Leveraged Loan Monthly

LEVERAGED LOAN MONTHLY
THOMSON REUTERS LPC JULY 2013

Colm Doherty Director of Analytics colm.doherty@thomsonreuters.com 646-223-6821 Hugo Pereira Senior Market Analyst hugo.pereira@thomsonreuters.com 646-223-6818
07/05/2013
Loan Market Monthly - July 2013
LEVERAGED LOAN MONTHLY

Leveraged Loan Market Overview
High Yield Bond Market Overview Investor Overview CLO Market Analysis CLO League Tables Loan Fund Flows & Returns CDS Market Snapshot
Slide 3
Slide 21 Slide 31 Slide 37 Slide 71 Slide 76 Slide 82
LEVERAGED LOAN MARKET OVERVIEW
07/05/2013
LEVERAGED LOAN ISSUANCE

U.S. LEVERAGED LOAN ISSUANCE Leveraged Loan Issuance ($ Bils.) 160.0 140.0 120.0 100.0 80.0 60.0 40.0 20.0 0.0 Jan-06 Mar-06 May-06 Jul-06 Sep-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Pro rata Institutional
Leveraged loan issuance hit a record $323 billion in 2Q13, up 11% from the previous record of $290 billion set in 1Q13. Once again refinancings and repricings dominated issuance. YTD leveraged loan issuance is now at $614 billion, with institutional loan issuance accounting for 62% of this total.
07/05/2013
U.S. INSTITUTIONAL LOAN AND HY BOND ISSUANCE

U.S. LOAN AND BOND ISSUANCE 120.0 HY Bonds 100.0 Issuance ($ Bils.) 80.0 Inst. Loans
60.0
40.0 20.0 0.0 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13
Despite the market volatility in June, institutional loan issuance amounted to $191 billion in 2Q13, a 1% drop from the 1Q13 total as issuers continued to take advantage of excess investor demand for loans and repriced their debt. Institutional loan issuance has totaled $385 billion in 1H13 compared to $142 billion in the same period last year. After posting a monthly record of $46.8 billion in May, high yield bond issuance fell to $13.8 billion in June amid the increased market volatility, bringing YTD volume to $174 billion.
07/05/2013
U.S. INSTITUTIONAL ISSUANCE: NEW MONEY VS. REFINANCING

U.S. INSTITUTIONAL LOAN ISSUANCE Institutional loan issuance ($ Bils.) 120.0 100.0 80.0 60.0 40.0 20.0 0.0 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 New money Refinancing
Refinancing/repricing activity represented the majority of institutional loan issuance in 2Q13 as issuers particularly in April and June took advantage of strong lender appetite for assets to cut spreads and extend maturities. YTD new money institutional issuance has amounted to $105 billion, only a 27% share of overall institutional loan volume.
07/05/2013
LEVERAGED M&A LOAN ISSUANCE

U.S. LEVERAGED M&A LOAN ISSUANCE Leveraged M&A loan issuance ($ Bils.) 25.0 20.0 15.0 10.0 5.0 0.0 Aug-12 Dec-12 Oct-12 Jun-12 May-12 LBOs Leveraged M&A (Non LBO)
While lenders continue to hope for an increase in M&A deal flow, volume remains relatively muted. Year to date, M&A leveraged loan issuance has amounted to $84 billion, with LBO activity accounting for $38 billion (46%) of this activity.
May-13
Mar-12
Apr-12
Mar-13
Sep-12
Nov-12
Feb-12
Feb-13
Apr-13
Jan-12
Jun-13
Jul-12
Jan-13
07/05/2013
COVENANT LITE LOAN ISSUANCE

U.S. COVENANT-LITE LOAN ISSUANCE 50.0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Covenant-lite loan issuance ($ Bils.)
Covenant-lite loan issuance totaled $61 billion in 2Q13, bringing year to date issuance to $140 billion. Indicative of how popular cov-lite loans have become this year is that in the same half year period a year ago, cov-lite loan issuance amounted to only $26 billion.
07/05/2013
DIVIDEND RECAP VOLUME

U.S. SPONSORED DIVIDEND RECAPITALIZATION LOAN VOLUME 12.0 Dividend recap loan volume ($Bils.) 10.0 8.0
6.0
4.0 2.0 0.0
Feb-12 Mar-12 Jun-12 Apr-12 Jan-12 May-12
Dec-12
Mar-13
Oct-12
Jul-12
Feb-13
Sep-12
Nov-12
Apr-13
Given the lack of M&A activity and the strong lender appetite in the market, sponsors availed of dividend recap financings, particularly in June when loan volume totaled $11.4 billion. This brought 2Q13 dividend recap loan volume to $21 billion and year to date volume to $31 billion.
May-13
Aug-12
Jun-13
Jan-13
07/05/2013
MIDDLE MARKET LOAN ISSUANCE

Middle market loan volume ($Bils.) 70.0 60.0 50.0 U.S. MIDDLE MARKET LOAN VOLUME
Large MM*
Trad. MM* Overall MM
40.0
30.0 20.0 10.0
1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 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
0.0
*Traditional MM: Deal Size <=$100M, Large MM: Deal Size >$100M to $500M, For all: Borrower Sales <$500M
Middle market lending picked up in 2Q13, amounting to $51 billion, up from $41 billion in 1Q13. Like in the large corporate market, new money volume was in the minority, representing 31% of middle market lending in 2Q13.
10
07/05/2013
EUROPEAN LEVERAGED LOAN ISSUANCE

EUROPEAN LEVERAGED LOAN ISSUANCE 30.0 25.0 Issuance ($ Bils.) 20.0 15.0 10.0 5.0 0.0 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13
European leveraged loan issuance amounted to $35 billion in 2Q13, down from $40 billion in 1Q13. While refinancing activity still represented the majority of European leveraged loan volume, its share fell to 64% in 2Q13 from 80% in 1Q13.
11
07/05/2013
LBO EQUITY CONTRIBUTIONS

LARGE CORPORATE LBO EQUITY CONTRIBUTIONS 60% Average Equity Contributions 50% 40% 30%
20%
10% 0% 1H04 2H04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 2008 2009 1H10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13
The average equity contribution in the large corporate market in 2Q13 was 30%, down from 32% in 1Q13 and 35% in 4Q12.
12
07/05/2013
INSTITUTIONAL LOAN PIPELINE

U.S. INSTITUTIONAL LOAN PIPELINE 90.0 Institutional loan pipeline ($ Bils.) 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 Jan Feb Mar Apr May Jun Jul Jul Aug Sep Oct Nov Dec 2011 2012 2013
The institutional loan pipeline has fallen to $29.5 billion as of June 27, down from $57 billion in mid-June as opportunistic refinancings were put on hold due to market conditions. M&A accounts for just over half of the pipeline volume, with refinancing/repricing representing 22% and the dividend recap share at 13%.
13
07/05/2013
PRIMARY MARKET YIELDS

U.S. PRIMARY MARKET INSTITUTIONAL LOAN YIELDS 10.0% 9.0% Average yield 8.0% 7.0% Large Corp. Middle Market
6.0%
5.0% 4.0% 1Q10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13
Given the volatility in the bond and equity markets in June, primary market loan yields in the large corporate market increased to 5.2% in June from 4.6% in May. New issue middle market loan yields also moved higher, averaging 6.8% in June, up from 6.3% in May.
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07/05/2013
U.S. SECONDARY MARKET BID LEVELS

U.S. SECONDARY MARKET AVERAGE BID 100.0 Avg. Bid (% of par) 98.0 96.0 94.0 92.0 90.0 01/03/11 02/03/11 03/03/11 04/03/11 05/03/11 06/03/11 07/03/11 08/03/11 09/03/11 10/03/11 11/03/11 12/03/11 01/03/12 02/03/12 03/03/12 04/03/12 05/03/12 06/03/12 07/03/12 08/03/12 09/03/12 10/03/12 11/03/12 12/03/12 01/03/13 02/03/13 03/03/13 04/03/13 05/03/13 06/03/13 SMi100 Overall Market
Flow names are down nearly 1 point from their recent high, with the SMi100 average bid at 98.23 as of month-end June, down from 99.15 in May. The broader market (all multi-quote institutional term loans) finished June at 98.66, down 87 bps from a high of 99.53 in May but still up 126 bps this year .
15
07/05/2013
SECONDARY MARKET BID LEVELS: U.S. VS. EUROPE

SECONDARY MARKET AVERAGE BIDS 100.0
98.0
Avg. Bid (% of par) 96.0 94.0 92.0 90.0 88.0 12/31/10 1/31/11 2/28/11 3/31/11 4/30/11 5/31/11 6/30/11 7/31/11 8/31/11 9/30/11 10/31/11 11/30/11 12/31/11 1/31/12 2/29/12 3/31/12 4/30/12 5/31/12 6/30/12 7/31/12 8/31/12 9/30/12 10/31/12 11/30/12 12/31/12 1/31/13 2/28/13 3/31/13 4/30/13 5/31/13 U.S. SMi100 European Leveraged 40
European flow names, like their U.S. counterparts have moved off their highs, finishing June at 98.54, down from a high of 99.79. Despite the recent drop, European flow names have gained roughly 83 bps this year.
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07/05/2013
SECONDARY MARKET BID LEVELS: COVENANT-LITE & SECOND-LIENS

U.S. COV-LITE AND SECOND LIEN LOAN BIDS 105.0 100.0 Avg. Bid (% of par) 95.0 90.0 Cov-lite 2nd Lien TL SMi 100
85.0 80.0
1/12/11 2/12/11 3/12/11 4/12/11 5/12/11 6/12/11 7/12/11 8/12/11 9/12/11 10/12/11 11/12/11 12/12/11 1/12/12 2/12/12 3/12/12 4/12/12 5/12/12 6/12/12 7/12/12 8/12/12 9/12/12 10/12/ 11/12/12 12/12/12 1/12/13 2/12/13 3/12/13 4/12/13 5/12/13 6/12/13 75.0
The average bid on covenant-lite loans is now at 99.11 as. Second-liens are at 95.45, still up 342 bps this year.
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07/05/2013
SECONDARY MARKET YIELD

SMI100 SECONDARY MARKET YIELD* 7.0 6.5 Average yield (%) 6.0 5.5 5.0 4.5 4.0
3.5
12/11/ 10/11/ 10/11/ 2/11/12 5/11/12 12/11/ 11/11/ 8/11/12 2/11/13 7/11/12 8/11/11 1/11/12 6/11/12 9/11/12 5/11/13 1/11/13 11/11/11 4/11/12 6/11/13 9/11/11 7/11/11 4/11/13 3/11/12 3/11/13
3.0
* Assuming three year life
After falling as low as 4.46% in mid-May, the average yield on the top 100 flow names has increased to 4.78 as of month-end June.
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07/05/2013
PAR-PLUS MARKET SHARE

U.S. PAR-PLUS SHARE: SMI100 & MULTI-QUOTE INSTITUTIONAL TERM LOANS 80.0% Share of loans bid >=100 70.0% 60.0% 50.0% 40.0% SMi 100 Overall Market
30.0%
20.0% 10.0% 0.0% 12/31/09 1/31/10 2/28/10 3/31/10 4/30/10 5/31/10 6/30/10 7/31/10 8/31/10 9/30/10 10/31/10 11/30/10 12/31/10 1/31/11 2/28/11 3/31/11 4/30/11 5/31/11 6/30/11 7/31/11 8/31/11 9/30/11 10/31/11 11/30/11 12/31/11 1/31/12 2/29/12 3/31/12 4/30/12 5/31/12 6/30/12 7/31/12 8/31/12 9/30/12 10/31/12 11/30/12 12/31/12 1/31/13 2/28/13 3/31/13 4/30/13 5/31/13
As the market softened recently, the share of loans bid in the par-plus region has fallen sharply. Par-plus loans now account for 42% of the broader secondary market (multi-quote institutional term loans), down from a high of 79% in May. The par-plus share of flow names is now at 32% (down from a high of 69%) .
19
07/05/2013
101-PLUS MARKET SHARE

U.S. 40.0% Share of loans bid >=101 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 1/4/12 1/19/12 2/3/12 2/18/12 3/4/12 3/19/12 4/3/12 4/18/12 5/3/12 5/18/12 6/2/12 6/17/12 7/2/12 7/17/12 8/1/12 8/16/12 8/31/12 9/15/12 9/30/12 10/15/12 10/30/12 11/14/12 11/29/12 12/14/12 12/29/12 1/13/13 1/28/13 2/12/13 2/27/13 3/14/13 3/29/13 4/13/13 4/28/13 5/13/13 5/28/13 6/12/13 6/27/13
101-PLUS SHARE: OVERALL MARKET
The share of loans bid in the 101-plus region has tumbled recently as bids have moved lower. The 101-plus share is now at 7%, down from 39% in early May.
20
HIGH YIELD BOND MARKET OVERVIEW
07/05/2013
HIGH YIELD BOND ISSUANCE

U.S. HY BOND ISSUANCE 50.0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13
Issuance ($ Bils.)
After posting a monthly record of $46.8 billion in May, high yield bond issuance fell to $13.8 billion in June amid the increased market volatility, bringing YTD volume to $174 billion. In the corresponding period last year (1H12), issuance stood at $139 billion.
22
07/05/2013
SENIOR SECURED HY BOND ISSUANCE

U.S. SENIOR SECURED HY BOND ISSUANCE 14.0 12.0 Issuance ($ Bils.) 10.0 8.0 6.0 4.0 2.0 0.0 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13
In keeping with the recent drop in high yield bond issuance, senior secured high yield bond issuance fell to $1.9 billion in June. So far this year, $34 billion of senior secured bonds have been issued, a similar amount to that issued in the same period last year.
23
07/05/2013
Issuance ($ Bils.) 60.0 20.0 40.0 10.0 50.0 30.0 0.0
YEAR TO DATE HY BOND ISSUANCE BY PURPOSE
Repay Bank Loan or Bridge Financing Redeem Existing Bonds or Securities Tender Offer Merger and Acquisition General Purpose Leveraged Buyout Capital Expenditure General Purpose/Refinance Dividend or Distribution to Shareholders N/A Property Expenditure (acquisition or development) Aircraft & Ship finance General Purpose/Acquisition General Purpose/Stock Repurchase Stock Repurchase
U.S. HY BOND ISSUANCE BY PURPOSE
Fund Pension Plans

Repay Intercompany Debt Spinoff Working Capital Projects Expenditure (other than capital projects) General Purpose/Working Capital
Bond-for-loan takeout volume ($56 billion) has been the biggest use of bond proceeds so far in 2013. Next is bond repayments at $34 billion.

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07/05/2013
HY BOND FOR LOAN TAKEOUTS

U.S. HY BOND FOR LOAN TAKEOUTS 16.0
14.0
Issuance ($ Bils.) 12.0 10.0 8.0 6.0 4.0 2.0
0.0
Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-109 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13
After posting a monthly record of $14.6 billion in May, bond-for-loan takeout activity fell in June to $4.2 billion. Year-to-date, $56 billion of bond proceeds have been designated to take out loans, compared to $45 billion in the same period a year ago.
25
07/05/2013
YEAR TO DATE HY BOND ISSUANCE BY RATING

HY BOND ISSUANCE BY RATING 30.0 BB
25.0
Issuance ($ Bils.) 20.0 15.0 10.0 5.0 0.0
B CCC NR
Aug-12
Jun-12
Oct-12
Dec-12
Mar-12
May-12
B rated issues accounted for just under half (49%) of HY bond issuance in June. BB rated issues have led the way YTD representing 46% of issuance, versus a 41% share for B rated deals and 13% for CCC rated issues.
May-13
Mar-13
Apr-12
Sep-12
Feb-12
Nov-12
Feb-13
Apr-13
Jan-12
Jun-13
Jul-12
Jan-13
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07/05/2013
HY BOND FUND FLOWS MUTUAL FUND VS. ETF

BREAKOUT
HY BOND FUND FLOWS MUTUAL FUND VS. ETF BREAKOUT
Across markets, volatility was heightened in June amid hints that the Federal Reserve may soon taper off its bond buying program. Treasury rates climbed and money flowed out of the bond market. Breaking out high yield bond fund flows, mutual funds saw outflows of $8.5 billion in June (through June 26), while ETF outflows totaled $2.9 billion. YTD, outflows have amounted to $6.9 billion for HY bond mutual funds and $3.1 billion for HY bond ETFs.
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07/05/2013
HY BOND & LOAN FUND NET ASSETS

HY BOND & LOAN FUND NET ASSETS* 350.0
300.0
Net Assets ($ Bils.) 250.0 200.0 150.0 100.0 50.0
Loan Funds HY Bond Funds
0.0
Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 * Does not include assets bought via leverage
High yield bond fund net assets fell to roughly $300 billion at the end of June as money flowed out of these funds due to fears around rising interest rates. The current net asset level is similar to that recorded at the start of the year and is still up from $274 billion held a year ago.
28
07/05/2013
NEW ISSUE HY BOND YIELDS

NEW ISSUE HY BOND YIELDS* 10.0
9.0 Average yield
8.0
7.0
6.0 Aug-12 Dec-12 Jun-12 Oct-12 Apr-12 Mar-12 May-12 May-13 Mar-13 Sep-12 Feb-12 Nov-12 Feb-13 Apr-13
* Yield to maturity
The average new issue bond yields (YTM) increased to 7.91% in June as investors pulled back and money flowed out of the asset class. New issue bond yields have averaged 6.64% overall in the first half of 2013.
Jan-12
Jun-13
Jul-12
Jan-13
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07/05/2013
HY BOND YIELDS
Yield (%) 20.0 14.0 18.0 22.0 12.0 16.0 10.0 24.0 6.0 8.0 BARCLAYS U.S. HIGH YIELD BOND INDEX 4.0
1/3/00 4/3/00 7/3/00 10/3/00 1/3/01 4/3/01 7/3/01 10/3/01 1/3/02 4/3/02 7/3/02 10/3/02 1/3/03 4/3/03 7/3/03 10/3/03 1/3/04 4/3/04 7/3/04 10/3/04 1/3/05 4/3/05 7/3/05 10/3/05 1/3/06 4/3/06 7/3/06 10/3/06 1/3/07 4/3/07 7/3/07 10/3/07 1/3/08 4/3/08 7/3/08 10/3/08 1/3/09 4/3/09 7/3/09 10/3/09 1/3/10 4/3/10 7/3/10 10/3/10 1/3/11 4/3/11 7/3/11 10/3/11 1/3/12 4/3/12 7/3/12 10/3/12 1/3/13 4/3/13
After falling to a record low of 4.95% in early May, the yield on the Barclays U.S High Yield index has now increased to 6.66% in the face of fears over rising interest rates.
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INVESTOR OVERVIEW
INVESTOR OVERVIEW
07/05/2013
U.S. CLO ASSETS UNDER MANAGEMENT

ASSETS UNDER MANAGEMENT 290.0 CLO APB Number of CLOs in sample 740 720 700 680 660 640 620 600 580 560 540 520 500 Dec-12 Mar-13 Apr-13 May-13 Feb-13 Jun-13 Jan-13
CLO Aggregate Principal Balance ($Bils.)
270.0
250.0
230.0 210.0 190.0 170.0 150.0 Aug-12 Sep-12 Oct-12 Jul-12 Nov-12
U.S. CLO assets under management is now at $284 billion (based on a universe of 730 CLOs in Thomson Reuters LPC Collateral).
Number of CLOs
32
INVESTOR OVERVIEW
07/05/2013
LOAN FUNDS AUM

U.S. LOAN MUTUAL FUND & ETF ASSETS UNDER MANAGEMENT Loan mutual fund & ETF AUM ($ Bils.) 140.0 120.0 100.0 80.0 60.0 40.0 20.0
0.0
Jan 2007 Apr 2007 Jul 2007 Oct 2007 Jan 2008 Apr 2008 Jul 2008 Oct 2008 Jan 2009 Apr 2009 Jul 2009 Oct 2009 Jan 2010 Apr 2010 Jul 2010 Oct 2010 Jan 2011 Apr 2011 Jul 2011 Oct 2011 Jan 2012 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13
Thanks to continued inflows, loan mutual funds & ETFs had roughly $116 billion in net assets at the end of June, and when taking into account the leverage employed by closed-end funds, total assets are estimated to be approximately $123 billion.
33
INVESTOR OVERVIEW
07/05/2013
INVESTOR SHARE OF INSTITUTIONAL LEVERAGED LOAN

OUTSTANDINGS
SHARE OF U.S. LEVERAGED INSTITUTIONAL LOAN MARKET OUTSTANDINGS**
Other 44% 37%
Loan Funds (mutual funds & ETFs)

CLOs* 19%
*Based on a universe of 730 U.S. CLOs **Based on S&P/LSTA Leveraged Loan Index outstandings
CLOs hold roughly 44% of institutional loan outstandings, while loan mutual funds & ETFs currently account for 19%.
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INVESTOR OVERVIEW
07/05/2013
CLO ISSUANCE VS. LOAN FUND FLOWS -MONTHLY

MONTHLY CLO ISSUANCE VS. LOAN FUND FLOWS 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 -2.0 -4.0 -6.0 -8.0 Mar-12 Jan-12 Feb-12 CLO Issuance Loan fund flows
$ Bils.
Aug-12
Dec-12
Jun-12
May-12
Oct-12
Apr-12
CLO issuance totaled $7.9 billion in June, bringing YTD issuance to $43.8 billion. Loan funds (mutual funds & ETFs) inflows amounted to $4.8 billion in June (through June 26), pushing YTD inflows to over $31.5 billion.
35
May-13
Mar-13
Sep-12
Nov-12
Feb-13
Apr-13
Jun-13
Jul-12
Jan-13
INVESTOR OVERVIEW
07/05/2013
CLO ISSUANCE VS. LOAN FUND FLOWS - ANNUAL

ANNUAL CLO ISSUANCE VS. LOAN FUND FLOWS 110.0 90.0 70.0 $ Bils. 50.0 30.0 10.0 -10.0 2004 2005 2006 2007 2008 2009 2010 2011 2012 1H13 CLO Issuance Loan fund flows
Combined U.S. CLO issuance and loan fund inflows through June have totaled $75.4 billion.
36
CLO MARKET ANALYSIS*

*Based on the most recently available data in Thomson Reuters LPC Collateral
CLO MARKET ANALYSIS
07/05/2013
CLO ISSUANCE AND AAA NEW ISSUE SPREADS

CLO ISSUANCE AND AAA NEW ISSUE SPREADS 12.0 CLO Issuance ($Bils.) 10.0 8.0 6.0 4.0 2.0 0.0 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Issuance Average AAA spread (excl. MM) 180.0 Average AAA spread (bps) 170.0 160.0 150.0 140.0 130.0 120.0 110.0 100.0
AAA CLO spreads averaged 117 bps in June, similar to the levels seen in the prior month. CLO issuance increased to $7.9 billion in June, up from $5 billion in May. Issuance amounted to $16.8 billion in 2Q13, down from $27 billion in 1Q13.
38
CLO MARKET ANALYSIS
07/05/2013
DISTRIBUTION OF NEW CLO SIZE

DISTRIBUTION OF NEW U.S. CLO SIZE 50.0% 2011 40.0% Share of CLOs 30.0% 20.0% 10.0% 0.0% <$300 $300 to <$350 $350 to <$400 $400 to <$450 $450 to <$500 $500 to <$550 $550 to <$600 >=$600 2012 1H13
CLO size ($Mils.)
The average size of the 89 new CLOs issued in the first five months of 2013 was $493 million. Just under half (49%) of these new CLOs have exceeded $500 million in size. The average size of the AAA tranche this year is $292 million, while the equity tranche size has averaged $50 million.
39
CLO MARKET ANALYSIS
07/05/2013
CLO AGGREGATE PRINCIPAL BALANCE

CLO AGGREGATE PRINCIPAL BALANCE: U.S & EUROPE 300 CLO Aggregate Principal Balance ($USD/Euro bils.) 250 200 150 100 50 0 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 U.S. Europe
U.S. CLOs aggregate principal balance is now at $284 billion, European CLOs are at 74 billion euros (based on a universe of 730 U.S. CLOs and 211 European CLOs in Thomson Reuters LPC Collateral).
40
CLO MARKET ANALYSIS
07/05/2013
SHARE OF ASSETS HELD BY CLOS THAT ARE STILL IN /

PAST THEIR STATED REINVESTMENT PERIOD
SHARE OF ASSETS HELD BY CLOS THAT ARE STILL IN THEIR STATED REINVESTMENT PERIOD
U.S. CLOs
European CLOs
30% 70%
Still in Reinv Period Post Reinv Period
41%
59%
Roughly 70% of U.S. CLO assets are held in CLOs that are still in their stated reinvestment period. For European CLOs, this figure is a much lower 41% .
41
CLO MARKET ANALYSIS
07/05/2013
BREAKDOWN OF U.S. CLO ASSETS

SHARE OF U.S. CLO ASSETS*
Reinv. end date <July 1, 2013
Reinv. end date >=July 1, 2013
Loans Bonds Structured Prod. Cash
83%
91%
*Based on a universe of 689 U.S. CLOs *Excludes 2012 & 2013 CLOs not yet in TR LPC Collateral
U.S. CLOs that are still in their stated reinvestment period have a higher share of their assets in loans (91%) compared to CLOs past their reinvestment date (83%), and have a corresponding lower share of cash, bonds, and structured products.
42
CLO MARKET ANALYSIS
07/05/2013
BREAKDOWN OF EUROPEAN CLO ASSETS

SHARE OF EUROPEAN CLO ASSETS
Reinv. end date <July 1, 2013
Reinv. end date >=July 1, 2013
88%
85%
European CLOs that are still in their stated reinvestment period have a lower share of their assets in loans (85%) compared to CLOs past their reinvestment date (88%), and have a higher share of cash, bonds, and structured products.
43
CLO MARKET ANALYSIS
07/05/2013
U.S. CLO AGGREGATE PRINCIPAL BALANCE BY

REINVESTMENT END DATE
U.S. CLO AGGREGATE PRINCIPAL BALANCE BY REINVESTMENT END DATE 80 70 60
50
$ Bils.
40
30 20 10 0 <=2011 2012 2013 2014 2015 Reinvestment end date 2016 2017
The aggregate principal balance of U.S. CLOs reaching their reinvestment end data in 2013 is $67 billion. The APB of CLOs scheduled to reach their reinvestment end date from 2014 onwards is $162 billion.
44
CLO MARKET ANALYSIS
07/05/2013
WEIGHTED AVERAGE BIDS OF UNDERLYING CLO ASSETS: U.S. VS. EUROPE

CLO WEIGHTED AVERAGE BID DISTRIBUTION 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 89 to <90 <80 86 to <87 88 to <89 87 to <88 80 to <85 90 to <91 85 to <86 U.S. Europe Share of CLOs
97 to <98
98 to <99
93 to <94
91 to <92
94 to <95
96 to <97
CLO weighted avg. bid
Half of U.S. CLOs have a weighted average bid (on their underlying assets) in the 99-plus range. European CLOs have lower weighted average bids, with the majority (59%) in the 91 to 95 range.
45
99 to <100
92 to <93
95 to <96
>=100
CLO MARKET ANALYSIS
07/05/2013
WEIGHTED AVERAGE BIDS OF UNDERLYING U.S. CLO

ASSETS
U.S. CLO WEIGHTED AVERAGE BID DISTRIBUTION 40% 35% Share of CLOs 30% 25% 20% 15% 10% 5% 0% 99 to <100 98 to <99 93 to <94 91 to <92 94 to <95 96 to <97 90 to <91 92 to <93 95 to <96 97 to <98 >=100 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13
<90
The weighted average bid on CLO assets fell in June amid the pick up in volatility across the markets. 72% of U.S. CLOs now have a weighted average bid (on their underlying assets) in the 98-plus range, down from 80% a month earlier. Most visibly, the par-plus share fell from 39% to 3% .
46
CLO MARKET ANALYSIS
07/05/2013
WEIGHTED AVERAGE BIDS OF UNDERLYING U.S. CLO ASSETS BY REINVESTMENT DATE

U.S. CLO WEIGHTED AVERAGE BID DISTRIBUTION 70% 60% Share of CLOs 50% 40% 30% 20% 10% 0% 99 to <100 <90 98 to <99 93 to <94 91 to <92 94 to <95 90 to <91 92 to <93 95 to <96 Reinv end date < July 1, 2013 Reinv end date >=July 1, 2013
The weighted average bid of assets in U.S. CLOs still in their stated reinvestment period are higher than those past their reinvestment date. 87% of CLOs in their reinvestment period have a weighted average bid >=98 versus 51% of CLOs past their stated reinvestment date. At the upper end, 71% of CLOs still in their stated reinvestment period now have a weighted average bid >=99, down from 84% last month.
47
96 to <97
97 to <98
>=100
CLO MARKET ANALYSIS
07/05/2013
WEIGHTED AVERAGE BIDS OF UNDERLYING EUROPEAN CLO ASSETS

EUROPEAN CLO WEIGHTED AVERAGE BID DISTRIBUTION 35% 30% Share of CLOs 25% 20% 15% 10% 5% 0% 89 to <90 86 to <87 80 to <85 93 to <94 91 to <92 92 to <93 87 to <88 90 to <91 88 to <89 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13
European CLO asset prices moved lower in the last month in the face of market volatility. 14% of European CLOs now have a weighted average bid above 95, down from 30% in May, and 23% in April, but its still above 7% share recorded at the start of the year.
48
94 to <95
85 to <86
>=95
<80
CLO MARKET ANALYSIS
07/05/2013
WEIGHTED AVERAGE BIDS OF UNDERLYING EUROPEAN CLO ASSETS BY REINVESTMENT DATE

EUROPEAN CLO WEIGHTED AVERAGE BID DISTRIBUTION 25% 20% Share of CLOs Reinv end date <July 1, 2013 Reinv end date >=July 1, 2013
15%
10% 5% 0% 99 to <100 <80 86 to <87 98 to <99 89 to <90 93 to <94 91 to <92 94 to <95 80 to <85 90 to <91 92 to <93 88 to <89 95 to <96 85 to <86
The weighted average bid of assets in European CLOs still in their stated reinvestment period are higher than those past their reinvestment date. 43% of CLOs in their reinvestment period have a weighted average bid >=94 versus 25% of CLOs past their stated reinvestment date.
49
96 to <97
97 to <98
87 to <88
>=100
CLO MARKET ANALYSIS
07/05/2013
CLO LOAN HOLDINGS BY MATURITY

CLO LOAN MATURITIES 30.0% Share of maturing loan volume U.S. 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 2013 2014 2015 2016 2017 2018 2019 >=2020 Europe
The vast majority of loans (90%) held by U.S. CLOs are scheduled to mature from 2016 onwards. For European CLOs, 77% of loan holdings are scheduled to mature from 2016 onwards. Looking at a longer time frame 27% of U.S. CLOs loan holdings are scheduled to mature from 2019 onwards. For European CLOs, the corresponding share is 14%.
50
CLO MARKET ANALYSIS
07/05/2013
U.S. CLO LOAN HOLDINGS BY MATURITY DEC 2012 VS. JUNE 2013
U.S. CLO LOAN MATURITIES 30.0% Share of maturing loan volume Dec-12 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 2013 2014 2015 2016 2017 2018 >=2019 Jun-13
Based on the most recent holdings data available, the maturity profile of U.S. CLO loan holdings has changed so far this year as refinancing activity and new deal flow have pushed out maturities. Over half (51%) of loan holdings mature from 2018 onwards, up from 32% at the end of last year.
51
CLO MARKET ANALYSIS
07/05/2013
EUROPEAN CLO LOAN HOLDINGS BY MATURITYDEC 2012 VS. JUNE 2013

EUROPEAN CLO LOAN MATURITIES 30.0% Share of maturing loan volume Dec-12 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 2013 2014 2015 2016 2017 2018 >=2019 Jun-13
The term to maturity of European CLO holdings has also lengthened. Over half (55%) of loan holdings are scheduled to mature from 2017 onwards, up from 44% at the end of last year.
52
CLO MARKET ANALYSIS
07/05/2013
LOAN HOLDINGS BY MATURITY & REINVESTMENT PERIOD: U.S. CLOS

CLO LOAN MATURITIES 30.0% Share of maturing loan volume Reinv end date <July 1, 2013 25.0% Reinv end date >=July 1, 2013 20.0% 15.0% 10.0% 5.0% 0.0% 2013 2014 2015 2016 2017 2018 2019 >=2020
U.S. CLOs still in their stated reinvestment period hold longer dated loans. 60% of loans in CLOs still in their stated reinvestment period are scheduled to mature from 2018 onwards. The corresponding figure for loans in CLOs post their reinvestment date is 31%.
53
CLO MARKET ANALYSIS
07/05/2013
LOAN HOLDINGS BY MATURITY FOR U.S. CLOS STILL IN THEIR REINVESTMENT PERIOD: DEC 2012 VS. JULY 2013
CLO LOAN MATURITIES 30.0% Share of maturing loan volume Dec-12 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Jun-13
2013
2014
2015
2016
2017
2018
>=2019
For U.S. CLOs still in their stated reinvestment period, 35% of loan holdings mature from 2019 onwards, up from 14% at the end of last year.
54
CLO MARKET ANALYSIS
07/05/2013
LOAN HOLDINGS BY MATURITY & REINVESTMENT PERIOD: EUROPEAN CLOS

CLO LOAN MATURITIES 30.0% Share of maturing loan volume 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 2013 2014 2015 2016 2017 2018 2019 >=2020 Reinv end date <July 1, 2013 Reinv end date >=July 1, 2013
European CLOs still in their stated reinvestment period also hold longer dated loans, but this trend is less pronounced than in the U.S. 37% of loans in CLOs still in their reinvestment period are scheduled to mature from 2018 onwards, versus 29% of loans in CLOs past their stated reinvestment date. In the nearer term, 21% of loans in CLOs still in their reinvestment period are scheduled to mature prior to 2016, versus 24% of loans in CLOs post reinvestment date.
55
CLO MARKET ANALYSIS
07/05/2013
CLO LOAN HOLDINGS BY RATING

U.S. CLO LOAN HOLDINGS DISTRIBUTION BY RATING 35.0% Share of CLO loan holdings 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% >=Baa3 Ba1 Ba2 Ba3 B1 B2 B3 Caa1 Caa2 <=Caa3 NR
Loans rated Ba3 and above account for 19% of U.S. CLO loan holdings. 54% of underlying loans are rated B1 or B2. Loans rated B3 and below account for 19% of CLO loan holdings.
56
CLO MARKET ANALYSIS
07/05/2013
U.S. CLO RATINGS BY REINVESTMENT PERIOD

U.S. CLO LOAN HOLDINGS DISTRIBUTION BY RATING 35.0% Share of CLO loan holdings 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% >=Baa3 Ba1 Ba2 Ba3 B1 B2 B3 Caa1 Caa2 <=Caa3 NR Reinv end date <July 1, 2013 Reinv end date >=July 1, 2013
The B1 and B2 rating categories are the most popular for both U.S. CLOs still in their stated reinvestment period (55% share) and those past it (51% share). Loans rated Ba3 and above account for a smaller share of assets for CLOs still in their reinvestment period (18%) versus those past their reinvestment end date (21%).
57
CLO MARKET ANALYSIS
07/05/2013
U.S. CLO CASH BALANCE BY VINTAGE

CASH BALANCE BY CLO VINTAGE 7.0 Cash balance ($ Bils.) 6.0 5.0 4.0 $ Cash Balance Cash Share 16.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% <=2002 2003 2004 2005 2006 2007 2008 2009CLO vintage 2010 2011 2012** 2013** Share of assets in cash 14.0%
3.0 2.0
1.0 0.0
*Based on a universe of 689 U.S. CLOs **Excludes 2012 & 2013 CLOs not yet in TR LPC Collateral
Based on the most recently available reports, U.S. CLOs have roughly 6.4% of their assets in cash. More recent vintage CLOs (which tend to still be in their reinvestment period) have a lower share of their assets in cash. For this sample of CLOs, cash balances amount to $17 billion.
58
CLO MARKET ANALYSIS
07/05/2013
U.S. CLO CASH BALANCE DISTRIBUTION PRE VS. POST REINVESTMENT END DATE
CASH BALANCE PRE VS. POST REINVESTMENT END DATE 35% Share of U.S. CLOS (%) 30% 25% 20% 15% 10% 5% 0%
0 to 1 to 2 to 3 to 4 to 5 to 6 to 7 to 8 to 9 to 10 to 11 to 12 to 13 to 14 to 15 to 16 to 17 to 18 to 19 to >=20 <1 <2 <3 <4 <5 <6 <7 <8 <9 <10 <11 <12 <13 <14 <15 <16 <17 <18 <19 <20
Reinv End Date <7/1/13 Reinv End Date >=7/1/13
*Based on a universe of 689 U.S. CLOs
Cash Balance (%)
39% of U.S. CLOs past their reinvestment period have more than 10% of their assets in cash. The corresponding number for CLOs still in their reinvestment period is 16%.
59
CLO MARKET ANALYSIS
07/05/2013
EUROPEAN CLO CASH BALANCE BY VINTAGE

CASH BALANCE BY CLO VINTAGE 1.8 Cash balance (Euro Bils.) 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 <=2002 2003 2004 2005 2006 2007 2008 2009-2011
*Based on a universe of 208 European CLOs
7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% CLO vintage
Based on the most recently available reports, European CLOs have around 4.7% of their assets in cash. Cash balances amount to 3.4 billion euros.
60
Share of assets in cash
$ Cash Balance Cash Share
9.0% 8.0%
CLO MARKET ANALYSIS
07/05/2013
EUROPEAN CLO CASH BALANCE DISTRIBUTION PRE VS. POST REINVESTMENT END DATE
CASH BALANCE PRE VS. POST REINVESTMENT END DATE 30% Share of European CLOS (%) 25% 20% 15% 10% 5% 0%
0 to <1 1 to <2 2 to <3 3 to <4 4 to <5 5 to <6 6 to <7 7 to <8 8 to <9 9 to <10 10 to <11 11 to <12 12 to <13 13 to <14 14 to <15 15 to <16
Reinv End Date <7/1/13 Reinv End Date >=7/1/13
Cash Balance (%)
16% of U.S. CLOs past their reinvestment period have more than 10% of their assets in cash. The corresponding number for CLOs still in their reinvestment period is 6%.
61
CLO MARKET ANALYSIS
07/05/2013
SHARE OF CASH HELD BY CLOS THAT ARE STILL IN /

PAST THEIR STATED REINVESTMENT PERIOD
SHARE OF CASH HELD BY CLOS THAT ARE STILL IN THEIR STATED REINVESTMENT PERIOD
U.S. CLOs*
European CLOs
46% 54%
42% 58%
*Excludes 2012 & 2013 CLOs not yet in TR LPC Collateral
Roughly 54% of U.S. CLO cash is held in CLOs that are still in their stated reinvestment period. For European CLOs, this figure is 42%.
62
CLO MARKET ANALYSIS
07/05/2013
CONTRACTUAL LOAN SPREADS BY REINVESTMENT END DATE U.S. CLOS

CONTRACTUAL LOAN SPREADS BY REINVESTMENT END DATE IN U.S. CLOS 25.0% Share of CLO loan assets 20.0% 15.0% 10.0% 5.0% 0.0% <200 200 to 250 to 300 to 350 to 400 to 450 to 500 to 550 to 600 to 650 to >=700 <250 <300 <350 <400 <450 <500 <550 <600 <650 <700 Contractual spread (bps) Reinv end date <July 1, 2013 Reinv end date >=July 1, 2013
U.S. CLOs still in their stated reinvestment period hold more loans with higher spreads. CLOs still in their reinvestment period have a higher share (54%) of loans with contractual spreads in the 350-plus bps range. The corresponding share for CLOs past their stated reinvestment period is 47%.
63
CLO MARKET ANALYSIS
07/05/2013
CONTRACTUAL LOAN SPREADS FOR U.S. CLOS STILL IN THEIR REINVEST PERIOD: DEC 2012 VS. MAY 2013
CONTRACTUAL LOAN SPREADS FOR U.S. CLOS 25.0% Share of CLO loan assets Dec-12 20.0% 15.0% 10.0% 5.0% 0.0% <200 200 to 250 to 300 to 350 to 400 to 450 to 500 to 550 to 600 to 650 to >=700 <250 <300 <350 <400 <450 <500 <550 <600 <650 <700 Contractual spread (bps) Jun-13
U.S. CLOs have seen the contractual spreads on their loan holdings decline this year due to the spate of refinancings and repricings. 54% of loans held by CLOs still in their reinvestment period have a spread in the 350-plus bps range, down from 65% at the start of the year.
64
CLO MARKET ANALYSIS
07/05/2013
CONTRACTUAL LOAN SPREADS ALL U.S. CLOS VS. MIDDLE MARKET CLOS
CONTRACTUAL LOAN SPREADS ALL U.S. CLOS VS. MIDDLE MARKET CLOS 25.0% Share of CLO loan assets 20.0% 15.0% 10.0% 5.0% 0.0% <200 200 to 250 to 300 to 350 to 400 to 450 to 500 to 550 to 600 to 650 to >=700 <250 <300 <350 <400 <450 <500 <550 <600 <650 <700 Contractual spread (bps) All U.S. CLOs U.S. Middle Market CLOs
U.S. Middle Market CLOs have a higher share (53%) of loans with contractual spreads in the 400-plus bps range. The corresponding share for all U.S. CLOs is 34%.
65
CLO MARKET ANALYSIS
07/05/2013
CONTRACTUAL LOAN SPREADS BY REINVESTMENT END DATE EUROPEAN CLOS

CONTRACTUAL LOAN SPREADS BY REINVESTMENT END DATE IN EUROPEAN CLOS 20.0% Reinv end date <July 1, 2013 Share of CLO loan assets 15.0% Reinv end date >=July 1, 2013
10.0%
5.0%
0.0%
<200 200 to 250 to 300 to 350 to 400 to 450 to 500 to 550 to 600 to 650 to >=700 <250 <300 <350 <400 <450 <500 <550 <600 <650 <700 Contractual spread (bps)
Active European CLOs hold a slightly higher share of higher spread loans. Loans with a spread >=450 bps account for 33% of loan holdings for CLOs still in their reinvestment period versus 31% for CLOs post reinvestment date.
66
CLO MARKET ANALYSIS
07/05/2013
SHARE OF U.S. CLO ASSETS IN DEFAULT

SHARE OF U.S. CLO ASSETS IN DEFAULT 1.40 Value of assets in default ($Bils.) 18.0% 14.0% 12.0% Share of U.S. CLO assets in default $ value of assets in default Share of assets in default 16.0%
1.20
1.00 0.80 0.60 0.40 0.20 0.00 <=2002 2003 2004 2005 2006
10.0%
8.0% 6.0% 4.0% 2.0% 0.0% 2007 2008 2009-10 2011 CLO Vintage 2012 2013
*Based on a universe of 689 U.S. CLOs **Excludes 2012 & 2013 CLOs not yet in TR LPC Collateral
1.3% of U.S. CLO assets are in default. Older vintage CLOs hold a higher share of defaulted assets. For CLOs still in their stated reinvestment period, 0.77% of their assets are in default versus 2.49% for those CLOs past their reinvestment date.
67
CLO MARKET ANALYSIS
07/05/2013
SHARE OF EUROPEAN CLO ASSETS IN DEFAULT

SHARE OF EUROPEAN CLO ASSETS IN DEFAULT 1.0 Value of assets in default ($Bils.) 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 <=2002 2003 2004 2005 2006 2007 CLO Vintage 2008 2009-2011 Share of assets in default $ value of assets in default 10.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% Share of European CLO assets in default 9.00%
2.7% of European CLO assets are in default. For CLOs still in their stated reinvestment period, 1.8% of their assets are in default versus 3.4% for those CLOs past their reinvestment date.
68
CLO MARKET ANALYSIS
07/05/2013
TOP INDUSTRIES U.S. CLOS

TOP INDUSTRIES U.S. CLOS Share of U.S. CLO loan assets 14.0%
12.0%
10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Bus. Services
Healthcare
Technology
Broadcasting
Chem & Plastics
Leisure & Ent.
Fin. Services
Wholesale
Services
Gen Mfg.
Telecom
Utilities
Retail
Auto
For U.S. CLOs, the top sector loan holdings are Healthcare (13.8%), Technology (10%), and Retail & Supermarkets (5.9%) . The top 10 sectors account for 65% of overall U.S. CLO loan holdings.
69
Media
CLO MARKET ANALYSIS
07/05/2013
TOP INDUSTRIES EUROPEAN CLOS

TOP INDUSTRIES EUROPEAN CLOS Share of European CLO loan assets 14.0%
12.0%
10.0% 8.0% 6.0% 4.0% 2.0% 0.0%
Broadcasting
Wholesale
Bus. Services
Restaurants
Healthcare
Services
Gen Mfg.
Chem & Plastics
Leisure & Ent.
Technology
Telecom
For European CLOs, the top sector loan holdings are Broadcasting (11.8%), Healthcare (11.3%), and General Manufacturing (10.2%) . The top 10 sectors account for 70% of European CLO loan holdings.
70
Textiles & App.
Utilities
Retail
Media
CLO LEAGUE TABLES
CLO LEAGUE TABLES
07/05/2013
YTD 2013 CLO ARRANGER LEAGUE TABLE (BY VOLUME)

(THROUGH JUNE 30, 2013)
Rank Bank Holding Company Arranger Volume # of Deals Market Share
1
2 3 4 5 6 7
Citi
Bank of America Merrill Lynch Morgan Stanley Wells Fargo JP Morgan Goldman Sachs Credit Suisse
8,430.90
6,513.63 5,738.75 3,713.78 3,359.75 2,819.32 2,431.70
17
12 11 8 7 6 4
19.2%
14.9% 13.1% 8.5% 7.7% 6.4% 5.5%
8
9 10 11 12 13 14 15 16 17
Deutsche Bank
RBS Securities Jefferies UBS GreensLedge Natixis Stormharbour Securities BNP Paribas Stiefel Nicolaus Guggehheim
2,419.38
2,276.95 1,887.50 1,356.60 825.75 740.00 515.00 361.35 310.20 140.00
5
5 4 2 2 2 1 1 1 1
5.5%
5.2% 4.3% 3.1% 1.9% 1.7% 1.2% 0.8% 0.7% 0.3%
72
CLO LEAGUE TABLES
07/05/2013
YTD 2013 CLO MANAGER LEAGUE TABLE (BY VOLUME)

Rank CLO Manager 1 2 3 GSO Carlyle Investment Management Credit Suisse Asset Management CLO Volume 1,763.28 1,744.80 1,496.45 # of Deals 3 3 2 Market Share 4.0% 4.0% 3.4%
4
5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Ares Management
Och Ziff Capital Management CIFC ING Alternative Investment Management Sankaty Advisors Octagon Credit Investors Western Asset Management Halcyon Asset Management BlueMountain Columbia Management Investment Advisers LCM Asset Management Oak Hill Advisors Prudential Investment Management Symphony Asset Management Ice Canyon GoldenTree Asset Management Oaktree Madison Capital (MM) CVC Marathon Asset Management MJX Asset Management
1,350.80
1,253.25 1,166.25 1,088.25 1,038.50 1,033.69 1,017.92 979.80 941.95 937.30 936.50 925.90 835.80 827.50 775.50 668.75 655.18 631.23 617.36 614.25 600.00
2
2 2 2 2 2 2 2 2 2 2 2 2 1 1 1 1 2 1 1 1
3.1%
2.9% 2.7% 2.5% 2.4% 2.4% 2.3% 2.2% 2.1% 2.1% 2.1% 2.1% 1.9% 1.9% 1.8% 1.5% 1.5% 1.4% 1.4% 1.4% 1.4%
Contd on next slide

73
CLO LEAGUE TABLES
07/05/2013

(THROUGH JUNE 30 , 2013)
Rank CLO Manager 25 26 27 28 29 30 31 32 33 34 Pinebridge Investments Kramer Van Kirk Highland Capital Alcentra Apidos Capital KKR Feingold O'Keefe Anchorage Capital Group Golub Capital Onex Credit Partners CLO Volume 598.02 570.00 525.50 525.25 523.00 519.40 515.00 514.60 513.00 512.00 1 1 1 1 1 1 1 1 1 1
Contd from previous slide

# of Deals Market Share 3.0% 2.9% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6%
35
36 37
3i Group
Benefit Street Partners Babson Capital Management
510.10
506.90 490.75
1
1 1
2.6%
2.5% 2.5%
38
39 40 41 42 43 44 44 46 47
Shenkman Capital Management

THL Credit (Thomas H. Lee Partners LP) Trimaran Advisors Jefferies Finance LLC Regiment Capital Advisors GLG Ore Hill LLC Seix Advisors Hillmark Capital Denali Capital American Money Management
471.38
467.10 465.00 461.53 455.33 425.50 421.00 421.00 417.35 417.30
1
1 1 1 1 1 1 1 1 1
2.4%
2.3% 2.3% 2.3% 2.3% 2.1% 2.1% 2.1% 2.1% 2.1%
Contd on next slide

74
CLO LEAGUE TABLES
07/05/2013

Rank CLO Manager 48 Silvermine Capital Management CLO Volume 415.97
Contd from previous slide

# of Deals 1 Market Share 4.8%
49
50 51 52 53 54 55 56 57
Par-Four Investment Management

Citi Capital Advisors American Capital 40/86 Ballyrock Investment Management Neuberger Berman LLC Crescent Capital Group LP Chicago Fundamental Investment Partners GreyWolf
415.72
414.95 414.30 413.50 413.50 413.19 412.80 412.71 412.30
1
1 1 1 1 1 1 1 1
4.8%
4.8% 4.8% 4.8% 4.8% 4.8% 4.7% 4.7% 4.7%
58
59 60 60 62 63 64 65 66 67 68 69 70
Fortress
Invesco Sound Point Capital Management TCW OFSI Aegon USA Investment Management Palmer Square Capital Management Telos Asset Management NXT Capital (MM) JMP Group Arrowpoint Asset Management Matlin Patterson KCAP Financial
412.00
411.90 400.00 400.00 394.15 365.25 362.35 361.35 357.94 340.00 310.20 300.25 140.00
1
1 1 1 1 1 1 1 1 1 1 1 1
4.7%
4.7% 4.6% 4.6% 4.5% 4.2% 4.2% 4.2% 4.1% 3.9% 3.6% 3.5% 1.6%
75
LOAN MUTUAL FUND FLOWS & RETURNS
LOAN FUND FLOWS & RETURNS
07/05/2013
LOAN VS. HY BOND FUND FLOWS - MONTHLY

MONTHLY LOAN VS. HY BOND FUND FLOWS 15.0 10.0 Fund flows ($ Bils.) 5.0 0.0 -5.0 -10.0 -15.0 Aug-12 Mar-12 May-12 Dec-12 Jun-12 Oct-12 Apr-12 May-13 Mar-13 Sep-12 Feb-12 Nov-12 Feb-13 Apr-13 Jan-12 Jun-13 Jul-12 Jan-13 HY bond fund flows Loan fund flows
Loan funds (mutual funds & ETFs) continued to experience strong inflows in June, while HY bonds saw large outflows. Loan fund inflows amounted to $4.8 billion (through June 26), while high yield bond fund outflows totaled $11.4 billion.
77
07/05/2013
LOAN VS. HY BOND FUND FLOWS - ANNUAL

ANNUAL LOAN VS. HY BOND FUND FLOWS
Year to date (through June 26), loan funds have pulled in $31.4 billion, while in contrast high yield bond funds have suffered outflows of $10 billion
78
07/05/2013
LOAN FUND FLOWS MUTUAL FUND VS. ETF BREAKOUT

LOAN FUND FLOWS MUTUAL FUND VS. ETF BREAKOUT
Breaking out loan fund flows into the mutual fund and ETF categories, we see that loan mutual funds have pulled in $28.3 billion year to date (through June 26), while ETFs have added $3.2 billion.
79
07/05/2013
LOAN FUNDS VS. LOAN INDEX MONTHLY RETURNS

MONTHLY FUND VS. INDEX RETURNS 4.0 3.0 2.0 Returns (%) 1.0 0.0 -1.0 -2.0 -3.0 -4.0 -5.0 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13
*Based on a straight average of all open-end loan fund returns.
Open-end Loan Funds* S&P/LSTA Leveraged Loan Index
Open-end loan funds lost an average of 0.66% in June, the first negative month since May 2012. In comparison the S&P/LSTA loan index lost 0.59% in June. In the first half of 2013, open-end loan funds returned 2.37% on average versus a gain of 2.31% for the S&P/LSTA loan index.
80
07/05/2013
LOAN VS. HY BOND FUNDS MONTHLY RETURNS

MONTHLY FUND RETURNS 6.0 4.0 Returns (%) 2.0 0.0 -2.0 -4.0 -6.0 May-11 Mar-12 May-12 May-13 Jul-12 Open-end Loan Funds* Open-end HY Bond Funds*
Jul-11
Nov-11
*Based on a straight average of all open-end fund returns.
HY bond funds posted their second consecutive monthly loss in June. Open-end HY bond funds lost 2.52% in June, compared to a loss of 0.66% for loan funds. Year to date, open-end HY bond funds have gained 1.36% while loan fund returns are at 2.37%.
81
Nov-12
Mar-13
Mar-11
Sep-11
Jan-12
Sep-12
Jan-13
Jan-11
CDS MARKET SNAPSHOT
CDS MARKET SNAPSHOT
07/05/2013
CDS INDEX SPREADS

CDX.NA.IG SPREAD 300 250 200 150 100 50 0 3/25/2008 6/25/2008 9/25/2008 12/25/2008 3/25/2009 6/25/2009 9/25/2009 12/25/2009 3/25/2010 6/25/2010 9/25/2010 12/25/2010 3/25/2011 6/25/2011 9/25/2011 12/25/2011 3/25/2012 6/25/2012 9/25/2012 12/25/2012 3/25/2013 6/25/2013 Price (% of par) Spread (bps) CDX.NA.HY price / spread
108 106 104 102 100 98 96 94 92 90 88 86 84
Price
Spread
1000 900 800 700 600 500 400 300 200 100 0
Spreads for the CDX IG Index continued to increase in June finishing the month 12 bps wider at 89 bps. Similarly, prices on the CDX HY index dropped to the 103 context, over 2 points lower than a month ago, widening the spread to the 420 bps context.
83
12/4/2009 3/4/2010 6/4/2010 9/4/2010 12/4/2010 3/4/2011 6/4/2011 9/4/2011 12/4/2011 3/4/2012 6/4/2012 9/4/2012 12/4/2012 3/4/2013 6/4/2013
Spread (bps)
CDS MARKET SNAPSHOT
07/05/2013
THOMSON REUTERS COUNTERPARTY DEFAULT INDEX

COUNTERPARTY DEFAULT INDEX* 400 350 300 250 200 150 100 50 0 14-Dec-07 14-Feb-08 14-Apr-08 14-Jun-08 14-Aug-08 14-Oct-08 14-Dec-08 14-Feb-09 14-Apr-09 14-Jun-09 14-Aug-09 14-Oct-09 14-Dec-09 14-Feb-10 14-Apr-10 14-Jun-10 14-Aug-10 14-Oct-10 14-Dec-10 14-Feb-11 14-Apr-11 14-Jun-11 14-Aug-11 14-Oct-11 14-Dec-11 14-Feb-12 14-Apr-12 14-Jun-12 14-Aug-12 14-Oct-12 14-Dec-12 14-Feb-13 14-Apr-13 14-Jun-13 Avg. CDS Spread (bps)
Average bank CDS spread climbs from 117 bps at the end of May to a high point of 161 bps before retreating to the 145 bps context by month-end June.
*The index tracks counterparty risk as reflected by average spreads of 5 year CDS for the top CDS dealers that operate in the CDS market.
84

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THOMSON REUTERS LPC JULY 2013

Loan Market Monthly - July 2013