Coronavirus Impact on US Leveraged Loan & High Yield Bond Markets

An Acuris Company

March 18 2020 Coronavirus impact on US leveraged loan & high yield bond markets

Colm (CJ) Doherty Global Head of Primary Market Analysis +1 212 390 7838 [email protected]

Vincent Daigger Senior Market Analyst +1 212 574 7876 [email protected] An Acuris Company

Key statistics:

Leveraged loans: • Leveraged loan prices are down nearly 12 points to 84.41. • Loan prices are now much more heavily concentrated in the sub-90 category, which accounts for 70% of the market, up from 11% on February 21. • The sub-80 share is at 16%, up from 5.5%. • Looking at the magnitude of prices declines, 64% of loans have dropped by more than 10 points, with 6% posting a severe decline of 20 points or more. • The oil & gas and entertainment & leisure sectors have been hit hardest in the recent downturn. The oil & gas average bid has fallen to 56.86 from 81.74, while entertainment & leisure is down to 78.92 from 99.23. • The share of oil & gas and entertainment & leisure loans bid at 90 cents on the dollar or lower exceeds 90%, while the par-plus share of the market has fallen to 0% in both sectors from 13% for oil & gas and 51% for entertainment & leisure loans • The biggest decliners are loans for California Resources (now bid at 12.4, down from 62), Donnelley Financial Solutions (bid at 17 from 67.1), VIP Cinema (bid at 16.67 from 54) and Save A Lot (bid at 7 from 19.58). (For a more extensive list, see page 13). • Loan retail funds have posted outflows of USD 4.36bn in the last two weeks ending March 11.

High yield bonds: • High yield bond prices are down 15 points on average since February 21. • HY bond index yields have widened sharply to 9.17% from 5.02% in the same time period. • High yield bond funds have posted outflows of USD 10.07bn in the last two weeks ending March 11. • The biggest decliners since January 31 are bonds for Windstream Services, EP Energy, Bruin EP Partners and Chesapeake Energy Corp. (For a more extensive list, see pages 14-16).

2 An Acuris Company

Volatility continues to shake leveraged loan and HY bond markets 100

-50

-100

-150

-200 Leveraged Loans

HY Bonds -250 Daily change in secondary market average average (bps) market pricesecondary in change Daily -300

-350

-400

Source: Debtwire Par, Markit, ICE BofA 3 An Acuris Company

Secondary loan market prices plummet nearly 12 points

80%

70%

60%

94 Weighted Avg. Bid Share of loans bid >=100 50%

92 40%

90 30% Weighted Avg. bid (% of par) of (% bid Avg. Weighted 88 ofShare loans >=100 bid (%) 20%

86 10%

84 0%

Source: Debtwire Par, Markit 4 An Acuris Company

Sub-90 share of loan market spikes to 70%

70%

Loans priced <80 and 80-90 combined 60% Loan priced <80

Loans priced 80-90 50%

40%

30%

20% Share of loans in secondary the market(%)

10%

0% 03-Jul-19 18-Jul-19 04-Jan-19 19-Jan-19 14-Jan-20 29-Jan-20 03-Jun-19 18-Jun-19 21-Sep-18 01-Sep-19 16-Sep-19 04-Apr-19 19-Apr-19 06-Oct-18 21-Oct-18 01-Oct-19 16-Oct-19 31-Oct-19 03-Feb-19 18-Feb-19 13-Feb-20 28-Feb-20 05-Dec-18 20-Dec-18 15-Dec-19 30-Dec-19 02-Aug-19 17-Aug-19 05-Nov-18 20-Nov-18 15-Nov-19 30-Nov-19 05-Mar-19 20-Mar-19 14-Mar-20 04-May-19 19-May-19

Source: Debtwire Par, Markit 5 An Acuris Company

Distribution of secondary loan prices changes dramatically

45% 21-Feb-20 17-Mar-20 40%

35%

30%

25%

20% Share of loans

15%

10%

Avg. Bid (% of par)

Source: Debtwire Par, Markit

6 An Acuris Company

Magnitude of change in secondary market loan prices: (Feb. 21 to March 17 time period)

16%

14%

12%

10%

14% Share of loans 6% 12%

10% 9% 4% 7% 6% 6%

2% 3% 3% 2% 2% 2% 1% 1% 1% 1% 1% 1% 0% 0.01%0.02% 0.03% 0%

Secondary market price change (points)

Source: Debtwire Par, Markit 7 An Acuris Company

Oil & gas and entertainment & leisure loans hit hardest

105 18%

21-Feb-20 17-Mar-20 % share of market 16%

95 14%

12%

85 10%

8% 75 Share of market of Share 6% Weighted avg.par) bid (%of

4% 65

55 0%

Source: Debtwire Par, Markit 8 An Acuris Company

Oil & gas secondary loan prices plummet

100 90%

95 80%

90 70%

85 Avg. bid 60% 90 share (%)90 share Par-plus share - 80 50% Sub-90 share

75 40% plus and share sub -

70 30% Oil & gas avg. par) avg. bid term Oil loan gas (% of &

65 20% Oil & gas par

60 10%

55 0%

9 Source: Debtwire Par, Markit An Acuris Company

Entertainment & leisure secondary loan prices sink amid coronavirus outbreak

105 90%

100 80%

95 70% 90 share 90 share (%) 90 - Avg. bid 60%

85 Par-plus share 50% Sub-90 share 80 plus share sub and - 40% 75

30% 70

20% 65 Entertainmentleisure & par Entertainment leisure Entertainment & par) avg. of bid term loan (%

60 10%

55 0%

10 Source: Debtwire Par, Markit An Acuris Company

HY bond yields top 9%

6 Yield (%)

Source: ICE BofA US High Yield Bond Index

11 An Acuris Company

HY bond and leveraged loan funds see surge in outflows

High yield bond fund flows* Leveraged loan fund flows* 5 3

3 2

1 1

0 0 -1

-2 -1 Loan flowsfund bn) (USD -3 HY bond fund HY fund bond flowsbn) (USD

-4 -2

-5

-6 -3

*Based on funds that report weekly flows

Source: Lipper 12 An Acuris Company

Leveraged Loan Biggest Decliners: (Feb. 21 to March 17)

Initial Initial Current Current Bid as of Change in LoanX ID Issuer Deal name Facility Ccy Country Industry Maturity Depth % change amount spread Bid Offer 02/21/20 points

California Resources 8/16 LX154198 CA RES CORP TL USD United States Oil & Gas 1000 31-Dec-21 1037.5 12.4 21.4 5 62 -49.6 -80.00% Second-Out Cov-Lite Donnelley Financial Solutions LX169586 LSC Comms Inc TLB USD United States Printing & Publishing 312.5 30-Sep-22 550 17 20.833 3 67.1 -50.1 -74.66% (LSC) 11/17

LX160062 VIP CINEMA HLDGS INC VIP Cinema 3/17 TL USD United States Home Furnishings 165 01-Mar-23 600 16.667 25 3 54 -37.333 -69.14%

LX157028 Moran Foods LLC Save A Lot 12/16 TL USD United States Retail Food & Drug 740 05-Dec-23 600 7 11 thin 19.583 -12.583 -64.25%

Southern Graphic Systems LX169591 SOUTHERN GRAPHICS INC TL USD United States Printing & Publishing 105 31-Dec-23 750 10.833 15.5 3 25.2 -14.367 -57.01% 12/17 2nd Lien Cov-Lite Chesapeake Energy 12/19 LX184560 Chesapeake Engy Corp TL USD United States Oil & Gas 1500 24-Jun-24 800 42.5 49.7 5 98.688 -56.188 -56.93% FILO Class A Cov-Lite Marshall LX135384 SEADRILL OPER LP Seadrill Partners 2/14 TL USD Oil & Gas 1800 21-Feb-21 600 18.75 23.05 10 40.333 -21.583 -53.51% Islands Gavilan Resources 2/17 2nd LX160201 GAVILAN RES LLC TL USD United States Oil & Gas 450 01-Mar-24 600 17.333 25.333 3 36.25 -18.917 -52.18% Lien Cov-Lite Murray Energy 6/18 LX174687 Murray Energy Corp TLB3 USD United States Metals & Mining 159.43 17-Oct-22 775 8.5 12 thin 16.5 -8 -48.48% Superpriority

LX173060 FIELDWOOD ENERGY LLC Fieldwood Energy 4/18 Exit TL USD United States Oil & Gas 1142.69 11-Apr-22 525 45 53.333 3 83.429 -38.429 -46.06% Professional & Business LX162379 CONSTELLIS HLDGS LLC Constellis 4/17 Cov-Lite TLB USD United States 872.5 21-Apr-24 500 9.625 14.375 4 17.5 -7.875 -45.00% Services Computers & LX167188 Peak 10 Hldg Corp Peak 10 7/17 Cov-Lite 2nd Lien TL USD United States 310 01-Aug-25 725 33 37.667 3 59.464 -26.464 -44.50% Electronics Jo-Ann Stores 5/18 2nd Lien LX173310 JoAnn Stores LLC TL USD United States Retailing 225 21-May-24 925 22.5 27.5 thin 39.667 -17.167 -43.28% Cov-Lite California Resources 11/17 LX169569 CA RES CORP TL USD United States Oil & Gas 1300 31-Dec-22 475 50.6 58.2 5 89 -38.4 -43.15% Cov-Lite Sungard AS 5/19 2nd Lien PIK Computers & LX180431 SUNGARD AS NEW HLDGS III LLC TL USD United States 300 03-Nov-22 650 31.167 37.5 3 53.5 -22.333 -41.74% (Takeback) Electronics Computers & LX161401 CO BUYER INC Cyxtera 5/17 Cov-Lite 2nd Lien TL USD United States 310 01-May-25 725 34.571 42.571 7 57.333 -22.762 -39.70% Electronics IPC Information Systems 2/15 LX142853 IPC SYSS INC TL USD United States Telecommunications 305 04-Feb-22 950 15 22 3 24.833 -9.833 -39.60% 2nd Lien Cov-Lite IPC Information Systems 11/19 LX184893 IPC CORP TL USD United States Telecommunications 171.46 06-Feb-22 1150 15 22 3 24.833 -9.833 -39.60% 2nd Lien PIK Entertainment And LX185521 CROWN FIN US INC Cineworld 2/20 Incremental TL USD United States 1932.2 05-Feb-27 300 59.75 65.75 4 98.542 -38.792 -39.37% Leisure LX172320 KCA DEUTAG US FIN LLC KCA 4/18 TLB USD United States Oil & Gas 414.57 28-Feb-23 675 42.781 45.906 8 70.125 -27.344 -38.99% Professional & Business LX174181 EXELA INTER LLC Exela Technologies 6/18 TLB USD United States 373.44 12-Jul-23 650 26.333 30.667 3 42.6 -16.267 -38.19% Services Entertainment And LX171023 CROWN FIN US INC Cineworld 2/18 (USD) Cov-Lite TL USD United States 3325 28-Feb-25 250 60.75 65.583 6 97.545 -36.795 -37.72% Leisure Cineworld 9/19 Incremental Entertainment And LX182972 CROWN FIN US INC TL USD United States 650 30-Sep-26 250 61 65.8 5 97.875 -36.875 -37.68% Cov-Lite Leisure

LX172971 Peabody Engy Corp Peabody Energy 4/18 TL USD United States Metals & Mining 400 31-Mar-25 275 50 55.625 4 79.5 -29.5 -37.11%

13 Source: Markit An Acuris Company

HY Bond Biggest Decliners : (Jan. 31 to March 17)

% Price ISIN Issuer Maturity Coupon YTM YTM (Jan. 31) Price Price (Jan. 31) change

US97381LAF58 Windstream Services LLC 6/30/2025 9 4.750 39.563 -87.99%

US97381LAE83 Windstream Services LLC 6/30/2024 10.5 5.438 40.500 -86.57%

US268787AE89 EP Energy 11/29/2024 8 6.833 50.833 -86.56%

US11680JAA07 BRUIN EP PARTNERS LLC 8/1/2023 8.875 139.990 24.580 8.750 64.541 -86.44%

US165167CY16 Chesapeake Engy Corp 9/15/2026 5.5 6.375 43.875 -85.47%

US13057QAG29 CA RES CORP 12/15/2022 8 212.710 57.497 5.221 34.063 -84.67%

US165167CN50 Chesapeake Engy Corp 4/15/2022 4.875 159.452 21.327 11.500 72.250 -84.08%

US13057QAD97 CA RES CORP 9/15/2021 5.5 331.736 72.015 6.981 41.789 -83.29%

US165167CZ80 Chesapeake Engy Corp 6/15/2027 8 90.596 20.929 9.052 52.450 -82.74%

US165167DD69 Chesapeake Engy Corp 1/1/2025 11.5 90.580 17.451 15.000 80.905 -81.46%

US165167DB04 Chesapeake Engy Corp 10/1/2026 7.5 81.269 22.255 10.241 49.925 -79.49%

US97381WAN48 Windstream Services LLC 10/15/2020 7.75 2.833 13.438 -78.91%

US165167DC86 Chesapeake Engy Corp 3/15/2026 8 84.694 23.620 10.750 50.719 -78.80%

US165167CT21 Chesapeake Engy Corp 1/15/2025 8 90.432 25.684 11.175 51.958 -78.49%

US165167CU93 Chesapeake Engy Corp 1/15/2025 8 90.432 25.684 11.175 51.958 -78.49%

US247916AC30 Denbury Res Inc 8/15/2021 6.375 194.097 21.854 17.500 80.725 -78.32%

US966387AP71 Whiting Petroleum Corp 4/1/2023 6.25 95.722 19.307 15.203 70.125 -78.32%

US97381LAA61 Windstream Services LLC 8/1/2023 6.375 3.000 13.375 -77.57%

US97381WAZ77 Windstream Services LLC 8/1/2023 6.375 3.000 13.300 -77.44%

US97381LAD01 Windstream Services LLC 12/15/2024 8.75 3.063 13.575 -77.44%

US165167CK12 Chesapeake Engy Corp 6/15/2021 5.375 207.975 19.860 19.000 83.375 -77.21%

US47987LAA98 Jonah Energy LLC 10/15/2025 7.25 120.811 40.534 6.375 27.833 -77.10%

US97381WAT18 Windstream Services LLC 10/1/2021 7.75 3.188 13.750 -76.82%

US812350AE65 Sears Hldgs Corp 10/15/2018 6.625 3.125 13.375 -76.64%

US13123XAT90 Callon Petroleum Co 10/1/2024 6.125 51.902 7.103 22.667 96.167 -76.43%

Source: Markit Continued on next slide… 14 An Acuris Company

HY Bond Biggest Decliners : (Jan. 31 to March 17)

% Price ISIN Issuer Maturity Coupon YTM YTM (Jan. 31) Price Price (Jan. 31) change

US97381WAX20 Windstream Services LLC 6/1/2022 7.5 3.188 13.469 -76.33%

US97381WAU80 Windstream Services LLC 4/1/2023 7.5 3.188 13.313 -76.06%

US65504LAN73 Noble Hldg Intl Ltd 4/1/2025 7.95 86.761 27.722 11.531 47.313 -75.63%

US674215AG39 Oasis Petroleum Inc 3/15/2022 6.875 106.728 8.920 23.500 96.125 -75.55%

US966387BE16 Whiting Petroleum Corp 1/15/2026 6.625 63.448 19.050 13.958 56.864 -75.45%

US966387BG63 Whiting Petroleum Corp 1/15/2026 6.625 63.448 19.050 13.958 56.864 -75.45%

US165167DA21 Chesapeake Engy Corp 10/1/2024 7 80.001 24.636 13.030 52.625 -75.24%

US165167CL94 Chesapeake Engy Corp 3/15/2023 5.75 96.358 24.978 14.917 59.980 -75.13%

US144577AJ24 Carrizo Oil & Gas Inc 7/15/2025 8.25 47.964 7.738 25.500 102.235 -75.06%

US65504LAK35 Noble Hldg Intl Ltd 3/15/2042 5.25 62.713 16.821 8.365 33.125 -74.75%

US65504LAL18 Noble Hldg Intl Ltd 4/1/2045 8.95 84.003 21.488 10.603 41.944 -74.72%

US13057QAF46 CA RES CORP 11/15/2024 6 112.543 44.610 6.667 26.000 -74.36%

US65504LAG23 Noble Hldg Intl Ltd 3/1/2041 6.05 68.454 18.495 8.800 34.313 -74.35%

US674215AE80 Oasis Petroleum Inc 1/15/2023 6.875 74.382 9.052 24.353 94.469 -74.22%

US13123XAZ50 Callon Petroleum Co 7/1/2026 6.375 39.878 7.407 24.468 94.800 -74.19%

US966387AH55 Whiting Petroleum Corp 3/15/2021 5.75 230.545 13.394 23.875 92.309 -74.14%

US65504LAD91 Noble Hldg Intl Ltd 8/1/2040 6.2 66.172 18.681 9.286 34.906 -73.40%

US90400GAA94 Ultra Res Inc 4/15/2022 6.875 362.715 160.835 3.000 11.188 -73.18%

US440543AL07 Hornbeck Offshore Svcs Inc 4/1/2020 5.875 1149.248 9.275 34.500 -73.12%

US144577AH67 Carrizo Oil & Gas Inc 4/15/2023 6.25 62.363 6.208 26.945 100.109 -73.08%

US65504LAP22 Noble Hldg Intl Ltd 1/15/2024 7.75 89.093 28.932 14.000 51.960 -73.06%

US268787AJ76 EP Energy 5/15/2026 7.75 18.500 68.264 -72.90%

US674215AK41 Oasis Petroleum Inc 5/1/2026 6.25 45.519 11.818 20.693 75.873 -72.73%

US440543AQ93 Hornbeck Offshore Svcs Inc 3/1/2021 5 587.398 166.657 8.063 29.250 -72.44%

US247916AD13 Denbury Res Inc 5/1/2022 5.5 119.248 28.194 17.667 64.025 -72.41%

Source: Markit Continued on next slide… 15 An Acuris Company

HY Bond Biggest Decliners : (Jan. 31 to March 17)

% Price ISIN Issuer Maturity Coupon YTM YTM (Jan. 31) Price Price (Jan. 31) change

US674215AJ77 Oasis Petroleum Inc 9/15/2023 2.625 19.875 71.417 -72.17%

US165167CG00 Chesapeake Engy Corp 2/15/2021 6.125 249.697 19.375 24.766 88.125 -71.90%

US247916AM12 Denbury Res Inc 2/15/2024 7.75 61.994 14.288 23.042 80.469 -71.37%

US629568BB14 Nabors Inds Inc 9/15/2023 5.1 53.630 7.713 26.750 91.884 -70.89%

US24823UAH14 Denbury Res Inc 7/15/2023 4.625 74.870 22.529 17.438 58.589 -70.24%

US91889DAD84 VALARIS PLC 3/15/2025 5.2 60.514 21.895 15.125 50.076 -69.80%

US62957HAD70 Nabors Inds Inc 2/1/2025 5.75 44.416 10.361 25.250 82.375 -69.35%

US62957HAF29 Nabors Inds Inc 2/1/2025 5.75 44.416 10.361 25.250 82.375 -69.35%

US268787AH11 EP Energy 5/1/2024 9.375 0.875 2.820 -68.98%

US69419WAA71 Pacific Drilling Second Lien Escrow Issuer Ltd 4/1/2024 11 123.798 50.219 10.667 33.889 -68.52%

US165167BU03 Chesapeake Engy Corp 11/15/2020 6.875 309.640 12.939 30.545 95.604 -68.05%

US893830AZ29 Transocean Inc 12/15/2041 9.35 36.545 12.219 25.538 78.250 -67.36%

US779382AP57 VALARIS PLC 6/1/2022 4.875 88.129 18.866 24.375 74.582 -67.32%

US50218PAA57 LSC Comms Inc 10/15/2023 8.75 83.199 29.944 17.875 54.375 -67.13%

US78454LAH33 SM Energy Co 1/15/2024 5 44.745 7.532 30.095 91.487 -67.10%

US242370AD62 Dean Foods Co 3/15/2023 6.5 6.393 18.868 -66.12%

US78454LAP58 SM Energy Co 1/15/2027 6.625 32.096 8.442 31.000 90.588 -65.78%

US12958RAD98 CALFRAC HLDGS LP 6/15/2026 8.5 70.229 29.763 14.000 40.722 -65.62%

US78454LAN01 SM Energy Co 9/15/2026 6.75 32.922 8.504 31.500 91.250 -65.48%

US29359NAA37 Ensign Drilling Inc 4/15/2024 9.25 48.908 11.027 32.500 94.125 -65.47%

US78454LAL45 SM Energy Co 6/1/2025 5.625 35.333 7.826 31.350 90.550 -65.38%

US74733VAC46 QEP RES INC 5/1/2023 5.25 48.836 6.534 33.563 96.293 -65.15%

US92922PAL04 W&T Offshore Inc 11/1/2023 9.75 52.921 11.486 33.250 94.805 -64.93%

US893830AF64 Transocean Inc 4/15/2031 7.5 32.477 12.042 25.805 72.438 -64.38%

US74153QAJ13 Pride Intl LLC 8/15/2040 7.875 45.871 17.056 17.125 48.031 -64.35%

Source: Markit 16