Leveraged Finance Annual Manual PDF

The Annual Manual
U.S. Leveraged Finance Primer
JUNE 2016
Executive Summary
This is the fifth edition of our U.S. leveraged finance primer. It reflects Fitch Ratings’ coordinated
effort across several U.S. rating groups, including Corporates, Financial Institutions, Structured
Credit, and Fund and Asset Managers.
The Annual Manual seeks to quantify and summarize the major factors driving risk and
opportunity for the various players in the space, including corporate bond and loan investors,
CLO investors, corporate debt issuers, private equity sponsors and regulators.
This piece emphasizes the continuous evolution of the market. New players are entering and
transaction characteristics are changing as the landscape adapts to the needs of different
capital providers and regulatory requirements. For context, we provide a historical perspective
on structures, volume and performance for different instruments and segments of the market.
If you have suggestions for further content enhancements, please do not hesitate to contact us.
Mike Simonton, CFA Michael Paladino, CFA

Head of U.S. Corporate Ratings Head of U.S. Leveraged Finance
+1 312 368-3138 + 1 212 908-9113
mike.simonton@fitchratings.com michael.paladino@fitchratings.com
The Annual Manual (U.S. Leveraged Finance Primer)

June 6, 2016
Key Contacts
U.S. Leveraged Finance

Mike Simonton, CFA Michael Paladino, CFA
Head of U.S. Corporate Ratings Head of U.S. Leveraged Finance
+1 312 368-3138 + 1 212 908-9113
mike.simonton@fitchratings.com michael.paladino@fitchratings.com
Sharon Bonelli Eric Rosenthal Ronald Nirenberg

Senior Director Senior Director Director
+1 212 908-0581 + 1 212 908-0286 + 1 212 612-7747
sharon.bonelli@fitchratings.com eric.rosenthal@fitchratings.com ronald.nirenberg@fitchratings.com
Hugo Sancen Caitlin Blalock

Associate Director Associate Director
+1 312 368-2096 + 1 312 368-3154
hugo.sancen@fitchratings.com caitlin.blalock@fitchratings.com
U.S. Structured Credit

Kevin Kendra Derek Miller Alina Pak, CFA
Managing Director Managing Director Senior Director
+1 212 908-0760 + 1 312 368-2076 + 1 312 368-3184
kevin.kendra@fitchratings.com derek.miller@fitchratings.com alina.pak@fitchratings.com
Financial Institutions
Joo-Yung Lee Nathan Flanders Meghan Neenan, CFA
Managing Director Managing Director Senior Director
+1 212 908-0560 + 1 212 908-0827 + 1 212 908-9121
joo-yung.lee@fitchratings.com nathan.flanders@fitchratings.com meghan.neenan@fitchratings.com
Fund and Asset Manager Ratings

Alastair Sewell Russ Thomas
Senior Director Director
+44 20 3530-1147 + 1 312 368-3189
alastair.sewell@fitchratings.com russ.thomas@fitchratings.com
Business and Relationship Management

Jill Zelter Winnie Fong, CFA
Managing Director Senior Director
+1 212 908-0774 + 1 212 908-9139
jill.zelter@fitchratings.com winnie.fong@fitchratings.com

June 6, 2016

1
1
2
2
2
Leveraged Finance Market Statistical Comparison 3

4
4
Defining the Markets 4
Defining the Loan Markets 4
Market History 5
Leveraged Loan Market History 5
Loan Retail Funds — Assets Under Management Increased Significantly Since Credit Crisis 5
Annual CLO Issuance Reached Record High in 2014 5
Institutional Leveraged Loan Market Profile — 2015 6
[Credit 101] What Are the Key Characteristics of Leveraged Loans? 6
Seniority 6
Leveraged Capital Structure — Seniority 6
Security 7
Pricing 7
Loan Pricing Components 7
Covenants 7
Common Loan Covenants 7
Callability 8
[Credit 101] What Are the Different Types of Leveraged Loans? 8
Pro Rata Tranches 8
Pro Rata Leveraged Loan Issuance 8
Institutional Tranches 8
Institutional Leveraged Loan Issuance 9
Credit Facility Summary 9
9
10
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10
10
Background 10
Impact 11
LBO Leverage in Decline Since Release of Leveraged Loan Guidance 11
Focus on Exploration and Production (E&P) Companies 12
OCC Ratio Metrics and Thresholds 12
Continued on next page.

June 6, 2016

12
12
12
13
Background 13
Impact 13
What Is Chapter 11 Reform? 13
Background 13
Impact 13
Direct Lending 14
[Credit 101] What Is Direct Lending? 14
Direct Lending as an Alternative to Traditional Bank Lending 14
How Has Direct Lending Gained Traction? 14
Tightening Regulatory Environment 14
Record Fundraising 14
Why Does Direct Lending Continue to Grow? 15
Middle-Market Yield Premium Averages 115 bps 15
Private Equity and LBO Market 16
[Credit 101] What Is the U.S. Private Equity (PE) Market? 16
Private Equity Market 16
Characteristics of Private Equity Investments 16
How Does Fitch Ratings Analyze Private Equity Companies? 17
Fitch’s Private Equity Firm Credit Rating Considerations 17
[Credit 101] What Is an LBO? 17
Common LBO Structure 18
What Is the Trend in the LBO Market? 18
U.S. Private Equity Market History 18
Annual LBO Loan Issuance 18
Primary Factors Impacting LBO Volume 19
[Credit 101] What Are BDCs? 20
What Does the Regulatory Environment Look Like for BDCs? 20
How Have BDCs Performed Lately? 20
Operating Performance 20
Yields Versus Stock Performance 20
Shifting Capital Structures 21
Second Lien Loans/Debt Portfolio (Fair Value) 21
Energy and Metals/Mining Performance 21
21
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22
Covenant-Lite Composes 57% of Outstanding Volume in
22
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Loan Volume Soft 24
U.S. Second Lien Institutional Term Loan Volumes 25

June 6, 2016

26
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26
Bankruptcy Types 26
United States Flow Chart 27
Claim Types 27
U.S. Bankruptcy Code — Pre- and Post-Petition Claims 27
What Are the Historical Default Rates for Leveraged Loans? 28
2007–2015 28
U.S. Institutional Leveraged Loan Default Rate 28
U.S. Institutional Leveraged Loan Default Volume 28
Industry Defaults 28
U.S. Institutional Leveraged Loan Default Rate — Default Source 2007–2015 28
Default Rates by Industry — 2007–2015 Average 29
Top 10 Defaulting Sectors (2007–2015) by Volume and Number of Issuers 29
What Is the Current Default Environment for Leveraged Loans? 30
Overall Defaults 30
Institutional Leveraged Loan Default Profile — 2009 Versus Now 30
Energy, Metals/Mining Defaults 30
Energy and Metals/Mining Exposure Limited in Loans 30
Sector Fundamentals 30
Maturities 31
31
32
32
Debtor-in-Possession 32
U.S. Bankruptcy Code — Priority Rules 32
Absolute Priority 33
Enterprise Valuation 33
Creditor Negotiations 33
[Credit 101] What Is DIP Financing? 34
DIP Loan Summary 34
[Credit 101] How Does Fitch Estimate Recovery? 34
Recovery Ratings 34
Fundamental Drivers of Recovery Ratings (RR) 35
Recovery Ratings (RR) Scale 35
Bankruptcy Case Studies 36
Published Bankruptcy Case Study Reports 36
Midpoint EV/EBITDA Multiple for Companies Reorganized as Going Concern 36
Majority of Bankrupt Companies Reorganized as Going Concern 37
Bankruptcy Case Study — Station Casinos, Inc. et al 38
Station Casinos, Inc., et al. 38–40
Recovery Rating Backtesting 40
Forecast Delta Default +30-Day Issue Price Implied RR Versus Fitch RR Estimate 40
How Do Leveraged Loans Perform in Fitch’s Recovery Analyses? 40
Overall Distributions 40
Recovery Rating Distribution — First Lien Debt 2015 41
Capital Structure Influences 41
First Lien Loans and Bonds RR Distribution by First Lien Leverage Ratio 41
What Are the Historical Post-Default Prices for Leveraged Loans? 42
First Lien Institutional Leveraged Loan 30-Day Post-Default Prices 42
What Are the Historical Emergence Prices for Leveraged Loans? 42
First Lien Institutional Leveraged Loan Emergence Prices 42

June 6, 2016

43
43
CLO Life Stages 43
CLO Types 43
CLO Types and Characteristics (Post Credit Crisis) 43
[Credit 101] What Are the Mechanics of an Arbitrage CLO? 44
Arbitrage CLO Transaction 44
Arbitrage CLO Interest/Principal Waterfall 45
[Credit 101] Who Are CLO Market Participants? 46
CLO Managers 46
Top 25 CLO Managers by Assets Under Management 46
Investors 46
CLO Investor Base 46
CLO Holdings 47
Top 50 Holdings in U.S. CLO Portfolios 47
How Does Fitch Ratings Analyze CLOs? 48
CLO Rating Criteria 48
What Is the Level of Recent CLO Issuance? 48
Annual CLO Issuance 48
Defaulted Obligors and CLO Exposure 49
How Has the Commodity Cycle Downturn Affected CLOs? 49
Default Exposure 49
Distressed and Defaulted Issuers Exposure 49
Restructuring Dents Metrics 49
50
51
Leveraged Loan Issuance 51
Institutional Leveraged Loan Issuance 51
Pro Rata Leveraged Loan Issuance 51
Covenant-Lite Loan Issuance 52
Second Lien Loan Issuance 52
ABL Issuance 52
Middle-Market Loan Issuance 53
Middle-Market Institutional Loan Issuance 53
DIP Loan Issuance 53
Sponsored Versus Nonsponsored Covenant-Lite 54
Sponsored Versus Nonsponsored Middle-Market Loan Issuance 54
Covenant Versus Covenant-Lite Second Lien Issuance 54
Canadian Syndicated Loan Issuance 55
Latin American Loan Issuance 55
Latin American Loan Issuance by Country 55
Largest Leveraged Loan Deals — 2015 56
Largest Covenant-Lite Deals — 2015 56
Largest Second Lien Deals — 2015 57
Largest ABL Deals — 2015 57
Largest Middle-Market Deals — 2015 58
Largest DIP Loan Deals — 2015 58
Issuance by Industry 59
Leveraged Loan Issuance by Industry — 2015 59
Covenant-Lite Loan Issuance by Industry — 2015 59
Second Lien Loan Issuance by Industry — 2015 59
ABL Issuance by Industry — 2015 60
DIP Loan Issuance by Industry 60
Latin American Loan Issuance by Industry — 2015 60
Canadian Loan Issuance by Industry 61

June 6, 2016

62
Leveraged Loan Use of Proceeds 62
Leveraged Loan Use of Proceeds — General Corporate Purposes 62
Leveraged Loan Use of Proceeds — Refinancing 62
Leveraged Loan Use of Proceeds — M&A/LBO 63
Leveraged Loan Use of Proceeds — Dividends 63
Second Lien Issuance by Purpose 63
ABL Use of Proceeds 64
Middle-Market Loan Use of Proceeds 64
Latin American Loan Use of Proceeds 64
Pricing 65
Institutional Loan Pricing by Rating 65
Institutional Loan Yield Components 65
Pro Rata Loan Pricing by Rating 65
Covenant-Lite Loan Pricing 66
Second Lien Loan Pricing — First Lien Versus Second 66
ABL Pricing 66
Middle-Market Loan Pricing (Revolver/Term Loan) 67
Middle-Market Loan Yield Components 67
DIP Loan Pricing 67
Maturities 68
Leveraged Loan Maturity Schedule 68
Institutional Leveraged Loan Maturity Schedule by Industry 68
ABL Maturity Schedule 69
Middle-Market Loan Maturity Schedule 69
Average DIP Loan Tenor 69
Secondary Bids 70
Leveraged Loan Secondary Bids 70
Covenant-Lite Loan Secondary Bids 70
Second Lien Loan Secondary Bids 70
Middle-Market Loan Secondary Bids 71
Loan Trading Volumes 71
Retail Funds 72
Loan Retail Funds — Assets Under Management 72
Loan Retail Fund Flows 72
Monthly Loan Retail Fund Flows — 2015 72
Top 10 Largest Outflows/Inflows — 2015 73
Top 10 Largest Outflows/Inflows — All Time 73
Default Rates 74
U.S. Institutional Leveraged Loan Default Rate 74
U.S. Institutional Leveraged Loan Default Rate: BSL 74
U.S. Institutional Leveraged Loan Cumulative Default Rates by Vintage 74
Default Rates by Industry — 2007–2015 Average 75
Institutional Leveraged Loan Industry Default Rates 75
2015 U.S. Institutional Leveraged Loan Defaults 76
Post-Default Prices 77
Institutional Leveraged Loan 30-Day Post-Default Prices 77
Institutional Leveraged Loan 30-Day Post-Default Prices by Industry 77
30-Day Post-Default Prices and Distribution 78–80
Emergence Prices 81
Institutional Leveraged Loan Emergence Prices 81
Emergence Prices and Distribution 82–84
Private Equity and Leveraged Buyout 85
Private Equity Investments and Exits 85
Private Equity Investments by Industry 85
Median Transaction Multiples 85

June 6, 2016
Leveraged Loans (Continued)
Private Equity and Leveraged Buyout (Continued)
All Private Equity — Median Net IRRs by Vintage Year 86
Private Equity Dry Powder by Fund Type 86
Largest Private Equity Sponsors 87
Common Private Equity Fund Investors 87
Select Private Equity Transactions by Firm 87
Annual LBO Loan Issuance 89
Largest LBOs — 2015 89
Private Equity Purchase Price Multiples 90
Equity Contribution Percentage 90
Largest LBO Deals of All Time 91
Largest LBO Deals Post Credit Crisis 92
Median Holding Period 93
Exits by Deal Type 93
Median Corporate Acquisition Valuation/EBITDA Exit 93
Select Exits — 2015 94
Private Equity-Based IPO Volume 94
Select Private Equity-Backed IPOs 95
Middle-Market Private Equity Activity 96
Middle-Market Private Equity Deal Count by Industry 96
Share of Middle-Market Private Equity Activity 97
Middle-Market Exit by Type 97
Annual Fundraising Volumes 98
U.S. Private Equity Energy Fundraising 98
Average Fund Closing Time 98
Annual Canadian Private Equity Deal Flow 99
Deal Flow by Canadian Province 99
Percent of Canadian Private Equity Investment by Industry 99
Private Equity Exit Activity 100
Private Equity Exits by Type 100
Private Equity Fundraising 100
Collateralized Loan Obligations 101
Monthly CLO Issuance — 2015 101
CLO Size Distribution 101
Primary CLO AAA Spreads — 2015 101
Secondary CLO Liability Spreads 102
Top CLO Holdings by Industry — 2015 102
Covenant-Lite Loans in CLOs 102
U.S. CLO Loan Maturities 103
Post-2002 CLO Minimum OC Cushion 103
Percentage of CLOs Failing OC Test 103
Annual Middle-Market CLO Issuance 104
Middle-Market Secondary CLO Spreads 104
CLO Transactions — 2015 105–108
Precrisis Versus Post-Crisis Arbitrage CLO Terms 109
Arbitrage CLO Structural Protections 109
Middle Market Versus Broadly Syndicated CLO Comparison 110
Middle-Market CLO Deals — 2015 110

111
111
Defining the Markets 111
High-Yield Bond Types 111
High-Yield Bond Characteristics 111

June 6, 2016
High-Yield Bonds (Continued)
High-Yield Bond Basics (Continued)
High-Yield Bond Versus Leveraged Loan Comparison 112
Market History 112
112
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113
U.S. Second Lien Bond Issuance Volume 113
Evolution of Second Lien Bond Volume by Industry 114
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116
Overall Defaults 116
Energy, Metals/Mining Defaults 116
What Is a Distressed Debt Exchange? 116
Distressed Debt Exchanges with Subsequent Default Events: 2008–2016 117
Recovery 118
[Credit 101] What Is Recovery? 118
How Do High-Yield Bonds Perform in Fitch’s Recovery Analyses? 118
Recovery Rating Distribution — Senior Unsecured Debt 2015 118
What Are the Historical Post-Default Prices for High-Yield Bonds? 118
High-Yield Bond Data

Option-Adjusted Spread Comparison — Investment-Grade Versus High-Yield 119
Option-Adjusted Spreads by Rating 119
Option-Adjusted Spreads by Industry (Top/Bottom Six) — 2015 119
Monthly High-Yield Bond Issuance — 2015 120
Cumulative High-Yield Bond Returns — 2015 120
2015 Risk-Adjusted Returns 120
Annual High-Yield Bond Returns by Rating Category 121
Top 10 Largest Outflows/Inflows — 2015 121
Top 10 Largest Outflows/Inflows of All Time 121
Average Par Value of Defaults Per Issuer 122
Top 10 Largest High-Yield Defaults 2000–2015 122
Recovery Rates by Seniority 123–124
2015 U.S. High-Yield Bond Defaults 125–126
Appendix
Sector Outlooks 127–128

June 6, 2016

128
2015 Upgrades (IDR) 128
2015 Downgrades (IDR) 129
2015 Speculative-Grade Upgrades/Downgrades by Industry 129
Historical Speculative-Grade Upgrades/Downgrades 130
Historical Rising Stars and Fallen Angels 130
130
130
Facility Utilization at Bankruptcy 130
Cash Flow Revolving Facility Utilization 131
ABL Revolving Facility Utilization 131
Pre-Default Utilization Uptrend 131
Average Utilization Rate Trend 131
Revolver Recovery Rates 132
PIK Debt Recoveries in Bankruptcies 132–133
Companies Featured in Bankruptcy Case Study Reports 134–137
137
137
138
Corporate Rating Methodology 138
Rating Definition Summary 139
Parent and Subsidiary Rating Linkage 139
LCF Decision Matrix 140
LCF Flow Chart 141
Rating Subsidiary Debt without Stand-Alone Financial Information or a Parent Guarantee 142
Recovery Rating Methodology 143
Recovery Analysis Methodology 143
Recovery Ratings (RR) Scale 143
B+ and Below IDR/Debt Instrument Mapping 144
Typical BB Rating Category Recovery Rating Assignment and Notching 144
Enterprise Value — Fitch-Employed Multiple for Recovery Analysis 144
ABL Recovery Analysis 145
ABL Recovery Analysis Methodology 145
Pension Recovery Analysis 146
Fitch’s Recovery Considerations — U.S. Defined Benefit Pension Plans 146
U.S. Pensions — Illustrative Application of Recovery Methodology 147
148
Sector Handbooks 148
Recent U.S. Leveraged Finance Research 148–149
Additional Research by Sector 149–154
155–164
165–166

June 6, 2016
The Cycles
The Cycles
Mixed Signals
Historically, the Business, Credit and Commodity Cycles have rarely been synchronized.
Despite this, they have often been logically sequenced and have signaled a similar message
to observers.
Currently the three cycles are sending mixed signals:
●● The Business Cycle has not gained the type of momentum that would be expected this
deep into the economic recovery. The very low-growth environment curbed managements’
typically enthusiastic growth expectations and curtailed the increases in costs and capex
characteristic of economic upturns.
●● The Commodity Cycle clearly signaled it is at a trough over the past year. High-yield defaults
in the commodity space reached 15% as of May 2016. Over the past few years, changes in
the overall market default rate have been almost entirely driven by the commodity sector and
very large defaults on legacy transactions from the prior upswing (Energy Future Holdings
Corp. and Caesars Entertainment Operating Co.). The high-yield default rate, excluding
commodities, is only 1%, which is consistent with nonrecessionary periods.
●● Credit Cycle deterioration tends to follow periods of unsustainable economic growth, and
exuberant management and market expectations. In the current environment, we believe
the Credit Cycle is advanced relative to the Business Cycle. The search for yield has driven
an abundance of capital toward low-rated entities. While new-deal leverage and the overall
volume of new deals has been muted by leveraged lending guidelines, transactions have
been aggressively structured with loose terms characteristic of late-cycle lending behavior.
The Cycles
PIK Issuance IPOs

Bond Spreads Widen
Covenant Lite Issuance
Second Lien Issuance
CLO Issuance Secured Bond Issuance
Credit
Leveraged Loan Issuance Cycle
LBO/M&A Activity Business
Cycle Distressed Debt Exchanges
Commodity
Cycle High-Yield Bond Issuance
Defaults
Convertible Bond Issuance

Interest Rates Lowered Tender Activity
Expansion Recession Recovery

PIK – Payment-in-kind.
Source: Fitch Ratings.
The Annual Manual (U.S. Leveraged Finance Primer) — The Cycles 1

June 6, 2016
The Cycles
Increased Volatility
The greed and fear dynamic of investing has historically been pronounced in leveraged finance.
The volatility associated with this dynamic is exacerbated by low interest rate policy and by
regulatory restrictions on banks’ market-making activities in risky assets.
For these reasons, we anticipate sharp security price corrections that, at times, will far outstrip
changes in underlying corporate credit fundamentals.
Elusive Equilibrium
Market Market
Dislocation Overheated
Market
Equilibrium
• Widening credit spreads. • Low interest rates, tight spreads.
• Bond/loan markets shut down. • Investors chasing yield.
• Risks not at company discretion. • Discretionary risk seeking actions
• CLO arbitrage vanishes. by companies.
• Companies conserve cash. • Supply of investor capital matches • Debt proceeds in market exceed
• Downgrades and voluntary and refinancing and prudent growth. refinancing needs.
nonvoluntary bankruptcies for companies • Capital needs of leveraged companies • Significant LBO and consolidation activity.
with near-term refinancing concerns. are met. • Heavy CLO activity.
• Downgrades from leveraging transactions.
Looking Ahead
We do not expect new deal characteristics to return to the leverage or transaction size levels of
2006/2007. It is likely we enter a downturn without seeing those types of large, highly leveraged
deals. It is also likely we enter a recession without the business environment ever returning to
full steam.
Idiosyncratic risk will continue to be the focus of sophisticated analysts in the leveraged finance
market. While Retail, Publishing and some subsectors of Healthcare are expected to endure
business model risks, we do not expect any broad sectors to experience widespread defaults
like we have seen in the Energy sector over the past year. Instead, we anticipate traditional
bottoms-up, company-specific analysis will identify the pockets of weaknesses in the market.
As the commodity risks shake out and capital begins flowing again in the leveraged finance space,
we anticipate discretionary risks to build again with private equity and management teams gaining
confidence, and taking advantage of historically low, albeit slowly rising, interest rates. Fitch Ratings
will continue to evaluate the overall use proceeds mix (refinancing, LBO, M&A) for new issuance;
any elevated new transaction levels; and the structure, leverage and size of those transactions.
In particular, we will be taking a hard look at liquidity and how companies are preparing their
balance sheets for the heavy refinancing the market requires in 2019 and 2020. It is very possible
we could enter a downturn at a point when significant debt is coming due in the market.
If 2016–2017 turn out to be downturn years, we expect the downturn to be mild. There is very
little bond and loan debt coming due and companies have solid interest coverage cushion to
brace them from unexpected EBITDA declines. With limited financing demands and the capacity
to avoid missed payments, we believe it would be a relatively shallow recession.

June 6, 2016
The Cycles
Leveraged Finance Market Statistical Comparison

2007 2015 Comment
Market Rates (%)
10-Year Treasury Rate 4.1 2.3 Peak: 6.6% (2000), Trough: 1.6% (2012)
LIBOR (90 Days) 4.70 0.61 Peak: 7.10% (2000), Trough: 0.25% (2013)
Federal Funds Rate 4.25 0.50 Peak: 6.50% (2000), Trough: 0.00%–0.25% (2010–2013)
Transaction Multiples (x)

Average Market Multiple (BB+ and Below) 9.4 9.5 Peak: 9.8 (2014), Trough: 6.3 (2008)
Average Enterprise Value Transaction Multiple (All Rating Categories) 11.7 11.4 Peak: 12.2 (2014), Trough: 8.8 (2009)
Rating Actions
No. of IDR Upgrades 66 30 —
No. of IDR Downgrades 40 27 —
Upgrades-to-Downgrades Ratio (x) 1.7 1.1 —
Fallen Angels: Rising Stars 4:7 9:5 —
High-Yield Bond Market Statistics

High-Yield Bond Issuance ($ Bil.) 144 251 Peak: 307 (2012), Trough: 52 (2008)
Number of High-Yield Bond Issues 313 371 Peak: 664 (2004), Trough: 106 (2008)
PIK Toggle Issuance ($ Bil.) 16.3 1.4 Peak: 16 (2007), Trough: 0 (2004)
Use of Proceeds: Refinance (%) 33 43 —
Use of Proceeds: GCP/Capex (%) 17 18 —
Use of Proceeds: M&A/LBO (%) 49 38 —
BofAML BB Rated OAS (bps) 459 424 Peak: 1,468 (December 2008), Trough: 171 (May 2007)
BofAML B Rated OAS (bps) 571 715 Peak: 2,084 (November 2008), Trough: 236 (May 2007)
BofAML BB Rated Yield-to-Worst (%) 8.3 6.1 Peak: 16.4 (December 2009), Trough: 4.0 (April 2013)
BofAML B Rated Yield-to-Worst (%) 9.4 9 Peak: 23.1 (November 2008), Trough: 4.8 (June 2014)
BofAML US HY Index Return (%) 2.2 (4.6) High: 57.5 (2009), Low: (26.4) (2008)
LTM High-Yield Default Rate (Based on Par Amount, %) 0.5 3.4 Peak: 16.4 (November 2009), Trough: 0.4 (March 2007)
Defaulted Issuers 15 74 Peak: 151 (2009), Trough: 15 (2007)
Leveraged Loan Market Statistics

Leveraged Loan Issuance ($ Bil.) 688 783.37 Peak: 1,135 (2013), Trough: 218 (2001)
Number of Leveraged Loan Deals 1,718 1821 Peak: 2,548 (2013), Trough: 906 (2009)
Institutional Loan Issuance ($ Bil.) 426 289 Peak: 625 (2013), Trough: 32 (2001)
LBO Issuance ($ Bil.) 210 73 Peak: 210 (2007), Trough: 8 (2009)
Covenant-Lite Issuance ($ Bil.) 108 228 Peak: 381 (2013), Trough: 1 (2009)
Dividend Recap Issuance ($ Bil.) 21 20 Peak: 50 (2013), Trough: 1 (2001)
Second Lien Issuance ($ Bil.) 40 14 Peak: 40 (2007), Trough: 2 (2009)
Use of Proceeds: Refinance/Reprice (%) 32 50 —
Use of Proceeds: Other (%) 47 20 —
Use of Proceeds: M&A/LBO (%) 22 30 —
BB Rated Institutional Spreads 251 334 Peak: 760 bps (2008), Trough: 179 bps (2006)
B Rated Institutional Spreads 304 448 Peak: 1,076 bps (2008), Trough: 253 bps (2006)
Overall Secondary Market Bid 93.2 95.2 Peak: 99.1 (December 2013), Trough: 60.2 (December 2008)
SMi 100 Average Bid 94.9 96.6 Peak: 101 (February 2007), Trough: 62.8 (December 2008)
LTM Loan Default Rate (Based on Par Amount, %) 0.2 1.7 Peak: 10.5 (2009), Trough: 0.2 (2007)
Number of Defaults 3 27 Peak: 93 (2009), Trough: 3 (2007)
Structured Credit Market Statistics

CLO Issuance ($ Bil.) 92 93 Peak: 124 (2014), Trough: 0 (2009)
Number of CLOs Issued N.A. 190 —
Average Deal Size ($ Mil.) 500 527 —
Average AAA Spreads (bps) 25 169 —
Average AA Spreads (bps) 50 257 —
Average A Spreads (bps) 120 360 —
Average BBB Spreads (bps) 275 548 —
Average BB Spreads (bps) 525 919 —
IDR – Issuer Default Rating. PIK – Payment-in-kind. GCP – General corporate purposes. OAS – Option-adjusted spread.
Source: Fitch U.S. High-Yield Default Index, Fitch U.S. Leveraged Loan Default Index, Thomson Reuters LPC, Advantage Data, BofA Merrill Lynch,
Citi CLO Research, Bloomberg.

June 6, 2016
Leveraged Loans
Leveraged Loan Basics 4

[Credit 101] What Is the U.S. Leveraged Loan Market? 4
[Credit 101] What Are the Key Characteristics of Leveraged Loans? 6
[Credit 101] What Are the Different Types of Leveraged Loans? 8
Regulatory Environment 10
What Regulations Will Have the Most Impact on the
Leveraged Loan Market? 10
What Is Leveraged Lending Guidance? 10
What Is Risk Retention? 12
What Is the Volcker Rule? 13
What Is Chapter 11 Reform? 13
Direct Lending 14
[Credit 101] What Is Direct Lending? 14
How Has Direct Lending Gained Traction? 14
Why Does Direct Lending Continue to Grow? 15
Private Equity and LBO Market 16

[Credit 101] What Is the U.S. Private Equity (PE) Market? 16
How Does Fitch Ratings Analyze Private Equity Companies? 17
[Credit 101] What Is an LBO? 17
What Is the Trend in the LBO Market? 18
[Credit 101] What Are BDCs? 20
What Does the Regulatory Environment Look Like for BDCs? 20
How Have BDCs Performed Lately? 20
Covenant-Lite Loans 22
[Credit 101] What Is a Covenant-Lite Loan? 22
What Is the Size of the Covenant-Lite Market? 22
How Did Covenant-Lite Become the New Market Standard? 22
What Considerations Does Fitch Give to Covenant-Lite Issuers? 23
Are Recovery Prospects Different for Covenant-Lite Loans? 23
Second Lien Loans 24

[Credit 101] What Is Second Lien Debt? 24
[Credit 101] Why Issue Second Lien Debt? 24
What Is the Current Appetite for Second Lien Loans? 24

June 6, 2016
Leveraged Loans
Defaults 26
[Credit 101] What Happens in an Event of Default? 26
[Credit 101] What Options Are Available to Issuers Under U.S. Bankruptcy Law? 26
What Are the Historical Default Rates for Leveraged Loans? 28
What Is the Current Default Environment for Leveraged Loans? 30
Recovery 32
[Credit 101] What Is DIP Financing? 34
How Do Leveraged Loans Perform in Fitch’s Recovery Analyses? 40
What Are the Historical Post-Default Prices for Leveraged Loans? 42
What Are the Historical Emergence Prices for Leveraged Loans? 42
CLOs 43
[Credit 101] What Is a CLO? 43
[Credit 101] What Are the Mechanics of an Arbitrage CLO? 44
[Credit 101] Who Are CLO Market Participants? 46
How Does Fitch Ratings Analyze CLOs? 48
What Is the Level of Recent CLO Issuance? 48
How Has the Commodity Cycle Downturn Affected CLOs? 49
Leveraged Loan Data 51

Issuance 51
Issuance by Industry 59
Issuance by Purpose 62
Pricing 65
Maturities 68
Secondary Bids 70
Retail Funds 72
Default Rates 74
Post-Default Prices 77
Emergence Prices 81
Private Equity and Leveraged Buyout 85
Collateralized Loan Obligations 101

June 6, 2016
Leveraged Loans
Leveraged Loan Basics
[Credit 101] What Is the U.S. Leveraged Loan Market?
Defining the Markets

The leveraged loan market generally consists of loans made to companies with Issuer Default
Ratings (IDR) of ‘BB+’ or lower. These loans are typically secured by a company’s assets with
pricing greater than LIBOR plus 200 bps. While this is the broadest definition of leveraged loans,
a number of unique market segments exist in which leveraged loans share specific structures
and characteristics.
Broadly syndicated loans represent the largest segment of the leveraged loan market.
These are loans made to large corporations and syndicated by banks to investors. There is also
a growing private market for leveraged loans, known as direct lending, where companies can
access financing from nonbank institutions. A market for leveraged loans to smaller companies,
known as the middle market, also exists.
Defining the Loan Markets

Leveraged Loans
Investment Broadly Syndicated/ Middle Direct
Grade Large Corporate Market Lending
Sales Size $9 Bil. + $500 Mil.–$7 Bil. < $500 Mil. Varies Widely
EBITDA Size $2 Bil.–$45 Bil. $300 Mil.–$2 Bil. < $100 Mil. Varies Widely
Ratings > BBB– < BB+ < BB+, Unrated < B+, Unrated
Average Deal Size > $1 Bil. $500 Mil. $75 Mil. Varies Widely
Structure RCFs RCFs RCFs TLs
TLs TLs TLs Unitranche
Unitranche
Security Unsecured Secured Secured Secured
Average Tenor 1–5 years 3–7 years 3–6 years 3–7 years
Secondary Liquidity Yes Yes Limited None
Syndication Method Broad Broad Broad Club
Club No Syndication
Lenders Banks Banks Banks Specialty Finance
Specialty Finance
Main Investors Retails Funds Banks Specialty Finance Specialty Finance
Insurance Companies Retail Funds CLOs Private Equity
Pension Funds CLOs Private Equity
RCF – Revolving credit facility. TL – Term loan. Note: Figures based on Fitch estimates.
The broadly syndicated leveraged loan market can be split into two distinct categories: pro rata
loans and institutional loans. Banks invest in pro rata loans, and institutional investors, such as
CLO managers and mutual funds, invest in institutional loans. Institutional loans in particular
experienced record growth in the years following the financial crisis.
The Annual Manual (U.S. Leveraged Finance Primer) — Leveraged Loans 4

June 6, 2016
Leveraged Loans
Market History
Leveraged Loan Market History
($ Bil., Institutional Leveraged Loan Market Size)
1,000
CLO Issuance Hits
All-Time High of $124 Bil.
900 Secondary Loan
Prices Plunge to 60
Institutional Loan
800
Issuance Hits Record
Dodd-Frank Bill Oil Falls Below $40/Barrel;
High of $639 Bil.
Proposed Default Count Highest
700
Since 2012
Lehman Brothers
600 Files for Bankruptcy
500 KKR Purchases TXU,

Largest LBO in U.S. History
400
300
200
100
Credit Crisis
0
2007 2008 2009 2010 2011 2012 2013 2014 2015
KKR – Kohlberg Kravis Roberts. TXU – TXU Corporation. Note: Gray section represents a recessionary period as
defined by the National Bureau of Economic Research.
Source: Fitch U.S. Leveraged Loan Default Index, Thomson Reuters LPC, Fitch Ratings.
Several factors have contributed to the record growth in the U.S. institutional leveraged loan
market in recent years. Investor demand in particular has played a major role. As interest rates
reached historic lows in the years following the financial crisis, the search for yield attracted
new investors into the high-yield bond and leveraged loan markets. CLOs and retail funds were
among the most active buyers of leveraged loans.
Loan Retail Funds — Assets Under Annual CLO Issuance Reached

Management Increased Significantly Record High in 2014
Since Credit Crisis ($ Bil.)
($ Bil.) 140
200
$174 Bil. 120
150 100
100 80
$24 Bil.
60
50
40
0 20
0
Note: Assets under management include both
exchange-traded funds (ETFs) and managed funds.
Source: Thomson Reuters LPC, Lipper FMI. Source: Thomson Reuters LPC.
The U.S. institutional leveraged loan market totaled over $945 billion in amount outstanding and
comprised nearly 1,500 issuers at the end of 2015.

June 6, 2016
Leveraged Loans
Institutional Leveraged Loan Market Profile — 2015

(Institutional Leveraged Loan Industry Composition)
Average
Amount Issue % of Industry
Outstanding No. Size First Second
Industry ($ Bil.) Issuers ($ Mil.) Lien Lien Sponsored Cov-Lite
Automotive 24.5 30 500.0 94 6 58 40
Banking & Finance 46.5 79 366.5 92 8 70 62
Broadcasting & Media 34.4 52 477.7 96 4 43 56
Building & Materials 13.9 27 315.3 91 9 70 72
Cable 19.0 19 595.1 99 1 23 15
Chemicals 34.1 66 374.6 94 6 54 52
Computers & Electronics 116.6 144 496.3 94 6 64 70
Consumer Products 13.7 27 361.1 95 5 67 56
Energy 43.4 79 425.8 79 21 43 47
Food, Beverage & Tobacco 14.1 37 271.8 89 11 56 31
Gaming, Lodging & Restaurants 32.3 45 598.1 98 2 46 56
Healthcare & Pharmaceutical 105.2 153 445.9 94 6 58 47
Industrial & Manufacturing 34.1 73 338.1 89 11 74 67
Insurance 15.6 23 355.7 86 14 93 75
Leisure & Entertainment 28.6 43 493.8 93 7 45 54
Metals & Mining 17.7 31 321.1 94 6 39 68
Paper & Containers 12.1 23 347.1 97 3 59 58
Real Estate 7.6 9 507.7 96 4 25 56
Retail 62.4 70 605.4 92 8 62 84
Services & Miscellaneous 132.7 255 331.6 89 11 78 62
Supermarkets & Drug Stores 12.6 16 546.9 89 11 68 85
Telecommunications 44.3 53 492.2 91 9 48 32
Textiles & Furniture 11.4 29 317.1 93 7 68 50
Transportation 43.3 70 441.5 96 4 58 54
Utilities, Power & Gas 24.9 44 461.6 96 4 47 30
Total 945.2 1,497 421.2 92 8 60 57
BSL ‒ Broadly syndicated loans. LMM ‒ Large middle market.
Source: Fitch U.S. Leveraged Loan Default Index, Thomson Reuters LPC, Bloomberg.
[Credit 101] What Are the Key Characteristics of Leveraged Loans?
Seniority
Leveraged loans typically sit at the top of the capital structure. In the event of a default, borrowers
are likely contractually obligated to make payments on the leveraged loans before they make
payments to other creditors, including most bondholders.
Leveraged Capital Structure — Seniority

Senior Secured Credit Facility:
• Asset-Based Revolver
• Revolver and/or Term Loan
Second-Lien Loan or Secured Bond
Senior Unsecured Bonds

Seniority
Senior Subordinated Bonds
Subordinated Junior Bonds
Hybrid Equity/Convertible Bonds
Equity

June 6, 2016
Leveraged Loans
Security
Leveraged loans are typically secured by the company’s physical assets — property, plant and
equipment — and other assets, such as accounts receivable and inventory. Most leveraged
loans have a first lien priority against these assets in the event of a default. However, some
loans can have a second lien priority against assets, but this is a small universe of loans and
represents less than 10% of the institutional leveraged market.
Pricing
Leveraged loan pricing is typically floating rate and is a function of the reference rate and
the spread. Other important loan pricing components include the LIBOR floor and the original
issue discount.
Loan Pricing Components

Component/Fee Detail
Reference Rate Overall pricing on a loan is based on a spread over a reference rate. The reference rate is
typically reset daily and is based on the bank’s prime lending rate. Common reference rates
include LIBOR or prime.
Spread The rate added to the reference rate to determine the overall rate on the loan. The spread is
based on the credit quality of the borrower and can change based on changes in the borrower’s
performance. For example, the lower the credit quality of a borrower, the higher the probability of
default. Due to this higher probability, investors will demand higher spreads to compensate for the
higher probability of default.
LIBOR Floor A LIBOR floor sets a minimum reference rate (i.e. LIBOR) on which the loan pricing is based. If the
market LIBOR rate falls below the LIBOR floor rate, pricing will be based upon the LIBOR floor rate
rather than the current market LIBOR rate.
Original Issue A discount to par (100). The OID is offered in the primary market during the syndication process to
Discount (OID) enhance investors’ yield on the loan.
Commitment Fee Paid to lenders on the undrawn portion of the revolving credit facility. Also called a ticking fee.
Usage Fee Paid to lenders on the drawn portion of the revolving credit facility if utilization falls below a certain
minimum threshold.
Facility Fee Fee paid on the entire commitment amount, regardless of usage.
Administrative Fee paid to the administrative agent for administrative tasks performed in conjunction with the loan,
Fee such as distribution of payments, etc.
Covenants
Covenants represent a set of restrictions that detail what the borrower can and cannot do during
the life of the loan. There are three main types of covenants:
●● Affirmative covenants state what a borrower must do to be in compliance during the life of the
loan (e.g. provide financial statements and maintain insurance).
●● Negative covenants limit what the borrower can do during the life of the loan (e.g. limits on
additional incurrence of debt or limits on dividend amounts).
●● Financial (maintenance) covenants require the borrower to maintain certain financial

performance measures during the life of the loan, which these are typically measured on a
quarterly basis (e.g. leverage ratio tests and coverage ratio tests).
Common Loan Covenants

Negative Covenants Affirmative Covenants Financial Covenants
• Incur Debt • Payment of Taxes • Maximum Senior Debt-to-EBITDA Ratio
• Grant Liens or Pledge Assets • Maintain Insurance • Maximum Total Debt-to-EBITDA Ratio
• Sell or Dispose of Assets • Access to Information • Minimum EBITDA-to-Total Interest Ratio
• Make Investments and Loans • Books and Records • Mimimum Fixed-Charge Coverage Ratio
• Make Acquisitions • Maintian Condition of Assets • Maximum Capex Limit
• Merge or Consolidate with any Other Entity • Additional Collateral • Minimum Tangible Net Worth Ratio
• Make Dividends or Distributions

June 6, 2016
Leveraged Loans
Callability
Leveraged loans are generally callable at par at any time by the borrower. Soft call provisions
have emerged in recent years, most notably in loans lower in the capital structure. Loans with
soft call provisions are generally callable at 103%, 102% and 101% of par for the first three
years, respectively. Soft call provisions protect investors in the event a company wishes to
refinance existing loans with new loans.
[Credit 101] What Are the Different Types of Leveraged Loans?
Pro Rata Tranches

Pro rata tranches refer to the types of leveraged loans invested in by banks and other
financing companies.
●● A revolving credit facility is similar to a credit card, a revolving credit facility (revolver) allows
a company to draw down debt, repay and then draw back down. The drawn amount is due at
maturity. The facility may contain borrowing base restrictions or sublimits. The revolver can
be multicurrency and allow for multiple borrowers.
●● A term loan A is an installment loan that is typically fully drawn at close, and pays both interest
and principal based on a predetermined amortization schedule. The remaining balance is
due at maturity. The required amortization percentage typically increases over time.
Pro Rata Leveraged Loan Issuance

($ Bil.)
600
Statistics:
High: $510 Bil. (2013)
500 Low: $165 Bil. (2002)
Avg.: $286 Bil.
400
300
200
100
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: Thomson Reuters LPC.
Institutional Tranches
Institutional tranches refer to the types of leveraged loans invested in by institutional investors
such as CLO managers and pension funds.
●● A term loan B is similar to a term loan A in mechanics, but with minimal amortization
through the life of the loan (1% per annum), with the balance due at maturity.
The facility may contain a delayed-draw component or a separate delayed-draw term loan.
Delayed-draw term loans are not drawn at close, and are used to fund an event only if the
company meets certain conditions.
●● A second lien credit facility is similar to a term loan B in structure and mechanics, except
for priority, security and pricing. The priority is second to first lien facilities, the security is
generally a second lien on the first assets and the pricing is wider by 200 bps–400 bps.

June 6, 2016
Leveraged Loans
Institutional Leveraged Loan Issuance

($ Bil.)
700
Statistics:
600 High: $639 Bil. (2013)
Low: $32 Bil. (2001)
Avg.: $243 Bil.
500
400
300
200
100
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Credit Facility Summary
Facility Types Comparison

Revolving Second Lien
Description Credit Facility Term Loan A Term Loan B Credit Facility
Security Senior secured — Senior secured — Senior secured — Senior, second to
generally a first lien generally a first lien generally a first lien first lien facilities,
on all assets and on all assets and on all assets and secured — generally
pledge of stock. pledge of stock. pledge of stock. a second lien on the
first lien assets and
a first lien on other
certain assets.
Structurea
Average Facility Size $100 Mil.–$300 Mil. $100 Mil.–$750 Mil. $250 Mil.–$2,000 Mil. $100 Mil.–$300 Mil.
Funded/Unfunded,
Unfunded, Partially Funded
or Fully Funded Funded Funded Funded Funded
Tenor Approximately Approximately Approximately Approximately
3–5 years five years 5–7 years 5–7 years
Repayments Amortizing Amortizing (gradual) Limited (bullet Limited (bullet
payment structure) payment structure)
Pricinga
Spread/Margin Floating Floating Floating Floating
Average Spread/Margin
(bps) 315 315 440 800
Commitment Fee (bps) 25–50 — — —
Markets
Market Private Private Private Private
Investors Retail Banks Retail Banks Institutional Institutional
Investors Investors
Fitch estimates as of Dec. 31, 2015.
a

June 6, 2016
Leveraged Loans
Regulatory Environment
What Regulations Will Have the Most Impact on the

Leveraged Loan Market?
Regulatory Overview
Impact on
Regulation Effect Loan Market
Leveraged Lending Guidance Could cause banks to pull back from leveraged loan High
underwriting, leaving nonbank originators to come in
to replace bank underwriters. Nonbank originators are
presumably not subject to the guidance, as they are not
regulated by the banking agencies.
Risk Retention (Dodd-Frank Act) Could cause CLO and loan markets to shrink and cost High
of financing to rise for speculative-grade borrowers, as
requirement to retain 5% of fair value of CLO will likely crimp
CLO origination.
Volcker Rule Many legacy CLOs will no longer be permissible investments Moderate
by banks and must mature, be restructured or be disposed of
by July 21, 2017.
Chapter 11 Reform Could adversely alter recovery prospects of first lien debt Low
claimholders, leading to a likely increase in cost of financing
for speculative-grade borrowers.
Source: LSTA, Fitch Ratings.
What Is Leveraged Lending Guidance?
Background
The Interagency Guidance on Leveraged Lending was issued by the Office of the Comptroller
of the Currency (OCC), the Board of Governors of the Federal Reserve System (board) and the
Federal Deposit Insurance Corporation (FDIC) in 2013 to curb high-risk lending among financial
institutions (banks).
The Shared National Credit (SNC) review, conducted by the OCC, the board and the FDIC,
assesses risk in the largest and most complex credits. The agencies conduct a credit assessment
program to rate credits based on credit quality.
The rating criteria under the SNC review can be broken down into three key pillars.
Clearly Defining Leveraged Lending

While acknowledging there is no exact, industrywide definition of leveraged lending, the agencies
stress that each bank must have a clear, measurable definition of leveraged lending so the
guidance can be applied uniformly across all business units of each bank.
Risk Management
The agencies outline risk management requirements, some of which include conducting proper
due diligence and stress tests, evaluating risk-adjusted returns, testing covenant compliance
and generating analytical risk assessment reports, all on a regular, periodic basis to improve
transparency and deter excessive risk taking.
Internal Oversight
The agencies tie the first two pillars together by requiring the establishment of internal oversight
to manage enforcement of related policies, compliance with regulators and resolution to conflicts
of interest, which can arise from having exposure to both borrowers’ credit and equity, among
other things.

June 6, 2016
Leveraged Loans
The agencies added some flexibility by leaving banks to set their own quantitative boundaries
(i.e. risk-adjusted return), barring two key exceptions:
●● Total debt/EBITDA should not exceed 6.0x in most industries.
●● Each borrower should be able to amortize any senior secured debt during the life of the
security or pay down at least 50% of the total principal over a 5- to 7-year period.
However, the agencies qualify these statements with the caveat that the guidance is a holistic
approach and a breach of either threshold may not necessarily result in a violation of the
guidance as long as the borrower or the debt has other redeeming qualities, such as protective
covenants or transparent strategic commitment to debt reduction.
Impact
Leveraged lending guidance has created challenging market conditions for some issuers at the
lower end of the rating spectrum and has played a significant role in restraining new LBO issuance.
High purchase price multiples and leverage constraints have reduced LBO deal flow. Prices for
companies remain at historically elevated levels. Fitch estimates the overall median transaction
multiple through November 2015 YTD was 11.4x, above the historical 10-year median of 10.9x.
It is now harder for private equity sponsors to make the economics of LBOs attractive given
leverage restrictions in the market. As a result, debt-to-EBITDA levels for LBOs have been on
the decline since the guidance was introduced in 2013.
LBO Leverage in Decline Since Release of Leveraged Loan Guidance

(Quarterly LBO Leverage for Broadly Syndicated Deals)
(x)
8.0
5.74x
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
Note: Left axis represents total debt/EBITDA.

The guidance has also created challenges for lower rated, highly leveraged issuers trying to
access the market for other purposes, such as refinancing. Fitch identified 23 deals in 2015
that were pulled from the primary during syndication as issuers reacted negatively to investors
demanding higher pricing and larger issue discounts.
While leveraged lending guidance may have a harnessing effect on leverage, as seen with the
decline of LBO leverage, some of the most aggressive structures are now moving outside the
bank market and being financed in the direct lending market instead.

June 6, 2016
Leveraged Loans
Focus on Exploration and Production (E&P) Companies
The OCC released the Oil and Gas E&P Lending booklet in March 2016. The booklet outlines
qualitative and quantitative guidelines to be followed in addition to the guidance to manage
leveraged lending in the E&P sector. The qualitative guidelines are similar to those shown in
the guidance, mostly emphasizing risk management and internal oversight. However, there are
many quantitative hurdles to overcome that are specific to E&P names.
OCC Ratio Metrics and Thresholds

Special Substandard
Ratio Pass Mention or Worse
Funded Debt/EBITDAX (x) < 3.5 3.5–4.0 > 4.0
Funded Debt/(Funded Debt + Equity Capital) (%) < 50 50–60 > 60
Total Committed Debt as a Percentage of
Total Unrisked and Undiscounted Proved Reserves (%) < 65 65–75 > 75
EBITDAX – Earnings before interest, taxes, depreciation and amortization, plus depletion and exploration expenses.
Source: Office of the Comptroller of Currency Oil and Gas Exploration and Production Handbook.
Fitch’s analysis suggests numerous U.S. high-yield Oil & Gas E&P companies may be assigned
loan risk ratings of Substandard, Doubtful or Loss (collectively Classified) based on leverage
ratio analysis and other factors included in regulatory assessment guidance.
Ramifications of Classified loan ratings could include further cuts to reserve-based revolver (RBL)
borrowing bases, higher funding costs and reduced access to new loans at a time when bond
market access is very limited for high-yield E&P companies. Nonbank lenders or specialized
production financing may take up some RBL lending slack, but at a price.
For more information on the E&P lending guidance please see the special report E&P Lending
Guidance Signals More Pain Ahead (OCC Lending Guidance Amplifies Challenges for Leveraged
E&P Borrowers).
What Is Risk Retention?
Background
The risk retention rules, under the Dodd-Frank Financial Reform and Consumer Protection Act
(Dodd-Frank), generally require securitizers of asset-backed securities to retain 5% of the fair value
of the CLO. The risk retention rules were motivated by the performance of some subprime residential
mortgage-backed securities (RMBS) and collateralized debt obligations of RMBS, for which Dodd-
Frank sought to use risk retention to align the incentives of securitizers with those of their investors.
Impact
The impact of requiring securitizers to retain 5% of the credit risk of the underlying assets will
crimp CLO origination. Most CLO managers are thinly capitalized and do not have the balance
sheet or spare funds to purchase a significant percentage of the CLO notes. This could cause
the CLO and loan markets to shrink and the cost of financings to increase for speculative-grade
borrowers if CLO managers do not gain access to capital for retention. More than 50% of CLOs
issued during the latter half of 2015 had at least a 5% component of the CLO liabilities held by
the CLO manager or an affiliate. The final risk retention rule will apply to new CLOs beginning in
December 2016, two years after the final rule.

June 6, 2016
Leveraged Loans
What Is the Volcker Rule?
Background
The Volcker Rule was passed in July 2010 as part of Dodd-Frank, and was finalized in December
2013. It was designed to prohibit:
●● Most proprietary trading by banks.
●● The ownership by banks of hedge funds and private equity funds.
●● Certain transactions between banks and covered funds they sponsor.
Impact
The final rule exempted loans from the proprietary trading restrictions imposed on banks for
most other assets and set out a clear path for CLOs’ complete exemption from the Volcker Rule.
However, to qualify for the exemption from the Volcker Rule, CLOs would not be able to hold
any securities other than short-term cash equivalents. The conformance period was extended to
July 2017, but this extension does not resolve the issue for banks. Nearly all 2.0 CLOs will still
be outstanding under the rule.
What Is Chapter 11 Reform?
Background
Chapter 11 bankruptcy code generally provides for reorganization of corporations or partnerships.
Chapter 11 Reform arises from a need to address the more complex and higher leveraged
capital structures of today’s companies.
Impact
Initial recommendations in the ABI’s Commission to Study the Reform of Chapter 11’s final report
published in December 2014 could adversely alter recovery prospects of first lien debt claimholders.
One principle that would reduce first lien recovery prospects, if adopted, proposes allocating a
redemption option value to the creditor class that receives no recovery and is immediately junior
in seniority to a class of claims that does receive a distribution. This is being mandated as long
as there is at least one class that would not receive any recovery. The proposal is being made
to compensate for reorganizations or asset sales that often occur at cyclical trough points, and
business or economic improvement is anticipated within a reasonable amount of time.
The reform suggestion would have a profound impact if passed by Congress. The ABI Commission
did not recommend any changes to the way enterprise valuations are done for bankruptcy plans.
A fundamental enterprise valuation would be completed using existing methodologies.

June 6, 2016
Leveraged Loans
Direct Lending
[Credit 101] What Is Direct Lending?

Direct lending is a strategy where nonbank entities bypass the traditional functions performed by
a bank and lend their capital directly to companies. Direct lenders typically charge higher interest
rates than bank lenders; the higher yield accounting for an illiquidity premium due to lack of a
tradeable market for the loan.
Companies that issue private debt can be anywhere in the range of $5 million to $100 million in EBITDA.
Direct Lending as an Alternative to Traditional Bank Lending

(Speed and Flexibility in deploying committed capital furthers appeal of Direct Lending)
Direct Lending Traditional Lending
Indirect Capital Capital

Providersa Providersa
$ Capital 1. Issuer info

$ Capital $ Returns 2. $ Returns
Regulatory Adherance
Direct Capital Regulatory
Banks
Providersb Interagency Guidance Agenciesc
on Leveraged Lending
1. Issuer info
$ Capital 2. $ Interest 1. Issuer info
$ Capital
3. $ Principal 2. $ Fees
Payments 3. $ Interest
Regulatory 4. $ Principal Payments
SEC/ Adherance
State-level Issuer
Regulators Regulation D Regulatory
Blue Sky Adherance SEC/
Regulation Issuer State-level
Regulation D Regulators
Blue Sky Regulation
aThose providing capital to issuers (e.g. general partners, such as private equity firms, hedge funds, banks, etc.).
bThose providing capital through the banks (i.e. lending participants). cThe Office of the Comptroller of the Currency,
Board of Governors of the Federal Reserve System and Federal Deposit Insurance Corporation.
How Has Direct Lending Gained Traction?

Tightening Regulatory Environment
The prominence of direct lending has increased in light of new regulations placed on banks.
Three major regulations have been introduced in recent years that have impaired banks’ ability
and willingness to lend capital:
●● Basel III.
●● The Dodd Frank Act.
●● Interagency Guidance on Leveraged Lending.
The combination of these regulations have constricted banks’ lending activity by requiring
banks to maintain specific capital ratios and avoid lending to highly leveraged entities. These
regulations have created a supply gap in the credit markets, and in turn, created opportunities
for unregulated institutions to lend in the banks’ stead.
Record Fundraising
On the demand side, the premium offered on private debt has further fueled the interest in direct-
lending platforms as investors navigate the current low-yield environment. North America-focused
private debt funds, most with a focus on direct lending, have raised $103 billion in 2015 alone.

June 6, 2016
Leveraged Loans
Direct lending funds have expanded the scope of their lending opportunities as their size and
presence has increased significantly over the years. A form of financing that was once only
tapped by smaller, sponsor-backed companies has now evolved into a market that can meet the
financing needs of much larger companies. For example, some of the largest alternative lending
deals completed in 2015 included Data Device Corporation’s $515 million refinancing deal and
American Seafoods Group’s $800 million recapitalization deal.
The scale at which direct lenders are now able to underwrite debt makes them a much more
competitive option to borrowers in a time when traditional banks are shrinking balance sheets
and curbing lending.
Why Does Direct Lending Continue to Grow?

Companies targeted by direct lenders tend to be smaller, and usually have nonrated loans and
limited access to the public markets. However, the range of companies issuing private debt has
broadened in recent years as bank regulation has shrunk the availability of traditional forms of
financing for many borrowers. Direct lenders have often been prepared to fund riskier deals and
on more flexible terms than banks will accept. As such, these companies are willing to pay the
higher yields that make direct lending attractive to investors. In addition, borrowers can benefit
from the greater speed, flexibility and execution certainty provided by direct-lending platforms in
volatile markets.
Middle-Market Yield Premium Averages 115 bps

(Middle-Market Term Loan Yield Premium over Broadly Syndicated Term Loans)
(bps)
250
200
150
100
50
Source: Thomson Reuters LPC

June 6, 2016
Leveraged Loans
Private Equity and LBO Market
[Credit 101] What Is the U.S. Private Equity (PE) Market?

The U.S. PE market is driven by private capital provided by investors and funds that is invested into
private companies or used to buy out publicly traded companies. Institutional investors are one of
the primary investors of PE because they can commit large sums of money for long holding periods.
PE firms seek to capitalize on the performance of the investment (company) as a method of

return. Most PE firms earn the majority of their return through exiting the investment by either
selling to another PE owner or taking the company public through an IPO.
Private Equity Market

Investors Intermediaries Issuers
Dollars Limited Partnerships New Ventures

• Managed by Independent Partnership • Early Stage
Dollars,
Corporate Pension Funds • Managed by Affiliates of Financial • Late Stage
Monitoring,
Institutions
Consulting
Public Pension Funds Limited
Partnership Middle-Market Private Companies
Foundations Interest • Expansion
- Capex
Banking Holding Companies - Acquisitions
Dollars • Change of Capital Structure
Wealthy Families and Individuals Other Intermediaries
- Financial Restructuring
• Small Business Investment Private Equity - Financial Distress
Insurance Companies Companies (SBICs) • Change in Ownership
• Publicly Traded Investment - Retirement of Owner
Investment Banks Equity Claim on Companies - Corporate Spinoff
Intermediary
Nonfinancial Corporations
Dollars Public Companies
Other Investors • Management of LBO
• Financial Distress
Private Equity Securities • Special Situations
Source: Stephen D. Prowse for Federal Reserve Bank of Dallas.
PE investments span the spectrum of companies needing equity capital to fund various stages
of development.
Characteristics of Private Equity Investments

Middle-Market Public and Private Firms
Characteristic Early-Stage New Ventures Late-Stage New Ventures Private Firms in Financial Distress Public Buyouts Other Public Firms
Size Revenues between Revenues between Established, with stable cash Any size. Any size. Any size.
$15 Mil. and $50 Mil. $15 Mil. and $50 Mil. flows between
$25 Mil. and $500 Mil.
Financial High growth potential. High growth potential. Growth prospects May be overleveraged or Underperforming. Depends on reasons for
Attributes vary widely. have operating problems. High levels of seeking private equity.
FCF.
Reasons for To start operations. To extend plant and To finance a required change in To effect a turnaround. To finance To ensure confidentially.
Seeking operations. ownership a change in To issue a small offering.
Private Equity To cash out early-state to capital structure. management or For convenience.
investors. To expand by acquiring or in management Because industry is
purchasing a new plant. incentives. temporarily out of favor with
public equity markets.
Major Source(s) Angels. Later-stage venture Later-stage venture partnerships.Turnaround partnerships. LBO and Nonventure partnerships.
of Private Equity Early-stage venture partnerships. Nonventure partnerships. mezzanine debt
partnerships. partnerships.
Extent of Access For more mature firms with Access to bank loans to Access to bank loans. Very limited access. Generally, accessGenerally, access to public
to Other Financial collateral, limited access to finance working capital. For more mature, larger firms, to public and and private markets.
Markets bank loans. access to the private placement private markets.
market.
Source: Fitch Ratings, Stephen D. Prowse for Federal Reserve Bank of Dallas.

June 6, 2016
Leveraged Loans
How Does Fitch Ratings Analyze Private Equity Companies?
Fitch’s Private Equity Firm Credit Rating Considerations

Component Comment
Legal Structure
Key Factors
Firm Structure General partner interests should be subordinated to that of limited partners and
debtholders.
Fund Document Terms
Key Man Events Viewed negatively if allow for liquidation of fund versus end of investment period.
Less risk if tied to group of individuals.
Fee Base Management fees based on committed or invested capital are more predictable.
Lock-Ups Inability to redeem capital allows for stable fee stream.
Fee and Hurdle Rates The need for fee discounts or higher than peer hurdle rates would be viewed
negatively.
Ancillary Fees A share of monitoring and transaction fees provides a revenue boost.
Fund Raising
Fund Maturities Presence of follow-on funds allows for laddering of fund maturities and more fee
stability.
Limited Partners Loyal investor base can ease fund raising.
Limited partner diversity by type and geography viewed positively.
Quality of Underlying Funds

Key Factors
Industry Review industry concentrations and understand potential cyclicality of investments.
Overall Fund Strategy Broad mandate versus sector fund.
Geographic Distribution Consider outsized exposure to underperforming economies.
Product Concentration Diversity of fund mandates can reduce performance correlations.
Cash Consider sufficiency of fund cash for follow-on investments, as necessary.
Liquid Investments Liquidity of holdings should improve as fund nears maturity.
Fund Performance Analyze fund returns versus internal benchmarks and hurdle rates.
Strong track record supports raise of follow-on funds and generation of stable fees.
Leverage
Key Leverage Ratios
Fund Leverage Not typical in private equity vehicles and viewed negatively, given illiquidity of holdings.
Debt/Fee-Related Earnings Leverage measured based on fee-related cash flows.
FEBITDA/Interest Expense Debt service measured based on fee-related cash flows.
Incentive Income Ability to generate incentive income not factored into operating cash flow but provides
cushion for debt service.
Balance Sheet Investments/Debt Balance sheet co-investments in funds are illiquid but can be viewed as collateral for
outstanding debt.
Funding Flexibility Unsecured funding profile viewed favorably.
Liquidity and Risk Management

Key Liquidity Factors
Contingent Liquidity Should be sufficient to fund operations, debt maturities, clawbacks and co-
investments. Consider willingness/ability to provide liquidity to funds, if necessary.
Clawback Risk Firm should reserve for employee portion of potential clawbacks if accrued incentive
compensation paid.
Redemption Risk If redemption allowed, fund investments should be sufficiently liquid.
Risk Management
Fund Valuation Valuation of investments needs to incorporate market data, and back-testing should
occur.
Involvement of independent valuation firms viewed positively.
Alignment of Interests General partners and employees should co-invest in fund vehicles.
Conflicts of Interest Policies should be in place to manage potential investment conflicts between funds.
FEBITDA – Fee-related earnings before interest, taxes, depreciation and amortization.
[Credit 101] What Is an LBO?

An LBO is the process of a PE firm taking a public company private by buying out owners
and funding the transaction with large amounts of debt. Many PE firms choose to finance LBO
acquisitions primarily with debt as a way to substantially increase their returns. If a PE firm’s
ROA is greater than the cost of the debt financing, the PE firm’s ROE is higher than if it only used
equity to finance the deal.

June 6, 2016
Leveraged Loans
Common LBO Structure

Source of Funds Average Multiple (x)a % of Capital Structure Average Coupon (%) Average Maturity (Years)
Bank Debt/Senior Debt

3.0–4.0 30–50 3.0–5.5 4–6
(Secured)
High-Yield/Subordinated Debt
2.0–3.0 10–30 5–9+ 7–10
(Unsecured)
Equity 2.0–4.0 30–40 20–30b 5c
Total 9.0x
What Is the Trend in the LBO Market?
U.S. Private Equity Market History

Largest post-crisis LBO:
(No. of Closed Samson Investment
($7 Bil).
1,200
Equity Office purchased Energy Future Holdings
for $34 Bil. purchased for $45 Bil.
1,000
First deal more than LBO issuance
$5 Bil. of the decade: hits record
Toys ‘R’ Us acquired for $7.5 Bil. $210 Bil.
800
600
First deal more than
$1 Bil. for the decade:
Lubrizol Advanced Holding periods hit
400 Materials ($1.4 Bil.). record high.
First fund more
than $15 Bil.: Largest private equity-
TPG Partners V. backed IPO: HCA, Inc.
($4.4 Bil.).
200
First fund more than $10 Bil.:
Apollo Investment Fund VI. Credit Crisis
0
Note: Gray sections represent a recessionary period as defined by the National Bureau of Economic Research.
Source: Pitchbook Data, Inc., Fitch Ratings.
Annual LBO issuance has slowed Annual LBO Loan Issuance

greatly since 2007, seeing only ($ Bil.)
$73 billion of issuance in 2015 from 250

Statistics:
the 2007 high of $207 billion. The High: $207 Bil. (2007)
200 Low: $7 Bil. (2009)
slowdown in the number and size
Avg.: $62 Bil.
of LBO deals being done is largely
150
attributable to several factors.
Leveraged lending guidelines for 100
banks are restricted from lending to
companies with leverage greater than 50
6.0x, making it increasingly difficult
for PE firms to finance deals with 0
2000 2002 2004 2006 2008 2010 2012 2014
large amounts of debt and increasing

June 6, 2016
Leveraged Loans
the need for a higher equity contribution. The low-growth landscape is also driving a more
competitive acquisition environment, from strategic buyers and other PE firms alike, which has
made securing quality assets difficult.
Primary Factors Impacting LBO Volume

Impact on LBO Volume Metrics: 2007–2015
Debt Leverage 6.5x
> Use of debt leverage constrained 5.1x

by 2013 leveraged lending
guidelines set at 6.0x
Equity Contribution
> PE equity contribution increasing 42%

due to combination of higher
valuation multiples, leverage
32%
constraints and fewer "Club Deals"
Growth
4.5%
> Low growth environment

3.5%
Cost Containment Opportunities
83.0%
> Very little low hanging fruit
81.6%
> IG maintaining disciplined
cost structures
Market Hurdle Rates
> Disciplined management teams

> Not dropping regardless of the low interest rate environment
Structure of Debt
> Loose structures seen in peak cycle
> Significant carveouts, "free and clear" incremental debt
> Given late 2015 disruption, underwriting cycle slowed
Cost of Debta
8.5%
> Lower cost of debt supporting
6.0%
higher deal returns
Valuation Multiples
10.2x
> Lack of quality assets driving median 9.1x
deal multiples to decline in 2015
> Strategic buyer competition still present
aCostof debt is a weighted average calculation using ‘B’ high-yield bond pricing and institutional leverage loan yields.
Weighting represents a 6x total deal leverage target with 4x leveraged loan leverage and 2x high-yield bond leverage.
Source: Pitchbook Data, Inc., Thomson Reuters LPC, Blooomberg Finance L.P., U.S. Bureau of Economic Analysis
(BEA), Fitch Ratings.

June 6, 2016
Leveraged Loans
[Credit 101] What Are BDCs?
Business development companies (BDCs) are companies that provide financing for small
companies in the early stages of development. BDCs are a category of closed-end investment
funds and can be publicly traded. Companies that elect to be designated as BDCs are subject to
regulatory constraints under the Investment Company Act of 1940. BDCs are typically considered
a regulated investment company for tax purposes under Subchapter M of the Internal Revenue
Code, which requires the annual distribution of 90% of investment company taxable income to
shareholders to avoid corporate taxes.
What Does the Regulatory Environment Look Like for BDCs?

Under the Investment Company Act of 1940, BDCs must have an asset coverage ratio if at least
200%, which is equivalent to a maximum debt-to-equity ratio of 1:1. Failure to maintain asset
coverage prohibits the BDC from incurring additional debt or paying dividends.
Discussions are currently being held among market participants, legislators and regulators
regarding potential changes in BDC legislation. The most notable of these potential changes
would be a decline in asset coverage requirements to 150% from 200%, effectively allowing
BDCs to increase leverage to 2.0x from 1.0x.
Another potential change includes an expansion of the eligible portfolio company definition.
BDCs must currently have at least 70% of their assets in qualifying assets. Nonqualifying assets
generally include non-U.S. securities, public companies with market capitalizations above
$250 million, CLOs and investments in finance companies. The expansion of the definition would
preserve the allowance for nonqualifying assets and allow for up to 20% of assets to be invested
in financial companies — including brokers, banks, insurers and niche lenders — allowing 50%
of assets to be invested in what are currently nonqualifying assets.
How Have BDCs Performed Lately?
Operating Performance
Fitch placed five of its 10 rated BDCs on Negative Outlook or Watch in March 2016, reflecting
the competitive underwriting conditions, mounting earnings pressure, underperforming energy
investments, unsustainable asset quality metrics, increased activist pressure and limited access
to growth capital.
Yields Versus Stock Performance

Middle-Market Yield (LHS) WFBDC Index (RHS)
(%)
8.0 2,500
7.5
2,000
7.0
1,500
6.5
1,000
6.0
500
5.5
5.0 0
Sources: Thomson Reuters LPC, www.marketwatch.com.

June 6, 2016
Leveraged Loans
While underwriting yields have widened in recent months, producing a more attractive origination
environment, many BDCs are capital constrained, as leverage has been pushed beyond targeted
ranges, given portfolio valuation declines and increased share repurchase activity. The sector
was trading at a 9% average discount to NAV, as of March 28, 2016, thus precluding most from
accessing the equity market for growth capital without significantly diluting existing shareholders.
Shifting Capital Structures

While BDCs generally continue to focus on senior secured positions, many have increased
exposure to second lien loans in recent quarters to boost portfolio returns. Second lien loans
averaged 28.2% of BDC debt portfolios at year-end 2015, up from 26.2% at year-end 2013. Ares
Capital Corporation (Ares) is at the top end of the peer group, with 46.5% of its debt portfolio
invested in second lien loans, compared with 26.3% two years prior. The potential impact on
portfolio risk is clear, as Ares’ underlying portfolio company net leverage increased to 5.3x at
fourth-quarter 2015 from 4.6x at fourth-quarter 2013.
Second Lien Loans/Debt Portfolio (Fair Value)

Total Average (LHS)
Rated Average (LHS)
($ Mil.) ARCC - WA Portfolio Net Leverage (RHS) (%)
36 5.4
5.3
5.2
34
5.1 5.1 5.2
32
5.0
30
4.8
28 4.8
4.6 4.7
4.6 4.6
26
4.6
24
4.4
22
20 4.2
4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
Source: Company filings.
Energy and Metals/Mining Performance

Oil and gas exposure was manageable at Dec. 31, 2015, at about 5.3% of aggregate portfolio
company investments for Fitch’s rated universe. BDCs are generally well positioned to withstand
an energy-specific stress scenario, although incremental non-accruals and valuation hits are
expected in 2016, which could pressure dividend coverage.
Varying Degrees of Energy Exposure

(Fair Value of Portfolio at Dec. 31, 2015)
Oil & Gas Other Energy Oil & Gas (% of Portfolio)
($ Mil.) (%)
1,200 14
12.9
1,000 12
9.9
9.0 9.0 10
800
8
600
6
400 3.2 3.0 2.9 4
1.7 1.6
200 2
0.0
0 0
AINV PNNT BKCC FSIC TSLX CCT ARCC FSC ACAS SLRC
Sources: Company filings, Fitch Ratings.

June 6, 2016
Leveraged Loans
Covenant-Lite Loans
[Credit 101] What Is a Covenant-Lite Loan?

Covenant-lite generally refers to a loan with no financial maintenance covenants. Instead,
covenant-lite loans only have high-yield bond-like incurrence covenants.
Other definitions of covenant-lite include “covenant-loose” and “springing covenant-lite.”

A covenant-loose loan is a loan with one or more maintenance covenants, but the covenant
breach level is set so loosely it would permit deviations of up to 50% from the issuer’s projections
versus a normal covenant cushion of approximately 15%–20%. A springing covenant-lite loan is
a loan that contains a maintenance covenant on the revolver but no maintenance covenants on
the term loan. The covenant applies or springs into effect on the term loan once the revolver is
drawn or when drawings exceed a certain threshold.
What Is the Size of the Covenant-Lite Market?

Covenant-lite loans have become the majority of the institutional leveraged loan market, making
up 56% of the $940 billion asset class as of March 2016. Nearly 57% of the current institutional
covenant-lite loans outstanding have been issued in the past 24 months.
Covenant-Lite Composes 57% of Outstanding Volume in the Institutional

Leveraged Loan Market
(%) Cov-Lite Covenants
100
90
80
70
60
50
40
30
20
10
0
Pre-2012 2012 2013 2014 2015 Overall Market
Issuance Year
Note: Cov-Lite percentages shown. Outstanding institutional leveraged loan market profile at end of December.
How Did Covenant-Lite Become the New Market Standard?

The rise in covenant-lite loan issuance since fourth-quarter 2012 reflects the market’s long-term
structural evolution as the buyer base has evolved from banks to institutional investors. The shift was
driven by record low interest rates, an improved economy, a mostly benign default rate environment,
stable corporate credit profiles, meaningful inflows and record CLO issuance.
For lenders, maintenance covenants provide an early warning mechanism and a means to intervene
in a deteriorating credit situation, thus possibly preserving value for lenders. In most cases, a
technical violation of a maintenance covenant rebalances the risk and return, thereby allowing a
group of lenders to negotiate a higher spread and extract a fee from the issuer, constrained by
the struggling company’s ability to pay the fee. Covenants also preserve certain rights that allow
lenders to initiate changes they may want or to call the loan in the most extreme cases.
For issuers, covenants are often a time-consuming and expensive hurdle. Most broadly
syndicated loans can frequently have dozens of different lenders in one single loan, making

June 6, 2016
Leveraged Loans
any type of amendment process cumbersome and time consuming. Conversely, a covenant-lite
loan affords the issuer greater financial flexibility and allows the business managers to focus on
running the business rather than managing around a financial covenant.
The transformation of the broadly syndicated loan market to a more covenant-lite market has been
supported by the growth of secondary loan trading through the standardization of transactions,
documents and practices. These changes have helped accelerate the convergence of terms
between the leveraged loan and high-yield bond markets.
What Considerations Does Fitch Give to Covenant-Lite Issuers?

Fitch does not treat covenant-lite and covenanted loans differently in its distressed enterprise
valuation or recovery rating analyses. Our assumptions for a reorganization multiple, sustainable
post-default EBITDA and liquidation values do not change based on the presence or absence of
financial maintenance covenants.
However, we do believe covenant-lite loans are generally reserved for issuers of higher credit
quality, but quantifying this view remains a challenge given a large percentage of the market
is privately sponsored. Fitch has computed and segmented the historical performance of
covenanted and covenant-lite issuers, and we are cautious not to over-interpret the data.
Fitch emphasizes that credit analysis involves thorough evaluation of a range of factors.
For example, credit metrics alone do not provide a holistic view of a company’s credit quality.
Leverage and coverage metrics remain relative measures and must be considered in context
with other factors, such as business risk. Similarly, covenant-lite status alone does not equate
to riskier lending practices.
In a market where covenant-lite status has become the norm, Fitch notes that, in certain cases,
fully covenanted issuers may actually represent the riskier borrowers. In this environment, the
presence of a financial maintenance covenant may be a red flag compensating for some other
source of weakness in the credit profile.
Are Recovery Prospects Different for Covenant-Lite Loans?

Due to the fact that covenant-lite is a relatively new phenomenon, the analysis suffers from small
sample sizes. The averages, medians and ranges taken from these small, heterogeneous data
sets can be misleading, as the circumstances around each company’s bankruptcy are unique
and their credit stories often involve issues unrelated to covenant status. The exact driver of
bankruptcy is typically a mix of factors, and it is challenging to pinpoint the exact cause to be
used for analysis in a dataset. However, most participants in the U.S. agree that an inability to
refinance is the primary contributor to defaults.
We do not perceive the presence or absence of financial maintenance covenants to be a key

driver of recovery values because refinancing risk can arise for companies that are still within
their covenant parameters, covenants are often waived, and companies and their bankers can
set wide covenant thresholds at the outset.
Fitch does not currently adjust recovery assumptions based on the presence or absence of
financial maintenance covenants for several reasons. Issuers of broadly syndicated loans in the
U.S. that encounter distress almost always restructure and emerge from bankruptcy with less
debt. Restructuring maximizes distressed enterprise value in these circumstances. Conversely,
liquidations tend to destroy enterprise value, as the whole is typically worth more than the sum of
the parts. In those jurisdictions and products where liquidation is more prevalent, Fitch may already
be using a lower reorganization multiple assumption that is appropriate for that market or product.
For more information on covenant-lite issuance, defaults, and recovery, please see our
Reference Data section.

June 6, 2016
Leveraged Loans
Second Lien Loans
[Credit 101] What Is Second Lien Debt?

Second lien debt generally places debtholders second in line for recovery in the case of
bankruptcy or default.
There is no consistent market definition of what constitutes a second lien facility and nomenclature
can be misleading. Sometimes the second lien is in a position that is not actually the second
most-senior position and sometimes the debt that does have the second most-senior position is
not called the second lien.
Some issuers can have a first lien asset-based lending (ABL) facility (priority to working capital
assets) and several other first lien facilities ahead of second lien debt. Along the same lines, term
loans with a second lien on working capital and a first lien on real estate, equipment and intangible
assets are sometimes referred to as second-lien debt, particularly among retailers and in the
middle market, even though the term loan lenders have a first lien on hard assets and intangibles.
[Credit 101] Why Issue Second Lien Debt?

Second lien issuers tend to be highly leveraged with low ‘B’ or ‘CCC’ category IDR credit profiles.
Investors are attracted to second lien for the spread premium relative to first lien debt while still
maintaining collateral. Second lien loan premiums over first lien facilities average 3.54% for
2003–2015.
Funding of opportunistic debt exchanges and distressed debt exchanges (DDEs) of unsecured
debt for second lien debt is one of the more common uses of second lien debt. Companies
can often push out the near-year maturities of unsecured debt by offering to swap the maturing
unsecured note for new second lien debt. Unsecured holders that agree to accept the exchange
offer avoid becoming subordinated to the new second lien debt that will be slotted above them.
Certain companies can also tap second lien debt markets to monetize parent company equity
value in subsidiaries. If a leveraged parent company has a subsidiary with a strong credit profile,
the parent company can tap this equity value through the issuance of debt secured by a first or
second lien on the capital stock of the subsidiary. Parent debt secured by subsidiary equity is
often a less tax-punitive way of monetizing equity value than a subsidiary sale or IPO.
What Is the Current Appetite for Second Lien Loans?

Choppy markets, leveraged lending guidance that restrained highly leveraged buyouts and
recapitalizations, and fewer refinancing opportunities weighed on second lien loan issuance in
2015, and are unlikely to abate in 2016.
Loan Volume Soft

Fitch expects 2016 second lien term loan volume to remain relatively muted. There was a steep
decline in issuance volumes last year, with a drop to $16.8 billion in 2015 from $38.7 billion in
2014. The covenant-lite share of total volume held relatively steady year over year, accounting
for 60% of 2015 issuance, compared with 59% in 2014.
Numerous headwinds continue to weigh on the lowest quality tiers of the leveraged term
loan new issue market, which accounts for most second lien facilities. These include volatile
markets, below-par bids and bank regulatory constraints on new highly leveraged transactions.
The Fed’s January 2016 survey of bank lenders showed that commercial lending standards
tightened in the fourth quarter of 2015, although nonbank lenders continue to be active in the

June 6, 2016
Leveraged Loans
U.S. Second Lien Institutional Term Loan Volumes
($ Bil.) 1Q15 2Q15 3Q15 4Q15
40
30
20 39.2 38.7 16.8

37.7
3.2
26.3
10 4.7
19.9 19.9 17.9
2.0 6.4
6.7 7.5 6.8 8.6
0 2.4
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: Thomson Reuters LPC, Fitch Ratings.
highly leveraged space. In addition, deteriorating and volatile equity markets are reducing
market enterprise valuations that in turn, weigh down recovery prospects, particularly for junior
lenders. Second lien loan energy volumes have dried up in the face of a lower-for-longer oil
price environment.
Fitch anticipates most proceeds of second lien loans will continue to be used for leveraged
or secondary buyouts and sponsor dividend payments. The financing for the buyout of ADT
Corp. by certain Apollo Funds announced in February 2016 includes a $3.14 billion second lien
tranche that is structured as a bond rather than a note. The buyout includes a relatively large
equity investment from the sponsors. In addition, some new issues may result from bankruptcy
exits for companies that emerge from Chapter 11.
Sectoral issuance volumes were fragmented in 2015, with Services & Miscellaneous leading at
16% and Real Estate trailing at 0.1%. Similarly, no single industry is expected to dominate the
second lien term loan market in 2016. This contrasts with the second lien bond market, in which
the stressed Energy and Metals & Mining sectors accounted for 53% and 13% of the total 2015
issuance, respectively. Fitch believes commodity-sensitive sectors will continue to account for a
material share of new bond issuances, especially via up-tier exchanges.
Loan volumes exclude unitranche structures in which a first lien lender carves out a second-
out loan based on a first-out/second-out agreement between the two lenders. The borrower
maintains only a single credit agreement with the first lien lender. These second-out facilities
create, for practical purposes, a second-lien position, but activity in this market is opaque.
For more info on the second lien loan market, please see Second-Lien Debt (Energy and
Exchanges Driving Second-Lien Bond Issuance).

June 6, 2016
Leveraged Loans
Defaults
[Credit 101] What Happens in an Event of Default?
Default Types
A default represents a failure to fulfill an obligation set forth by a credit agreement, bond indenture
or other legal contract. There are two main types of defaults for corporate debt issuers:
●● A debt service default, otherwise known as a payment default, is a type of default occurs
when a borrower has failed to make a scheduled principal or interest payment.
●● A technical default occurs when a borrower violates a covenant outlined in the debt contract.
Default Remedies
A default does not automatically force an issuer into a bankruptcy filing. While bankruptcy is an
option, in many instances, a default is accompanied by a grace period that affords an issuer
anywhere from three to 60 days — depending on the type of default and covenant structure — to
remedy the situation before the debtholder can force the issuer into bankruptcy. Alternatives to
bankruptcy can include a debt restructuring or an amendment to the debt contract.
Debt restructuring is more prevalent for high-yield bond issuers. Instead, leveraged loan lenders
are sometimes willing to agree to an amendment granting additional fees, wider pricing or
tighter covenants.
[Credit 101] What Options Are Available to Issuers Under U.S.

Bankruptcy Law?
Bankruptcy Types
As a distressed company approaches default and previous attempts at restructuring existing
debt and other forms of out-of-court workouts have failed, bankruptcy filing emerges as an
option. U.S. corporates can seek bankruptcy protection under Chapter 7 or Chapter 11 of the
U.S. Bankruptcy Code.
●● Chapter 7 applies when the company is seeking a winding up or dissolution of its business.
As soon as a Chapter 7 petition is filed, the legal title of the estate is automatically transferred
to a Chapter 7 trustee appointed on day one of the filing.
●● In contrast, under a Chapter 11 filing, the company continues to make decisions on behalf
of the estate as a debtor-in-possession (DIP). Chapter 11 bankruptcies can end up being
confirmed either via a plan of reorganization or a plan of liquidation if the latter maximizes
recoveries for all creditors.
A significant majority of U.S. bankruptcies result in the reorganization and emergence of an

issuer as a going concern (GC) — either as an independent GC that has shed some or all of
its pre-petition debt, or as a new entity created to buy the assets and the business of a debtor
under a bankruptcy sale. Although Chapter 7 liquidations are filed by issuers from time to time,
Fitch’s U.S. corporate case study database of 150 companies indicates petitioning for Chapter 7
liquidation is rare outside the Retail sector.

June 6, 2016
Leveraged Loans
United States Flow Chart

Financial Crisis/Liquidity Event
Out-of-court restructuring, Chapter 7 Bankruptcy filing —

Chapter 11 Bankruptcy filing
including a distressed debt exchange Asset liquidation done by a trustee
Sufficient leverage reduction to Insufficient debt reductions —

become nondistressed More serious restructuring efforts needed
Emergence as a restructured Sale of all assets under Section 363 to Going out of business liquidation under Chapter 11
independent going concern a third party as a going concern (debtor controls process)
Debtor files a liquidating plan or

converts to a Chapter 7 liquidation
Claim Types
A summary overview of the different types of claims that generally arise during a bankruptcy
process is schematically presented in the chart below.
U.S. Bankruptcy Code — Pre- and Post-Petition Claims

Prepetition Period Post-Petition Period
(Prebankruptcy) (During Bankruptcy)
Petition Date
Unpaid Unpaid Wages and Benefits Normal Operating Emergence

Expense: Professional Fees Date
Taxes (180-day pre-BK) Expenses
Pre-BK Pre-BK Unsecured Pre-BK Secured Unsecured Creditb

Secured Debt Subordinated Fundinga (Trade Payables)
Liability:
Priming or Pari- New or Junior

Payable for Goods Received Additional Passu Liens Liens
up to 20 days Pre-BK Claims (DIP Financing)
Contingent
Liability:
Executory Defined Benefit Environment

Contracts, Plans, Vested Obligations
Leases OPEB
If Reject/
Terminate Contract
Prepetition (Liability) Prepetition (Expense)

Post-Petition (Liability) Post-Petition (Expense)
Prepetition (Cont. Liab.)
aRefers to secured funding provided to the company as debtor-in-possession (DIP) by lenders subject to court approval. This debt may be secured by unencumbered
assets or by a junior lien on already encumbered assets under section 364(c). If the company is still unable to obtain credit, only then will the court permit "DIP
Financings" that are secured by a senior ("Priming") or equal ("pari passu") lien on already encumbered assets under section 364(d). Such DIP financings that supercede
existing liens require that existing/pre-petition secured creditor be adequately protected. bRefers to post-filing unsecured funding (trade payables) provided to the
company by vendors and is entitled to treatment as an administrative expense (§ 364[a] and § 364[b]). If the company is unable to obtain funding based on administrative
claim status, the court may approve it as a super-priority unsecured claim with priority over other adminstrative expense claims (§ 364[c]). BK – Bankruptcy.
OPEB – Other post-employment benefits.

June 6, 2016
Leveraged Loans
What Are the Historical Default Rates for Leveraged Loans?
2007–2015
The U.S. institutional leveraged loan default rate has averaged 2.8% for the nine-year period
from 2007 to 2015. Leveraged loan defaults have remained low in the years since the financial
crisis, and the annual default rate has ended below the nine-year average of 2.8% in five of the
six years since 2009. The annual leveraged loan default rate only rose above 2.8% in 2014,
when Energy Future Holdings Corp. (EFH) filed for bankruptcy and added over $19 billion to the
default volume. As expected, the majority of the leveraged loan default activity is concentrated
in 2008–2009. The default environment peaked in 2009, when the institutional leveraged loan
default rate reached 10.5%.
U.S. Institutional Leveraged Loan U.S. Institutional Leveraged Loan

Default Rate Default Volume
($ Bil.) Volume Number of Issues
12
Statistics: ($ Bil.) (Count)
10 High: 10.5% (2009)
Low: 0.2% (2007) 80 100
Avg.: 2.8% 70 90
8 80
60
70
6 50 60
40 50
4 30 40
30
20
2 20
10 10
0 0 0
Source: Fitch U.S. Leveraged Loan Default Index, Source: Fitch U.S. Leveraged Loan Default Index,
Thomson Reuters LPC, Bloomberg. Thomson Reuters LPC, Bloomberg.
Industry Defaults U.S. Institutional Leveraged Loan

While Utilities, Power & Gas and Chemicals Default Rate — Default Source
represent a large portion of the total defaulted 2007–2015
volume, the majority of the defaulted volume
for these industries came from the single Missed
bankruptcy filings of EFH in April 2014 Payment
17%
($19 billion) and Lyondell Chemical Co. in
January 2009 ($16 billion), respectively (more
color on EFH and Lyondell?). Distressed
Exchange
4%
Companies in the Broadcasting & Media;
Gaming, Lodging & Restaurants; Energy; and
Building & Materials industries represented the
largest number of defaults from 2007 to 2015.
These industries represented companies in
Bankruptcy
secular decline and companies most exposed 79%
to the effects of the recession in the years
following the financial crisis.
Source: Fitch U.S. Leveraged Loan Default Index.

June 6, 2016
Leveraged Loans
Default Rates by Industry — 2007–2015 Average

(%)
Utilities, Power & Gas

Chemicals
Real Estate
Broadcasting & Media
Building & Materials
Gaming, Lodging & Restaurants
Banking & Finance
Cable
Paper & Containers
Leisure & Entertainment
Automotive
Metals & Mining
Energy
Retail
Transportation
Consumer Products
Textiles & Furniture
Telecommunications
Services & Miscellaneous
Healthcare & Pharmaceutical
Industrial/Manufacturing
Supermarkets & Drug Stores
Food, Beverage & Tobacco
Computers & Electronics
Insurance
Total Market
0 2 4 6 8 10
Top 10 Defaulting Sectors (2007–2015) by Volume and

Number of Issuers
Amount No. of
Sector ($ Bil.) Sector Issuers
Broadcasting & Media 33.2 Broadcasting & Media 38
Utilities, Power & Gas 23.4 Gaming, Lodging & Restaurants 26
Chemicals 17.2 Energy 22
Gaming, Lodging & Restaurants 14.8 Building & Materials 21
Banking & Finance 12.0 Services & Miscellaneous 19
Energy 8.2 Retail 18
Cable 7.8 Automotive 15
Services & Miscellaneous 6.8 Transportation 13
Building & Materials 6.6 Healthcare & Pharmaceutical 12
Retail 6.4 Paper & Containers 12
Most of the defaults in our nine-year default history come from companies in cyclical sectors
that experienced severe downturns in their cash flows during the 2008–2009 financial crisis
and subsequent recession. In many cases, an overleveraged capital structure, likely issued
in the credit boom of 2006–2007 to fund a buyout or acquisition, compounded the challenges
caused by a weak operating environment. Many of these companies were then unable to reach
consensus with creditors on amend-and-extend transactions or below-par debt exchanges due
to deteriorated EBITDAs and the credit crunch that followed the financial crisis.
In other cases, such as for companies in the Broadcasting & Media industry, more permanent
secular declines in businesses — including yellow pages, newspapers, commercial printers
and some technology companies — led to bankruptcy filings. Other defaults were made
by highly leveraged companies that were confronted by individual liquidity or business
challenges that could not be overcome out of court. Drivers included flawed business
models, production problems, accounting issues, higher raw material costs, lack of funding
market access and steep declines in demand for key products due to cyclical downturns
or competition.

June 6, 2016
Leveraged Loans
What Is the Current Default Environment for Leveraged Loans?
Overall Defaults
The current default rate environment remains generally benign for leveraged loans.
The institutional leveraged loan default rate ended February 2016 at 1.6%, significantly below
the 2009 high of 10.5% and still below the 2007–2015 average of 2.8%. We believe leveraged
credit fundamentals will remain largely unchanged from what is currently reflected in our ratings
and default expectations. While leveraged loan defaults are forecast to rise, pockets of risk
remain mostly isolated to the Energy and Metals/Mining sectors.
Institutional Leveraged Loan Default Profile — 2009 Versus Now

2009 02/01/16
Overall Default Rate (%) 10.5 1.6
Overall Default Volume ($ Bil.) 77.5 14.9
Size of Market ($ Bil.) 750 940
Energy, Metals/Mining Defaults

Falling commodity prices have taken a toll on the Energy and Metals/Mining sectors. The Energy
institutional leveraged loan default rate was 12% and the Metals/Mining default rate was 26%
as of February 2016. However, the overall institutional leveraged loan market remains relatively
incubated from commodity-related pressures compared with the high-yield bond market. Energy
and Metals/Mining compose only 7% of the institutional leveraged loan market, while the high-
yield bond market composes nearly a quarter of these sectors.
Energy and Metals/Mining Exposure Limited in Loans
(Institutional Leveraged Loan Market Size Versus High-Yield Bond Market Size)
Institutional Leveraged Loan Market High-Yield Bond Market
Energy and Energy and

Metals/Mining Metals/Mining
7% 24%
Rest of Institutional Rest of High-Yield

Leveraged Loan Market Bond Market
93% 76%
Sector Fundamentals
Despite commodity prices hovering near recent historical lows, industry fundamentals are broadly
stable across the corporate universe, with 26 of 34 sectors assigned a Stable Outlook in Fitch’s 2016
U.S. Corporate Outlook. Four of the six negative sector outlooks are in commodities-related areas
(Oil & Gas, Midstream Services, Oilfield Services and Mining). Other sectors on negative outlook
include Alcoholic Beverages and Pharmaceuticals. However, these sectors are largely composed of
investment-grade issuers and do not pose a systemic risk to the leveraged loan market.

June 6, 2016
Leveraged Loans
Maturities
The bulk of institutional leveraged loan maturities have been successfully pushed back to 2020
and beyond. As a result, we do not view the refinancing cliff as a significant macro-leveraged
finance market concern in the near to midterm. At a micro level, refinancing could be a significant
credit issue for specific companies when access to debt capital tightens, as we saw in the late
stages of 2015 and first two months of 2016.
Leveraged Loan Maturity Schedule

($ Bil.)
300
250
200
150
100
50
0
2016 2017 2018 2019 2020 2021 2022 and
Beyond

June 6, 2016
Leveraged Loans
Recovery
[Credit 101] What Is Recovery?

When it comes to corporate credit analysis, recovery refers to the amount of value a creditor can
expect to recover from an investment in an event of default. Value can be in the form of cash,
new debt or stock in an entity that emerges from bankruptcy.
Debtor-in-Possession
The U.S. Chapter 11 framework is DIP. This essentially means the debtor’s management can
stay in place and operate its business in an ordinary manner while it seeks protection from
creditors and takes steps to reorganize under the supervision of specialized bankruptcy courts.
These protections include the application of an automatic stay immediately upon filing, which
restricts creditors from beginning or continuing actions to collect on most claims, and allows
access to new funding, typically in the form of super-senior DIP financing. Chapter 11 therefore
U.S. Bankruptcy Code — Priority Rules

Issuer Bankruptcy (BK)
Chapter 11 Chapter 7
1. DIP Claimsa Absolute Priority Rule:

► Priming DIP liens §364(d)
1. DIP Facility Claims
► Pari-passu DIP liens §364(d); new DIP liens § 364(c)(2)
► Super-priority unsecured DIP §364(c)(1) 2. Secured Claims (Pre-BK)
2. Super-Priority Claims 3. Priority Claimsc,g
► Inadequate protection §507(b) claim of prepetition secured creditorb 4. Priority Tax Claims
3. Priority Claimsc 5. Unsecured Claims
► Administrative expensesd
— Wages and salaries and taxes (post-petition) §503(b)(1) 6. Subordinated Claims
— Professional fees for attorneys and accountants (post-petition) §503(b)(4) 7. Equity
— Goods shipped to company within 20 days of filing (prepetition) §503(b)(9)
— Unsecured DIP funding §364(a) and §364(b)
► Unpaid wages for 180-day period prior to filing, up to $10,000 per employee (cap)
► Unpaid employee benefit plan contributions (180-day period) up to cap balance left
► Prepetition taxes
4. Secured Claims:
► Existing prepetition liens §506(a), 552(b)
5. Unsecured Claims:
► Prepetition unsecured and trade debt
► Deficiency claimse
► Executory contract rejection damages
► Defined benefit plan termination claimsf
6. Subordinated Claims
7. Equity
aThe fact that a DIP lender holds a post-petition super-priority or secured claim under section 364(c) or 365(d) does not automatically entitle it to be deemed a
administrative expense for purposes of section 1129(a)(9), which stipulates that administrative expense claims be paid in full in cash by the effective date for the plan to
be confirmed. Therefore, the chart assumes that the court provides relief in the order, approving the DIP financing for the administrative expense priority even for secured
DIP financings. bIf a prepetition secured creditor’s collateral is not adequately protected following a priming/pari DIP etc., then the difference is to be treated as a super-
priority unsecured claim under section 507(b). This is not the same as a deficiency claim. cAs per priorities laid out in section 507 of the code. Since priority claims are
nonetheless unsecured in nature, under the absolute priority rule that applies strictly under a Chapter 7 liquidation, unsecured priority claims rank lower than secured
claims. However, for Chapter 11 scenarios, administrative expense/priority claims must be satisfied in full in cash by the effective date for the plan to be confirmed as per
section 1129(a)(9) of the Bankruptcy code. The plan refers to either a plan of reorganization or a Chapter 11 liquidating plan. dAdministrative expenses refer to the actual,
necessary costs and expenses of preserving the estate, which are allowed under Code Section 507(a)(2) and specified in 503(b). The code requires that all administrative
claims be paid on the effective date of the plan, unless a particular claimant agrees to a different treatment. Holders of super-priority administrative expenses under
§ 507(b) are paid before other administrative expenses. eSecured claims that are undercollateralized result in deficiency claims §506 (representing that portion of the
claim for which there is insufficient collateral). Deficiency claims are treated pari passu with unsecured claims. fIf defined benefit pension plans are terminated during
bankruptcy, the resulting unfunded pension liability claim is treated as a unsecured claim but is structurally senior relative to the general unsecured creditor claims.
gIf a Chapter 11 is converted to a Chapter 7, the administrative expenses of a Chapter 7 (including trustee fees) take priority over the Chapter 11 administrative expenses.
DIP – Debtor-in-possession.

June 6, 2016
Leveraged Loans
gives a company breathing room to operate its business with the same management — or a
chief restructuring officer to be appointed if management has departed or been released by the
ownership — while it negotiates a restructuring that satisfies the desire to remain a GC and
generate the highest possible recoveries for all stakeholders via rehabilitation.
Chapter 11 allows a debtor to propose a plan of reorganization — and sometimes liquidation

— before it can emerge from bankruptcy. The plan is voted on by creditors and is subject to
court approval. If the plan proposed by the debtor is rejected and/or the debtor’s exclusive time
period for proposing a plan has lapsed, creditors and/or other interested parties may propose an
alternative or competing plan. In the event of competing plans, creditors will again be entitled to
vote on the competing plans, with the court approving the plan if it is considered to be fair and
equitable, and representative of the best and highest recovery for creditors.
Absolute Priority
Under Chapter 11 bankruptcy code, the absolute priority rule establishes the order in which
creditors get paid. Relative seniority is key for recovery performance, as debtholders get paid
before equityholders, and secured debtholders get paid before unsecured debtholders. The one
exception is unsecured administrative claims, which must be paid in full before secured claims
for a Chapter 11 plan of reorganization (or plan of liquidation) to be confirmed. The graphic below
outlines the priority schedule for different types of claims.
Enterprise Valuation
The fundamental estimates of reorganization enterprise value (EV) are critical to the bankruptcy
reorganization process. The fundamental EV, or negotiated settlement value, determines the
amount of value, if any, to be distributed to each class of creditors. Fundamental EV estimates
are typically completed by third-party advisors on both a going-concern reorganization basis and a
liquidation-alternative basis for the disclosure statements used in the bankruptcy plans. The most
common going-concern valuation methods applied by third-party financial advisors are discounted
cash flow approaches, comparable company peer analyses and precedent transaction analyses.
Valuations are more often based on higher EBITDA projections for the company post emergence
than historical EBITDA levels prior to the bankruptcy filing. Higher cash flows post emergence
can be due to expectations of cyclical recoveries or cash flow benefits from shedding legacy
liabilities — including union liabilities, lawsuits, rejection of unprofitable leases or achieving other
improvements in cost structure — during the reorganization process.
However, lower EBITDA after emergence can also be projected by companies that expect to
remain mired in deep cyclical downturns or face the secular decline of their products or services,
even after reorganization. Lower EBITDA forecasts can also be a function of shrinking the
company during the bankruptcy process through asset sales or company split-ups.
Courts deal with valuation on a case-by-case basis, and it is often a negotiated value determined
through a settlement among the various classes of claimants.
Creditor Negotiations
Senior and junior creditors often have opposing views on valuation. Impaired senior creditors —
whose claims are not fully repaid in cash or through reinstatement (including principal and interest),
and who wish to get most of a reorganizing company’s new equity instead — have an incentive
to support a lower EV. This enables the senior creditors to prevent junior creditors or old common
shareholders from getting any or a greater share of the new equity. Conversely, junior creditors
and old common shareholders have a motive to value the reorganizing company at a higher EV to
assume a controlling or material ownership interest in the newly reorganized company.

June 6, 2016
Leveraged Loans
Even within the same class or seniority, creditors can have different motivations regarding
valuation and case resolution. For example, a distressed investor that purchased an unsecured
debt issue at a deep discount and wants to make a quick profit may not act like a regular trade
creditor that wants to retain the customer for future business.
Because Chapter 11 entitles junior investors to insist on an appraisal of the debtor, the outcome
of which is uncertain and can rapidly change, impaired senior lenders often agree to make
distributions to junior creditors to lock in a “yes” vote on acceptance of a plan of reorganization.
Fitch refers to these types of negotiated payments as concession payments. Concession
payments highlight the complexity of the bankruptcy valuation negotiation process, where
disparate creditor motivations may result in deviations from the rule of absolute priority.
[Credit 101] What Is DIP Financing?

A DIP facility is a form of financing arranged by a company while under the Chapter 11 bankruptcy
process. DIP financing provides a bankrupt company with the funds necessary to operate its
business while it is developing and implementing its plan of reorganization. DIP financing has
super priority and is expected to recover before other pre-petition creditors on the liability waterfall.
In some cases, pre-petition lenders can convert all or a portion of their pre-petition claims into a DIP
facility. This is referred to as a roll-up DIP. This gives the debtor new liquidity during bankruptcy and
enables the pre-petition creditor to elevate its pre-petition claim to administrative priority status.
For more information on DIP financing, please refer to our Leveraged Loan Reference Data section.
DIP Loan Summary

Characteristic Description
Description Financing arranged by a company while under the Chapter 11 bankruptcy process.
Purpose Provides a bankrupt company with funds necessary to operate its business while it is developing and
implementing its plan of reorganization.
Priority Super priority, above other pre-petition creditors on the liability waterfall.
Security Unencumbered assets and/or a priming lien on encumbered assets by providing adequate protection
of the interest of the existing lender holding a lien on such assets.
Size $1 Mil. plus.
Facility Types Revolvers and term loans.
Funding Status Can be drawn and undrawn.
Tenor 12–24 months.
Arrangers Commercial banks and specialized finance companies.
Investors Prepetition lenders.
Nontraditional DIP lenders including institutional lenders, CLOs/CDOs and hedge funds.
Liquidity Limited to none.
CDO – Collateralized debt obligations. DIP – Debtor in possession.
[Credit 101] How Does Fitch Estimate Recovery?
Recovery Ratings
For issuers with IDRs at ‘B+’ and below, Fitch performs a bespoke recovery analysis. Fitch completes
a company valuation in a distressed scenario under both a GC and liquidation approach. GC
means emergence from bankruptcy and continuing to stay in business, and liquidation approach
means ceasing all operations, such as a retailer going out of business and having an inventory
liquidation sale. The higher of the two resulting values is then allocated to creditors according to
their relative seniority. This is consistent with the best interest test applied in Chapter 11 plans.
About 80% of the time, Fitch’s valuation is higher under the GC method, which is about the same
share of GC outcomes for large company cases Fitch has analyzed in its bankruptcy case study
enterprise valuation and creditor recovery report series.

June 6, 2016
Leveraged Loans
Fitch also makes assumptions that a portion of the total value will be allocated to administrative
expenses and claims, such as lawyer and consultant fees and DIP loan claims — this is usually
10% of value.
Fitch also makes an assumption that a certain percentage — usually 5% — of the remaining
value will be allocated from a more senior creditor to a more junior creditor. This is a result of
consensual settlements assumed to happen during the bankruptcy process to incent the junior
creditors to vote to accept the proposed plan of reorganization and allow the company to emerge
from bankruptcy more quickly.
Fundamental Drivers of Recovery Ratings (RR)

1. Enterprise or Liquidation Valuation
Going-Concern Approach Liquidation Approach
Assumed
Going Concern EBITDA Book Value of Assets
x x
Reorganization Multiple Advance Rate%
= =
Enterprise Valuation (EV) Liquidation Value (LV)
Higher of LV and EV
2. Distribution to Various Claimants
Outputs:
Administrative
Expense Priority/Administrative Claims
Assumption (%)
Sr. Secured Claims RR Secured
RR Unsecured
Sr. Unsecured Claims
Concessions Sr. Subordinated RR Subordinated

Assumption
Old Equity
A schematic of the process is shown above. Each debt issue in the capital structure is assigned
an RR based on its expected recovery rate range — distributions as a percentage of the claim
amount. Fitch’s six-category RR scale is shown in the table below.
Recovery Ratings (RR) Scale

RR Description Recovery (%) Issue Notching from the IDR
RR1 Outstanding 91–100 +3 (Usually Secured Debt Only)
RR2 Superior 71–90 +2 (Unsecured Usually Capped)
RR3 Good 51–70 +1
RR4 Average 31–50 +0
RR5 Below Average 11–30 (1)
RR6 Poor 0–10 (2)–(3)
IDR – Issuer Default Rating.

June 6, 2016
Leveraged Loans
For more information on Fitch’s Recovery Rating Methodology, including revolver assumptions
and multiples used for valuation, please refer to the Criteria Summaries in the appendix.
Bankruptcy Case Studies

Fitch has gathered real world data on over 150 bankruptcy cases and analyzed their outcomes to
create a useful feedback loop that we incorporate into our recovery analyses. We have published
a series of bankruptcy case study reports since 2012 and will continue to expand on this effort.
Published Bankruptcy Case Study Reports

Title Date
Industrial and Manufacturing Bankruptcy Enterprise Value and Creditor Recoveries
(Fitch Case Studies — Edition IX) 01/28/16
Healthcare, Food, Beverage and Consumer Bankruptcy Enterprise Value and Creditor Recoveries
(Fitch Case Studies — Edition VIII) 08/12/15
Energy, Power and Commodities Bankruptcy Enterprise Value and Creditor Recoveries
(Fitch Case Studies — Edition VII) 04/27/15
Automotive Sector Bankruptcy Enterprise (Fitch Case Studies — Edition VI) Value and Creditor Recoveries 12/12/14
Telecom, Media and Technology Bankruptcy (Fitch Case Studies — Edition V of a Recurring Series)
Enterprise Values and Creditor Recoveries 08/09/14
U.S. Gaming, Lodging and Restaurant Bankruptcy Enterprise Valuation and Creditor Recoveries 09/04/13
U.S. Retail Case Studies in Bankruptcy Enterprise Values and Creditor Recoveries 04/16/13
Case Studies in Bankruptcy Enterprise Values and Creditor Recoveries — Volume 2 02/14/13
Case Studies in Bankruptcy Enterprise Values and Creditor Recoveries 06/07/12
The median corporate reorganization multiple was 5.98x for 155 companies across sectors, for
which bankruptcy exit multiples could be estimated. The distribution of multiples are illustrated in
the chart below, which provides further support to the 6.0x median multiple employed in Fitch’s
recovery methodology.
Midpoint EV/EBITDA Multiple for Companies Reorganized as Going Concern

(Count)
70
60
50
40
30
20
10
0
<= 3.0x 3.1x–5.0x 5.1x–7.0x 7.1x–9.0x 9.1x–11.0x > 11.0x
EV – Enterprise value.
Source: Fitch bankruptcy database, company filings.

June 6, 2016
Leveraged Loans
The bankruptcy case studies also
Majority of Bankrupt Companies Reorganized
indicated most companies are as Going Concern
reorganized as GCs because this (Bankruptcy Resolution for 187 Case Studies
produces a higher value than would be as of Jan. 28, 2016)
realized in liquidation. Ownership often

Liquidation
changes hands in bankruptcy court, but 20%
most businesses continue to produce
revenues and cash flows under the
new owners in reorganization.
The Retail sector is an exception,

with full chain liquidations a frequent
outcome due to noncompetitive
business models or undifferentiated Going
lines. It is consequently appropriate to Concern
80%
estimate a company’s value on both a
GC and liquidation basis, and use the Source: Fitch Ratings, company filings.
higher value to estimate recoveries for

the different creditor classes, which is
consistent with the best interest test in
the bankruptcy code.

June 6, 2016
Leveraged Loans
Bankruptcy Case Study — Station Casinos, Inc. et al.
Below we present an excerpt from one of our bankruptcy case study reports.
Station Casinos, Inc., et al. ($ Mil., Except Where Noted)

Issuer Profile Key Drivers of Bankruptcy Filing
Key Driver Deep Cyclical Trough
Fitch Industry Classification Leisure and Entertainment
Subsector Casinos Key Driver Untenable Capital Structure
Prepetition Ticker Symbol Not publicly traded
Petition Date Assets 5,832 Financial Profile
Emergence Parent Company Name/Ticker Station Casinos LLC/Privately Held 12-Month Period Amount
Prepetition EBITDAb 2008 406
Bankruptcy Summary Post-Emergence EBITDA Forecast No Projections Disclosed
Did All Entities in the Group File?a No
Plan Proposed by Debtor Enterprise Value (EV) Range
Court District Nevada Low 1,771
Substantive Consolidation No High 1,771
Petition Date 7/28/09 Midpoint EV 1,771
Confirmation or Conversion Date 8/27/10 Equity Value Range (Including Cash On Hand)
Effective Date 6/17/11 Low N.A.
Duration (Months) 13 High N.A.
Filing — Type Chapter 11 (Prepackaged) Midpoint EV/Post-Emergence EBITDA Estimate (x) N.A.
Section 363 Asset Sale by Debtor Yes — Sale of Substantially All Assets
(as Going Concern)
Petition Date Versus Emergence Date
Voluntary or Involuntary Filing Voluntary
Petition Emergence
Postconfirmation Liquidating Trust Not Available Datec Dated
Resolution Emerged/Reorganized (Private) Total Debt 6,483 2,435
Consolidated Leverage (x) 16.0 N.A.
Debt Shed in Bankruptcy 4,048
Debt Shed in Bankruptcy (%) 62
Events Leading Up to Bankruptcy (or Contributing Factors)

Station Casinos (SCI) became significantly leveraged as a result of a going private transaction completed in November 2007 (the Merger). The Merger added
$3,650 million of secured bank debt to the balance sheet.
Shortly after SCI went private, there was a sharp downturn in the economy and consumer spending. Due to weak economic conditions, including the credit crisis and a
decrease in consumer confidence levels, the company experienced a significant reduction in revenues. The greater Las Vegas area, where SCI’s casinos are located, was
especially hard hit from rising unemployment, reduced travel and a severe housing crisis. The value of the company’s property assets declined as a result of the weak local
economy and depressed real estate market. Operating results declined and additional credit to restructure and refinance debt was not available. This led to the bankruptcy
filing in July 2009.
Enterprise Valuation Estimate Summary

Sale of the OpCo Assets, Foreclosure of PropCo Assets
SCI and its OpCo subsidiaries sold most of their assets through an auction process (sales excluded the PropCo assets that were foreclosed on by its lenders) in
August 2010.
The stalking-horse bid from Fertitta Group and the mortgage lenders valued the OpCo assets at $772 million and left the casinos in the hands of the founding Fertitta family.
There were no other bidders aside from the stalking-horse bid, which resulted in $0 recoveries for OpCo unsecured creditors.
The value of the PropCo assets was not disclosed, but if the new $1,600 million PropCo exit debt is valued at par and the new equity is worth $171.2 million based on
the sale of 50% of the new equity to the Fertitta Group for $85.6 million by the foreclosing lenders that became the new owners, then PropCo had an estimated EV of
$1,771.2 million.
The total Station Casinos EV, including the OpCo and PropCo estimated values, is $2,543.2 million. Excluded from the EV and the bankruptcy were the Green Valley Ranch
and Aliante Station casinos, which filed a separate bankruptcy petition.
Station Casinos had three major financing entities: OpCo, a financing vehicle that owns most of the casinos, joint ventures, licenses, vacant land, and intellectual property;
PropCo, owner of four major hotel casinos: Red Rock, Sunset, Palace and Boulder; and Landco, owned two parcels of vacant land in the Las Vegas metropolitan area.
Liquidation Value Alternative

The liquidation analysis dated July 30, 2010, estimated a range of liquidation value for PropCo/Mezzco of $1,180 million–$1,304 million.
a
Green Valley Ranch and Aliante Casinos filed a separate bankruptcy petition. bSource: 2008 10-K and. cSource: Bankruptcy petition dated July 24, 2009. dEmergence
debt excludes any revolver borrowings. eStation Casinos, Inc. had three major financing entities: OpCo, a financing vehicle that owns most of the casinos, joint ventures,
licenses, vacant land and intellectual property; PropCo, owner of four major hotel casinos: Red Rock, Sunset, Palace and Boulder; and Land co, owned two parcels of
vacant land in the Las Vegas metropolitan area. DIP – Debtor in possession. N.A. – Not available. Continued on next page.
Source: Company disclosure statement for the first amended joint plan of reorganization dated July 28, 2010.

June 6, 2016
Leveraged Loans
Station Casinos, Inc., et al. ($ Mil., Except Where Noted) (Continued)
Estimated Recoveries for Select Claims
Form of Distribution
Projected
Claim Allowed Recovery Equivalent Secured Unsecured Subordinated New Options/
Seniority Claim Type Claims (%) RR Category Cash Notes Notes Notes Equity Warrants
DIP $185 Million Vista DIP Facility 173 0.0 RR6 — — — — — —
DIP Past Enterprises DIP Facility 154 0.0 RR6 — — — — — —
Secured SCI OpCo Bank Facility 884 88.0 RR2 317 455 — — — —
Secured PropCo CMBS Mortgage Loans 1,801 N.D. RR1 86 1,600 — — 86 —
Secured PropCo CMBS Mezzco Loans
(Loans I–IV) 676 0.0 RR6 — — — — — —
Secured Land Loan 242 43.0 RR4 — 105 — — — —
Unsecured SCI 6% and 7.75%
Senior Unsecured Notes 850 0.0 RR6 — — — — — —
Unsecured PropCo General Unsecured Swap
Claim 144 0.55 RR6 8 — — — — —
Subordinated SCI Senior Subordinated Notes 1,558 0.0 RR6 — — — — — —
Intercompany Intercompany Claims 0 0.0 RR6 — — — — — —
Equity Equity Claims 0 0.0 — — — — — —
Estimated Claims 6,482 Recoveries 411 2,160 0 0 86 0
New Borrowings at Emergence 275
Debt of Nonfiling Affiliates on
Emergence Date 0
Claim Claim
Seniority Type Description
DIP $185 Million Vista DIP Facility • The DIP was unsecured, subordinated and had administrative priority (except holders would receive
$0 distributions if OpCo prepetition lenders were not paid in full). SCI OpCo Lenders were not paid in full.
• The lender was a nondebtor affiliate of SCI.
• The DIP terms required an affiliate SCI, Vista Holdings, to maintain cash and equivalents of at least $100 million.
• Repayment of the DIP was subordinate to SCI’s OpCo prepetition bank facility lender claims.
• The DIP facility claims held by Vista and Past Enterprises (amounts not disclosed) received no distributions
under the plan and were extinguished. There was $172.9 million outstanding under the DIP as of May 31, 2010.
DIP Past Enterprises DIP Facility • The Past Enterprises loan was unsecured and had administrative priority (except claims would receive
$0 distributions if OpCo prepetition lenders were not paid in full).
• Repayment was subordinate to full repayment of the SCI prepetition OpCo credit agreement claims. The Past
Enterprises facility lender was an affiliate of SCI.
• The DIP facility claims of Vista and Past Enterprises received no distribution and were extinguished.
• There was $154 million borrowed under the facility and $84 million cash held at the Past Enterprises affiliate as
of May 31, 2010.
Secured SCI OpCo Bank Facility • There were petition date borrowings and interest of approximately $884 million under the $900 million revolver
and term loan facility, including $10 million letters of credit.
• Secured by a first-priority interest in properties owned by certain subsidiary guarantors.
• The OpCo lenders supported a $772 million stalking-horse bid for the OpCo assets by Fertitta Gaming,
Colony Capital and the PropCo lenders.
Secured PropCo CMBS Mortgage Loans • The $1,801 million claim represents outstanding principal amount and was assumed on the effective date.
• Secured by four casino properties: Palace Station Hotel & Casino, Boulder Station Hotel & Casino, Sunset
Station Hotel & Casino, Red Rock Casino Resort Spa and certain related assets.
• The mortgage lenders took ownership of the PropCo assets and sold 50% of the equity to a newly formed entity
owned by the Fertitta family for $85.6 million.
Secured PropCo CMBS Mezzco Loans • The $676 million claim represents the collective principal amount of the four PropCo CMBS Mezzco loans.
(Loans I–IV) • The various loans to the Mezzco borrowers were secured by a pledge of equity interests of the owners.
Secured Land Loan • Holders of the loan received rights to purchase 60% of Landco’s equity for nominal value in addition to the
$105 million new note.
Unsecured SCI 6% and 7.75%
Senior Unsecured Notes • Consisted of $450 million 6% due 2014 and $400 million 7.75% notes due 2016.
Unsecured PropCo General Unsecured Swap • PropCo general unsecured swap claim received $7.9 million cash from the mortgage lenders in a
Claim concession payment.
Subordinated SCI Senior Subordinated Notes • Consisted of $450 million 6.5% notes due 2014, $700 million 6.875% notes due 2016, and $300 million 6.625%
notes due 2018.
• Received no recovery under the plan.
Intercompany Intercompany Claims • Intercompany claims were extinguished with no recovery. PropCo intercompany claims were $8.8 million, and
there were also various Mezzco intercompany claims of approximately $5.9 million each.
Equity Equity Claims • Received no recovery.
RR – Recovery Rating. DIP – Debtor in possession. N.D. – Not disclosed. Continued on next page.
Source: Company disclosure statement for first amended joint plan of reorganization dated July 28, 2010, unless otherwise noted.

June 6, 2016
Leveraged Loans
Station Casinos, Inc., et al. ($ Mil., Except Where Noted) (Continued)
Additional Information
Cash on Filing Date Not disclosed. Cash and equivalents were $315.4 million and restricted cash was $90 million on June 30, 2009
(source: 10-Q filing for period ended June 30, 2009).
Prepetition Bank Facility Commitments OpCo: $900 million prepetition credit facility consisting of a $650 million revolver and $250 million term loan due August 2012.
PropCo had $1,800 million of CMBS debt.
Prepetition Bank Facility
Borrowings on Filing Date The OpCo facility had $884 million of borrowings.
Was the DIP a New Money Facility or The $185 million DIP was a new money facility that was lent to SCI by Vista Holdings, a nondebtor affiliate of SCI.
Roll Up of a Prepetition Facility? Another affiliate, Past Enterprises, provided a postpetition new money revolving credit facility.
Disclosure or Estimate of Total
Administrative and Priority Claims for Not disclosed. Per disclosure in Station Casinos, Inc. 2010 10K and Station Casinos LLC second-quarter 2011 10Q,
Entire Period of Bankruptcy Proceeding? Fitch estimates professional fees associated with the restructuring at $159 million.
If Yes, Admin. + Priority as % of
Enterprise Value? Not available. The professional fees portion was 6.3%.
Executory Contracts Not disclosed. A compromise settlement was reached on master lease payments for certain hotels to reduce the rent.
Deficiency Claims Yes. Unsecured portion of opco credit agreement claims were treated as general unsecured claims.
Contingent Claims No material contingencies noted.
Intercompany Claims Intercompany claims were extinguished with no recovery under the plan.
Pension Claims/Motions The company terminated the supplemental executive retirement plan and the supplemental management retirement plan in
the bankruptcy. The claim was not disclosed. The benefit obligation was approximately $26 million.
Postpetition Interest? Yes
If Yes, Recipient Class Not applicable
Concession Payments Yes
Recipient Propco General unsecured swap claim
DIP – Debtor in possession.
Source: Company disclosure statement for first amended joint plan of reorganization dated July 28, 2010, unless otherwise noted.
Recovery Rating Backtesting

Fitch’s RRs provide an unbiased and somewhat conservative estimate of recoveries. In a recent
back test, our RRs were within one RR category of the implied RR — based on 30-day post-
default security trading prices — for 81% of the138 Fitch-rated debt issues that defaulted from
January 2008 to July 2015.
Forecast Delta Default +30-Day Issue Price Implied RR Versus Fitch RR Estimate
(All Seniorities)
Fitch RR < Price-Implied RR Fitch RR > Price-Implied RR Cumulative
(%, Sample Issues)
120
100
80
60
40
20
0
Zero Error One Notch Two Notches Three Notches Four Notches or More
RR – Recovery Rating. Note: U.S. corporate public Issuer Default Ratings of B+ and lower only.
How Do Leveraged Loans Perform in Fitch’s Recovery Analyses?

Overall Distributions
Fitch assigns RRs based on ultimate recovery expectations. In the recurring Road to Recovery
Ratings report series, Fitch deconstructs its recovery analyses and explores the effects of
different capital structures and leverage on RRs for the first lien debt instruments of 206 U.S.
speculative-grade issuers.

June 6, 2016
Leveraged Loans
The RRs on first lien secured debt issues are concentrated at the ‘RR1’ end of the recovery
scale, corresponding to a 91%–100% ultimate recovery rate expectation. While the sample
is not exclusive to leveraged loans, the vast majority of our sample is composed of first lien
secured leveraged loans.
Recovery Rating Distribution — First Lien Debt 2015
(% of Issues)
80
60
40
20
0
RR1 RR2 RR3 RR4 RR5 RR6
RR – Recovery Rating. Note: U.S. corporate public Issuer Default Ratings and Credit Opinions of 'B+' and lower only.
Capital Structure Influences

In Fitch studies, first lien RR expectations decreased as the proportion of first lien debt to total
debt increased, although there were strong recoveries for most first lien issues regardless of
leverage through the first lien.
First Lien Loans and Bonds RR Distribution by First Lien Leverage Ratio
(%)
100
80
60
40
20
0
<3 ≥ 3–< 5 ≥ 5–< 7 ≥7
RR – Recovery Rating.
Source: Company reports for public ratings and Credit Opinions, Fitch Ratings.
First lien debt issue recoveries are somewhat more insulated from decreases in EV due to
the protection of having a more senior position in the distribution waterfall. Exceptions include
cases when all debt in the capital structure is equally secured with a first lien, there is more
than one type of first lien issue (each with a different collateral package) or the issuer is grossly
overleveraged, so recoveries are sensitive to declines in EV.

June 6, 2016
Leveraged Loans
What Are the Historical Post-Default Prices for Leveraged Loans?
The topic of recovery has substantial nuance, and there are multiple ways to measure recovery
on defaulted corporate debt. Each approach has pros and cons, but in the end, all are linked and
reflect some assessment of firm value. The 30-day post-default price is a widely available and
often used proxy for recovery rates.
First Lien Institutional Leveraged Loan 30-Day Post-Default Prices

(2007–2015 Historical Distribution)
Average 61.7%, Median 66.1%

(%)
35
30
25
20
15
10
What Are the Historical Emergence Prices for Leveraged Loans?

Another widely available and often used proxy for recovery rates is the emergence price.
We define emergence as the time shortly after a plan of reorganization has been confirmed
by a bankruptcy court — and approved by requisite creditors — but before pre-petition debt
is canceled and replaced with new debt and equity. Fitch research has shown that in times
of market stress, post-default loan prices can be less predictive of ultimate recovery, making
emergence prices another useful reference point.
First Lien Institutional Leveraged Loan Emergence Prices

(2007–2015 Historical Distribution)

(%)
35
30
25
20
15
10

June 6, 2016
Leveraged Loans
CLOs
[Credit 101] What Is a CLO?

A CLO is a form of securitization where a collection of assets, known as collateral, are pooled
together and then sold to investors in various tranches. CLO collateral is primarily composed of
broadly syndicated and middle-market leveraged loans. Some CLOs may also include corporate
bonds, other CLOs, structured finance securities and equity as collateral.
CLO Life Stages

Warehouse Assets 1–6 Months
Structuring 2–3 Weeks
Draft Documents 7–9 Weeks
Equity Marketing 1–4 Weeks
Debt Marketing 1–4 Weeks
Pricing < 1 Week
Closing and Funding 3–5 Weeks
Ramp-Up Period 3–6 Months
Noncall Period 2–3 Years
Reinvestment Period 4–5 Years
CLO Types
There are two main types of CLOs:
●● Arbitrage CLOs are created in an attempt to capture the excess spread between higher
yielding assets and lower yielding liabilities. Because the equity tranche receives all residual
cash flows, all excess interest earned by the collateral is paid to the equity tranche holders.
●● Balance sheet CLOs are used by issuers as a financing vehicle to obtain additional capital,
which is secured by the assets on its balance sheet. Typically the issuer retains the equity
in the transaction and the special purpose vehicle is consolidated onto the balance sheet.
CLO Types and Characteristics (Post Credit Crisis)

Arbitrage CLO Balance Sheet CLO
Market Share Approximately 95% Market Share 5%
Portfolio Selector Portfolio manager Portfolio Selector • Banks
• Specialty finance companies
Debt Issuer Bankruptcy-remote SPV Debt Issuer Bankruptcy-remote SPV
Purpose • Structured exposure to leveraged Purpose • Reduction of regulatory capital
loan market
• Reduces credit risk
• Management fees
• Cheaper financing
Collateral Type Primarily broadly syndicated Collateral Type Middle-market or broadly syndicated
leveraged loans leveraged loans
Collateral Security Primarily senior secured loans Collateral Security Primarily senior secured loans
Collateral Origination/ • Loans purchased into SPV from primary and Collateral Origination/ • Loans on balance sheet are transferred
Sourcing secondary market Sourcing into SPV
• Issuer not involved in asset origination • Issuer involved in asset origination
SPV – Special-purpose vehicle. OC – Overcollateralization. IC – Interest coverage. Continued o next page.


June 6, 2016
Leveraged Loans
CLO Types and Characteristics (Post Credit Crisis) (Continued)

Arbitrage CLO Balance Sheet CLO
Issuer Capital Structure Primarily floating-rate notes with varying levels of Issuer Capital Structure Primarily floating-rate notes with varying
priority and a (typically) unrated equity tranche levels of priority and a (typically) unrated
equity tranche.
Forms of Credit Enhancement • Generally 33%–38% subordination below Forms of Credit Enhancement • Generally, 35%–50% subordination below
senior class senior class
• OC of rated notes • OC of rated notes
• Spread arbitrage • Spread arbitrage
• OC and IC tests that, if failing, divert proceeds • OC and IC tests that, if failing, divert
to redeem senior notes proceeds to redeem senior notes
Average Life of Liabilities 5–10 years for senior notes, 7–10 years for Average Life of Liabilities 5–10 years for senior notes, 7–10 years for
subordinated notes and equity subordinated notes and equity
Portfolio Management Style • Usually managed; Three- to four-year Portfolio Management Style • Static or managed. If managed, one- to
reinvestment periods three-year reinvestment period
• Reinvestment subject to satisfaction or • Reinvestment subject to satisfaction or
maintenance/improvement of portfolio maintenance/improvement of portfolio
covenants covenants
Use of Leverage Yes, 7x–12x (debt/equity) Use of Leverage Yes, 1x–5x (debt/equity)
SPV – Special-purpose vehicle. OC – Overcollateralization. IC – Interest coverage.

[Credit 101] What Are the Mechanics of an Arbitrage CLO?

An arbitrage CLOs is created in an attempt to capture the excess spread between higher yielding
assets (i.e. a portfolio of leveraged loans) and lower yielding liabilities (i.e. multiple tranches with
various ratings).
Arbitrage CLO Transaction

Administrative Agents
Trustee Collateral Administrator

Typical
Assets Liabilities (Typical Rating) c/e (%)
Class A (AAAsf) 34–40
Issuance Proceeds Issuance Proceeds
Class B (AAsf) 24–28
Special-Purpose
Class C (Asf) 16–22
Portfolio of Vehicle
Leveraged Loans
Class D (BBBsf) 11–16
P&I from Loans P&I from Loans
Class E (BBsf) 7–11
Asset Managera Equity (NR) 0
Arranger
aAssetmanager typically contributes a portion of equity. P&I – Principal and interest. C/e – Credit enhancement (based on subordination). NR – Not rated.

June 6, 2016
Leveraged Loans
Cash flows received from the underlying CLO collateral must follow a defined sequence of
use known as a waterfall. Below we present a typical arbitrage CLO waterfall for interest and
principal payments.
Arbitrage CLO Interest/Principal Waterfall

Arbitrage CLO Interest Waterfalla Arbitrage CLO Principal Waterfallb
Trustee and Other Agent Fees Unpaid Senior Fees

Senior Fees
Hedge Payments (If Applicable)
Unpaid Class A Interest

Senior Management Fee (0.15%–0.20%)
Class A Interest Unpaid Class B Interest
Class B Interest
If any senior coverage tests are failing,
pay principal on the senior notes until the Senior Coverage Testsb
Senior Coverage Tests
applicable test is cured or until the class is
paid in full.
Class C Interest Class C Coverage Testsb,c

If any Class C coverage tests are failing,
pay principal sequentially beginning with
Class C Coverage Tests
the senior notes, until the applicable test is
cured or until the classes are paid in full.
Class D Coverage Testsb,c
Class C Deferred Interest
Class D Interest Class E Coverage Testsb,c

If any Class D coverage tests are failing,
Class D Coverage Tests
Reinvestment (During Reinvestment Period)
Class D Deferred Interest
Class E Interest Sequential Redemption of Notes

If any Class E coverage tests are failing,
Class E Coverage Tests
Unpaid Subordinate Management Fee
This test is only applicable during the
Class E Deferred Interest reinvestment period and is usually
calculated in the same fashion as the
junior-most OC test, with a higher test
Interest Diversion Test threshold. If failing, some percentage Other Unpaid Fees
(e.g. 60%) of the remaining interest
proceeds at this point of the waterfall can
Subordinated Management Fee (0.25%–0.40%) be used to reinvest in additional collateral
or redeem the notes.
Equity Holders (Until Target IRR Reached)
Equity Holders (Until Target IRR Reached)
15%–20% of Remaining Proceeds to 15%–20% of Remaining Proceeds to

Collateral Manager, 80%–85% to Equity Collateral Manager, 80%–85% to Equity
aTransaction waterfalls can and do vary from deal to deal. These waterfalls are displayed for indicative purposes only. bCertain coverage tests may only be applicable in
the principal waterfall during the reinvestment period or may not be included in the principal waterfall at all. cNonsenior coverage tests will usually include provisions for
the payment of unpaid mezzanine/subordinate tranche interest amounts, in addition to payment of principal. Note: Coverage tests — overcollateralization (OC) and
interest coverage (IC) tests.

June 6, 2016
Leveraged Loans
[Credit 101] Who Are CLO Market Participants?
CLO Managers
With the increased demand and issuance of CLOs in recent years, new entrants to the market
took advantage of favorable conditions and entered a space historically dominated by large
institutional firms. As expected, the profile of newer entrants in terms of size is quite different
than the frontier CLO 2.0 issuers of 2010 and 2011. Average firm assets under management of
later entrants are significantly less than early issuers.
Top 25 CLO Managers By Assets Under Management

USD EUR Total
Rank Manager Bil. No. Bil. No. (USD Bil.) No.
1 GSO Capital Partners 12.25 24 7.20 24 20.07 48
2 Carlyle Group 13.41 30 5.69 16 19.60 46
3 Credit Suisse Asset Management 14.47 23 1.77 6 16.40 29
4 Ares Management 13.48 30 1.92 7 15.57 37
5 CIFC Asset Management 12.91 29 0.00 0 12.91 29
6 Apollo Global Management 11.63 20 0.79 2 12.49 22
7 Alcentra 5.11 14 6.02 18 11.65 32
8 Prudential Investment
Management (Pramerica) 8.91 19 2.32 6 11.43 25
9 3i Debt Management 5.40 12 5.13 17 10.98 29
10 Highland Capital Management 10.87 26 0.00 0 10.87 26
11 CVC Credit Partners 8.46 21 2.14 5 10.78 26
12 KKR Financial Advisors 5.82 9 4.46 15 10.67 24
13 Octagon Credit Investors 9.45 17 0.00 0 9.45 17
14 MJX Asset Management 9.12 17 0.00 0 9.12 17
15 Oak Hill Advisors 7.36 14 1.55 4 8.91 18
16 Voya Alternative 8.78 20 0.00 0 8.78 20
Asset Management
17 Babson Capital Management 6.17 14 2.22 6 8.59 20
18 Golub Capital 8.19 19 0.00 0 8.19 19
19 Sankaty Advisors 7.14 15 0.73 2 7.93 17
20 Fortress Investment Group 7.75 13 0.00 0 7.75 13
21 Columbia Management 7.51 14 0.00 0 7.51 14
22 Och Ziff 7.50 13 0.00 0 7.50 13
23 BlueMountain
Capital Management 7.30 17 0.00 0 7.30 17
24 Invesco 6.39 15 0.31 2 6.72 17
25 Halcyon Loan Management 5.30 12 1.17 5 6.57 17
Source: Creditflux.
Investors
The CLO investor base expanded over the past several years as the asset class became more
attractive in a world of unappealing unlevered credit yields in other products. The ‘AAA’ investor
base, in particular, continues to broaden and now includes regional U.S. banks to go along with
the U.S. investment banks, Asian banks, insurance companies and pension funds. Prior to 2012,
it was common for an anchor investor to take down the entire ‘AAA’ tranche. The broadening of
the investor base has allowed the senior most tranches to be divided among several investors.
CLO Investor Base

AAA Notes Mezzanine Notes Equity
• Insurance Companies • Hedge Funds • Private Equity
• Foreign Banks (European and Asian) • Asset Managers • CLOs (Vintage CLO 1.0)
• Pension Funds • Insurance Companies • Credit Opportunity Funds
• U.S. Regional Banks • CLOs (Vintage CLO 1.0) • CLO Managers
• U.S. Investment Banks

June 6, 2016
Leveraged Loans
CLO Holdings
CLO holdings are well diversified across industries, with the greatest concentration in Technology,
Healthcare and Retail. Below is a table of companies with the most debt held by CLOs.
Top 50 Holdings in U.S. CLO Portfolios

Rank Company Name Industrya Principal ($ Bil.)
1 Valeant Pharmaceuticals International, Inc. Healthcare & Pharmaceutical 3.74
2 First Data Corp Class A Computers & Electronics 3.26
3 Asurion Corp. Insurance 3.01
4 Avago Technologies Ltd. Computers & Electronics 2.79
5 Community Health Systems, Inc. Healthcare & Pharmaceutical 2.53
6 Albertson's Inc. Supermarkets & Drug Stores 2.46
7 Numericable SAS Cable 2.27
8 Calpine Corporation Utilities, Power & Gas 2.09
9 Chrysler Corporation Automotive 1.99
10 Charter Communications, Inc. Class A Cable 1.97
11 Fortescue Metals Group Ltd. Metals & Mining 1.79
12 Scientific Games Corporation Class A Leisure & Entertainment 1.79
13 Cablevision Systems Corporation Class A Cable 1.78
14 Univision Communications Inc. Class A Broadcasting & Media 1.77
15 TransDigm Group Incorporated Transportation 1.65
16 Dell Computer Corp. Ltd. Computers & Electronics 1.65
17 INEOS Group Holdings Ltd. Chemical 1.64
18 Royalty Pharma Healthcare & Pharmaceutical 1.62
19 TXU Corporation Utilities 1.59
20 Berry Plastics Corp. Paper & Containers 1.55
21 HCA Holdings, Inc. Healthcare & Pharmaceutical 1.48
22 PetSmart, Inc. Retail 1.47
23 Formula One Group Services & Miscellaneous 1.45
24 American Airlines Group, Inc. Transportation 1.44
25 Sabre Holdings Corporation Services & Miscellaneous 1.36
26 Mediacom Broadband Corp. Cable 1.34
27 Aramark Corporation Gaming, Lodging & Restaurants 1.33
28 Level 3 Communications, Inc. Telecommunication 1.33
29 Infor Global Solutions, Inc. Computers & Electronics 1.26
30 Avaya Inc. Telecommunication 1.23
31 Federal-Mogul Holdings Corp. Automotive 1.23
32 NXP BV Computers & Electronics 1.23
33 Hertz Entertainment Services Corp. Banking & Finance 1.22
34 Dollar Tree, Inc. Retail 1.21
35 WME IMG Holdings LLC Services & Miscellaneous 1.2
36 BMC Software, Inc. Computers & Electronics 1.18
37 Advantage Sales & Marketing of Louisiana, Inc. Services & Miscellaneous 1.18
38 Travelport Holdings, Inc. Services & Miscellaneous 1.18
39 Tribune Publishing Co. Broadcasting & Media 1.16
40 West Corporation Services & Miscellaneous 1.12
41 Communications Sales & Leasing Inc. Real Estate 1.11
42 US Airways Group, Inc. Transportation 1.09
43 WideOpenWest Finance LLC Cable 1.09
44 MacDermid, Incorporated Chemical 1.09
45 Pharmaceutical Product Development, LLC Services & Miscellaneous 1.08
46 Clarke American Corp. Consumer Products 1.06
47 Carestream Health, Inc. Healthcare & Pharmaceutical 1.06
48 Endo Pharmaceuticals, Inc. Healthcare & Pharmaceutical 1.05
49 Cequel Communications Holdings I LLC Telecommunication 1.04
50 Energy Transfer Equity, L.P. Energy 1.03
Fitch defined.
a

June 6, 2016
Leveraged Loans
How Does Fitch Ratings Analyze CLOs?
CLO Rating Criteria

Rating Consideration Application
Asset Quality Asset quality is based on the corporate Issuer Default Rating (IDR) and term to maturity.
Asset quality is a primary driver of the default probability of the underlying corporate assets.
Asset Security Asset security is determined by the seniority of the corporate obligation and the jurisdiction of
the issuer. Asset security is a primary driver of recovery rate assumptions.
Portfolio Portfolio composition analysis focuses on industry, obligor and geographic concentrations
Composition within the underlying pool of assets. Portfolio composition is a determining factor of the level
of portfolio correlation, which is a driver of default probability.
Portfolio Ongoing portfolio management and trading may result in an evolving portfolio credit
Management profile, extension risk and other portfolio changes not represented by the closing portfolio.
The investment guidelines and permitted management terms are analyzed to evaluate the
potential risk factors of a managed portfolio.
Performance and Migration beyond established benchmarks may suggest performance not contemplated
Surveillance by the credit enhancement (CE) afforded to the rated notes. The extent and magnitude of
changes to portfolio quality and composition are the primary drivers of future
rating movement.
Portfolio Default and Cash flow analysis is used to determine whether a class of notes pays according to its
Recovery Analysis terms under a series of defined scenarios for a given stress level. Different scenarios are
evaluated assuming variations in default and recovery timing.
Structural Features The transaction structure is analyzed for features such as: priority of payments,
overcollateralization (OC) and interest coverage (IC) tests, fee structure, excess spread and
portfolio covenants. These features are then are incorporated into Fitch’s cash flow model.
What Is the Level of Recent CLO Issuance?

Total CLO issuance for 2015 reached $98.6 billion from 177 CLOs, which represents nearly a
20% decline from the 2014 totals of $126.6 billion from 216 deals. New issue-stated spreads on
senior notes averaged 153 bps over LIBOR during the fourth quarter, slightly above the yearly
average of 150 bps for 2015.
Eighteen U.S. CLOs issued $7.4 billion in the first quarter of 2016, down significantly from fourth-
quarter 2015 issuance of $18.5 billion via 38 CLOs. New issue-stated spreads on senior notes
averaged 170 bps over LIBOR during the quarter, wide of the fourth-quarter 2015 average of
153 bps. The month of March claimed the highest volume of issuance as 12 deals priced totaling
$4.85 billion.
Annual CLO Issuance

($ Bil.)
140
Statistics:
120 High: $123.6 Bil. (2014)
Low: $0.5 Bil. (2009)
Avg.: $48.2 Bil.
100
80
60
40
20
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: Thomas Reuters LPC.

June 6, 2016
Leveraged Loans
Defaulted Obligors and CLO Exposure
(No.) Exposed CLOs Defaulted Issuers
180
160
140
120
100
80
60
40
20
0
1Q15 2Q15 3Q15 4Q15 1Q16
How Has the Commodity Cycle Downturn Affected CLOs?
Default Exposure
The number of CLOs with exposure to defaults increased to 159 ($787 million) at first-quarter 2016
from 97 ($392 million) at fourth-quarter 2015. About $586 million of the $787 million total defaulted
notional amount comes from issuers in the Energy (Oil & Gas) and Metals/Mining sectors.
Approximately 70% of the 233 deals in Fitch’s U.S. CLO Index had exposure to at least one
defaulted issuer, with 16%, or 37 CLOs, exposed to at least three defaulted issuers. Across all
159 exposed CLOs, maximum exposure was seven defaulted issuers, with an average of two.
Average exposure was 0.95%.
The largest default exposures were Murray Energy Corporation at $197 million in 52 CLOs,
Southcross Holdings LP at $97 million in 60 CLOs, RCS Capital Corporation at $83 million in 31
CLOs, Essar Steel Algoma Inc. at $77 million in 26 CLOs, Aspect Software Group Holdings Ltd.
at $71 million in 21 CLOs, Noranda Aluminum Holding Corporation at $67 million in 20 CLOs and
Paragon Offshore plc at $64 million in 34 CLOs.
Distressed and Defaulted Issuers Exposure

Distressed Issuers Defaulted Issuers
(%)
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
1Q15 2Q15 3Q15 4Q15 1Q16
Note: Distressed includes nondefaulted issuers rated lower than ‘CCC’.
Source: Fitch Rarings.
Restructuring Dents Metrics

In several recent chapter 11 restructuring proposals, lenders of first lien loans are being offered
equity in the reorganized company. Equity may increasingly be seen in restructurings in the near
term due to the distress in commodity sectors and noncommodity issuers with high pre-petition
leverage, struggling business models and declining enterprise valuations.

June 6, 2016
Leveraged Loans
Receiving equity dents key CLO metrics, as it receives no credit in the calculation of a CLO’s
aggregate principal balance or overcollateralization ratios until the manager monetizes the equity
position. How the equity portion of a recovery distribution will be accounted for is becoming more
important to noteholders, as additional defaults are expected this year.
For more information on equity treatment in CLOs please see the special report, Equity in US
Leveraged Loan Restructuring Dents US CLO Metrics.
Examples of Recovery Rates Used in OC Calculations

OC Notional
Recovery Market No. of Value
Issuer Rate (%) Recovery Rate Basis Pricea CLOs ($ Mil.)
Alpha Natural Resources 32 Market Value 32 11 23
Arch Coal. 30 Market Value 30 14 31
Aspect Software Group. 50/60 Moody's or S&P 99 21 71
Caesars Entertainment 30/50 Moody's or S&P 84 4 6
Essar Steel Algoma 18 Market Value 18 16 77
Foresight Energyb 60 Moody's 75 16 36
Murray Energy Corporation 41 Market Valuec 41 52 197
Noranda Aluminum 24 Market Valuec 24 20 67
Paragon Offshore 21 Market Value 21 34 64
RCS Capital First Lien 45 Moody's 55–58 31 78
RCS Capital Second Lien 10 Market Value 10 6 5
Samson Second Lien 2 Market Value 2 14 21
Southcross LPb 15 Market Valuec 15 60 97
The Sports Authority Inc. 14 Market Value 14 4 9
Verso Paper Holdings LLC (NewPage) 24 Market Valuec 24 15 20
aMarket values across CLOs can vary slightly due to different reporting dates and sources for market data. The information
provided here is based on the most recent trustee reports available at the time of the analysis. bSome CLOs reported Foresight
Energy, LLC as a default and applied haircut in the OC calculations. Fitch does not consider this issuer to be currently in default
and as such did not include it in the defaulted exposure notional of $790 million. cFebruary report was the most recent report
available for a number of CLOs. In those reports, several of the recent defaults were within their first 30 days. Some CLO
documentation allow for a rating agency’s recovery rate to apply for the OC calculation within the first 30 days, even if it is higher
than the market value rate. OC – Overcollateralization.
Source: Trustee reports, Fitch Ratings.

June 6, 2016
Leveraged Loan Data
Leveraged Loan Data
Issuance
Leveraged Loan Issuance

($ Bil.)
1,200
Statistics:
High: $1,135 Bil. (2013)
1,000 Low: $218 Bil. (2001)
Avg.: $525 Bil.
800
600
400
200
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Institutional Leveraged Loan Issuance

($ Bil.)
700
Statistics:
600 High: $639 Bil. (2013)
Low: $32 Bil. (2001)
Avg.: $243 Bil.
500
400
300
200
100
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Pro Rata Leveraged Loan Issuance

($ Bil.)
600
Statistics:
High: $510 Bil. (2013)
500 Low: $165 Bil. (2002)
Avg.: $286 Bil.
400
300
200
100
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
The Annual Manual (U.S. Leveraged Finance Primer) — Leveraged Loan Data 51
June 6, 2016
Leveraged Loan Data
Covenant-Lite Loan Issuance

($ Bil.)
450
Statistics:
400 High: $381 Bil. (2013)
Low: $1 Bil. (2009)
350 Avg: $111 Bil.
300
250
200
150
100
50
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Second Lien Loan Issuance

($ Bil.)
45
Statistics:
40 High: $40 Bil. (2007)
Low: $2 Bil. (2009)
35 Avg.: $19 Bil.
30
25
20
15
10
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
ABL Issuance
($ Bil.)
120
Statistics:
High: $101 Bil. (2011)
100 Low: $42 Bil. (2008)
Avg.: $71 Bil.
80
60
40
20
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
ABL – Asset-based loan.
June 6, 2016
Leveraged Loan Data
Middle-Market Loan Issuance

Large Middle Market Traditional Middle Market
($ Bil.)
250
200
150
100
50
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Note: Large Middle Market defined as deal sizes of $100 Mil.–$500 Mil. Traditional Middle Market defined as deal sizes
less than $100 Mil.
Middle-Market Institutional Loan Issuance

($ Bil.)
80
Statistics:
70 High: $72 Bil. (2006)
Low: $6 Bil. (2009)
60 Avg.: $33 Bil.
50
40
30
20
10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
DIP Loan Issuance

($ Bil.)
16
Statistics:
14 High: $14.2 Bil. (2009)
Low: $1.3 Bil. (2007)
12 Avg.: $6.3 Bil.
10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
June 6, 2016
Leveraged Loan Data
Sponsored Versus Nonsponsored Covenant-Lite

Sponsored Nonsponsored
(%)
100
80
60
40
20
0
2011 2012 2013 2014 2015
Sponsored Versus Nonsponsored Middle-Market Loan Issuance

Sponsored Nonsponsored
($ Bil.)
250
200
150
100
50
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Covenant Versus Covenant-Lite Second Lien Issuance

Covenant Covenant-Lite
(%)
100
90
80
70
60
50
40
30
20
10
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: Fitch Ratings, Thomson Reuters LPC.
June 6, 2016
Leveraged Loan Data
Canadian Syndicated Loan Issuance

Issuance Deal Count
($ Bil.) (No.)
300 600
250 500
200 400
150 300
100 200
50 100
0 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: Thomson Reuters LPC, Bloomberg.
Latin American Loan Issuance

($ Bil.)
80
Statistics:
70 High: $69 Bil. (2006)
Low: $7 Bil. (2009)
60 Avg.: $29 Bil.
50
40
30
20
10
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Latin American Loan Issuance by Country

Argentina Brazil Chile Colombia Mexico Peru Venezuela
($ Bil.)
80
70
60
50
40
30
20
10
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
June 6, 2016
Leveraged Loan Data
Largest Leveraged Loan Deals — 2015

Total Deal Term Loan B Term Loan LIBOR
Date of Amount Amount B Pricing Floor Term Loan B Yield
Borrower Name Transaction ($ Mil.) ($ Mil.) (bps) (%) OID (%) Purpose
Dollar Tree Stores 03/09/15 6,200 3,950 350 0.75 100.00 3.57 M&A
Cablevision Systems Corp. 09/28/15 5,800 3,800 400 1.00 98.50 5.17 M&A
Petsmart Inc. 03/11/15 5,050 4,300 400 1.00 100.00 4.93 M&A
Valeant Pharmaceuticals International 04/01/15 5,150 2,350 325 0.75 99.50 6.64 M&A
Albertson’s Inc. 01/30/15 4,559 4,559 450 1.00 98.50 5.94 M&A
Community Health Systems 05/18/15 4,540 2,940 300 1.00 100.00 5.65 Refinancing
Coty Inc. 10/27/15 4,485 500 300 0.75 99.50 3.97 M&A
Dell International LLC 06/04/15 4,362 4,362 325 0.75 99.75 4.14 GCP
CSRA Inc. 11/27/15 3,500 750 300 0.75 99.50 3.82 M&A
NXP BV 12/17/15 3,300 2,700 300 0.75 99.25 3.79 Refinancing
Commscope Inc. 06/29/15 3,250 1,250 300 0.75 99.75 4.18 M&A
SS&C Technologies Inc. 07/08/15 2,630 1,820 325 0.75 99.50 4.26 M&A
BELK Inc. 12/10/15 3,000 1,500 475 1.00 89.00 11.39 M&A
Pharmaceutical Product Development 08/18/15 2,875 2,575 325 1.00 99.50 4.90 Div. Recap
Peabody Energy Corp. 02/05/15 2,838 1,188 325 1.00 — 44.27 GCP
OID – Original issue discount. GCP – General corporate purposes. Note: Excludes bridge loan.
Largest Covenant-Lite Deals — 2015

Total Deal Term Loan B Term Loan
Date of Amount Amount B Pricing LIBOR Term Loan
Borrower Name Transaction ($ Mil.) ($ Mil.) (bps) Floor (%) B OID Yield (%) Purpose
Cablevision Systems Corp. 09/28/15 10,600 3,800 400 1.00 98.50 5.17 M&A
Dollar Tree Stores 03/09/15 9,000 7,900 350 0.75 100.00 3.57 GCP
Petsmart Inc. 03/11/15 6,950 4,300 400 1.00 100.00 4.93 GCP
Albertson’s Inc. 01/30/15 4,559 4,559 450 1.00 98.50 5.94 M&A
Community Health Systems 05/18/15 4,540 4,540 300 1.00 100.00 5.65 GCP
Coty Inc. 10/27/15 4,485 1,235 300 0.75 99.50 3.97 M&A
Dell International LLC 06/04/15 4,362 4,362 325 0.75 99.75 4.14 GCP
NXP BV 12/07/15 3,300 2,700 300 0.75 99.25 3.79 M&A
Commscope Inc. 06/29/15 3,250 1,250 300 0.75 99.75 4.18 M&A
SS&C Technologies Inc. 07/08/15 3,130 2,230 325 0.75 99.50 4.26 M&A
BELK Inc. 12/10/15 3,000 1,500 475 1.00 89.00 11.39 M&A
Pharmaceutical Product Development 08/18/15 2,875 2,575 325 1.00 99.50 4.90 Div. Recap
XPO Logistics Inc. 10/30/15 2,600 1,600 450 1.00 98.00 5.74 M&A
Chemours Co. 05/12/15 2,500 1,500 300 0.75 99.50 7.04 M&A
Academy Sports & Outdoors 07/02/15 2,475 1,825 400 1.00 99.50 7.57 GCP
OID – Original issue discount. GCP – General corporate purposes.
June 6, 2016
Leveraged Loan Data
Largest Second Lien Deals — 2015

Total Deal Second Lien Second Lien
Date of Amount TL Amount TL Pricing LIBOR Second Lien
Borrower Name Transaction ($ Mil.) ($ Mil.) (bps) Floor (%) TL OID Yield (%) Purpose
Goodyear Tire & Rubber Co. 06/15/15 1,000 1,000 300 0.75 — 3.82 GCP
BELK Inc. 12/10/15 3,000 600 — — — — LBO
Mauser AG 06/24/15 504 402 775 1.00 — 15.52 GCP
Deltek Systems Inc. 06/25/15 1260 390 850 1.00 99.0 11.49 Div. Recap
Lions Gate Entertainment Inc. 03/17/15 375 375 — — — 9.50 GCP
FULLBEAUTY Brands Inc. 10/14/15 1265 345 900 1.00 87.0 15.35 LBO
TransFirst Holdings Inc. 06/09/15 1,150 320 800 — — 8.60 GCP
IPC Systems Inc. 02/06/15 925 305 950 1.00 92.0 21.30 LBO
Hostess Brands 08/03/15 1,325 300 750 1.00 99.5 10.13 Div. Recap
W&T Offshore 05/11/15 300 300 — — 99.0 — GCP
Vine Oil & Gas LP 03/31/15 850 284 900 1.00 90.0 — M&A
Arena Energy LLC 07/24/15 280 280 700 — — — GCP
US Renal Care Inc. 11/17/15 2,165 265 800 1.00 98.0 9.75 M&A
Protection One Alarm Monitoring Inc. 07/01/15 1,450 260 875 1.00 98.5 — LBO
TL – Term loan. OID – Original issue discount. GCP – General corporate purposes.
Largest ABL Deals — 2015

Date of Total Deal Specific ABL ABL Amount ABL Pricing Commitment
Borrower Name Transaction Amount ($ Mil.) Facility ($ Mil.) (bps) Fee (bps) Purpose
Albertson’s Inc. 12/21/15 4,000 Revolver 4,000 150 40.0 GCP
Rite Aid Corp. 01/03/15 3,700 Revolver 3,700 200 37.5 GCP
Albertson’s Inc. 01/30/15 3,000 Revolver 3,000 175 37.5 GCP
Ashtead Group Plc 07/27/15 2,600 Revolver 2,600 175 25.0 GCP
United Rentals 03/31/15 2,497 Revolver 2,300 150 25.0 GCP
Sears Holdings Corp. 07/21/15 1,971 Revolver 1,971 375 50.0 GCP
United States Steel 07/27/15 1,500 Revolver 1,500 150 37.5 GCP
Interpool Inc. 12/10/15 1,250 Revolver 1,250 200 25.0 GCP
US Foodservice 10/20/15 1,300 Revolver 1,025 150 25.0 GCP
American Tire Distributors Inc. 04/21/15 1,110 Revolver 1,110 150 20.0 GCP
USA Compression Partners LP 01/12/15 1,110 Revolver 1,110 200 — GCP
Sothebys Inc. 06/15/15 1,285 Revolver 1,035 200 — GCP
US Foodservice 06/19/15 1,100 Revolver 1,025 175 37.5 GCP
XPO Logistics Inc. 10/30/15 2,600 Revolver 1,000 175 — M&A
Univar Inc. 06/30/15 1,400 Revolver 1,000 150 37.5 GCP
ABL – Asset-based lending. GCP – General corporate purposes.
June 6, 2016
Leveraged Loan Data
Largest Middle-Market Deals — 2015

Total Deal Term Loan B Term Loan LIBOR
Date of Amount Amount B Pricing Floor Term Loan B Yield
Borrower Name Transaction ($ Mil.) ($ Mil.) (bps) (%) OID (%) Purpose
Walgreens Infusion Services 04/07/15 495 415 500 — — — LBO
Cowlitz Tribal Gaming 12/04/15 483 343 1050 1 93.00 14.20 GCP
CHI Overhead Doors Inc. 07/29/15 475 320 375 1 99.75 5.45 SBO
Spencer Gifts LLC 06/26/15 470 225 425 1 — 6.54 GCP
HelpSystems 10/08/15 465 300 525 1 98.00 — SBO
Plaskolite 11/03/15 458 313 475 1 99.00 6.03 LBO
Bioplan 05/13/15 453 283 475 1 85.00 12.42 M&A
Chemstralia Pty Ltd. 02/26/15 453 402 625 — — 7.45 GCP
AgroFresh Inc. 07/31/15 450 425 475 1 99.50 — M&A
Research Now Group Inc. 03/20/15 440 265 450 1 99.50 6.61 SBO
Osmose Holdings Inc. 08/21/15 440 285 375 1 99.50 6.13 SBO
At Home Holding III Inc. 06/05/15 430 300 400 1 99.00 6.76 Refinance
Charter NEX Films Inc. 01/30/15 430 270 425 1 99.00 5.75 SBO
OID – Original issue discount. GCP – General corporate purposes. SBO – Shareholder buyout.
Largest DIP Loan Deals — 2015

DIP Facility
Borrower Name Date of Transaction Amount ($ Mil.) Industry
Alpha Natural Resources LLC 08/06/15 692 Mining
LightSquared Inc. 02/25/15 211 Telecom
Standard Register 03/02/15 125 Media
Cal Dive International Inc. 03/03/15 120 Oil & Gas
Taylor Wharton International LLC 10/02/15 60 Manufacturing
June 6, 2016
Leveraged Loan Data
Issuance by Industry
Leveraged Loan Issuance by Industry — 2015

(% of Total Loan Issuance)
12
10
Covenant-Lite Loan Issuance by Industry — 2015

(% of Covenant-Lite Loan Issuance)
18
16
14
12
10
8
6
4
2
0
Second Lien Loan Issuance by Industry — 2015

(% of Total Second Lien Issuance)
14
12
10
8
6
4
2
0
June 6, 2016
Leveraged Loan Data
ABL Issuance by Industry — 2015

(% of Total Loan Issuance)
35
30
25
20
15
10
5
0

DIP Loan Issuance by Industry

2009 2014 2015
(%) (%) (%)
30 70 70
25 60 60
50 50
20
40 40
15
30 30
10
20 20
5 10
10
0 0 0

Latin American Loan Issuance by Industry — 2015

(%)
35
30
25
20
15
10
June 6, 2016
Leveraged Loan Data
Canadian Loan Issuance by Industry
2013 2014 2015
(%) (%) (%)
40 45 60
35 40
50
30 35
30 40
25
25
20 30
20
15
15 20
10 10
10
5 5
0 0 0
June 6, 2016
Leveraged Loan Data
Issuance by Purpose
Leveraged Loan Use of Proceeds
2007 2014 2015
Dividend Dividend
Refinancing 2% 2%
GCP GCP
44% 32% M&A M&A
23% GCP
17% 30%
18%
M&A
Dividend 22% Refinancing Refinancing
3% 57% 50%
GCP – General corporate purposes. Note: May not add due to rounding.
Leveraged Loan Use of Proceeds — General Corporate Purposes

GCP Issuance % of Total Leveraged Loan Issuance
($ Bil.) (%)
350 50
45
300
40
250 35
30
200
25
150
20
100 15
10
50
5
0 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
GCP – General corporate purposes.

Leveraged Loan Use of Proceeds — Refinancing

Refinancing Issuance % of Total Leveraged Loan Issuance
($ Bil.) (%)
800 70
700 60
600
50
500
40
400
30
300
20
200
100 10
0 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
June 6, 2016
Leveraged Loan Data
Leveraged Loan Use of Proceeds — M&A/LBO

M&A Issuance % of Total Leveraged Loan Issuance
($ Bil.) (%)
300 35
250 30
25
200
20
150
15
100
10
50 5
0 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Leveraged Loan Use of Proceeds — Dividends

Dividend Issuance % of Total Leveraged Loan Issuance
($ Bil.) (%)
60 9.0
8.0
50
7.0
40 6.0
5.0
30
4.0
20 3.0
2.0
10
1.0
0 0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Second Lien Issuance by Purpose

2007 2014 2015
Takeover Corp.
4% Purposes
Acquisition Corp. M&A 26%
19% Purposes 18%
LBO 34%
Debt M&A
43%
Repay. 16%
1%
LBO Dividend
16% Recap.
11%
GCP
25% Debt
Repay. LBO
4% 20%
Dividend Debt Repay. Dividend SBO SBO

Recap. 2% Recap. 22% 24%
9% 7%
GCP – General corporate purposes. SBO – Shareholder buyout. Note: May not add due to rounding.
June 6, 2016
Leveraged Loan Data
ABL Use of Proceeds

GCP Amend and Extends DIP/Exit Fin. M&A Other
(%)
100
80
60
40
20
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
ABL – Asset-based loan. GCP – General corporate purposes. DIP – Debtor in possession.
Middle-Market Loan Use of Proceeds

Corporate Purposes Debt Repayment M&A Working Capital Other
($ Bil.)
250
200
150
100
50
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Latin American Loan Use of Proceeds

2013 2014 2015
Other Working Working
7% Capital Other Capital
Project 14% 5% 1%
Finance Project
11% Finance
16%
Other
Acquisition 9%
Line
10% Acquisition
Line
1%
Project
Finance
13%
Corporate Acquisition Corporate Corporate

Purposes Line Purposes Purposes
72% 5% 59% 77%
June 6, 2016
Leveraged Loan Data
Pricing
Institutional Loan Pricing by Rating

BB B
(bps)
1,200
Statistics:
1,000 High (BB): 760 bps (2008)
Low (BB): 179 bps (2006)
Avg. (BB): 338 bps
800 High (B): 1,076 bps (2008)
Low (B): 253 bps (2006)
600 Avg. (B): 471 bps
400
200
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Institutional Loan Yield Components
(%) LIBOR/LIBOR Floor LIBOR Spread OID
12
10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
OID – Original issue discount.

Pro Rata Loan Pricing by Rating

(bps) BB B
600
500
400
300
Statistics:
High (BB): 394 bps (2009)
200 Low (BB): 141 bps (2007)
Avg. (BB): 272 bps
100 High (B): 484 bps (2012)
Low (B): 200 bps (2007)
Avg. (B): 353 bps
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Note: No pro rata ‘B’ data points from 2008 to 2009 available.
June 6, 2016
Leveraged Loan Data
Covenant-Lite Loan Pricing

(bps)
550
Statistics:
High: 500 bps (2012)
500 Low: 335 bps (2007)
Avg: 439 bps
450
400
350
300
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Second Lien Loan Pricing — First Lien Versus Second

b
(bps) First Lien Drawn a Second Lien Drawn
1,200
Statistics (Second Lien):
1,000 High: 1,022 bps (2011)
Low: 577 bps (2007)
Avg.: 756 bps
800
600
400
200
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
aNodata points to record from first-quarter 2008 to fourth-quarter 2010. bNo data points to record from fourth-quarter
2007 to fourth-quarter 2010.
ABL Pricing
(bps)
450
Statistics:
High: 432 bps (1Q09)
400 Low: 162 bps (2Q07)
Avg: 236 bps
350
300
250
200
150
1Q05 4Q05 3Q06 2Q07 1Q08 4Q08 3Q09 2Q10 1Q11 4Q11 3Q12 2Q13 1Q14 4Q14 3Q15

June 6, 2016
Leveraged Loan Data
Middle-Market Loan Pricing (Revolver/Term Loan)

Average Revolver Spreads Average First Lien Spreads
(bps)
700
Statistics (Avg. First Lien Spreads):
600 High: 650 bps (2009)
Low: 307 bps (2006)
500 Avg.: 450 bps
400
300
200
100
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Note: Data not avaliable for average first lien spreads prior to 2002.
Middle-Market Loan Yield Components

LIBOR/LIBOR Floor Spread OID
(%)
12
10
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
OID – Original issue discount.

DIP Loan Pricing

(bps)
900
Statistics:
800 High: LIBOR 831 (2015)
Low: LIBOR 400 (2004)
700 Avg.: LIBOR 579
600
500
400
300
200
100
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

June 6, 2016
Leveraged Loan Data
Maturities
Leveraged Loan Maturity Schedule

($ Bil.)
300
250
200
150
100
50
0
2016 2017 2018 2019 2020 2021 2022 and
Beyond
Institutional Leveraged Loan Maturity Schedule by Industry

($ Bil.)
2022 and
Industry 2016 2017 2018 2019 2020 2021 Beyond
Automotive 1.6 3.2 3.1 3.5 2.5 8.5 2.0
Banking & Finance 0.4 0.7 3.7 4.2 15.2 15.1 6.2
Broadcasting & Media 1.9 0.5 1.3 8.3 16.3 4.1 1.9
Building & Materials 0.0 0.3 0.8 0.2 5.0 2.5 4.7
Cable 0.1 0.7 0.2 3.3 2.5 3.3 8.9
Chemicals 0.1 2.5 2.3 4.6 9.0 6.6 8.7
Computers & Electronics 1.6 2.8 12.6 11.7 29.4 19.8 37.5
Consumer Products 0.0 1.3 1.2 3.2 2.0 3.6 1.9
Energy 0.5 0.2 6.2 4.2 11.4 16.5 3.3
Food, Beverage & Tobacco 0.4 1.5 0.5 1.8 3.7 3.0 3.1
Gaming, Lodging & Restaurants 0.0 0.3 2.9 5.4 7.9 14.9 0.7
Healthcare & Pharmaceutical 1.7 5.7 12.4 17.1 10.3 34.9 22.0
Industrial & Manufacturing 0.5 1.9 0.8 3.9 7.1 13.7 5.8
Insurance 0.8 0.3 0.5 4.0 2.9 1.9 5.3
Leisure & Entertainment 0.3 0.0 1.7 2.5 11.0 6.8 6.3
Metals & Mining 0.2 2.2 2.4 2.9 5.8 1.1 2.7
Paper & Containers 0.2 0.0 0.0 0.8 4.8 2.4 3.9
Real Estate 0.0 0.0 0.7 0.4 1.9 1.7 3.1
Retail 0.2 2.1 4.9 7.7 13.2 15.0 18.4
Services & Miscellaneous 2.0 3.7 13.6 19.6 19.5 46.0 26.3
Supermarkets & Drug Stores 0.1 0.0 0.6 2.9 1.8 2.1 5.1
Telecommunications 0.1 0.1 0.9 9.3 16.8 9.3 7.7
Textiles & Furniture 0.2 0.4 0.3 2.1 3.0 2.3 2.1
Transportation 1.3 1.3 3.2 7.5 11.5 11.8 6.7
Utilities, Power & Gas 0.0 0.6 4.1 2.9 7.7 4.1 5.6
Total 14.2 32.3 80.9 133.9 222.0 250.8 199.8
June 6, 2016
Leveraged Loan Data
ABL Maturity Schedule

($ Bil.)
90
80
70
60
50
40
30
20
10
0
2016 2017 2018 2019 2020
Middle-Market Loan Maturity Schedule

($ Bil.)
60
50
40
30
20
10
0
2016 2017 2018 2019 2020 2021 2022
Note: Includes both sponsor and nonsponsor maturities.
Average DIP Loan Tenor
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
0 2 4 6 8 10 12 14 16 18
(Months)
June 6, 2016
Leveraged Loan Data
Secondary Bids
Leveraged Loan Secondary Bids

Overall Market Average Bid SMi 100
(% of Par)
110
100
90
80
Statistics:
High (Overall): 99.34 (July 2014)
70 Low (Overall): 60.19 (December 2008)
Avg. (Overall): 93.60
High (SMi 100): 100.78 (March 2006)
60 Low (SMi 100): 62.78 (December 2008)
Avg. (SMi 100): 95.30
50
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: Thomson Reuters SMi.
Covenant-Lite Loan Secondary Bids

(% of Par) Covenant-Lite Avg. Overall Bid SMi 100
110
100
90
80
70
Statistics (Cov-Lite):
High: 101.0 (February 2007)
60 Low: 57.7 (December 2008)
Avg: 92.42
50
2007 2008 2009 2010 2011 2012 2013 2014 2015
Second Lien Loan Secondary Bids

Second Lien TL Average Market Bid SMi 100
(% of Par)
110
100
90
80
70
60
50
Statistics (Second Lien):
40 High: 99.3 (March 2007)
Low: 36.3 (March 2009)
30 Avg.: 83.4
20
2007 2008 2009 2010 2011 2012 2013 2014 2015
TL – Term loan.
Source: Thomson Reuters SMi.
June 6, 2016
Leveraged Loan Data
Middle-Market Loan Secondary Bids

Middle Market (MM) SMi100 Overall Bid
(% of Par)
110
100
90
80
70
Statistics (MM):
60 High: 99.7 (June 2007)
Low: 71.0 (March 2009)
Avg.: 92.6
50
2007 2008 2009 2010 2011 2012 2013 2014 2015
Loan Trading Volumes

($ Bil.)
700
Statistics:
High: $628 Bil. (2014)
600
Low: $102 Bil. (2000)
Avg.: $347 Bil.
500
400
300
200
100
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: LSTA, 2000–2005 trading volumes sourced from Thomson Reuters LPC.
June 6, 2016
Leveraged Loan Data
Retail Funds
Loan Retail Funds — Assets Under Management

($ Bil.)
200
$174 Bil.
180
160
140
120
100
80
$24 Bil.
60
40
20
0
2007 2008 2009 2010 2011 2012 2013 2014 2015
Note: Assets under management include both exchange-traded funds (ETFs) and managed funds.
Source: Thomson Reuters LPC, Lipper FMI.
Loan Retail Fund Flows

($ Bil.)
60
Statistics:
50
High: $52 Bil. (2013)
40 Low: ($24) Bil. (2014)
Avg.: $5 Bil.
30
20
10
(10)
(20)
(30)
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Note: Assets under management include both exchange-traded funds (ETFs) and managed funds.
Source: Lipper FMI.
Monthly Loan Retail Fund Flows — 2015

($ Bil.)
1.0
0.0
(1.0)
(2.0)
(3.0)
(4.0)
Statistics:
(5.0) High: $0.5 Bil. (May)
Low: ($5.9) Bil. (December)
(6.0) Avg: ($1.8) Bil.
(7.0)
Source: Lipper FMI.
June 6, 2016
Leveraged Loan Data
Top 10 Largest Outflows/Inflows — 2015

Outflows Inflows
Rank Week Ending Total ($ Mil.) Week Ending Total ($ Mil.)
1 12/16/15 (3,811) 10/21/15 3,343
2 12/09/15 (3,460) 02/11/15 2,935
3 07/01/15 (2,980) 01/28/15 2,800
4 06/17/15 (2,890) 02/04/15 2,670
5 05/06/15 (2,745) 11/04/15 2,048
6 06/10/15 (2,560) 10/28/15 2,035
7 09/30/15 (2,152) 02/18/15 1,642
8 03/11/15 (1,956) 10/14/15 1,476
9 11/11/15 (1,800) 04/08/15 1,350
10 07/29/15 (1,722) 07/15/15 1,230
Source: Lipper FMI.
Top 10 Largest Outflows/Inflows — All Time

Outflows Inflows
Rank Week Ending Total ($ Mil.) Week Ending Total ($ Mil.)
1 12/16/15 (3,811) 10/21/15 3,343
2 12/09/15 (3,460) 02/11/15 2,935
3 07/01/15 (2,980) 01/28/15 2,800
4 06/17/15 (2,890) 02/04/15 2,670
5 05/06/15 (2,745) 11/04/15 2,048
6 06/10/15 (2,560) 10/28/15 2,035
7 09/30/15 (2,152) 08/07/13 1,872
8 08/17/11 (2,120) 07/24/13 1,851
9 03/11/15 (1,956) 08/21/13 1,802
10 11/11/15 (1,800) 07/17/13 1,709
Source: Lipper FMI.
June 6, 2016
Leveraged Loan Data
Default Rates
U.S. Institutional Leveraged Loan Default Rate

($ Bil.)
12
Statistics:
High: 10.5% (2009)
10 Low: 0.2% (2007)
Avg.: 2.8%
8
0
2007 2008 2009 2010 2011 2012 2013 2014 2015
U.S. Institutional Leveraged Loan Default Rate: BSL
(%) BSL LMM
14
12
10
0
2007 2008 2009 2010 2011 2012 2013 2014 2015
BSL ‒ Broadly syndicated loans. LMM ‒ Large middle market.

U.S. Institutional Leveraged Loan Cumulative Default Rates by Vintage

(%)
35
30
25
20
15
10
0
2007 2008 2009 2010 2011 2012 2013 2014
June 6, 2016
Leveraged Loan Data
Default Rates by Industry — 2007–2015 Average

(%)
Utilities, Power & Gas
Chemicals
Real Estate
Broadcasting & Media
Building & Materials
Gaming, Lodging & Restaurants
Banking & Finance
Cable
Paper & Containers
Leisure & Entertainment
Automotive
Metals & Mining
Energy
Retail
Transportation
Consumer Products
Textiles & Furniture
Telecommunications
Services & Miscellaneous
Healthcare & Pharmaceutical
Industrial/Manufacturing
Supermarkets & Drug Stores
Food, Beverage & Tobacco
Computers & Electronics
Insurance
Total Market
0 1 2 3 4 5 6 7 8 9
Institutional Leveraged Loan Industry Default Rates

2007–
(%) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2015
Automotive — 2.7 19.3 — — — — — — 2.9
Banking & Finance — — 33.4 2.1 0.4 5.8 — — — 4.5
Broadcasting & Media — 8.8 19.5 6.0 0.4 1.0 17.6 1.1 0.5 7.1
Building & Materials — 13.8 31.2 4.2 — 3.0 1.9 — — 6.9
Cable — — 28.1 — — 2.3 — — — 4.2
Chemicals — 3.7 44.2 — — — — — — 7.5
Computers & Electronics — — 1.9 0.2 — — — 0.2 0.1 0.2
Consumer Products — 0.9 8.1 3.2 0.5 1.6 — — 3.5 2.0
Energy — 1.7 2.6 — — 2.1 1.1 — 9.8 2.2
Food, Beverage & Tobacco — 1.2 0.8 — — 0.3 — — — 0.2
Gaming, Lodging & Restaurants — 13.4 2.5 3.9 0.6 4.1 2.5 2.1 13.0 5.0
Healthcare & Pharmaceutical 0.2 0.3 1.0 1.7 — 0.4 0.1 0.3 2.3 0.8
Industrial/Manufacturing — — 4.0 1.9 — — — — — 0.6
Insurance — — — — — — — — — —
Leisure & Entertainment 1.3 — 32.8 — 1.5 2.6 — 0.8 — 4.1
Metals & Mining 1.1 — 4.1 — — — — 2.3 12.9 2.4
Paper & Containers 1.3 1.9 11.8 2.9 12.9 — — — — 4.1
Real Estate — 19.8 21.1 0.9 — — — — — 7.2
Retail 3.1 — 4.8 5.8 2.9 4.2 0.6 0.2 0.5 2.1
Services & Miscellaneous — 1.2 0.6 1.0 — 2.5 1.2 1.9 0.6 1.0
Supermarkets & Drug Stores — — 4.2 — — — — — — 0.3
Telecommunications — 2.0 5.2 — 0.5 2.5 — 1.9 — 1.3
Textiles & Furniture — 3.7 8.1 — 2.5 — — — — 1.8
Transportation — 4.6 1.2 — 0.1 9.8 1.0 3.3 — 2.0
Utilities, Power & Gas — — — 5.7 0.2 1.5 — 50.9 — 7.8
Total Index 0.2 2.9 10.5 1.9 0.6 1.8 1.6 3.2 1.7 2.8
June 6, 2016
Leveraged Loan Data
2015 U.S. Institutional Leveraged Loan Defaults

Par Value Default Default
Month Issuer ($ Mil.) Date Source Industry
January 2015 Caesars Entertainment Operating Co. 5,358.8 01/15/15 Chapter 11 Filing Gaming, Lodging & Restaurants
Subtotal 5,358.8
February 2015 RadioShack Corp. 250.0 02/05/15 Chapter 11 Filing Retail
Altegrity Inc. 275.0 02/08/15 Chapter 11 Filing Services & Miscellaneous
Subtotal 525.0
March 2015 Cal Dive International Inc. 80.0 03/03/15 Chapter 11 Filing Energy
Standard Register 214.4 03/12/15 Chapter 11 Filing Consumer Products
Quicksilver Resources Inc. 625.0 03/17/15 Chapter 11 Filing Energy
Subtotal 919.4
April 2015 EveryWare Global Inc. 248.6 04/07/15 Chapter 11 Filing Consumer Products
Subtotal 248.6
May 2015 Patriot Coal Corp. 250.0 05/12/15 Chapter 11 Filing Metals & Mining
Sabine Oil and Gas Corp. 700.0 05/21/15 Missed Payment Energy
Subtotal 950.0
June 2015 Boomerang Tube LLC 214.0 06/09/15 Chapter 11 Filing Metals & Mining
Edmentum Inc. 140.0 06/10/15 Distressed Exchange Computers & Electronics
Subtotal 354.0
July 2015 Walter Energy Inc. 978.2 07/15/15 Chapter 11 Filing Metals & Mining
Core Entertainment Inc. 160.0 07/15/15 Missed Payment Broadcasting & Media
Subtotal 1,138.2
August 2015 Alpha Natural Resources Inc. 610.9 08/03/15 Chapter 11 Filing Metals & Mining
American Seafoods Group LLC 281.5 08/20/15 Distressed Exchange Services & Miscellaneous
Wilton Holdings Inc. 283.4 08/24/15 Distressed Exchange Services & Miscellaneous
NYDJ Apparel LLC 50.0 08/25/15 Distressed Exchange Retail
Univita Health Inc. 200.0 08/28/15 Chapter 7 Filing Healthcare & Pharmaceuticals
Subtotal 1,425.8
September 2015 Samson Resources Co. 1,000.0 09/16/15 Chapter 11 Filing Energy
Subtotal 1,000.0
October 2015 Miller Energy Resources Inc. 175.0 10/01/15 Chapter 11 Filing Energy
Elo Touch Solutions Inc. 15.0 10/09/15 Distressed Exchange Computers & Electronics
MMM Holdings Inc. 352.0 10/30/15 Missed Payment Healthcare & Pharmaceuticals
Subtotal 542.0
November 2015 Essar Steel Algoma Inc. 375.0 11/09/15 Chapter 15 Filing Metals & Mining
Millennium Health LLC 1,775.0 11/10/15 Chapter 11 Filing Healthcare & Pharmaceuticals
Subtotal 2,150.0
December 2015 Vantage Drilling Co. 664.8 12/03/15 Chapter 11 Filing Energy
Energy & Exploration Partners Inc. 765.3 12/07/15 Chapter 11 Filing Energy
Magnum Hunter Resources Corp. 336.6 12/15/15 Chapter 11 Filing Energy
Subtotal 1,766.7
June 6, 2016
Leveraged Loan Data
Post-Default Prices
Institutional Leveraged Loan 30-Day Post-Default Pricesa

First Lien
(%) Bond and Loan-Only
Default Year First Lien Second Lien BSL LMM Cov-Lite Loan Issuers Issuers
2007 88.8 41.3 88.8 — — 88.8 —
2008 49.4 18.5 48.0 58.6 37.6 45.3 56.4
2009 54.9 31.9 56.1 39.7 42.0 63.0 42.1
2010 77.9 12.1 84.7 64.9 — 82.7 76.5
2011 60.5 13.5 68.9 54.5 — 97.5 49.2
2012 65.5 26.5 67.3 60.0 59.0 68.9 64.5
2013 69.4 40.0 68.8 93.6 54.1 71.5 66.7
2014 78.4 53.3 78.5 77.6 — 78.3 80.1
2015 49.9 49.6 52.3 39.0 32.9 53.3 44.3
2007–2015 61.7 34.0 62.5 55.2 44.0 65.6 55.4
Observations ($ Bil.)
2007 0.8 0.4 0.8 — — 0.8 —
2008 16.7 1.5 14.4 2.3 0.9 10.5 6.2
2009 48.1 2.3 44.7 3.4 4.1 29.4 18.6
2010 7.3 1.8 4.8 2.5 — 1.6 5.7
2011 1.0 0.4 0.4 0.6 — 0.2 0.7
2012 9.3 0.9 6.9 2.3 2.9 2.1 7.2
2013 9.1 0.2 8.9 0.2 1.7 5.2 4.0
2014 24.0 2.3 22.6 1.4 — 21.7 2.3
2015 9.8 2.2 8.0 1.8 4.3 6.2 3.6
2007–2015 126.1 11.8 111.7 14.5 13.8 77.7 48.4
a
Par weighted and based on market prices post default. The date above is specific to defaulted loans with price data. BSL – Broadly syndicated loans.
LMM – Large middle market.
Source: Fitch U.S. Leveraged Loan Default Index, Thomson Reuters LPC.
Institutional Leveraged Loan 30-Day Post-Default Prices by Industrya

First Lien
Bond and Loan-Only
(%) First Lien Second Lien BSL LMM Cov-Lite Loan Issuers Issuers ($ Bil.)
2014
Telecommunications 100.0 — 100.3 99.0 — 100.3 99.0 0.7
Metals & Mining 99.9 — — 99.9 — 99.9 — 0.3
Retail 93.8 — — 93.8 — — 93.8 0.1
Computers & Electronics 92.8 — — 92.8 — 92.8 — 0.1
Transportation 90.0 — 90.0 — — — 90.0 1.1
Healthcare & Pharmaceutical 89.5 — — 89.5 — — 89.5 0.3
Broadcasting & Media 82.0 5.0 82.0 — — — 82.0 0.3
Utilities, Power & Gas 79.1 60.7 79.1 — — 79.1 — 19.2
Services & Miscellaneous 53.8 — 53.8 — — 53.8 — 1.5
Gaming, Lodging & Restaurants 40.3 30.0 — 40.3 — — 40.3 0.4
2015
Retail — 99.5 — — — — — —
Gaming, Lodging & Restaurants 90.5 — 90.5 — — 90.5 — 1.7
Services & Miscellaneous 96.8 — 97.5 95.3 — 96.4 97.5 0.8
Healthcare & Pharmaceutical 44.9 — 44.9 — 41.7 — 44.9 2.1
Metals & Mining 44.2 — 47.1 35.0 53.9 43.2 54.5 2.4
Consumer Products 38.0 — — 38.0 — — 38.0 0.2
Energy 16.0 48.2 14.5 19.8 13.2 13.2 22.0 2.4
Computers & Electronics — 30.8 — — — — — —
Broadcasting & Media — 5.0 — — — — — —
Par weighted and based on market prices post default. BSL ‒ Broadly syndicated loans. LMM ‒ Large middle market.
a
June 6, 2016
Leveraged Loan Data
30-Day Post-Default Prices — Distribution

First Lien ($126.1 Bil.) Average 61.7%, Median 66.1%
(% Tranches)
(% of Par)
Default Weighted Straight 25
Year Avg. Avg. Median Tranches
2007 88.8 92.9 92.9 2 20
2008 49.4 59.0 65.8 32
2009 54.9 52.5 48.1 68 15
2010 77.9 71.8 75.3 23
2011 60.5 62.3 53.8 6 10
2012 65.5 66.2 68.5 24
5
2013 69.4 72.1 73.9 15
2014 78.4 78.9 82.0 15
0
2015 49.9 50.6 43.2 16
2007–2015 61.7 61.4 66.1 201
Source: Fitch U.S. Leveraged Loan Default Index,
Thomson Reuters LPC.

Second Lien ($11.8 Bil.)
(% Tranches)
(% of Par)
Year Avg. Avg. Median Tranches 40
2007 41.3 41.6 41.6 2 35
2008 18.5 16.5 15.0 11 30
2009 31.9 24.2 11.3 18 25
2010 12.1 12.3 10.8 8 20
2011 13.5 29.6 24.8 4 15
2012 26.5 21.1 8.6 6 10
2013 40.0 40.0 40.0 1
5
2014 53.3 39.3 43.4 4
0
2015 49.6 52.1 54.8 7
2007–2015 34.0 26.3 15.0 61

First Lien BSL ($111.7 Bil.)
(% Tranches)
(% of Par)
2007 88.8 92.9 92.9 2 16
2008 48.0 55.9 57.0 19 14
2009 56.1 55.8 56.2 47 12
2010 84.7 83.5 83.2 11 10
2011 68.9 80.1 80.1 2 8
6
2012 67.3 68.1 68.5 14
4
2013 68.8 68.8 71.0 13
2
2014 78.5 74.3 79.0 9
0
2015 52.3 55.8 49.3 10
2007–2015 62.5 63.2 67.0 127
June 6, 2016
Leveraged Loan Data

First Lien LMM ($14.5 Bil.) Average 55.2%, Median 55.3%
(% of Par) (% Tranches)
2007 — — — 0 25
2008 58.6 63.4 67.0 13
20
2009 39.7 45.3 40.0 21
2010 64.9 61.0 69.9 12 15
2011 54.5 53.3 43.9 4
2012 60.0 63.6 66.6 10 10
2013 93.6 93.6 93.6 2
5
2014 77.6 85.9 93.3 6
2015 39.0 41.8 30.9 6 0
2007–2015 55.2 58.3 55.3 74

First Lien Loans and Bonds Average 65.6%, Median 73.4%
(% Tranches)
($77.7 Bil.)
35
(% of Par)
2007 88.8 92.9 92.9 2 25
2008 45.3 63.8 70.0 11
20
2009 63.0 61.7 66.1 33
2010 82.7 78.6 93.0 5 15
2011 97.5 97.5 97.5 2
10
2012 68.9 81.4 94.0 5
2013 71.5 78.2 84.3 4 5
2014 78.3 76.6 79.0 9
2015 53.3 49.4 42.4 10 0
2007–2015 65.6 66.9 73.4 81

First Lien Loans Only
(% Tranches)
($48.4 Bil.) 18
(% of Par) 16
Default Weighted Straight
14
12
2007 — — — 0
2008 56.4 56.5 65.0 21 10
2009 42.1 43.8 40.0 35 8
2010 76.5 69.8 74.6 18 6
2011 49.2 44.6 43.9 4 4
2012 64.5 62.2 66.7 19 2
2013 66.7 69.9 71.0 11 0
2014 80.1 82.4 89.8 6
2015 44.3 52.5 48.1 6
2007–2015 55.4 57.6 57.5 120
Source: Fitch U.S. Leveraged Loan Default Index, Source: Fitch U.S. Leveraged Loan Default Index.
June 6, 2016
Leveraged Loan Data

First Lien Covenant Lite Average 44.0%, Median 39.1%
($13.8 Bil.) (% Tranches)
(% of Par) 40
30
2007 — — — 0
2008 37.6 37.6 37.6 1 25
2009 42.0 33.5 34.2 8 20
2010 — — — 0 15
2011 — — — 0
2012 59.0 60.4 57.8 5 10
2013 54.1 58.8 39.1 5 5
2014 — — — 0 0
2015 32.9 33.0 30.7 6
2007–2015 44.0 44.0 39.1 25
June 6, 2016
Leveraged Loan Data
Emergence Prices
Institutional Leveraged Loan Emergence Pricesa

First Lien
(%) Bond and Loan-Only
Default Year First Lien Second Lien BSL LMM Cov-Lite Loan Issuers Issuers
2007 74.7 20.6 74.7 — — 74.7 —
2008 58.6 2.3 59.6 48.2 80.3 70.5 23.3
2009 78.9 29.2 80.7 55.7 85.7 89.3 55.7
2010 76.2 6.5 86.5 58.0 — 60.9 81.7
2011 67.0 55.0 — 67.0 — 78.0 55.0
2012 57.1 — 58.8 43.5 53.9 54.2 63.9
2013 77.1 — 76.8 99.5 51.0 87.0 59.0
2014 70.2 60.8 76.5 47.3 — 90.5 58.7
2015 46.9 — 41.3 68.5 41.5 69.3 41.1
2007–2015 72.6 30.2 74.3 55.8 65.3 82.9 53.1
Observations ($ Bil.)
2007 0.8 0.4 0.8 — — 0.8 —
2008 13.5 1.0 12.4 1.1 0.9 10.1 3.4
2009 38.8 1.2 36.1 2.8 3.2 26.9 11.9
2010 3.0 1.1 1.9 1.1 — 0.8 2.2
2011 0.3 0.0 — 0.3 — 0.2 0.1
2012 2.1 — 1.9 0.2 1.3 1.5 0.6
2013 8.0 — 7.9 0.1 1.5 5.2 2.8
2014 2.7 1.9 2.1 0.6 — 1.0 1.7
2015 2.5 — 2.0 0.5 1.8 0.5 2.0
2007–2015 71.8 5.5 65.1 6.7 8.7 46.9 24.9
a
Par weighted and based on market prices at emergence. The data above is specific to issuers that have emerged from
bankruptcy with loan-price data BSL – Broadly syndicated loans. LMM – Large middle market.
Source: Fitch U.S. Leveraged Loan Default Index, Thomson Reuters LPC.
June 6, 2016
Leveraged Loan Data
Emergence Prices — Distribution

First Lien ($71.8 Bil.) Average 72.6%, Median 75.3%
(% Tranches)
(% of Par)
2007 74.7 83.2 83.2 2
2008 58.6 50.0 51.9 19 25
2009 78.9 74.1 89.3 49 20
2010 76.2 73.2 84.0 9
15
2011 67.0 66.5 66.5 2
2012 57.1 57.4 54.9 4 10
2013 77.1 66.5 70.0 9 5
2014 70.2 74.8 79.0 5
2015 46.9 53.9 40.8 4 0
2007–2015 72.6 67.5 75.3 103

Second Lien ($5.5 Bil.)
(% Tranches)
(% of Par)
2007 20.6 20.6 20.6 2
2008 2.3 2.5 2.0 6 50
2009 29.2 15.1 5.3 10 40
2010 6.5 6.2 0.8 4
30
2011 55.0 55.0 55.0 1
2012 — — — 0 20
2013 — — — 0 10
2014 60.8 61.2 61.2 2
2015 — — — 0 0
2007–2015 30.2 16.4 4.5 25

First Lien BSL ($65.1 Bil.) Average 74.3%, Median 79.0%
35
2007 74.7 83.2 83.2 2
2008 59.6 44.6 44.6 13 30
2009 80.7 78.8 91.2 34 25
2010 86.5 88.6 91.2 4 20
2011 — — — 0
15
2012 58.8 62.1 56.0 3
2013 76.8 62.4 59.3 8 10
2014 76.5 81.0 79.0 3 5
2015 41.3 40.8 40.8 2 0
2007–2015 74.3 69.4 79.0 69
BSL – Broadly syndicated loan.
June 6, 2016
Leveraged Loan Data

First Lien LMM ($6.7 Bil.) Average 55.8%, Median 64.5%
30
2007 — — — 0
2008 48.2 61.7 57.8 6 25
2009 55.7 63.6 66.0 15
20
2010 58.0 60.8 61.5 5
2011 67.0 66.5 66.5 2 15
2012 43.5 43.5 43.5 1
10
2013 99.5 99.5 99.5 1
2014 47.3 65.5 65.5 2 5
2015 68.5 67.0 67.0 2
0
2007–2015 55.8 63.8 64.5 34
Emergence Prices — First Lien Distribution

Loans and Bonds ($46.9 Bil.)
(% Tranches)
(% of Par)
50
2007 74.7 83.2 83.2 2
2008 70.5 67.8 75.0 10 40
2009 89.3 87.8 94.3 28
2010 60.9 54.3 54.3 2 30
2011 78.0 78.0 78.0 1
20
2012 54.2 54.9 54.9 2
2013 87.0 84.3 94.5 4 10
2014 90.5 89.3 89.3 2
2015 69.3 68.0 68.0 2 0
2007–2015 82.9 80.2 92.0 53

Loans Only ($24.9 Bil.)
(% Tranches)
(% of Par)
2007 — — — 0 20
2008 23.3 30.1 25.8 9
2009 55.7 55.9 46.0 21 15
2010 81.7 78.5 84.0 7
2011 55.0 55.0 55.0 1 10
2012 63.9 59.9 59.9 2
2013 59.0 52.3 39.1 5 5
2014 58.7 65.2 64.5 3
2015 41.1 39.8 39.8 2 0
2007–2015 53.1 54.1 49.0 50
June 6, 2016
Leveraged Loan Data

Covenant Lite ($8.7 Bil.) Average 65.3%, Median 73.2%
(% Tranches)
(% of Par)
2007 — — — 0 30
2008 80.3 80.3 80.3 1
25
2009 85.7 79.5 94.8 7
2010 — — — 0 20
2011 — — — 0 15
2012 53.9 53.9 53.9 1 10
2013 51.0 53.0 39.1 4
5
2014 — — — 0
2015 41.5 41.5 41.5 1 0
2007–2015 65.3 67.4 73.2 14
June 6, 2016
Leveraged Loan Data
Private Equity and Leveraged Buyout
Private Equity Investments and Exits
No. of Closed Deals No. of Exits
(No.)
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: Pitchbook Data, Inc.
Private Equity Investments by Industry

Business Services (B2B) Consumer Products and Services (B2C)
Energy Financial Services
Healthcare and Pharma Information Technology (IT)
Materials and Resources
(%)
100
80
60
40
20
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Median Transaction Multiples

(x)
14
Statistics:
High: 11.1x (2014)
12 Low: 7.3x (2009)
Avg.: 9.5x
10
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
June 6, 2016
Leveraged Loan Data
All Private Equity — Median Net IRRs by Vintage Year

(%)
18
Statistics:
16 High: 14.3% (2009)
Low: 6.9% (2005)
14 Avg.: 10.8%
12
10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: Preqin.
Private Equity Dry Powder by Fund Type

($ Bil., Years Ended Dec. 31)
Year Buyout Distressed Real Estate
2003 185.3 20.5 39.0
2004 176.6 18.2 55.1
2005 257.9 20.2 98.1
2006 378.6 36.0 132.6
2007 438.2 60.1 166.9
2008 481.5 55.0 171.4
2009 480.8 54.5 180.5
2010 422.9 67.1 154.3
2011 387.9 71.0 166.9
2012 352.8 63.5 156.6
2013 399.0 74.0 186.1
2014 447.4 80.7 197.1
2015a 480.6 84.2 243.7
Data as of Sept. 30, 2015.
a
Source: Preqin.
June 6, 2016
Leveraged Loan Data
Largest Private Equity Sponsors

• ABRY Partners • Apollo Global Management • Audax Group • HarbourVest Partners
• Kelso & Co. • Berkshire Partners • Genstar Capital • Warbug Pincus
• The Blackstone Group • AEA Investors • Cornerstone Holdings • Housatonic Partners
• Summit Partners • The Carlyle Group • Vista Equity Partners
Common Private Equity Fund Investors

• Funds of Funds • Pension • Insurance • Foreign Investor
• ETFs • Endowments/Foundations • Investment Banks • Wealthy Founder/Individual
ETFs – Exchange-traded funds.
Select Private Equity Transactions by Firm

Acquisition Target Total Purchase Purchase Price
Year Price ($ Mil.) Multiple (x) Status
Kohlberg Kravis Roberts
Energy Future Holdings Corp. 2007 43,218 7.9 Bankrupt
HCA Inc. 2006 32,193 8.3 Exited
RJR Nabisco Inc. 1988 30,062 N.A. Exited
First Data Corp. 2007 27,497 14.6 Current
Alliance Boots Holdings Ltd. 2007 23,351 30.8 Exited
Biomet Inc. 2006 11,427 16.2 Exited
Nielsen Co. BV 2006 10,643 15.9 Current
SunGard Data Systems Inc. 2005 10,592 10.1 Current
Capmark Financial Group Inc. 2005 8,800 N.A. Current
Toys ‘R’ Us Inc. 2005 7,544 11.4 Current
Dollar General Corp. 2007 7,321 16.3 Exited
Samson Investment Co. 2011 7,200 N.A. Current
US Foodservice 2007 7,100 25.7 Exited
Del Monte Foods Co. 2010 5,099 8.3 Current
Intelsat Corp. 2004 4,681 7.87 Exited
The Blackstone Group

Equity Office Properties Trust 2006 34,102 18.3 Current
Hilton Worldwide Inc. 2007 26,235 15.3 Exited
Freescale Semiconductor Inc. 2006 16,222 11.2 Exiting
Michaels Stores Inc. 2006 5,523 11.7 Exited
Gates Global Inc. 2014 5,400 9.6 Current
TRW Automotive Holdings Corp. 2002 4,700 N.A. Exited
Travelport Ltd. 2006 4,300 N.A. Exited
NALCO 2003 4,235 N.A. Exited
Extended Stay America Inc. 2010 3,925 17.5 Exited
The Weather Channel LLC 2008 3,500 N.A. Current
Catalent Pharma Solutions, Inc. 2007 3,320 N.A. Exited
SeaWorld Parks & Entertainment 2009 2,300 N.A. Exited
TPG Capital
Caesars Entertainment (f/k/a Harrah’s Entertainment Inc.) 2006 27,160 11.6 Bankrupt
Alltel Corp. 2007 27,149 10.8 Exited
Univision Communications Inc. 2006 12,606 19.5 Current
Avaya Inc. 2007 7,044 10.8 Current
N.A. – Not available. Continued on next page
Source: Bloomberg, Fitch Ratings.
June 6, 2016
Leveraged Loan Data
Select Private Equity Transactions by Firm (Continued)

Acquisition Target Total Purchase Purchase Price
Year Price ($ Mil.) Multiple (x) Status
TPG Capital (Cont.)
Washington Mutual Inc. 2008 7,040 N.A. Exited
IMS Health Inc. 2009 5,057 9.4 Exited
The Neiman Marcus Group Inc. 2005 5,044 9.6 Exited
Sabre Holdings Corp. 2006 4,998 12.1 Current
Life Time Fitness, Inc. 2015 4,000 10.2 Current
J Crew Group Inc. 2010 2,637 8.4 Exited
Par Pharmaceutical Companies, Inc. 2012 1,934 9.0 Current
The Carlyle Group

Kinder Morgan Kansas Inc. 2006 27,450 27.4 Exited
HD Supply Inc. 2007 8,500 N.A. Exited
HCR Manor Care Inc. 2007 5,936 13.2 Current
The Hertz Corporation 2005 5,600 N.A. Exited
Allison Transmission Inc. 2007 5,575 N.A. Exited
Acosta Sales & Marketing 2014 4,750 13.0 Current
DuPont Performance Coatings 2013 4,900 N.A. Current
Intelsat Corp. 2004 4,681 7.9 Exited
Ortho-Clinical Diagnostics Inc. 2014 4,150 N.A. Current
NBTY Inc. 2010 3,812 8.1 Current
CommScope Inc. 2010 3,788 7.8 Current
Hamilton Sundstrand Industrial 2012 3,460 N.A. Current
Pharmaceutical Product Development Inc. 2011 3,449 11.3 Current
Bain Capital
HCA Inc. 2006 32,193 8.3 Exited
iHeart Media Inc. (f/k/a Clear Channel Communications Inc.) 2008 25,455 N.A. Current
NXP BV 2006 9,473 N.A. Exited
HD Supply Inc. 2007 8,500 N.A. Exited
Toys ‘R’ Us Inc. 2005 7,544 11.4 Current
BMC Software 2013 6,900 8.2 Current
Michaels Stores Inc. 2006 5,523 11.7 Exited
The Weather Channel LLC 2008 3,500 N.A. Current
Bloomin’ Brands, Inc. (f/k/a OSI Restaurant Partners LLC) 2006 3,259 9.8 Exited
Nets Holding A/S 2014 3,140 12.4 Current
Warner Chilcott PLC 2004 2,927 N.A. Exited
WorldPay Ltd. 2010 2,710 N.A. Current
Warner Music Group Corp. 2003 2,600 N.A. Exited
Dunkin’ Brands Inc. 2005 2,425 N.A. Exited
GS Capital Partners
Kinder Morgan Kansas Inc. 2006 27,450 27.4 Exited
Alltel Corp. 2007 27,149 10.8 Exited
Capmark Financial Group Inc. 2005 8,800 N.A. Current
ARAMARK Corp. 2006 7,999 8.6 Exited
Hawker Beechcraft Corp. 2006 3,300 N.A. Current
Education Management Corp. 2006 3,124 N.A. Current
TransUnion Corp. 2012 3,000 8.9 Current
Adesa Inc. 2006 2,676 9.7 Exited
CCS Corp. 2007 2,556 9.6 Exited
Alliance Atlantis Communications Inc. 2007 2,145 4.4 Exited
HealthMarkets Inc. 2005 1,713 N.A. Current
Michael Foods Inc. 2010 1,700 N.A. Exited
N.A. – Not available.
June 6, 2016
Leveraged Loan Data
Annual LBO Loan Issuance
($ Bil.)
250
Statistics:
High: $207 Bil. (2007)
200 Low: $7 Bil. (2009)
Avg.: $62 Bil.
150
100
50
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Largest LBOs — 2015

Total Debt LIBOR
Date of Purchase Amount Term Loan B Floor Term Loan Yield
Borrower Name Private Equity Sponsor Transaction Price ($ Mil.) ($ Mil.) Pricing (bps) (%) B OID (%)
Petsmart Inc. BC Partners Inc., CDPQ, StepStone 03/11/15 8,700 6,950 325 1 100.00 4.44
Informatica Corp. Canada Pension Plan Investment Board, 08/06/15 5,300 1,855 350 1 99.75 5.28
Permira Advisors Ltd.
SIG Combibloc Group AG Onex Corp. 03/03/15 4,120 1,225 325 1 100.00 4.44
Life Time Fitness, Inc. Leonard Green & Partners, TPG Capital 06/05/15 4,000 1,500 325 1 99.50 4.69
Riverbed Technology Inc. Ontario Teachers Pension Plan, Thoma 04/24/15 3,600 1,725 500 1 99.50 5.99
Cressey Bravo
Belk Inc. Sycamore Partners 12/10/15 3,000 3,000 475 1 89.00 10.43
TI Automotive Ltd. Bain Capital 06/25/15 2,400 1,090 350 1 99.50 4.86
Standard Aero Veritas Capital 07/07/15 2,100 1,075 425 1 99.50 N.A.
Protection One Alarm Apollo Global Management 07/01/15 1,500 1,450 400 1 99.50 N.A.
Monitoring Inc.
Cirque du Soleil CDPQ, Forsun International Ltd., TPG 07/08/15 1,500 905 400 1 99.75 6.84
Capital
Hanson Building Products Lone Star Funds 03/13/15 1,400 1,045 550 1 99.00 7.15
USAGM Holdco LLC Warburg Pincus LLC 07/28/15 N.A. 1,280 375 1 99.00 6.03
Gulf Oil ArcLight Capital Partners LLC 07/23/15 N.A. 1,125 425 1 99.50 7.89
Knowledge Universe Partners Group AG 08/13/15 N.A. 925 500 1 98.50 6.46
Education LLC
Penn Product Terminals LLC ArcLight Capital Partners LLC 04/01/15 N.A. 750 375 1 99.50 8.16
OID – Original issue discount. CDPQ – Caisse Deport et Placement du Quebec. N.A. – Not available.
June 6, 2016
Leveraged Loan Data
Private Equity Purchase Price Multiples

Debt/EBITDA Equity/EBITDA
(x)
12
10
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Equity Contribution Percentage

(%)
60
Statistics:
High: 50.1% (2009)
50 Low: 31.2% (2004)
Avg.: 38.8%
40
30
20
10
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
June 6, 2016
Leveraged Loan Data
Largest LBO Deals of All Time

Purchase EBITDA
Announcement Price Multiple
Date Target Company Private Equity Sponsor ($ Mil.) (x) Industry
02/26/07 Energy Future Holdings Corp. KKR/TPG/GSCP 45,000 7.9 Utilities
11/20/06 Equity Office Properties Trust BX 34,102 18.3 REIT
07/24/06 HCA Inc. Bain/KKR/ML 33,700 8.3 Healthcare & Pharma
10/02/06 Harrah’s Entertainment, Inc. Apollo/TPG 31,200 11.6 Gaming, Lodging & Leisure
10/19/88 RJR Nabisco Inc. KKR 30,062 N.A. Food, Beverage & Tobacco
04/02/07 First Data Corp. KKR 29,700 14.6 Technology
05/21/07 Alltel Corp. GSCP/TPG 27,500 10.8 Telecommunications
07/03/07 Hilton Worldwide Inc. BX 26,000 15.3 Gaming, Lodging & Leisure
11/16/06 Clear Channel Communications Inc. Bain/THO 25,455 N.A. Media & Entertainment
09/27/13 Dell Inc. Michael Dell/Silver Lake Management LLC 24,900 6.9 Technology
03/09/07 Alliance Boots Holdings Ltd. KKR 23,351 30.8 Healthcare & Pharma
06/07/13 H.J. Heinz Company 3G Capital/Bershire Hathaway Inc. 23,200 11.4 Food, Beverage & Tobacco
12/20/07 Tribune Co. Sam Zell 13,400 11.1 Media & Entertainment
05/29/06 Kinder Morgan Kansas Inc. AIG/Carlyle/GSCP/Riverstone 21,600 27.4 Utilities
05/29/07 Archstone-Smith Trust Lehman/Tishman Speyer Properties LP 19,957 27.6 REIT
09/15/06 Freescale Semiconductor Inc. Firestone Holdings LLC 17,600 11.2 Technology
01/23/06 Albertsons LLC Cerberus 16,119 6.6 Retailing
06/27/06 Univision Communications Inc. MDP/Providence/Saban/TPG/THO 12,606 19.5 Media & Entertainment
12/18/06 Biomet Inc. BX/GSCP/KKR/TPG 11,427 16.2 Healthcare & Pharma
03/08/06 Nielsen Co BV AlpInvest/BX/Carlyle/KKR/THO/HF 10,643 15.9 Media & Entertainment
03/28/05 SunGard Data Systems Inc. Bain/BX/GS/KKR/Providence/Silver Lake/TPG 11,700 9.8 Technology
08/03/05 Capmark Financial Group Inc. Five Mile/GSCP/KKR 8,800 N.A. Diversified Services
12/15/14 Petsmart BC Partners 8,700 9.1 Retailing
06/19/07 HD Supply Inc. Bain/Carlyle/CDR 8,500 N.A. Home Building &

Building Materials
05/01/06 ARAMARK Corp. GSCP/JPM/THO/Warburg Pincus 8,300 8.6 Food, Beverage & Tobacco
08/11/15 Veritas Software Carlyle 8,000 9.67 Technology
03/17/05 Toys ‘R’ Us Inc. Bain/KKR/Vornado 7,544 11.4 Retailing
03/12/07 Dollar General Corp. KKR 7,321 16.3 Retailing
11/23/11 Samson Investment Co. Crestview/ITOCHU/KKR 7,200 N.A. Energy
KKR – Kohlberg Kravis Roberts. TPG – TPG Capital. GSCP – Goldman Sachs Capital Partners. BX – Blackstone Group LP. Bain – Bain Capital LLC. ML – Merrill Lynch.
Apollo – Apollo Global Management. THO – Thomas H. Lee. AIG – American International Group. Carlyle – The Carlyle Group LP. Riverstone – Riverstone Holdings
LLC. Lehman – Lehman Brothers. Cerberus – Cerberus Capital Management. MDP – Madison Dearborn Partners LLC. Providence – Providence Equity Partners Inc.
Saban – Saban Capital Group. AlpInvest – AlpInvest Partners BV. HF – Hellman & Freidman LLC. GS – Goldman Sachs. Five Mile – Five Mile Capital Partners LLC.
CDR – Clayton, Dubilier, & Rice. JPM – JPMorgan. Vornado – Vornado Realty Trust. Crestview – Crestview Partners LP. ITOCHU – ITOCHU Corp. N.A. – Not available.
June 6, 2016
Leveraged Loan Data
Largest LBO Deals Post-Credit Crisis

Announcement Purchase EBITDA
Date Target Company Private Equity Sponsor Price ($ Mil.) Multiple (x) Industry
09/27/13 Dell Inc. Michael Dell/Silver Lake 24,900 6.9 Technology
06/07/13 H.J. Heinz Company 3G/Berkshire Hathaway Inc. 23,200 11.4 Food, Beverage & Tobacco
12/15/14 Petsmart Inc. BC Partners 8,700 9.1 Retailing
11/23/11 Samson Investment Co. Crestview/ITOCHU/KKR 7,200 N.A. Energy
07/13/11 Kinetic Concepts Inc. Apax/Canada Pension /Public Sector Pension 5,727 8.9 Healthcare & Pharma
04/04/14 Gates Global Inc. BX 5,400 9.6 Industrials
11/25/10 Del Monte Foods Co. KKR/Vestar/Centerview Partners 5,300 8.8 Food, Beverage & Tobacco
12/10/15 Informatica Corp. Canada Pension Plan Investment Board, 5,300 19.9 Technology
Permira Advisors Ltd.
09/26/14 Acosta Inc. Carlyle 4,750 13.0 Business Services
02/17/14 Multiplan Inc. Partners Group/Starr Investments 4,400 N.A. Business Services
12/05/14 Tibco Software Vista Equity Partners 4,300 18.2 Business Services
06/16/14 Advantage Sales & Marketing Leonard Green & Partners/CVC Capital Partners 4,200 N.A. Business Services
01/16/14 Ortho-Clinical Diagnostics Inc. Carlyle 4,150 N.A. Healthcare & Pharma
03/03/15 SIG Combibloc Group AG Onex Corp. 4,120 8.6 Paper & Packaging
09/02/10 Burger King Holdings Inc. 3G/TPG/GSCP/Bain 4,000 9.0 Food, Beverage & Tobacco
06/05/15 Life Time Fitness, Inc. Leonard Green & PartnersTPG Capital 4,000 10.6 Gaming, Lodging & Leisure
07/27/10 Extended Stay America Inc. BX/Centerbridge/Paulson & Co Inc. 3,925 17.5 Gaming, Lodging & Leisure
07/15/10 NBTY Inc. Carlyle 3,812 8.1 Retailing
10/25/10 CommScope Inc. Carlyle 3,788 7.8 Technology
04/24/15 Riverbed Technology Inc. Ontario Teachers Pension Plan/Thomas Cressey Bravo 3,600 22.2 Technology
12/05/12 Hamilton Sundstrand Industrial BC Partners Inc. 3,460 N.A. Industrials
10/03/11 Pharmaceutical Product Carlyle/HF 3,449 11.3 Healthcare & Pharma
Development Inc.
10/03/12 Getty Images Inc. Carlyle 3,300 N.A. Media & Entertainment
02/06/14 Signode Industrial Group US Inc. Carlyle 3,200 8.5 Industrials
03/24/14 Nets Holding A/S Advent International/ATP/Bain Capital 3,140 12.4 Business Services
07/09/10 Multiplan Inc. BC Partners Holdings Ltd./Silver Lake 3,100 N.A. Business Services
08/04/11 Emdeon Inc. BX 3,013 12.0 Business Services
02/17/12 TransUnion Corp. Advent International Corp./GSCP 3,000 8.9 Diversified Services
12/10/15 Belk Inc. Sycamore Partners 3,000 13.2 Retailing
09/19/12 AOT Bedding Super Holding LLC Advent Private Capital 3,000 8.9 Consumer Products
Silver Lake – Silver Lake Management LLC. 3G – 3G Capital Inc. Crestview – Crestview Partners LP. ITOCHU – ITOCHU Corp. KKR – Kohlberg Kravis Roberts.
Apax – Apax Partners LLP. Canada Pension – Canada Pension Plan Investment Board. Public Sector Pension – The Public Sector Pension Investment Board.
BX – Blackstone Group LP. Vestar– Vestar Capital Partners. Carlyle – The Carlyle Group LP. TPG – TPG Capital. GSCP – Goldman Sachs Capital Partners.
Bain – Bain Capital LLC. Centerbridge – Centerbridge Capital Partners LLC. HF – Hellman & Freidman LLC. ATP – The ATP Group. N.A. – Not available.
June 6, 2016
Leveraged Loan Data
Median Holding Period
(Years)
7.0
Statistics:
6.0 High: 6.1 years (2014)
Low: 3.0 years (2008)
Avg.: 4.4 years
5.0
4.0
3.0
2.0
1.0
0.0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Exits by Deal Type

Acquisition Exit Secondary Buyout IPO
(%)
70
60
50
40
30
20
10
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Median Corporate Acquisition Valuation/EBITDA Exit

(x)
14
Statistics:
12 High: 13.0x (2006)
Low: 7.0x (2009)
Avg.: 8.9x
10
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
June 6, 2016
Leveraged Loan Data
Select Exits — 2015

Deal Size
Company Seller(s) Exit Type ($ Mil.)
Freescale Semiconductor BX, Carlyle, Permira, TPG Merger 16,700
Suddenlink Communications BC Partners, CCP Investment Board Trade Sale 9,100
SunGard Data Systems Inc. Bain, BX, GSMBD, KKR, Providence, Trade Sale 9,100
Silver Lake, TPG
Par Pharmaceutical Companies, Inc. TPG Trade Sale 8,100
Big Heart Pet Brands Centerview Capital, KKR, Trade Sale 6,000
Vestar Capital Partners
Interactive Data Corporation Silver Lake, Warburg Pincus Trade Sale 5,200
PETCO Freeman Spogli & Co, Sale to GP 4,600
Leonard Green & Partners, TPG
Cardioxyl Pharmaceuticals NEA, OrbiMed, Aurora Funds, Trade Sale 2,070
Osage University Partners
BX – Blackstone Group LP. Carlyle – The Carlyle Group LP. Permira – Permira Advisors Ltd. TPG – TPG Capital. CPP
Investment Board – Canada Pension Plan Investment Board. Bain – Bain Capital LLC. GSMBD – Goldman Sachs Merchant
Banking Division. KKR – Kohlberg Kravis Roberts. Providence – Providence Equity Partners LLC. Silver Lake – Silver Lake
Management LLC. NEA – New Enterprise Associates.
Source: Pitchbook Data, Inc., Preqin.
Private Equity-Based IPO Volume

Proceeds Raised No. of Deals
($ Bil.) (No.)
90 300
80
250
70
60 200
50
150
40
30 100
20
50
10
0 0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: Renaissance Capital, Greenwich, CT (www.renaissancecapital.com).
June 6, 2016
Leveraged Loan Data
Select Private Equity-Backed IPOs

Gross IPO
Proceeds
Company Name Date of IPO Sponsor ($ Mil.) Industry
HCA Inc. 03/01/11 Bain/KKR 3,800 Healthcare & Pharma
Kinder Morgan, Inc. 02/10/11 GSCP/Highstar/Carlyle/Riverstone 2,900 Utilities
Plains GP 10/16/13 First Reserve Corporation 2,816 Energy
First Data Corp. 10/15/15 KKR 2,560 Financial Services
Ally Financial 04/10/14 Cerberus Capital, Oaktree Capital, Sun Capital 2,375 Financial Services
Hilton Worldwide Inc. 12/11/13 BX 2,340 Hotels
Twitter 11/07/13 Rizvi Traverse Management 1,820 Technology
Santander Consumer USA 01/23/14 Centerbridge Partners, KKR, Warburg Pincus 1,800 Financial Services
Nielsen Holdings Inc. 01/01/11 BX/Carlyle/KKR/THO 1,800 Media & Entertainment
Antero Resources Corp. 10/10/13 Trilantic Capital Partners/Warburg Pincus/Yorktown Partners 1,572 Energy
Huntsman Corp. 02/21/05 MatlinPatterson 1,450 Chemicals
Hertz Global Holdings Inc. 11/05/06 CDR/Carlyle/ML 1,320 Finance
IMS Health 04/04/14 TPG/Canada Pension/Leonard Green & Partners 1,300 Technology
Samsonite International S.A. 06/01/11 CVC/Royal Bank of Scotland 1,250 Consumer Products
Realogy Holdings Corp. 10/01/12 Apollo 1,242 Consumer Products
Warner Chilcott PLC 09/21/06 Bain/DLJ Merchant Banking/JPM/THO 1,059 Healthcare & Pharma
COTY Inc. 06/13/13 Berkshire Partners/Rhone Capital 1,000 Retailing
Envision Healthcare Corporation 08/13/13 CDR 966 Healthcare & Pharma
HD Supply Inc. 07/02/13 Bain/CDR/Carlyle 957 Business Services
Quintiles Transnational Holdings 05/08/13 Bain/TPG 947 Healthcare & Pharma
Rice Energy 01/24/14 Natural Gas Partners 924 Energy
Freescale Semiconductor Inc. 05/01/11 BX/TPG/Carlyle/Permira Advisers LLP 783 Technology
Univar Inc. 06/18/15 CVC/Clayton Dubilier & Rice 770 Chemicals
ARAMARK Holdings Corp. 12/12/13 CCMP Capital/GSCP/THO/TPG 725 Business Services
Dollar General Corp. 11/12/09 KKR 716 Retailing
Allison Transmission Holdings Inc. 03/01/12 Carlyle/Onex Corp. 690 Automotive
Transunion 06/25/15 Advent International Corp./GSCP 665 Business Services
La Quinta 04/09/14 BX 650 Hotels
PetroLogistics LP 05/01/12 Lindsay Goldberg LLC 595 Energy
SandRidge Mississippian Trust II 04/01/12 SandRidge Energy, Inc. 590 Energy
Vantiv Inc. 03/01/12 Advent International Corp. 575 Technology
Sensata Technologies Holdings B.V. 03/03/10 Bain 569 Industrials
Rexnord Inc. 03/01/12 Apollo 490 Automotive
Bain – Bain Capital LLC. KKR – Kohlberg Kravis Roberts. GSCP – Goldman Sachs Capital Partners. Highstar – Highstar Capital. Carlyle – The Carlyle Group LP.
Riverstone – Riverstone Holdings LLC. BX – Blackstone Group LP. THO – Thomas H. Lee. CDR – Clayton Dublier & Rice Inc. ML – Merrill Lynch. TPG – TPG Capital.
Canada Pension – Canada Pension Plan Investment Board. CVC – CVC Capital Partners Group. Apollo – Apollo Global Management. JPM – JPMorgan.
Source: Fitch Ratings, Renaissance Capital, Greenwich, CT (www.renaissancecapital.com).
June 6, 2016
Leveraged Loan Data
Middle-Market Private Equity Activity

Capital Invested No. of Deals
($ Bil.) (No.)
450 2,500
400
350 2,000
300
1,500
250
200
1,000
150
100 500
50
0 0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Middle-Market Private Equity Deal Count by Industry

2011 2015
Materials and Materials and

Resources Resources
Information Information
5% 5%
Technology Technology
12% B2B 14%
37% B2B
30%
Healthcare Healthcare
13% 11%
Financial
Services Financial
8% Services
Energy 10% B2C
6% B2C Energy 22%
19% 8%
B2B – Business to business. B2C – Business to consumer. Note: Numbers may not add due to rounding.
June 6, 2016
Leveraged Loan Data
Share of Middle-Market Private Equity Activity
2011 2015
Upper Upper
Middle Market Lower Middle Market Lower
($500 Mil.–$1 Bil.) Middle Market ($500 Mil.–$1 Bil.) Middle Market
14% ($25 Mil.–$100 Mil.) 17% ($25 Mil.–$100 Mil.)
38% 34%
Core Core
Middle Market Middle Market
($100 Mil.–$500 Mil.) ($100 Mil.–$500 Mil.)
48% 50%
Note: Numbers may not add due to rounding.

Middle-Market Exit by Type

Corp. Acquisition IPO Secondary Buyout
(No.)
1,000
900
800
700
600
500
400
300
200
100
0
a
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
aDataas of June 30, 2015.
June 6, 2016
Leveraged Loan Data
Annual Fundraising Volumes

Capital Raised Funds Closed
($ Bil.) (No.)
350 400
300 350
300
250
250
200
200
150
150
100
100
50 50
0 0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
U.S. Private Equity Energy Fundraising
($ Bil.)
40
35
30
25
20
15
10
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Average Fund Closing Time

Buyout Funds All Private Equity Funds
(Months)
22
20
18
16
14
12
10
8
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
June 6, 2016
Leveraged Loan Data
Annual Canadian Private Equity Deal Flow
(CAD Bil.)
60
50
40
30
20
10
0
a
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
aDataas of of Sept. 30, 2015.
Deal Flow by Canadian Province
2008 2010 2015a

New Nova Manitoba New Manitoba
Manitoba Nova Saskatchewan
Brunswick Scotia 1% Brunswick 1%
2% Saskatchewan Scotia 1%
3% 3% Prince 2% Nova
2% 1% New
Saskatchewan Edward Scotia Quebec Brunswick
3% Island 2% 17%
Quebec 3%
1% 17%
Quebec
15%
Ontario
34% Ontario Alberta
British British
38% 19%
Columbia Columbia Ontario
13% 19% 42%
British
Alberta Alberta Columbia
28% 19% 15%
Data as of Sept. 30, 2015. Note: Numbers may not add due to rounding.
a
Percent of Canadian Private Equity Investment by Industry

Materials & Resources IT Healthcare Financial Services Energy B2C B2B
(%)
100
80
60
40
20
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 a
aDataas of Sept. 30, 2015. B2B – Business to business. B2C – Business to consumer.
June 6, 2016
Leveraged Loan Data
Private Equity Exit Activity

Exit Capital No. of Exits
(CAD Bil.) (No.)
35 80
30 70
60
25
50
20
40
15
30
10
20
5 10
0 0
a
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
aDataas of Sept. 30, 2015.
Private Equity Exits by Type

Acquisition IPO Buyout
(%)
100
80
60
40
20
0
a
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Private Equity Fundraising

Capital Raised No. of Funds Closed
(CAD Bil.) (No.)
12 25
10
20
8
15
6
10
4
5
2
0 0
a
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
June 6, 2016
Leveraged Loan Data
Collateralized Loan Obligations
Monthly CLO Issuance — 2015
Issuance Count
($ Bil.) (No. of CLOs)
16 30
14
25
12
20
10
8 15
6
10
4
5
2
0 0
CLO Size Distribution

2013 2014 2015
(%)
35
30
25
20
15
10
($ Mil.)
Primary CLO AAA Spreads — 2015

(bps)
160
155
150
145
140
135
130 Statistics:
High: 158 bps (January)
125 Low: 145 bps (June)
Avg: 151 bps
120
01/15 02/15 03/15 04/15 05/15 06/15 07/15 08/15 09/15 10/15 11/15 12/15
June 6, 2016
Leveraged Loan Data
Secondary CLO Liability Spreads

AAA AA A BBB BB
(bps)
1,400
1,200
1,000
800
600
400
200
0
2011 2012 2013 2014 2015
Source: Citi Investment research and analysis.
Top CLO Holdings by Industry — 2015

(%)
12
10
Covenant-Lite Loans in CLOs

(% of Loans)
70
Statistics:
High: 66% (2014)
60
Low: 0% (2009)
Avg.: 45%
50
40
30
20
10
0
≤ 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
June 6, 2016
Leveraged Loan Data
U.S. CLO Loan Maturities
(% of Total)
30
25
20
15
10
0
2016 2017 2018 2019 2020 2021 Thereafter
Post-2002 CLO Minimum OC Cushion

(bps)
600
500
400
300
200
100
(100)
(200)
2009 2010 2011 2012 2013 2014 2015
OC – Overcollateralization.
Source: Intex, Wells Fargo Securities, LLC.
Percentage of CLOs Failing OC Test

Minimum OC Minimum OC/Interest Diversion
(%)
80
70
60
50
40
30
20
10
OC – Overcollateralization.
Source: Intex, Wells Fargo Securities, LLC.
June 6, 2016
Leveraged Loan Data
Annual Middle-Market CLO Issuance

($ Bil.)
25
Statistics:
High: $22.1 Bil. (2006)
Low: $0.0 Bil. (2009)
20 Avg.: $6.9 Bil.
15
10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Middle-Market Secondary CLO Spreads

AAA AA A BBB
(bps)
1,000
900
800
700
600
500
400
300
200
100
0
2010 2011 2012 2013 2014 2015
Source: Wells Fargo Securities, LLC.
June 6, 2016
Leveraged Loan Data
CLO Transactions — 2015

Deal Size AAA
Amount Pricing AAA Spread Noncall Reinvestment Max.
Deal Name ($ Mil.) Collateral Manager Structurer Date CE (%) (bps) (Years) (Years) WAL
Apidos CLO XX 509.3 CVC Credit Partners Credit Suisse 01/15/15 36.00 155 1.8 4.0 8.0
Galaxy XIX CLO 509.9 PineBridge Investments Citigroup 01/15/15 37.40 155 2.0 4.0 8.0
ALM XII 786.0 Apollo Credit Mgmt Morgan Stanley 01/23/15 36.01 155 2.1 4.1 8.0
Dorchester Park CLO 509.4 GSO/Blackstone Debt Funds Mgmt Deutsche Bank 01/28/15 37.50 140 1.8 4.0 8.0
Jamestown CLO VI 759.8 3i Debt Mgmt Citigroup 01/28/15 36.00 160 2.0 4.0 8.0
Dryden 37 Senior Loan Fund 509.1 Prudential Investment Mgmt JPMorgan 01/29/15 36.00 150 2.0 4.0 8.0
NZCG Funding 846.1 Guggenheim Investment Mgmt Citigroup 01/30/15 39.17 177 2.0 4.0 8.0
Ares XXXIII 613.0 Ares Mgmt Goldman Sachs 02/03/15 37.80 150 1.5 4.0 8.0
Clear Creek CLO 307.0 40/86 Advisors Goldman Sachs 02/03/15 32.00 145 2.1 4.1 8.1
Carlyle GMS CLO 2015-1 669.5 Carlyle Investment Mgmt Morgan Stanley 02/05/15 36.00 153 2.1 4.1 8.0
MidOcean Credit CLO IV 411.0 MidOcean Credit Fund Mgmt Credit Suisse 02/05/15 37.13 155 2.0 4.0 8.0
Vibrant CLO III 412.0 DFG Investment Advisers BNP Paribas 02/05/15 37.75 163 1.5 4.0 8.0
Golub Capital Partners
CLO 22(B) 504.7 GC Investment Mgmt JPMorgan 02/06/15 36.00 148 2.2 4.0 8.0
Magnetite XII 608.8 BlackRock Financial Mgmt Wells Fargo 02/06/15 35.60 150 1.6 4.0 8.0
Flatiron CLO 2015-1 415.0 NYL Investors Morgan Stanley 02/13/15 36.25 140 2.1 4.1 8.3
OZLM XI 512.0 Och Ziff Loan Mgmt Bank of America 02/13/15 36.60 155 1.8 3.9 8.0
Race Point IX 506.8 Sankaty Advisors Citigroup 02/13/15 35.38 151 2.0 4.0 8.0
LCM XVIII 609.6 LCM Asset Mgmt Deutsche Bank 02/16/15 38.38 151 2.1 4.1 8.5
Oaktree EIF II Series B1 498.9 Oaktree Capital Mgmt Wells Fargo 02/19/15 38.50 155 1.9 3.7 8.0
BlueMountain CLO 2015-1 506.7 BlueMountain Citigroup 02/20/15 38.00 155 2.0 4.0 8.0
CIFC Funding 2015-I 614.2 CIFC Asset Mgmt BNP Paribas 02/20/15 35.00 152 1.5 4.1 8.0
Madison Park XVI 615.0 Credit Suisse Asset Mgmt Bank of America 02/24/15 38.79 150 1.5 4.0 8.0
Betony CLO 618.0 Invesco Senior Secured Mmgt Morgan Stanley 02/25/15 36.00 151 1.5 4.1 8.0
Denali CLO XI 413.7 Crestline Denali Capital Natixis 02/25/15 36.63 157 2.0 4.0 8.0
Benefit Street Partners CLO VI 508.9 Benefit Street Partners Deutsche Bank 02/26/15 36.80 163 — 4.0 8.0
Battalion CLO VIII 504.9 Brigade Capital Mgmt Citigroup 02/27/15 35.72 153 2.0 4.0 8.0
GoldenTree Loan
Opportunities XI 551.1 GoldenTree Asset Mgmt GreensLedge 02/27/15 36.98 150 1.5 4.0 8.0
ACIS CLO 2015-6 578.4 Acis Capital Mgmt Jefferies 03/03/15 38.48 159 1.5 4.0 8.0
Steele Creek CLO 2015-1 361.0 Steele Creek BNP Paribas 03/03/15 36.50 160 1.5 4.0 8.0
Voya CLO 2015-1 612.5 Voya Alternative Asset Mgmt Credit Suisse 03/03/15 35.00 148 1.5 4.0 8.0
Sound Point VIII 625.0 Sound Point Capital Morgan Stanley 03/05/15 35.00 153 2.1 4.1 8.0
Treman Park CLO 616.8 GSO/Blackstone Debt Funds Mgmt Goldman Sachs 03/05/15 35.00 150 1.5 4.0 8.0
OHA Loan Funding 2015-1 656.0 Oak Hill Advisors JPMorgan 03/06/15 36.00 150 1.7 4.0 8.0
ECP 2015-7 512.4 Silvermine Capital Mgmt Citigroup 03/10/15 35.78 155 2.0 4.0 8.0
Anchorage CLO 6 569.6 Anchorage Capital JPMorgan 03/11/15 38.50 154 2.0 4.0 8.0
Cent CLO 23 513.5 Columbia Mgmt Investment Advisors Bank of America 03/13/15 38.00 149 1.5 4.0 8.0
Venture XX CLO 616.3 MJX Asset Mgmt JPMorgan 03/13/15 36.98 149 2.0 4.0 8.0
Canyon Capital CLO 2015-1 412.1 Canyon Capital Advisors Goldman Sachs 03/17/15 35.00 155 2.0 4.0 8.0
Halcyon Loan Advisors
Funding 2015-1 518.0 Halcyon Asset Mgmt Morgan Stanley 03/17/15 38.00 145 2.0 4.0 8.0
Highbridge Loan
Management 6-2015 519.8 Highbridge Principal Strategies Morgan Stanley 03/17/15 36.00 145 2.0 4.0 8.0
Greywolf CLO V 658.8 Greywolf Capital Mgmt Citigroup 03/18/15 35.15 160 2.0 4.0 8.0
WhiteHorse X 512.5 H.I.G. WhiteHorse Bank of America 03/19/15 37.00 143 2.0 4.0 8.0
JFIN Revolver CLO 2015 440.0 Apex Credit Partners (Jefferies) Jefferies 03/20/15 43.25 150 1.0 0.0 6.0
Shackleton 2015-VII 508.0 Alcentra NY Credit Suisse 03/24/15 36.00 154 1.5 4.0 8.0
Arrowpoint CLO 2015-4 408.1 Arrowpoint Asset Mgmt Deutsche Bank 03/25/15 36.94 155 4.0 4.0 8.0
Crown Point CLO III 416.0 Valcour Capital Mgmt Natixis 03/25/15 37.35 165 2.5 4.5 8.0
CE – Credit enhancement. WAL – Weighted-average life. N.A. – Not available. Continued on next page.
Source: Fitch Ratings, public domain.
June 6, 2016
Leveraged Loan Data
CLO Transactions — 2015 (Continued)

Deal Size AAA
Dryden 38 Senior Loan Fund 515.2 Prudential Investment Mgmt Morgan Stanley 03/25/15 38.00 143 3.2 5.2 9.0
JFIN CLO 2015 512.6 Apex Credit Partners (Jefferies) BNP Paribas 03/25/15 39.20 148 2.0 4.0 8.0
Kitty Hawk CLO 2015-1 558.9 Guggenheim Investment Mgmt Mitsubishi UFJ 03/26/15 39.82 151 2.0 4.0 8.0
Apollo Credit Funding IV 477.0 Apollo Credit Mgmt Mizuho Securities 03/27/15 36.01 147 1.5 4.0 8.0
Catamaran CLO 2015-1 463.8 Trimaran Advisors Barclays 03/27/15 36.13 155 2.0 4.0 8.0
NZCG Funding 2 856.8 Guggenheim Investment Mgmt Citigroup 03/27/15 37.50 155 2.0 4.0 8.0
Babson CLO 2015-I 512.3 Babson Capital Mgmt JPMorgan 04/01/15 36.00 143 2.0 4.0 8.0
Carlyle GMS CLO 2015-2 610.3 Carlyle Investment Mgmt Citigroup 04/01/15 36.00 147 2.0 4.0 8.0
Zais CLO 3 409.0 ZAIS Leveraged Loan Mgr Credit Suisse 04/08/15 36.00 160 N.A. 4.0 8.2
JFIN Revolver CLO 2015-II 170.0 Apex Credit Partners Jefferies 04/09/15 44.00 115 2.0 0.0 5.0
Palmer Square CLO 2015-1 435.8 Palmer Square JPMorgan 04/09/15 37.93 150 2.0 4.0 8.0
AMMC CLO 16 510.8 American Money Mgmt Jefferies 04/10/15 36.40 150 1.9 3.9 8.0
KKR CLO 11 564.5 KKR Financial Advisors JPMorgan 04/10/15 36.00 152 2.0 4.0 8.0
Octagon Investment
Partners 24 758.6 Octagon Credit Investors Citigroup 04/14/15 35.42 147 1.5 4.0 8.0
ACAS CLO 2015-1 552.5 American Capital Asset Mgmt Deutsche Bank 04/15/15 35.75 149 2.0 4.0 8.0
Jackson Mill CLO 559.5 Shenkman Capital Mgmt Credit Suisse 04/16/15 36.00 154 1.5 4.0 8.0
OCP CLO 2015-8 708.5 Onex Credit Partners Bank of America 04/17/15 37.00 153 2.0 4.0 8.0
Stewart Park CLO 660.8 GSO/Blackstone Debt Funds Mgmt Wells Fargo 04/17/15 39.50 143 2.0 4.7 8.0
KVK CLO 2015-1 612.0 KVK Credit Strategies Goldman Sachs 04/22/15 35.50 158 N.A. 4.0 8.0
TICP CLO IV 515.3 TICP CLO Mgmt Morgan Stanley 04/22/15 36.00 150 1.5 4.2 8.0
CIFC Funding 2015-II 513.4 CIFC Asset Mgmt Barclays 04/24/15 35.00 145 1.4 4.0 8.0
OZLM XII 565.7 Och Ziff Loan Mgmt JPMorgan 04/24/15 36.50 145 3.0 5.0 9.0
Madison Park XVII 813.6 Credit Suisse Asset Mgmt Wells Fargo 04/28/15 36.33 145 1.7 4.2 8.0
Allegro CLO III 414.0 AXA Investment Managers Morgan Stanley 04/30/15 39.00 152 2.2 4.2 8.2
Cutwater 2015-I 462.1 Cutwater Investor Services RBC 05/01/15 35.11 161 1.5 4.0 8.0
Monroe Capital CLO 2015-1 412.0 Monroe Capital Mgmt BNP Paribas 05/01/15 37.00 143 2.0 4.0 8.0
Avery Point VI 516.5 Sankaty Advisors Morgan Stanley 05/06/15 39.50 145 3.2 5.2 9.0
Trinitas CLO III 409.4 Triumph Capital Nomura 05/07/15 37.13 160 2.1 4.1 8.0
Garrison Funding 2015-1 413.7 Garrison Investment Group JPMorgan 05/08/15 38.00 145 2.0 4.0 8.0
Apidos CLO XXI 512.9 CVC Credit Partners JPMorgan 05/13/15 37.00 143 3.1 5.1 9.0
Mountain View IX 565.5 Seix Investment Advisors Citigroup 05/13/15 35.20 146 2.1 4.1 8.0
CLO 23(B) 458.3 GC Investment Mgmt Wells Fargo 05/18/15 36.00 149 2.0 4.0 8.0
BlueMountain CLO 2015-2 408.6 BlueMountain JPMorgan 05/20/15 37.73 145 3.0 5.0 9.0
Galaxy XX CLO 555.5 PineBridge Investments Goldman Sachs 05/20/15 36.00 145 2.0 4.0 8.0
Magnetite XIV 535.5 BlackRock Financial Mgmt Deutsche Bank 05/20/15 38.00 139 2.1 5.1 9.0
GoldenTree Loan
Opportunities X 720.3 GoldenTree Asset Mgmt Morgan Stanley 06/02/15 40.00 142 3.1 5.1 9.1
ALM VI 514.0 Apollo Credit Mgmt Credit Suisse 06/03/15 35.70 143 2.1 4.1 8.0
Funding 2015-2 512.5 Halcyon Asset Mgmt Wells Fargo 06/03/15 36.70 139 2.1 4.1 8.0
Z Capital Credit Partners
CLO 2015-1 400.8 Z Capital Credit Partners Jefferies 06/03/15 36.64 133 3.0 5.0 8.0
OCP CLO 2015-9 756.8 Onex Credit Partners Citigroup 06/04/15 37.33 150 2.1 4.0 8.0
Venture XXI CLO 616.3 MJX Asset Mgmt Credit Suisse 06/04/15 37.67 149 2.0 4.0 8.0
THL Credit Wind River 2015-1 616.3 THL Credit Credit Suisse 06/10/15 36.00 150 2.0 4.0 8.0
Cathedral Lake II 410.6 Carlson Capital Jefferies 06/11/15 35.75 159 2.0 4.0 8.0
ICG US CLO 2015-1 410.8 ICG Debt Advisors Credit Suisse 06/11/15 35.50 150 2.0 4.0 8.0
Parallel 2015-1 415.0 DoubleLine Capital Morgan Stanley 06/12/15 36.00 145 2.3 4.3 8.5
Octagon Investment
Partners XXIII 609.0 Octagon Credit Investors Wells Fargo 06/15/15 35.40 142 1.3 4.0 8.0
Fortress Credit Investments Iv 408.0 Fortress Investment Group Merrill Lynch 06/16/15 45.00 125 2.0 0.0 8.0
Marathon CLO VIII 461.4 Marathon Asset Mgmt JPMorgan 06/16/15 37.00 149 2.0 5.0 9.0
June 6, 2016
Leveraged Loan Data

Deal Size AAA
Neuberger Berman CLO XIX 410.2 Neuberger Berman BNP Paribas 06/16/15 36.50 142 2.0 4.0 8.0
Sound Point CLO IX 515.5 Sound Point Capital Bank of America 06/18/15 35.00 152 2.0 4.0 9.0
Palmer Square CLO 2015-2 408.2 Palmer Square Citigroup 06/22/15 36.80 150 N.A. N.A. N.A.
CIFC Funding 2015-III 516.2 CIFC Asset Mgmt BNP Paribas 06/23/15 35.00 142 2.3 4.3 8.0
Voya 2015-2 569.0 Voya Investment Mgmt Morgan Stanley 06/23/15 39.00 140 2.0 5.0 9.0
Jefferson Mill CLO 412.5 Shenkman Capital Mgmt Bank of America 06/26/15 36.00 150 3.0 5.0 9.0
Benefit Street
Partners CLO VII 512.6 Benefit Street Partners JPMorgan 06/30/15 37.18 153 2.0 4.0 8.0
Carlyle GMS CLO 2015-3 589.6 Carlyle Investment Mgmt JPMorgan 06/30/15 37.00 140 3.0 5.0 9.0
Hildene CLO IV 358.3 Hildene Leveraged Credit Citigroup 06/30/15 36.00 150 2.0 4.0 8.0
Jamestown CLO VII 510.5 3i Debt Mgmt Credit Suisse 06/30/15 35.50 155 2.0 4.0 8.0
LCM XIX 617.5 LCM Asset Mgmt Morgan Stanley 06/30/15 39.50 147 2.0 5.0 9.0
OZLM XIII 511.6 Och Ziff Loan Management Citigroup 06/30/15 36.02 145 3.0 5.0 9.0
Symphony CLO XVI 410.8 Symphony Asset Mgmt Bank of America 07/01/15 36.00 142 3.0 5.0 9.5
Dryden 40 Senior
Loan Fund 611.9 Prudential Investment Mgmt Wells Fargo 07/02/15 36.83 140 2.0 5.0 9.0
Battalion CLO IX 509.2 Brigade Capital Mgmt RBC 07/09/15 35.50 155 2.0 5.0 9.0
KKR 12 412.0 KKR Financial Advisors BNP Paribas 07/10/15 36.00 141 1.9 3.9 8.0
ALM XVI 1,111.9 Apollo Credit Mgmt JPMorgan 07/15/15 35.00 146 2.0 4.0 8.0
Cumberland Park CLO GSO/Blackstone
617.5 Debt Funds Mgmt Credit Suisse 07/20/15 39.67 141 2.0 5.0 8.0
Babson CLO 2015-II 512.0 Babson Capital Mgmt Bank of America 07/23/15 35.00 140 1.9 3.9 8.0
Funding 2015-3 510.3 Halcyon Asset Mgmt Citigroup 07/23/15 35.52 155 2.1 4.1 8.0
Ares XXXIV 813.6 Ares Mgmt Barclays 07/29/15 38.13 141 2.0 4.0 8.0
ACAS CLO 2015-2 510.0 American Capital Asset Mgmt Wells Fargo 07/31/15 35.00 150 2.2 4.2 8.0
Mountain View X 415.6 Seix Investment Advisors LLC Morgan Stanley 07/31/15 37.50 150 2.0 4.0 8.1
Loomis Sayles II 413.8 Loomis Sayles JPMorgan 08/03/15 36.50 153 2.0 4.0 8.0
Oaktree CLO 2015-1 511.8 Oaktree Capital Mgmt Bank of America 08/03/15 38.00 155 2.1 4.1 8.0
Cent CLO 24 Columbia Mgmt
709.8 Investment Advisors Goldman Sachs 08/07/15 38.30 147 3.1 5.1 8.0
Madison Park XVIII 775.0 Credit Suisse Asset Mgmt Morgan Stanley 08/11/15 39.50 147 2.1 4.1 8.0
Anchorage CLO 7 517.5 Anchorage Capital BNP Paribas 08/14/15 41.75 157 2.0 4.0 8.0
CIFC Funding 2015-IV 512.8 CIFC Asset Mgmt Citigroup 08/14/15 35.56 144 3.1 5.1 9.0
Shackleton 2015-VIII 442.7 Alcentra NY JPMorgan 08/18/15 36.94 151 2.1 4.1 8.0
Recette CLO 513.5 Invesco Senior Secured Mmgt Bank of America 08/19/15 35.00 143 2.1 4.1 8.0
BlueMountain CLO 2015-3 457.2 BlueMountain Credit Suisse 08/20/15 36.29 148 2.1 4.1 8.0
Wellfleet CLO 2015-1 360.0 Wellfleet Credit Partners Morgan Stanley 08/26/15 36.00 165 2.1 4.1 8.0
Voya 2015-3 809.6 Voya Alternative Asset Mgmt Citigroup 08/28/15 35.20 145 2.0 5.0 9.0
York CLO-2 511.8 York Managed Holdings Credit Suisse 09/01/15 36.00 160 2.1 4.1 8.0
Apidos CLO XXII 513.5 CVC Credit Partners Bank of America 09/16/15 36.00 150 3.0 5.0 9.0
Ares XXXV 406.4 Ares Mgmt Deutsche Bank 09/16/15 32.25 132 2.0 2.0 7.3
Dryden 41 Senior
Loan Fund 512.2 Prudential Citigroup 09/17/15 35.85 150 2.0 4.0 8.0
THL Credit Wind
River 2015-2 448.1 THL Credit Deutsche Bank 09/23/15 36.15 155 2.0 4.0 8.0
JFIN CLO 2015-II 409.5 Apex Credit Partners Jefferies 09/25/15 38.13 155 2.0 4.0 8.0
Fortress Credit BSL III 425.4 Fortress Investment Group Mitsubishi UFJ 09/29/15 35.13 151 2.0 4.0 8.0
Ares XXXVII 707.0 Ares Mgmt Goldman Sachs 09/30/15 38.10 146 2.0 4.0 8.0
Octagon Investment
Partners 25 820.0 Octagon Credit Investors Morgan Stanley 09/30/15 38.00 146 2.0 5.0 8.0
Eaton Vance 2015-1 408.2 Eaton Vance Mgmt Wells Fargo 10/06/15 38.50 146 3.0 5.0 8.0
OCP CLO 2015-10 508.0 Onex Credit Partners Bank of America 10/06/15 37.00 158 2.0 4.0 8.0
June 6, 2016
Leveraged Loan Data

Deal Size AAA
Amount Pricing AAA CE Spread Noncall Reinvestment Max.
Deal Name ($ Mil.) Collateral Manager Structurer Date (%) (bps) (Years) (Years) WAL
Atrium XII 819.3 Credit Suisse Asset Mgmt Credit Suisse 10/08/15 38.00 146 2.0 5.0 8.0
ICG US CLO 2015-2 411.0 ICG Advisors Morgan Stanley 10/14/15 36.00 152 2.2 4.2 8.0
LCM XX 509.0 LCM Asset Mgmt Bank of America 10/15/15 37.00 150 3.0 5.0 9.0
CLO 26(B) 407.7 GC Investment Mgmt JPMorgan 10/16/15 36.00 165 2.0 4.0 8.0
Magnetite XV 620.3 BlackRock Financial Mgmt GreensLedge 10/20/15 35.81 148 2.2 4.2 8.0
Cathedral Lake III 404.4 Carlson Capital Jefferies 10/23/15 35.75 137 1.1 1.6 6.5
OHA Credit Partners XI 407.7 Oak Hill Advisors Wells Fargo 10/23/15 36.50 150 2.9 4.9 9.0
Benefit Street Partners
CLO VIII 485.8 Benefit Street Partners Citigroup 10/29/15 37.94 145 2.0 4.0 8.0
CIFC Funding 2015-V 510.5 CIFC Asset Mgmt Credit Suisse 10/30/15 36.00 155 2.4 4.4 8.5
Cole Park CLO 435.8 GSO/Blackstone Debt Funds Mgmt Deutsche Bank 10/30/15 36.47 150 1.9 4.9 9.0
Highbridge Loan
Management 7-2015 453.5 Highbridge Principal Strategies BNP Paribas 10/30/15 45.44 148 2.0 5.0 8.0
Neuberger Berman CLO XX 511.3 Neuberger Berman Morgan Stanley 10/30/15 36.50 154 2.0 4.2 8.0
Galaxy XXI CLO 411.2 PineBridge Investments Barclays 11/05/15 35.25 158 2.1 4.1 8.0
AMMC CLO 17 357.3 American Money Mgmt Mitsubishi UFJ 11/13/15 35.50 157 2.0 4.0 8.0
Avery Point VII 408.5 Sankaty Advisors JPMorgan 11/17/15 37.00 150 2.0 5.0 9.0
Ares XXXVIII 408.0 Ares Mgmt Bank of America 11/19/15 38.13 148 2.1 4.1 8.0
5180-2 CLO 994.7 Guggenheim Investment Mgmt Citigroup 11/20/15 39.15 170 1.9 4.0 8.0
Jamestown CLO VIII 504.3 3i Debt Mgmt Mizuho Securities 11/20/15 36.01 152 2.1 4.1 8.1
KKR CLO 13 412.0 KKR Financial Advisors Morgan Stanley 11/23/15 36.00 152 2.1 4.1 8.0
Bean Creek CLO 305.5 40/86 Advisors JPMorgan 11/30/15 34.50 162 2.1 4.1 9.0
Madison Park XIX 609.8 Credit Suisse Asset Mgmt Citigroup 12/02/15 35.50 152 2.0 5.1 9.0
Apidos CLO XXIII 499.9 CVC Credit Partners Citigroup 12/03/15 38.00 149 2.1 4.7 8.0
Magnetite XVI 506.5 BlackRock Financial Mgmt Credit Suisse 12/03/15 36.00 150 2.0 4.0 8.0
AIMCO CLO 2015-A 501.0 Allstate Investment Mgmt Goldman Sachs 12/04/15 35.00 155 2.0 4.0 8.0
OZLM XIV 507.4 Och Ziff Loan Mgmt Deutsche Bank 12/07/15 36.25 155 2.1 5.1 9.0
OHA Credit Partners XII 606.0 Oak Hill Advisors Goldman Sachs 12/08/15 35.90 149 2.0 4.8 8.0
Sound Point CLO X 460.3 Sound Point Capital Morgan Stanley 12/08/15 35.00 165 2.1 4.1 8.1
BlueMountain CLO 2015-4 505.8 BlueMountain Bank of America 12/10/15 38.00 150 2.0 4.0 8.0
SCOF-2 505.0 Symphony Asset Mgmt BNP Paribas 12/14/15 36.50 165 2.3 4.3 8.0
Oaktree EIF I Series A1 432.0 Oaktree Capital Mgmt Mitsubishi UFJ 12/15/15 38.42 162 2.0 3.0 7.0
Webster Park CLO 506.7 GSO/Blackstone Debt Funds Mgmt Citigroup 12/15/15 39.84 150 2.0 4.8 8.0
Palmer Square CLO 2016-1 200.2 Palmer Square JPMorgan 12/17/15 32.50 130 1.0 0.0 8.0
ALM XVII 604.8 Apollo Credit Mgmt Wells Fargo 12/22/15 35.50 156 2.5 4.5 8.5
Venture XXII CLO 400.5 MJX Asset Mgmt Jefferies 12/22/15 40.75 150 2.0 4.0 8.0
CE – Credit enhancement. WAL – Weighted-average life. N.A. – Not available.
June 6, 2016
Leveraged Loan Data
Precrisis Versus Post-Crisis Arbitrage CLO Terms

Precrisis (2006–2007) Post-Crisis (2011–2015)
Economics
Typical Deal Size ($ Mil.) 500 350–550
Average Asset Price (% of Par) 100 95–100
Weighted Average Spread Covenant (bps) 200–250 350–450
CLO AAA Spread (bps) 25–35 140–160
Leverage (Debt/Equity) (x) 10–12 8–12
Key Terms (Years)

Reinvestment Period 5–7 3–4
Final Legal Maturity 10–14 10–13
Noncall Period 3–4 1.5–2.0
Typical Key Portfolio Parameters

% of First Lien Senior Secured Loans Minimum 85–90 Minimum 90
% of Second Lien Loans Maximum 5–10 Maximum 5–10
% of Fixed-Rate Assets Maximum 5–10 Maximum 10
% of Assets Rated CCC+ or Below Maximum 5.0–7.5 Maximum 7.5
% of Structured Finance Securities Maximum 5 0
Arbitrage CLO Structural Protections

Coverage Tests Purpose
Overcollateralization (OC) The OC tests protect noteholders in the event of credit quality deterioration and/or par
Tests value erosion in the portfolio. OC refers to the excess of the par amount of collateral
available to secure one or more note classes over the par amount of those note classes.
If the deal fails an OC test, cash flows are diverted from equity or more junior classes of
notes to pay down the liabilities in order of seniority until the senior notes are paid in full,
or until the test is back in compliance.
Interest Coverage (IC) Tests The IC tests protect noteholders in the event of a reduction in the cash flows produced
by the portfolio collateral. The IC test is the ratio of the interest income received (or
anticipated) on the assets between payment dates to interest payments due on the
liabilities. If the deal fails an IC test, cash flows are diverted from equity or more junior
classes of notes to pay down the liabilities in order of seniority until the senior notes are
paid in full, or until the test is back in compliance.
Collateral Quality Tests

Weighted-Average Life The weighted average time until all the loans in the portfolio mature. Designed to prevent
(WAL) the total risk horizon of the portfolio from exceeding a covenanted level. The WAL is
necessary in determining base default rates since default rates increase over time.
Weighted-Average Spread The WAS over LIBOR of the loan portfolio. This test ensures a minimum level of cash
(WAS) flow from the underlying portfolio that should be sufficient to pay interest on the liabilities,
which are typically paid a spread over LIBOR.
Weighted-Average The weighted average recovery rate of the loan portfolio. This test measures what the
Recovery Rate expected recoveries may be upon default of the entire portfolio.
Weighted-Average The WARF is a measure of the average credit rating of the portfolio. It is an indicator of
Rating Factor (WARF) the portfolio's average credit risk.
Typical Investment Criteria (Minimum/Maximum Allowances)a

% First Lien/Sr. Secured % Synthetic Securities % Bonds % Zero-Coupon Securities
% Rated CCC+ or Below % Fixed-Rate Securities % Debtor in Possession Loans % Same Industry Category
% Non U.S. Issuer/Non-USD % Structured Finance % Revolving Credit Facilities % Covenant-Lite Loans
% Single Issuer/Obligor % Long-Dated Assets % Delayed-Draw Term Loans
% PIK-able Securities % Second Lien/Unsecured % Current Pay Obligations
Not an exhaustive list. PIK – Payment in kind.
a
June 6, 2016
Leveraged Loan Data
Middle Market Versus Broadly Syndicated CLO Comparison

Middle Market Broadly Syndicated
Issuance ($ Bil.) 5.6 93.1
Structure
AAA CE (%) 44.6 36.8
AAA Spread (bps) 192 150
Noncall (Years) 2 2
Reinvestment (Years) 4.0 4.1
Max Weighted Average Life 8.0 8.1
Initial Target WARF 3,400 2,725
Secondary CLO Spreads (bps)
AAA 205 169
AA 310 251
A 415 352
BBB 600 523
CE – Credit enhancement. WARF – Weighted-average rating factor. Note: Data as of Dec. 31, 2015.
Middle-Market CLO Deals — 2015

AAA
Deal Size AAA Spread Noncall Reinvestment
Deal Name ($ Mil.) Collateral Manager Structurer CE (%) (bps) (Years) (Years)
Fifth Street SLF I 309.5 Fifth Street Mgmt Wells Fargo 42.5 200 2.0 4.0
NewStar Commercial Loan Funding 2015-1 496.1 NewStar Financial Wells Fargo 42.3 180 2.1 4.1
Fortress Credit Opportunities VI 350.0 Fortress Investment Group Natixis 52.0 190 2.0 4.0
Golub Capital Partners CLO 24(M) 707.7 GC Investment Mgmt Wells Fargo 46.8 180 2.0 4.0
NXT Capital CLO 2015-1 408.6 NXT Capital Wells Fargo 45.1 185 2.0 4.0
FS Senior Funding 309.0 Fifth Street Mgmt Natixis 41.7 180 2.0 4.0
Carlyle GMS Finance MM CLO 2015-1 398.9 Carlyle Investment Mgmt Citigroup 43.3 185 2.1 4.1
Ivy Hill Middle Market Credit Fund X 384.7 Ivy Hill Asset Mgmt Citigroup 44.7 175 2.0 4.0
Fifth Street SLF II 416.6 Fifth Street Mgmt Natixis 44.0 189 2.0 4.0
NewStar Commercial Loan Funding 2015-2 397.8 NewStar Financial Wells Fargo 43.0 200 2.0 4.0
Maranon Loan Funding 2015-1 354.8 Maranon Capital LP Citigroup 44.8 210 2.0 4.0
CE – Credit enhancement.
June 6, 2016
High-Yield Bonds
High-Yield Bond Basics 111

[Credit 101] What Is the U.S. High-Yield Bond Market? 111
Second Lien Bonds 113

[Credit 101] What Are Second Lien Bonds? 113
What Is the Current Appetite for Second Lien Bonds? 113
PIK Bonds 114

[Credit 101] What Are PIK Bonds? 114
Why Do Issuers Choose PIK Bonds? 114
How Is PIK Accounting Different? 115
Defaults 115
[Credit 101] What Happens in an Event of Default? 115
[Credit 101] What Options Are Available to Issuers Under U.S. Bankruptcy Law? 115
What Are the Historical Default Rates for High-Yield Bonds? 115
What Is the Current Default Environment for High-Yield Bonds? 116
What Is a Distressed Debt Exchange? 116
Recovery 118
How Do High-Yield Bonds Perform in Fitch’s Recovery Analyses? 118
What Are the Historical Post-Default Prices for High-Yield Bonds? 118
High-Yield Bond Data 119

June 6, 2016
High-Yield Bonds
High-Yield Bond Basics
[Credit 101] What Is the U.S. High-Yield Bond Market?
Defining the Markets

The high-yield bond market generally consists of companies with Issuer Default Ratings (IDRs)
of ‘BB+’ or lower. High-yield bonds can be secured or unsecured, and typically rank lower in
terms of priority than loans. Bonds are issued to corporations and syndicated by banks to
investors. Bonds are originated in several different forms, with cash pay and zero coupon being
the most common types.
High-Yield Bond Types

Type Description
Cash Pay Pays a fixed-coupon rate of interest, usually paid in cash, until maturity or an earlier stated
redemption date.
Step Coupon Offers one interest (coupon) rate in the early years of the bond’s life, followed by a second,
higher interest rate at a specified date (the step-up date).
Payment in Kind (PIK) Allows the issuer the option of paying the bondholder interest in cash now or the option to
accumulate interest and add it to the principal balance of the bond. At maturity, the issuer must
pay both the principal and accumulated interest amounts to the holder of the bond.
Zero Coupon Sold at a deep discount from its face value and pays no current interest to the bondholders.
Instead the interest is compounded and paid with the principal at maturity.
Convertible May be converted into shares of another security or cash under stated terms. The security is
often the issuing company’s common stock.
The characteristics of high-yield bonds are often dictated by the issuing company’s credit profile.
High-yield companies typically have weaker operating profiles or higher leverage, resulting in a
weaker cash flow profile. Due to these inherent risks coupled with a lower priority in the capital
structure, investors typically demand higher yields than those demanded for loans.
High-Yield Bond Characteristics

Type Description
Coupon The interest rate stated on a bond when issued. There are generally three types of coupon
structures:
• Cash Pay: The coupon is paid in cash, typically semiannually, and can be fixed or floating.
• Floating Rate: Floating-rate notes (FRNs) typically pay quarterly interest that varies according
to the movement of the underlying benchmark
(i.e. three-, six- or nine-month T-bill rate or LIBOR).
• Payment-in-Kind (PIK): Allows the issuer the option of paying the bondholder interest in cash
now or the option to accumulate interest and add it to the principal balance of the bond.
Maturity The date on which the principal amount of a bond becomes due, is repaid to the investor and
interest payments stop.
Call Protection A protective provision for investors that prohibits the issuer from repaying the security in full for
a stated number of years. Call protection exists to protect bondholders from the risk that interest
rates will fall before the call date. Investors’ yields can be negatively affected when a bond is called
prior to maturity.
Call Premiums The premium paid by the issuer over par for the right to redeem the bond before the bond’s
maturity date.
Structure A high-yield bond can be unsecured or secured on a first or second lien basis. Further, it can be
senior, senior subordinated, subordinated or junior subordinated in rank.
Make-Whole A lump-sum payment to the holder of the bond that is equal to the net present value of coupons
they would have received had the bond not been called.
Put Provisions Allows a bondholder to sell a bond back to the issuer at a price, generally par, on certain stipulated
dates prior to maturity. Helps mitigate the risk of increasing interest during the stated put period.
Equity Clawbacks A clawback provision in a bond gives the issuer an option to redeem a preset fraction of the bond
within a preset period at a predetermined price, as long as the funds used for the debt redemption
come from an equity offering.
Warrants A provision that allows the holder of the bond the option to buy a defined number of warrants to
purchase equity in the company at a later date.
The Annual Manual (U.S. Leveraged Finance Primer) — High-Yield Bonds 111
June 6, 2016
High-Yield Bonds
High-Yield Bond Versus Leveraged Loan Comparison

Characteristics High-Yield Bonds Leveraged Loans
Priority Senior or Subordinated Senior
Security Unsecured/Secured Secured
Rating ≤ BB+ ≤ BB+
Average Deal Size (Average Range) Approximately $500 Mil. Approximately $400 Mil.
($100 Mil.–$2.5 Bil.) ($100 Mil.–$5.0 Bil.)
Coupon Fixed Floating
Average Yield Approximately 5%–7% Approximately 3%–6%
Call Protection Yes Some soft calls
Covenants Yes — Incurrence Yes — Maintenance
Tenor Approximately 10+ years Approximately 3–6 years
Amortization No Yes
Secondary Liquidity Yes Some
Investors Investors Retail Banks/Investors
2015 Default Rate (%) 3.4 1.7
2015 Recovery Rate (%) 31.3 50.0
Market History
Key Events in the High-Yield Bond Market

Fed Begins Raising
($ Bil., Market Size) Interest Rates
1,600
Fed Begins Taper
1,400
Secured Issuance Spikes High-Yield Bond Market
Exceeds $1 Tril.
1,200
Dot-Com Bubble Fed Completes
Taper
1,000
1990s: Overfunded Annual Issuance Hits

LBO Boom New Record = $307 Bil.
Bonds and Equity
800
Clawbacks
First Appear Fed Lowers
Fed Funds Rate
600
High-Yield Default Rate
Peaks At 16.4%
400
High-Yield Telecom Defaults

Bond Market
200
Size = $521 Bil.
Credit Crisis
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Note: Grey sections represent a recessionary period as defined by the National Bureau of Economic Research.
Source: Fitch U.S. High Yield Default Index, Bloomberg.
Several factors have contributed to record growth in the U.S. high-yield bond market in recent
years. Investor demand in particular has played a major role. As interest rates reached historic
lows in the years following the financial crisis, the search for yield attracted new investors into the
high-yield bond and leveraged loan markets. Insurance companies, mutual funds and pension
funds were among the most active investors of high-yield bonds.
The U.S. high-yield bond universe surpassed $1.5 trillion during first-quarter 2016, a 90%
gain since the first quarter of 2009. Energy and Metals/Mining compose 24% of the current
outstanding amount. The lowest rated ‘CCC’ segment accounts for nearly 19% of the high-yield
bond market.
June 6, 2016
High-Yield Bonds
Evolution of the High-Yield Investor Base
2000 2006 2015
Mutual Mutual Equity and

Other Funds Funds Hedge Funds Income Funds
Other and Other 4%
18% 13% 21% 14%
6% Mututal
Investment- Funds
Grade Funds 28%
Pension 6%
Funds Pension
19% Foreign Funds
8% 20%
CBOs
Insurance
21%
Companies
29%
Investment-
Insurance Grade
Investment- Companies Funds Pension
Insurance
Grade 22% 12% Funds
Companies
Funds 27%
25%
7%
CBO – Collateralized bond obligation.
Source: JP Morgan.
Second Lien Bonds
[Credit 101] What Are Second Lien Bonds?

Second lien bonds are secured bonds that constitute a bifurcated deal structure in which the first
lien bondholders stand before second lien bondholders for payments on asset claims. Due to
their lower position in the capital structure, second lien bonds are perceived to be riskier, and are
consequently more expensive and have higher yields for investors than first lien bonds.
Please refer to the Leveraged Loan section for further explanation of second lien debt.
What Is the Current Appetite for Second Lien Bonds?

U.S. second lien bond issuance rose to a record $22.3 billion in 2015, surpassing the 2010 high
of $21.1 billion.
U.S. Second Lien Bond Issuance Volume

($Bil.)
25
20
15
10
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
The record second lien 2015 issuance was driven by the struggling energy sector, which
accounted for 53% of the total annual volume, and 14 of 31 new senior bond issuances.
June 6, 2016
High-Yield Bonds
Ten of the 31 new bond issues were bond exchanges, primarily for stressed issuers in the
Energy, Gaming and Metals/Mining sectors. Seven of these 10 were exchanges of unsecured
debt for second lien debt, which often led to reduced debt burdens or maturity extensions in
exchange for collateral and increases in seniority.
Evolution of Second Lien Bond Volume by Industry
2010 2015
Paper & Other
Other Containers 7%
15% Computers & 5%
Electronics Energy
Healthcare &
25% 53%
Pharmaceutical
Transportation
5%
9%
Computers &
Electronics
10%
Chemical
10% Gaming,
Gaming, Lodging &
Lodging & Restaurants
Restaurants 6%
Telecommunication 15%
12% Energy Metals & Mining
14% 13%
PIK Bonds
[Credit 101] What Are PIK Bonds?

Payment-in-kind (PIK) is a relatively expensive source of debt funding that allows issuers to pay
interest in the form of additional securities rather than in cash. Paying in kind can be optional
— known as a toggle option — mandatory, or a combination of the two. Contingent cash-pay
requirements were frequently included in recent PIK transactions. This means the issuer must
make payments in cash when financial thresholds are met. When not met, the issuer may or
must pay in kind, depending on the deal-specific terms. Thresholds vary from restricted payment
basket availability under the company’s bank facility to maximum leverage or minimum liquidity
levels. Maximum limits on the total number of payments that could be made in kind were relatively
common in recent PIK issue indentures.
Defining the PIK Market

PIK volumes tend to fluctuate with the credit cycle and have recently constituted a much smaller
share of total high-yield issuance, as the overall U.S. market has propelled to $1.5 trillion.
In 2014, $7.5 billion worth of PIK debt was issued, the fourth-largest annual U.S. PIK issuance.
However, it represented less than 3% of total U.S. high-yield issuance. PIK issuance all but
disappeared in 2015, with total issuance of $1.9 billion representing only 0.1% of U.S. high-yield
issuance. This is in sharp contrast to 2007 ($16 billion) and 2008 ($14 billion) PIK volumes that
represented 11% and 27%, respectively, of total U.S. high-yield issuance.
Why Do Issuers Choose PIK Bonds?

PIK options allow flexibility for the issuer in the event of cash flows temporarily deteriorating
and liquidity becoming a concern. PIK debt has recently been used primarily to fund dividend
recapitalizations of LBO targets or as a restructuring tool for distressed issuers. Periods of
elevated PIK issuance tend to be driven by dividend deals.
June 6, 2016
High-Yield Bonds
Deferred Payment (PIK) Bond Issuance

PIK Issuance % of Total Issuance
($ Bil.) (%)
18 30
Statistics:
16 High: $16 Bil. (2007)
Low: $0 Bil. (2000) 25
14
Avg.: $4.3 Bil.
12 20
10
15
8
6 10
4
5
2
0 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
PIK – Payment-in-kind.
How Is PIK Accounting Different?

Flexibility exists under U.S. GAAP regarding the cash flow statement treatment of the final
accrued interest payment made on a PIK issue’s maturity or call date. This cash outflow can be
classified as operating or financing.
If a company adopts the former treatment, the final bond payment would be bifurcated into
an accrued PIK interest portion and an original principal portion on the cash flow statement.
Payment of accrued interest would be classified as an operating cash outflow (based on
Accounting Codification Standard 230-10-45-17), and the original principal payment amount
would be classified as a financing cash flow. If a company adopts the latter treatment, the
entirety of the cash payment at maturity would be classified as a financing cash flow, resulting
in higher operating cash flow.
Defaults
[Credit 101] What Happens in an Event of Default?

Please refer to the Leveraged Loan section for Fitch Ratings’ explanation of what happens in an
event of default.
[Credit 101] What Options Are Available to Issuers Under U.S. Bankruptcy Law?
Please refer to the Leveraged Loan section for Fitch’s explanation of options available to issuers
under U.S. bankruptcy law.
What Are the Historical Default Rates for High-Yield Bonds?
2000–2015
The U.S. high-yield bond default rate has averaged 4.3% over the past 16 years. More significantly,
the recessionary average over that time finished at 12.5%, while the nonrecessionary average
was a benign 2.3%. The 2009 recession involved several industries, leading to a 13.7% rate and
a record yearly amount of $119 billion of default volume. The past six years produced reasonably
low default activity, with a 2% average. The rate inched up over the last two years, reaching 2.4%
and 3.4%, respectively.
June 6, 2016
High-Yield Bonds
Industry Defaults
The 2001–2002 recession involved one sector, Telecommunications, which produced the bulk of
the default volume. The default rate climbed to a peak 16.4% in 2002. Unlike 2001–2002, there
were six sectors in 2009 whose default rate topped 20%. Automotives led the way and produced
the highest ever sector mark at over 44%. Adverse credit markets led to financing difficulties
for car buyers and liquidity problems for manufacturers. As a result, substantial reductions in
vehicle sales led to cutbacks in original equipment manufacturers’ production and reduced parts
demand from suppliers. At the same time, legacy labor and benefit costs were burdensome and
prices of raw materials, including steel, were on the rise. These challenges caused widespread
auto defaults.
Energy and Metals/Mining accounted for 52% of the total defaults in 2015, while Caesars
Entertainment Operating Co. was the year’s largest high-yield bond bankruptcy at $12.4 billion.
Energy and Metals/Mining, especially the exploration and production (E&P) and coal subsectors,
continue to struggle and will lead to an increased overall default rate for the third consecutive year.
What Is the Current Default Environment for High-Yield Bonds?
Overall Defaults
Fitch projects a 6% U.S. high-yield bond default rate for 2016 due to ongoing challenges in the
Energy and Metals/Mining space. Fitch forecasts a total of just under $90 billion, which would
be the third highest on record behind the $110 billion and $119 billion tallied in 2002 and 2009,
respectively. Fitch anticipates a benign 1.5%‒2.0% default rate for non-Energy and Metals/
Mining companies.
Energy, Metals/Mining Defaults

The Energy and Metals/Mining sectors are likely to garner $70 billion in defaults this year.
Fitch forecasts the Energy sector’s TTM default rate will surpass 20% during 2016. Energy default
volume totals $26 billion through mid-May, versus $17.5 billion for all of 2015. Fitch anticipates
more than $25 billion of additional outstanding energy bond debt will default this year. The April
2016 Energy TTM default rate was at 10.7% and is expected to surpass 14% in May 2016.
The majority of Energy defaults are in the E&P subsector. Fitch projects the 2016 E&P default rate
at 30%‒35%.
Fitch expects the Metals/Mining sector default rate to finish 2016 at 20%. The Coal subsector
is forecast to reach an astounding 60% at the end of the year, with the April 2016 TTM rate at
nearly 75%.
What Is a Distressed Debt Exchange?

Fitch categorizes defaults under three methods: a bankruptcy filing, a missed interest payment
in which the issuer does not cure its payment within the 30-day grace period, or a distressed
debt exchange (DDE). A DDE occurs when bond investors are offered securities with structural
or economic terms that are diminished in comparison with those of existing bonds.
DDE’s accounted for 19% of the defaulted amount in 2015, but 38% on an issuer count basis.
The 28 DDEs equals the number tallied over the prior three years combined, but less than the 45
registered in 2009. Energy and Metals/Mining composed $6.9 billion of the $9.1 billion in DDEs
during 2015. Through April 2016, there have been $3.2 billion in DDEs, with the Energy and
Metals/Mining sectors tallying 87% of the total.
The table below details those issuers from 2008 through April 2016 that have experience
a subsequent default following an initial DDE. This translates to 43% of the sample and
June 6, 2016
High-Yield Bonds
demonstrates that an initial DDE is often not enough to prevent another DDE or an eventual
missed interest payment/filing.
Distressed Debt Exchanges with Subsequent Default Events: 2008–2016

Issuer Industry Original Debt Exchange Multiple Debt Exchange Missed Payment Bankruptcy
French Lick Resorts & Casino Gaming, Lodging & Restaurants April 2008 April 2009 — —
Primus Telecomm Group Telecommunications May 2008 — — March 2009
Residential Capital LLC Banking & Finance June 2008 Dec. 2008 May 2012 May 2012
Six Flags Inc. Leisure & Entertainment June 2008 — — June 2009
Metaldyne Corp. Automotive Nov. 2008 — — May 2009
Finlay Fine Jewelry Corp. Retail Nov. 2008 — July 2009 —
Neff Corp. Banking & Finance Dec. 2008 — — May 2010
Harrahs Operating Co Inc. Gaming, Lodging & Restaurants Dec. 2008 April 2009 — Jan. 2015
American Achievement Group Holding Services & Miscellaneous March 2009 Aug. 2009 — —
Energy XXI Energy March 2009 — — April 2016
Nxp Bv/Nxp Funding LLC Computers & Electronics March 2009 July 2009 — —
Wolverine Tube Inc. Metals & Mining April 2009 — — Oct. 2010
Hawker Beechcraft Acquisition Co. Transportation June 2009 — May 2012 May 2012
Affinity Group Inc. Services & Miscellaneous June 2009 — Sept. 2009 —
William Lyon Homes Inc. Building & Materials June 2009 Oct. 2009 Oct. 2011 —
Momentive Performance Chemicals June 2009 — — April 2014
Advanta Capital Trust I Banking & Finance June 2009 — — Nov. 2009
Fairpoint Communications Telecommunications July 2009 — — Oct. 2009
NewPage Corp. Paper & Containers Oct. 2009 — — Sept. 2011
Catalyst Paper Paper & Containers March 2010 — Jan. 2012 —
Reddy Ice Services & Miscellaneous March 2010 — — April 2012
Titan Petrochemicals Energy July 2010 — March 2012 —
Brookstone Company Inc. Retail Oct. 2010 — Feb. 2014 —
GMX Resources Inc. Energy Dec. 2011 — — April 2013
Dune Energy Energy Dec. 2011 — — March 2015
Dex One Corp. Broadcasting & Media April 2012 — — March 2013
Verso Paper Holdings Paper & Containers May 2012 July-14, Jan-15 Jan. 2016 Jan. 2016
Chukchansi Economic Development Gaming, Lodging & Restaurants June 2012 — April 2013 —
Energy Future Holdings Utilities, Power & Gas Dec. 2012 Jan. 2015 April 2014 April 2014
Travelport LLC Leisure & Entertainment April 2013 March 2014 — —
American Media Inc. Broadcasting & Media Oct. 2013 Sept. 2014, March 2016 — —
Winsway Coking Coal Holdings Metals & Mining Oct. 2013 — May 2015 April 2016
Affinion Group Holdings Broadcasting & Media Dec. 2013 June 2014, Nov. 2015 — —
Altegrity Inc. Services & Miscellaneous June 2014 — Jan. 2015 Feb. 2015
Walter Energy Metals & Mining Aug. 2014 — June 2015 July 2015
Hidili Industry International Metals & Mining Oct. 2014 — Nov. 2015 —
Alpha Natural Resources Inc. Metals & Mining April 2015 — — Aug. 2015
Venoco Inc. Energy April 2015 — — March 2016
Halcon Resources Corp. Energy April 2015 Sept. 2015, Dec. 2015 — —
SandRidge Energy Inc. Energy May 2016 Aug. 2015, Oct. 2015 — —
Midstates Petroleum Inc. Energy May 2015 — — April 2016
Warren Resources Inc. Energy May 2015 Oct. 2015 March 2016 —
American Energy - Woodford Energy June 2015 April 2016 — —
Tonon Bioenergia SA Food, Beverage & Tobacco July 2015 — — Dec. 2015
Goodrich Petroleum Inc. Energy Oct. 2015 — — April 2016
Logan's Roadhouse Gaming, Lodging & Restaurants Oct. 2015 — May 2016 —
Exco Resources Inc. Energy Oct. 2015 Nov. 2015 — —
Comstock Resources Inc. Energy Feb. 2016 April 2016, May 2016 — —
Community Choice Financial Banking & Finance Feb. 2016 April 2016 — —
Rex Energy Inc. Energy March 2016 April 2016 — —
Source: Fitch U.S. High Yield Default Index.
June 6, 2016
High-Yield Bonds
Recovery
[Credit 101] What Is Recovery?

Please refer to the Leveraged Loan section for Fitch’s explanation of recovery.
[Credit 101] How Does Fitch Estimate Recovery?

Please refer to the Leveraged Loan section for Fitch’s approach to estimate recovery.
How Do High-Yield Bonds Perform in Fitch’s Recovery Analyses?

Most unsecured recovery ratings (RRs) trend in the average (RR4) to poor (RR6) ranges due to
their lack of seniority in the capital structure.
Recovery Rating Distribution — Senior Unsecured Debt 2015
(% of Issues)
50
40
30
20
10
0
RR – Recovery Rating. Note: U.S. Corporates public Issuer Default Ratings and Credit Opinions of ‘B+’ and lower only.
What Are the Historical Post-Default Prices for High-Yield Bonds?

Fitch uses the 30-day post default price to determine recovery rates. Taking bid levels one month
following a default is common practice in the high-yield market and is seen as a good proxy for
the emergence price.
The recovery rates varied noticeably over the past 16 years, reaching highs of 66.4% of par in
2007 and lows of 22.5% in 2002. The historical recovery rate average is 37.9%. A high default
environment usually leads to low recovery rates.
The recovery rate finished at 31.3% in 2015, as Energy and Metals/Mining defaults dragged
down the overall average. The Energy recovery rate stood at 22.9% while Metals/Mining was at
17.3%, with these two troublesome sectors combining for 62% of the issue sample. TTM recovery
rates through April 2016 are challenging the low mark of 2002. As the Energy and Metals/Mining
defaults continue throughout 2016, recovery rates are unlikely recovery to improve.
June 6, 2016
Option-Adjusted Spread Comparison — Investment-Grade Versus High-Yield
BofAML US High Yield Index BofAML US Corporate Index
(bps)
2,000
1,800
1,600
1,400
1,200
November 2008: 1,347 bps
1,000
800
600
400
200 May 2007: 152 bps
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: BofA Merrill Lynch Global Research, used with permission.
Option-Adjusted Spreads by Rating

BofAML BB US HY Index
BofAML B US HY Index
BofAML CCC US HY Index
(bps)
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Option-Adjusted Spreads by Industry (Top/Bottom Six) — 2015

(BofAML US High Yield Index)
(bps)
1,200
1,000
2015 Avg. OAS: 560 bps
800
600
400
200
0
OAS – Option-adjusted spread.

The Annual Manual (U.S. Leveraged Finance Primer) — High-Yield Bond Data 119
June 6, 2016
Monthly High-Yield Bond Issuance — 2015

($ Bil.)
45
Statistics:
40 High: $41 Bil. (March)
Low: $6 Bil. (December)
35
Avg.: $21 Bil.
30
25
20
15
10
Cumulative High-Yield Bond Returns — 2015

(%)
5.0
4.0
3.0 2.49
2.0 2.55
1.0
0.0
(1.0)
(2.0)
(2.53)
(3.0)
(4.0)
(5.0)
(4.64)
(6.0)
2015 Risk-Adjusted Returns
Leveraged Loans
IG Bonds
MBS
S&P 500
10 Year
HY BB
HY B
HY CCC
Gold
(2.0) (1.5) (1.0) (0.5) 0.0 0.5 1.0 1.5 2.0

(Sharpe Ratio)
IG – Investment-grade. MBS – Mortgage-backed securities. HY – High-yield.
Source: JPMorgan.
June 6, 2016
Annual High-Yield Bond Returns by Rating Category

(%) BB B CCC
100
80
60
40
20
(20)
(40)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Top 10 Largest Outflows/Inflows — 2015

Outflows Inflows
Rank Week of Total ($ Mil.) Rank Week of Total ($ Mil.)
1 12/16/15 (3,811) 1 10/21/15 3,343
2 12/09/15 (3,460) 2 02/11/15 2,935
3 07/01/15 (2,980) 3 01/28/15 2,765
4 06/17/15 (2,890) 4 02/04/15 2,670
5 05/06/15 (2,745) 5 11/04/15 2,048
6 06/10/15 (2,560) 6 10/28/15 2,035
7 09/30/15 (2,152) 7 02/18/15 1,642
8 03/11/15 (1,956) 8 10/14/15 1,476
9 11/11/15 (1,800) 9 04/08/15 1,350
10 07/29/15 (1,700) 10 07/15/15 1,230
Source: Lipper FMI.
Top 10 Largest Outflows/Inflows of All Time

Outflows Inflows
Rank Week of Total ($ Mil.) Rank Week of Total ($ Mil.)
1 08/06/14 (7,068) 1 10/26/11 4,248
2 06/05/13 (4,600) 2 10/21/15 3,343
3 12/16/15 (3,811) 3 07/24/13 3,200
4 12/09/15 (3,460) 4 08/27/03 3,259
5 06/22/11 (3,432) 5 09/25/13 3,100
6 08/10/11 (3,415) 6 02/11/15 2,935
7 06/12/13 (3,283) 7 01/28/15 2,765
8 06/26/13 (3,086) 8 07/17/13 2,700
9 12/17/14 (3,080) 9 02/04/15 2,670
10 07/01/15 (2,980) 10 11/05/14 2,441
Source: Lipper FMI.
June 6, 2016
Average Par Value of Defaults Per Issuer

($ Mil.)
1,000
Statistics:
900 High: $857 Mil. (2014)
800 Low: $233 Mil. (2007)
Avg.: $523 Mil.
700
600
500
400
300
200
100
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Top 10 Largest High-Yield Defaults 2000–2015

Amount
Outstanding at Default
Issuer Default ($ Bil.) Date Default Source Industry
WorldCom Inc. 26.3 07/22/02 Chapter 11 Filing Telecommunications
CIT Group Inc. 20.3 11/01/09 Chapter 11 Filing Banking & Finance
Energy Future Holdings 16.6 04/29/14 Chapter 11 Filing Utilities, Power & Gas
GMAC LLC 14.6 12/31/08 Distressed Exchange Banking and Finance
Caesars Entertainment
Operating Co. 12.4 01/15/15 Chapter 11 Filing Gaming, Lodging & Restaurants
Charter Holding Co. LLC 12.6 03/27/09 Chapter 11 Filing Cable
General Motors Corp. 10.4 06/01/09 Chapter 11 Filing Automotive
Calpine Corp. 10.0 12/21/05 Chapter 11 Filing Utilities, Power & Gas
Residential Capital LLC 8.1 06/04/08 Distressed Exchange Banking & Finance
Residential Capital LLC 6.6 12/31/08 Distressed Exchange Banking & Finance
June 6, 2016
Recovery Rates by Seniority

Weighted Avg. Straight Avg. Median Number of Issues
(%) Recovery Rate Recovery Rate Recovery Ratea with Price Data
2000
Senior Secured 50.5 53.9 47.5 19
Senior Unsecured 18.4 22.5 13.3 74
Senior Subordinated 27.1 23.6 20.0 64
Total Defaulted Issues 24.9 28.0 20.0 157
2001
2002
2003
2004
2005
2006
2007
2008
2009
a
Similar seniorities per issuer collapsed into one observation. Note: Recoveries 30 days post default.
Source: Fitch U.S. High Yield Default Index, Advantage Data.
June 6, 2016
Recovery Rates by Seniority (Continued)

Weighted Avg. Straight Avg. Median Number of Issues
(%) Recovery Rate Recovery Rate Recovery Ratea with Price Data
2010
2011
2012
2013
2014
2015
2000–2015
Senior Secured 57.8 53.4 23.6 340
Senior Unsecured 33.7 33.5 25.3 1,315
Total Defaulted Issues 37.9 36.3 26.9 1,995
Similar seniorities per issuer collapsed into one observation. Note: Recoveries 30 days post default.
a
Source: Fitch U.S. High Yield Default Index, Advantage Data.
June 6, 2016
2015 U.S. High-Yield Bond Defaults

Month Issuer Par Value ($ Mil.) Default Date Default Source Industry
January 2015 Verso Paper Holding LLC/Inc. 160.5 01/07/15 Distressed Exchange Paper & Containers
Caesars Entertainment Operating Co. 12,350.9 01/15/15 Chapter 11 Filing Gaming, Lodging & Restaurants
Altegrity Inc. 1,397.5 01/31/15 Missed Payment Services & Miscellaneous
Subtotal 13,908.9
February 2015 OAS Financial Ltd. 900.0 02/01/15 Missed Payment Building & Materials
Saratoga Resources Inc. 125.2 02/02/15 Missed Payment Energy
RadioShack Corp. 325.0 02/05/15 Chapter 11 Filing Retail
Virgolino de Oliveira Finance S/A 735.0 02/13/15 Missed Payment Food, Beverage & Tobacco
Subtotal 2,085.2
March 2015 Chassix Inc. 375.0 03/04/15 Missed Payment Automotive
Liberty Tire Recycling Holdco LLC 222.7 03/05/15 Distressed Exchange Industrial/Manufacturing
Dune Energy Inc. 67.8 03/08/15 Chapter 11 Filing Energy
Doral Financial Corp. 170.0 03/11/15 Chapter 11 Filing Banking & Finance
Chassix Holdings 155.7 03/12/15 Chapter 11 Filing Automotive
Quicksilver Resources Inc. 1,173.0 03/17/15 Chapter 11 Filing Energy
Subtotal 2,164.2
April 2015 Alpha Natural Resources Inc. 443.0 04/01/15 Distressed Exchange Metals & Mining
American Eagle Energy Corp. 175.0 04/02/15 Missed Payment Energy
Venoco Inc. 191.8 04/02/15 Distressed Exchange Energy
Xinergy Corp. 195.0 04/06/15 Chapter 11 Filing Metals & Mining
Kaisa Group Holdings 800.0 04/19/15 Missed Payment Real Estate
Halcon Resources Corp. 252.2 04/30/15 Distressed Exchange Energy
Subtotal 2,057.0
May 2015 RAAM Global Energy Co. 238.0 05/01/15 Missed Payment Energy
Magnetation LLC 425.0 05/05/15 Chapter 11 Filing Metals & Mining
Winsway Enterprises Holdings Ltd. 309.3 05/08/15 Missed Payment Metals & Mining
Connacher Oil & Gas Ltd. 550.0 05/08/15 Distressed Exchange Energy
Patriot Coal Corp. 281.9 05/12/15 Chapter 11 Filing Metals & Mining
SandRidge Energy Inc. 50.0 05/20/15 Distressed Exchange Energy
Midstates Petroleum Co. 627.9 05/21/15 Distressed Exchange Energy
Lupatech Finance 47.9 05/25/15 Chapter 11 Filing Metals & Mining
Warren Resources Inc. 69.6 05/26/15 Distressed Exchange Energy
Subtotal 2,599.5
June 2015 Cimento Tupi S.A. 185.0 06/11/15 Missed Payment Building & Materials
Colt Defense LLC 250.0 06/14/15 Chapter 11 Filing Services & Miscellaneous
Tunica-Biloxi Gaming Authority 150.0 06/15/15 Missed Payment Gaming, Lodging & Restaurants
Ceagro Agricola Ltd. 100.0 06/16/15 Missed Payment Services & Miscellaneous
Saratoga Resources Inc. 54.6 06/18/15 Chapter 11 Filing Energy
American Energy - Woodford LLC 339.7 06/22/15 Distressed Exchange Energy
Molycorp Inc. 650.0 06/25/15 Chapter 11 Filing Metals & Mining
Subtotal 1,729.3
July 2015 Lightstream Resources Ltd. 463.5 07/02/15 Distressed Exchange Energy
Walter Energy Inc. 2,101.8 07/15/15 Chapter 11 Filing Metals & Mining
Sabine Oil & Gas Corp. 1,150.0 07/15/15 Chapter 11 Filing Energy
Tonon Bioenergia S.A. 289.2 07/16/15 Distressed Exchange Food, Beverage & Tobacco
Subtotal 4,004.5
August 2015 Alpha Natural Resources Inc. 2,268.0 08/03/15 Chapter 11 Filing Metals & Mining
Black Elk Energy Offshore Operations
LLC 138.7 08/11/15 Chapter 7 Filing Energy
Hercules Offshore Inc. 1,200.0 08/15/15 Chapter 11 Filing Energy
American Seafoods Group LLC 275.0 08/20/15 Distressed Exchange Services & Miscellaneous
ASG Consolidated LLC 258.4 08/20/15 Distressed Exchange Services & Miscellaneous
SAExploration Holdings Inc. 10.0 08/27/15 Distressed Exchange Energy
Subtotal 4,675.1
September 2015 Quiksilver Inc. 505.0 09/09/15 Chapter 11 Filing Textiles & Furniture
Halcon Resources Corp. 1,566.3 09/10/15 Distressed Exchange Energy
Samson Investment Co. 2,250.0 09/16/15 Chapter 11 Filing Energy
Shale-Inland Holdings 28.6 09/29/15 Distressed Exchange Metals & Mining
Subtotal 4,349.9
June 6, 2016
2015 U.S. High-Yield Bond Defaults (Continued)

Month Issuer Par Value ($ Mil.) Default Date Default Source Industry
October 2015 Goodrich Petroleum Corp. 158.2 10/01/15 Distressed Exchange Energy
American Apparel Inc. 214.5 10/05/15 Chapter 11 Filing Textiles & Furniture
Logan's Roadhouse Inc. 211.1 10/14/15 Distressed Exchange Gaming, Lodging & Restaurants
Warren Resources Inc. 63.1 10/22/15 Distressed Exchange Energy
Schahin II Finance Co. (SPV) Ltd. 651.5 10/25/15 Missed Payment Energy
Exco Resources Inc. 577.0 10/26/15 Distressed Exchange Energy
Dex Media Inc. 270.1 10/30/15 Missed Payment Broadcasting & Media
Subtotal 2,545.5
November 2015 Exco Resources Inc. 251.4 11/04/15 Distressed Exchange Energy
Hidili Industry International 182.8 11/04/15 Missed Payment Metals & Mining
Essar Steel Algoma Inc. 375.0 11/09/15 Chapter 15 Filing Metals & Mining
1839688 Alberta ULC 279.6 11/09/15 Chapter 15 Filing Metals & Mining
Affinion Group Holdings 247.4 11/09/15 Distressed Exchange Broadcasting & Media
Affinion Investments LLC 337.3 11/09/15 Distressed Exchange Broadcasting & Media
Far East Energy Bermuda Ltd. 84.7 11/10/15 Chapter 7 Filing Energy
China Shanshui Cement Group Ltd. 28.9 11/12/15 Missed Payment Building & Materials
Subtotal 1,787.0
December 2015 Offshore Group Investment Ltd. 1,814.4 12/03/15 Chapter 11 Filing Energy
Getty Images Inc. 234.4 12/10/15 Distressed Exchange Broadcasting & Media
Magnum Hunter Resources Corp. 600.0 12/15/15 Chapter 11 Filing Energy
New Gulf Resources LLC 517.0 12/17/15 Chapter 11 Filing Energy
Halcon Resources Corp. 289.5 12/21/15 Distressed Exchange Energy
Automotores Gildemeister S.A. 700.0 12/24/15 Missed Payment Automotive
Empresas ICA S.A.B. de C.V. 1,350.0 12/29/15 Missed Payment Building & Materials
Swift Energy Co. 875.0 12/31/15 Chapter 11 Filing Energy
Subtotal 6,380.4
June 6, 2016
Appendix
Sector Outlooks 127
Historical Rating Actions 128
Bankruptcy Case Studies 130

Revolving Credit Utilization in Bankruptcy 130
Criteria Summaries 137

Corporate Rating Methodology 138
Parent and Subsidiary Rating Linkage 139
Rating Recovery Methodology 143
ABL Recovery Analysis 145
Pension Recovery Analysis 146
Research Portfolio 148
Rating Coverage 155
U.S. Leveraged Finance Contact List 165

June 6, 2016
Appendix
Sector Outlooks
Rating Outlook Sector Outlook
Corporate Sector 2015 2016 2015 2016 Highlights
Global Aerospace & Defense Stable Stable Stable Stable Substantial backlog and rising commercial aircraft production. Positive defense
spending trends are indicated. Cash deployment is a concern. End markets
display some weakening, such as business jets.
U.S. Agribusiness Stable Stable Stable Stable Plentiful crop harvests maintaining large global stockpiles. Slowing emerging
market growth. M&A increases along with solid cash flow generation.
North American Airlines Positive Positive Positive Positive Growing demand for air travel. Low fuel prices. Improving credit metrics.
EMEA and U.S. Alcoholic Beverages Stable Negative Stable Stable In developed world, market share shifts from changes in consumption. Reported
performance influenced by currency volatility. Geographic diversification and cost
savings help protect profits.
U.S. Auto Manufacturers & Suppliers Positive Stable Stable Stable Ongoing global demand growth. Strong industry liquidity. Relatively low
break-even levels.
U.S. Building & Home Products Stable Stable Stable Stable Cyclical improvement in U.S. construction activity. Modestly better FCF
and Services generation. Prospects for debt reduction.
North American Chemicals Stable Stable Stable Stable Solid domestic growth. Trade headwinds. Activist shareholders.
U.S. and EMEA Consumer Products Stable Stable Stable Stable Organic top-line growth is stable. Cost savings and a benign commodity
environment will protect margins. Strategic M&A is intended to improve
business profiles.
Crude Oil & Refined Products Pipelines Stable Stable Stable Stable The sector is largely supported by long-term fee-based contracts. Lack of direct
commodity exposure benefits the sector, some volume risk exists. Economical
shale plays will increase production, even in low crude price environment,
boosting demand for certain pipelines.
Diversified Manufacturing & Stable Stable Stable Negative Capital goods cycles deteriorating. Shareholder-friendly cash deployment.
Capital Goods Negative currency offsets slow growth.
U.S. Equity REITs Stable Stable Positive Positive Good property-level fundamentals. Limited expected deleveraging. Capital
allocation decisions key.
U.S. Gaming Stable Stable Stable Stable Secular headwinds. REIT transactions. Suppliers' high leverage.
U.S. Healthcare Negative Stable Stable Stable Good demand tailwinds, but secular challenges to profitability. The value debate
influences business development decisions. Presidential election cycle headline
risk to equity prices and may influence capital deployment.
Global Hotels Stable Stable Stable Stable Positive global travel trends. Global RevPAR growth of 3%–5%. Elevated event
risk; new competition.
U.S. Housing & Homebuilders Stable Stable Stable Stable The up-cycle, although so far less robust than normal, should meet or exceed
expectations in 2016. Expect Fed to be cautious in raising rates. Home price
inflation continues to cool. Affordability above norm, credit standards to ease.
U.S. Leisure Stable Stable Stable Stable Increasing competition for travel distribution channels. China focuses on cruise
lines. Shift to more profitable gaming distribution channels.
U.S. Media & Entertainment Stable Stable Stable Stable Operating environment more conducive to growth. Evolution of
media consumption spurs further disruption. Shareholder returns exceed
FCF generation.
U.S. Midstream Services Stable Negative Negative Negative Price weakness leads to volume declines. Credit impacts should be limited,
but counterparty risk increasing. Sensitivity to price will vary by issuer.
Global Mining Stable Negative Stable Negative Slowdown in Chinese growth and demand for commodities to continue.
Investor sentiment to remain negative for at least six months. Prices to remain
volatile with a negative bias.
U.S. Natural Gas Pipelines Stable Stable Stable Stable Contractual support provides stability. Marcellus/Utica capacity increasing.
Gas demand growing, exports increasing.
U.S. Non-Alcoholic Beverages Stable Stable Stable Stable Low global carbonated soft drink volume growth and currency headwinds.
Robust brands, geographic and product diversity key for long-term stability.
M&A and shareholder distributions have removed rating headroom.
Health and wellness, regulatory headwinds.
U.S. Oil & Gas Stable Negative Negative Negative Additional delays in supply response to sharp industry capex cuts. Another leg
down in Chinese/emerging-market demand. Potential step-up in oil exports by
Libya or Iran post sanctions.
Oilfield Services N.A. Negative N.A. Negative Lower-for-longer oil and gas prices. Reduced E&P capital spending.
Rationalization of services supply in certain segments.
U.S. and EMEA Packaged Food Stable Stable Stable Stable Low revenue growth. Cash flow generation at lower levels to fund restructurings.
Improving margins and leverage with commodities and cost cutting. M&A likely to
improve business profiles.
Global Pharmaceuticals Negative Negative Stable Stable Industry outlook supported by strong science base and innovation.
Growth supported by positive demographics and increasing healthcare
access. Focus on value principles shapes demand and leads to the evolution
of business models.
North American Refining N.A. Stable N.A. Stable Good profitability, financial flexibility. Structural cost advantages.
Modest legislative risks.
U.S. Restaurants Stable Stable Stable Stable Slightly better comparable store sales anticipated due to price/mix, but
promotional activity likely to remain elevated. Shift toward franchising,
particularly within the quick-service segment. Increased share buybacks
with some debt financed.
N.A. – Not available. E&P – Exploration and production. Continued on next page.
The Annual Manual (U.S. Leveraged Finance Primer) — Appendix 127

June 6, 2016
Appendix
Sector Outlooks (Continued)

Rating Outlook Sector Outlook
Corporate Sector 2015 2016 2015 2016 Highlights
U.S. Retailing Stable Stable Stable Stable U.S. retail sales to grow 3%–4%. Company/subsector performance varies
widely given secular pressures, including spending shift to alternative formats
and toward services. Overall sector operating and credit metrics/liquidity stable,
but event risk around M&A and financial strategy.
U.S. Technology Stable Stable Stable Negative Rapid cloud adoption driving negative top-line growth for legacy technology
companies. Top-line pressures intensifying acquisition activity, shareholder
returns and restructuring. Cash location will drive increased borrowing and
weaken credit profiles.
U.S. Telecom & Cable Stable Negative Stable Stable Enduring competitive operating environment. Outlook expected to return to stable
on transaction closings. Data service demand underpins stable operating profile.
U.S. Timeshare Stable Stable Stable Stable Volumes drive midsingle-digit sales growth. Benefiting from some arguably
unsustainable trends. Consolidation to continue, but at a slower pace.
Global Tobacco Stable Negative Stable Stable Pricing power, cost rationalization support high margins. Consolidation eroded
leverage headroom; improvement expected. Majority of cash flows directed to
shareholder returns. Regulation, litigation risks are manageable.
U.S. Utilities, Power & Gas Stable Stable Stable Stable Electricity sales show modest growth. Natural gas prices to remain weak.
Regulatory environments to remain supportive.
N.A. – Not available. E&P – Exploration and production.
Historical Rating Actions
2015 Upgrades (IDR)

Company From To Date Sector
M/I Homes, Inc. B B+ 03/04/15 Homebuilding/Building Materials
Goodyear Tire & Rubber Company (The) B+ BB– 03/02/15 Auto & Related
AMC Entertainment Inc. B B+ 02/27/15 Media
Air Canada B B+ 02/23/15 Transportation
JetBlue Airways Corp. B B+ 02/19/15 Transportation
Masco Corporation BB BB+ 02/18/15 Homebuilding/Building Materials
H.J. Heinz Holding Corp. BB– BBB– 06/25/15 Food, Beverage & Tobacco
General Motors Company BB+ BBB– 06/18/15 Auto & Related
NOVA Chemicals Corporation BB+ BBB– 06/11/15 Chemicals
Apartment Investment and
Management Company (AIMCO) BB+ BBB– 06/05/15 Real Estate
Regency Energy Partners BB BBB– 05/01/15 Energy (Oil & Gas)
United Continental Holdings, Inc. B B+ 04/07/15 Transportation
Crown Castle International Corp. BB BBB– 07/01/15 Telecommunications
Marina District Finance Company, Inc. B– B 07/21/15 Gaming, Lodging & Leisure
Allison Transmission, Inc. BB– BB 08/07/15 Auto & Related
Best Buy Co., Inc. BB BBB– 08/27/15 Retail
J. C. Penney Company, Inc. CCC B– 08/27/15 Retail
Level 3 Communications, Inc. B+ BB– 08/28/15 Telecommunications
HCA Holdings Inc. BB– BB 09/01/15 Healthcare
Delta Air Lines BB BB+ 09/14/15 Transportation
United Airlines, Inc. B+ BB– 09/18/15 Transportation
CalAtlantic Group, Inc. B+ BB– 09/29/15 Homebuilding/Building Materials
Sanmina Corporation BB BB+ 09/30/15 Technology
Avago Technologies Finance Pte. Ltd. BB+ BBB– 11/03/15 Technology
Levi Strauss & Co. BB– BB 11/05/15 Retail
Freescale Semiconductor, Inc. B+ BBB– 12/04/15 Technology
American Airlines Group, Inc. B+ BB– 12/07/15 Transportation
Meritor, Inc. B B+ 12/09/15 Auto & Related
Corner Investment PropCo,
LLC (The Cromwell) CCC B– 12/15/15 Gaming, Lodging & Leisure

June 6, 2016
Appendix
2015 Downgrades (IDR)

Company From To Date Sector
Peabody Energy
(Formerly P&L Coal Holding Corp.) BB– B 03/02/15 Energy (Oil & Gas)
Vogue International LLC BB– B+ 02/19/15 Consumer
Bombardier Inc. BB– B+ 02/18/15 Aerospace & Defense
RadioShack Corporation C D 02/06/15 Retail
Caesars Entertainment Operating
Company, Inc. C D 01/15/15 Gaming, Lodging & Leisure
CITGO Petroleum Corp. BB– B 01/09/15 Energy (Oil & Gas)
NGPL PipeCo LLC B– CCC 05/15/15 Energy (Oil & Gas)
First Quantum Minerals Ltd. BB BB– 05/08/15 Natural Resources
Avon Products, Inc. BB BB– 05/04/15 Consumer
Arch Coal, Inc. CCC C 07/06/15 Natural Resources
Peabody Energy
(Formerly P&L Coal Holding Corp.) B CCC 07/27/15 Energy (Oil & Gas)
Energy XXI Gulf Coast, Inc. B CCC 07/29/15 Energy (Oil & Gas)
Energy XXI LTD B– CCC+ 07/29/15 Energy (Oil & Gas)
Harsco Corporation BBB– BB+ 07/29/15 Diversified Manufacturing
Bombardier Inc. B+ B 08/13/15 Aerospace & Defense
DCP Midstream, LLC BBB– BB+ 09/09/15 Energy (Oil & Gas)
Transocean, Inc. BBB– BB+ 10/08/15 Energy (Oil & Gas)
Teck Resources Ltd. BBB– BB+ 10/13/15 Natural Resources
Avon Products, Inc. BB– B+ 11/05/15 Consumer
Chesapeake Energy Corp. BB BB– 11/06/15 Energy (Oil & Gas)
Seacor Holdings, Inc. BB– B+ 11/11/15 Energy (Oil & Gas)
Mack-Cali Realty Corporation BBB– BB+ 11/16/15 Real Estate
Seacor Holdings, Inc. B+ B 12/03/15 Energy (Oil & Gas)
United States Steel Corporation BB– B+ 12/07/15 Natural Resources
Hovnanian Enterprises, Inc. B– CCC 12/09/15 Homebuilding/Building Materials
Chesapeake Energy Corp. BB– B 12/16/15 Energy (Oil & Gas)
NGL Energy Partners LP BB B+ 12/23/15 Energy (Oil & Gas)
2015 Speculative-Grade Upgrades/Downgrades by Industry

Upgrades Downgrades
(No. of IDR Changes)
10
10
15


June 6, 2016
Appendix
Historical Speculative-Grade Upgrades/Downgrades

Upgrades Downgrades
(No. of IDR Changes)
100
50
51 66
38 39 49 38 35 29 28 29
0
32 29 34 22 18 27
35 40
50
100 125
150
178
200
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Historical Rising Stars and Fallen Angels

Rising Stars Fallen Angels
(No. of Rating Actions)
10
8
6
4
2
0
(2)
(4)
(6)
(8)
(10)
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Bankruptcy Case Studies
Revolving Credit Utilization in Bankruptcy

Fitch Ratings analyzed utilization rates of revolvers at the time of bankruptcy filing in a
Sept. 22, 2014 report, Revolving Credit Facility Performance in Bankruptcy (U.S. Corporate
Revolver Utilization and Recovery Rates). The study was performed to verify Fitch’s typical
drawdown assumptions in bespoke recovery analyses for issuers rated ‘B+’ and lower.
Facility Utilization at Bankruptcy

Fitch observed that utilization rates for cash flow (CF) revolvers exceeded asset-based lending (ABL)
facilities, which is consistent with our analytical practice in the amount estimated for the recovery
waterfall. The median CF facility utilization rate was 94% for the 64 CF revolvers in the sample. The
rate supports Fitch’s analytical approach of assuming full draws of CF facilities in recovery analysis.
The median and average utilization rates for ABLs were 64% and 65%, respectively, for the 30
ABL facilities in the study sample. There was less utilization for the 15 retail ABLs compared with

June 6, 2016
Appendix
the 15 from other sectors. The ABLs may have had structural features that limited borrowings,
including springing restrictions if fixed-charge coverage ratios fall below 1.0x, reserve
requirements or cash dominion. Fitch’s Recovery Rating analyses usually include assumptions
of retail sector ABL drawdown rates of approximately 70%, and 50%–100% in other sectors.
There was more variability in ABL utilization compared with CF revolvers, as illustrated in the
distribution charts below.
Cash Flow Revolving Facility Utilization ABL Revolving Facility Utilization

(Facility Count) (Facility Count)
50 10
40 8
30 6
4
20
2
10
0
0
ABL – Asset-backed lending.

Source: Fitch Ratings, company disclosure statements. Source: Fitch Ratings, company disclosure statements.
Pre-Default Utilization Uptrend

Utilization rates spiked in the years prior to bankruptcy for the 31 largest revolvers in Fitch’s
analysis. Average revolver utilization increased to 77% on the bankruptcy date from 63% one
year prior to default, and from 33% three years prior to default.
Average Utilization Rate Trend
All Cash Flow ABL

(%)
100
80
60
40
20
0
BK Less Three Years BK Less Two Years BK Less One Year BK
ABL – Asset-backed lending. BK – Bankruptcy date.

Source: Fitch Ratings, company 10-Ks and disclosure statements.

June 6, 2016
Appendix
Revolver Recovery Rates
The report also focused on recovery rates for revolving facilities. Fitch gathered recovery data
from the plan disclosure statements filed with bankruptcy courts. Revolver debt had excellent
recovery rates, with ultimate recoveries averaging 90% for the 92 facilities that had borrowings
outstanding on the bankruptcy petition dates. ABL lender recoveries were superior to those of
CF facility providers. Recoveries averaged 97% and 87% on ABL and CF revolvers, respectively.
Among ABL claims, 90% (27 out of 30) received full recovery, including the 15 retail sector
facilities structured as ABLs. Fifty-six percent of distributions made to revolver claimholders were
paid in the form of cash, while others were combinations of cash, new debt or new equity.
PIK Debt Recoveries in Bankruptcies

PIK Debt
Bankruptcy Emergence PIK Holder Recovery Form of PIK
Company Date Date PIK Debt Issue Claim ($ Mil.) Rate (%) Debt Recovery Comment
Trump Holding and 11/21/04 05/20/05 17.625% Second 50 95 $47.7 Mil. of new The second priority PIK notes were
Funding (Parent of Priority Notes notes plus accrued junior in priority to approximately
Trump Hotel and interest on $54 Mil. $1.75 Bil. of first mortgage notes.
Casino Resorts, Inc.)
American 01/19/05 04/15/05 10.375% Senior 96 95 New common stock There was only a modest amount
Banknote, Inc. Unsecured Notes of debt ahead of the PIK notes in
priority. The equity distributed to the
PIK holders was valued at $114 Mil.
in the disclosure statement
$108 Mil. allocated to PIK claims).
Pliant Corp. 01/03/06 07/19/06 11.625% Senior 254 100 The notes were In Pliant's first bankruptcy filing the
(First Bankruptcy) Secured Notes reinstated in the first secured debt was reinstated and
reorganization plan the more junior claims received
distributions in the form of new
notes and new common equity.
Bally Total Fitness 12/03/08 09/03/09 14.000% 231 0.0–1.5 3% share of new PIK claims were deeply
Holdings Corp. Subordinated common stock and subordinated to more senior debt
Notes warrants shared with including $50 Mil. revolver and
15.625% subordinated $242 Mil. term loan claims,
noteholders $260 Mil. senior note claims,
$75 Mil.–$245 Mil. of general
unsecured claims. Secured term
loan lenders received 94% of the
new common stock.
Pliant Corp. 02/11/09 12/03/09 11.625% Senior 393 50 100% of the new In Pliant's second filing, the $145 Mil.
(Second Bankruptcy) Secured Notes common stock credit facility claims were reinstated,
the secured PIK notes were
exchanged for equity and $275 Mil.
of unsecured claims received
0.5% recovery.
Finlay 08/05/09 08/02/10 Second Lien 23 100 Cash ABL revolver and second lien
Enterprises, Inc. Notes claims were paid in full and third lien
claims received 45% of par in cash
recoveries from proceeds
from going out of business
liquidation sale.
Finlay 08/05/09 08/02/10 Third Lien Notes 194 45 Cash ABL revolver and second lien claims
Enterprises, Inc. and Vendor were paid in full and third lien claims
Financing received 45% cash recoveries from
proceeds from going out of business
liquidation sale.
Atrium 01/20/10 04/28/10 15.000% 220 2.5–3.9 Depends on plan PIK claims were junior in priority
Companies, Inc. Senior alternative that was to $383 Mil. of secured debt
Subordinated completed (new and $48 Mil. of 11% priority
Notes value or alternative unsecured notes.
acquisition). Would
be in form of new
common stock, cash
or other consideration
a
Recovery rate not available due to valuation estimates not provided in disclosure statement. PIK – Payment in kind. ABL – Asset-based loan.
PGBC – Pension Benefits Guaranty Corporation. DIP – Bebtor in posession. N.A. – Not applicable. Continued on next page.
Source: Fitch Ratings, Company reports, Bloomberg.

June 6, 2016
Appendix
PIK Debt Recoveries in Bankruptcies (Continued)

PIK Debt
Bankruptcy Emergence PIK Holder Recovery Form of PIK
Company Date Date PIK Debt Issue Claim ($ Mil.) Rate (%) Debt Recovery Comment
Black Gaming LLC 03/01/10 08/04/10 12.750% Senior 66 0 Five-year warrants PIK claims junior in priority to
Subordinated Notes to buy 5% of $15 Mil. first lien revolver
common stock borrowings and $125 Mil.
contingent upon second lien notes.
reaching minimum
enterprise value
threshold of
$140 Mil.
Wolverine Tube, Inc. 11/01/10 06/10/11 15.000% Senior 131 77 $30 Mil. of new first The main claims against the debtor
Secured Notes lien notes less the were the PIK notes and PGBC
distributable cash claims. Common stock assumed
and 95% of the new to have total value of $75 Mil.
common stock based on financial projections
($71 Mil.) exhibit to disclosure statement
dated April 15, 2011.
American Media 11/17/10 12/22/10 9.000% Guaranteed 25 100 New second lien PIK claims senior in priority to
Operations, Inc. Notes notes or PIK notes $356 Mil. of subordinated notes.
or preferred stock
Vertis Holdings, Inc. 11/18/10 12/20/10 13.500% Senior 258 5 3.75% share of the Junior in priority to $90 Mil. first lien
Unsecured Notes new common stock revolver and $437 Mil. first lien term
loan claims, $492 Mil. second lien
notes (3 series).
Sbarro, Inc. 04/04/11 11/28/11 Second Lien 34 0 N.A. The first lien holders received new
Term Loan debt and 100% of the new common
stock.
Indianapolis 04/07/11 04/11/13 15.500% Third 78 16 Cash PIK claims junior to $98 Mil. of first
Downs, LLC Lien Notes lien facility claims (rolled into DIP)
and $375 Mil. of second lien note
claims. Recovery increased by
$25 Mil. upon occurrence of
specified scenario.
Dex One Corp. 03/17/13 04/30/13 12.000% Senior 220 100 Notes were The bankruptcy filing enabled
(Second Bankruptcy) Subordinated Notes reinstated in a Dex One, and its merger partner,
prepackaged filing SuperMedia, to complete their
merger and to extend their
respective debt credit facility
maturities to 2016 from 2014 while
keeping their prepetition capital
structures intact and preserving
equity interests. The merger closed
on their plan of reorganization
effective dates.
Revel AC Inc. 03/25/13 05/21/13 12.000% Second 388 18 Share of contingent Junior in priority to $923 Mil.
Lien Notes payment rights to term loan claims and $208 Mil.
any payments from of revolver and term loan claims.
the State of New Recovery rate assumes maximum
Jersey's Economic $70 Mil. of ERG payments.
Redevelopment
Grant (ERG)
proceeds
GMX Resources Inc.a 04/01/13 02/04/14 Senior Secured 338 — 100% of new The PIK notes were senior in priority
Notes common stock to $102 Mil. unsecured debt.
Cengage 07/02/13 04/01/14 13.750% Senior 68 0.4 N.A. The holdco notes were structurally
Learning Holdco Unsecured Holdco subordinated and also subordinated
Notes to secured debt at the operating
and holding companies. First lien
debt claims, including interest
and related swap claims were
approximately $4.6 Bil.
a
Recovery rate not available due to valuation estimates not provided in disclosure statement. PIK – Payment in kind. ABL – Asset-based loan.
PGBC – Pension Benefits Guaranty Corporation. DIP – Bebtor in posession. N.A. – Not applicable.
Source: Fitch Ratings, Company reports, Bloomberg.

June 6, 2016
Appendix
Companies Featured in Bankruptcy Case Study Reports

Name Industry
Allied Holdings, Inc. Automobiles
Chrysler LLC (Old CarCo LLC) Automobiles
Collins & Aikman Corporation Automobiles
Cooper-Standard Holdings Inc. Automobiles
Dana Corporation, et al Automobiles
Delphi Corporation Automobiles
Dura Automotive Systems, Inc. Automobiles
Fisker Automotive Holdings, Inc. Automobiles
General Motors Corp. (Motors Liquidation Corp.) Automobiles
Hayes Lemmerz International, Inc. Automobiles
Holley Performance Products Inc. Automobiles
J.L. French Automotive Castings, Inc. Automobiles
Key Plastics LLC Automobiles
Lear Corp. Automobiles
Mark IV Industries, Inc. Automobiles
Noble International, Ltd. Automobiles
Plastech Engineered Products, Inc. Automobiles
Remy International, Inc. Automobiles
Tower Automotive, Inc. Automobiles
Visteon Corporation et al Automobiles
Affiliated Media, Inc. Broadcasting & Media
American Media Operations, Inc. et al Broadcasting & Media
Cengage Learning Inc. Broadcasting & Media
Citadel Broadcasting Corp. Broadcasting & Media
Dex One Corp. Broadcasting & Media
Freedom Communications Holdings, Inc. Broadcasting & Media
GateHouse Media, Inc. Broadcasting & Media
Haights Cross Communications, Inc. Broadcasting & Media
Houghton Mifflin Harcourt Publishing Company Broadcasting & Media
Idearc, Inc., et al Broadcasting & Media
ION Media Networks, Inc., et al Broadcasting & Media
Journal Register Company Broadcasting & Media
Lee Enterprises, Inc. Broadcasting & Media
Local Insight Media Holdings, Inc. Broadcasting & Media
LodgeNet Interactive Corporation Broadcasting & Media
Morris Publishing Group, LLC Broadcasting & Media
Muzak Holdings LLC Broadcasting & Media
Nebraska Book Company Broadcasting & Media
Penton Business Media Holdings, Inc. Broadcasting & Media
Quebecor World (USA), Inc., et al Broadcasting & Media
R.H. Donnelly Corp. Broadcasting & Media
RDA Holding Co. (Readers Digest) Broadcasting & Media
Regent Communications, Inc. Broadcasting & Media
RHI Entertainment, Inc. Broadcasting & Media
Star Tribune Company (The) Broadcasting & Media
SuperMedia Inc. Broadcasting & Media
The Reader’s Digest Association, Inc., et al Broadcasting & Media
Tribune Company Broadcasting & Media
Truvo USA LLC, et al Broadcasting & Media
Vertis Holdings, Inc. Broadcasting & Media
Young Broadcasting, Inc. Broadcasting & Media
Masonite Corporation, et al Building & Materials
William Lyons Homes, et al Building & Materials
Chemtura Corporation, Chemtura Canada Co. Chemicals
Lyondell Chemical Company, et al Chemicals
Tronox Incorporated, et al Chemicals
BearingPoint, Inc. Computers & Electronics
Conexant Systems, Inc. Computers & Electronics
Eastman Kodak Company Computers & Electronics
MagnaChip Semiconductor LLC, MagnaChip Finance Co. Computers & Electronics
Spansion Inc. et al Computers & Electronics
Aventine Renewable Energy Holdings Inc. Energy
Baseline Oil and Gas Corp. Energy

June 6, 2016
Appendix
Companies Featured in Bankruptcy Case Study Reports (Cont.)

Name Industry
Crusader Energy Group Energy
Delta Petroleum Corporation Energy
Energy Partners, Ltd. Energy
Geokinetics, Inc. Energy
Global Geophysical Services, Inc. Energy
GMX Resources, Inc. Energy
Pacific Energy Resources Ltd. Energy
Seahawk Drilling, Inc. Energy
SemCrude L.P., et al. (SemGroup) Energy
Stallion Oilfield Services Ltd. Energy
Teton Energy Corp. Energy
Tuscany International Holdings (USA) Ltd. Energy
TXCO Resources Inc. Energy
AgFeed Industries, Inc. Food, Beverage & Consumer
Aurora Foods, Inc. Food, Beverage & Consumer
EuroFresh, Inc. Food, Beverage & Consumer
Home Products International, Inc. Food, Beverage & Consumer
Hostess Brands, Inc. Food, Beverage & Consumer
Interstate Bakeries Corp. Food, Beverage & Consumer
Le-Nature’s, Inc. Food, Beverage & Consumer
Merisant Worldwide, Inc. Food, Beverage & Consumer
New World Pasta Company Food, Beverage & Consumer
Pierre Foods, Inc. Food, Beverage & Consumer
Pilgrim’s Pride Corporation Food, Beverage & Consumer
Reddy Ice Holdings, Inc. Food, Beverage & Consumer
Spectrum Brands, Inc. Food, Beverage & Consumer
Wornick Company, The Food, Beverage & Consumer
Amelia Island Company Gaming, Lodging & Restaurants
Black Gaming LLC Gaming, Lodging & Restaurants
Buffets Restaurants Holdings, Inc. Gaming, Lodging & Restaurants
Circus & Eldorado Joint Venture Gaming, Lodging & Restaurants
Extended Stay, Inc. Gaming, Lodging & Restaurants
Friendly’s Ice Cream Corp. Gaming, Lodging & Restaurants
Greektown Holdings, LLC, et al Gaming, Lodging & Restaurants
Herbst Gaming, Inc. Gaming, Lodging & Restaurants
Indianapolis Downs, LLC Gaming, Lodging & Restaurants
Louisiana Riverboat Gaming Partnership (Legends Gaming 2008) Gaming, Lodging & Restaurants
Magna Entertainment Corp. Gaming, Lodging & Restaurants
Majestic Star Casino LLC, (The) Gaming, Lodging & Restaurants
Perkins & Marie Callender's Inc. Gaming, Lodging & Restaurants
Premier Entertainment Biloxi LLC (d/b/a Hardrock Hotel & Casino Biloxi) Gaming, Lodging & Restaurants
Revel AC Inc. Gaming, Lodging & Restaurants
Sbarro, Inc. Gaming, Lodging & Restaurants
Station Casinos, Inc., et al Gaming, Lodging & Restaurants
Tropicana Entertainment, LLC (aka OpCo Debtors) Gaming, Lodging & Restaurants
Trump Entertainment Resorts, Inc. Gaming, Lodging & Restaurants
Ultimate Escapes, Inc. Gaming, Lodging & Restaurants
Uno Restaurant Holdings Corp. Gaming, Lodging & Restaurants
aaiPharma, Inc. Healthcare & Pharmaceuticals
Able Laboratories, Inc. Healthcare & Pharmaceuticals
Curative Health Services, Inc. Healthcare & Pharmaceuticals
Dendreon Corp. Healthcare & Pharmaceuticals
Insight Health Services Holdings Corp. Healthcare & Pharmaceuticals
K-V Pharmaceutical Company Healthcare & Pharmaceuticals
Leiner Health Products, Inc. Healthcare & Pharmaceuticals
Magellan Health Services, Inc. Healthcare & Pharmaceuticals
MModal Holdings, Inc. Healthcare & Pharmaceuticals
OCA, Inc. Healthcare & Pharmaceuticals
OnCure Medical Corp. Healthcare & Pharmaceuticals
Oscient Pharmaceuticals Corp. Healthcare & Pharmaceuticals
Physiotherapy Holdings, Inc. Healthcare & Pharmaceuticals
Rotech Healthcare, Inc. Healthcare & Pharmaceuticals
Rural/Metro Corp. Healthcare & Pharmaceuticals

June 6, 2016
Appendix

Name Industry
Spheris, Inc. Healthcare & Pharmaceuticals
American LaFrance, LLC Industrial/Manufacturing
AMTROL Holdings, Inc. Industrial/Manufacturing
Atrium Companies, Inc. Industrial/Manufacturing
Chassix Inc. Industrial/Manufacturing
Colt Defense LLC Industrial/Manufacturing
EaglePicher Holdings Inc. Industrial/Manufacturing
Energy Conversion Devices, Inc. Industrial/Manufacturing
Exide Technologies Industrial/Manufacturing
Fedders Corporation Industrial/Manufacturing
Global Power Equipment Group Inc. Industrial/Manufacturing
International Aluminum Corp. Industrial/Manufacturing
Momentive Performance Materials Inc. Industrial/Manufacturing
Motor Coach Industries International Industrial/Manufacturing
National RV Holdings, Inc. Industrial/Manufacturing
Neenah Enterprises, Inc. Industrial/Manufacturing
O’Sullivan Industries, Inc. Industrial/Manufacturing
Panolam Industries International, Inc. Industrial/Manufacturing
Propex Inc. Industrial/Manufacturing
Simmons Company Industrial/Manufacturing
Solyndra LLC Industrial/Manufacturing
True Temper Sports, Inc. Industrial/Manufacturing
Wellman Inc. Industrial/Manufacturing
Wolverine Tube, Inc. Industrial/Manufacturing
Bally Total Fitness Holdings Corp. Leisure & Entertainment
MGM Holdings Inc. (Metro-Goldwyn-Mayer Inc.) Leisure & Entertainment
Six Flags, Inc. Leisure & Entertainment
Source Interlink Companies, Inc. Leisure & Entertainment
Aleris International, Inc. Metals & Mining
ASARCO LLC Metals & Mining
Barzel Industries Inc. Metals & Mining
Patriot Coal Corp. Metals & Mining
Reddy Ice Holdings, Inc. Miscellaneous
Trico Marine Services, Inc. et al Miscellaneous
AbitibiBowater, Inc. Paper & Forest Products
Smurfit-Stone Container Enterprises, Inc. et al Paper & Forest Products
The Newark Group, Inc. Paper & Forest Products
Borders Group Inc. Retail
BSCV, Inc. (formerly Boscov’s Inc.) et al Retail
Circuit City Stores, Inc., et al Retail
Eddie Bauer Holdings, Inc. Retail
Finlay Enterprises, Inc., et al Retail
Goody's, LLC, et al Retail
Gottschalks, Inc. Retail
Harry & David Holdings, Inc. Retail
Hub Holdings Corp., et al (f/k/a Anchor Blue Retailing Group, Inc.) Retail
Linens ’N Things, Inc., Linens Holdings Co., et al Retail
Loehmann’s Holdings Inc. et al Retail
Movie Gallery Inc., et al Retail
Syms Corp., Filene's Basement, LLC, Syms Clothing, Inc., Syms Advertising Inc. Retail
The Bombay Company, Inc. et al Retail
Value City Holdings, Inc., et al Retail
BI- LO, LLC, et al Supermarkets & Drug Stores
Great Atlantic and Pacific Tea Company, Inc., (The) Supermarkets & Drug Stores
Penn Traffic Company Supermarkets & Drug Stores
Winn-Dixie Stores, Inc., et al Supermarkets & Drug Stores
Broadview Networks Holdings, Inc. Telecommunications
Charter Communications, Inc., et al Telecommunications
FairPoint Communications, Inc. Telecommunications
FiberTower Corporation Telecommunications
Hawaiian Telcom Communications, Inc. Telecommunications
Primus Telecommunications Group, Inc. Telecommunications
Oneida Ltd. Textiles & Furniture

June 6, 2016
Appendix

Name Industry
ATA Holdings, Inc. (ATA Airlines) Transportation
Delta Air Lines, Inc. et al Transportation
Frontier Airlines Holdings, Inc. Transportation
General Maritime Corp. Transportation
Mesa Air Group, Inc., et al Transportation
Northwest Airlines Corp., et al Transportation
UAL Corporation Transportation
Calpine Corp., et al Utilities
Dynegy Holdings, LLC Utilities
Edison Mission Energy Utilities
Entergy New Orleans, Inc. Utilities
Mirant Corp., et al Utilities
Criteria Summaries
Criteria Overview
Name
Master Rating Criteria
Corporate Rating Methodology (Including Short-Term Ratings and Parent and Subsidiary Linkage)
Other General Criteria Relevant for Corporates

Parent and Subsidiary Rating Linkage
Short-Term Ratings Criteria for Non-Financial Corporates
Rating Non-Financial Corporates Above the Country Ceiling
Rating Investment Holding Companies
Criteria on Priority, Security and Recovery Ratings

Recovery Ratings and Notching Criteria for Non-Financial Corporate Issuers
Recovery Ratings and Notching Criteria for Equity REITs
Recovery Ratings and Notching Criteria for Utilities
Country-Specific Treatment of Recovery Ratings
Treatment and Notching of Hybrids in Non-Financial Corporate and REIT Credit Analysis
Rating Aircraft Enhanced Equipment Trust Certificates
Relevant Special Reports and Worked Examples

To help interpret our criteria, these special reports provide examples of how our criteria are applied in typical,
practical situations.
Financial Ratios and Adjustments
Cash-Flow Measures in Corporate Analysis
Debt Factoring; Analytical Adjustments for Corporate Issuers and Their Recovery Ratings
Operating Leases
Adjusting for Fair Value of Debt and Related Derivatives in Corporate Analysis
Treatment of Cash in Corporate Analysis
Leveraged Finance
Assigning Corporate Ratings to Issuers in Restructuring
Differentiating Credits Rated ‘B+’ and Below
Treatment of Junior Corporate Debt in Europe (European HoldCo PIK and Shareholder Loans)
Other Topics
Using Commodity Prices in Corporate Projections
Treatment of Intra-Group Loans in Corporate Analysis
Related Resources: Other Cross-Sector Rating Criteria Relevant to Corporates

Distressed Debt Exchange
Criteria for Evaluating Third-Party Partial Credit Guarantees
Evaluating Corporate Governance
National Scale Ratings Criteria

June 6, 2016
Appendix
Corporate Rating Methodology
Fitch’s corporate ratings make use of both qualitative and quantitative analyses to assess the
business and financial risks of fixed-income issuers and of their individual debt issues. An Issuer
Default Rating (IDR) is an assessment of the issuer’s relative vulnerability to default on financial
obligations, and is intended to be comparable across industry groups and countries.
A fundamental part of Fitch’s approach is based on a comparative analysis, through which Fitch
reviews the strength of an issuer’s business and financial risk profile relative to others in its
industry and/or rating category peer group.
Corporate Rating Methodology

Key Rating Factors Description
Industry Risk Fitch determines an issuer’s ratings within the context of each issuer’s industry
fundamentals. Industries that are in decline, highly competitive, capital
intensive, cyclical or volatile are inherently riskier than stable industries with
few competitors, high barriers to entry, national dominance and predictable
demand levels.
Operating Environment Fitch explores the possible risks and opportunities in an issuer’s
echnological changes. The agency considers the effects of geographical
diversification and trends in the industry expansion or consolidation
equired to maintain a competitive position. Industry overcapacity is a key
issue, because it creates pricing pressure and, thus, can erode profitability.
Also important are the stage of an industry’s life cycle and the growth or
maturity of product segments, which determine the need for expansion
and additional capital spending.
Company Profile Several factors indicate an issuer’s ability to withstand competitive
pressures, including its position in key markets, level of product dominance
and ability to influence price. Maintaining a high level of operating
performance often depends on product diversity, geographical spread
of sales, diversification of major customers and suppliers, and the
comparative cost position.
Management Strategy and Fitch’s consideration of management strategy focuses on operating strategy,
Corporate Governance risk tolerance, financial policies and corporate governance. Corporate
goals are evaluated, centering upon future strategy and past track record.
Key factors considered are the mix of debt and equity in funding growth,
the issuer’s ability to support higher levels of debt, and the funding
requirement of new assets. The historical mode of financing acquisitions
and internal expansion provides insight into management’s risk tolerance.
Fitch considers management’s track record of its ability to create a healthy
business mix, maintain operating efficiency and strengthen its market
position. Financial performance over time provides a useful measure of
management’s ability to execute its operational and financial strategies.
Ownership, Support and Fitch considers the relationship between parents and their subsidiaries in
Group Factors assigning IDRs and debt issue ratings. In most cases, separate issuers
of debt within a corporate group are typically assigned separate (though
potentially identical) IDRs. Issues in determining linkage include legal
jurisdiction, corporate structures, company by-laws, loan documentation,
the degree of integration between the entities and the strategic importance
of a subsidiary.
Financial Profile Cash Flow and Earnings:
Profits and cash flow affect the maintenance of operating facilities, internal
growth and expansion, access to capital and the ability to withstand
downturns in the business environment. Fitch’s analysis focuses on the
stability of earnings and continuing cash flows from the issuer’s major
business lines. Sustainable operating cash flow supports the issuer’s ability
to service debt and finance its operations and capital expansion without the
reliance on external funding.
Capital Structure:
Fitch analyzes capital structure to determine an issuer’s level of dependence
on external financing. Several factors are considered to assess the credit
implications of an issuer’s financial leverage, including the nature of its
business environment and the principal funds from operations. Because
industries differ significantly in their need for capital and their capacity to
support high debt levels, the financial leverage in an issuer’s capital structure
is considered relative to industry norms.

June 6, 2016
Appendix
Rating Definition Summary

AAA: Highest Credit Quality ‘AAA’ ratings denote the lowest expectation of default risk. They are
assigned only in cases of exceptionally strong capacity for payment of
financial commitments. This capacity is highly unlikely to be adversely
affected by foreseeable events.
AA: Very High Credit Quality ‘AA’ ratings denote expectations of very low default risk. They indicate
very strong capacity for payment of financial commitments. This capacity
is not significantly vulnerable to foreseeable events.
A: High Credit Quality ‘A’ ratings denote expectations of low default risk. The capacity for
payment of financial commitments is considered strong. This capacity
may, nevertheless, be more vulnerable to adverse business or economic
conditions than is the case for higher ratings.
BBB: Good Credit Quality ‘BBB’ ratings indicate that expectations of default risk are currently
low. The capacity for payment of financial commitments is considered
adequate but adverse business or economic conditions are more likely
to impair this capacity.
BB: Speculative ‘BB’ ratings indicate an elevated vulnerability to default risk, particularly
in the event of adverse changes in business or economic conditions over
time. However, business or financial flexibility exists that supports the
servicing of financial commitments.
B: Highly Speculative ‘B’ ratings indicate that material default risk is present, but a limited
margin of safety remains. Financial commitments are currently
being met. However, capacity for continued payment is vulnerable to
deterioration in the business and economic environment.
CCC: Substantial Credit Risk Default is a real possibility.
CC: Very High Levels of Credit Risk Default of some kind appears probable.
C: Exceptionally High Levels of Credit Risk Default is imminent or inevitable, or the issuer is in standstill. Conditions
that are indicative of a ‘C’ category rating for an issuer include: a) the
issuer has entered into a grace or cure period following nonpayment of
a material financial obligation; b) the issuer has entered into a temporary
negotiated waiver or standstill agreement following a payment default
on a material financial obligation; or c) Fitch Ratings otherwise believes
a condition of ‘RD’ or ‘D’ to be imminent or inevitable, including through
the formal announcement of a distressed debt exchange.
RD – Restricted default.
Parent and Subsidiary Rating Linkage

Understanding the multifaceted relationship between a parent company and its subsidiaries is
crucial for determining each company’s respective probabilities of default.
Fitch employs the parent and subsidiary rating linkage methodology when assigning IDRs
to nonfinancial companies that are tied together by a parent/subsidiary relationship. The
methodology takes into account several considerations when assessing the legal, operational
and strategic ties that can link the IDRs of two or more issuers. The steps taken by Fitch to
determine the linking of IDRs collectively form the Linkage Considerations Framework (LCF).
The LCF steps, including respective criteria, are summarized in the LCF Decision Matrix and
LCF Flow on the next page.

June 6, 2016
Appendix
LCF Decision Matrix

Question Conclusion Criteria
• Parent has majority ownership of sub
Yes/Uncertain • Parent has influential control over sub
1. Does a parent/sub • Existence of sub is strategically important to parent

relationship exist? • Parent/investor holds passive equity stake in sub
No • No control over strategic decisions of sub
• Existence of sub not particularly important to parent
2. Are sector-specific Yes • Refer to sector-specific criteria

criteria available? No • Continue current analysis
Parent • Relative risk of default is higher for sub
3. Which entity has the
stronger stand-alone Subsidiary • Relative risk of default is higher for parent
credit profile?
Equal • Relative risk of default is equal for parent and sub
Legal
• Guarantees of debt obligations exist between entities
• Cross-default provisions in place
Operational
• Parent has control of sub’s board
Yes
• All external funding is channeled through parent
• Sub operations integral to the core business of the parent
Strategic
• Parent risks its own survival to keep sub operational
• High degree of demonstrated tangible support from parent to sub
4. Are legal,
Legal
operational, and
strategic ties strong? • Covenants with dividend restrictions exist
• Policies exist to mitigate related-party transactions
• Breached covenants can easily be waived (i.e. private bank
financing)
• Different legal jurisdictions impede enforceability
No
Operational
• Low level of senior management overlap
• Separate financing exists between parent and sub
Strategic
• Parent sells sub or lets sub fail if economically appropriate
• Absence of tangible support from parent to sub
IDR – Issuer Default Rating. LCF – Linkage considerations framework.

June 6, 2016
Appendix
LCF Flow Chart

1
Does Parent/Sub
Relationship Exist?
Yes/Uncertain
2 No
Does Sector-Specific IDRs are Based on

Criteria Exist? Stand-Alone Profiles
No
3
Yes
Which Entity has the
Refer to Sector-Specific
Stronger Credit Profile?
Criteria Published by Fitch
Same Subsidiary Parent

Path A: Legal and Operational Ties Path B: Legal, Operational and Strategic Ties
• Guarantees (Upstream) • Guarantees (Downstream)
• Dividend Restrictions • Intra-Group Restrictions
• Cross-Defaults • Cross-Defaults
• Different Jurisdictions • Different Jurisdictions
• Management Control and Commonality • Operational Integration
• Centralized Treasury • Strategic Importance of Subsidiary
• Other/Intangibles • Tangible Support
• Other/Intangibles
4 4
Are Legal and Operational Are Legal, Operational and

Ties Strong? Strategic Ties Strong?
Conclusion: Yes No Yes No
Same or Different IDRs Same Same Can be the Same Can be the Same Different
or Different or Different
Stand-Alone or Consolidated
Credit Metric/Profile Both Consolidated Both Both Stand-Alone
Notching N.A. N.A. Parent Can be Notched Sub Can be “Up Notching” Possible
Down or Sub Notched Up Notched Down in Limited Situations
LCF – Linkage considerations framework. IDR – Issuer Default Rating. N.A. – Not applicable.
In a case when a subsidiary has issued long-term public bonds but does not issue stand-alone
financial statements or benefit from a downstream parent guarantee, the considerations in the
flow on the next page should be made. The below guidelines are not meant as an alternative to
the parent-subsidiary linkage methodology used in the main criteria, nor are these guidelines
meant for new debt issuances.

June 6, 2016
Appendix
Rating Subsidiary Debt without Stand-Alone Financial Information or a Parent Guarantee

What is parent rational for Future Flexibility/Evolving Business
Do not rate subsidiary debt
not guaranteeing? Strategy
Costs/Administrative/Unknown
Is Parent rated ‘B’ category

Yes Do not rate subsidiary debt
or lower?
No
Has management weakened debt Was past actions related to relatively

Yes No
holders before? minor subs and/or debt amounts?
No/Unknown Yes Do not rate subsidiary debt
Will operations be Will operations be

No No
materially integrated? materially integrated?
Yes Yes
Committee should weigh the following factors to determine if debt of a subsidiary

Subsidiary’s debt can be rated can be rated:
• Need for future bond market access
• Material subsidiary cross-default language
• Reputation Risk
• Overall parent credit strength (a ‘BB’ parent may get less leeway than
an ‘A’ category)
• Stated public intentions of management (if any)
• Materiality of existing subsidiary debt compared to previous negative actions
(if applicable)

June 6, 2016
Appendix
Recovery Rating Methodology
For issuers with IDRs at ‘B+’ and below, Fitch performs a recovery analysis for each class
of obligations of the issuer. This analysis consists of three steps: estimating the distressed
enterprise value (EV), estimating creditor claims and distribution of value.
Recovery Analysis Methodology

Step 1: Estimating Distressed Enterprise Value (EV)
Going Concern (GC) Approach Cash Flow Multiple: Fitch’s most often used recovery analysis, using a
distressed cash flow (typically EBITDA) and multiple
based on actual or expected market and/or distressed
multiples.
A. Post-Default Cash Flow
B. Multiple Selection and Application
Traded Asset Value: Acceptable for industry sectors with valuation
approaches for assets that are actively traded on
exchanges or frequently bought or sold.
Present Value of Acceptable when future cash flows can be estimated
Cash Flow: with adequate precision. Ex: U.S. Utility and Native
American gaming sectors.
Liquidation Value (LV) Approach Involves discounting the book value of balance sheet assets and
summing the results.
Step 2: Estimating Credit Claims

Fitch estimates existing claims through: • Fitch’s analysis includes the following:
• Claims that are typically taken on as a company’s fortunes
Revolving Claims:
deteriorate.
• Priority Administrative Claims
• Claims that are necessary to the reorganization process
• Lease Rejection Claims
and:
• Concession Assumption
• Claims that have priority in the relevant bankruptcy code.
• Pension and Other Post-Employment
Benefit (OPEB) Obligations
• Other Non-Debt and Contingent Claims
Step 3: Distribution of Value

After the going concern of liquidation valuation processes are complete, the resulting distressed EV is allocated to
creditors according to jurisdicitonal practice for distributing value among claimants according to the seniority of their
claims (the waterfall approach).
The overall risk for a particular debt issuance is made up of two components: the relative
probability of default for the issuer — reflected in its IDR — and the likely recovery for each class
of debt given default. Therefore, the rating for an issuer’s debt instruments, whether secured,
senior unsecured or subordinated, is notched from the issuer’s IDR.
Recovery Ratings (RR) Scale

Issue Notching Issue Notching
Recovery Rating Description Recovery (%) for B IDR for BB IDR
RR1 Outstanding 91–100 +3 (secured debt only) +1 to +2
RR2 Superior 71–90 +2 (capped at RR2 for 0 to +1
unsecured debt)
RR3 Good 51–70 1 0
RR4 Average 31–50 0 0
RR5 Below Average 11–30 –1 –1
RR6 Poor 0–10 –2 to –3 –1 to –2

June 6, 2016
Appendix
B+ and Below IDR/Debt Instrument Mapping

IDR B+ B B– CCC CC C RD D
RR1 BB+ BB BB– B CCC+ CCC CCC CCC
RR2 BB BB– B+ B– CCC CCC– CCC– CCC–
RR3 BB– B+ B CCC+ CCC– CC CC CC
RR4 B+ B B– CCC CC C C C
RR5 B B– CCC+ CCC– C C C C
RR6 B–/CCC+ CCC+/CCC CCC/CCC– CC/C C C C C
In some regions and cases, Fitch may assign RRs to debt instruments of issuers with ‘BB’ rating
category IDRs. RRs in these situations are not computed via bespoke analysis.
Typical BB Rating Category Recovery Rating Assignment

and Notching
Second Lien Secured and
First Lien Secured Senior Unsecured Subordinated
Instrument Instrument Instrument
IDR RR Notching Rating RR Notching Rating RR Notching Rating
BB+ RR1 +1 BBB– RR4 0 BB+ RR5 –1 BB
BB RR1 +1 or +2 BB+/BBB– RR4 0 BB RR5 –1 BB–
BB– RR1 +2 BB+ RR4 0 BB– RR5 –1 B+
Enterprise Value — Fitch-Employed Multiple for Recovery Analysis

Fitch-
Employed
Multiple for
(LTM EBITDA Multiplesa, 10-Year Historical Recovery
As of Sept. 30, 2015) Public Marketb Transaction/Takeoutc Analysis
Sector Low High Median Current Low High Median Current Averaged
Automotive 4.74 7.67 5.76 5.33 4.49 14.86 8.70 7.72 5.7
Broadcasting & Media 6.40 12.01 8.77 8.75 7.35 13.51 10.20 9.34 6.0
Building & Materials 6.43 21.93 11.08 12.24 2.25 16.45 10.37 9.78 6.4
Chemical 5.04 10.94 8.54 9.08 4.90 17.40 10.55 8.10 5.5
Computers & Electronics 7.09 12.22 10.38 11.25 11.31 20.80 16.65 16.70 6.3
Consumer Products 6.21 12.47 9.48 11.64 7.70 12.30 10.10 10.70 6.0
Energy 4.08 10.63 8.72 8.97 6.05 11.30 8.51 8.64 4.7e
Food, Beverage & Tobacco 8.42 15.47 10.76 15.47 7.94 15.67 11.96 15.67 6.7
Gaming, Lodging,
Leisure & Restaurants 7.76 11.88 10.80 11.22 6.40 12.90 9.86 9.86 6.9
Healthcare & Pharmaceutical 7.26 11.52 9.52 10.66 9.70 18.05 15.76 17.85 6.8
Industrial/Manufacturing 4.57 9.81 8.07 8.01 7.48 20.53 11.00 20.53 5.7
Metals & Mining 5.13 13.65 10.12 7.67 7.26 19.90 11.69 8.48 5.6
Paper & Containers 6.11 8.96 7.85 7.82 4.40 10.86 8.60 10.45 5.3
Retail 4.95 11.20 8.22 10.65 6.89 17.50 9.70 17.50 5.3
Services & Miscellaneous 7.45 12.83 9.49 10.33 7.21 17.53 10.75 17.53 5.8
Telecommunication & Cable 6.39 10.29 8.78 10.15 7.90 12.24 9.60 12.24 5.7
Transportation 5.47 10.95 8.44 9.11 4.54 12.20 9.41 9.41 5.3
Utilities 7.82 11.63 9.48 9.59 3.41 15.96 8.68 9.60 —
All Sectors 6.31 9.78 9.39 9.46 8.80 12.20 10.89 11.44 6.0
a
LTM EBITDA refers to LTM of EBITDA. Multiples represent Fitch estimates. bMarket multiples are assessed specifically for
speculative-grade, publicly traded U.S. companies. Current values are based on market capitalization as of Nov. 17, 2015.
c
Transaction multiples cover merger and acquisition transactions across the rating spectrum. dRepresents the mean distressed
multiple assumed by Fitch for purposes of its recovery analysis based on Fitch’s explicitly rated and Credit Opinion portfolio of
U.S. leveraged issuers. The range of multiples assumed by Fitch within each sector is determined by subsector classifications
and issuer-specific idiosyncratic factors. Because the Fitch-employed multiple is applied to a distressed EBITDA value, it
generates a lower enterprise value than would otherwise have been obtained in a nondistressed scenario. For companies
where the recovery value is maximized under a liquidation scenario, the implied multiple has been imput based on liquidation
value and distressed EBITDA. eRefers to an implied EBITDA multiple derived from Fitch’s assumed distressed valuation metric
of an average of $12.50/boe (enterprise value per barrel of oil equivalent) used in recovery analysis, subject to adjustment.
Source: FactSet, Bloomberg, Fitch Ratings.

June 6, 2016
Appendix
In recovery analyses, Fitch generally chooses a multiple below M&A precedent transactions
and market trading multiples, particularly during periods of robust valuations. This is because
recovery analyses incorporate adverse circumstances and uncertainty surrounding the market
conditions at the time of a hypothetical reorganization. Similarly, when markets are so depressed
or disrupted they are essentially illiquid, Fitch recovery multiples may be higher than observed
market multiples, if any are available.
ABL Recovery Analysis

The presence of an ABL materially affects the residual EV available for other creditors in the
capital structure.
In the case of well-structured ABL facilities with credit-protective features — such as availability
limited by a borrowing base formula, springing or full-cash dominion or frequent monitoring/
reporting of collateral — Fitch assumes ABL debt will recover ahead of other first lien debt
under the recovery waterfall. Where a cash dominion feature is in place, Fitch will assume an
additional source of recovery (cash component). In instances where the ABL is secured by
specific (and not all) assets, Fitch will first deduct the value of assets pledged for such facilities
(collateral component) from the overall valuation so the remaining creditors’ recoveries are
assessed more realistically.
Fitch acknowledges not all ABL facilities are created equal, and the strength of each structure
will need to be evaluated separately.
ABL Recovery Analysis Methodology

Step 1: Estimating Distressed Enterprise Value (EV)
Going Concern Step 1 remains largely unaffected by the presence of an ABL when estimating EV under the going concern approach.
(GC) Approach The sample of comparable transaction or market multiples used to form an input assumption includes industry peers
with ABL-inclusive capital structures.
Liquidation Value Fitch Advance Rates Liquidation approach involves discounting book value of balance sheet assets and summing results. In absence of
(LV) Approach detailed valuation reports, analytical guidance is generally drawn from the history of ABLs in the sector or historical
liquidation experience.
Reliance on Analytical consideration given to third-party appraiser valuation reports. Fitch advance rates should not be confused
Third-Party Valuations with advanced rates used in ABLs. Analyst discretion determines appropriate discount to be applied to book values
based on additional considerations such as: credit risk of obligors, asset portfolio concentration risk and potential
deterioration of collateral.
Administrative Expense Fitch deducts administrative expense claims up to 10% of EV to arrive at adjusted EV.
Step 2: Estimating ABL Claims

The following considerations of sizing ABL claims remain unchanged regardless of whether EV is maximized under a going concern or liquidation scenario.
• Revolving Claims
–– In the case of CF-based revolving claims, Fitch assumes unused portions of committed lines are fully drawn to extent permitted. Greater judgement exercised
for ABL revolvers that can only be drawn up to borrowing base availability. Fitch also considers borrowing base availability may or may not have significant
seasonal fluctuations.
• Alternative Sources
––Additional factors to assess strategic value of ABL considered for capital structures with an ABL and a CF-based revolving facility.
Step 3: Distribution of Value to ABL

Fitch identifies two sources of recovery for an ABL — a collateral component and a cash component regardless of whether EV is maximized under a going
concern or liquidation scenario.
• ABL Recovery — Collateral Component
–– Waterfall: ABL is entitled to priority over other first lien cash flow-based debt to extent of the value of specific collateral securing ABL. Fitch first allocates portion attributable
to liquidation value of specific assets securing the ABL; and the EV for the other first lien debt is net of the amount allocated to the ABL collateral component.
––First-Out/Last-Out Tranches: Different payment prioirities among various tranches of an ABL are reflected accordingly in the distribution waterfall.
• ABL Recovery — Cash Component
––Cash on balance sheet generally assumed to dissipate during or before bankruptcy. In the case of ABLs, value of cash included in estimating recoveries for ABL
facilities that have sprining or full cash dominion feature.
ABL – Asset-based lending. CF – Cash flow.

June 6, 2016
Appendix
For more information on Fitch’s methodologies in the recovery analysis of ABL facilities please
see Evaluating U.S. Asset-Based Lending Facilities (Recovery Outcomes and Analysis for
ABL-Inclusive Capital Structures).
Pension Recovery Analysis

Terminated underfunded pension liabilities can meaningfully impair recoveries of other credit
classes in a bankruptcy scenario in the following ways.
First, the unpaid minimum funding contributions and premiums are treated as administrative
claims so they will recover even before secured debt. Second, the amount owed to the Pension
Benefits Guaranty Corporation (PBGC) can be calculated in various ways and results in
drastically different amounts. Other general unsecured claims can be materially affected as a
result. Third, the controlled group liability doctrine entitles the PBGC to assert claims on each
and every member within the controlled group. The doctrine can effectively put the PBGC ahead
of other unsecured claims.
Even if the unfunded pension plan is not terminated in bankruptcy, the periodic minimum funding
contribution payments are entitled to administrative expense treatment during the pendency of
the bankruptcy.
Fitch’s Recovery Considerations —

U.S. Defined Benefit Pension Plans
Going Concern Scenario Fitch assumes an underfunded pension plan remains with a reorganized entity. Therefore,
a pension liability will not show up in the waterfall of claims, but rather remain as an
ongoing expense for the new entity.
Liquidation Scenario Fitch’s analysis only includes the Pension Benefits Guaranty Corporation (PBGC) as an
unsecured creditor in liquidation scenarios, or for those companies whose future annual
pension commitments severely impair cash flow expectations.
Claim Priority: Upon plan termination, the PBGC assumes the pension plan and files
a matured claim as an unsecured creditor. The PBGC claim will be
entitled to recover as if it held an unsecured upstream guarantee form
each controlled group member.
Claim Size: The size of the PBGC claim for unfunded pension liability will typically
be estimated on a GAAP basis for purposes of Fitch’s recovery
methodology. However, if the claim amount calculated by the PBGC is
substantially different, Fitch will analyze the difference and decide the
final amount case by case.
Other Issues: Fitch’s analysts may also factor in U.K. pension regulator powers if
there are materially underfunded U.K. pension plans in the group. For
companies with material foreign assets, Fitch’s analysts may assume
that the PBGC may attach a lien on such assets.

June 6, 2016
Appendix
U.S. Pensions — Illustrative Application of Recovery Methodology

Example 1 — Going Concern Approach (Pension Plan Continues)
U.S. Parent — Plan Sponsor
Pension Contingenta Claim ($100) = N.A.
Unsecured Debt ($100) = $60 Recovery (RR3)
$0 $60c
100% 75%b
Subsidiary A — CGE
Subsidiary B — Non CGE
[Net Assets = $100]
[Net Assets = $130]
Pension Contingenta Claim ($100) = N.A.
aPension Benefits Guaranty Corporation (PBGC) files a contingent claim for the full unfunded benefit liability (UBL) amount of $100 in each and every controlled group
entity's bankruptcy case. If the pension plan is not terminated, the claim does not arise. bSubsidiary B is not a controlled group entity since it is below the 80% ownership
threshold. cResidual equity value upstreamed to U.S. parent from 75% owned non-CGE = 75% of $80 = $60. RR – Recovery Rating. CGE – Controlled group entity.
N.A. – Not applicable.
Example 2 — Liquidation Approach (Pension Plan Terminates)

U.S. Parent — Plan Sponsor
PBGC Unsecured Claima ($100) = $30b Recovery
$0 $60c
100% 75%e
Subsidiary A — CGE
Subsidiary B — Non CGE
[Net Assets = $100]
[Net Assets = $130]
PBGC Unsecured Claima ($100) = $50d Recovery
aPension Benefits Guaranty Corporation (PBGC) files a contingent claim for the full unfunded benefit liability (UBL) amount of $100 in each and every controlled group
entity's case. bPBGC will share pro rata with other unsecured creditors at the parent sponsor’s level. Note that PBGC’s aggregate recovery (from the sponsor and all
controlled group members) cannot exceed 100% of its claim. cResidual equity value upstreamed to U.S. parent from 75% owned non-CGE = 75% of $80 = $60.
dNot only does PBGC recover as an unsecured creditor in the parent sponsor’s bankruptcy but also recovers separately from each member of the controlled group as
an unsecured creditor, up to an aggregate recovery of 100% of its claim. eSubsidary B is not a controlled group entity because it is below the 80% ownership threshold.
RR – Recovery Rating. CGE – Controlled group entity.
For more information on Fitch’s methodologies in the recovery of pensions please see
Pension Liabilities in Bankruptcy.

June 6, 2016
Appendix
Research Portfolio
Sector Handbooksa
Date Title
05/04/16 The Checkup: High-Yield Healthcare Handbook
(Comprehensive Analysis of High-Yield U.S. Healthcare Companies)
04/12/16 All In: Global Gaming Handbook (Second Edition)
01/25/16 High-Yield Retail Checkout (Comprehensive Analysis of Major High-Yield Retailers)
01/15/16 U.S. Diversified Industrials and Capital Goods Handbook
11/24/15 North American Chemicals Handbook (A Detailed Review of Companies in the Chemicals Sector)
11/04/15 Automotive Handbook (Second-Half 2015)
10/13/15 Media and Entertainment Handbook (Fitch’s Comprehensive Credit Profile Analysis of Issuers, Volume 2)
09/22/15 Credit Encyclo-Media: Fitch’s Comprehensive Analysis of the (Volume VIII, 2015–2016)
07/30/15 U.S. Grocery Retailing (Supermarkets Play Defense; Grocery Market Share Shifting to Discount
and Specialty Formats)
07/20/15 Fitch 50 (Capital Structure Diagrams & Debt Document Summaries for Fifty of the Largest U.S.
Leveraged Credits) — Amended
07/01/15 Fitch’s Telecom & Cable Company Handbook (A Detailed Review of Companies in the U.S. and Canada
Telecom and Cable Sector) — Amended
06/29/15 Oil & Gas Handbook (North American Exploration and Production Handbook)
06/29/15 U.S. High-Yield Consumer Handbook (Comprehensive Analysis of High-Yield Food, Beverage, Tobacco,
Restaurant and Consumer Products Companies)
a
Comprehensive analysis of business profiles and capital structures for largest issuers.
Recent U.S. Leveraged Finance Research

Date Title Type
01/28/16 Industrial and Manufacturing Bankruptcy Enterprise Value and Creditor Recoveries Bankruptcy Case Study
(Fitch Case Studies — Edition IX)
08/12/15 Healthcare, Food, Beverage and Consumer Bankruptcy Enterprise Value and Creditor Bankruptcy Case Study
Recoveries (Fitch Case Studies — Edition VIII)
04/29/15 Bankruptcy Case Study Price Results: Bond Pricing Analysis for $0.55 Screen Bankruptcy Case Study
04/27/15 Energy, Power and Commodities Bankruptcy Enterprise Value and Creditor Bankruptcy Case Study
Recoveries (Fitch Case Studies — Edition VII)
09/24/15 U.S. Leveraged Finance: Road to Recovery Ratings Cross-Sector Recovery
(Cross-Sector Analysis of Recovery Assumptions and Results) Analysis
02/25/16 Second-Lien Debt (Energy and Exchanges Driving Second-Lien Bond Issuance) Structural Analysis
11/17/15 Intercreditor Arrangements Structural Analysis
(Tug-of-War Between First-Lien and Second-Lien Lenders)
08/24/15 Evaluating U.S. Asset-Based Lending Facilities (Recovery Outcomes and Analysis for Structural Analysis
ABL-Inclusive Capital Structures)
12/16/15 U.S. Leveraged Finance Multiple EV-aluator (pdf version) EV Multiple Analysis
12/14/15 U.S. Leveraged Finance Multiple EV-aluator EV Multiple Analysis
04/14/16 Fitch U.S. High Yield Default Insight (U.S. HY TTM Default Rate Approaches 4%; April HY Default Insight
E&P Default Rate to Pass 20%)
03/17/16 Fitch U.S. High Yield Default Insight (U.S. HY Default Rate Forecast Raised to 6%; HY Default Insight
Energy to 20%)
02/19/16 Fitch U.S. High Yield Default Insight (February Double-Digit Issuer Defaults HY Default Insight
Most Since 2009)
01/26/16 Fitch U.S. High Yield Default Insight (2015 U.S. High Yield Market Default Rate 3.4%; HY Default Insight
Arch Headlines January Defaults)
12/14/15 Fitch U.S. High Yield Default Insight (2016 U.S. High Yield Default Rate Forecast at HY Default Insight
4.5%; Energy at 11%)
11/13/15 Fitch U.S. High Yield Default Insight (Energy Default Rate Heads to 6%; Arch Filing HY Default Insight
Would Push Metals/Mining Over 14%)
10/14/15 Fitch U.S. High Yield Default Insight (2015 Default Outlook Boosted to 3.5%) HY Default Insight
09/21/15 Fitch U.S. High Yield Default Insight (Energy TTM Default Rate Approaches 5%; HY Default Insight
Highest Level Since 1999)
08/13/15 Fitch U.S. High Yield Default Insight (August Defaults Likely to Drive HY Default Insight
TTM Default Rate to 3%)
07/16/15 Fitch U.S. High Yield Default Insight (2015 Default Outlook Increased to 2.5%–3.0%) HY Default Insight
06/12/15 Fitch U.S. High Yield Default Insight (DDEs Hit HY Market; Volume Surpasses 2012’s HY Default Insight
Record Pace)
05/21/15 Fitch U.S. High Yield Default Insight (Yankee Bond Default Rate Exceeds HY Default Insight
U.S./Canada; 1Q15 Financial Results)

June 6, 2016
Appendix
Recent U.S. Leveraged Finance Research (Continued)

Date Title Type
04/21/15 Fitch U.S. High Yield Default Insight (HY Energy Coupons Rise; DDEs Prevalent) HY Default Insight
04/27/16 Fitch U.S. Leveraged Loan Default Insight (April Trailing 12-Month Institutional LL Default Insight
Leveraged Loan Default Rate Reaches 1.8%)
03/29/16 Fitch U.S. Leveraged Loan Default Insight (Energy, Metals/Mining Defaults Continue; LL Default Insight
Secondary Bid Levels Strengthen)
02/26/16 Fitch U.S. Leveraged Loan Default Insight (Energy, Metals/Mining February Default LL Default Insight
Rates Reach New Heights)
01/29/16 Fitch U.S. Leveraged Loan Default Insight (2015 U.S. Institutional Leveraged Loan LL Default Insight
Default Rate 1.7%; Defaults Heat Up in January)
12/17/15 Fitch U.S. Leveraged Loan Default Insight (2016 U.S. Leveraged Loan Default Rate LL Default Insight
Forecast at 2.5%; Energy Defaults Climb)
11/24/15 Fitch U.S. Leveraged Loan Default Insight ($2 Billion in Loan Defaults for November; LL Default Insight
Weak Second-Lien Bids for Energy)
10/26/15 Fitch U.S. Leveraged Loan Default Insight (Energy Default Rate Surpasses 5%; LL Default Insight
Overall Rate Tracking to 1.5%‒2% Forecast)
09/30/15 Fitch U.S. Leveraged Loan Default Insight LL Default Insight
(Default Rate Rise Commences with Samson)
08/28/15 Fitch U.S. Leveraged Loan Default Insight (Commodity Prices Lift Metals/Mining, LL Default Insight
Energy Default Rates; Other Sectors Resilient)
07/28/15 Fitch U.S. Leveraged Loan Default Insight (TTM Loan Default Rate 1.4%, LL Default Insight
Tracking Toward 1.5%–2%)
05/28/15 Fitch U.S. Leveraged Loan Default Insight (Loan Default Rate Falls to 1.4%; LL Default Insight
2015 Issuance Remains Light)
04/29/15 Fitch U.S. Leveraged Loan Default Insight (Energy Defaults Return While Broader LL Default Insight
Market Metrics Improve)
01/26/16 U.S. Leveraged Market Quarterly (Fourth-Quarter 2015) Market Quarterly
10/22/15 U.S. Leveraged Market Quarterly (Third-Quarter 2015) Market Quarterly
07/23/15 U.S. Leveraged Market Quarterly — Second-Quarter 2015 Market Quarterly
04/23/15 U.S. Leveraged Market Quarterly Market Quarterly
04/18/16 Fitch U.S. Corporates LF Data Comparator–Fourth Quarter 2015 Stats Quarterly
12/10/15 Fitch U.S. Corporates Leveraged Finance Data Comparator — Third-Quarter 2015 Stats Quarterly
09/17/15 Fitch U.S. Corporates Leveraged Finance Data Comparator — Second-Quarter 2015 Stats Quarterly
07/17/15 Fitch U.S. Corporates Leveraged Finance Data Comparator — First-Quarter 2015 Stats Quarterly
Additional Research by Sector

Date Title Sector
11/16/15 U.S. Corporate Bond Market Monitor (Downgrade Impact Greatest in Six Macro Credit Research
Years; Record Issuance Through October)
08/06/15 U.S. Corporate Bond Market Monitor (Upgrades Outpace Downgrades in Macro Credit Research
Second Quarter; Record Volume through July)
05/13/15 U.S. Corporate Bond Market Monitor (Record New Issuance; Downgrades Macro Credit Research
Surpass Upgrades)
04/28/16 Corporate Upgrade/Downgrade Dashboard 1Q16 Macro Credit Research
01/19/16 Fitch Fundamentals Index — U.S. (4Q15) Macro Credit Research
10/16/15 Fitch Fundamentals Index — 3Q15 Macro Credit Research
07/15/15 Fitch Fundamentals Index — 2Q15 Macro Credit Research
04/15/15 Fitch Fundamentals Index — U.S. Macro Credit Research
04/07/16 U.S. Senior Fixed-Income Investor Survey 1Q16 Macro Credit Research
12/02/15 U.S. Senior Fixed-Income Investor Survey November 2015 Macro Credit Research
05/19/15 U.S. Senior Fixed-Income Investor Survey April 2015 Macro Credit Research
02/10/16 2016 Outlook: U.S. Corporates (Fundamental Stability amid Market Volatility) Macro Credit Research
01/28/16 The Credit Outlook Macro Credit Research
01/15/16 Outlook Overview Tool 2016 Macro Credit Research
07/20/15 The Credit Outlook Macro Credit Research
04/18/16 Fitch U.S. Corporates IG Data Comparator — Fourth-Quarter 2015 Macro Credit Research

June 6, 2016
Appendix
Additional Research by Sector (Continued)

Date Title Sector
12/10/15 Fitch U.S. Corporates Investment Grade Data Comparator — Macro Credit Research
Third-Quarter 2015
09/17/15 U.S. Corporates Investment-Grade Data Comparator — Macro Credit Research
Second-Quarter 2015
03/23/16 The Causes of Non-Financial Corporate Upgrades and Downgrades Macro Credit Research
12/17/15 US Rate Rises Expose Some Leveraged Corporates, Macro Credit Research
Investment-Grade More Stable
12/14/15 China Slowdown Scenario (Testing Credit Connections) Macro Credit Research
11/06/15 Activist Activities: Fall 2015 (Nonfinancial U.S. Corporate Campaign Macro Credit Research
Case Studies and Profiles of Notable Activists)
09/30/15 Fitch Ratings Global Cross-Asset Default Update Macro Credit Research
04/29/15 The Causes of Non-Financial Corporate Upgrades and Downgrades Macro Credit Research
01/11/16 The Strong USD: Implications for Europe and the U.S. (Background Macro Credit Research
Analysis of the Impact on the Broader Economy and Nonfinancial
Corporates)
05/06/16 Global Corporate Finance 2015 Transition and Default Study Macro Credit Research
03/30/16 Transition and Default Excel Data — 2015 Macro Credit Research
06/26/15 Fitch Ratings Global Short-Term Rating 2014 Transition and Macro Credit Research
Default Study
06/26/15 Fitch Ratings Global Short-Term Rating 2014 Transition and Macro Credit Research
Default Study — Excel Data
06/17/15 Metals & Mining Chartbook Chemicals & Natural Resources
03/08/16 North American Met Coal Dashboard Chemicals & Natural Resources
11/17/15 North American Potash Dashboard Chemicals & Natural Resources
11/11/15 North American Phosphate Fertilizer Dashboard Chemicals & Natural Resources
11/04/15 North American Nitrogen Fertilizer Dashboard Chemicals & Natural Resources
09/25/15 North American Olefins Dashboard Chemicals & Natural Resources
08/27/15 North American Methanol Dashboard Chemicals & Natural Resources
06/10/15 North America Paints and Coatings Dashboard Chemicals & Natural Resources
05/06/15 U.S. Aluminum Dashboard Chemicals & Natural Resources
05/06/15 North American Gold Dashboard Chemicals & Natural Resources
11/24/15 North American Chemicals Handbook (A Detailed Review of Chemicals & Natural Resources
Companies in the Chemicals Sector)
10/06/15 High-Yield Specialty Chemicals Review (Analyzing Key Metrics, Chemicals & Natural Resources
Trends and Outliers)
12/07/15 2016 Outlook: North American Chemicals (Managing the Macro) Chemicals & Natural Resources
12/07/15 2016 Outlook: North American Pulp, Paper and Forest Products Chemicals & Natural Resources
12/03/15 2016 Outlook: Global Mining Chemicals & Natural Resources
10/05/15 Mining - What to Watch Chemicals & Natural Resources
10/26/15 Global Fertilisers Industry and Peer Study Chemicals & Natural Resources
01/18/16 Updating Fitch’s Mid-Cycle Commodity Price Assumptions Chemicals & Natural Resources
10/02/15 Updating Fitch’s Commodity Price Assumptions Chemicals & Natural Resources
03/07/16 Arch Coal, Inc. Recovery Tools Chemicals & Natural Resources
03/04/16 Peabody Energy Recovery Tools Chemicals & Natural Resources
05/07/15 U.S. Natural Resources Recovery Models (First-Quarter 2015) Chemicals & Natural Resources
12/16/15 London Energy Seminar Energy (Oil & Gas)
05/04/16 U.S. Driller Dashboard Energy (Oil & Gas)
04/13/16 U.S. Refining Dashboard (April 2016) Energy (Oil & Gas)
12/17/15 U.S. Onshore Drillers Dashboard Energy (Oil & Gas)
11/11/15 U.S. Natural Gas Dashboard (Fall 2015) Energy (Oil & Gas)
07/21/15 U.S. Refining Dashboard 2H15 Energy (Oil & Gas)
06/25/15 U.S. Onshore Drillers Dashboard Energy (Oil & Gas)
05/22/15 U.S. Natural Gas Dashboard (Spring 2015) Energy (Oil & Gas)
06/29/15 Oil & Gas Handbook (North American Exploration and Energy (Oil & Gas)
Production Handbook)
01/13/16 High-Yield E&P Asset Coverage (Capital Structures, Energy (Oil & Gas)
Cost Positions in Focus)
09/28/15 High-Yield E&P Hedge and Netback Profiles Update Energy (Oil & Gas)
(Limited $60 Hedges Added in Q2; Full-Cycle Netbacks
Suggest Underinvestment at $50)
04/20/15 High-Yield E&P Stress Test (Examining Exposure to the Downturn) Energy (Oil & Gas)

June 6, 2016
Appendix

Date Title Sector
05/02/16 Full-Cycle Costs Drop for North American E&Ps (Faster Reset in North Energy (Oil & Gas)
America, but Future Givebacks Likely)
04/12/16 E&P Lending Guidance Signals More Pain Ahead (OCC Lending Energy (Oil & Gas)
Guidance Amplifies Challenges for Leveraged E&P Borrowers)
12/18/15 Revisiting U.S. Reserve Borrowing Bases One Year On (Cuts Moderate Energy (Oil & Gas)
Despite Increased Headwinds)
12/15/15 E&P Capex Trends and Oilfield Services Prospects (What E&P and Energy (Oil & Gas)
Oilfield Services Corporates Are Saying in Q3)
05/18/15 Statistical Review of U.S. Independent E&Ps (Price-Induced Pain Energy (Oil & Gas)
Deferred Until 2015)
01/26/16 2016 Outlook: U.S. Oil & Gas (Rating Outlook Shifts to Negative) Energy (Oil & Gas)
12/01/15 2016 Outlook: Crude Oil and Refined Products Pipelines (Positioned for
Stability Despite Ongoing Commodity Price Weakness) Energy (Oil & Gas)
11/23/15 2016 Outlook: U.S. Oil & Gas (Risk of Lower for Longer
Weighs on Sector) Energy (Oil & Gas)
11/23/15 2016 Outlook: North American Refining (With Ample Global Supply,
Focus on Product Demand, Exports) Energy (Oil & Gas)
11/23/15 2016 Outlook: Oilfield Services (Continued E&P Capital Cutbacks
Pressure Sector) Energy (Oil & Gas)
01/20/16 Oil & Gas Price Assumptions Lowered (Resilient Production, El Niño
Push Recovery Out) Energy (Oil & Gas)
11/09/15 Oil and Gas Price Assumptions November 2015 Energy (Oil & Gas)
08/06/15 U.S. Lower 48 New Normal Rig Run-Rate (Rig-Linked 2H Production
Decline Forecast; Productivity Gains Drive New Normal) Energy (Oil & Gas)
07/16/15 High-Yield Offshore Driller Recovery Prospect Pressures (Backlog Burn
Rate, Declining Revenue, Limited Liquidity and High Leverage) Energy (Oil & Gas)
06/08/15 Revising Our Oil and Gas Price Assumptions (Wider Brent-WTI Spread
and Lower Natural Gas Price) Energy (Oil & Gas)
05/07/15 U.S. LNG: Dimming Prospects? (Low Oil Prices, Supply/Demand Profile,
Asian LNG Pricing Introduce Outlook Uncertainty) Energy (Oil & Gas)
05/01/15 Midstream Energy Counters Price Uncertainty (Closed-End Funds Shift
Holdings after Market Declines) Energy (Oil & Gas)
02/24/16 Using Commodity Prices in Corporate Projections Energy (Oil & Gas)
02/05/16 Hotel Lenders Tightening the Screws (Key Takeaways from the
ALIS Conference) Gaming, Lodging & Leisure
12/15/15 Black Hawk Colorado Casino Tour Takeaways Gaming, Lodging & Leisure
10/07/15 2015 Global Gaming Expo Takeaways (Highlights of Key Gaming Issues
and Fitch’s Las Vegas Property Tours) Gaming, Lodging & Leisure
07/29/15 New England Casino Tour Takeaways Gaming, Lodging & Leisure
06/17/15 Hotel Loan Underwriting Bending, Unbroken
(Post-Conference Lending-Related Takeaways) Gaming, Lodging & Leisure
05/29/15 GLL Asia Trip Takeaways (Affirming All Three U.S.-Based Macau
Operators Factoring in Macau Weakness) Gaming, Lodging & Leisure
04/26/16 Las Vegas Strip Gaming Dashboard Gaming, Lodging & Leisure
04/26/16 Macau Gaming Dashboard Gaming, Lodging & Leisure
04/26/16 U.S. Gaming Supplier Dashboard Gaming, Lodging & Leisure
04/20/16 U.S. Regional Casino Gaming Dashboard (First-Half 2016) Gaming, Lodging & Leisure
01/05/16 U.S. Gaming Supplier Dashboard (Third-Quarter 2015) Gaming, Lodging & Leisure
11/17/15 U.S. Online Travel Agencies Dashboard (Second-Half 2015) Gaming, Lodging & Leisure
10/09/15 U.S. Regional Casino Gaming Dashboard (First-Half 2015) Gaming, Lodging & Leisure
10/09/15 Las Vegas Strip Gaming Dashboard Gaming, Lodging & Leisure
10/09/15 Macau Gaming Dashboard Gaming, Lodging & Leisure
02/29/16 U.S. Gaming Regulatory Monitor (A State-by-State Guide to Existing and
Proposed Gaming Regulations) Gaming, Lodging & Leisure
05/29/15 Eye in the Sky Series: Japan (Gaming Jurisdiction Surveillance Monitor) Gaming, Lodging & Leisure
05/29/15 Eye in the Sky Series: Macau (Gaming Jurisdiction Surveillance Monitor) Gaming, Lodging & Leisure
05/29/15 Eye in the Sky Series: South Korea
(Gaming Jurisdiction Surveillance Monitor) Gaming, Lodging & Leisure
04/06/15 Eye in the Sky Series: New Jersey
04/06/15 Eye in the Sky Series: Pennsylvania

June 6, 2016
Appendix

Date Title Sector
04/06/15 Eye in the Sky Series: Massachusetts Gaming, Lodging & Leisure
(Gaming Jurisdiction Surveillance Monitor)
04/06/15 Eye in the Sky Series: New York Gaming, Lodging & Leisure
(Gaming Jurisdiction Surveillance Monitor)
12/17/15 An Arduous Path to Deleveraging for Gaming Suppliers (A Credit Gaming, Lodging & Leisure
Investor’s Guide to High-Yield Gaming Suppliers)
10/07/15 Regional Gaming in the U.S.: An In-Depth Discussion Gaming, Lodging & Leisure
01/22/16 Gaming, Lodging & Leisure Global eNewsletter Gaming, Lodging & Leisure
07/20/15 Gaming, Lodging and Leisure Global eNewsletter Gaming, Lodging & Leisure
04/12/16 All In: Global Gaming Handbook (Second Edition) Gaming, Lodging & Leisure
09/23/15 All In: Global Gaming Handbook Gaming, Lodging & Leisure
01/14/16 U.S. Leveraged Finance Spotlight Series: Caesars Entertainment Corp. Gaming, Lodging & Leisure
01/14/16 U.S. Leveraged Finance Spotlight Series: Scientific Games Corporation Gaming, Lodging & Leisure
01/07/16 U.S. Lodging Cycle Concierge Gaming, Lodging & Leisure
12/11/15 2016 Outlook: U.S. Timeshare (Solid Fundamentals, Helped By Some Gaming, Lodging & Leisure
Potentially Unsustainable Trends)
12/10/15 2016 Outlook: Global Hotels (Still Constructive on Cycle, But Cognizant Gaming, Lodging & Leisure
of Overstaying)
12/07/15 2016 Outlook: Macau Gaming (Mass Market Provides Support but Gaming, Lodging & Leisure
Cannibalization from New Supply Could Be Painful)
12/07/15 2016 Outlook: U.S. Gaming (Outlook Stable, but REIT Transactions and Gaming, Lodging & Leisure
Secular Challenges Pose Concerns)
12/04/15 2016 Outlook: U.S. Leisure (Competition Remains Intense for Share of Gaming, Lodging & Leisure
Consumers’ Wallet)
05/13/15 Outlook Still Bright; Credit Risk Selectively Increasing (What U.S. Lodging Gaming, Lodging & Leisure
Companies Are Saying)
04/06/16 U.S. Gaming Recovery Tools (Fourth-Quarter 2015) Gaming, Lodging & Leisure
01/05/16 U.S. Gaming Recovery Tools (Third-Quarter 2015) Gaming, Lodging & Leisure
09/10/15 U.S. Gaming Recovery Tools (Second-Quarter 2015) Gaming, Lodging & Leisure
06/09/15 U.S. Gaming Recovery Tools (First-Quarter 2015) Gaming, Lodging & Leisure
04/27/15 U.S. Gaming Recovery Tools (Fourth-Quarter 2014) Gaming, Lodging & Leisure
09/22/15 What Investors Want to Know: U.S. Lodging (Growth to Slow, but Remain Gaming, Lodging & Leisure
Solid; Event Risk Rising)
03/03/16 Group Therapy: Fixating on a Late Cycle Demand Indicator (What U.S. Gaming, Lodging & Leisure
Lodging Companies Are Saying)
11/10/15 Softer Transient Lodging Demand Subdues Confidence (What U.S. Gaming, Lodging & Leisure
Lodging Companies Are Saying)
08/06/15 Airbnb Not a Competitive Threat to Hotels — Yet (What U.S. Lodging Gaming, Lodging & Leisure
Companies Are Saying)
05/04/16 U.S. Healthcare Corporates Dashboard (Fourth-Quarter 2015) Healthcare &
Pharmaceuticals Group
01/15/16 U.S. Healthcare Corporates Dashboard (Third-Quarter 2015) Healthcare &
12/15/15 For-Profit Hospital Insights (Fitch’s Annual Review of Bad Debt Healthcare &
Accounting Policies and Practices) Pharmaceuticals Group
05/04/16 The Checkup: High-Yield Healthcare Handbook (Comprehensive Analysis Healthcare &
of High-Yield U.S. Healthcare Companies) Pharmaceuticals Group
04/30/15 High-Yield Healthcare Checkup: Comprehensive Analysis of High-Yield Healthcare &
U.S. Healthcare Companies Pharmaceuticals Group
04/20/16 Hospitals’ Credit Diagnosis (Noteworthy Items in Patient Volume Trends) Healthcare &
01/05/16 Hospitals’ Credit Diagnosis (Affordable Care Act (ACA) Growing Pains) Healthcare &
08/31/15 Hospitals’ Credit Diagnosis (Tapering ACA Benefit Belies Decent Healthcare &
Operating Fundamentals) Pharmaceuticals Group
07/07/15 Hospitals’ Credit Diagnosis (Favorable Subsidy Ruling Means the ACA Is Healthcare &
Here to Stay) Pharmaceuticals Group
04/14/15 Hospitals’ Credit Diagnosis (Operating Performance Strength to Persist Healthcare &
in Early 2015) Pharmaceuticals Group

June 6, 2016
Appendix

Date Title Sector
02/23/16 Navigating the U.S. Pharmaceutical Channel Healthcare &
(Innovative Pharmaceutical Manufacturers) Pharmaceuticals Group
12/03/15 2016 Outlook: U.S. Healthcare (Angling for Position in a Healthcare &
Value-Based World) Pharmaceuticals Group
02/03/16 Global Pharmaceutical R&D Pipeline (2015 - Strong Year for Approvals) Healthcare &
12/04/15 Global Pharmaceutical R&D Pipeline (Insights on Approvals) Healthcare &
08/19/15 Global Pharmaceutical R&D Pipeline (Data on Cancer Treatments in Healthcare &
Focus) Pharmaceuticals Group
05/13/15 Global Pharmaceutical R&D Pipeline (Cardiovascular and Hepatitis C) Healthcare &
03/30/16 U.S. Healthcare Recovery Tool (Fourth Quarter 2015) Healthcare &
12/15/15 U.S. Healthcare Recovery Tool (Third Quarter 2015) Healthcare &
09/29/15 U.S. Healthcare Recovery Tool (Second-Quarter 2015) Healthcare &
09/14/15 Hospital Consolidation to Continue; REITs to Fund Healthcare &
08/25/15 U.S. Biosimilars Making Progress Healthcare &
(Competitive Landscape Remains Uncertain) Pharmaceuticals Group
08/13/15 Fitch Wire+: Generic Pharma Ratings Face Pressure From M&A Surge Healthcare &
04/02/15 Fitch Wire+: Global Pharma M&A Risks Healthcare &
12/17/15 What Investors Want to Know: Global Pharma Healthcare &
01/29/16 U.S. Building Materials Dashboard Homebuilding &
Construction
01/29/16 U.S. Building Products Sector Dashboard Homebuilding &
Construction
12/30/15 U.S. Homebuilders Dashboard Homebuilding &
Construction
10/06/15 Measuring Wheel (The U.S. Nonresidential Construction Industry — Homebuilding &
2015–2016) Construction
01/07/16 Under One Roof: U.S. Housing in 2016 Homebuilding &
Construction
12/09/15 2016 Outlook: U.S. Housing and Homebuilders Homebuilding &
(Expect Recovery to Continue) Construction
11/17/15 Building Materials Peer Comparison Homebuilding &
Construction
04/28/16 U.S. Homebuilding, Building, and Home Products and Services Recovery Homebuilding &
Tools (First-Quarter 2016) Construction
02/02/16 U.S. Homebuilding, Building, and Home Products and Homebuilding &
Services Recovery Tools Construction
12/09/15 Hovnanian Enterprises, Inc. Recovery Tool Homebuilding &
Construction
Services Recovery Tools — Amended Construction
Services Recovery Tools (Second-Quarter 2015) Construction
Services Recovery Tools Construction
02/04/16 U.S. Homebuilding/Construction: The Chalk Line (Winter 2015/2016) Homebuilding &
Construction
10/29/15 U.S. Homebuilding/Construction: The Chalk Line (Fall 2015) Homebuilding &
Construction
07/21/15 U.S. Homebuilding/Construction: The Chalk Line Homebuilding &
Construction
04/22/15 U.S. Homebuilding/Construction: The Chalk Line (Spring 2015) Homebuilding &
Construction
01/11/16 The Tale of the “Measuring” Tape (U.S. Home Improvement Industry) Homebuilding &
Construction

June 6, 2016
Appendix

Date Title Sector
03/01/16 U.S. Building Materials Volume and Pricing Trends (Fourth-Quarter 2015) Homebuilding & Construction
12/01/15 U.S. Building Materials Volume and Pricing Trends (Third-Quarter 2015) Homebuilding & Construction
09/01/15 U.S. Building Materials Volume and Pricing Trends — Second Quarter 2015 Homebuilding & Construction
06/26/15 U.S. Building Materials Volume and Pricing Trends (First-Quarter 2015) Homebuilding & Construction
01/26/16 U.S. Diversified Industrials/Capital Goods Dashboard Industrials & Transportation
09/15/15 U.S. Auto Dashboard (Second-Half 2015) Industrials & Transportation
08/20/15 Diversified Industrials/Cap Goods Dashboard Industrials & Transportation
12/01/15 Garda World Security Corporation — Ratings Navigator Industrials & Transportation
01/15/16 U.S. Diversified Industrials and Capital Goods Handbook Industrials & Transportation
11/04/15 Automotive Handbook (Second-Half 2015) Industrials & Transportation
08/21/15 Global Aviation — Coverage Book 2015 Industrials & Transportation
12/10/15 2016 Outlook: Diversified Industrials & Capital Goods Industrials & Transportation
(Deteriorating Business Cycle)
12/10/15 2016 Outlook: Global Aerospace and Defense Industrials & Transportation
(Defense Upturn Could Join Commercial Strength)
12/09/15 2016 Outlook: U.S. Auto Manufacturers and Suppliers Industrials & Transportation
(Slower Near-Term Sales Growth, Long-Term Disruption Risks)
12/08/15 2016 Outlook: North American Airlines Industrials & Transportation
12/03/15 2016 Outlook: Global Automotive Manufacturers Industrials & Transportation
11/27/15 2016 Outlook: European Automotive Manufacturers Industrials & Transportation
11/25/15 Trends in U.S. Autos: The Credit Perspective Industrials & Transportation
09/29/15 Volkswagen Crisis Likely to Affect Entire Auto Sector Industrials & Transportation
04/04/16 European-Based Brewers Results Dashboard 2015 Retail & Consumer Group
10/08/15 Agribusiness Dashboard (October 2015) Retail & Consumer Group
08/25/15 European-Based Brewers Results Dashboard 1H15 Retail & Consumer Group
01/25/16 High-Yield Retail Checkout Retail & Consumer Group
(Comprehensive Analysis of Major High-Yield Retailers)
07/30/15 U.S. Grocery Retailing (Supermarkets Play Defense; Grocery Market Share Retail & Consumer Group
Shifting to Discount and Specialty Formats)
06/29/15 U.S. High-Yield Consumer Handbook (Comprehensive Analysis of High-Yield Retail & Consumer Group
Food, Beverage, Tobacco, Restaurant and Consumer Products Companies)
12/11/15 2016 Outlook: EMEA and US Alcoholic Beverages Retail & Consumer Group
12/11/15 2016 Outlook: U.S. Restaurants (Strong Operating Backdrop; Mixed Credit Retail & Consumer Group
Trends as Loyalty Rests With Shareholders)
12/11/15 2016 Outlook: Latin American Beverage Sector (Weak Regional Environment Retail & Consumer Group
Drives Lackluster Results)
12/11/15 2016 Outlook: U.S. Non-Alcoholic Beverages Retail & Consumer Group
12/04/15 2016 Outlook: Global Tobacco (A Tale of Two Regions) Retail & Consumer Group
12/02/15 2016 Outlook: U.S. Agribusiness Retail & Consumer Group
(Ample Global Supplies Limiting Pricing Volatility)
11/23/15 2016 Outlook: U.S. Retailing (Organic Growth Narrows) Retail & Consumer Group
09/28/15 Global Tobacco Peer Study Retail & Consumer Group
01/29/16 U.S. Retail Recovery Tool (Third-Quarter 2015) Retail & Consumer Group
07/02/15 U.S. Retailing Recovery Tool (First-Quarter 2015) Retail & Consumer Group
04/09/15 P&G Beauty Division Divestment — Retail & Consumer Group
Block Sale to Investment-Grade Peer Unlikely
10/13/15 Media and Entertainment Handbook (Fitch’s Comprehensive Credit Profile Technology, Media & Telecom
Analysis of Issuers, Volume 2)
09/22/15 Credit Encyclo-Media: Fitch’s Comprehensive Analysis of the (Volume VIII, Technology, Media & Telecom
2015–2016)
07/01/15 Fitch’s Telecom & Cable Company Handbook (A Detailed Review of Companies Technology, Media & Telecom
in the U.S. and Canada Telecom and Cable Sector) — Amended
04/01/16 U.S. Leveraged Finance Spotlight Series — Sprint Corporation Technology, Media & Telecom
07/01/15 An Exclusive Preview (Fitch’s 2015 U.S. Movie Exhibitor Industry Report) Technology, Media & Telecom
12/11/15 2016 Outlook: U.S. Technology (Cloud Raining on Legacy Tech) Technology, Media & Telecom
12/11/15 2016 Outlook: North American Telecommunications and Cable Technology, Media & Telecom
06/30/15 U.S. Telecommunications and Cable Recovery Tools (First-Quarter 2015) Technology, Media & Telecom
06/23/15 U.S. Media and Entertainment Recovery Tool (First-Quarter 2015) Technology, Media & Telecom
04/13/15 U.S. Telecommunications and Cable Recovery Tools (Fourth-Quarter 2014) Technology, Media & Telecom
04/10/15 Media and Entertainment Recovery Tool — Fourth-Quarter 2014 Technology, Media & Telecom

June 6, 2016
Appendix
Rating Coverage by Sector

Issuer Name/Obligor Name Sector Rating
BE Aerospace Aerospace & Defense NPR
Bombardier Inc. Aerospace & Defense B
DigitalGlobe Inc. Aerospace & Defense NPR
Ducommun Inc. Aerospace & Defense NPR
Huntington Ingalls Industries, Inc. Aerospace & Defense BB+
LMI Aerospace Inc. Aerospace & Defense NPR
Orbital ATK, Inc. Aerospace & Defense BB+
TransDigm Group Aerospace & Defense B
TransDigm Inc. Aerospace & Defense B
Spirit Aerosystems Holdings Inc. Aerospace & Defense NPR
SRA International Aerospace & Defense NPR
Triumph Group, Inc. Aerospace & Defense NPR
Wesco Aircraft Hardware Corp. Aerospace & Defense NPR
Allison Transmission Holdings, Inc. Auto & Related BB
Allison Transmission, Inc. Auto & Related BB
American Axle & Manufacturing Holdings, Inc. Auto & Related BB–
American Axle & Manufacturing, Inc. Auto & Related BB–
Goodyear Tire & Rubber Company (The) Auto & Related BB
Meritor, Inc. Auto & Related B+
Tenneco, Inc. Auto & Related BB+
Affinia Group Inc. Auto & Related NPR
Chrysler Group LLC Auto & Related NPR
Dana Holdings Corp. Auto & Related NPR
Federal Mogul Corp. Auto & Related NPR
Metaldyne Performance Group Auto & Related NPR
Remy International Inc. Auto & Related NPR
Tower International Inc. Auto & Related NPR
AECOM Technology Building Materials & Construction NPR
Aecon Group Inc. Building Materials & Construction NPR
HD Supply Building Materials & Construction NPR
Headwaters Inc. Building Materials & Construction NPR
McDermott International Inc. Building Materials & Construction NPR
NCI Building Systems Building Materials & Construction NPR
SNC-Lavalin Building Materials & Construction NPR
Summit Materials LLC Building Materials & Construction NPR
Terex Corp. Building Materials & Construction NPR
ADT Corporation Building Materials & Construction BB
Masco Corporation Building Materials & Construction BB+
Trinidad Cement Limited Building Materials & Construction B–
USG Corporation Building Materials & Construction B+
Vulcan Materials Company Building Materials & Construction BB+
Affinion Group Inc. Business Services NPR
ARC Document Solutions Inc. Business Services NPR
Bright Horizons Family Solutions Inc. Business Services NPR
DealerTrack Inc. Business Services NPR
Education Management LLC Business Services NPR
EPIQ Systems Inc. Business Services NPR
FleetCor Technologies Inc. Business Services NPR
Interactive Data Corp. Business Services NPR
Iron Mountain Inc. Business Services NPR
KAR Auction Services Inc. Business Services NPR
Manitowoc Co. Inc. Business Services NPR
Nord Anglia Education Plc Business Services NPR
On Assignment Inc. Business Services NPR
Realogy Corp. Business Services NPR
Rent-A-Center Business Services NPR
Science Applications International Corp. Business Services NPR
Service Corp. Business Services NPR
NPR – Not publicly rated. Note: Ratings as of May 6, 2016. Continued on next page.

June 6, 2016
Appendix
Rating Coverage by Sector (Continued)

ServiceMaster Business Services NPR
StoneMor Partners LP Business Services NPR
Transunion Business Services NPR
WESCO International Inc. Business Services NPR
Ashland Inc. Chemicals NPR
Axiall Chemicals NPR
Celanese Chemicals NPR
Chemours Chemicals NPR
Chemtura Corp. (fka Crompton Corp.) Chemicals NPR
Hi-Crush Partners Chemicals NPR
Huntsman Corp. Chemicals NPR
Kronos International Inc. (Valhi, Inc.Unit) Chemicals BB–
Kronos Worldwide, Inc. Chemicals BB–
Minerals Technologies Chemicals NPR
Momentive Performance Materials Chemicals NPR
Nexeo Solutions LLC Chemicals NPR
OCI Beaumont LLC Chemicals NPR
OMNOVA Solutions Inc. Chemicals NPR
Platform Specialty Chemicals Chemicals NPR
Polymer Group Inc. Chemicals NPR
Tronox Limited Chemicals NPR
Viskase Cos Inc. Chemicals NPR
W.R. Grace Chemicals NPR
ACCO Brands Corporation Consumer Products BB
Avon Products, Inc. Consumer Products B+
Spectrum Brands Canada, Inc. Consumer Products BB–
Spectrum Brands, Inc. Consumer Products BB–
Bauer Performance Sports Ltd. (fka Bauer Hockey Corp.) Consumer Products NPR
Coty Inc. Consumer Products NPR
Jarden Corporation Consumer Products NPR
Libbey Glass Inc. Consumer Products NPR
Mattress Firm Holding Corp. Consumer Products NPR
Revlon Consumer Products Consumer Products NPR
Tempur Sealy International Consumer Products NPR
Visant Corporation (Jostens) Consumer Products NPR
Weight Watchers International Consumer Products NPR
Atlas Energy LP Energy (Oil & Gas) NPR
Breitburn Energy Partners Energy (Oil & Gas) NPR
C&J Energy Energy (Oil & Gas) NPR
Callon Petroleum Co. Energy (Oil & Gas) NPR
Chesapeake Energy Corp. Energy (Oil & Gas) B–
CITGO Holding, Inc. Energy (Oil & Gas) B–
CITGO Petroleum Corp. Energy (Oil & Gas) B
Concho Resources, Inc. Energy (Oil & Gas) NPR
Continental Resources Energy (Oil & Gas) NPR
Crestwood Midstream Partners, LP Energy (Oil & Gas) NPR
DCP Midstream, LLC Energy (Oil & Gas) BB+
Denbury Resources Inc. Energy (Oil & Gas) NPR
Diamond Offshore Drilling Energy (Oil & Gas) NPR
EnCana Energy (Oil & Gas) NPR
Energy Transfer Equity, L.P. Energy (Oil & Gas) BB
Energy XXI Gulf Coast, Inc. Energy (Oil & Gas) C
Energy XXI LTD Energy (Oil & Gas) C
EP Energy LLC Energy (Oil & Gas) NPR
EXCO Resources Energy (Oil & Gas) NPR
GlobalSantaFe Inc. Energy (Oil & Gas) BB
Green Plains Inc. Energy (Oil & Gas) NPR
IFM (US) Colonial Pipeline 2 LLC Energy (Oil & Gas) BB+

June 6, 2016
Appendix

Jones Energy Holdings, LLC Energy (Oil & Gas) B
Kosmos Energy Ltd. Energy (Oil & Gas) B
Linn Energy LLC Energy (Oil & Gas) NPR
Magnum Hunter Resources Corp. Energy (Oil & Gas) NPR
MEG Energy Corporation Energy (Oil & Gas) NPR
Murphy Oil Corporation Energy (Oil & Gas) BB+
Newfield Exploration Company Energy (Oil & Gas) BB+
NGL Energy Partners LP Energy (Oil & Gas) B+
NuStar Logistics, L.P. Energy (Oil & Gas) BB
Ocean Rig Energy (Oil & Gas) NPR
Pacific Drilling SA Energy (Oil & Gas) NPR
Phillips 66 Energy (Oil & Gas) NPR
QEP Resources Energy (Oil & Gas) NPR
Quicksilver Resources Inc. Energy (Oil & Gas) NPR
Range Resources Corporation Energy (Oil & Gas) NPR
Sabine Oil Energy (Oil & Gas) NPR
SandRidge Energy, Inc. Energy (Oil & Gas) NPR
Seacor Holdings, Inc. Energy (Oil & Gas) B
Seadrill Ltd. Energy (Oil & Gas) NPR
Seventy Seven Operating LLC Energy (Oil & Gas) NPR
Southwestern Energy Company Energy (Oil & Gas) B+
Sunoco LP Energy (Oil & Gas) BB
Targa Resources Partners, L.P. Energy (Oil & Gas) NPR
Tesoro Corporation Energy (Oil & Gas) NPR
Transocean, Inc. Energy (Oil & Gas) BB
Unit Corporation Energy (Oil & Gas) B+
Vantage Drilling Energy (Oil & Gas) NPR
Weatherford International Ltd. (Bermuda) Energy (Oil & Gas) BB
Weatherford International, LLC Energy (Oil & Gas) BB
Western Refining Co. LP Energy (Oil & Gas) NPR
Williams Companies, Inc. (The) Energy (Oil & Gas) BB+
Arcos Dorados Holdings Inc. Food, Beverage & Tobacco BB+
Ball Corporation Food, Beverage & Tobacco BB+
CIH International S.a.r.l. Food, Beverage & Tobacco BB+
Constellation Brands, Inc. Food, Beverage & Tobacco BB+
Dean Foods Company Food, Beverage & Tobacco BB–
Dean Holding Company Food, Beverage & Tobacco BB–
JBS USA Lux S.A. Food, Beverage & Tobacco BB+
Alliance One Food, Beverage & Tobacco NPR
ARAMARK Inc. Food, Beverage & Tobacco NPR
Bloomin Brands (OSI) Food, Beverage & Tobacco NPR
Boulder Brands (fka Smart Balance) Food, Beverage & Tobacco NPR
Darling Ingredients Food, Beverage & Tobacco NPR
Denny's Food, Beverage & Tobacco NPR
Keurig Green Mountain Food, Beverage & Tobacco NPR
NPC International, Inc. Food, Beverage & Tobacco NPR
Pinnacle Foods Finance LLC Food, Beverage & Tobacco NPR
Post Holdings Food, Beverage & Tobacco NPR
Prestige Brands Food, Beverage & Tobacco NPR
Restaurant Brands International Food, Beverage & Tobacco NPR
Wendy's International Inc. Food, Beverage & Tobacco NPR
888 Holdings Gaming, Lodging & Leisure NPR
Affinity Gaming LLC Gaming, Lodging & Leisure NPR
Agua Caliente Band of Cahuilla Indians Gaming, Lodging & Leisure BB
Amaya Holdings Gaming, Lodging & Leisure NPR
American Casino & Entertainment Properties LLC Gaming, Lodging & Leisure NPR
Boyd Gaming Corporation Gaming, Lodging & Leisure B
Caesars Entertainment Corporation Gaming, Lodging & Leisure CC

June 6, 2016
Appendix

Caesars Entertainment Resort Properties, LLC Gaming, Lodging & Leisure B–
Caesars Growth Properties Holdings, LLC Gaming, Lodging & Leisure B–
Carnival Corp. Gaming, Lodging & Leisure NPR
ClubCorp Gaming, Lodging & Leisure NPR
Corner Investment PropCo, LLC Gaming, Lodging & Leisure B–
Diamond Resorts Gaming, Lodging & Leisure NPR
Eldorado Resorts Inc. Gaming, Lodging & Leisure NPR
Extended Stay America Inc. Gaming, Lodging & Leisure NPR
FelCor Lodging Trust Gaming, Lodging & Leisure NPR
Georgia Worldwide Gaming, Lodging & Leisure NPR
Hersha Hospitality Gaming, Lodging & Leisure NPR
Hilton Worldwide, Inc. Gaming, Lodging & Leisure NPR
Hospitality Properties Trust Gaming, Lodging & Leisure NPR
Hyatt Hotels Corp. Gaming, Lodging & Leisure NPR
Intrawest Corp. Gaming, Lodging & Leisure NPR
Isle of Capri Casinos Gaming, Lodging & Leisure NPR
La Quinta Holdings Inc. Gaming, Lodging & Leisure NPR
Marina District Finance Company, Inc. Gaming, Lodging & Leisure B
Marriott Vacations Worldwide Corporation Gaming, Lodging & Leisure NPR
MGM Resorts International Gaming, Lodging & Leisure B+
Mohegan Tribal Gaming Authority Gaming, Lodging & Leisure NPR
Orbitz Worldwide, Inc. Gaming, Lodging & Leisure NPR
Peninsula Gaming, LLC Gaming, Lodging & Leisure B
Penn National Gaming Inc. Gaming, Lodging & Leisure NPR
Pinnacle Entertainment, Inc. Gaming, Lodging & Leisure B+
Priceline Gaming, Lodging & Leisure NPR
Quechan Indian Tribe Gaming, Lodging & Leisure B–
Regal Entertainment Group Gaming, Lodging & Leisure B+
Royal Caribbean Cruises Ltd. Gaming, Lodging & Leisure NPR
Sabre Inc. Gaming, Lodging & Leisure NPR
Scientific Games Corp. Gaming, Lodging & Leisure NPR
Six Flags Theme Parks Premier Parks Gaming, Lodging & Leisure NPR
Station Casinos Gaming, Lodging & Leisure NPR
Travelport Gaming, Lodging & Leisure NPR
Tropicana Entertainment Gaming, Lodging & Leisure NPR
Wynn America, LLC Gaming, Lodging & Leisure BB
Wynn Las Vegas LLC Gaming, Lodging & Leisure BB
Wynn Macau, Limited Gaming, Lodging & Leisure BB
Wynn Resorts, Limited Gaming, Lodging & Leisure BB
CHS/Community Health Systems, Inc. Healthcare B+
Community Health Systems, Inc. Healthcare B+
HCA Holdings, Inc. Healthcare BB
HCA Inc. Healthcare BB
LifePoint Health, Inc. Healthcare BB
Tenet Healthcare Corp. Healthcare B
Universal Health Services, Inc. Healthcare BB+
21st Century Oncology Healthcare NPR
Alere Medical Healthcare NPR
Alkermes, Inc. Healthcare NPR
Alliance Healthcare Healthcare NPR
Amsurg Healthcare NPR
Biomet Healthcare NPR
BioScrip Inc Healthcare NPR
Catalent Pharma Solutions Inc. Healthcare NPR
Catamaran Corp. Healthcare NPR
Concordia Healthcare Healthcare NPR
DaVita Inc. Healthcare NPR
DJO Finance LLC Healthcare NPR

June 6, 2016
Appendix

Emdeon Inc. Healthcare NPR
Endo Pharmaceutical Healthcare NPR
Envision Healthcare Corporation Healthcare NPR
Grifols/Talcris Healthcare NPR
Halyard Health Inc. Healthcare NPR
HealthSouth Corp. Healthcare NPR
Hill-Rom Holdings Inc. Healthcare NPR
Hologic Inc. Healthcare NPR
Horizon Pharma Healthcare NPR
IASIS Health Healthcare NPR
Immucor Inc. Healthcare NPR
IMS Health Inc. Healthcare NPR
Indivior Healthcare NPR
Jazz Pharmaceuticals Plc Healthcare NPR
Kindred Healthcare Healthcare NPR
Kinetic Concepts Healthcare NPR
Lantheus Medical Imaging Inc. Healthcare NPR
Mallinckrodt Plc Healthcare NPR
MedAssets Healthcare NPR
Merge Healthcare NPR
Mylan Pharmaceuticals Inc. Healthcare NPR
Omnicare Inc. Healthcare NPR
Par Pharmaceutical Companies, Inc. Healthcare NPR
Quintiles Transnational Healthcare NPR
RadNet Inc. Healthcare NPR
Select Medical Holdings Corp. Healthcare NPR
Surgical Care Affiliates Healthcare NPR
Team Health Inc. Healthcare NPR
Truven Health Analytics (Ex-Wolverine Healthcare) Healthcare NPR
United Surgical Partners International Inc. Healthcare NPR
Valeant Pharmaceuticals Healthcare NPR
VWR Funding Inc. Healthcare NPR
Allegion US Holding Company Inc. Homebuilding NPR
Armstrong World Industries Inc. Homebuilding NPR
Continental Building Products Homebuilding NPR
Interline Brands Homebuilding NPR
Monitronics International Inc. Homebuilding NPR
Nortek, Inc. Homebuilding NPR
Ply Gem Industries Homebuilding NPR
William Lyon Homes Homebuilding NPR
Beazer Homes USA, Inc. Homebuilding B–
CalAtlantic Group, Inc. Homebuilding BB–
D. R. Horton, Inc. Homebuilding BB+
Hovnanian Enterprises, Inc. Homebuilding CCC
KB Home (formerly Kaufman and Broad Home Corp.) Homebuilding B+
Lennar Corporation Homebuilding BB+
M/I Homes, Inc. Homebuilding B+
Meritage Homes Corporation Homebuilding BB–
Navistar International Corporation Industrial & Manufacturing CCC
Navistar, Inc. Industrial & Manufacturing CCC
Belden Inc. Industrial & Manufacturing NPR
Chicago Bridge & Iron Company N.V. Industrial & Manufacturing NPR
CNH Industrial Industrial & Manufacturing NPR
Colfax Corp. Industrial & Manufacturing NPR
Generac Power Systems Inc. Industrial & Manufacturing NPR
Granite Construction, Inc. Industrial & Manufacturing NPR
Harsco Corporation Industrial & Manufacturing BB
Oshkosh Corporation Industrial & Manufacturing NPR

June 6, 2016
Appendix

Paccar Industrial & Manufacturing NPR
PGT Inc. Industrial & Manufacturing NPR
SPX Corporation Industrial & Manufacturing BB+
Wireco Worldgroup Inc. Industrial & Manufacturing NPR
Argan Inc. Industrial & Manufacturing NPR
Rexnord Industrial & Manufacturing NPR
Wabash National Corp. Industrial & Manufacturing NPR
Activision Blizzard Inc. Media & Entertainment NPR
AMC Entertainment Inc. Media & Entertainment B+
AMC Networks Media & Entertainment NPR
Cedar Fair LP Media & Entertainment NPR
Cengage Learning Media & Entertainment NPR
Cenveo Corporation Media & Entertainment NPR
Cinemark Media & Entertainment NPR
Clear Channel Worldwide Holdings Inc. Media & Entertainment B
Commscope Inc. Media & Entertainment NPR
Cumulus Media Inc. Media & Entertainment NPR
DreamWorks Animation SKG, Inc. Media & Entertainment B+
Dreamworks Entertainment Media & Entertainment NPR
E.W. Scripps Media & Entertainment NPR
EMMIS Communications Media & Entertainment NPR
Entercom Communications Media & Entertainment NPR
First Data Corp. Media & Entertainment B
Gannett Co. Inc. Media & Entertainment NPR
Gray Television Media & Entertainment NPR
Hemisphere Media Holdings Media & Entertainment NPR
HMH Publishers LLC Media & Entertainment B+
Houghton Mifflin Harcourt Publishers, Inc. Media & Entertainment B+
Houghton Mifflin Harcourt Publishing Company Media & Entertainment B+
iHeartCommunications, Inc. Media & Entertainment CCC
Lamar Media Media & Entertainment NPR
Lions Gate Entertainment Corp. Media & Entertainment NPR
Live Nation Worldwide Inc. Media & Entertainment NPR
Mastercard Incorporated Media & Entertainment NPR
McGraw-Hill Global Education Finance, Inc. Media & Entertainment B+
McGraw-Hill Global Education Holding, LLC Media & Entertainment B+
McGraw-Hill School Education Holdings, LLC Media & Entertainment B
Media General, Inc. Media & Entertainment NPR
MHGE Parent Finance, Inc. Media & Entertainment B+
MHGE Parent, LLC Media & Entertainment B+
National Cinemedia Inc. Media & Entertainment NPR
Nexstar Broadcasting Media & Entertainment NPR
Nielsen Media & Entertainment NPR
OUTFRONT Media Media & Entertainment NPR
Quad/Graphics Inc. Media & Entertainment NPR
R.R. Donnelley & Sons Media & Entertainment NPR
Radio One Inc. Media & Entertainment NPR
Regal Cinemas Corporation Media & Entertainment B+
Salem Communications Corp. Media & Entertainment NPR
SeaWorld Parks & Entertainment Inc. Media & Entertainment NPR
Sinclair Broadcast Group Media & Entertainment NPR
Sirius XM Radio Inc. Media & Entertainment NPR
Time Inc. Media & Entertainment NPR
Townsquare Media Media & Entertainment NPR
Tribune Co. Media & Entertainment NPR
Univision Communications, Inc. Media & Entertainment B
Warner Music Group (WMG) Media & Entertainment NPR
AmeriGas Finance Corp. Natural Gas & Propane BB

June 6, 2016
Appendix

AmeriGas Partners, L.P. Natural Gas & Propane BB
AK Steel Natural Resources NPR
Alpha Natural Resources Natural Resources NPR
Appvion (ex-Appleton Papers Inc.) Natural Resources NPR
CONSOL Energy Inc. Natural Resources NPR
Noranda Aluminum Natural Resources NPR
Novelis Inc. Natural Resources NPR
Steel Dynamics Inc. Natural Resources NPR
Walter Energy Natural Resources NPR
Westmoreland Coal Co. Natural Resources NPR
Xerium Natural Resources NPR
Alcoa Inc. Natural Resources BB+
Arch Coal, Inc. Natural Resources D
First Quantum Minerals Ltd. Natural Resources B
Peabody Energy (Formerly P&L Coal Holding Corp.) Natural Resources C
Teck Resources Ltd. Natural Resources B+
United States Steel Corporation (U.S. Steel Corp.) Natural Resources B+
Uranium One Inc. Natural Resources BB–
Berry Plastics Packaging & Containers NPR
BWAY Corporation Packaging & Containers NPR
Crown Holdings Packaging & Containers NPR
Owens-Illinois Packaging & Containers NPR
Reynolds Group Holdings Inc. Packaging & Containers NPR
Rock-Tenn Co. Packaging & Containers NPR
Sealed Air Corp. Packaging & Containers NPR
Caparra Hills, LLC Property/Real Estate B+
Corrections Corporation of America Property/Real Estate BB+
Forest City Enterprises, Inc. Property/Real Estate BB–
Forest City Realty Trust, Inc. Property/Real Estate BB–
Mack-Cali Realty Corporation Property/Real Estate BB+
Mack-Cali Realty, L.P. Property/Real Estate BB+
Sabra Health Care Limited Partnership Property/Real Estate BB+
Sabra Health Care REIT, Inc. Property/Real Estate BB+
American Capital Mortgage Investment Corp. Property/Real Estate NPR
Bimini Capital Management Inc. Property/Real Estate NPR
99 Cents Only Stores Retailing NPR
Bon-Ton Stores Retailing NPR
Burlington Coat Factory Retailing NPR
Cabela’s Retailing NPR
Claire’s Stores Retailing NPR
Dollar Tree, Inc. Retailing NPR
Empire Company Limited Retailing NPR
GNC Holdings Retailing NPR
Gymboree Corp. Retailing NPR
Hanesbrands Inc. Retailing NPR
J. Crew Group, Inc. Retailing NPR
Kate Spade & Co. Retailing NPR
Lands’ End Retailing NPR
Men's Wearhouse Retailing NPR
Michaels Stores Inc. Retailing NPR
NBTY, Inc. Retailing NPR
Neiman Marcus Retailing NPR
Party City Holdings Retailing NPR
Pep Boys (Manny Moe & Jack) Retailing NPR
Pier 1 Imports Retailing NPR
PVH Corp. Retailing NPR
Roundy’s Retailing NPR
Sally Beauty Holdings Inc. Retailing NPR

June 6, 2016
Appendix

Smart and Final Stores Inc. Retailing NPR
Sprouts Farmers Market Retailing NPR
The Pantry Retailing NPR
Vince Holdings Corp. Retailing NPR
J. C. Penney Company, Inc. Retailing B
J.C. Penney Corporation, Inc. Retailing B
Kmart Corp. Retailing CC
Kmart Holding Corp. Retailing CC
L Brands, Inc. Retailing BB+
Levi Strauss & Co. Retailing BB
Liberty Interactive LLC Retailing BB
QVC, Inc. Retailing BB
Rite Aid Corporation Retailing B
Sears Holdings Corporation Retailing CC
Sears Roebuck Acceptance Corp. Retailing CC
Sears, Roebuck and Co. Retailing CC
SuperValu Inc. Retailing B
Toys ‘R’ Us — Delaware, Inc. Retailing CCC
Toys ‘R’ Us Property Co. I, LLC. Retailing CCC
Toys ‘R’ Us Property Co. II, LLC Retailing CCC
Toys ‘R’ Us, Inc. Retailing CCC
Aeroflex Incorporated Technology NPR
Alliance Data Systems Corp. Technology NPR
Amkor Technology Inc. Technology NPR
Ancestry.com Technology NPR
Anixter Inc. Technology BB+
Anixter International Inc. Technology BB+
API Technologies Inc. Technology NPR
Aspect Software Group Holdings Technology NPR
Avaya, Inc. Technology NPR
AVG Technologies Technology NPR
Booz Allen & Hamilton Inc. Technology NPR
CDW Corporation Technology NPR
Dell Inc. Technology BB
Dell International LLC Technology BB
Endurance International Group Holdings Technology NPR
Entegris Inc. Technology NPR
Epicor Software Corporation Technology NPR
Equinix, Inc. Technology BB
EVERTEC Inc. Technology NPR
Genpact International Inc. Technology NPR
Infor Global Solutions Technology NPR
Informatica Technology NPR
Internap Network Services Corp. Technology NPR
Lattice Semiconductor Technology NPR
Micro Focus Technology NPR
Microsemi Technology NPR
MoneyGram International Technology NPR
NXP B.V. Technology NPR
Omnivision Technologies Technology NPR
Rovi Corp. Technology NPR
Sensata Technologies Holdings N.V. Technology NPR
SITEL Worldwide Corp. Technology NPR
SS&C Technologies Inc. Technology NPR
SunEdison Semiconductor Ltd Technology NPR
SunGard Data Systems, Inc. Technology NPR
Verifone Systems Inc. Technology NPR
Verint Systems Inc. Technology NPR

June 6, 2016
Appendix

Visa Inc. Technology NPR
Western Digital Technology NPR
Western Digital Corp. Technology BB+
Zebra Technologies Corp. Technology NPR
Alaska Communications Systems Telecom & Cable NPR
Arris Group Inc. Telecom & Cable NPR
Cequel Communications LLC Telecom & Cable NPR
Cincinnati Bell Telecom & Cable NPR
Consolidated Communications Telecom & Cable NPR
General Communication Inc. Telecom & Cable NPR
Hawaiian Telcom Holdco Inc. Telecom & Cable NPR
Intelsat Jackson Telecom & Cable NPR
Liberty Cablevision of Puerto Rico LLC Telecom & Cable NPR
Mitel Networks Corp. Telecom & Cable NPR
nTelos Inc. Telecom & Cable NPR
Nuance Communications Inc. Telecom & Cable NPR
Open Text Corp. Telecom & Cable NPR
SBA Communications Telecom & Cable NPR
Syniverse Technologies, Inc. Telecom & Cable NPR
Telesat Canada Telecom & Cable NPR
T-Mobile Telecom & Cable NPR
West Corp. Telecom & Cable NPR
Wide Open West Finance, LLC Telecom & Cable NPR
Zayo Group Telecom & Cable NPR
Cablevision Systems Corporation Telecom & Cable BB–
CCO Holdings, LLC Telecom & Cable BB–
CenturyLink, Inc. Telecom & Cable BB+
Charter Communications Operating, LLC Telecom & Cable BB–
Clearwire Communications LLC Telecom & Cable B+
Cogeco Cable Inc. Telecom & Cable BB+
Comcel Trust Telecom & Cable BB+
Communications Sales & Leasing, Inc. Telecom & Cable BB–
CSC Holdings, LLC (Cablevision-U.S.) Telecom & Cable BB–
CSL Capital, LLC Telecom & Cable BB–
Digicel Group Limited Telecom & Cable B
Digicel International Finance Limited (DIFL) Telecom & Cable B
Digicel Limited Telecom & Cable B
DISH DBS Corporation Telecom & Cable BB–
DISH Network Corp. Telecom & Cable BB–
Embarq Corporation Telecom & Cable BB+
Embarq Florida, Inc. Telecom & Cable BB+
Frontier Communications Corporation Telecom & Cable BB
Frontier North Telecom & Cable BB
Frontier West Virginia Telecom & Cable BB
Level 3 Communications, Inc. Telecom & Cable BB–
Level 3 Financing, Inc. Telecom & Cable BB–
Qwest Communications International Inc. Telecom & Cable BB+
Qwest Corporation Telecom & Cable BB+
Qwest Services Corporation Telecom & Cable BB+
Sprint Communications, Inc. Telecom & Cable B+
Sprint Corporation Telecom & Cable B+
Telephone and Data Systems, Inc. Telecom & Cable BB+
United States Cellular Corp. Telecom & Cable BB+
Windstream Holdings of the Midwest, Inc. Telecom & Cable BB–
Windstream Services, LLC Telecom & Cable BB–
ADS Waste Holdings Transportation NPR
Air Canada Transportation B+
American Airlines Group, Inc. Transportation BB–

June 6, 2016
Appendix

American Airlines, Inc. Transportation BB–
Atlantic Aviation FBO Inc. Transportation NPR
Delta Air Lines Transportation BB+
Garda World Security Corporation Transportation B+
Grupo TACA Holdings Limited Transportation B
Hawaiian Airlines Transportation B
Hawaiian Holdings, Inc. Transportation B
JetBlue Airways Corporation Transportation BB–
Navios Maritime Holdings Transportation NPR
Quality Distribution Inc. Transportation NPR
Rand Logistics Inc. Transportation NPR
Spirit Airlines, Inc. Transportation BB+
Swift Transportation Co. Transportation NPR
Union Pacific Transportation NPR
United Airlines, Inc. Transportation BB–
United Continental Holdings, Inc. Transportation BB–
XPO Logistics, Inc. Transportation NPR
YRC Worldwide Inc. Transportation NPR
Calpine Construction Finance Company, L.P. Utilities, Power & Gas B+
Calpine Corporation Utilities, Power & Gas B+
Canadian Solar Inc. Utilities, Power & Gas BB
ContourGlobal L.P. Utilities, Power & Gas B+
Dayton Power & Light Company Utilities, Power & Gas BB+
DPL Inc. Utilities, Power & Gas B+
FirstEnergy Corp. Utilities, Power & Gas BB+
IPALCO Enterprises, Inc. Utilities, Power & Gas BB+
Mountaineer Gas Company Utilities, Power & Gas BB+
The AES Corporation Utilities, Power & Gas BB–
Ameresco Utilities, Power & Gas NPR
Atlantic Power Corp. Utilities, Power & Gas NPR
Brookfield Renewable Energy Partners L.P. Utilities, Power & Gas NPR
CLECO Corporation Utilities, Power & Gas NPR
Dynegy Inc. Utilities, Power & Gas NPR
Idaho Power Utilities, Power & Gas NPR
ITC Holdings Corp. Utilities, Power & Gas NPR
NRG Energy Inc. Utilities, Power & Gas NPR
Puget Energy Inc. Utilities, Power & Gas NPR
TerraForm Power Utilities, Power & Gas NPR
Viridian Group Investments Limited Utilities, Power & Gas B+
NPR – Not publicly rated. Note: Ratings as of May 6, 2016.

June 6, 2016
Appendix
U.S. Leveraged Finance Contact List

Fitch Analyst Title Market Sector Coverage Phone Email
Richard Hunter Global Head of Corporates Corporate Finance +1 44 203 530-1102 richard.hunter@fitchratings.com
Michael Simonton U.S. Regional Group Head Corporate Finance +1 312 368-3138 mike.simonton@fitchratings.com
Michael Weaver U.S. Deputy
Regional Group Head Corporate Finance +1 312 368-3156 michael.weaver@fitchratings.com
John Hatton Global Group Credit Officer Corporate Finance +1 44 203 530-1061 john.hatton@fitchratings.com
Rolando Larrondo Group Credit Officer U.S.
and Canada Corporate Finance +1 212 908-9189 rolando.larrondo@fitchratings.com
Leveraged Finance Group

Michael Paladino Managing Director/Team Head Gaming, Lodging & Leisure/
Homebuilding/REITs/Leveraged Finance +1 212 908-9113 michael.paladino@fitchratings.com
Sharon Bonelli Senior Director Leveraged Finance +1 212 908-0581 sharon.bonelli@fitchratings.com
Eric Rosenthal Senior Director Leveraged Finance +1 212 908-0286 eric.rosenthal@fitchratings.com
Ronald Nirenberg Director Gaming, Lodging & Leisure/
Homebuilding/REITs/Leveraged Finance +1 212 612-7747 ronald.nirenberg@fitchratings.com
Hugo Sancen Associate Director Leveraged Finance +1 312 368-2096 hugo.sancen@fitchratings.com
Real Estate & Leisure Group

Michael Paladino Managing Director/Team Head Gaming, Lodging & Leisure/
Homebuilding/REITs/Leveraged Finance +1 212 908-9113 michael.paladino@fitchratings.com
Alex Bumazhny Senior Director Gaming, Lodging & Leisure +1 212 908-9179 alex.bumazhny@fitchratings.com
Stephen Boyd Senior Director Gaming, Lodging & Leisure/REITs +1 212 908-9153 stephen.boyd@fitchratings.com
Colin Mansfield Associate Director Gaming, Lodging & Leisure +1 212 908-0899 colin.mansfield@fitchratings.com
Steven Marks Managing Director/Sector Head REITs +1 212 908-9161 steven.marks@fitchratings.com

Stephen Boyd Senior Director REITs/Gaming, Lodging & Leisure +1 212 908-9153 stephen.boyd@fitchratings.com
Britton Costa Director REITs +1 212 908-0524 britton.costa@fitchratings.com
Daniel Kornblau Associate Director REITs +1 646 582-4946 daniel.kornblau@fitchratings.com
Bob Curran Managing Director/Sector Head Homebuilding/Building & Home Products & Services +1 212 908-0515 robert.curran@fitchratings.com
Robert Rulla Director Homebuilding/Building & Home Products & Services +1 312 606-2311 robert.rulla@fitchratings.com
Monica Delarosa Associate Director Homebuilding/Building & Home Products & Services +1 212 908-0525 monica.delarosa@fitchratings.com
Retail & Consumer Group

Monica Aggarwal Managing Director/Team Head Retail/Consumer Products/
Food, Beverage Restaurants & Agri Business +1 212 908-0282 monica.aggarwal@fitchratings.com
Carla Norfleet Taylor Senior Director Restaurants/Grocery +1 312 368-3195 carla.norfleettaylor@fitchratings.com
Bill Densmore Senior Director Beverage/Agri Business/ P&P/Telecom & Cable +1 312 368-3125 bill.densmore@fitchratings.com
David Silverman Senior Director Retail/Consumer Products +1 212 908-0840 david.silverman@fitchratings.com
Healthcare & Pharma Group

Megan Neuburger Managing Director/Team Head Healthcare, Pharma & Tobacco +1 212 908-0501 megan.neuburger@fitchratings.com
Robert Kirby Director Healthcare/Pharmaceticals +1 312 368-3147 robert.kirby@fitchratings.com
Jacob Bostwick Director Healthcare +1 312 368-3169 jacob.bostwick@fitchratings.com
Gregory Dickerson Director Healthcare/Tobacco +1 212 908-0220 gregory.dickerson@fitchratings.com
Caitlin Blalock Associate Director Healthcare/Tobacco +1 312 368-3154 caitlin.blalock@fitchratings.com
Industrials & Transportation Group

Craig Fraser Managing Director/Team Head Autos/A&D/Diversified Manufacturing/
Transportation/EETCs +1 212 908-0310 craig.fraser@fitchratings.com
Stephen Brown Senior Director Autos/Transportation +1 312 368-3139 stephen.brown@fitchratings.com
Eric Ause Senior Director A&D/Diversified Manufacturing +1 312 606-2302 eric.ause@fitchratings.com
Jason Pompeii Senior Director Technology/Diversified Manufacturing +1 312 368-3210 jason.pompeii@fitchratings.com
Philip Zahn Senior Director Diversified Manufacturing +1 312 606-2336 philip.zahn@fitchratings.com
David Petu Director A&D/Diversified Manufacturing/EETCs +1 212 908-0280 david.petu@fitchratings.com
Joseph Rohlena Director Airlines/Transportation/EETCs +1 312 368-3112 joseph.rohlena@fitchratings.com
Akin Adekoya Director Autos/A&D/Diversified Manufacturing/Transportation +1 212 908-0312 akin.adekoya@fitchratings.com
Nicholas Varone Associate Director A&D/Diversified Manufacturing/EETCs +1 212 908-0349 nicholas.varone@ftichratings.com

June 6, 2016
Appendix
U.S. Leveraged Finance Contact List (Continued)

Fitch Analyst Title Market Sector Coverage Phone Email
Utilities & Natural Resources Group
Shalini Mahajan Managing Director/Team Head Utilities, Power & Gas/
Energy (Oil & Gas)/MLPs/Bsc Mtrls/ Ntrl Rscrs +1 212 908-0351 shalini.mahajan@fitchratings.com
Robert Hornick Senior Director Utilities, Power & Gas +1 212 908-0523 robert.hornick@fitchratings.com
Philip Smyth Senior Director Utilities, Power & Gas +1 212 908-0531 philip.smyth@fitchratings.com
Philippe Beard Director Utilities, Power & Gas +1 212 908-0242 philippe.beard@fitchratings.com
Julie Jiang Director Utilities, Power & Gas +1 212 908-0708 julie.jiang@fitchratings.com
Maude Tremblay Director Utilities, Power & Gas +1 312 368-3203 maude.tremblay@fitchratings.com
Kevin Beicke Director Utilities, Power & Gas +1 212 908-0618 kevin.beicke@fitchratings.com
Daniel Neama Associate Director Utilities, Power & Gas +1 212 908-0561 daniel.neama@fitchratings.com
Mark Sadeghian Senior Director/Sector Head Energy (Oil & Gas)/Basic Material/
Natural Resources +1 312 368-2090 mark.sadeghian@fitchratings.com
Monica Bonar Senior Director Basic Materials/Natural Resources +1 212 908-0579 monica.bonar@fitchratings.com
Joan Okogun Senior Director Energy (Oil & Gas)/Basic Materials +1 212 908-0384 joan.okogun@fitchratings.com
Dino Kritikos Director Energy (Oil & Gas) +1 312 368-3150 dino.kritikos@fitchratings.com
Gregory Fodell Associate Director Basic Materials/Energy (Oil & Gas) +1 312 368-3117 gregory.fodell@fitchratings.com
Brad Bell Associate Director Basic Materials/Energy (Oil & Gas) +1 312 368-3149 brad.bell@fitchratings.com
David Cameli Associate Director Basic Materials/Natural Resources +1 312 368-3160 david.cameli@fitchratings.com
Colin Cordes Associate Director Energy (Oil & Gas)/Gas, Midstream & MLPs +1 312 368-3120 colin.cordes@fitchratings.com
Peter Molica Senior Director/Sector Head Gas, Midstream & MLPs +1 212 908-0288 peter.molica@fitchratings.com
Kathleen Connelly Director Gas, Midstream & MLPs +1 212 908-0290 kathleen.connelly@fitchratings.com
Colin Cordes Associate Director Energy (Oil & Gas)/Gas, Midstream & MLPs +1 312 368-3120 colin.cordes@fitchratings.com
Technology, Media & Telecom

Dave Peterson Senior Director/Team Head Technology/Telecom & Cable/Media & Entertainment +1 312 368-3177 david.peterson@fitchratings.com
Jason Pompeii Senior Director Technology/Diversified Manufacturing +1 312 368-3210 jason.pompeii@fitchratings.com
John Culver Senior Director Telecom & Cable +1 312 368-3216 john.culver@fitchratings.com
Bill Densmore Senior Director Beverage/Telecom & Cable +1 312 368-3125 bill.densmore@fitchratings.com
Jack Kranefuss Senior Director Media & Entertainment +1 212 908-0791 jack.kranefuss@fitchratings.com
Matthew Hankin Director Technology/Telecom & Cable/Media & Entertainment +1 646 582-4985 matthew.hankin@fitchratings.com
Constance McKay Associate Director Telecom & Cable +1 312 368-3148 constance.mckay@fitchratings.com
Rachel Shanker Associate Director Media & Entertainment +1 212 908-0649 rachel.shanker@fitchratings.com
Zack Schroeder Associate Director Technology/Telecom & Cable/Media & Entertainment +1 312 368-2056 zack.schroeder@fitchratings.com
Dustin DeMaria Associate Director Technology +1 312 368-2071 dustin.demaria@fitchratings.com

June 6, 2016
Appendix
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The Annual Manual

U.S. Leveraged Finance Primer

Mike Simonton, CFA Michael Paladino, CFA

The Annual Manual (U.S. Leveraged Finance Primer)

U.S. Leveraged Finance

Sharon Bonelli Eric Rosenthal Ronald Nirenberg

Hugo Sancen Caitlin Blalock

U.S. Structured Credit

Fund and Asset Manager Ratings

Business and Relationship Management

The Annual Manual (U.S. Leveraged Finance Primer)

Continued on next page.

The Annual Manual (U.S. Leveraged Finance Primer)

Continued on next page.

The Annual Manual (U.S. Leveraged Finance Primer)

Continued on next page.

The Annual Manual (U.S. Leveraged Finance Primer)

Continued on next page.

The Annual Manual (U.S. Leveraged Finance Primer)

Continued on next page.

The Annual Manual (U.S. Leveraged Finance Primer)

Continued on next page.

The Annual Manual (U.S. Leveraged Finance Primer)

High-Yield Bond Data

Continued on next page.

The Annual Manual (U.S. Leveraged Finance Primer)

The Annual Manual (U.S. Leveraged Finance Primer)

Currently the three cycles are sending mixed signals:

PIK Issuance IPOs

Convertible Bond Issuance

Expansion Recession Recovery

The Annual Manual (U.S. Leveraged Finance Primer) — The Cycles 1

The Annual Manual (U.S. Leveraged Finance Primer) — The Cycles 2

Leveraged Finance Market Statistical Comparison

Transaction Multiples (x)

High-Yield Bond Market Statistics

Leveraged Loan Market Statistics

Structured Credit Market Statistics

The Annual Manual (U.S. Leveraged Finance Primer) — The Cycles 3

Leveraged Loan Basics 4

Private Equity and LBO Market 16

Second Lien Loans 24

Continued on next page.

The Annual Manual (U.S. Leveraged Finance Primer)

Leveraged Loan Data 51

The Annual Manual (U.S. Leveraged Finance Primer)

[Credit 101] What Is the U.S. Leveraged Loan Market?

Defining the Markets

Defining the Loan Markets

The Annual Manual (U.S. Leveraged Finance Primer) — Leveraged Loans 4

Leveraged Loan Market History

($ Bil., Institutional Leveraged Loan Market Size)

500 KKR Purchases TXU,

Loan Retail Funds — Assets Under Annual CLO Issuance Reached

The Annual Manual (U.S. Leveraged Finance Primer) — Leveraged Loans 5

Institutional Leveraged Loan Market Profile — 2015

[Credit 101] What Are the Key Characteristics of Leveraged Loans?

Leveraged Capital Structure — Seniority

Second-Lien Loan or Secured Bond

Senior Unsecured Bonds

Senior Subordinated Bonds

Subordinated Junior Bonds

Hybrid Equity/Convertible Bonds