Gleacher Hy Distressed Ideas

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June 1, 2012 Trading Desk Material _________________________________________________________________________________________________________________________________________________________________________________________________________

IMPORTANT: PLEASE READ DISCLOSURES & DISCLAIMERS ON PAGE 25

Companies in June 2012 Edition

Air Canada American Achievement Ardagh Packaging Armtec Infrastructure Aventine Renewables Boise Inc. Broadview Networks Capmark Catalyst Paper Cengage Learning Cenveo Claire’s Stores Clear Channel Worldwide Clearwater Paper Consolidated Communications Delta Air Lines Dynegy Eastman Kodak Edgen Murray Energy Future Holdings First Data Fortescue Metals GateHouse Media Geokinetics Headwaters Intelsat Lawson Software /Infor Global LBI Media

Marfrig The McClatchy Company Mercer International Millar Minerva Mohegan Tribal Gaming

Authority MTR Gaming NII Holdings Nortel Networks Overseas Shipholding Group Realogy Reynolds Group Satelites Mexicanos Shingle Springs Sorenson Communications Spanish Broadcasting Tembec Inc. Travelport United Airlines Verso Paper Virgolino de Oliveira Visteon Corporation Westmoreland Coal Xerium Technologies Xinergy Yonkers Racing Corp

Gleacher High-Yield/Distressed Desk Analyst Trade Ideas

Kieran Byrne Shipping, Special Situations

973.226.7358 / [email protected]

Owen Douglas Special Situations


Patrick Fitzgerald Media, Special Situations


John Fleming Gaming, Special Situations


Andrew Hain Special Situations


Gary Madia Paper, Metals, Packaging


Bill Mastoris Airlines


Christina Ronac Emerging Markets


Matt Swope Tech, Media, Telecom


Brian Taddeo Power & Energy


Desk Analyst Team

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Top Trade Ideas Added for June 2012 Consolidated Communications (CNSL) Pos: 10.875% Senior Notes due 2020 at $101, 10.7% YTM First Data (FDC) Pos: 11.25% Senior Sub Notes due 2016 at $87.75, 15.6% YTM Marfrig (MARFRI) Pos: 8.375% USD Sr. Unsecured $72.5, 15.6% YTM Pos: 9.5% USD Sr. Unsecured $72.5, 15.6% YTM The McClatchy Company (MNI) Pos: McClatchy 11.5% First Lien Notes due 2017 at $101, 11.2% YTW Minerva (MINERV) Pos: 10.875% USD Sr. Unsecured at $96.75, 11.5% YTM MTR Gaming (MNTG) Pos: 11.5% Secured (2nd Lien) Notes due 2019 at $101 11.2% YTM NII Holdings (NIHD) Neg: 10% USD Sr. Unsecured 2016 at $107, 7.4% YTW Neg: 8.875% USD Sr. Unsecured 2019 at $94, 10% YTM Neg: 7.625% USD Sr. Unsecured 2021 at $85.5, 10.1% YTM Realogy Corp. (REALOG) Pos: 12.375% Senior Subordinated Notes due 2015 at $90.00, 16.9% YTM Reynolds Group (REYNOL) Pos: 9.0% Senior Notes at yields north of 9.5% Verso Paper (VRS) Pos: 1.5 lien Notes at $79.0, 17.2% YTW Pos: 8.75% 2nd lien notes at $37.0, 32.3% YTW Virgolino de Oliveira (GVOBR) Neg: 10.5% USD Sr. Unsecured at $83.5, 14.9% YTW Neg: 11.75% USD Sr. Unsecured at $83.0, 15.1% YTW

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Top Trade Ideas Removed for June 2012 Ameren Energy Generating Company (AEE) Neg: 7% Senior Notes due 2018 at $86.5, 10.1% YTW Neg: 6.3% Senior Notes due 2020 at $79.0, 10.2% YTW Neg: 7.95% Senior Notes due 2032 at $81.5, 10.1%YTW Appleton Papers (APPPAP) Pos: 10.5% 1st lien notes at $105.0, 7.4% YTW, 11.3% YTC Pos: 11.25% 2nd lien notes at $92.0, 14.1% YTW ATP Oil & Gas (ATPG) Pos: 11.875% Notes due 2015 at $77.25, 22.8%YTW Caesar’s Entertainment Corp (CZR) Pos: Chester Downs 9.25% Secured Notes due 2020 at $105.5, 8.0% YTM Cemex (CEMEX) Pos: 8.875% €115MM Sr. Secured 2017 at $89, 11.8% YTW Pos: 9.875% USD Sr. Secured due 2019 at $95, 10.9% YTW Pos: 9.875% €179MM Sr. Secured due 2019 at $90, 12% YTW Pos: 9.25% Sr. Secured due 2020 at $91.5, 10.8% YTW Digicel (DLLTD) Neg: 10.5% DGL Senior Unsecured due 2018 at $110.5, 7.1% YTW First Data (FDC) Pos: Extended Term Loans due 2018 at $91.25, swapped yield of 7.2% FriendFinder Networks (FFN) Pos: FFN 14% First Lien Excess CF Sweep Notes due 9/30/13 at $80, 32.5% YTM Morris Publishing (MORPUB) Pos: MORPUB 10% Secured Excess Cash Flow Sweep Notes at $94, ~13.5% YTM OSX (OSXBBZ) Pos: 9.25% 1St Lien Sr. Secured due 2015 at $104.625, 7.6% YTW Production Resources (PRORES) Pos: PRORES 8.875% Unsecured Notes due 5/1/19 at $81, 13.1% YTW

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June 2012 Detailed Top Trade Idea Descriptions Air Canada (ACACN) Bill Mastoris (973.226.5812) Pos: Air Canada 9.25% 1st Lien Notes at $97.25, 10.28% YTW Pos: Air Canada 12.0% 2nd Lien Notes at $87.0, 16.89% YTW

Best franchise of any Canadian carrier and is the only carrier with the ability or authority to fly any of the higher yielding international routes to the Pacific and Europe.

LTV through the 1st lien notes according to a November 2011 appraisal indicates a 40% LTV. If all foreign gates, slots and leasehold interests are excluded, the LTV is 71%.

LTV through the 2nd lien notes according to a November 2011 appraisal indicates a 49% LTV. If all foreign-related assets are excluded, the LTV is 87%.

Liquidity is adequate at nearly 20% of LTM revenues. American Achievement (AMEACH) Kieran Byrne (973.226.7358) Pos: AMEACH 10.875% Secured Notes at $69.5, 23.2% YTM (current yield 15.6%)

American Achievement manufactures and sells yearbooks, class rings and other scholastic products. It is a private Intralinks name.

American Media (AMRMED) Patrick Fitzgerald (973.364.2538) Neg: 11.5% First Liens at $97 Neg: 13.5% Second Liens at $91

The company says it generates $25MM-$30MM in Levered FCF annually. However, even on an LTM basis American Media only generated $12MM of Levered FCF based on $81MM of LTM EBITDA (Note: we effectively treat rack expenses as opex), $11MM of Cap-x, and $58MM of cash interest.

If revenue declines at a 10% rate (PF revenue was down 12% in F2Q11 and 18% in F3Q11), American Media would need to cut cash costs by at least 7.5% to remain above the $65MM in EBITDA it needs to service its cash needs.

American Media has done a tremendous job of cutting costs over the years, but further cost cuts run the risk of exacerbating the top-line decline.

Leverage through the 11.5% First Liens and 13.5% Second Liens is 4.8x and 6.0x. If American Media’s EBITDA were to fall 25% from current levels to $61MM, a 4x multiple equates to a price of 65 in the First Liens.

Ardagh Packaging (ARGID) Gary A. Madia (973.226.7062) Pos: 11.125% Senior PIK Notes due 2018 at $95.0, 12.0% YTW

Ample free cash generation given EBITDA margins in the 18% area Heavy M&A activity in the space indicates company should be worth north of 7.0x Leverage through the HoldCo PIKs is only 6.0x, 5.6x net. Company hopes to do a partial IPO in the US (markets permitting) which should help to tighten

all parts of the capital structure and increase the disclosure of financial information.

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Armtec Infrastructure (ARFCN) Patrick Fitzgerald (973.364.2538) Pos: 8.875% Unsecureds at $63.0, 20.7% YTM

We expect EBITDA to improve significantly in 2012 as Armtec completes the low-Margin ES projects it signed during the recession in 1H12. Armtec’s new project bookings are being signed at historical gross margin levels, and Armtec is taking actions to reduce $20MM of (primarily) SG&A expenses.

Assuming Armtec can achieve 10% EBITDA margins and hold revenue flat in 2012, EBITDA would grow from $17MM in 2011 to $45MM in 2012. This assumption conforms to consensus 2012 EBITDA expectations of $49MM.

$49MM in 2012 EBITDA implies less than 6 turns of leverage through the 8.875% Unsecured bonds, which at 62 imply YTM of 21%.

We expect the bond price to rebound as EBITDA improves throughout 2012. Aventine Renewables (AVRW) Andrew Hain (973.226.8174) Pos: Senior Secured Term Loan due 2015 (L+850; 2.0% floor) at $80.0, 18.1% YTM

The term loan is secured by a 1st lien on the Company’s 6 plants which are capable of producing 450 million gallons of ethanol a year.

The term loan has good asset coverage. The loan creates the Company’s ethanol business at 45 cents/gallon which is cheap to: Replacement cost of $1.50/gallon Current public valuations ~$0.80 - $1.00/gallon Recent acquisitions in the space of over $1.00/gallon Distressed assets sales in March 2009 $0.60/gallon (VLO purchase of VSE)

Pos: Common Stock at $1.80 The common stock values the business at ~53 cents per gallon whereas most public comparables

trade between $0.80 - $1.00 per gallon. We believe asset coverage is good. We believe it is likely that crush margins return to more normalized levels of at least 20 to 25

cents per gallon, which would equate to roughly 100mm in EBITDA (or a 2.9x valuation). Boise Inc. (BZ) Gary A. Madia (973.226.7062) Pos: Equity at $7.23

EV is now $1.45b, implying market multiple of 4.1x, which is too low in our opinion given the growing percentage of EBITDA coming from its packaging segment.

Company could further reinforce packaging segment with bid for IP CB mills. Company’s primary product (uncoated freesheet) has held up better than other paper grades (BZ

volumes flat YoY) due to IP and Domtar managing capacity. Nice free cash generation has created attractive special dividends for past three years. Recent acquisition of Hexacomb further reinforces the focus on growing its Packaging segment.

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Broadview Networks (BDVU) Matt Swope (973.226.3258)

Neg: 11.375% Senior Notes due 9/1/12 at $84.5 Broadview is a lower quality, fiber-lite CLEC that is levered 4.6x through these notes. The

company just files quarterly presentations but doesn’t hold earnings calls. Broadview is seeing revenue declines of close to 10% but until the last two quarters had held

EBITDA close to flat via cost cuts that we don’t believe are sustainable. As such we believe a more realistic estimate of leverage is closer to 6x.

The company started the process of trying to get a refinancing done last June but quickly pulled the plug. We believe as we move closer to the September maturity that this turns from a refinancing into a restructuring and that the bonds will trade off.

Broadview has hired FTI Consulting to serve as a financial advisor. Capmark (CPMK) Andrew Hain (973.226.8174) Pos: Reorganized Equity at $22.50

Capmark emerged from bankruptcy in 2011 and had written down its loan portfolio by ~30%. Current book value of the Company’s assets is approximately $2.7 billion versus a market cap of

$2.3 billion, or a ~15% discount to book. The combination of write-downs and the discount to book value make the equity look attractive

to us. The story is underfollowed and we believe there is upside into the mid to high $20s.

Catalyst Paper (CTLCN) Gary A. Madia (973.226.7062) Pos: 11% 1st lien notes at $53.0

We see back-stop value at about $55 just on the NBSK pulp assets, based upon the implied value per ton estimate of the Resolute bid for Fibrek.

Vote down of POR allows 1st lien group to gain control of 100% of equity via the $275mm credit bid.

Sell off in commodities is putting pressure on $CAD which supports the option value of the equity.

We feel the combo of the non-secular NBSK assets and the Specialty Paper assets at a conservative value (3.0x) get the EV in the $350mm area implying about 80% recovery for 1st lien bondholders.

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Cengage Learning (TLACQ) Matt Swope (973.226.3258)

Pos: 11.5% Senior Secured Notes due 2020 at $100.25, 11.4% YTW Pos: 13.75% Senior HoldCo Notes due 2015 at $80, 23.1% YTW Cengage is a college textbook publisher that has been under pressure since it had a couple of

weak quarters in 2011 and the market, for now, has given up hope that the bonds will be taken out with a near term IPO. That said, we continue to believe that the company has a turn of equity cushion behind the debt based on public comps, in part driven by the opportunities that a move to digital textbooks could create.

For Cengage’s fiscal first and second quarters, the year over year revenue changes were slightly negative on an organic basis but investors took comfort that the numbers were not as bad as the previous two quarters. For the fiscal third quarter, Cengage’s organic revenue growth was about 3%.

The new first lien bonds struggled mightily to get done in the new issue market. As a result, despite manageable leverage of under 5x, these bonds came much wider than originally anticipated and offer a very high yield with significant coverage.

We find the holdco notes attractive first because the bonds have a big coupon and are due to receive an AHYDO payment of $42 million in July of 2012 or about 1/3 of the total bonds outstanding. Second, we think this situation will either result in an IPO or that it will ultimately be a restructuring where the first lien is in control so we think a better return for similar risk comes from the back of the structure.

Cenveo (CVO) Matt Swope (973.226.3258)

Pos: 7.875% Senior Sub Notes due 12/2013 at $95, 11.6% YTM Cenveo is a diversified printing company with operations including printing prescription labels

and business forms, manufacturing envelopes and commercial printing scientific, technical and medical journals. Cenveo continues to be acquisitive with a focus on its packaging, envelope and label businesses and away from the commercial printing business.

Cenveo recently struggled its way through the bond market with a partially successful deal attempting to refinance all the unsecured debt in its structure. The sloppy execution on this new deal left approximately $150 million of this issue outstanding.

Cenveo is levered 5.3x through these notes at the back of the structure. The company is currently in the market with a $65 million term loan with the use of proceeds to chip away at these notes.

The company generates significant free cash flow with roughly $230 million in EBITDA, $110 million in interest and $20 million of capital expenditures. We believe the free cash flow in addition to the new bank borrowing give the company significant flexibility to retire these bonds.

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Claire’s Stores Inc. (CLE) Andrew Hain (973.226.8174) Pos: 8.875% 2nd Lien Notes due 2019 at $85.0, 12.2% YTM

We believe the 2nd Lien Notes are a compelling risk/reward security in the Claire’s structure. An investor creates the Claire’s franchise at 5.5x net of cash through the 2nd liens and receives an

“equity-like” return of 12%. The Company has recently made a “dent” in its maturity wall by issuing $500mm of 9% 1st Lien

Notes due 2019 to refinance its term loan due in 2014. The downside is protected at this level as we believe the Company is worth at least 7.0 - 8.0x.

Pair Trade: Pos: 9.625% Senior Notes due 2015 at $85.0, 16.1% YTM Neg: 10.50% Subordinated Notes due 2017 at $79.0, 16.9% YTM

Simply put, the spread between the Seniors and Subs is too tight at 80bps given the leverage. If same-store-sales continue to slump in Europe we would expect this gap to widen significantly.

Clear Channel Worldwide (CCO) Matt Swope (973.226.3258)

Pos: 7.625% Senior Sub Notes due 2020 at $95.5, 8.4% YTM Clear Channel Worldwide (effectively Clear Channel Outdoor) has gross leverage of 6.5x but net

leverage of only 5.7x. The bonds have an incurrence test that only lets them incur debt up to 7x. Clear Channel Outdoor has strong assets in the well protected outdoor industry. We believe

outdoor will prove to be far superior to other media assets (including not only newspaper, yellow pages and radio, but TV as well) going forward.

We believe investors are being overcompensated (especially as compared to Lamar’s 5 7/8% bonds with leverage of 4.5x trading that are two years longer yet trade 250 basis points tighter) for perceived Clear Channel structure risk. The cash management with the parent is a negative and a Clear Channel parent bankruptcy may actually be the best thing that could happen for these bonds.

CCO’s public equity cap is $2.2 billion as compared to net debt of $4.2 billion. Clearwater Paper (CLW) Gary A. Madia (973.226.7062) Pos: Equity at $32.51

Company has very defensive end markets (tissue and consumer paperboard packaging) and a strong presence in the growing private label tissue channel.

SAC Capital is putting pressure on company to create value for shareholders. Value through equity, pro-forma for Shelby build-out and cost savings, puts EBITDA in the

$250 to $275mm range. At those EBITDA levels, equity is being created at 4.5x which is too low given non-secular end

markets and growing private label tissue business. Pulp prices have been lower and should aid margins through most of 2012.

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Consolidated Communications (CNSL) Matt Swope (973.226.3258)

Pos: 10.875% Senior Notes due 2020 at $101, 10.7% YTM Consolidated is a telecom company with ~225,000 RLEC lines and ~90,000 CLEC lines in IL,

PA and TX. Consolidated recently bought overbuilder SureWest at a multiple of 5.0x after synergies and partially funded the deal with this bond.

Before synergies, the secured leverage is 3.2x and total leverage is 4.6x. Giving the company credit for synergies and net of cash, leverage is closer to 4.0x.

The initial talk on the new deal was close to 8% but the deal widened dramatically as the market got weaker and as Frontier brought a new deal wider than expectations.

We believe Consolidated looks cheap compared to slightly less levered telecoms like Windstream and compared to significantly more levered cable companies like Mediacom. The company has an equity cap of $425 million behind $1.2 billion of net debt.

Delta Air Lines (DAL) Bill Mastoris (973.226.5812) Pos: DAL 7.027% at $107.0, 5.62% YAL – INVESTMENT GRADE IDEA

One of the least expensive “A” tranches that contains an attractive collateral package which is cross-collateralized.

Ample near-term liquidity with $5.4B in unrestricted liquidity. Management’s commitment and track record of deleveraging ($3.2B over the past 2 yrs towards

a goal of $7B in debt reduction) to a $10.0B net target by mid-2013. Estimated LTV is 63%, market LTV is 68%.

Pos: DAL 8.954% “C” Tranche at $102.75, 7.24% YTW Ample near-term liquidity with $5.7B in unrestricted liquidity. DAL expects to generate

approximately $4.0B in FCF in the next 2 years and reach a net debt of $10.0B by mid-2013. Aircraft is core to DAL future fleet plans and has an attractive near amortization schedule with a

17% annual SF. Relatively short maturity of August 2014 and collateral protection mitigates downside price

movement. Estimated LTV is 97%.

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Dynegy Inc. (DYN) Brian Taddeo (973.226.3525) Pair Trade: Pos: Roseton/Danskammer 7.67% Project Bonds at $64.5 Neg: Dynegy Holdings 7.75% Unsecured Notes at $62.5

Dynegy recently announced that the company reached an agreement in principle with creditors holding over $2.5 billion in unsecured and subordinated claims with regard to a new proposed plan of reorganization.

Under the proposed plan, unsecured creditors would receive $200 million of cash and 99% of the common equity in the new reorganized Dynegy. In addition they would receive 50% of the asset sale proceeds tied to Roseton/Danskammer.

Roseton Danskammer bonds would have a lease rejection claim of an agreed upon amount of $540 million. This is up significantly from the original $300 million placeholder. In addition, project bondholders would receive the remaining 50% of the proceeds of any asset sale of the Roseton/Danskammer facilities. Full recovery on the lease claims would be capped at $571 million.

Given the new proposed plan, we believe the DHI unsecured bonds and the Roseton/Danskammer project bonds should trade roughly six points apart given the increased lease rejection claim level. Thus we believe the pair trade makes sense given that the two bonds trade roughly two points apart currently. We also like the trade given that it is not as directly impacted by volatility in natural gas prices as is playing a piece of the capital structure on a standalone basis.

Eastman Kodak (EK) John Fleming (973.226.5194) Pos: 7% Convertible Notes due 2017 at $12.50

The Company filed in late January and will be moving to sell the IP related to their digital imaging products (digital cameras) in the 2H-2012.

Despite the recent negative ruling related to the Company’s ongoing patent infringement litigation with Apple and RIM, we believe there could be significant upside to the bonds if the Company moves to liquidate / sell all of its IP, including the technology associated with its growth initiatives (consumer and commercial printing products).

Risks to the story include lower than expected cash inflow resulting from the IP auctions (these assets are very difficult to value) and higher than expected cash outflow during bankruptcy that could result if the company continues to “invest” in its growth initiatives.

Another risk to the story is the UK pension liability – the UK pension authority has proven to be a difficult stakeholder to deal with the Nortel bankruptcy and it could prove to be difficult in this case as well.

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Edgen Murray (EDNMUR) Brian Taddeo (973.226.3525) Pos: 12.25% Secured Notes due 2015 at $102.5, 10.5% YTW

Fundamentally, we believe relatively high oil prices will continue to help to drive increased E&P activity throughout 2012 and should thus benefit the oil/gas service providers worldwide.

While LTM net leverage is roughly 7.5x, we expect net leverage to improve to roughly 5x by the end of 2012 based on improved results this year. On an Edgen Group consolidated basis, net leverage through the notes would be roughly 3.5x given 2012 guidance.

The equity sponsors recently completed an IPO for the Edgen Group, the parent entity of both Edgen Murray and sister entity Bourland & Leverich. Proceeds were used to repay debt at both B&L and EMC, however the bulk went to repaying the bank debt at B&L.

Further upside in the bonds could also be realized if the company looks to refinance its capital structure at the parent entity, above both EMC and B&L. The bonds are callable in Jan 2013 at $106.125 – 17.6% YTC).

Energy Future Holdings (TXU) Brian Taddeo (973.226.3525) Pos: EFH 5.55% Senior Notes due 2014 at $72.5, 20.2% YTW Pos: EFH 6.50% Senior Notes due 2024 at $48.0, 16.4% YTW Pos: EFH 6.55% Senior Notes due 2034 at $44.5, 15.4% YTW

Following the company’s issuance of the 11.75% Second Lien Notes at EFIH – proceeds of which were upstreamed to EFH and used to repay the intercompany loan to TCEH – we believe management is creating a clear separation between the two sides of the structure.

While TCEH is so far underwater that any return to the equity is unlikely at this point, we believe equity holders may look to the regulated side of the business (Oncor) to recapture at least a portion of their investment.

With the ‘14s, ‘24s and 34’s being the most subordinated part of the structure ahead of the equity, we expect management will look to use its newly created second lien currency at EFIH to complete exchange offers for these notes to push out the near term maturity (‘14s) and/or capture the significant discount to par to create additional equity value for themselves.

First Data (FDC) Matt Swope (973.226.3258)

Pos: 11.25% Senior Sub Notes due 2016 at $87.75, 15.6% YTM The company was hit hard by the global economic downturn in 2009 and into 2010 leaving total

leverage through the subordinated bonds at 9.8x. However, the company’s EBITDA seems to have bottomed at about $2 billion and then grew at 11% despite the economic headwinds in 2011 with potential growth of 10% or greater over each of the next two years.

First Data completed a significant exchange, led by over $3 billion from its biggest holders, where it exchanged $6 Billion of its Senior Notes into 2 pieces: a new Second Lien Note (cash or toggle) due 2021/2022 and a new Senior Note due 2021. The company since then has done over $2 billion in new secured bond deals to pay down bank debt and has extended over $7 billion of its term loans to 2017 and 2018.

We expect that the company will continue its capital structure maneuvers as it deals with the remaining $3.3 billion of term loans that mature in 2014 and the $1.5 billion in bond “stubs” that mature in 2015. The wildcard is when and how the company deals with these $2.5 billion of sub bonds that are due in 2016.

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Fortescue Metals (FSUMF) Gary A. Madia (973.226.7062) Pos: FMG equity at $4.60

The combination of still high ore prices ($135+) and continued production expansion at the company creates potential for a huge amount of operating leverage.

The focus on debt reduction after the company reached 155mtpa is a positive in our view as it reduces any potential balance sheet issues in the future.

China needs ore even if GDP moderates, and with India keeping more of its ore to fuel its growing steel industry, the supply/demand should remain snug through at least 2013.

Long term ore prices are difficult to predict but many equity analysts are taking a very conservative view ($60 to $75) versus current ore prices near $135.

Any uptick in average long term ore price estimates combined with continued expansion of new FMG ore resources and production growth should lead to a higher stock value.

GateHouse Media (GHSE) Patrick Fitzgerald (973.364.2538) Pos: GateHouse Term Loans at $31.5, 8% current yield

Net leverage at market through the GateHouse TLs at a price of 31.5 is 3.7x. At 3.7x, GateHouse is the cheapest way to create newspaper assets, which is somewhat surprising because GateHouse’s newspaper assets are the best performing in the newspaper space.

Consider that TEV/LTM EBITDA through the Lee “2nd Lien” is 5.2x, and ~6x through the equity. McClatchy’s TEV/LTM EBITDA is 6x when factoring in its pension liability. If you assume GateHouse is worth 5.5x, this implies a price of 46, up 46% from current levels.

As Warren Buffett recently articulated after buying Media General’s newspapers at ~4.5x: “I believe newspapers that intensively cover their communities will have a good future … Berkshire will probably purchase more papers in the next few years. We will favor towns and cities with a strong sense of community … In a very general way, strong interest in community affairs varies inversely with population size and directly with the number of years a community’s population has been in residence. Therefore, we will focus on small and mid-sized papers in long-established communities.”

GateHouse operates “hyper-local” newspapers, where it is usually the primary, and sometimes, the sole provider of comprehensive and in-depth local market news and information. More than 84% of its dailies have been published for 100 years and 100% have been published for 50 years.

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Geokinetics (GOK) Kieran Byrne (973.226.7358) Pos: Geokinetics 9.75% Secureds at $70.5, 26.5% YTM (current yield 13.8%)

Despite near term liquidity risk, we like the risk-reward of the 9.75% Secureds at 73.5 as your downside is mitigated by the Company’s asset liquidation value which we believe to be in the 50 cent range on the 9.75% Secureds.

In the event of a restructuring, par value (or higher) is likely created via a debt for equity swap coupled with a comprehensive operational restructuring. Additionally, we believe industry fundamentals should support a swap into equity as elevated oil prices and increasing E&P spend in 2012 should prove to be a positive seismic demand driver.

An operational restructuring would involve a material reduction in SG&A expense as well as a better managed project bidding and execution process aimed at improving proprietary gross profit margins. Under our high level assumptions, we believe that $80m in annual proprietary EBITDA (excluding late sales) is achievable which would lever the Secureds (at market) at 3.5x.

In the event that management can navigate the Company’s near term liquidity issues and its $465m backlog proves profitable in 2012, earnings will improve which will result in improved trading levels on the 9.75% Secureds.

Headwaters (HW) Brian Taddeo (973.226.3525) Pos: HW 2.5% Subordinated Convert Notes due 2014 at $92.75, 7.2% YTW

Despite the continued run up, we still believe the bonds are attractive yielding over 7%. The converts are 5 years shorter than the first lien notes and the next major maturity.

Management continues to buy back its high coupon convertible debt in the open market to reduce overall debt levels and reduce ongoing interest expense. The remaining few million of 16% notes will also be called/retired in June. In addition, they have started to buy back the 2.5% converts and have reached an agreement with holders of $50 million of the notes to push them out a few years, leaving roughly $60 million to mature in 2014.

Given roughly $65 million of annual cash needs (capex/interest), we expect the company to generate free cash over the next several years which they will also likely use to delever the company with the major focus still being the convertible notes.

The company also continues to look to sell its non-core coal assets over the coming months which are doing roughly $0 EBITDA, proceeds from which will also likely be used for debt reduction. This is in addition to the $18.5 million the company received earlier this year for its stake in an ethanol JV.

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Intelsat (INTEL) Matt Swope (973.226.3258)

Pos: 11. 5% Intelsat Luxembourg Notes due 2017 at $99.5, 11.6% YTM Intelsat is the world’s largest Fixed Satellite Services operator, with 54 satellites and covering

99% of the earth’s populated regions. Intelsat’s business is characterized by highly predictable revenue as evidenced by the company’s current backlog at $10.7 billion or more than four times the amount of revenue the company did in 2011.

The leverage through the bonds is high at 7.7x but the company is loath to add more debt and expects to see an increase in EBITDA as it starts to reap some benefits from its new satellites. The Media segment continues to improve and the satellite launches in 2012 will boost the company’s total transponders by more than 5%.

Capital expenditures net of customer prepayments are expected to decline from $625 to $650 million in 2012 to $400 to $450 million in 2013 and 2014.

Companies in the FSS industry have historically been valued at 8x to 9x, providing asset coverage to the bonds. The company has filed an F-1 with the FCC to do an IPO and would presumably look to take these bonds out to cut down on interest expense.

Lawson Software/Infor Global (LWSN) Matt Swope (973.226.3258)

Pos: 9.375% Senior Notes due 2019 at $103.5, 8.6% YTM The company is the combination of Lawson Software and Infor Global both of whom are owned

by Golden Gate Capital. The combined company is an industry focused, ERP business with very predictable revenue

streams. Maintenance revenue makes up over 50% of the company’s total and the combined company’s retention rates are close to 95%.

The net, pro forma leverage is about 6.5x. The new capital structure was aided significantly by an equity infusion from the combination of Golden Gate and its new equity partner, Summit Partners.

Despite the bond premium we still believe there is value in this bond as compared to other software names in the technology sector. Public ERP comps like SAP trade well over 10x.

LBI Media (LBIMED) Matt Swope (973.226.3258)

Pos: 9.25% Senior Secured Notes due 2019 at $83, 13.1% YTM LBI Media is a Hispanic media company that owns radio stations and TV stations. LBI launched a new programming network, Estrella, in September of 2009 that has seen

significant ratings gains over the last two years but has been a significant op ex and cap ex drain. The network generated $10.9 million of new revenue in 2010 and we estimate that it did over $20 million in 2011.

LBI’s only near term maturity is $42 million of holding company notes that are due in October of 2013. However, the company continues to burn cash and we estimate that the company will draw about half of its $50 million revolver in 2012.

LBI’s radio division did 2011 EBITDA of $23.6 million and at a multiple of 8x, this division alone comes close to covering these notes. The company continues to explore “non-core asset sales” to help with liquidity and everything in the radio division could be a candidate for sale.

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Marfrig (MARFRI) Christina Ronac (212.273.7512) Pos: 8.375% USD Sr. Unsecured $72.5, 15.6% YTM Pos: 9.5% USD Sr. Unsecured $72.5, 15.6% YTM

With a base case scenario of US $900MM-US $1Bn in EBITDA, US $400MM capex, and US $600MM pro forma cash interest expense (after refinancing low short-term rates into higher rates and assuming BNDES PIKs its BRL 2.5Bn convert), Marfrig should be able to operate near a break-even level before taxes. Upside should Marfrig prove us wrong and able to execute successfully as well as upside should BNDES provide additional capital.

The local chatter is that Marfrig is asking BNDES to PIK its BRL 2.5Bn convert until maturity, increase the size of the convert, as well as convert the note to equity at maturity. As JBS was able to do this with its BNDES convert, it seems likely BNDES will give Marfrig the same treatment.

Although we have low conviction in management’s ability to transform Marfrig into a brand business, Marfrig should benefit from CADE’s restriction on BRF’s Perdigao brand for 3 to 5 years and the Batavo brand for 4 years.

The McClatchy Company (MNI) Patrick Fitzgerald (973.364.2538) Pos: McClatchy 11.5% First Lien Notes due 2017 at $101, 11.2% YTW

The 11.5s are only 2.2x net levered, there is no debt ahead, the pension liability is below, and YTW is 11.2%. While we expect revenue to remain under pressure, McClatchy has done a superb job of cutting costs, and we expect EBITDA to decline at less than a 10% rate going forward.

McClatchy owns valuable non-newspaper assets, including a 15% stake of CareerBuilder, and 25.6% stake of Classified Ventures (cars.com and apartments.com). McClatchy received $31MM in dividends from these investments in 2011 (vs. $24MM in 2010). Ascribing a 15x multiple to the dividends, implies these assets are worth ~$450MM. If you net the internet assets against first lien debt, leverage through newspaper EBITDA is roughly 1x.

Mercer International (MERC) Gary A. Madia (973.226.7062) Pos: Equity at $6.47

Stock had been crushed the past few months as pulp fundamentals had weakened and with increasing negative sentiment for companies with any exposure to Europe .

Weaker Euro versus $US will benefit the company. Market is not properly pricing the (growing) earnings coming from energy sales. Pulp prices appear to have bottomed with $30/ton price increases on table. In addition, we believe softwood pulp will still be in a tighter supply/demand situation (once

again) by late 2012 as new Asian paper/tissue capacity comes on line. Millar Western (MILLAR) Gary A. Madia (973.226.7062) Pos: 8.5% Senior Notes at $82, 11.8% YTW

HY pulp prices have bottomed and lumber prices are showing some signs of life. There is a chance you begin to see positive contributions from both segments at the same time

beginning in 2Q12. 10.4% current yield. Current price bakes in a lot of pain and we feel given the slow turnaround in both segments the

bonds will catch a bid.

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Minerva (MINERV) Christina Ronac (212.273.7512) Pos: 10.875% USD Sr. Unsecured at $96.75, 11.5% YTM Pos: 12.25% USD Sr. Unsecured at $99, 12.4% YTM

The weaker BRL should benefit Minerva as 60% of its revenues are exports. With net leverage of 3.6x, no need to access the capital markets, and FCF guided to be positive in 2012, we feel Minerva’s bonds should be trading near 9% yield.

Minerva has traded down in sympathy with Marfrig, general risk-off mode, as well as news that it will issue a 10-year BRL 420MM note. Per management, this local bond will have no impact on gross debt or net debt.

The BRL 420MM note will be a way for Minerva to transfer the funds from the ’22 note at the Luxembourg subsidy into Brazil without triggering the 6% tax rate on USD debt. Soon after re-tapping the ’22 note, the government changed the tax structure on prepayment export facilities, which is the instrument Minerva would have used to transfer the funds into Brazil.

With Brazil’s cattle supply to increase, while Australia and the US face cattle declines, more export markets are opening up to Brazil such as Chile and Asia.

Mohegan Tribal Gaming Authority (TRIBAL) John Fleming (973.226.5194) Pos: 11.5% Secured (2nd Lien) Notes due 2017 at $104.5, 10.3% YTM

This is a Native American gaming credit so bondholders’ rights / remedies in a restructuring are significantly limited.

That said, the Company recently completed an out-of-court restructuring which gives the Company at least a couple of years of run-way.

In addition, we think this security is attractive given its high yield and solid asset coverage - total leverage through this security is only 4.0x Adjusted EBITDA (Adjusted EBITDA = EBITDA less relinquishment payments less tribe payments).

Significant new competition from Massachusetts is going to come on line in 2014 or 2015, but the structural seniority provided by the 2nd lien helps to cushion these bonds from a future decline in Adjusted EBITDA.

MTR Gaming (MNTG) John Fleming (973.226.5194) Pos: 11.5% Secured (2nd Lien) Notes due 2019 at $101 11.2% YTM

Good yield with manageable leverage (6.6x). The Company’s 2 main properties are both facing significant new competition from new

facilities set to open in Ohio – 1st from Caesar’s new facility in Cleveland (set to open within the next few weeks) and second from Penn Gaming’s new development in Austintown (which will likely be open in early 2014)

In the meantime the Company is set to open its own new gaming facility outside of Columbus Ohio at the Company’s Scioto Downs racetrack.

We think leverage at the Company should improve over the next few quarters as the Company realizes the significant benefit from its new facility and only has to defend itself against one new property in Cleveland. Over time, while we expect leverage to return to current levels, we believe the Company’s very strong management team will be able to pull enough cash out of their properties to adequately service their capital structure.

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NII Holdings (NIHD) Christina Ronac (212.273.7512) Neg: 10% USD Sr. Unsecured 2016 at $107, 7.4% YTW Neg: 8.875% USD Sr. Unsecured 2019 at $94, 10% YTM Neg: 7.625% USD Sr. Unsecured 2021 at $85.5, 10.1% YTM

The competitive landscape in Brazil recently changed in the second half of 2011 when the major players (Vivo, Tim, Claro, and Oi) started to offer unlimited local and long-distance calls, which used to be NIHD’s unique offering. NIHD Brazil won’t have 3G and a smart phone offering until year end. In the meantime, NIHD will continue to lose high-margin customers and it will be hard to bring them back once they have purchased a new phone and are under a competitive pricing plan.

The acceleration of NIHD losing customers is clearly illustrated by Brazil’s government agency, Anatel, which reported net subscriber adds for NIHD in April of 5,687, a significant drop compared to January, February, and March, which had net adds of 31k to 50k per month. NIHD is not likely to make its 2012 guidance, as guidance implies a net adds run rate of at least 35k per month.

We believe by the end of 2013, after spending US $2.6Bn to upgrade its network, net leverage could be 3.8x to 4.3x. BRL and MXN weakness is another negative factor; both currencies have weakened 11% since the end of 1Q12. Brazil represents 55% of NIHD’s 1Q12 EBITDA, Mexico 33%, Argentina 10%, and Peru 1%.

We would be bullish if management decided to break-up the business and do asset sales, however, we believe management will continue to stick to its strategy and continue to burn cash. We would consider going long when yields reach 12%.

Nortel Networks (NT) Patrick Fitzgerald (973.364.2538) Pos: NT 10.75% at $112.5 Pos: 10.125% at $112 Pos: FRNs at $105 Pos: Converts at $99.5

We believe there is asset coverage significantly in excess of each bond’s par + prepetition claim. In a worst case scenario bond holders would recover their par + prepetition claims, offering little downside from current levels (ranging from 7 points downside in the 10-handle notes and no downside in the converts).

We believe bondholders have several paths to a recovery in excess of par + prepetition. The strongest arguments are for 1) post petition interest, which would imply a 150 recovery in the 10.75s (assuming 2012 year-end disposition), and 2) increasing pre-petition claims by the filing-date FX rates between the US and Canada (i.e., 1.22x), which would imply a 129 recovery in the 10.75s.

Essentially all of the assets have been sold at this point, so the recovery timeframe depends on how quickly and effectively the various stakeholders can negotiate a settlement. Mediation focused on achieving a global settlement began 4/24/12 in Toronto, and it is important to note that this is the first time mediation has been pursued since the $4.5B IP asset sale.

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Overseas Shipholding Group (OSG) Kieran Byrne (973.226.7358)

Pos: OSG 8.125% Unsecured Notes at $71.5, 15.8% YTM (current yield 11.4%) Pos: OSG 7.5% Unsecured Notes at $60.0, 14.8% YTM (current yield 12.5%) While the near term international crude tanker outlook remains challenging (44% of 2011

Revenue Days), the Crude division’s weak results will be offset (at least in part) by the Company’s Jones Act tanker business (19% of 2011 Revenue Days) which contributed $103.7m in 2011 EBITDA and its sizable product tanker division (36% of 2011 Revenue Days) which is viewed as having a more favorable near to intermediate term outlook.

Near term performance aside, we believe that the OSG’s unsecureds have solid asset coverage through par and will remain covered at par over the next few years. Currently, this asset coverage is being overlooked as the market is focused on poor near term earnings and potential liquidity/covenant issues (as the Company approaches its February 2013 Revolver maturity).

While potential liquidity/covenant issues may arise over the course of the next 12 months, we believe the size of OSG’s operations, its sizable amount of unencumbered assets, and the continuity of certain lenders involved in both the current and forward start revolvers will all help to facilitate any issues that arise (which would include securing additional financing if necessary).

We believe that both the OSG 8.125% and 7.5% Unsecureds in the 60-72 context are interesting plays. We like that we are paid equity like returns to the tune of an 11-13% current yield (14-16% YTM with the potential for a higher total return if the market reacts positively to near term liquidity initiatives), but are creating a position (at 60 to 72) at a sizable discount to actual asset value.

Realogy Corp. (REALOG) Andrew Hain (973.226.8174) Pos: 12.375% Senior Subordinated Notes due 2015 at $90.00, 16.9% YTM

We believe Realogy’s operating results will continue to improve as the housing crisis in the US clears.

The Company has done a great job of pushing maturities out and these 2015 Notes are the next maturity to come due which is greater than $100mm.

While the Company interest burden is significant we believe large holders of the 11.0% converts would exchange their paper into PIK or equity before entering a Chapter 11.

We think the likelihood that the 2015 maturity is paid in full is high. Reynolds Group (REYNOL) Gary A. Madia (973.226.7062) Pos: 9.0% Senior Notes at yields north of 9.5% Pos: 9.875% Senior Notes at yields north of 9.5%

Heavy debt fueled M&A activity has created a levered profile but recent Graham acquisition reduces reliance upon the weaker European region and adds a very defensive high margin business to the mix.

Still a defensive business with less volatility in earnings. Margins remain high (18% EBITDA margin) which should allow for free cash generation. Aggressive debt amortization schedule should allow company to delever by paying down senior

bank debt. If comp Ardagh can pull off a US IPO this year it would bode well for Reynolds’s valuation.

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Satelites Mexicanos (SATMEX) Matt Swope (973.226.3258)

Pos: 9.5% Senior Secured Notes due 2017 at $104.5, 8.1% YTW Satmex is a provider of Fixed Satellite Services in the Americas, a much smaller version of

Intelsat and Telesat. The company produces the vast majority of its revenue from two satellites, Satmex 5 and Satmex 6.

The company is ahead of schedule in the process of building Satmex 8, a replacement for the wounded Satmex 5, and is starting the process on another replacement satellite, Satmex 7. Even after the recent $35 million add-on deal, the company’s leverage is very manageable at about 4x.

The problem with Satmex 5 ultimately drove the company into a prepackaged bankruptcy. Key creditors Centerbridge and Monarch took a leading role through the bankruptcy process and own a majority of the company’s reorganized equity.

Satmex is the beneficiary of the same predictable and growing revenue stream as its larger peers but Satmex’ additional risk comes from the small size of the fleet. However, the insurance that the company has on Satmex 6 and Satmex 8 provides the bondholders with significant protection against individual satellite risk.

Shingle Springs (SHINGL) John Fleming (973.226.5194) Pos: 9.375% Senior Notes due 2015 at $75.8, 20.5% YTM (12.4+% Current Yield)

This is a Native American gaming credit so bondholders’ rights / remedies in a restructuring are significantly limited.

Recently, there have been several instances of tribal gaming restructurings that have been beneficial to investors e.g. INNMTN (completed), RIVER (completed), TRIBAL (completed), and CHUKCH (completed).

At current levels, investors are earning a good current yield and creating their position within the capital structure at a manageable 4.6x Adjusted EBITDA (EBITDA less Tribe Payments) - and we think the Company’s future EBITDA should remain pretty stable.

This leverage calculation also assumes the $30mm legal victory recently awarded to Sharp Image Gaming is paid in full in cash and funded with new 1st lien debt – there are many reasons to believe the ultimate size of this liability could be much smaller as the Company is appealing the ruling and its claim could end up being junior to the bonds.

Sorenson Communications (SRNCOM) Patrick Fitzgerald (973.364.2538)

Pos: SRNCOM 2nd Liens due 2/15/15 at $82, 19.5% YTM (13% Current Yield) Pos: SRNCOM bank debt due 8/16/13 at $98, 8.8% YTM We believe it most likely the VRS industry rate structure will remain @ ~$5.15/minute (blended)

throughout 2012 and into 2013, as the FCC slowly determines the optimal compensation strategy.

At the current $5.15/minute (blended) rate, Sorenson generates enough unlevered FCF to continue to meet the principal and interest obligations on its current capital structure.

Sorenson operates a business model that is superior to its peers and we see limited risk to Sorenson’s 80%+ market share.

We believe there’s limited downside in the bonds from current levels even if the FCC cut the VRS reimbursement rate to $4.00/minute (or a per user rate that decreases revenue by the same amount).

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Spanish Broadcasting (SBSA) Patrick Fitzgerald (973.364.2538) Pos: SBSA 12.5% Senior Secured Bonds at $105.0, 10.9% YTW

Spanish Broadcasting’s radio stations generate $57MM in Radio BCF on an LTM basis. Leverage through the new 12.5% Secured Note is 4.8x radio BCF. Pure-play radio comps with similar leverage through Radio BCF trade much tighter, including Entercom’s 10.5s (5.1x levered, 8.6% YTW), Cumulus’s 7.75s (~6.6x levered, 9% YTW), Salem’s 9.625s (4.3x levered, ~5% YTW), and Townsquare’s 9s (~4.6x, 8.5% YTW).

The only difference between the aforementioned comps and the SBSA 12.5s is that Spanish Broadcasting’s TV business loses $5MM annually (LTM). However, the company expects its TV business to be cash flow positive by 2H12, and the SBSA 12.5% indenture compensates holders for the additional risk by granting holders 2% additional interest beginning 4/15/13 if TV BCF is not positive over 2H12.

Pos: SBSA stock at $3.10 To say that this stock is extremely volatile is an understatement. The stock was $1 in November

of 2011, but the stock had rebounded to above $7 prior to reporting 1Q12, where SBSA released better-than-expected results. Since earnings the stock has dropped over 50%.

SOP Valuation implies a >$10 dollar stock price even if Mega TV never works out. Summary SOP Valuation: 1) 7x Radio Station BCF of $57MM = $400MM; 2) $30MM for its 2

TV stations in Miami and Houston, 3) $10MM for the Mega TV content production. Sum of parts implies total value of $440MM, minus $364MM of net debt and preferred, and there are 7.3MM shares outstanding, implying >$10 per share.

Tembec Inc. (TMBCN) Gary Madia (973.226.7062) Pos: Tembec 11.25% 1st lien Notes at $99.5, 11.4% YTW

Heavy technical pressure on bonds has pushed levels to below par. Commodity pulp prices have bottomed and price increases have been announced. Lumber prices continue to trend higher and should mitigate much if not all of the negative

EBITDA from the segment going forward. A terrible 2QFY12 has also weighed on the bonds but less internal production issues, better

product pricing and a weaker $CAD should allow for a nice bounce back in 3Q. Asset sale proceeds will assist in growth CAPEX and announced high ROI energy project

funding. Travelport, LLC (TPORT) Bill Mastoris (973.226.5812) Pos: TPORT Extended TL B at $90.0, 8.52% YTW (10.02% to the springing maturity)

Current leverage is 3.74x. Even with the loss of the UAL contract in March 2012 in their IT Solutions group, we don’t expect Sr. Secured leverage to exceed 3.8x (well below the likely 6x TEV multiple).

4th amended credit facility covenants prohibit payment of cash interest to 2nd Liens if leverage >4.0x.

Springing maturity assures that no class of subordinated holders will receive principal payments before the Sr. secured holders.

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United Airlines (UAL) Bill Mastoris (973.226.5812) Pos: United Airlines 7.461% at $102.0, 5.93% YAL – INVESTMENT GRADE / CROSSOVER

This issue is one of the least expensive “A” tranches with potential for future upside from an S & P upgrade; very short average life (4/2013). 50% of bonds will be sunk / redeemed on 4/1/2013 and an additional 41% on 4/1/14.

The Company has ample near-term liquidity at 21% of LTM revenues. The Company has the premier network of all legacy carriers, generating the highest yields and

LTM EBITDAR margins of 12.6%. Estimated LTV is now 52%.

Pos: United Airlines 12.0% “B” tranche of 16 at $109.25, 7.33% YAL Very aggressive SF with 40% over the next 2 years; additionally, the “A” tranche sinks 25%

over the next 2 years; the combination should lead to considerable improvements in LTVs. The Company has ample near-term liquidity at 21% of LTM revenues. This issue is one of the cheapest “B” tranches with a short AL (8/14) and final (1/15/16). Estimated LTV is 96%.

Verso Paper (VRS) Gary Madia (973.226.7062) Pos: 1.5 lien Notes at $79.0, 17.2% YTW

Pos: 8.75% 2nd lien notes at $37.0, 32.3% YTW Balance sheet reconfiguration and maturity extension is essentially complete with HoldCo term

loan the only remaining issue. Capital structure appears to be pricing in a restructuring in the short term which we do not see. Paper sector certainly has longer term secular issues but market pulp prices are rebounding and

should begin to benefit earnings in 2Q. The carry yields for both bonds are attractive for a company we feel will last through at least

2013. We suspect any cash burn in 2012 will be manageable and will not require a meaningful (if any)

draw on the revolver.

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Virgolino de Oliveira (GVOBR) Christina Ronac (212.273.7512) Neg: 10.5% USD Sr. Unsecured at $83.5, 14.9% YTW Neg: 11.75% USD Sr. Unsecured at $83.0, 15.1% YTW

GVO is facing three headwinds: (a) lower cane harvest due to drought/lack of sugarcane-plantation investments by third parties, (b) lower global sugar prices due to high global supply and (c) lower sucrose yields due to late harvesting/sugarcane flowering. The International Sugar Organization (ISO) projects a new production record despite a significant decrease in sugar output anticipated for Brazil; the ISO expects a sugar surplus to remain for the 2012/13 and 2013/14 seasons as well.

For the last twelve months, sugar prices were on average US $26c/lb, yet GVO’s LTM EBITDA was only US $147MM, which is also lower than its pro forma interest expense. Going forward, we believe the price of sugar will hover around US $20 c/lb, providing additional pressure to GVO.

About 30-40 plants in the state of Sao Paulo (out of 180 mills) are available for sale according to Estado de Sao Paulo. Our industry checks tell us that these plants can be purchased from US $50-60/ton. Given GVO’s 12mm ton capacity, this would value the firm at US $600MM-720MM vs. net debt of US $952MM and US $1.3Bn total liabilities, with liabilities likely to increase.

GVO has secured debt around US $345MM and Copersucar debt of US $257MM, both of which will be likely paid before the noteholders. As Copersucar controls the payments it makes to GVO, we view Copersucar’s debt as senior to the bonds.

Visteon Corporation (VC) Andrew Hain (973.226.8174) Pos: VC Equity at $39.80

We believe that Visteon trades below its intrinsic value. The Company owns 70% of a publically traded Korean auto supplier known as Halla. The

Company’s stake in Halla is worth approximately $1.3B. Additionally, we believe the Company’s JV’s (primarily Yanfeng) are worth at least $1.7B based

upon a 10x multiple on 2012 earnings. At a stock price of $39.80, Visteon is valued at $2.0B which is less than the $3.1B in value for

the 2 assets mentioned above and does not include any value for the Company’s remaining businesses. We believe the stock has material upside from current levels.

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Westmoreland Coal (WLB) Brian Taddeo (973.226.3525)

Pos: 10.75% Senior Secured Notes due 2018 at $93.5, 12.4% YTW Given the company’s significant hedge percentage and the cost plus nature of their contracts we

believe Westmoreland, yielding over 12%, is attractive. The company is over 90% hedged for each of the next several years.

We expect EBITDA and free cash flow to significantly improve in 2012 given the addition of the Kemmerer mine earlier this year, step ups in contract pricing as well as the assumption of normal weather, as the strong hydro season last year weighed on coal production from one of the company’s core mines.

In addition, we expect Westmoreland to begin to delever its balance sheet (currently proforma 3.8x) over the next two years given the expectation for the higher free cash flow and the significant amortization schedule at WML which began in 2011.

Furthermore, we believe the company will eventually look to simplify the capital structure by selling its non-core ROVA power plant, retiring the subsidiary WML term debt and concentrating all of the company’s debt at the parent.

Xerium Technologies (XRM) Gary Madia (973.226.7062) Pos: Xerium 8.875% senior notes at $76.0, 15% YTW

Weak 1Q/4Q has weighed on bonds. A lot of negative energy already priced in. Despite weak 1Q the company run-rate EBITDA should equate to approx. $85-$90mm of

EBITDA which still allows for healthy free cash flow ($20mm to $25mm). Company can cut CAPEX in half if necessary to aid in cash generation. Despite a weak 1Q the company made a $13mm voluntary term loan payment in the Q. Production rationalization plan is forthcoming which should allow for a reduction fixed costs. At $90mm of EBITDA leverage through notes is only 5.1x, with net leverage of 4.7x, which we

feel is manageable given higher EBITDA margin. Xinergy Corp (XRGCN) Brian Taddeo (973.226.3525)

Pair Trade: Pos: Xinergy (XRGCN) 9.25% Senior Secured Notes due 2019 at $60.0, 20.2% YTW Neg: James River Coal (JRCC) 7.875% Senior Notes due 2019 at $56.5, 19.7% YTW The CAPP coal market continues to remain under pressure from the impacts of low natural gas

prices and new/upcoming EPA regulations. While we acknowledge the lower net leverage levels at James River on an LTM basis (<1.0x vs. 3.0x) currently, we believe a pair trade involving the Xinergy secured notes and the James River unsecured notes makes sense giver our expectations for the next several quarters. Both bonds have a similar duration and trade at roughly similar yields.

We believe the Xinergy bonds are attractive on a relative basis given: 1) Xinergy maintains a roughly $15-$20/ton cost advantage for mining CAPP coal, which has become increasingly important given the weakness in coal prices given low natural gas prices; 2) we expect significantly less free cash burn from Xinergy over the next few years combined with a lack of a potential near term liquidity event, 3) Xinergy has a higher percent of its EBITDA coming from met coal, which has historically delivered higher margins per ton and 4) while not a certainty to occur, James River bonds provide for well over $100 million of additional secured debt which could be placed ahead of the senior notes.

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Yonkers Racing Corp (YONKER) John Fleming (973.226.5194) Pos: 11.375% Senior Notes due 2016 at $106.8, 8.8% YTM

Good yield with low net leverage (~ 4.3x) and very little debt ahead. Company’s sole property in Yonkers NY, about a mile from the New York City border (Bronx

Borough), enjoys the benefit of being one of 2 properties in NYC. New competition came on line in Oct 2011 at the Aqueduct raceway in Queens, New York,

which will negatively impact future earnings over the next few quarters (we are expecting about a 15-25% decline in Y-O-Y EBITDA).

Over the longer term, we believe the New York Market with about 18mm people is more than large enough to support these (and potentially more) casinos – assuming 2012E EBITDA were to decline by 25%, total net leverage would remain around 5.0x.

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IMPORTANT DISCLOSURE This communication has been prepared by Gleacher & Company Securities, Inc. This communication is provided to you for information purposes only. The views and recommendations in this communication are typically the short-term views of the Sales and/or Trading desk of Gleacher & Company Securities, Inc. This communication has not been produced by the Research Department of either Gleacher & Company Securities, Inc or any of its affiliates, and does not constitute research. Readers should not consider the information contained in this communication to be objective or independent of the interests of Gleacher & Company Securities, Inc Trading and Sales desk. As these are the views of the Trading and/or Sales desks, you should assume that the authors of this communication are active participants in the markets, investments or strategies contained herein. Prices shown in this communication are indicative and Gleacher & Company Securities, Inc is not offering to buy or sell or soliciting offers to buy or sell any financial instrument. The information contained in this communication has been obtained from sources that Gleacher & Company Securities, Inc believes are reliable but we do not represent or warrant that it is accurate or complete. The views in this publication are those of Gleacher & Company Securities, Inc and are subject to change, and Gleacher & Company Securities, Inc has no obligation to update its opinions or the information in this publication. Gleacher & Company Securities, Inc and its affiliates and their respective officers, directors, partners and employees, including persons involved in the preparation or issuance of this document, may from time to time act as manager, co-manager or underwriter of a public offering or otherwise, in the capacity of principal or agent, deal in, hold or act as market-makers or advisors, brokers or commercial and/or investment bankers in relation to the securities which are the subject of this communication. Neither Gleacher & Company Securities, Inc, nor any affiliate, nor any of their respective officers, directors, partners, or employees accepts any liability whatsoever for any direct or consequential loss arising from any use of this communication or its contents. The financial instruments discussed in this communication may not be suitable for all investors. Gleacher & Company Securities, Inc recommends that investors independently evaluate each issuer, security or instrument discussed in this communication, and consult any independent advisors they believe necessary. The value of and income from any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information in this publication is not intended to predict actual results, which may differ substantially from those reflected. Gleacher & Company Securities, Inc and its affiliates do not provide tax advice and nothing contained herein should be construed to be tax advice. Additional information regarding this communication will be furnished upon request.

High-Yield/Distresed Desk Analyst Coverage List

June 1, 2012Analyst/Sector Primary Coverage Secondary Coverage

Kieran Byrne American Achievement AGY HoldingSpecial Situations/Shipping Dryships Apria [email protected] Excel Maritime Carriers Baltic Trading973.226.7358 Genco Shipping & Trading CMA CGM

Geokinetics Frontline Ltd.Navios Maritime Acquisition Horizon LinesNavios Maritime Holdings Reddy IceOcean Rig Rotech HealthcareOverseas Shipholding GroupVisantWestern Express

Patrick Fitzgerald American Media Accretive Solutions Special Situations/Bank Debt Armtec Infrastructure Ames Taping Tools System [email protected] Avaya Cygnus Business Media973.364.2538 Colt Defense Endurance Biz Media

Cumulus Media Entercom RadioFriendFinder Networks GannettGateHouse Media Lamar AdvertisingMcClatchy Leap WirelessMorris Publishing Lee EnterprisesNortel Networks Media GeneralProduction Resources Mueller WaterRadio One New York TimesSorenson Communications Penton MediaSpanish Broadcasting Postmedia Networks

Salem CommunicationsSirius XM RadioTownsquare RadioWarner Music Group

John Fleming American Casino Affinity Gaming (fka Herbst)Special Situations/Gaming Boyd Gaming [email protected] Caesars Entertainment (HET) CCM Merger (Motorcity)973.226.5194 Chukchansi Eldorado Resorts

Circus & Eldorado EPL Intermediate (El Pollo Loco)Eastman Kodak Hooters of AmericaFirst Capital Inn of the Mountain GodsGreektown Isle of CapriIndiana Downs KellwoodJacobs Entertainment Mashantucket Tribe (Foxwoods)Majestic Star Peninsula GamingMarina District Finance (Borgata) River Rock EntertainmentMGM Resorts International Station CasinosMidwest Gaming TropicanaMohegan Tribal Trump EntertainmentMTR Gaming Wynn ResortsShingle SpringsSnoqualmieSugarhouseYonkers Raceway

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Andrew Hain Aventine Renewables Fannie MaeSpecial Situations Bon-Ton Stores [email protected] Bumble Bee Medimedia973.226.8174 Capmark Toys "R" Us

Claire's Stores Inc. U.S. ConcreteExide TechnologiesGymboreeHD SupplyK-V PharmaceuticalPatriot CoalPetroplusRealogySitel WorldwideVisteonYRC Worldwide

Gary Madia AbitibiBowater (Resolute) Algoma Steel (Essar)Paper, Metals, Packaging Ainsworth Lumber [email protected] Appleton Domtar973.226.7062 Ardagh Packaging Hilex Poly

Ball Corp. Louisiana-PacificBerry Plastics Rock-TennBoise Inc. Tekni PlexCatalyst Paper White BirchClearwater Paper Crown HoldingsFortescue Metals GroupGraphic PackagingLibbey GlassLongview FibreMercer InternationalMiller WesternNew PageReynolds GroupRyerson Inc.Sappi PaperSealed AirSealed AirTembecThompson CreekVerso PaperXerium Technologies

Bill Mastoris AIR 2 US Allegiant AirAirlines Air Canada [email protected] Air Lease Atlas Air973.226.5812 Aircastle, Ltd AWAS

AMR Corp Mesa Air GroupContinental Airlines (now UAL) Selected AerospaceDelta Air Lines Southwest AirlinesGlobal Aviation HoldingsInternational Lease FinanceJetBlue AirwaysSabre HoldingsTravelportUnited AirlinesUS Airways

Christina Ronac Axtel SAB de CV Aeropuertos ArgentinaEmerging Markets Cemex Argentina [email protected] Copeinca ASA Banco Cruzeiro do Sul212.273.7512 Corp GEO SAB de CV Brasil Foods

Desarrolladora Homex Brazil MallsDigicel Centrais Electricas do Para SAGrupo Posadas City of Buenos AiresJBS (JBSSBZ) Corporacion LindleyLupatech EdenorMarfrig Geo MaquinariaMaxtel Telecomunicaciones IRSA (IRSAAR)Minerva OdebrechtNII Holdings Inc Rede Empresas de Energia EletricaOGX (OGXPBZ) ScribeOSX (OSXBBZ) TGS (TRAGAS)Servicios Corporativos Javer TransenerTrilogy International PartnersUrbi Desarrollos UrbanosVirgolino de Oliveira

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Matt Swope Bonten Media Allbritton CommunicationsTechnology, Media, Telecom Broadview Networks [email protected] Cengage Learning Cablevision973.226.3258 Cenveo Charter Communications

Ceridian Corporation Cincinnati BellClear Channel Communications Consolidated CommunicationsClear Channel Outdoor Crown MediaClearwire DatatelDex One EntravisionFirst Data FairPoint CommunicationsGray Television Frontier CommunicationsIntelsat GXS WorldwideLBI Media Hutchinson TechnologyLevel 3 Lawson SoftwareLocal TV Nebraska BookNewport TV NokiaNexstar Broadcasting Open SolutionsPowerwave Technologies SatmexPrimus Telecom SeagateSinclair Broadcasting SuperMediaTelesat Holdings Univision

Windstream/PAETECYellow Media

Brian Taddeo Ameren Genco AESPower & Energy ATP Oil & Gas Alpha [email protected] Calpine Arch Coal973.226.3525 CHC Helicopter Bristow Group

Dynegy Cloud PeakEdgen Murray Murray EnergyEdison Mission Niska GasEnergy XXI Patriot CoalGenOn Energy XinergyHeadwatersHercules OffshoreJames River CoalLNG (Sabine Pass)LNG (Sabine Pass)McJunkin Red ManMcMoRan ExplorationNRG EnergyPower Project DebtStone EnergyTXUWestmoreland Coal

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Gleacher Hy Distressed Ideas

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