127

162 173

128

-

10

20

30

40

50

60

-

100

200

300

400

500

600

700

800

Services (other) Healthcare Co mputer services Financial Services Co nsumer: Oth er Retail Media Techn ology Teleco mmun icatio ns Manufacturin g

(other)

USD

m

Entrance Fair Value Exits Fair Value Entrance count Exits count

Debtwire.com



Debtwire.com


TOTAL PRINCIPAL AND DEAL COUNT OF FIRST LIEN ENTRANCES PER SECTOR, 2Q17 (USD 000'S)


2Q17 | Industry Analysis – First Lien

OVERVIEW:

We continue to track the largest total deal inflow in the following sectors (as classified by Debtwire): healthcare, servicesand computer related technology. This quarter we saw less inflow from retail, energy and industrial products, whencompared to 1Q17.

38,160Sum of Principal

39,485

391,489

27,836 127,51650,537 43,633

2,742

77,096

178,226

526,658

134,755 59,160104,517

191,547

11,254106,600

730,053

133,621101,378 54,212 20,925

5

Deal Count

6

35

4

9 8

4

2

13 12

42

88

13

17

1

13

53

15

12

53

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

Au

tom

oti

ve

Ch

em

ica

ls a

nd m

ate

ria

ls

Co

mp

ute

r se

rvic

es

Co

nst

ruct

ion

& H

om

eb

uild

ing

Co

nsu

me

r P

rod

uct

s

Co

nsu

me

r: O

ther

De

fen

se

Ele

ctro

nic

s

En

erg

y

Fin

anci

al s

erv

ices

He

alth

care

Ind

ust

rial

pro

du

cts

and

ser

vic

es

Lie

sure

Man

ufa

ctu

rin

g

Med

ia

Min

nin

g

Ret

ail

Ser

vice

s (o

the

r)

Te

chn

olo

gy

Te

leco

mm

un

ica

tio

n

Tra

nsp

ort

atio

n

Uti

lity

0

10

20

30

40

50

60Sum of Principal Deal Count

Debtwire.com



Debtwire.com


AVERAGE FIRST LIEN CASH COUPON PER SECTOR, 2Q17



OVERVIEW:

The graph above illustrates the average first lien cash coupon per industry, originated by the BDCs in 2Q17. Construction &homebuilding loans had the highest cash interest rate at 11.3%, in 2Q17. The interest rate on mining and financialservices loans were also relatively high this quarter.

6.1%

6.4%

8.8%

11.3%

7.1%

6.7%

7.5%

8.4%

9.7%

8.8%

7.6%

5.5%

6.5%

8.8%

10.8%

6.9%

8.8%

8.7%

9.3%

8.9%

8.3%

5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0%

Automotive

Chemicals and materials

Computer services

Construction & Homebuilding

Consumer Products

Defense

Electronics

Energy

Financial services

Healthcare

Industrial products and services

Liesure

Manufacturing

Media

Minning

Retail

Services (other)

Technology

Telecommunication

Transportation

Utility

Debtwire.com



Debtwire.com


AVERAGE FIRST LIEN PRICE AT ISSUANCE, PER SECTOR, 2Q17



OVERVIEW:

In 2Q17, the chemicals and materials industry had the lowest average first lien price (fair value/principal) at 90.6%. All othersectors were reasonably close to 100%.

98.7%

90.6%

98.9%

96.8%

99.4%

99.9%

101.3%

98.1%

98.2%

99.1%

100.3%

99.8%

99.7%

99.0%

98.3%

98.4%

97.3%

98.0%

101.1%

99.9%

101.2%

5.0% 25.0% 45.0% 65.0% 85.0% 105.0% 125.0%

Automotive

Chemicals and materials

Computer services

Construction & Homebuilding

Consumer Products

Defense

Electronics

Energy

Financial services

Healthcare

Industrial products and services

Liesure

Manufacturing

Media

Minning

Retail

Services (other)

Technology

Telecommunication

Transportation

Utility

Debtwire.com



Debtwire.com

2Q17

Contacts


Debtwire Middle Market Editorial Debtwire Middle Market Research Sales

Jon Berke, Middle Market Editor, Debtwire North America+1 212 686 2741, [email protected]

Suneet Chandvani, Head of Mid-Market Research+1 646 378 3170, [email protected]

Jonathan Reed, Managing Director+1 212 686 5418, [email protected]

Bill Weisbrod, Reporter+1 212-500-1399, [email protected]

Alex Federbusch, Analyst+1 212 500 7554, [email protected]

Brian Fitzgerald, Head of Debtwire Sales Americas+1 212 686 5277, [email protected]

Rachel Butt, Energy Reporter+1 212-500-1387, [email protected]

Amol Shinde, Middle Market Analyst+91-22-61331670, [email protected]

Tanvi Acharya, Reporter+1 646-378-3142, [email protected]

Rahul Ramaswamy, Middle Market Analyst+91-22-62351533, [email protected]

mailto:[email protected]










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Debtwire.com

2Q17


Debtwire reports on corporate debt situations before credit ratings are changed. Offering unique insights, credit analysis, debt data, and analytics for distressed debt and leveraged finance markets.

Subscribers choose Debtwire for speed and depth of coverage they can’t get anywhere else. Our reporters talk to an impressive range of contacts every day to bring you valuable early insight into fast evolving situations.

To complement your newsfeed, Debtwire’s credit analysis and research teams provide deep technical details and angles that help you understand situations more clearly.

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EMEA10 Queen Street PlaceLondonEC4R 1BEUnited Kingdom+44 203 741 [email protected]

AsiaSuite 1602-6Grand Millennium Plaza 181 Queen’s Road, Central Hong Kong+ 612 9002 [email protected]

Americas330 Hudson St. 4th FloorNew York, NY 10013 USA+1 212 500 [email protected]

Disclaimer

We have obtained the information provided in this report in good faith from sources that we consider to be reliable, but we do not independently verify the information. The information is not intended to provide tax, legal or investment advice. We shall not be liable for any mistakes, errors, inaccuracies or omissions in, or incompleteness of, any information contained in this report. All such liability is excluded to the fullest extent permitted by law. Data has been derived from company reports, press releases, presentations and Debtwire intelligence.

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