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Options for Illiquid Portfolio Investors in the New Normal

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Options for Illiquid Portfolio Investors in the New Normal Options for Illiquid Portfolio Investors in the New Normal PORTFOLIO ACQUISITION AND DIVESTITURE SERVICES M A Y 2 0 2 0 Portfolio Acquisition and Divestiture Services (PADS) Motivated Buyers and Sellers of Portfolios of Illiquid Securities The current market environment creates opportunities to acquire, divest, or lever illiquid portfolios. Houlihan Lokey’s PADS team is well positioned as a supplement to or in lieu of a sellside or buyside advisor to assist with underwriting support or valuation to get deals over the finish line. Alternative asset managers are looking to utilize leverage or amend Sophisticated asset managers are purchasing portfolios of private certain facilities at the fund level, and lenders need to gain a thorough investments, driven by sellers reacting to regulatory developments, understanding of the underlying collateral base. liquidity requirements, or portfolio rationalization. Direct lenders (e.g., BDCs) are looking to shed non-core portfolios and may require external Fund finance providers are lending against support to maximize sale proceeds (including portfolios of private investments (also managing relationships with existing lenders). known as NAV facilities). Regulated institutions are seeking to free SELLERS BUYERS up regulatory capital and participate in Investment committees need an synthetic risk transfer trades. Exposures Current market Clients hire us in connection with experienced and highly commercial remain with the financial institutions, while dislocation is driving investors to transactions that advisor able to support the investment capital relief is achieved through an pursue creative involve one or more diligence process for single asset external provider. alternatives to private investment purchases. achieve liquidity where the parties and find funding are under/ partners with approaching GPs are looking to monetize end-of-life and stronger balance exclusivity. Institutional investors are purchasing orphaned portfolios to return capital and sheets. stakes in fund managers that hold private reduce the day-to-day management burden. investments. Co-invest opportunities require investors to perform timely Corporations are rationalizing their non-core investment portfolios, diligence, develop a quick understanding of the transaction, and and the natural purchasers (and partners) are alternative asset have the ability to articulate key investment considerations to managers. their investment committees. 2 Value Proposition and Select Qualifications Houlihan Lokey’s PADS team supports investment committees and deal teams contemplating transactions involving portfolios of illiquid securities so that the firm’s clients can make quicker, more informed investment decisions by knowing the impact of market and transaction dynamics. ENHANCING YOUR PROCESS SELECTIndustry QUALIFICATIONS & Transaction Breadth of Firm Offering We develop creative approaches and custom Expertise Houlihan Lokey was engaged to provide acquisition advice/deliverables based on the characteristics Alternative support in relation to buy-to-let loans, owner of each transaction. InvestmentAsset banking insights to comple- Deep technical expertise and market $6B+ ment Managertraditional valuationoccupied advice loans, commercialpresence mortgages, lifetime mortgages, and reverse mortgages. We accelerate and enhance the investment Our access to the firm’s dedicated industry groups Our firm understands the nuances of various industries diligence process for buyers, which informs deal in the investment banking Houlihanpractice providesLokey an was engagedand asset to provide classes andpre -has domestic and international pricing/structure and provides a competitive unmatchedPension level of expertisetransaction and transaction investment diligencepresence on to meetmultiple clients’ global investment strategy. experience. $3.1B advantage relative to peers. Investor warehouse facilities backed by 61 underlying portfolio companies and 64 securities. We help minimize sale time and maximize deal pricing for sellers. Houlihan Lokey was engaged to develop an Insurance underwriting template for the client’s loan $450M+ We provide valuable industry and asset class Company underwriting activities and provide additional expertise to bolster investment committee analytics around ~100 credits across ~50 issuers. materials. Special Houlihan Lokey was engaged to provide certain pre- transaction investment diligence and valuation The Houlihan Lokey brand brings credibility when SituationsOngoing Valuation $1.3B services for ~40 portfolio companies covering 60 going through the investment committee process. Fund Process securities.Support We function as an extension of our client’s deal Documentation and support to enhance Long tenured professionals supported by the valuation review processHoulihan Lokey was engagedexperienced to provide financial investment staff team and provide access to our vast pool of NAV diligence and underwriting support for a loan backed $200M+ resources. Lender Our firm has experience interactingby quick with service auditors, restaurant Our brands senior -operatinglevel professionals across are continuously regulators, investors, fund Southeastadministrators Asia. and other involved throughout an engagement. We have the ability to leverage the broader relevant parties Houlihan Lokey platform and bring all of the firm’s Special Houlihan Lokey was engaged to provide underwriting support in the form of credit services to bear, which provides continuity Situations Undisclosed throughout the transaction lifecycle from the Fund screening/underwriting memorandums for certain original transaction, to ongoing monitoring, to an publicly traded securities. ultimate exit. 3 Extensive Asset Manager Relationships Houlihan Lokey has extensive relationships and has worked with some of the world’s leading asset managers. Selected recent clients include: Allianz SE Farallon Capital Management, LLC Perry Capital Anchorage Capital Group, LLC Fortelus Capital Management Pershing Square Capital Management, LP Angelo, Gordon & Company Fortress Investment Group, LLC PineBridge Investments Arcmont Asset Management Limited Glenview Capital Prospect Capital Ares GlobeOp Financial Services Ramius BlueBay Asset Management plc GoldenTree Asset Management, LP Sandell Asset Management Corp. Sculptor Capital Management (formerly BlueCrest Capital Management (UK) LLP Goldman Sachs & Co. (Private Equity Group) Och-Ziff Capital Management) Cambridge Place Investment Management Halcyon Asset Management Silver Lake Partners Canyon Capital Realty Advisors Harbert Management Corporation Silver Point Capital, LP Carval Investors Hercules Technology Growth Capital Solus Alternative Asset Management Centerbridge Partners, LP HBK The Baupost Group , LLC Cerberus Highland Capital Management Technology Investment Capital Corp. China Investment Corporation Levine Leichtman Capital Partners Terra Firma Capital Partners Citco Fund Services LIM Advisors TPG Capital Colony Capital, LLC Marathon Asset Management, LLC Tudor Davidson Kempner Capital Management NWQ Investment Management Company, LLC Vision Capital Group Ltd. DDJ Capital Management, LLC Oaktree Capital Management, LLC Wayzata Capital Management Inc. DE Shaw Octavian Advisors, LP York Capital Management Deutsche Bank AG Palladium Equity Partners LLC Yorkville Advisors 4 Scope of Services PORTFOLIO INVESTMENT DILIGENCE ASSET MANAGEMENT AND EXIT CONSIDERATIONS Review of available information and documentation Assess/identify ongoing asset management requirements Conduct diligence meetings/calls with the seller/buyer and strategies Develop an understanding of security-specific Evaluate monetization scenarios terms/features and capital structure Examine aggregated portfolio-level statistics to Pre- Analyze asset level: understand both qualitative and quantitative factors Acquisition Collateral performance history, quality, and VALUATION, PRICING, AND RETURNS Investment recoverability relative to similar assets Determine intrinsic asset/portfolio value Diligence Liquidity profile, earnings quality, and volatility Present asset/portfolio-specific factors to inform pricing Financial trends decisions Construct macroeconomic and industry-specific Sensitize returns and address risk management concerns overviews through scenario analyses Portfolio valuation for fair value reporting and monitoring purposes Ongoing refinement of asset management strategies Post- Market intelligence and advisory support focused on helping Acquisition to maximize terminal value Monitoring Evaluate liquidity options in conjunction with our Corporate Finance teams Identify, screen, and initiate discussions with potential counterparties Provide pricing intelligence to help establish reserve levels Monetization Advise on structure and terms Support Rendering fairness opinions to the board 5 Advisory Services Throughout the Transaction Lifecycle An integrated, market-driven approach to helping clients realize value and manage risk throughout the transaction lifecycle. Post-Close Identification Evaluation Execution Monetization Monitoring SOURCING PRE-LOI EXCLUSIVITY CLOSING SUPPORT MONETIZATION Financial Sponsors Group Provide valuation analysis Evaluate quality of Assist with purchase price Corporate Finance business and Corporate Finance to assist in investment earnings and cash flows allocation and open provides sellside advisory business have access to decision making Identify potential risks
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