Credit Markets Update - KPMG · 2020. 2. 26. · of 2016 to reach $22 billion and $29 billion,...
Transcript of Credit Markets Update - KPMG · 2020. 2. 26. · of 2016 to reach $22 billion and $29 billion,...
Credit Markets Update December 31, 2017
©2018 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
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Credit Markets Update as of December 31, 2017We are pleased to provide this summary update of the U.S credit markets through the fourth calendar quarter ending December 31, 2017 to our clients and friends:
— Overall, credit market fundamentals remained healthy in the fourth quarter, as leveraged loan and high yield bond volume remained strong with terms continuing to favor issuers. 2017 was the busiest year ever for leveraged loans lead by M&A and repricing activity
— Newly issued leveraged loan volume in the fourth quarter of 2017 stood at $124 billion, down from the blockbuster 1st quarter of 2017. On an annual basis, 2017 new-issue volume increased versus prior year, up 34.8% at $645 billion versus $478 billion in 2016
— New-issue covenant-lite loan volume increased to $375 billion in 2017, a 53.0% increase from the previous year total of $245 billion
— Number of LBO transactions and volume fell by 26.7% and 27.0%, respectively, from the fourth quarter of 2016 to reach $22 billion and $29 billion, respectively, in the fourth quarter. Full year 2017 transactions and volume numbers are up 44.8% and 11.3%, respectively, over 2016
— Purchase price multiples for middle market LBOs increased to 11.6x in 2017 from 10.2x in the previous year and continued to remain above the levels of 8.5x – 9.5x seen historically
— Debt multiples of middle market and large corporate LBO loans rose to 5.5x and 5.8x in 2017 from 5.3x and 5.5x in the prior year, respectively
— Equity contributions to LBOs increased to 41.3% of the purchase price in 2017
— Second lien loan issuance volume decreased to $4 billion in the fourth quarter, lowest since the fourth quarter of 2016. Full year 2017 volume was 149.1% higher as compared to 2016
— The U.S. middle market ended 2017 on a strong note with $9.2 billion in syndicated transactions of $350 million or less in the fourth quarter of 2017 which was up 11% from the fourth quarter of 2016. Total volume in all of 2017 was $38 billion, the most since 2014
- Demand for middle market deals pushed the private debt asset class to its most successful fundraising year ever in 2017, with over $180 billion raised
— High yield bond issuance volume increased in the fourth quarter and full year 2017 to $68 billion and $276 billion, respectively, from $47 billion and $229 billion in the corresponding quarter a year ago and the previous year, respectively
— High yield bond pricing increased to 6.4% in the fourth quarter of 2017 from 5.9% in the last quarter. For full year 2017, pricing was 6.3%, down 255 bps from 2016
— Flows into high yield bond funds remained negative in the fourth quarter with outflow exceeding the inflow by $9 billion
— Funds flows into leveraged loan funds increased to $31 billion in the fourth quarter of 2017 from $29 billion in the previous quarter
— CLO volume increased to $118 billion in 2017, up 63% from $72 billion in 2016, and spreads tightened to L+109
— Distress indicators eased during the quarter, with the dollar amount and number of facilities of all outstanding first lien loans trading in the secondary market at prices of L+1000 or greater remaining flat at 4.2% and 3.8%, respectively
— Percentage of leveraged loans in default or in bankruptcy fell to 1.1% in 2017 from 1.6% last year, marking improvements in credit fundamentals
©2018 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
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Leveraged Loans
Total Volume: $645B Total Volume: $124B
148186188
84 7847 55
4411 1616 18 27
4366
5472
141120
5362
11588
126137
189164
127127
168159
134
67
94
140113
7491128 141
119
210166
145124
$0B
$50B
$100B
$150B
$200B
$250B
4Q'0
61Q
'07
2Q'0
73Q
'07
4Q'0
71Q
'08
2Q'0
83Q
'08
4Q'0
81Q
'09
2Q'0
93Q
'09
4Q'0
91Q
'10
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03Q
'10
4Q'1
01Q
'11
2Q'1
13Q
'11
4Q'1
11Q
'12
2Q'1
23Q
'12
4Q'1
21Q
'13
2Q'1
33Q
'13
4Q'1
31Q
'14
2Q'1
43Q
'14
4Q'1
41Q
'15
2Q'1
53Q
'15
4Q'1
51Q
'16
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63Q
'16
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61Q
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2Q'1
73Q
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New Issue Leveraged Loan Volume - Quarterly ($bn)
Institutional Pro Rata
$480 $535
$157$77
$236$377
$466$607
$528$423 $478
$645
$0B$140B$280B$420B$560B$700B
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
New Issue Leveraged Loan Volume - Annual ($bn)
Institutional Pro Rata
Refinancing, 40%
M&A, 28%
LBO, 17%
Recap, 8%
Others, 7%
Leveraged Loan Issuance by Purpose - 2017
Refinancing, 43%
M&A, 26%
Recap, 12%
LBO, 11%
Others, 8%
Leveraged Loan Issuance by Purpose - 4Q'17
Source: Standard & Poor | Leveraged Commentary & Data
$24$97 $3 $3 $8
$57 $98 $262 $237 $178$245
$375
75.0%
0.0%16.0%32.0%48.0%64.0%80.0%
$0B$80B
$160B$240B$320B$400B
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
New-Issue Covenant-Lite Loans ($bn)
Volume Percent of all Institutional loans
©2018 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
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Leveraged Loans (continued)
225
239
L+100
L+170
L+240
L+310
L+380
L+450
4Q'0
61Q
'07
2Q'0
73Q
'07
4Q'0
71Q
'08
2Q'0
83Q
'08
4Q'0
81Q
'09
2Q'0
93Q
'09
4Q'0
91Q
'10
2Q'1
03Q
'10
4Q'1
01Q
'11
2Q'1
13Q
'11
4Q'1
11Q
'12
2Q'1
23Q
'12
4Q'1
21Q
'13
2Q'1
33Q
'13
4Q'1
31Q
'14
2Q'1
43Q
'14
4Q'1
41Q
'15
2Q'1
53Q
'15
4Q'1
51Q
'16
2Q'1
63Q
'16
4Q'1
61Q
'17
2Q'1
73Q
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4Q'1
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New-Issue First Lien Spreads BB/BB - Quarterly
Pro Rata Institutional
375366
L+150
L+230
L+310
L+390
L+470
L+550
4Q'0
61Q
'07
2Q'0
73Q
'07
4Q'0
71Q
'08
2Q'0
83Q
'08
4Q'0
81Q
'09
2Q'0
93Q
'09
4Q'0
91Q
'10
2Q'1
03Q
'10
4Q'1
01Q
'11
2Q'1
13Q
'11
4Q'1
11Q
'12
2Q'1
23Q
'12
4Q'1
21Q
'13
2Q'1
33Q
'13
4Q'1
31Q
'14
2Q'1
43Q
'14
4Q'1
41Q
'15
2Q'1
53Q
'15
4Q'1
51Q
'16
2Q'1
63Q
'16
4Q'1
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'17
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73Q
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4Q'1
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New-Issue First Lien Spreads B+/B - Quarterly
Pro Rata Institutional
7585
L+0
L+40
L+80
L+120
L+160
L+200
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Average Spread Per Unit of Leverage (SPU) on LBO’s
Large Corp. Middle Market
Source: Standard & Poor | Leveraged Commentary & Data
©2018 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
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Leveraged Loans – Middle Market
Total Volume: $13B Total Volume: $2BSource: Standard & Poor | Leveraged Commentary & DataNote: Middle market refers to companies with EBITDA of $50 million or less
$34
$29
$8$5
$11$14
$10$13 $15
$10 $9$13
$0B
$8B
$16B
$24B
$32B
$40B
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Leveraged Loan Volume- Annual ($bn)
Institutional ProRata
$8 $8
$13
$5$3
$4$2 $1
$0 $1 $1 $1$2 $2
$4$2
$3$5 $5
$3$2 $2 $3 $3 $3 $3 $4 $3
$4$3
$4$5
$3$2
$4$3
$1$2 $2
$1
$4 $4$3
$5
$2
$0B
$3B
$6B
$9B
$12B
$15B
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
Leveraged Loan Volume- Quarterly ($bn)
Institutional ProRata
LBO, 52%Refinancing,
43%
M&A, 5%
Total New-Issue Volume by Purpose - 4Q'17
LBO, 53%
Refinancing, 24%
M&A, 13%
Recap, 7%
Others, 3%
Total New-Issue Volume by Purpose - 2017
©2018 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
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LBO Summary
$39$29
0
16
32
48
64
80
$0B
$32B
$64B
$96B
$128B
$160B
4Q'0
61Q
'07
2Q'0
73Q
'07
4Q'0
71Q
'08
2Q'0
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'08
4Q'0
81Q
'09
2Q'0
93Q
'09
4Q'0
91Q
'10
2Q'1
03Q
'10
4Q'1
01Q
'11
2Q'1
13Q
'11
4Q'1
11Q
'12
2Q'1
23Q
'12
4Q'1
21Q
'13
2Q'1
33Q
'13
4Q'1
31Q
'14
2Q'1
43Q
'14
4Q'1
41Q
'15
2Q'1
53Q
'15
4Q'1
51Q
'16
2Q'1
63Q
'16
4Q'1
61Q
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73Q
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4Q'1
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Num
ber o
f Dea
ls
Volu
me
($bn
)
LBO Transaction Volume - Quarterly ($bn)
8.4x 9.7x
9.1x
7.7x 8.5x 8.8x 8.7x 8.8x
9.7x 10.3x 10.0x
10.6x
0.0x
2.4x
4.8x
7.2x
9.6x
12.0x
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Average Purchase Price Multiple - All LBOs
Senior Debt/EBITDA Sub Debt/EBITDA Equity/EBITDA Others
8.1x9.3x
8.3x
6.6x
8.4x 8.2x 7.9x8.8x
9.6x10.7x 10.2x
11.6x
0.0x
2.4x
4.8x
7.2x
9.6x
12.0x
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Average Purchase Price Multiple – Middle Market LBOs(1)
Senior Debt/EBITDA Sub Debt/EBITDA Equity/EBITDA Others
Source: Standard & Poor | Leveraged Commentary & Data(1) Middle market refers to companies with EBITDA of $50 million or less
©2018 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
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LBO Summary (continued)
5.4x
6.2x
4.9x
4.0x 4.7x
5.2x 5.3x 5.4x 5.8x 5.7x 5.5x 5.8x
0.0x
1.3x
2.6x
3.9x
5.2x
6.5x
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Average Debt Multiples of Large Corporate LBO Loans(1)
FLD/EBITDA SLD/EBITDA Other Sr Debt/EBITDA Sub Debt/EBITDA
4.7x
5.6x
4.5x
3.3x
4.2x 4.3x 4.5x 4.8x5.3x 5.3x 5.3x 5.5x
0.0x
1.2x
2.4x
3.6x
4.8x
6.0x
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Average Debt Multiples of Middle-Market LBO Loans(2)
FLD/EBITDA SLD/EBITDA Other Sr Debt/EBITDA Sub Debt/EBITDA
31.1% 30.9%
38.9%
45.7%41.4%
38.0% 37.7%35.6% 37.0%
40.5% 40.8% 41.3%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Equity Contribution - All LBOs
Source: Standard & Poor | Leveraged Commentary & Data(1) Large corporate refers to companies with EBITDA of more than $50 million.(2) Middle market refers to companies with EBITDA of $50 million or less.
©2018 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
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Second-Lien Loans
$28 $30
$3 $2$5 $7
$18
$29
$37
$11 $10
$25
$0B
$8B
$16B
$24B
$32B
$40B
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Second-Lien Loan New-Issue Volume - Annual ($bn)
$10$11
$14
$2 $2$1 $1 $1 $0 $0$0
$1$0 $1 $1 $0
$3$1
$4
$1$0
$4$3 $4
$6$5
$11
$6 $7
$12$13
$8
$4$2
$3$4
$1 $1 $1
$3$5
$7
$5
$10
$4
$0B
$3B
$6B
$9B
$12B
$15B
4Q'0
61Q
'07
2Q'0
73Q
'07
4Q'0
71Q
'08
2Q'0
83Q
'08
4Q'0
81Q
'09
2Q'0
93Q
'09
4Q'0
91Q
'10
2Q'1
03Q
'10
4Q'1
01Q
'11
2Q'1
13Q
'11
4Q'1
11Q
'12
2Q'1
23Q
'12
4Q'1
21Q
'13
2Q'1
33Q
'13
4Q'1
31Q
'14
2Q'1
43Q
'14
4Q'1
41Q
'15
2Q'1
53Q
'15
4Q'1
51Q
'16
2Q'1
63Q
'16
4Q'1
61Q
'17
2Q'1
73Q
'17
4Q'1
7
Second Lien Loan New-Issue Volume - Quarterly ($bn)
676 659
1,069
1,480
1,0621,085 1,064928 898
996 968
829
L+0
L+300
L+600
L+900
L+1200
L+1500
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Average New Issue Second-Lien Spreads
LIBOR Floor Upfront Fee Spread
138
178
1911
3146
89
152
198
85
62
131
0
40
80
120
160
200
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Second-Lien Loans New-Issue Volume(Number of Deals)
Source: Standard & Poor | Leveraged Commentary & Data
©2018 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
9
High Yield Bonds
$144 $144
$68
$164
$287
$218
$345$322 $310
$262$229
$276
$0B
$80B
$160B
$240B
$320B
$400B
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
High Yield Bond Issuance – Annual ($bn)
Secured Unsecured Subordinated
$68
$0B
$22B
$44B
$66B
$88B
$110B
4Q'0
62Q
'07
4Q'0
72Q
'08
4Q'0
82Q
'09
4Q'0
92Q
'10
4Q'1
02Q
'11
4Q'1
12Q
'12
4Q'1
22Q
'13
4Q'1
32Q
'14
4Q'1
42Q
'15
4Q'1
52Q
'16
4Q'1
62Q
'17
4Q'1
7High Yield Bond Issuance – Quarterly ($bn)
Secured Unsecured Subordinated
6.4%
0.0%
2.8%
5.6%
8.4%
11.2%
14.0%
4Q'0
62Q
'07
4Q'0
72Q
'08
4Q'0
82Q
'09
4Q'0
92Q
'10
4Q'1
02Q
'11
4Q'1
12Q
'12
4Q'1
22Q
'13
4Q'1
32Q
'14
4Q'1
42Q
'15
4Q'1
52Q
'16
4Q'1
62Q
'17
4Q'1
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New Issue High Yield Bond Yield to Maturity
9.7% 6.1% 4.4%13.4% 10.2% 6.8% 10.3% 14.1% 9.9% 9.9% 7.1% 5.9%
19.9%16.2%
2.4%5.9% 12.5% 15.3% 15.6% 15.7% 22.3% 29.8%
14.0% 16.3%
23.9% 35.4%
42.9% 4.8% 7.1% 5.5% 5.2% 3.8%3.3%
5.8% 4.0%
34.0% 29.2% 42.0%
75.5% 62.8% 54.4% 58.1% 50.3% 48.5%46.3%
63.7% 64.9%
12.5% 13.2% 8.3% 5.2% 9.8% 16.5% 10.5% 14.7% 15.5% 10.6% 9.4% 8.9%
0%
20%
40%
60%
80%
100%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
High Yield Bond Issuance by Purpose
Corp Purpose M&A/Acquisition M&A/LBO Refinancing Others
Source: Standard & Poor | Leveraged Commentary & Data
©2018 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
10
Dividend Recapitalization
$0.0
$49 $49
$3 $3
$38 $36
$56
$70
$53
$38
$50$56
$0B
$14B
$28B
$42B
$56B
$70B
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Dividend or Stock Repurchase Loan Volume- Annual ($bn)
Institutional ProRata
$11
$26
$21
$1 $1 $1 $2$0 $0 $0 $0 $2 $1
$7$5
$8
$19$17
$16
$2 $1
$16
$8
$16 $16$18
$27
$14$11
$17$18
$13
$4$7
$15$13
$3$0
$14 $13
$22$20
$7
$15$14
$0B
$6B
$12B
$18B
$24B
$30B
4Q'0
61Q
'07
2Q'0
73Q
'07
4Q'0
71Q
'08
2Q'0
83Q
'08
4Q'0
81Q
'09
2Q'0
93Q
'09
4Q'0
91Q
'10
2Q'1
03Q
'10
4Q'1
01Q
'11
2Q'1
13Q
'11
4Q'1
11Q
'12
2Q'1
23Q
'12
4Q'1
21Q
'13
2Q'1
33Q
'13
4Q'1
31Q
'14
2Q'1
43Q
'14
4Q'1
41Q
'15
2Q'1
53Q
'15
4Q'1
51Q
'16
2Q'1
63Q
'16
4Q'1
61Q
'17
2Q'1
73Q
'17
4Q'1
7
Dividend or Stock Repurchase Loan Volume- Quarterly ($bn)
Institutional ProRata
$0.9
$0.0B
$0.4B
$0.8B
$1.2B
$1.6B
$2.0B
4Q'0
62Q
'07
4Q'0
72Q
'08
4Q'0
82Q
'09
4Q'0
92Q
'10
4Q'1
02Q
'11
4Q'1
12Q
'12
4Q'1
22Q
'13
4Q'1
32Q
'14
4Q'1
42Q
'15
4Q'1
52Q
'16
4Q'1
62Q
'17
4Q'1
7
Middle-Market Dividend Related Volume- Quarterly ($bn)
Institutional ProRata
$5.2
$3.2
$0.4$0.3
$2.8$2.5
$0.8
$3.0
$1.8
$0.9$1.5
$0.5
$0.0B
$1.1B
$2.2B
$3.3B
$4.4B
$5.5B
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Middle-Market Dividend Related Volume- Annual ($bn)
Institutional ProRata
Source: Standard & Poor | Leveraged Commentary & Data
©2018 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
11
Funds Flows
$4 $3 $4
($10)
($2)
$9
($5)($9)
($2)
$8
($4)
$6 $2
($6) ($1) ($1)($9)
($12B)
($8B)
($3B)
$1B
$6B
$10B
4Q'13 1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17
Flows into High Yield Bond Funds - Quarterly ($bn)
$25 $23
$38$32 $31 $31 $29
$19 $20$8
$18 $20$26
$17
$35 $30$36
$12 $9
($5)($12) ($17)
($4)($2) ($7)
($13) ($8) ($1)
$3
$14
$16
$4
($1) ($5)
($20B)
($7B)
$6B
$19B
$32B
$45B
4Q'13 1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17
Flows into Leveraged Loan Funds - Quarterly ($bn)
CLO issuance Prime fund flows
$12
$54
$83
$124
$99
$72
$118
0
50
100
150
200
250
$0B
$25B
$50B
$75B
$100B
$125B
2011 2012 2013 2014 2015 2016 2017
Annual CLO Volume ($bn)
Volume ($B) Count
Source: Standard & Poor | Leveraged Commentary & Data
©2018 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
12
Funds Flows (continued)
109
0
40
80
120
160
200
4Q'1
2
1Q'1
3
2Q'1
3
3Q'1
3
4Q'1
3
1Q'1
4
2Q'1
4
3Q'1
4
4Q'1
4
1Q'1
5
2Q'1
5
3Q'1
5
4Q'1
5
1Q'1
6
2Q'1
6
3Q'1
6
4Q'1
6
1Q'1
7
2Q'1
7
3Q'1
7
4Q'1
7
Libo
r +
U.S. CLO Spreads
0.89x0.94x 0.92x
0.81x 0.82x0.85x 0.88x
0.93x1.00x 0.99x
0.95x 0.94x0.89x
0.00x
0.20x
0.41x
0.61x
0.82x
1.02x
4Q'14 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17
Public BDCs - Price to Book Value Multiple - Quarterly
Source: Standard & Poor | Leveraged Commentary & Data
©2018 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
13
Distress and Defaults
4.2%
0.0%
16.0%
32.0%
48.0%
64.0%
80.0%
Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17
Percent of First-Lien Loans with Secondary Spreads of L+1000 or HigherBy Amount Outstanding
3.8%
0.0%
16.0%
32.0%
48.0%
64.0%
80.0%
Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17
Percent of First-Lien Loans with Secondary Spreads of L+1000 or HigherBy Number of Facilities
Source: Standard & Poor | Leveraged Commentary & Data
©2018 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
14
Distress and Defaults (continued)
$8$3
$22
$57
$25
$12 $12$8
$24
$31
$14$10
$0B
$12B
$24B
$36B
$48B
$60B
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Par Amount of Leveraged Loans in Payment Default or Bankruptcy ($bn)
1.9%
0.6%
3.7%
10.7%
5.0%
2.3% 2.2%1.2%
2.9%3.5%
1.6% 1.1%
0.0%
2.4%
4.8%
7.2%
9.6%
12.0%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Percent of Outstanding Leveraged Loans in Default or Bankruptcy
1410
44
74
29
139 12 9
13 1412
0
16
32
48
64
80
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Number of Issuers in Payment Default or Bankruptcy
Source: Standard & Poor | Leveraged Commentary & Data
©2018 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
15
• Primary Service Offerings
Debt
and
equi
tyca
pita
lrai
ses — Senior debt financing, refinancing or amendments
— Acquisition and growth capital
— Dividend recapitalizations and minority buyouts
— Mezzanine/junior subordinated financing
— Structured and minority equity
— Project financing
— Capital for special situations, including bankruptcies
Capital Advisory PracticeWe are a leading global financial advisor with real time knowledge of the capital markets. We advise on a wide range of transactions involving both debt and equity, including raising financing for acquisitions, buyouts, dividend recapitalizations, growth capital, special situations, and DIP and exit financing in bankruptcies
We maintain close relationships with debt, mezzanine and equity capital providers, including banks, BDCs, specialty finance companies, insurance companies, family offices, credit and equity funds and other private investors
Value added advisor— Unbiased and objective advice— Local market insight with strong relationships across all
tranches of capital— Experienced deal team— Flexible and innovative approach— Fully integrated service offering— KPMG global advisory network
Capital Advisory Practice
Value added advisor
Primary advisory service offerings
KPMG Investment Banking – Capital Advisory
www.kpmgcorporatefinance.comCorporate financeservices, including Financing,Debt Advisory,andValuation Services, are not performedby all KPMGmember firmsand are not offeredby member firms in certain jurisdictions due to legal or regulatory constraints.
For more information, contact:
Doug Christensen
Vice PresidentCapitalAdvisory [email protected]
Philip Isom
Managing DirectorGlobal Head of M&A [email protected]
Pablo Escobar
DirectorCapitalAdvisory [email protected]
Michael Rudolph
Managing DirectorCapitalAdvisory [email protected]
©2018 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
16
— Depth and breadth of specialist resources
— Restructuring professionals in every major country— In middle market, unmatched global footprint
Restructuring Practice
KPMG Restructuring
For more information, contact:
We deliver a full suite of services to maximize value to
stakeholders
Turnaround Management
Industry Expertise
Operations and
Performance Improvement
Quality of Earnings and Due Dilligence
M&A Advisory
Debt Restructuring
KPMG Restructuring understands the complex challenges organizations face, regardless of size, industry or global reach
We bring this understanding to the service of our clients, working with companies, management teams, senior lenders, investors or other important stakeholders to help identify, develop, and deliver restructuring solutions that provide sustainable improvements to cash flow, profit & loss, and the balance sheet
We help our clients turn around performance and generate lasting value
— Comprehensive and integrated network of services— Deep industry knowledge and specialist resources— Global platform
— Assessment of strategic alternatives— Turnaround and crisis management— Plant level operations assessment and performance
improvement— Debt restructuring and exchange offers— M&A, including Article 9 and bankruptcy §363 sales— Plans of reorganization— Quality of earnings and due diligence
Ford Phillips
Managing [email protected]
Sandy Prabhakar
Investment Banking1
KPMG’s Differentiated Offering
End to End Solution
All Major Verticals Covered
Global Platform
1 Investment banking services delivered by KPMG Corporate Finance LLC. Member FINRA/SIPC.2 Advisory services are provided by KPMG LLP.
Kevin Krakora
Tom Bibby
Advisory2
Tim Monahan
©2018 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
17
Important notice
The information contained in this newsletter is of a general nature and is not intended to address thecircumstances of any particular individual or entity including their investment objectives or financial needs. Inpreparing this newsletter, we have relied upon and assumed, without independent verification, the accuracyand completeness of all information available from public sources. Although we endeavor to provide accurateand timely information, there can be no guarantee that such information is accurate as of the date it isreceived or that it will continue to be accurate in the future. No one should act or rely on the information in thisnewsletter without appropriate professional advice after a thorough examination of the particular situation.The information contained in this newsletter does not constitute a recommendation, offer, or solicitation tobuy, sell or hold any security of any issuer. Past performance does not guarantee future results.