2014 Global High-Yield Bond Study

(1)

(2)

High-Yield Bond Study

Call Protection ... 5

Debt ... 10

Restricted Payments/Investments ... 51

Liens ... 94

Affiliate Transactions ... 101

Asset Sales ... 118

Merger Covenant... 129

Registration Rights ... 137

Covenant Suspension/ Fall Away ... 147

Collateral ... 164

(3)

Andrew Bettwy

Partner, Global Capital Markets and Finance

212.969.3180

Andrew Fung, CFA

Global Capital Markets Manager

212.969.5031

Maximillian P. Kirchner

Senior Counsel, Global Capital Markets

44.20.7539.0621

Roberto Bruno

Partner, Global Capital Markets

44.20.7539.0639

Justin Breen

Partner, Global Capital Markets and Finance

212.969.3055

Philippa M. Bond

Partner, Global Capital Markets

310.284.5607

Los Angeles

Frank J. Lopez

Co-Head, Global Capital Markets

212.969.3492

(4)

High-Yield Issuance in 2013

• Issuances of high-yield bonds hit new highs in

2013. Driven by investors’ demand for yield and

appetite for risk, deal count and deal value rose

to 808 and $376 billion, respectively, from 769

and $365 billion in 2012.

• Issuers took advantage of low interest rates, as

nearly half of deal value (43%) was used for

refinancing.

• The U.S. dominated geographical activity, accounting

for nearly 80% of both deal count and deal value. EMEA was a distant second at 12% of deal

count and 5% of deal value.

• The most active industries were manufacturing and communications, which combined for 34% of

deal count and 40% of deal value. In terms of ratings, BB rated deals led the way with 34% of deal

count and 45% of deal value.

543 $253 769 $365 808 $376 0 300 600 900

Deal count Deal value (billions)

HIGH-YIELD ISSUANCE 2011-2013

(5)

Methodology

General

• Reviewed 939 high-yield deals closed globally from 2011 – 2013

• Data broken down by geography, deal size, industry, rating and whether sponsor-backed

• Outliers that were three or more standard deviations away from the mean for any given data set were excluded from our calculations • In circumstances where less than 1% of reviewed transactions contained a specific term, such term was excluded from our calculations • Deals in the sample population with only a pledge of stock are considered to be secured deals for purposes of this study

• Deals reviewed also include high-yield rated bonds with investment grade or hybrid covenant packages. These deals have been excluded for purposes of covenant analysis. Allocation

• In our geographic analysis, Canada is included in the U.S. data, Australia is included in the Asia data, and issuers operating in the Caribbean are included in the Latin America data.

• In our industry breakdown, deals by issuers in the sample population are categorized as follows: - issuers in the real estate industry are included in our Hospitality/Gaming category - issuers in the power and mining industries are included in our Industrials category - service providers to the oil & gas industry are included in our Oil & Gas category Financial Metrics

• EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) and total assets calculations were based on of the applicable issuer’s trailing four quarter (or LTM, if applicable) data disclosed in the relevant marketing materials

• References in this study to EBITDA include "Adjusted EBITDA" when the relevant marketing materials contained such presentations and “Pro Forma EBITDA/Adjusted EBITDA” when such metrics were presented

Ratings

• All ratings categories are based on credit ratings by Standard & Poor’s • Calculations based solely on rating exclude deals that were not rated

• The rating categories do not distinguish “+” or “–” signs within a ratings category Definitions

(6)

Categories of Analysis

• Geography:

-

U.S./Canada

-

Europe, Middle-East and Africa (EMEA)

-

Asia

-

Latin America

• Size of Deal:

-

Small: 0 - $200 million

-

Medium: $201 - $499 million

-

Large: $500 million+

• Industry:

-

Consumer

-

Financial Services

-

Healthcare

-

Hospitality/Gaming

-

Industrials

-

Oil & Gas

-

Technology, Media and Telecommunications (TMT)

• Ratings

-

BB

(7)

(8)

% of Deals with 103% Redemption

• 103% Redemption

: Ability to call 10% of bonds per year at 103% during non-call period

Global

0% 5% 10% 15% 20% 25%

8%

92%

Global 2013

(9)

% of Deals with 103% Redemption

Geographies

0% 5% 10% 15% 20% 25%

US EMEA Asia Latin America

Deal Size

0% 5% 10% 15% 20% 25%

Small Medium Large

(10)

---% of Deals with 103---% Redemption

0% 5% 10% 15% 20% 25%

Consumer Financial Services Healthcare Hospitality/Gaming Industrials Oil & Gas TMT

---Industry

(11)

---% of Deals with 103---% Redemption

Ratings

0% 5% 10% 15% 20% 25%

Sponsor

0% 5% 10% 15% 20% 25% BB B CCC

(12)

(13)

---Ratio Debt

Global

0% 25% 50% 75% 100% 2011 2012 2013

79%

15%

6%

Global 2013

(14)

50% 75% 100%

Geographic Breakdown

US

0% 25% 50% 75% 100% 2011 2012 2013

FCCR

Leverage

Both

EMEA

0% 25% 50% 75% 100% 2011 2012 2013

Asia

Latin America

50% 75% 100%

(15)

Deal Size Breakdown

Small

0% 25% 50% 75% 100% 2011 2012 2013

Medium

0% 25% 50% 75% 100% 2011 2012 2013

Large

0% 25% 50% 75% 100% 2011 2012 2013

(16)

Industry Breakdown

Consumer

0% 25% 50% 75% 100% 2011 2012 2013

Hospitality / Gaming

0% 25% 50% 75% 100% 2011 2012 2013

Industrials

0% 25% 50% 75% 100% 2011 2012 2013

Oil & Gas

0% 25% 50% 75% 100% 2011 2012 2013

TMT

0% 25% 50% 75% 100% 2011 2012 2013

Financial Services

0% 25% 50% 75% 100% 2011 2012 2013

Healthcare

0% 25% 50% 75% 100% 2011 2012 2013

(17)

Ratings Breakdown

BB

0% 25% 50% 75% 100% 2011 2012 2013

B

0% 25% 50% 75% 100% 2011 2012 2013

CCC

0% 25% 50% 75% 100% 2011 2012 2013

(18)

Ratio Debt

Sponsor

0% 25% 50% 75% 100% 2011 2012 2013

84%

11%

5%

Sponsor 2013

(19)

% of Deals with FCCR of 2.0x vs. FCCR of Greater than 2.0x

Global

0% 25% 50% 75% 100% 2011 2012 2013

78%

22%

Global 2013

(20)

50% 75% 100%

% of Deals with FCCR of 2.0x vs. FCCR of Greater than 2.0x

US

0% 25% 50% 75% 100% 2011 2012 2013

FCCR of 2.0x

FCCR of > 2.0x

EMEA

0% 25% 50% 75% 100% 2011 2012 2013

Asia

Latin America

50% 75% 100%

(21)

% of Deals with FCCR of 2.0x vs. FCCR of Greater than 2.0x

Small

0% 25% 50% 75% 100% 2011 2012 2013

Medium

0% 25% 50% 75% 100% 2011 2012 2013

Large

0% 25% 50% 75% 100% 2011 2012 2013

(22)

% of Deals with FCCR of 2.0x vs. FCCR of Greater than 2.0x

Consumer

0% 25% 50% 75% 100% 2011 2012 2013

Hospitality / Gaming

0% 25% 50% 75% 100% 2011 2012 2013

Industrials

0% 25% 50% 75% 100% 2011 2012 2013

Oil & Gas

0% 25% 50% 75% 100% 2011 2012 2013

TMT

0% 25% 50% 75% 100% 2011 2012 2013

Financial Services

0% 25% 50% 75% 100% 2011 2012 2013

Healthcare

0% 25% 50% 75% 100% 2011 2012 2013

(23)

% of Deals with FCCR of 2.0x vs. FCCR of Greater than 2.0x

BB

0% 25% 50% 75% 100% 2011 2012 2013

B

0% 25% 50% 75% 100% 2011 2012 2013

CCC

0% 25% 50% 75% 100% 2011 2012 2013

(24)

% of Deals with FCCR of 2.0x vs. FCCR of Greater than 2.0x

Sponsor

0% 25% 50% 75% 100% 2011 2012 2013

81%

19%

Sponsor 2013

(25)

Global Analysis

% of EBITDA

% of Assets

0% 50% 100% 150% 200% 250% 300% 350% 400% 450% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

(26)

Geographic Breakdown

% of EBITDA

% of Assets

0% 50% 100% 150% 200% 250% 300% 350% 400% 450%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

(27)

Deal Size Breakdown

% of EBITDA

% of Assets

0% 50% 100% 150% 200% 250% 300% 350% 400% 450%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

(28)

Industry Breakdown

% of EBITDA

% of Assets

0% 50% 100% 150% 200% 250% 300% 350% 400% 450% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

(29)

Ratings Breakdown

% of EBITDA

% of Assets

0% 50% 100% 150% 200% 250% 300% 350% 400% 450% BB B CCC 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% BB B CCC

(30)

Sponsor Breakdown

% of EBITDA

% of Assets

0% 50% 100% 150% 200% 250% 300% 350% 400% 450% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

(31)

% of Deals with JV Debt Basket

Global

0% 5% 10% 15% 20% 25% 30%

13%

87%

Global 2013

(32)

% of Deals with JV Debt Basket

Geographies

0% 5% 10% 15% 20% 25% 30%

Deal Size

0% 5% 10% 15% 20% 25% 30%

(33)

---% of Deals with JV Debt Basket

0% 5% 10% 15% 20% 25% 30%

Industry

(34)

---% of Deals with JV Debt Basket

Ratings

0% 5% 10% 15% 20% 25% 30%

Sponsor

0% 5% 10% 15% 20% 25% 30% BB B CCC

(35)

Global Analysis

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35% 0% 1% 2% 3% 4%

(36)

Geographic Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35%

0% 1% 2% 3% 4%

(37)

---Deal Size Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35%

0% 1% 2% 3% 4%

(38)

Industry Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35% 0% 1% 2% 3% 4% ---- ---- ---- ---- ---- ----

(39)

----Ratings Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35% BB B CCC 0% 1% 2% 3% 4% BB B CCC

(40)

Sponsor Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35% Sponsor 0% 1% 2% 3% 4% Sponsor

(41)

Global Analysis

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35% 0% 1% 2% 3% 4% 5% 6% 7% 8%

(42)

Geographic Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35%

0% 1% 2% 3% 4% 5% 6% 7% 8%

(43)

Deal Size Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35%

0% 1% 2% 3% 4% 5% 6% 7% 8%

(44)

Industry Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35% 0% 1% 2% 3% 4% 5% 6% 7% 8%

(45)

Ratings Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35% BB B CCC 0% 1% 2% 3% 4% 5% 6% 7% 8% BB B CCC

(46)

Sponsor Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35% 0% 1% 2% 3% 4% 5% 6% 7% 8%

(47)

Global Analysis

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 0% 1% 2% 3% 4% 5%

(48)

Geographic Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

0% 1% 2% 3% 4% 5%

(49)

Deal Size Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

0% 1% 2% 3% 4% 5%

(50)

Industry Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 0% 1% 2% 3% 4% 5%

(51)

Ratings Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% BB B CCC 0% 1% 2% 3% 4% 5% BB B CCC

(52)

Sponsor Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 0% 1% 2% 3% 4% 5%

(53)

(54)

% of Deals with Net Income-Based vs. Cash Flow-Based Build-Up

Global

0% 25% 50% 75% 100% 2011 2012 2013

85%

15%

Global 2013

(55)

50% 75% 100%

% of Deals with Net Income-Based vs. Cash Flow-Based Build-Up

US

0% 25% 50% 75% 100% 2011 2012 2013

Net Income-Based

Cash Flow-Based

EMEA

0% 25% 50% 75% 100% 2011 2012 2013

Asia

Latin America

50% 75% 100%

(56)

% of Deals with Net Income-Based vs. Cash Flow-Based Build-Up

Small

0% 25% 50% 75% 100% 2011 2012 2013

Medium

0% 25% 50% 75% 100% 2011 2012 2013

Large

0% 25% 50% 75% 100% 2011 2012 2013

(57)

% of Deals with Net Income-Based vs. Cash Flow-Based Build-Up

Consumer

0% 25% 50% 75% 100% 2011 2012 2013

Hospitality / Gaming

0% 25% 50% 75% 100% 2011 2012 2013

Industrials

0% 25% 50% 75% 100% 2011 2012 2013

Oil & Gas

0% 25% 50% 75% 100% 2011 2012 2013

TMT

0% 25% 50% 75% 100% 2011 2012 2013

Financial Services

0% 25% 50% 75% 100% 2011 2012 2013

Healthcare

0% 25% 50% 75% 100% 2011 2012 2013

(58)

% of Deals with Net Income-Based vs. Cash Flow-Based Build-Up

BB

0% 25% 50% 75% 100% 2011 2012 2013

B

0% 25% 50% 75% 100% 2011 2012 2013

CCC

0% 25% 50% 75% 100% 2011 2012 2013

(59)

% of Deals with Net Income-Based vs. Cash Flow-Based Build-Up

Sponsor

0% 25% 50% 75% 100% 2011 2012 2013

93%

7%

Sponsor 2013

(60)

% of Deals with Basket

Global

0% 25% 50% 75% 100%

44%

56%

Global 2013

(61)

% of Deals with Basket

Geographies

0% 25% 50% 75% 100%

Deal Size

0% 25% 50% 75% 100%

(62)

---% of Deals with Basket

0% 25% 50% 75% 100%

Industry

(63)

---% of Deals with Basket

Ratings

0% 25% 50% 75% 100%

Sponsor

0% 25% 50% 75% 100% BB B CCC

(64)

% of Deals with Basket

Global

0% 25% 50% 75% 100%

42%

58%

Global 2013

(65)

% of Deals with Basket

Geographies

0% 25% 50% 75% 100%

Deal Size

0% 25% 50% 75% 100%

(66)

---% of Deals with Basket

0% 25% 50% 75% 100%

Industry

(67)

---% of Deals with Basket

Ratings

0% 25% 50% 75% 100%

Sponsor

0% 25% 50% 75% 100% BB B CCC

(68)

% of Deals with Basket

Global

0% 25% 50% 75% 100%

37%

63%

Global 2013

(69)

% of Deals with Basket

Geographies

0% 25% 50% 75% 100%

Deal Size

0% 25% 50% 75% 100%

(70)

---% of Deals with Basket

0% 25% 50% 75% 100%

Industry

(71)

---% of Deals with Basket

Ratings

0% 25% 50% 75% 100%

Sponsor

0% 25% 50% 75% 100% BB B CCC

(72)

% of Deals with Basket

Global

0% 25% 50% 75% 100%

92%

8%

Global 2013

(73)

% of Deals with Basket

Geographies

0% 25% 50% 75% 100%

Deal Size

0% 25% 50% 75% 100%

(74)

% of Deals with Basket

0% 25% 50% 75% 100%

(75)

% of Deals with Basket

Ratings

0% 25% 50% 75% 100%

Sponsor

0% 25% 50% 75% 100% BB B CCC

(76)

% of Deals with Basket

Global

0% 25% 50% 75% 100%

54%

46%

Global 2013

(77)

% of Deals with Basket

Geographies

0% 25% 50% 75% 100%

Deal Size

0% 25% 50% 75% 100%

(78)

% of Deals with Basket

0% 25% 50% 75% 100%

(79)

% of Deals with Basket

Ratings

0% 25% 50% 75% 100%

Sponsor

0% 25% 50% 75% 100% BB B CCC

(80)

Global Analysis

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 0% 1% 2% 3% 4% 5%

(81)

Geographic Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

0% 1% 2% 3% 4% 5%

(82)

---Deal Size Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

0% 1% 2% 3% 4% 5%

(83)

Industry Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 0% 1% 2% 3% 4% 5%

(84)

----Ratings Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% BB B CCC 0% 1% 2% 3% 4% 5% BB B CCC

(85)

Sponsor Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 0% 1% 2% 3% 4% 5%

(86)

% of EBITDA

Global

0% 5% 10% 15% 20% 25% 30% 35%

Geographies

0% 5% 10% 15% 20% 25% 30% 35%

(87)

% of EBITDA

Deal Size

0% 5% 10% 15% 20% 25% 30% 35%

Industries

0% 5% 10% 15% 20% 25% 30% 35%

(88)

% of EBITDA

Ratings

0% 5% 10% 15% 20% 25% 30% 35% BB B CCC

Sponsor

0% 5% 10% 15% 20% 25% 30% 35%

(89)

Global Analysis

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 0% 1% 2% 3% 4% 5%

(90)

Geographic Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

0% 1% 2% 3% 4% 5%

(91)

Deal Size Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

0% 1% 2% 3% 4% 5%

(92)

Industry Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35% 0% 1% 2% 3% 4% 5%

(93)

Ratings Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% BB B CCC 0% 1% 2% 3% 4% 5% BB B CCC

(94)

Sponsor Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 0% 1% 2% 3% 4% 5%

(95)

(96)

% of Deals with Grower

Global

0% 25% 50% 75% 100%

44%

56%

Global 2013

(97)

% of Deals with Grower

Geographies

0% 25% 50% 75% 100%

Deal Size

0% 25% 50% 75% 100%

(98)

---% of Deals with Grower

0% 25% 50% 75% 100%

(99)

% of Deals with Grower

Ratings

0% 25% 50% 75% 100%

Sponsor

0% 25% 50% 75% 100% BB B CCC

(100)

% of Total Assets

Global

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

Geographies

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

(101)

% of Total Assets

Deal Size

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

Industries

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

(102)

% of Total Assets

Ratings

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% BB B CCC

Sponsor

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

(103)

(104)

% of Deals with Fairness Opinion Requirements

Global

0% 25% 50% 75% 100%

56%

44%

Global 2013

(105)

% of Deals with Fairness Opinion Requirements

Geographies

0% 25% 50% 75% 100%

Deal Size

0% 25% 50% 75% 100%

(106)

% of Deals with Fairness Opinion Requirements

0% 25% 50% 75% 100%

(107)

% of Deals with Fairness Opinion Requirements

Ratings

0% 25% 50% 75% 100%

Sponsor

0% 25% 50% 75% 100% BB B CCC

(108)

Global Analysis

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 0% 1% 2% 3% 4%

(109)

Geographic Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30%

0% 1% 2% 3% 4%

(110)

Deal Size Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30%

0% 1% 2% 3% 4%

(111)

Industry Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 0% 1% 2% 3% 4%

(112)

Ratings Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% BB B CCC 0% 1% 2% 3% 4% BB B CCC

(113)

Sponsor Breakdown

% of EBITDA

% of Assets

0% 5% 10% 15% 20% 25% 30% 0% 1% 2% 3% 4%

(114)

Global Analysis

% of EBITDA

% of Assets

0% 2% 4% 6% 8% 10% 12% 0% 1% 2% 3% 4%

(115)

Geographic Breakdown

% of EBITDA

% of Assets

0% 2% 4% 6% 8% 10% 12%

0% 1% 2% 3% 4%

(116)

Deal Size Breakdown

% of EBITDA

% of Assets

0% 2% 4% 6% 8% 10% 12%

0% 1% 2% 3% 4%

(117)

Industry Breakdown

% of EBITDA

% of Assets

0% 2% 4% 6% 8% 10% 12% 0% 1% 2% 3% 4%

(118)

Ratings Breakdown

% of EBITDA

% of Assets

0% 2% 4% 6% 8% 10% 12% BB B CCC 0% 1% 2% 3% 4% BB B CCC

(119)

Sponsor Breakdown

% of EBITDA

% of Assets

0% 2% 4% 6% 8% 10% 12% 0% 1% 2% 3% 4%

(120)

(121)

Reinvestment Period*

Global

0% 25% 50% 75% 100% 2011 2012 2013

1%

87%

12%

Global 2013

(122)

50% 75% 100%

Geographic Breakdown

US

0% 25% 50% 75% 100% 2011 2012 2013

< 360 Days

360 – 365 Days

> 360 Days

EMEA

0% 25% 50% 75% 100% 2011 2012 2013

Asia

Latin America

50% 75% 100%

(123)

Deal Size Breakdown

Small

0% 25% 50% 75% 100% 2011 2012 2013

Medium

0% 25% 50% 75% 100% 2011 2012 2013

Large

0% 25% 50% 75% 100% 2011 2012 2013

(124)

Industry Breakdown

Consumer

0% 25% 50% 75% 100% 2011 2012 2013

Hospitality / Gaming

0% 25% 50% 75% 100% 2011 2012 2013

Industrials

0% 25% 50% 75% 100% 2011 2012 2013

Oil & Gas

0% 25% 50% 75% 100% 2011 2012 2013

TMT

0% 25% 50% 75% 100% 2011 2012 2013

Financial Services

0% 25% 50% 75% 100% 2011 2012 2013

Healthcare

0% 25% 50% 75% 100% 2011 2012 2013

(125)

Ratings Breakdown

BB

0% 25% 50% 75% 100% 2011 2012 2013

B

0% 25% 50% 75% 100% 2011 2012 2013

CCC

0% 25% 50% 75% 100% 2011 2012 2013

(126)

Reinvestment Period

Sponsor

0% 25% 50% 75% 100% 2011 2012 2013

3%

70%

27%

Sponsor 2013

(127)

% of Deals with Carveout

Global

0% 25% 50% 75% 100%

62%

38%

Global 2013

(128)

% of Deals with Carveout

Geographies

0% 25% 50% 75% 100%

Deal Size

0% 25% 50% 75% 100%

(129)

% of Deals with Carveout

0% 25% 50% 75% 100%

(130)

% of Deals with Carveout

Ratings

0% 25% 50% 75% 100%

Sponsor

0% 25% 50% 75% 100% BB B CCC

(131)

(132)

Ratio Debt Condition

• Condition to merger requiring that: (1) applicable pro forma ratio debt capacity test is met, (2) the applicable ratio

is no worse on a pro forma basis or (3) pro forma improvement of the applicable ratio

25%

57%

18%

Global 2013

Global

0% 25% 50% 75% 100% 2011 2012 2013

(133)

50% 75% 100%

Geographic Breakdown

US

0% 25% 50% 75% 100%

2011 2012 2013

Must Meet Ratio Test

Ratio No Worse

Ratio Must Improve

EMEA

0% 25% 50% 75% 100% 2011 2012 2013

Asia

Latin America

50% 75% 100%

(134)

Deal Size Breakdown

Small

0% 25% 50% 75% 100% 2011 2012 2013

Medium

0% 25% 50% 75% 100% 2011 2012 2013

Large

0% 25% 50% 75% 100% 2011 2012 2013

(135)

Industry Breakdown

Consumer

0% 25% 50% 75% 100% 2011 2012 2013

Hospitality / Gaming

0% 25% 50% 75% 100% 2011 2012 2013

Industrials

0% 25% 50% 75% 100% 2011 2012 2013

Oil & Gas

0% 25% 50% 75% 100% 2011 2012 2013

TMT

0% 25% 50% 75% 100% 2011 2012 2013

Financial Services

0% 25% 50% 75% 100% 2011 2012 2013

Healthcare

0% 25% 50% 75% 100% 2011 2012 2013

(136)

Ratings Breakdown

BB

0% 25% 50% 75% 100% 2011 2012 2013

B

0% 25% 50% 75% 100% 2011 2012 2013

CCC

0% 25% 50% 75% 100% 2011 2012 2013

(137)

Ratio Debt Condition

Sponsor

0% 25% 50% 75% 100% 2011 2012 2013

14%

69%

17%

Sponsor 2013

(138)

(139)

Registration Rights

Global

0% 25% 50% 75% 100% 2011 2012 2013

56%

8%

36%

Global 2013

(140)

50% 75% 100%

Geographic Breakdown

US

0% 25% 50% 75% 100% 2011 2012 2013

Private-for-Life

Registered

Registration Rights

EMEA

0% 25% 50% 75% 100% 2011 2012 2013

Asia

Latin America

50% 75% 100%

(141)

Global Deal Size Breakdown

Small

0% 25% 50% 75% 100% 2011 2012 2013

Medium

0% 25% 50% 75% 100% 2011 2012 2013

Large

0% 25% 50% 75% 100% 2011 2012 2013

(142)

U.S. Deal Size Breakdown

Small

0% 25% 50% 75% 100% 2011 2012 2013

Medium

0% 25% 50% 75% 100% 2011 2012 2013

Large

0% 25% 50% 75% 100% 2011 2012 2013

(143)

Global Industry Breakdown

Consumer

0% 25% 50% 75% 100% 2011 2012 2013

Hospitality / Gaming

0% 25% 50% 75% 100% 2011 2012 2013

Industrials

0% 25% 50% 75% 100% 2011 2012 2013

Oil & Gas

0% 25% 50% 75% 100% 2011 2012 2013

TMT

0% 25% 50% 75% 100% 2011 2012 2013

Financial Services

0% 25% 50% 75% 100% 2011 2012 2013

Healthcare

0% 25% 50% 75% 100% 2011 2012 2013

(144)

U.S. Industry Breakdown

Consumer

0% 25% 50% 75% 100% 2011 2012 2013

Hospitality / Gaming

0% 25% 50% 75% 100% 2011 2012 2013

Industrials

0% 25% 50% 75% 100% 2011 2012 2013

Oil & Gas

0% 25% 50% 75% 100% 2011 2012 2013

TMT

0% 25% 50% 75% 100% 2011 2012 2013

Financial Services

0% 25% 50% 75% 100% 2011 2012 2013

Healthcare

0% 25% 50% 75% 100% 2011 2012 2013

(145)

Global Ratings Breakdown

BB

0% 25% 50% 75% 100% 2011 2012 2013

B

0% 25% 50% 75% 100% 2011 2012 2013

CCC

0% 25% 50% 75% 100% 2011 2012 2013

(146)

U.S. Ratings Breakdown

BB

0% 25% 50% 75% 100% 2011 2012 2013

B

0% 25% 50% 75% 100% 2011 2012 2013

CCC

0% 25% 50% 75% 100% 2011 2012 2013

(147)

Global Sponsor Breakdown

Sponsor

0% 25% 50% 75% 100% 2011 2012 2013

72%

4%

24%

Sponsor 2013

(148)

U.S. Sponsor Breakdown

Sponsor

0% 25% 50% 75% 100% 2011 2012 2013

65%

_6%

29%

Sponsor 2013

(149)

(150)

% of Deals with Suspension vs. Fall Away vs. Neither

64%

13%

23%

(151)

% of Deals with Suspension vs. Fall Away vs. Neither

Geographies 2013

0% 25% 50% 75% 100%

Deal Size 2013

0% 25% 50% 75% 100%

(152)

% of Deals with Suspension vs. Fall Away vs. Neither

0% 25% 50% 75% 100%

(153)

% of Deals with Suspension vs. Fall Away vs. Neither

Ratings 2013

Sponsor 2013

0% 25% 50% 75% 100% BB B CCC

74%

5%

20%

(154)

% of Deals with Suspension / Fall Away

Global

0% 25% 50% 75% 100%

77%

23%

Global 2013

(155)

% of Deals with Suspension / Fall Away

Geographies

0% 25% 50% 75% 100%

Deal Size

0% 25% 50% 75% 100%

(156)

% of Deals with Suspension / Fall Away

0% 25% 50% 75% 100%

(157)

% of Deals with Suspension / Fall Away

Ratings

0% 25% 50% 75% 100%

Sponsor

0% 25% 50% 75% 100% BB B CCC

(158)

% of Deals Requiring Investment Grade Ratings from Both Agencies

Global

0% 25% 50% 75% 100%

94%

6%

Global 2013

(159)

% of Deals Requiring Investment Grade Ratings from Both Agencies

Geographies

0% 25% 50% 75% 100%

Deal Size

0% 25% 50% 75% 100%

(160)

% of Deals Requiring Investment Grade Ratings from Both Agencies

0% 25% 50% 75% 100%

(161)

% of Deals Requiring Investment Grade Ratings from Both Agencies

Ratings

0% 25% 50% 75% 100%

Sponsor

0% 25% 50% 75% 100% BB B CCC

(162)

% of Deals with Change of Control Suspended

Global

0% 5% 10% 15% 20% 25%

8%

92%

Global 2013

(163)

0% 5% 10% 15% 20% 25%

---% of Deals with Change of Control Suspended

Geographies

Deal Size

0% 5% 10% 15% 20% 25%

(164)

---0% 5% 10% 15% 20% 25%

---% of Deals with Change of Control Suspended

Industry

(165)

---% of Deals with Change of Control Suspended

Ratings

0% 5% 10% 15% 20% 25%

Sponsor

0% 5% 10% 15% 20% 25% BB B CCC

(166)

(167)

Priority of Collateral Package

Global

0% 25% 50% 75% 100% 2011 2012 2013

54%

25%

21%

Global 2013

(168)

50% 75% 100%

Geographic Breakdown

US

0% 25% 50% 75% 100% 2011 2012 2013

First Lien

Second Lien

Split Lien

EMEA

0% 25% 50% 75% 100% 2011 2012 2013

Asia

Latin America

50% 75% 100%

(169)

Deal Size Breakdown

Small

0% 25% 50% 75% 100% 2011 2012 2013

Medium

0% 25% 50% 75% 100% 2011 2012 2013

Large

0% 25% 50% 75% 100% 2011 2012 2013

(170)

Industry Breakdown

Consumer

0% 25% 50% 75% 100% 2011 2012 2013

Hospitality / Gaming

0% 25% 50% 75% 100% 2011 2012 2013

Industrials

0% 25% 50% 75% 100% 2011 2012 2013

Oil & Gas

0% 25% 50% 75% 100% 2011 2012 2013

TMT

0% 25% 50% 75% 100% 2011 2012 2013

Financial Services

0% 25% 50% 75% 100% 2011 2012 2013

Healthcare

0% 25% 50% 75% 100% 2011 2012 2013

(171)

Ratings Breakdown

BB

0% 25% 50% 75% 100% 2011 2012 2013

B

0% 25% 50% 75% 100% 2011 2012 2013

CCC

0% 25% 50% 75% 100% 2011 2012 2013

(172)

Priority of Collateral Package

Sponsor

0% 25% 50% 75% 100% 2011 2012 2013

60%

19%

21%

Sponsor 2013

(173)

Substantially All Collateral

Global

0% 25% 50% 75% 100% 2011 2012 2013

3%

49%

14%

24%

10%

Global 2013

(174)

50% 75% 100%

Substantially All Collateral

Geographic Breakdown

US

0% 25% 50% 75% 100% 2011 2012 2013

Majority

66.67%

75%

80%

90 - 95%

100%

EMEA

0% 25% 50% 75% 100% 2011 2012 2013

Asia

Latin America

50% 75% 100%

(175)

Substantially All Collateral

Deal Size Breakdown

Small

0% 25% 50% 75% 100% 2011 2012 2013

Medium

0% 25% 50% 75% 100% 2011 2012 2013

Large

0% 25% 50% 75% 100% 2011 2012 2013

(176)

Substantially All Collateral

Industry Breakdown

Consumer

0% 25% 50% 75% 100% 2011 2012 2013

Hospitality / Gaming

0% 25% 50% 75% 100% 2011 2012 2013

Industrials

0% 25% 50% 75% 100% 2011 2012 2013

Oil & Gas

0% 25% 50% 75% 100% 2011 2012 2013

TMT

0% 25% 50% 75% 100% 2011 2012 2013

Financial Services

0% 25% 50% 75% 100% 2011 2012 2013

Healthcare

0% 25% 50% 75% 100% 2011 2012 2013

(177)

Substantially All Collateral

Ratings Breakdown

BB

0% 25% 50% 75% 100% 2011 2012 2013

B

0% 25% 50% 75% 100% 2011 2012 2013

CCC

0% 25% 50% 75% 100% 2011 2012 2013

(178)

Substantially All Collateral

Sponsor

0% 25% 50% 75% 100% 2011 2012 2013

5%

48%

10%

32%

5%

Sponsor 2013

(179)

(180)

% of Deals with Greater than 25% of Holders Required to

Accelerate

Global

0% 10% 20% 30%

90%

10%

Global 2013

(181)

% of Deals with Greater than 25% of Holders Required to

Accelerate

Geographies

0% 10% 20% 30%

Deal Size

0% 10% 20% 30%

(182)

---% of Deals with Greater than 25---% of Holders Required to

Accelerate

0% 10% 20% 30%

Industry

(183)

---% of Deals with Greater than 25---% of Holders Required to

Accelerate

Ratings

0% 10% 20% 30%

Sponsor

0% 10% 20% 30% BB B CCC

(184)

---% of Total Assets

Global

0% 1% 2% 3% 4%

Geographies

0% 1% 2% 3% 4%

(185)

% of Total Assets

Deal Size

0% 1% 2% 3% 4%

Industries

0% 1% 2% 3% 4%

(186)

% of Total Assets

Ratings

0% 1% 2% 3% 4% BB B CCC

Sponsor

0% 1% 2% 3% 4%

2014 Global High-Yield Bond Study

High-Yield Bond Study

Call Protection ... 5

Debt ... 10

Restricted Payments/Investments ... 51

Liens ... 94

Affiliate Transactions ... 101

Asset Sales ... 118

Merger Covenant... 129

Registration Rights ... 137

Covenant Suspension/ Fall Away ... 147

Collateral ... 164

Andrew Bettwy

Partner, Global Capital Markets and Finance

212.969.3180

[email protected]

Andrew Fung, CFA

Global Capital Markets Manager

212.969.5031

[email protected]

Maximillian P. Kirchner

Senior Counsel, Global Capital Markets

44.20.7539.0621

[email protected]

Roberto Bruno

Partner, Global Capital Markets

44.20.7539.0639

[email protected]

Justin Breen

Partner, Global Capital Markets and Finance

212.969.3055

[email protected]

Philippa M. Bond

Partner, Global Capital Markets

310.284.5607

[email protected]

Los Angeles

Frank J. Lopez

Co-Head, Global Capital Markets

212.969.3492

High-Yield Issuance in 2013

•

Issuances of high-yield bonds hit new highs in

2013. Driven by investors’ demand for yield and

appetite for risk, deal count and deal value rose

to 808 and $376 billion, respectively, from 769

and $365 billion in 2012.

•

Issuers took advantage of low interest rates, as

nearly half of deal value (43%) was used for

refinancing.

•

The U.S. dominated geographical activity, accounting

for nearly 80% of both deal count and deal value. EMEA was a distant second at 12% of deal

count and 5% of deal value.

•

The most active industries were manufacturing and communications, which combined for 34% of

deal count and 40% of deal value. In terms of ratings, BB rated deals led the way with 34% of deal

count and 45% of deal value.

Methodology

Categories of Analysis

•

Geography:

-

U.S./Canada

-

Europe, Middle-East and Africa (EMEA)

-

Asia

-

Latin America

•

Size of Deal:

-

Small: 0 - $200 million

-

Medium: $201 - $499 million

-

Large: $500 million+

•