The High Yield Handbook T H

European High Yield Credit Research January 2006

The High Yield Handbook T h

e Part 2 H i g h Y i e l

d Our ‘Bottom-Up’ View of European High Yield H a n d b o o k

AMSTERDAM ATHENS BANGKOK BRUSSELS CHICAGO BNP Paribas BNP Paribas BNP Paribas BNP Paribas BNP Paribas Herengracht 477 94 Vassilissis Sofias Avenue and 29th Floor Avenue Louise, 489 209 South La Salle Street 1017 BS Amsterdam 1 Kerasountos Street Abdulrahim Place B-1000 - Brussels Chicago Netherlands 115 28 Athens 990 Rama IV Road Belgium Illinois 60604 Tel + 31 20 550 1212 or: P.O.Box 171 58 - 100 24 Athens Bangkok 10500 Tel + 32 2 518 08 11 U.S.A. Fax + 31 20 625 3921 Greece Tel + 66 2 636 19 00 Fax + 32 2 518 09 34/511 4626 Tel + 1 312 977 2200 Tel + 30 210 74 68 000 Fax + 66 2 636 19 33/34/35 Fax + 1 312 977 1380 Fax + 30 210 74 86 726

DUBLIN FRANKFURT GENEVA HONG KONG LISBON BNP Paribas Mainzer Landstrasse 16 BNP Paribas BNP Paribas BNP Paribas 5 George’s Dock D-60325 2 Place de Hollande 63/F Two International Finance Centre Av. 5 de Outubro, 206 IFSC Frankfurt am Main 1211 Geneva 11 8 Finance Street 1050-065 Lisbon Dublin 1 Germany Switzerland Hong Kong Portugal Ireland Tel + 49 69 71 930 Tel + 41 22 787 7111 Tel + 852 2909 8888 Tel + 351 21 791 0000 Tel + 353 1 612 50 00 Fax + 49 69 71 93219 Fax + 41 22 787 8000 Fax + 852 2865 2523 Fax + 351 21 795 5616 Fax + 353 1 612 51 00

LONDON LUXEMBOURG MADRID MANILA MILAN BNP Paribas BNP Paribas BNP Paribas BNP Paribas BNP Paribas 10 Harewood Avenue 10A Boulevard Royal Hermanos Becquer 3 30/F Philamlife Tower Piazza San Fedele 2 London NW1 6AA 2093 Luxembourg PO Box 50784 8767 Paseo de Roxas 20121 Milan United Kingdom Tel + 35 24 64 61 28006 Madrid Makati City 1226 Italy Tel + 44 20 7595 2000 Fax + 35 24 64 64 141 Spain Philippines Tel + 39 02 72 471 Fax + 44 20 7595 2555 Tel + 34 91 745 9000 Tel + 632 885 0252 Fax + 39 02 86 6388 Fax + 34 91 745 8888 Fax + 632 885 7028

MUMBAI NEW YORK PARIS SAN FRANCISCO SEOUL BNP Paribas BNP Paribas BNP Paribas BNP Paribas BNP Paribas French Bank Building The Equitable Tower 3 rue d’Antin One Front Street 23rd & 24th Floor, Taepyeongno Building 62 Homji Street 787 Seventh Avenue 75078 Paris Cedex 2 23rd Floor 310 Taepyeongno 2-ga, Jung-gu Fort New York France San Francisco Seoul 100-767 Mumbai 400 001 NY 10019 Tel + 33 1 42 98 12 34 CA 94111 Korea India U.S.A. Fax + 33 1 42 98 11 42 U.S.A. Tel + 82 2 317 1700 Tel + 91 22 22642 006 Tel + 1 212 841 3000 Tel + 1 415 772 1370 Fax + 82 2 757 2530 Fax + 91 22 22679 710 Fax + 1 212 841 3555 Fax + 1 415 391 3390

SHANGHAI SINGAPORE SYDNEY TAIPEI TOKYO BNP Paribas (China) Limited BNP Paribas BNP Paribas BNP Paribas BNP Paribas 13/F Shanghai Stock Exchange Building 20 Collyer Quay 60 Castlereagh Street 3 - 6/F, 52 Min Sheng East Road Tokyo Sankei Building 528 Pu Dong Road (S) #05-01 Tung Centre Sydney NSW 2000 Sec. 4, Taipei 105 20th Floor Shanghai 200120 Singapore 049319 Australia P.O.Box 118-980 Taipei 1-7-2- Otemachi, Chiyoda-ku People’s Republic of China Tel + 65 6439 5000 Tel + 61 2 9232 8733 Taiwan Tokyo 100-0004 Tel + 86 21 5840 5500 Fax + 65 6538 4300 Fax + 61 2 9221 3026 Tel + 88 62 27 16 1167 Japan Fax + 86 21 5879 1702 Fax + 88 62 27 15 2027 Tel + 81 3 5290 1000 Fax + 81 3 3529 1120

I 2006 European High Yield Market Outlook

I 81 Credit Snapshots: Recommendations, Financials, Structures, Covenants J a n u a r y 2 0 0 6 www.GlobalMarkets.bnpparibas.com Please refer to important information found at the end of the report The High Yield Handbook ⎪ January 2006

List of Issuers – Part 2

ABB 26 Invitel 220 Ahold 30 IT Holding 224 Alstom 32 Jenoptik 230 Antenna 36 Kabel BW 236 Ardagh 42 Kabel Deutschland 240 Avio Holding Spa (Aspropulsion) 46 Kamps 246 Barry Callebaut 50 Klockner Pentaplast 250 Basell 54 Kronos 254 Brake Brothers 58 Legrand 258 British Airways 64 Lucite 262 Cable & Wireless 66 MTU 266 CableCom 70 Nalco 270 UPC 71 NTL Cable plc 276 Carmeuse 80 ONO 280 Cell C 84 Polypore 284 Central European Media 90 Preem 288 CIRSA 94 Rallye 292 Clondalkin 100 Remy Cointreau 298 CMA CGM 104 Rexel 304 Codere 110 Rhodia 310 Cognis 116 Rockwood 314 Colt Telecom 122 Safilo 320 Corus 126 SAS 324 Culligan 130 Saur 328 Ecobat 136 Seat Pagine Gialle 334 Editis 140 Sicpa 340 Eircom 146 Smurfit Kappa Group 344 EMI 152 Sol Melia 350 Escada 158 Tele Columbus 352 Fage Dairy 162 Telenet 356 FKI 168 Tim Hellas 362 Focus 172 TUI 368 Gildemeister 178 TVN 372 GM 182 United Biscuits 376 Grohe 186 Unity Media (Iesy) 380 Head NV 190 Vendex KBB 386 Heckler & Koch 194 Warner 392 Hornbach 198 Wind 400 Impress Group 202 World Directories 406 Ineos Vinyls (EVC) 206 Yell 412 Inmarsat 210 Invensys 216

25 European High Yield Research Inmarsat ⎪ January 2006

Aizaz Shaikh +44 20 7595 8607 [email protected] Inmarsat

Bond Description & Market Data, as of 05 January 2006 Next Call Description Amount (o/s) Ratings Date Price Price YTW STW 7.625 % Sr Nts due 2012 USD 310mn B1/B 01-Mar-08 103.813 102.75 6.97% 216 bp 10.375% Sr Disc Nts due 2012 USD 450mn B2/B 15-Nov-08 105.188 83 8.42% 362 bp Source – BNP Paribas

Company Profile Inmarsat provides global mobile satellite communications services, via its owned and operated satellites. From its fleet of nine geostationary satellites, the company provides voice and data services, including telephony, fax, video, email and intranet and internet access. End users of its services operate at sea, on land and in the air, and include military, enterprise-level users, and international organisations such as the International Red Cross. The company's business is characterised by long-term contracts; roughly half of company revenues derive from maritime service. Revenues and EBITDA for the twelve months ended 30 September 2005 were $490mn and $315mn, respectively. At the end of that period the company’s leverage was 2.7x.

Debt Profile The company's debt was raised pursuant to the buyout of the business by Apax Partners and Permira in 2004. The company issued two 8-year high yield bonds in 2004: a 7.625% senior bond (including an original $375mn issue and subsequent $105mn add-on) and, subsequently, a 10.375% senior discount bond. The discount bonds were issued by Inmarsat Finance II Plc, the holding company of the issuer of the senior notes; the discount bonds accrete until 2008 and thereafter pay cash until maturity. Both bond issues are callable in 2008 (NC4). The 7.625% senior notes are guaranteed by Inmarsat Investments Limited, and a have second ranking pledge over the shares of Inmarsat Ventures Limited.

New Senior Credit Agreement

On May 2005, the group’s subsidiary Inmarsat Investments Limited signed a new $550mn Senior Credit Facility led by Barclays Capital, ING Bank N.V. and The Royal Bank of Scotland plc. The facility is for general corporate purposes. The $550mn five- year senior Credit Facility consists of a $250mn amortizing term loan and a $300mn revolving credit facility. The term loan and drawings under the revolving credit facility were initially priced at 120bp above LIBOR and thereafter tied to a leverage grid. As of June 2005, the $300mn revolving credit facility was undrawn.

The New Senior Credit Facility, in combination with existing surplus cash and the proceeds of the IPO, was used to repay the Previous Senior Credit Facility of $728.mn and the remaining of the EUR-denominated Subordinated Preference Certificates (€272.7mn). In addition, on July 2005 the company redeemed 35% of the 7.624% Senior Notes 2012 issued for an amount totalling $184.9mn.

210 European High Yield Research Inmarsat ⎪ January 2006

Inmarsat Structure

Shareholders

Inmarsat Group Holdings Limited

Subordinated Inmarsat Holdings preference certificates Limited Subordinated Inmarsat Senior intercompany Intercompany Finance II note proceeds Discount funding(1) loan $301.0 m plc Notes $612.4m Inmarsat Group $450.0m principal Limited amount at maturity ($301.0m initial accreted value)

$ 550m Senior credit Inmarsat agreement Investments Limited Inmarsat Senior Finance Notes plc Inmarsat Ventures Subordinated intercompany $310.4 million Limited senior note proceeds loan $477.5 m

Operating and other subsidiaries Guarantor of Senior Notes

Guarantor of Senior Discount Notes

1. Comprised of $34.5mn of ordinary equity and a $577.9mn subordinated intercompany funding loan. The subordinated intercompany funding loan is pledged to secure Inmarsat Holdings Limited’s guarantee of the notes on a first priority basis, and to secure Inmarsat Holdings Limited’s obligations under the subordinated intercompany note proceeds loan on a second priority basis.

Source – Inmarsat

211 European High Yield Research Inmarsat ⎪ January 2006

Bond Covenants

USD 375mn 7.625% Senior Notes 2012 USD 450mn 10.375% Senior Discount Notes 2012 Bond description USD notes 7.625% USD notes 10.375% Issuing entity Inmarsat Finance Plc Ranking Senior notes Senior Discount notes Position vs. bank debt Structurally Subordinated Position vs. other bonds Structurally Subordinated ! The notes will be secured by first ! The obligations of the Issuer under the priority security over the subordinated notes will be guaranteed by the Parent inter-company Note Proceeds Loan. Guarantor on a senior basis. ! The notes are general unsecured ! The notes will be secured by first- obligation of Inmarsat Group Plc ranking security over the Subordinated Security/Guarantees ! The notes will be unsecured (save that Inter-company Note Proceeds Loan. the guarantee of Inmarsat Investments Limited will be secured by a second ranking charge over the shares of Inmarsat Ventures Limited) ! Make Whole – prior to 15 March 2007 at treasuries/bunds/gilts+50bp ! Equity Claw – prior to 15 November 2007 max 35% of issue at par + coupon Optional Redemption ! Call Schedule: ! Call Schedule 01 March 2008 – 103.813% 15 November 2008 – 105.188% 01 March 2009 – 102.542% 15 November 2009 – 103.458% 01 March 2010 – 101.271% 15 November 2010 – 101.729% 01 March 2011 – 100.000% 15 November 2011 – 100.000% Change of control Put at 101, 50%+ of voting power Tax redemption Yes – at par Negative pledge Yes Cross default Yes Fall away covenants No Anti-layering Yes (Debt and Liens) the gross cash proceeds of that sale and leaseback transaction are at least equal to the Fair Asset sales Market Value of the property that is the subject of that sale and leaseback transaction; Debt is permitted up to 2x pro forma Inmarsat Group limited Fixed Charge coverage ratio. Carve outs: ! the incurrence by Inmarsat Group Limited and its Restricted Subsidiaries of Indebtedness under or in the form of letters of credit, bank guarantees, short-term credit and overdraft facilities in an aggregate principal amount at any one time Debt limit outstanding under this clause not to exceed $12.0mn; ! Incurrence of indebtedness for refinancing purposes not exceeding $25m at any time; ! CLOs, mortgage & purchase money obligations up to $20mn; ! General basket up to $20mn. ! carve outs include a) $5mn stock b) post IPO dividends at 6% of IPO proceeds per Restricted payments year and c) general basket of $15mn.

Limitation on liens No Carve out Not less favourable than arms length transaction; if in excess of $5mn (majority of board of Transactions with affiliates directors): if in excess of $25mn written opinion of an independent financial advisory. Source – BNP Paribas, Inmarsat

212 European High Yield Research Inmarsat ⎪ January 2006

Inmarsat, Financial Model USD mn Historic Historic Historic Historic Historic Historic Historic Historic Historic Historic FYE 31 December FY 02 FY 03 Q1 04 Q2 04 Q3 04 Q4 04 FY 04 Q1 05 Q2 05 Q3 05 PROFIT & LOSS

Revenue 463 504 117 124 119 117 481 127 126 120 Net operating Costs -150 -168 -45 -39 -37 -51 -177 -44 -38 -42 D&A -129 -136 -44 -44 -43 -14 -145 -30 -30 -34 Total Operating Profit 185 201 28 41 39 52 159 54 58 44 EBITDA 314 337 72 84 82 66 304 84 88 78 P&L Interest 1.2 9 42 38 39 46 46 164 40 32

Revenue growth y/y 8.9% -3.1% -10.8% -5.9% -1.8% -4.7% 9.3% 2.0% 0.7% Operating profit margin 39.9% 39.8% 23.9% 32.9% 32.4% 44.6% 33.1% 42.7% 45.9% 36.4% EBITDA margin 67.7% 66.7% 61.7% 68.2% 68.6% 56.2% 63.2% 65.9% 70.0% 64.7%

BALANCE SHEET

Cash & Equivalents 11 291 242 282 274 378 379 351 220 45

New Bank Debt 247 248 $975m Bank Debt -$400m Term A LB+2.5% Dec 09 400 400 384 316 316 317 -$200m Term B LB+3.0% Dec 10 200 200 200 200 200 200 -$200m Term C LB+3.5% Dec 11 200 200 200 200 200 200 -$100m Sr Capex Facility Dec 09 0 0 0 0 0 0 -$75m Multicurrency Revolver 0 0 0 0 0 0 $477m 7.625% HY Bonds 476 476 462 459 459 459 460 299 Other 0 0 0 0 0 0 7 14 Total Sr Debt 111 1,732 1,276 1,276 1,246 1,174 1,174 1,176 714 561 Net Sr Debt 99 1,441 1,035 995 972 796 796 825 494 517 Sub parent company loan 619 619 571 571 571 571 0 0 $450m 10.375% HY Bonds 0 0 0 291 291 301 307 307 Total Debt 111 1,732 1,895 1,895 1,816 2,037 2,037 2,048 1,021 868 Net Debt 99 1,441 1,653 1,614 1,543 1,658 1,658 1,697 801 824

CREDIT RATIOS

Leverage Bank Leverage (gross) 2.5x 2.6x 2.5x 2.4x 2.4x 2.3x Senior Notes Leverage (gross) 4.0x 4.2x 4.0x 3.9x 3.9x 3.7x 2.2x 1.8x Total leverage (gross) 5.9x 6.2x 5.9x 6.7x 6.7x 6.5x 3.2x 2.8x Total leverage (net) 5.1x 5.3x 5.0x 5.5x 5.5x 5.4x 2.5x 2.6x Source – BNP Paribas Estimates, Inmarsat

213 European High Yield Research Inmarsat ⎪ January 2006

214 European High Yield Research Inmarsat ⎪ January 2006

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215 European High Yield Research Invensys ⎪ January 2006

Adam Harnetty, ACA +44 20 7595 8831 [email protected] Invensys

Bond Description & Market Data, as of 5 January 2006 Next Call Issuer Credit Trend: Negative Description Amount (o/s) Ratings Date Price Price YTW STW 6.5% Sr Nts due 2010 USD 200mn B3/B- 15-Mar-10 100.000 89 9.87% 509bp 9.875% Sr Nts due 2011 EUR 540mn B3/B- 15-Mar-08 104.938 103.125 9.10% 614bp 9.875% Sr Nts due 2011 USD 550mn B3/B- 15-Mar-08 104.938 99 10.12% 532bp Source – BNP Paribas

Company Profile UK-based Invensys is a global automation and controls the group that sells to the chemical, rail, oil and gas, power generation, telecommunications, paper, food, dairy and pharmaceutical markets, which in the 12 months to 30 September 2005 had sales of £2,426mn and an EBITDA of £261mn. Its products are used in factories and residential and commercial buildings to automate tasks and processes, such as the monitoring and control of the flow of products in an oil refinery and the heating, ventilation and air conditioning of homes and commercial buildings. The group was formed in 1999 when Siebe plc, a manufacturer and supplier of industrial and appliance controls, merged with BTR plc, an engineering group.

Investment Recommendation Invensys has embarked on an extensive disposal and restructuring program in recent years. The disposal program is now broadly complete. The restructuring program has achieved mixed success with fairly flat revenues overall and despite profitability gains in some divisions, these have been offset by declines in others, notably the Controls division. Operationally the company generates minimal free cash flow, which is currently used to fund ongoing restructuring expenses. The controls division is stabilising but has not turned the corner yet. More positively the company’s book to bill ratio has been around 1.1 for the past two quarters auguring well for future revenue growth. Given the company’s large cash pile and current level of spreads, we have a HOLD recommendation.

Debt Profile Bank Facilities The company’s bank facility comprises the following:

Term B loan due September 2009 denominated in USD, EUR and GBP with £316mn outstanding. A revolving credit facility due March 2009 for the USD equivalent of £205mn, currently undrawn. A bonding facility due March 2009 for the USD equivalent of £405mn, £275 currently drawn as a guarantee. A second lien facility due December 2009 denominated in USD and EUR with £271mn outstanding.

Senior Notes 2011 The Company issued $550mn of notes and €475mn of high yield style notes in February 2004. A tap issue of a further €75mn was completed in February 2005 to fund a tender of some MTN notes and 144a notes.

Rule 144A Notes The company is the issuer of $250mn aggregate principal amount of 7.125% Notes due 2007 and $200mn aggregate principal amount of 6.5% Notes due 2010. The Rule 144A Notes are unsecured and unsubordinated senior obligations of the company and rank at least equally with all of the company’s other unsecured and unsubordinated obligations. Through various tender offers, the outstanding amount of the 7.125% was reduced to $1.6mn.

Guarantee, Bond and Letter of Credit Facilities A number of financial institutions have entered into numerous smaller guarantee, bond and letter of credit facilities with the Company and, principally, its subsidiaries.

216 European High Yield Research Invensys ⎪ January 2006

Invensys Structure

$200m 6.5% Senior Notes 2010 €540m 9.875% Senior Notes 2011 Invensys plc $550m 9.875% Senior Notes 2011

Holdco

Invensys Bank Facilities International Holdings Ltd

Operating subsidiaries

Source – Invensys

217 European High Yield Research Invensys ⎪ January 2006

Bond Covenant 9.875% Senior Notes Due 15 March 2011 9.875% Senior Notes Due 15 March 2011 6.5% Notes Due 2010 Issuing entity Invensys Plc Ranking Senior Unsecured notes Position vs. bank debt Structurally subordinated Position vs. other bonds Pari passu Security/guarantees None for any bond Make Whole – none Equity Claw – prior to 15 March 2007 max 35% of each issue at par+coupon following IPO (no equity claw on $6.5% 2010) Optional redemption Call Schedule (2011 bonds only): 15 March 2008 – 104.938% 15 March 2009 – 102.469% 15 March 2010 – 100.000% Change of control Put at 101%, 50%+ of voting power or substantial sale of assets Tax redemption Yes – at par on all issues Limitation on liens but with some carve outs (security over Senior Credit facilities and any refinancing being the major one) Negative pledge $6.5% 2010 prohibits security over certain manufacturing facilities and the stock of such subsidiaries Cross default Yes for all Fall away covenants Yes/No for $6.5% 2010 Anti-layering None Debt is permitted up to 2x pro forma consolidated coverage ($6.5% 2010 no limit). Carve outs: CLOs, mortgage & purchase money obligations up to £25mn;

Debt limit Indebtedness of Japanese companies up to £20mn; Investment grants or government subsidies up to £30mn; Bank facility to finance working capital of a subsidiary up to £35mn; General basket up to £40mn. If company can raise €1 of additional debt then: 50% consolidated net income. Restricted payments Carve outs: Repurchase of capital stock up to £2mn a year; General basket up to £25mn.

Must not be less favourable than if executed in an arms length transaction. Requires Transactions with affiliates certification of Directors if greater than £10mn and an external opinion if greater than £25mn. Market value and at least 75% of consideration received in cash or cash equivalent. Within Asset sales 360 days must reinvest in similar businesses or repay debt. Any proceeds remaining (>£10mn) must be used to tender bonds at par. Source – BNP Paribas, Invensys

218 European High Yield Research Invensys ⎪ January 2006

Invensys, Financial Model FYE 31 March UK GAAP UK GAAP IFRS IFRS IFRS IFRS IFRS IFRS IFRS GBP mn 2003 2004 Q1 05 Q2 05 Q3 05 Q4 05 2005 Q1 06 Q2 06 31/03/03 31/03/04 30/06/04 30/09/04 31/12/04 31/03/05 31/03/05 30/06/05 30/06/05 PROFIT & LOSS Revenues 5,018 3,891 586 619 2,432 577 622 Operating expenses -4,733 -3,674 -569 -570 -2,258 -545 -574 Operating profit 285 217 17 49 0 0 174 32 48 Exceptionals -824 -372 -12 -116 -158 -3 -16 Gwill impairment -707 -78 -28 0 -28 0 0 Total Operating Profit -1,246 -233 -23 -67 0 0 -12 29 32 Loss on sale of PPE 0 0 -3 0 0 Loss on disposal of operations 0 0 0 -3 0 FX -5 -2 16 -16 -5 Finance costs -113 -112 -40 -38 -156 -38 -40 Finance income 3 5 19 6 8 Other finance charges 30 -23 -4 -4 -15 -2 -1 Loss before tax -1,329 -368 -69 -106 0 0 -151 -24 -6 Tax -57 35 -4 -6 21 -5 -6 Loss after tax from continuing -1,386 -333 -73 -112 0 0 -130 -29 -12 Net profit from discontinued 31 4 24 3 51 MSI 6 5 -1 14 11 -2 0 Loss for the period -1,380 -328 -43 -94 0 0 -95 -28 39

D&A 159 110 23 0 0 0 82 17 18 EBITDA pre exceptionals 444 327 40 49 0 0 256 49 66

Revenue growth y/y -22.5% -37.5% -1.5% 0.5% Operating profit margin 5.7% 5.6% 2.9% 7.9% 7.2% 5.5% 7.7% EBITDA Margin 8.8% 8.4% 6.8% 7.9% 10.5% 8.5% 10.6%

CASHFLOW Taxes paid -62 -73 -13 -6 -76 -3 -8 Interest paid -115 -121 -12 -51 -131 -18 -47 Change in working capital -101 -343 -43 27 30 -56 8 Cashflow from operating activities 33 -401 -71 -39 -97 -27 -10

Capex -139 -126 -20 -16 -76 -15 -18 Net acquisitions/disposals 1,446 486 377 -6 363 -8 200 Other 63 11 3 4 4 4 7 Cashflow from investing activities 1,370 371 360 -18 0 0 291 -19 189

Net debt repayment -1,417 -165 101 -107 -110 -2 -114 Other -2 405 2 -1 -1 -1 0 Cashflow from financing -1,419 240 103 -108 0 0 -111 -3 -114

Change in cash -16 210 392 -165 0 0 83 -49 65

BALANCE SHEET Cash & ST deposits 365 566 954 793 638 574 673

Senior bank debt 497 499 388 422 316 2nd lien loan 266 268 262 269 271 Old 144a Bonds 275 192 131 113 114 2011 $ and € bonds 623 629 663 672 678 Other 17 -8 -4 -17 -15 Gross debt 1,921 1,552 1,678 1,580 0 0 1,440 1,459 1,364

Net debt 1,556 986 724 787 0 0 802 885 691

LTM RATIOS Coverage 3.9 2.9 1.9 2.0 2.0 EBITDA-Capex/Interest 2.7 1.8 1.3 1.5 1.4 Gross leverage 4.3 4.7 5.6 5.5 5.2 Net leverage 3.5 3.0 3.1 3.3 2.6 Source – BNP Paribas, Invensys

219 European High Yield Research Invitel ⎪ January 2006

Aizaz Shaikh +44 20 7595 8607 [email protected] Invitel

Bond Description & Market Data, as of 05 January 2006 Next Call Issuer Credit Trend: Stable Description Amount (o/s) Ratings Date Price Price YTW STW

10.75% Sr Nts due 2012 EUR 142mn Caa1/B- 15-Aug-08 105.375 116 5.95% 305 bp Source – BNP Paribas Company Profile Invitel is the second largest fixed line telecommunications services provider in Hungary. The company is the incumbent provider of fixed line telecommunications services to residential and business customers in the geographical areas where it operated under exclusive licences until the end of 2002 and has a 99.7% market share based on the number of lines in these areas. Its historical concession areas cover 1.4 million people, representing 14% of Hungary’s population. Invitel also provides fixed line telecommunications services, primarily to business customers, in the remainder of Hungary. Its total operating revenue and adjusted EBITDA were €183mn and €81mn, respectively, for the twelve months ended 30 September 2005. At the end of the third quarter, leverage was 3.2x. Investment Recommendation We maintain our BUY rating on Invitel, despite the steady appreciation and high-bond point value of the company’s bonds. It appears that de-leveraging has been significantly achieved in 2005, and therefore further credit enhancement from a operating performance is likely to be slow. The next catalyst is likely to be via corporate activity or M&A; while leveraging may increase slightly as a consequence, there is an equal prospect of a scenario resulting in credit enhancement. Debt Profile Invitel’s debt comprises a high yield bond and outstanding senior credit facilties of €134mn at 30 September 2005. The high yield bond has standard high yield covenant package and is callable in August 2008 (NC4). The notes were issued by Magyar Telecom B.V, the intermediate holding company owning Invitel Rt and V-Holding Rt, the operating companies. The bond benefits from a second ranking basis by pledge of the funding loan, a pledge of the share capital of Matel and pledges of all share capital of Invitel and V-Holding held, directly and indirectly, by Matel. New Senior Credit Facility The senior credit facilities provide for facilities up to EUR or EUR-equivalent of €165mn, to be comprised of: ! A Euro amortising term loan of €160mn; ! A multi-currency revolving credit facility of Euro equivalent of €5mn; The senior credit facilities are guaranteed on a senior basis by Matel and V-Holding. In addition, Invitel obligation are secured by: ! first ranking pledge of all the shares capital of Matel and V-Holding; ! an intercreditor deed governing any downstream shareholder loans and any other subordinated debt; ! an assignment of inter-company loans among the Matel, V-Holding and Matel Holdings N.V; ! a pledge of accounts by Matel and V-Holding; and ! a floating charge over all assets. Term Facility Amortisation Schedule Date Installment Cumulative to 31 December 2005 9.25% 31 March 2006 2.50% 30 June 2006 2.50% 30 September 2006 3.00% 31 December 2006 3.00% 31 March 2007 3.50% 30 June 2007 3.50% 30 September 2007 3.50% 31 December 2007 3.50% 31 March 2008 4.00% 30 June 2008 4.00% 30 September 2008 4.00% 31 December 2008 4.25% 31 March 2009 4.50% 30 June 2009 4.50% 30 September 2009 4.50% 31 December 2009 4.50% Total during 2010 20.50% Total during 2011 11% Source - Invitel

220 European High Yield Research Invitel ⎪ January 2006

Invitel Structure

Matel Holdings N.V. (Parent)

Magyar Telecom B.V. €142 million (Matel) Senior Notes(1)

Funding Loan

74.67% 100%

€165 million new Senior Credit Invitel Rt.(3) 17.00% V-holding Rt. Facilities(2)

Senior Subordinated Guarantees

Guarantors of the notes on a senior subordinated basis

1. The senior notes are secured on a second ranking basis by a pledge of the Funding Loan, a pledge of the share capital of Matel and pledges of all the share capital of Invitel and V-holding held, directly and indirectly, by Matel. 2. The senior credit facilities are guaranteed by Matel, V-holding and Invitel on a senior basis and are secured on a first ranking basis by a pledge of the Funding Loan, a pledge of the share capital of Matel, pledges of all the share capital of Invitel and V-holding held, directly or indirectly, by Matel, and pledges over the assets of Invitel. 3. The company conducts substantially all of its operations through Invitel.

Source – Invitel

221 European High Yield Research Invitel ⎪ January 2006

Bond Covenant Bond description EUR 142m 10.75% Senior Notes 2012 Issuing entity Magyar telecom BV, a holding company Ranking Senior notes Position vs. bank debt Structurally subordinated Position vs. other bonds No other bonds outstanding Second-priority security interest in the shares of Invitel Rt., V-Holdings and Matel BV and a Security/Guarantees second-priority security interest in the Funding Loan Guaranteed on a senior subordinated basis by Invitel Rt and V-Holdings ! Equity Claw – prior to 15 August 2007 (35%) at 110.75% plus accrued and unpaid interest and additional amounts. ! Call Schedule: Optional redemption 28 August 2008 – 105.375% 28 August 2009 – 103.583% 28 August 2010 – 101.792% 28 August 2011 – 100.000% Tax redemption Yes – at par Negative pledge Yes Cross default Yes Fall away covenants No Anti-layering Yes (Debt and Liens) Change of control Put at 101, 50%+ of voting power Except for permitted assets swaps, at least 75% of the consideration must be in the form of Asset sales cash or cash equivalents (including the assumption of liabilities and securities converted into cash or cash equivalents within 90 days). The company may not incur debt if pro forma leverage exceeds 5.0x. Carve outs: ! € 165mn under Senior Credit Facility minus (i) the amount of any permanent repayments or prepayments of any such Debt with the proceeds of Asset Sales; Debt limit ! The greater of € 25mn or 5% of total assets; ! Permitted refinancing debt; incurrence of debt under Interest Rate and Currency Agreements. If no event of default and able to incur €1 debt, not to exceed the sum of: ! 50% of consolidated net income from date of Indenture to last day of fiscal quarter ending prior to date of proposed Restricted Payment; ! 100% of the net cash proceeds of sales of capital stock of the issuer and cash capital contribution from shareholders to the issuer; ! amount of balance sheet debt reduction as a result of conversion into capital stock of the issuer, up to the net cash proceeds received from the issuance of such convertible Restricted payments debt; and ! amount equal to the net reduction in restricted investments ! Basket for Permitted Payments: € 8mn; ! General permitted investment basket: The greater of € 6mn and 1.5% of total assets ! Management and Consulting Fees: Not to exceed € 1mn per year; ! Distributions to Parent for general administrative expenses : Not to exceed € 150K per year Not less favourable than arms length transaction; if in excess of €10mn (majority of board of Transactions with affiliates directors) ; if in excess of €20mn written opinion of an independent entity Limitations on liens The greater of € 25mn or 5% of total assets Source – BNP Paribas, Invitel

222 European High Yield Research Invitel ⎪ January 2006

Invitel, Financial Model Restated FYE 31 December Historic PF PF Historic Historic Historic BNPP Poj’d EUR mn FY 02 FY 02 FY 03 Q1 04* Q2 04* Q2 04* Q2 04* Q3 04 Q4 04 Q1 05 Q2 05 FY 05 FY 06 FY 06 PROFIT & LOSS Mass market Voice: In 110 112 103 24 25 25 23 96 24 23 22 95 93 91 Mass market Voice: Out 0 1 1 0 0 0 1 1 0 0 0 0 0 0 B2B 45 50 52 13 13 13 12 50 12 11 11 52 53 54 Mass market Internet 4 6 9 3 4 4 4 14 5 5 5 20 22 21 Wholesale 1 8 11 2 3 4 4 14 6 8 8 16 20 24

Revenue 161 177 176 42 45 45 44 175 45 47 46 183 187 190 COGS 31 49 44 43 44 46 Interconnect charges 31 35 35 7 11 11 3 32 12 14 13 30 32 33 Other COGS charges 0 13 9 0 0 0

Gross margin 130 129 132 35 34 34 31 134 34 32 33 140 143 145 Network related costs 36 39 36 0 8 7 12 27 0 0 0 28 28 29 SG&A 44 38 29 0 7 6 15 27 0 0 0 30 31 31

EBITDA 58 56 69 19 20 21 21 81 21 18 20 81 83 83 EBITDA margin 35.8% 31.7% 39.3% 45.4% 44.2% 46.7% 48.9% 46.2% 46.0% 39.4% 43.2% 44.2% 44.0% 43.7%

D&A & impairment loss 35 50 49 11 11 11 12 43 0 10 9 50 50 51 Restructuring 0 3 9 0 0 0 1 1 0 0 1 0 0 0

EBIT 22 2 11 8 9 10 9 36 0 8 10 31 33 32 CASH FLOW Changes in working capital 9 5 0 -6 0 -4 5 -5 -7 -2 6 -15 -5 -5 Cash interest, net 0 -4 -18 -12 -9 -2 -8 -29 -10 -14 NA -34 -27 -24 Other -14 -32 -26 2 1 1 -2 1 -2 17 NA 20 10 11 Operating cash flow 52 25 25 2 12 17 17 48 3 19 7 52 61 65

Capex -71 -42 -16 0 -10 -3 -8 -21 -5 -10 0 -21 -17 -15 Free cash flow -19 -17 9 2 2 14 9 27 -2 9 7 31 44 50

Investing cash flow -89 -59 -41 -4 -11 11 12 8 -1 -6 -3 -21 -17 -15 Financing cash flow 39 17 13 -6 -7 -27 -8 -48 -18 -20 15 -52 -24 -17 FX 6 1 -2 1 0 1 0 1 0 0 0

Change in cash 8 -16 -4 -6 -6 1 21 10 -17 -7 19 -21 20 33

BALANCE SHEET Cash & equivalents 37 20 16 10 4 5 26 26 9 2 21 5 24 58

Bank debt 293 262 136 74 64 139 136 136 125 137 134 92 68 51 High yield bonds 0 0 0 142 142 140 140 140 141 140 140 140 140 140 Other non-current liabilities 0 41 104 0 10 12 11 11 11 9 9 10 10 10 Shareholder Loan 21 30 23 91 91 27 23 23 16 0 0

Total Debt 313 332 263 307 307 319 310 310 292 287 283 242 218 201 Net Debt 276 312 247 297 304 314 284 284 283 285 261 237 194 144

RATIOS

Senior Debt / LQA EBITDA 5.1x 4.7x 2.0x 1.0x 0.8x 1.6x 1.6x 1.7x 1.5x 1.7x 1.7x 1.1x 0.8x 0.6x Net Senior Debt / LQA EBITDA 4.4x 4.3x 1.7x 0.8x 0.8x 1.6x 1.3x 1.4x 1.4x 1.7x 1.4x 1.1x 0.5x NA

Total Debt / LQA EBITDA 5.4x 5.9x 3.8x 4.1x 3.9x 3.8x 3.6x 3.8x 3.6x 3.6x 3.5x 3.0x 2.6x 2.4x Net Debt / LQA EBITDA 4.8x 5.5x 3.6x 3.9x 3.8x 3.7x 3.3x 3.5x 3.5x 3.5x 3.2x 2.9x 2.3x 1.7x

*Pro Forma (PF) for debt financing and dividend Source – BNP Paribas Estimates, Invitel

223 European High Yield Research IT Holding ⎪ January 2006

Oleksiy Soroka, CFA +44 20 7595 4878 [email protected] IT Holding

Bond Description & Market Data, as of 5 January 2006 Next Call Issuer Credit Trend: Negative Description Amount (o/s) Ratings Date Price Price YTW STW 9.875% Senior Notes due 2012 EUR 185 mn Caa1/CCC+ NC NC 82.00 14.04% 1,128bp Source – BNP Paribas Company Profile IT Holding is a leading European producer and distributor of branded apparel and accessories which are targeted primarily at the young lines market segment. The company designs, produces, markets and distributes products under both exclusively licensed brands, including D&G Dolce & Gabbana, Versace Sport, Versace Jeans Couture, Just Cavalli and C’N’C Costume National as well as its own brands such as Gianfranco Ferre, Malo and Exte. IT Holding has an extensive distribution network spanning over 100 countries and 4,000 wholesale customers. In July 2005, IT Holding announced that it will not renew its licensing agreement with Dolce & Gabbana for its popular D&G brand of apparel and accessories starting from the 2007 spring/summer collection. D&G apparel and accessories accounted for almost one third of sales and approximately 40% of EBITDA (according to Moody’s) in 2004. The ordinary shares of IT Holding S.p.A. are publicly traded on the Italian Stock exchange. The beneficial ownership of the ordinary shares as of 7 March 2005 was as follows: PA Investments: 65.23%; Mr. Luigi Giribaldi: 21.3%; Mr. Gian Franco Ferre: 2.83%; GTP Holding S.p.A: 1.02%; Other: 9.62%. In the twelve months to 30 September 2005, IT Holding had turnover of €668.7mn and EBITDA of €105.5mn. To calculate IT Holding’s underlying leverage, we have adjusted the company’s reported EBITDA for costs of development of new collections. Based on this measure, we estimate that the company had a high leverage of 9.3x at the end of third quarter 2005. The third quarter is one of the seasonal peaks for IT Holding’s cash outflow due to swings in the company’s working capital. Therefore, we expect that the leverage measure will come down a bit to 8.2x by the end of this year. Investment Recommendation We maintain our BUY/Negative Credit Trend recommendation for IT Holding’s high yield notes. The notes dropped significantly after the company announced that it failed to renew the Dolce & Gabbana (D&G) manufacturing license at the end of July 2005. The bonds have since recovered off the lows, but still remain the cheapest in the Consumer universe on a spread basis. We think that the current yield and spread imply a distressed scenario for the notes in the near future, whereas we believe this will not be the case during the next twelve months. We recognise that IT Holding is fundamentally a weak credit and that the company’s bonds have a highly speculative profile. However, we think that the current price levels already reflect this reality and we have been unable to identify major near-term negative catalysts that would drive the bonds prices further down. Conversely, we do not anticipate any events that would trigger a significant capital appreciation of the notes during the next twelve months. Therefore, we recommend buying IT Holdings’ bonds at the current levels as a carry trade for the next six-month horizon. We admit that the cornerstone of our favourable recommendation for IT Holding’s notes is an assumption that the company has sufficient liquidity to weather the next two years. Our view is underpinned by several important assumptions: (1) Italian bank lenders under the uncommitted bilateral loan facilities (16 local financial institutions in total) will remain supportive of IT Holding throughout the period and will not pull their lines - at the end of the third quarter 2005, approximately €66mn was outstanding under those bilateral arrangements; (2) The company will be compliant with its covenants under the senior loan facility; (3) There will be cash inflows as a result of lower working capital requirements due to the loss of the D&G license; and (4) The company will manage underlying changes in its working capital prudently. We believe that IT Holding has satisfactory relations with its (Italian) bank lenders under both the bilateral and the senior facilities and do not think those relationships will break down in the medium term. Secondly, it is logical to expect that material amount of cash will be freed up as a result of the loss of the D&G license. Admittedly, our positive free cash flow forecasts for those years are heavily helped by the expected one-off working capital inflows and by our assumption that the underlying changes in the company’s working capital will have only a moderate negative effect on IT Holding’s cash flow generation.

224 European High Yield Research IT Holding ⎪ January 2006

Debt Profile High Yield Notes There are €185mn of 9.875% senior notes due 2012 outstanding at the moment. The notes are guaranteed on a senior basis by IT Holding S.p.A. and each of its subsidiaries - Ittierre S.p.A., ITC S.p.A. and Malo S.p.A. The guarantees provided by IT Holding S.p.A. and Ittierre S.p.A. are secured on an equal and rateable basis with all obligations of IT Holding S.p.A. under the €85mn loan agreement, and by a first priority pledge of the equity interests in Gianfranco Ferre S.p.A., Malo S.p.A. and Ittierre S.p.A.

Loan Agreement In October 2004, IT Holding entered into a senior loan facility that provided €85mn to replace their former term loan. Interest accrues at a rate per annum equal to EURIBOR+2.4%. The senior credit agreement benefits from the same guarantee package as the Senior Notes. As of 30 September 2005, the amount outstanding stood at €75.6mn.

Uncommitted Bilateral Loan Facilities and Overdraft Facilities As of 30 September 2005, IT Holding’s Uncommitted Bilateral Loan Facilities provided for total borrowings of up to approximately €140mn, of which €66mn was drawn. The facilities are unsecured, uncommitted, short-term in nature and are subject to termination at any time.

Securitisation Programme In July 2003, IT Holding, along with certain subsidiaries, entered into a 5-year programme for the securitization of trade receivables. The amount of receivables cannot exceed €160mn, of which €40mn remained available on 30 September 2005.

IT Holding Structure

€85.0 million IT Holding S.p.A.(1)(3) New Credit Agreement

Funding Loan(2)(3)

IT Holding Gianfranco €185.0 million Ittierre S.p.A.(3)(4)(5) Notes Finance S.A. Ferré S.p.A.

Other Other MALO S.p.A.(3)(4)(5) ITC S.p.A. (4)(5) subsidiaries subsidiaries

Other Other subsidiaries subsidiaries

1. The Company provides a downstream senior guarantee of the Notes. The Company’s obligations under this guarantee are equal and ratable with its obligations under the New Credit Agreement. 2. The proceeds from the issuance of the Notes were loaned by the Issuer to the Company pursuant to the Funding Loan. 3. The Issuer’s rights to the amount owed to it under the Funding Loan were pledged on a first-priority basis for the benefit of the holders of the Notes. In addition, the Company’s equity interests in Ittierre S.p.A., MALO S.p.A., ITC S.p.A. and Gianfranco Ferre S.p.A. were pledged by the Company for the benefit of the lenders under the New Credit Agreement and the holders of the Notes on an equal and ratable basis. 4. Ittierre S.p.A., MALO S.p.A. and ITC S.p.A. guarantee the New Credit Agreement and the Notes on an equal and ratable basis.

Source – IT Holding

225 European High Yield Research IT Holding ⎪ January 2006

Bond Covenant Bond description EUR 185mn 9.875% Senior Notes due 2012 Issuing entity IT Holding Finance S.A. Ranking Senior Secured Position vs. bank debt Pari passu Position vs. other bonds Not applicable Senior guarantees by the Company and the Subsidiary Guarantors. The obligations of the company and Ittierre S.p.A. will be secured on an equal and ratable basis with all obligations of the company under the credit agreement by a first-priority security interest in all the issued share capital of each of the pledged entities (Ittierre S.p.A., MALO S.p.A. and Security/Guarantees Gianfranco Ferre S.p.A.). In addition, the company is permitted to pledge the share capital in the pledged entities in connection with future issuances of indebtedness of the issuer, including any notes permitted under the indenture and on terms consistent with the relative priority of such indebtedness. Make Whole – Bund Rate plus 50 basis points, prior to 15 May 2006 Optional redemption Equity Claw – Max 35% of issue at 109.875%, prior to 15 November 2007

Tax redemption Yes – at par Negative pledge Yes – limitation on liens Cross default Yes – on €15mn or more of other debt Fall away covenants No Anti-layering No Change of control Put at 101%. The company (or the Restricted Subsidiary) cannot sell assets involving considerations of over €2.0mn unless: The issuer receives fair market value for them; 75% of the consideration received is in the form of: (a) cash or cash equivalents; (b) any liabilities of the company or any restricted subsidiary that are assumed by the transferee or purchaser; (c) any securities, notes or other obligations received by the company or any such restricted subsidiary from such transferee that within 180 days are converted into cash. Asset sales The company must use the net proceeds within 365 days to repay indebtedness under the new credit agreement, acquire a permitted business, make a capital expenditure, or to acquire other non-current assets that are used or useful in a permitted business. Net proceeds from an asset sale not used for the above will constitute excess proceeds. When the aggregate amount exceeds €10.0 million, the issuer will make a pro rata asset sale offer at par to all holders of notes and other indebtedness that is pari passu with the notes. If any excess proceeds remain after consummation of an asset sale offer, the company may use those excess proceeds for any purpose not otherwise prohibited by the indenture. Pro forma Fixed Coverage Ratio is at least 3.0x. Carve outs: Credit facilities cannot exceed €100.0mn less the aggregate amount of all net proceeds of asset sales used to repay term indebtedness or revolving credit under such credit facilities; Revolving credit indebtedness and letters of credit under credit facilities cannot exceed Debt limit 70% of receivables plus 50% of inventories, net of reserves; CLOs, mortgage financings or PMOs of up to €5.0mn; Inter-company debt provided it is expressly subordinated in right of payment to the notes, in the case of the issuer, or the Note Guarantee, in the case of a guarantor; General basket of up to €30mn; provided that only €10mn of such amount may be incurred by restricted subsidiaries of the company that are not subsidiary guarantors.

Source – BNP Paribas, IT Holding

226 European High Yield Research IT Holding ⎪ January 2006

Bond Covenant Bond description EUR 185mn 9.875% Senior Notes due 2012 If the company can raise at least €1.00 of additional indebtedness pursuant to the fixed charge coverage ratio test then 50% of the accumulated consolidated net income, plus 100% of equity or equity-like proceeds, plus 50% of any dividends received from an unrestricted subsidiary, plus the fair market value of an unrestricted subsidiary re- designated as a restricted subsidiary. Carve outs: Up to €5.0mn per 12 months in aggregate to buy back shares held by any current or Restricted payments former officer, director, employee of the company or any of its restricted subsidiaries. Redemption of any indebtedness that is contractually subordinated to the notes or to any note guarantee (i) at a purchase price not greater than 101% of the principal amount in the event of a change in control or (ii) at a purchase price not greater than 100% of the principal amount in accordance with provisions similar to the provisions described in the case of an asset sale. General basket of €10mn. Transactions of over €5.0mn have to be at fair terms and approved by a majority of the disinterested members of the Board of Directors. Transactions with affiliates Affiliate transactions or series of related affiliate transactions involving aggregate consideration in excess of €10.0mn require a written fairness opinion by an accounting, appraisal or investment banking firm of international standing. Source – BNP Paribas, IT Holding

227 European High Yield Research IT Holding ⎪ January 2006

IT Holding, Financial Model BNPP BNPP BNPP BNPP BNPP FYE – 31 December Actual Actual Actual Actual Actual Actual Forecast Forecast Forecast Forecast Forecast EUR mn 2002 2003 2004 Q1 05 Q2 05 Q3 05 Q4 05 2005 2006 2007 2008 P&L SUMMARY Net Revenues Ferre 95.2 118.3 31.4 19.9 33.5 34.6 119.4 121.3 126.1 132.4 % change 24.3% -5.7% 29.2% -2.3% -2.0% 0.9% 1.6% 4.0% 5.0% Malo 51.9 55.5 10.7 9.2 16.7 17.2 53.8 55.1 56.8 58.5 % change 6.9% -24.6% 1.1% 6.4% 4.0% -3.1% 2.5% 3.0% 3.0% Young Lines 395.3 421.1 131.7 70.5 126.7 87.2 416.1 422.5 233.7 247.7 % change 6.5% 5.2% -8.1% -2.4% -2.5% -1.2% 1.6% -44.7% 6.0% Accessories 34.5 58.3 20.8 22.7 24.1 15.1 82.7 98.5 84.1 97.2 % change 69.0% 38.7% 66.9% 33.1% 30.0% 41.8% 19.1% -14.6% 15.7% Other 10.0 0.0 0.1 -0.1 0.3 0.1 0.4 0.0 0.0 0.0 % change -100.0% Net Revenues 659.8 669.7 709.9 194.7 122.2 201.3 154.1 672.3 697.4 500.6 535.8 % change 1.5% 6.0% -7.5% -12.3% -3.9% 2.4% -5.3% 3.7% -28.2% 7.0%

EBITDA Ferre 9.6 12.5 3.8 -2.3 4.2 9.3 15.0 13.3 13.3 13.6 % of sales 10.1% 10.6% 12.1% -11.6% 12.5% 27.0% 12.6% 11.0% 10.5% 10.3% Malo -1.0 2.2 -0.1 -0.4 3.4 1.0 3.9 3.9 3.9 4.0 % of sales -1.9% 4.0% -0.9% -4.3% 20.4% 6.0% 7.3% 7.0% 6.8% 6.8% Young Lines 85.0 85.2 31.3 22.9 28.7 -7.4 75.5 74.2 38.8 40.3 % of sales 21.5% 20.2% 23.8% 32.5% 22.7% -8.5% 18.1% 17.6% 16.6% 16.3% Accessories 5.2 10.5 4.8 6.0 6.0 2.0 18.8 21.6 18.2 20.7 % of sales 15.1% 18.0% 23.1% 26.4% 24.9% 13.0% 22.7% 21.9% 21.7% 21.3% Other -1.9 -5.4 -3.7 -2.8 -2.4 2.5 -6.4 -6.0 -6.0 -5.5 EBITDA 108.0 96.8 106.0 36.2 23.3 39.9 7.4 106.8 106.9 68.2 73.1 % of sales 16.4% 14.5% 14.9% 18.6% 19.1% 19.8% 4.8% 15.9% 15.3% 13.6% 13.7%

EBIT 24.6 -50.0 7.5 13.2 5.4 13.6 -10.6 21.6 24.2 -1.8 5.8 % of sales 3.7% -7.5% 1.1% 6.8% 4.4% 6.7% -6.9% 3.2% 3.5% -0.4% 1.1%

Depreciation/amortization -83.4 -146.8 -98.5 -22.9 -18.1 -26.3 -18.0 -85.3 -82.7 -70.0 -67.3

Financial charges -27.3 -34.8 -29.4 -10.1 -11.2 -9.3 -12.4 -43.0 -28.5 -26.4 -26.1 Financial income 1.0 0.2 0.3 0.4 1.8 0.6 0.3 0.4 Net financial expense -27.3 -34.8 -29.4 -9.2 -11.0 -9.0 -12.1 -41.2 -27.9 -26.1 -25.7 Gain on disposal of discontinued operations 0.0 0.0 25.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Loss on disposal of discontinued operations 0.0 0.0 -1.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Income (loss) before taxes -2.7 -84.8 2.6 4.0 -5.6 4.6 -22.6 -19.7 -3.7 -27.8 -19.9 Income taxes 2.0 21.7 -13.8 -6.5 -2.8 -4.2 7.9 -5.5 1.3 9.7 6.9 Net income (loss) before minority interest -0.7 -63.0 -11.2 -2.4 -8.4 0.4 -14.7 -25.2 -2.4 -18.1 -12.9

CASH FLOW ITEMS EBITDA 96.8 106.0 36.2 23.3 39.9 7.4 106.8 106.9 68.2 73.1 Cash interest paid -36.4 -24.5 -5.8 -20.0 -2.5 -12.4 -40.7 -28.5 -26.4 -26.1 Cash interest received 6.6 9.7 0.5 0.4 0.2 0.4 1.5 0.6 0.3 0.4 Cash taxes paid -23.8 -2.8 0.0 0.0 -3.2 -1.8 -5.0 -2.6 0.0 0.0 Change in net working capital -7.2 -10.0 -53.2 17.0 -35.1 79.0 7.6 10.0 30.0 -18.0 Investments in collection development -47.5 -56.2 -66.6 -14.8 -17.1 -12.4 -19.0 -63.3 -49.8 -46.5 -45.8 Other operating cash items -6.4 10 0.0 -5.1 2.6 2.0 -0.5 0.0 0.0 0.0 Cash flow from operations -26.6 21.9 -37.0 -1.5 -10.5 55.6 6.5 36.6 25.7 -16.3 Capex -13.8 -7.0 -0.4 -1.7 -2.4 -2.0 -6.4 -7.0 -7.0 -7.0 Free cash flow -40.4 14.9 -37.4 -3.1 -12.9 53.6 0.1 29.6 18.7 -23.3

BALANCE SHEET ITEMS Factoring 81.5 123.7 89.5 138.3 59.3 59.3 49.3 19.3 37.3 Bilateral Bank Facilities 40.0 18.4 52.6 50.1 50.1 50.1 50.1 80.1 110.1 7% Ferre 2005 Bond 175.0 91.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 9.875% 2012 Bond 150.0 185.0 185.0 185.0 185.0 185.0 185.0 185.0 185.0 Senior Bank Facility 85.0 85.0 85.0 85.0 75.6 75.6 56.7 37.8 18.9 Total Debt 531.4 504.0 412.1 458.4 370.0 370.0 341.1 322.2 351.3

Cash and cash equivalents (plus escrowed cash) 163.4 18.7 13.2 46.8 11.9 11.9 12.6 12.4 18.2

Net Debt 368.0 485.3 398.9 411.6 358.0 358.0 328.4 309.8 333.0

CREDIT RATIOS Net debt/EBITDA 3.5x 4.7x 3.9x 3.9x 3.4x 3.4x 3.1x 4.5x 4.6x Net debt/EBITDA less ICD amortisation 7.4x 9.3x 8.2x 7.5x 16.1x 12.5x EBITDA/net interest expense 7.2x 6.1x 4.8x 4.6x 2.7x 2.7x 3.8x 2.6x 2.9x Source – BNP Paribas Estimates, IT Holding Leverage and Coverage are based on the last 12 months’ results. Some of the ratios are adjusted for the effects of acquisitions and disposals. In addition, these 2 measures are usually calculated based on EBITDA adjusted for exceptional or non-recurring items. Leverage is defined as net lease-adjusted debt (x8 operating leases)-to-EBITDAR. Coverage is defined as EBITDAR-to-(net interest+rental expenses).

228 European High Yield Research IT Holding ⎪ January 2006

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229 European High Yield Research Jenoptik AG ⎪ January 2006

Tran Dang, CFA +44 20 7595 8291 [email protected] Jenoptik AG

Bond Description & Market Data, as of 5 January 2006 Next Call Description Amount (o/s) Ratings Date Price Price YTW STW 7.875% Sr Nts due 2010 EUR 150mm B1/B 15-Nov-07 103.938 107.5 5.59% 272bp 2.5% Convert Nts due 2009 EUR 62.1mn NA/CCC+ 23-Aug-07 100 n.a. n.a. n.a. Source – BNP Paribas

Company Profile Jenoptik is an industrial technology group headquarted in Germany with two principal business divisions: Photonics Technologies and Clean Systems Technologies. The Photonics group develops, manufactures and markets lasers, precision optics and sensor measurement for a variety of industries including semiconductors, health care, automobile and various local authorities (mainly for traffic surveillance). The division also supplies stabilisation systems, generators & drives and aircraft components mainly to the defence industry. The Clean Systems division, which is under the process of being sold, offers integrated solutions and services that span and extend the useful life of manufacturing and office facilities. The division provides services related to the construction of complex manufacturing facilities, including plants with ultra-clean manufacturing environments (e.g. chip making, flat-panel manufacture). Jenoptik will typically act as the general contractor but will outsource around 80–90% of the work. The division also offers maintenance and management services under long- term contract to customers who own such plants. For the 12 months ending 30 September 2005, the group had revenues of €2,219mn and EBITDA of €97mn. Jenoptik is listed on the German Stock Exchange. Debt Profile As of 30 September 2005, the group had €475mn of financial liabilities consisting of:

! Bank liabilities: €203mn of which €84mn are short term, consisting of amounts outstanding under various bilateral bank facilities and certificates of indebtedness; ! Finance leases: €70mn of which €2mn are short term; ! Bills of exchange: €1mn; ! €150mn 7.875% Senior Notes due 2011: issued by Jenoptik AG in 2003; ! €62mn 2.5% Convertible Notes due 2009: issued by Jenoptik AG in July 2004, contractually subordinated to the €150mn 7.875% bond and structurally subordinated to operating subsidiaries’ liabilities.

230 European High Yield Research Jenoptik AG ⎪ January 2006

Jenoptik Structure

Subsidiary Guarantees

Intercompany Loans Assigned €62m Conv Nts €150m Senior for Security Purposes 2009 Jenoptik AG Notes 2010

€50 €100 100% 72.89%

M + W Zander Holding AG

100%

Jenoptik Laser, Optik, ESW_EXTEL Systems Wedel Jenoptik Facility Systeme GmbH Gesellschaft für Ausrüstung mbH Automatisierungstechnik GmbH Management M + W Zander Facility Subsidiaries Engineering GmbH

Other Photonics Subsidiaries

Other Facility Engineering Subsidiaries

Source – Jenoptik

231 European High Yield Research Jenoptik AG ⎪ January 2006

Bond Covenants Bond description 7.875% Senior Notes due 2010 2.5% Convertible Notes due 2009 Issuing entity Jenoptik AG Jenoptik AG Ranking Senior Unsubordinated Position vs. bank debt Structurally subordinated Structurally subordinated Position vs. other bonds Senior to the 2009 Convertible Notes Subordinated to the 2010 Senior Notes Senior guarantees from Jenoptik Laser, Optik, Syteme GmbH, ESW-Extel Systems Wedel Gesellschaft fur Ausrustrung GmbH, Security/guarantees Jenoptik Automatisierungstechnik GmbH - Security over €50mn loan to M+W Zander Holding AG and €100mn loan to M+W Zander Facility Engineering AG ! Make Whole – None ! Equity Claw – Prior to 15 November 2006, up to 35% at 107.875% From 23 Aug 2007 Jenoptik has the right to ! Call Schedule: Optional redemption redeem all the Notes by delivery of 15 November 2007 – 103.938% Jenoptik shares 15 November 2008 – 101.969% 15 November 2009 – 100% Tax redemption Yes at par No Negative pledge Limitation on liens with carve outs Yes Cross default Yes Yes Fall away covenants No No Anti-layering Yes No If >50% of voting rights or Jenoptik AG Put at 101%, based on >50% of voting Change of control disposes of all or substantially all of its power or substantial sale of assets assets Fair market value and 75% to be in cash, equivalents or Replacement Assets (as defined). Within 360 days reinvest into Asset sales similar business or repay debt. Any - proceeds remaining (subject to €10mn minimum) must be used to tender for bonds at par. Consolidated coverage ratio must exceed 2.25:1. Carve outs: ! €75mn pursuant to Credit Facilities or Capital Markets Indebtedness incurred Debt limit after the issue date of the notes (less - indebtedness under a receivables program); ! Capital lease and similar up to €35mn; ! Receivables Program up to €75mn; ! €15mn general carve out.

Source – BNP Paribas, Jenoptik

232 European High Yield Research Jenoptik AG ⎪ January 2006

Bond Covenants Bond description 7.875% Senior Notes due 2010 2.5% Convertible Notes due 2009

Subject to being able to incur €1 of additional debt then: ! 50% Consolidated Net Income less 100% of net loss plus proceeds from equity. Carve outs ! €1.5mn p.a. to repurchase employee stock;

Restricted payments ! A spin off of the holding in M+W - Zander Holding AG to the shareholders of Jenoptik, provided that related pension liabilities are transferred without recourse, that consolidated net debt of Jenoptik & Restricted subsidiaries is reduced by €220mn and that pro forma €1 of additional indebtedness may be incurred; ! €10mn general basket.

Must be no less favourable than if executed in an arms length transaction. If >€5mn Transactions with affiliates requires board support and if greater than - €40mn requires a fairness certificate from an external advisor. Source – Jenoptik

233 European High Yield Research Jenoptik AG ⎪ January 2006

Jenoptik, Financial Model

IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS FYE 31 December Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual EUR mn FY 02 FY 03 Q1 04 Q2 04 Q3 04 Q4 04 FY 04 Q1 05 Q2 05 Q3 05 PROFIT & LOSS

Sales 1,584 1,922 400 617 649 858 2,523 409 486 466 Cost of Sales -1,390 -1,718 -353 -547 -581 -750 -2,230 -360 -423 -409 Gross profit 195 204 47 70 68 108 293 49 63 56 R&D expenses -30 -28 -7 -8 -7 -10 -32 -7 -9 -8 SG&A -170 -183 -44 -48 -42 -48 -182 -36 -37 -35 Other operating income/expenses 70 16 39 -14 3 -26 2 4 -7 -6 EBIT 65 9 36 0 21 24 81 11 10 7 Net investment -16 -24 -2 -2 -4 -3 -10 1 -3 -3 Net interest -3 -28 -13 -6 -8 -6 -33 -6 -7 -6 Taxes -6 -3 -7 -1 -1 -10 -18 -3 -1 -2 Minorities -4 -6 -1 -2 -1 -2 -6 -1 -1 -3 Net profit 37 -52 13 -10 8 3 13 2 -2 -6

EBIT 65 9 36 0 21 24 81 11 10 7 D&A 31 42 12 12 16 11 51 11 11 13 Gains/loses from disposals -13 -1 -36 0 -4 2 -38 0 0 0 EBITDA 82 50 12 22 36 38 108 22 21 25

Revenue growth y/y 21.3% 31.3% 2.3% -21.2% -28.2% Gross profit margin 12.3% 10.6% 11.8% 11.3% 10.5% 12.6% 11.6% 12.0% 13.0% 12.1% EBITDA margin 5.2% 2.6% 2.9% 3.6% 5.6% 4.5% 4.3% 5.3% 4.4% 5.4%

CASH FLOW

Change in working capital -41 -8 -14 10 -69 49 -25 15 -39 -20 Cash from Operating Activities -29 43 -17 20 -38 110 75 -8 -28 23

Capex -45 -60 -10 -8 -7 -22 -47 -7 -11 -12 Acquisitions/Disposals/other -31 -28 83 1 -9 -55 21 -1 -39 7 Cash from Investing Activities -76 -88 74 -7 -16 -77 -26 -8 -50 -6

Debt Repayment -101 -81 -2 -13 -13 -109 -3 -31 -38 -38 Cash from Financing Activities 126 82 -47 12 21 3 -10 16 26 5

Net Change in Cash 21 37 10 25 -32 37 40 0 -52 22

BALANCE SHEET

Cash & Equivalents 125 111 146 150 107 110

Bank liabilities 205 198 145 178 192 203 Bills of exchange 0 0 0 0 0 1 Finance leases 0 163 70 70 70 70 €150mn 7.875% bonds due 2011 0 158 143 144 145 145 Gross Debt (at the Senior Notes level) 205 519 358 392 407 418 Convertible bond maturing 2009 0 0 57 57 57 57 Gross Debt 205 519 415 449 464 476

Net debt (Sr notes level) 80 408 212 242 300 308 Net Debt (Convert level) 80 408 269 299 357 365

LTM RATIOS

Coverage 28.3 1.8 3.3 4.5 4.3 4.3 (EBITDA-Capex)/Interest 12.8 -0.4 1.8 2.8 2.6 2.2

Gross leverage (Sr Notes level) 2.5 10.4 3.3 3.3 3.5 3.9 Net leverage (Sr Notes level) 1.0 8.2 2.0 2.0 2.6 2.9

Gross leverage (Convert level) 2.5 10.4 3.8 3.8 4.0 4.5 Net leverage (Convert level) 1.0 8.2 2.5 2.5 3.0 3.4 Source – BNP Paribas, Jenoptik

234 European High Yield Research Jenoptik AG ⎪ January 2006

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235 European High Yield Research Kabel BW ⎪ January 2006

Aizaz Shaikh +44 20 7595 8607 [email protected] Kabel BW

Bond Description & Market Data, as of 05 January 2006 Next Call Issuer Credit Trend: Stable Description Amount (o/s) Ratings Date Price Price YTW STW

9.502 % Senior Notes due 2015 EUR 170mn Caa1/CCC+ 03-Feb-06 103.000 101 9.68% 719 bp Source – BNP Paribas

Company Profile Kabel BW is the principle Level 3 cable television operator in the German state of Baden-Wurttemberg, Germany. Baden- Wurttemberg is the third largest German federal state, with a population of 10.7 million and approximately 4.9 million households. As of 30 September 2005, the company served approximately 2.3 million subscribers and its network passed approximately 3.4 million homes. For the twelve months ended 30 September 2005, Kabel BW generated total revenues of €255mn and EBITDA of €135mn. Net total leverage at September 2005 was 7.6x.

Investment Recommendation Kabel BW floating rate notes provide a fairly high running yield, with standard low call protection. We remain SELL on the notes with an underlying STABLE credit trend. The bonds held their value in 2005, but we think the risk is likely to heighten in 2006. Deleveraging has yet to materialize and the company also faces the prospect of being left out the major consolidating transactions occurring elsewhere in Germany. These factors complicate an exit strategy for shareholders (via IPO or trade sale), especially given the very low FCF/Debt. The likelihood of higher interest rates in 2006 may heighten the reward profile of the FRNs, but it ultimately puts more pressure on the company to improve its capital structure, which appears at this point to be challenging. Debt Profile The company's debt comprises a €170mn senior secured, floating rate, high yield bond issued in January 2005, with standard high yield covenants, and a senior credit facility. The bond was issued by Kabel BW Holdings, an intermediate holding company of Kabel BW operations and is secured by a third priority pledge of the partnership interests in Kabel BW and the shares in KBWV, the subsidiaries of the bond issuer which hold the operating assets of Kabel BW. The bonds are callable in 2006 (NC1).

Senior Credit Facilities

As part of the February 2005 financing, the Kabel BW, which conducts and owns the operations of the KBW, entered into a senior secured credit facility consisting of three term loans in an amount of €508.0mn, a second lien term loan in an amount of €78.0mn, an acquisition facility in an amount of €35.0mn and a revolving credit facility in an amount of €55.0mn for an aggregate amount of €676.0mn. As of 30September 2005, the term loan had tranche A outstanding in an amount of €185mn, tranche B outstanding in an amount of €162mn and tranche C outstanding in an amount of €162mn. The Senior Credit Facilities are secured by substantially all of Kabel BW’s assets and the equity interests in Kabel BW and its partners. Kabel BW Holdings, the issuer of the High Yield bonds has pledged all of its shares and interests in Kabel BW and KBWV (an intermediate hold co) as security for the credit facilities. Additionally, Kabel BW must meet a quarterly security coverage test requiring that 85% of consolidated EBITDA remain within guarantor companies.

Subordinated Shareholders Loan

As of 30 September 2005, €111.3mn of subordinated shareholder Loans were outstanding. These loans are unsecured and subordinated to any senior indebtedness, and mature on 4 February 2016.

236 European High Yield Research Kabel BW ⎪ January 2006

Kabel BW Structure

Shareholders(1)

Subordinated Shareholder 100% Loan

Kabel BW Holdings €170mn Senior FRNs

Senior (2) 100% KBWV Subordinated Guarantee Senior Credit Kabel BW Facilities

1. The shareholders hold their equity interests in Kabel BW Holdings through intermediate holding entities in Luxembourg and the Cayman Islands. 2. Kabel BW Holdings owns all of the economic interests in Kabel BW and all of the interests in KBWV, the general partner of Kabel BW.

Source – Kabel BW

237 European High Yield Research Kabel BW ⎪ January 2006

Bond Covenant EUR 170mn Floating rate (EUR + 736bps) Senior Notes Due 2015 Bond description EUR Notes Issuing entity Kabel BW Holdings GmbH Ranking Senior Notes Position vs. bank debt Structurally subordinated Position vs. other bonds No other bonds outstanding Senior subordinated guarantees from certain subsidiaries. The obligations of the Issuer Security/Guarantees under the Notes and the Indenture will be secured by a third-priority security interest in the Equity Interests in Kabel BW and KBWV held by the Issuer. ! Make Whole – prior to 11 Feb 2007 at bunds+50bp ! Equity Claw – prior to 03 Feb 2006 max 35% of issue at par + rate applicable on the date. ! Call Schedule: Optional redemption 03 Feb 2006 – 103.000% 03 Feb 2007 – 102.000% 03 Feb 2008 – 101.000% 03 Feb 2009 – 100.000% Tax redemption Yes – at par + accrued and unpaid interest Negative pledge Yes Cross default Yes Fall away covenants No Anti-layering Yes Change of control Put at 101%, 50%+ of voting power Not less that current market fair value, if above €10mn then authorisation from the Asset sales supervisory board is required. Debt is permitted up to 7.0x pro forma leverage before the 2nd year anniversary of the issue date, afterwards 6.0x. Carve outs: Debt limit ! Incurrence up to €675mn; ! CLOs, mortgage & purchase money obligations up to €40mn and 4% of Total Assets at the time of incurrence; ! General basket up to €50mn. If no event of default an the company can raise €1.00 of debt, then 50% net income less 100% net loss. Carve outs: ! Payments of dividends following the covenant “Debt Limit”; ! Cash payments instead of issuing fractional shares following the exchange of Restricted payments securities in connection with any stock dividend, distribution, stock split merger etc; ! Repurchase of stock out of the net cash proceeds of an issuance of shares up to €10mn; ! Dividends up to 6.0% a year of the net proceeds received of a public offering; ! General basket up to €35mn. Greater than €5mn, Transaction is on terms that are not materially less favourable, taken as a whole, to the Issuer or the relevant Restricted Subsidiary than those that would have been Transactions with affiliates obtained in a comparable transaction. Greater than €10mn, than needs an opinion from an international investment bank. Limitation on liens No Carve out Source – BNP Paribas, Kabel BW

238 European High Yield Research Kabel BW ⎪ January 2006

Kabel BW, Financial Model FYE 31 December Historic Historic Historic Historic PF Historic Historic Historic Historic Historic Proj’d Proj’d Proj’d EUR mn FY 02 9 mths FY 03 9 mths Q4 04 FY 04 Q1 05 Q2 05 Q3 05 FY 05 FY 06 FY 07 PROFIT & LOSS

Revenues 213.0 161.4 215.6 174.6 174.6 58.9 233.5 59.9 60.7 62.0 Own work capitalized 3.0 1.7 2.7 4.4 4.4 0.4 4.8 1.3 1.9 2.6 Other operating income 7.1 8.3 10.3 15.7 15.7 1.9 17.6 2.4 2.8 0.0 Total revenues 223.1 171.4 228.6 194.7 194.7 61.2 256.0 63.6 65.4 64.6 258.9 262.8 262.8 COGS -44.0 -29.9 -39.9 -23.4 -23.4 -7.5 -30.9 -7.0 -7.1 -7.4 Gross profit 179.1 141.4 188.7 171.3 171.3 53.7 225.0 56.6 58.4 57.2 SG&A -27.8 -24.0 -32.4 -26.9 -26.9 -6.5 -33.4 -8.5 -8.8 -8.8 Other expenses -56.8 -46.2 -56.8 -34.1 -34.1 -12.9 -47.0 -52.3 -13.8 -8.4 Including extraordinary financial costs -2.8 -2.8 -40.1 including duct leases 5.9 5.9 0.0 EBITDA 94.5 71.2 99.5 110.3 110.3 34.3 144.7 32.1 31.1 37.4 142.4 147.2 147.2 EBITDA after Duct leases 26.2 25.2 n.a. P&L Interest -91.4 -70.5 -93.1 -64.3 -27.0 -91.4 -21.2 -18.8 -18.8

Revenue growth y/y 2% 14% 14% 12% 1% 1% 0% Gross margin 80% 83% 83% 88% 88% 88% 88% 89% 89% 89% SG&A / sales 12% 14% 14% 14% 14% 11% 13% 13% 13% 14% EBITDA margin 42% 42% 44% 57% 57% 56% 57% 50% 48% 58% 55% 56% 56%

CASH FLOW

Cash interest -93.5 -72.3 -95.3 -64.7 -53.1 -26.6 -91.4 -21.2 2.4 0.0 -52.1 -51.6 -51.0 Change in working capital -60.8 -61.2 -46.4 -51.8 -51.8 -50.3 -102.1 -80.5 2.9 -13.8 Tax 0.0 -0.1 -0.1 -0.1 -0.1 0.0 0.0 0.0 0.0 0.0 Cash generated from operations 5.7 29.1 26.9 121.9 54.9 45.4 167.3 26.1 11.7 8.8 100.0 120.0 120.0 Net cash provided by operating activities -87.9 -43.2 -68.4 57.1 1.8 18.8 75.9 4.8 14.2 8.8 47.9 68.4 69.0

Capex -99.2 -10.0 -20.7 -27.1 -27.1 -7.1 -34.2 -14.9 -20.5 -15.2 -58.0 -40.0 -40.0 Investing cash flow -99.2 -8.6 -19.5 -24.1 -35.0 -6.3 -30.4 -15.0 -20.5 -16.0 -58.0 -40.0 60.0

Financing activities 101.8 -3.6 -4.5 -84.6 -85.5 -7.5 -92.0 15.8 -0.6 -0.6 0.0 -16.0 -27.0

Change in cash 8.3 16.9 2.9 -51.5 -65.5 5.0 -46.5 5.6 -6.9 -7.8 -10.1 12.4 2.0

BALANCE SHEET

Cash & equivalents 80.5 97.4 83.5 32.0 17.9 37.0 37.0 42.5 35.8 28.0 26.9 39.3 41.3

Bank Debt 512.3 512.3 512.3 436.3 425.0 425.0 586.0 586.0 586.0 586.0 586.0 576.0 565.0 Term Loan A 185.0 185.0 185.0 185.0 185.0 175.0 164.0 Term Loan B 161.5 161.5 161.5 161.5 161.5 161.5 161.5 Term Loan C 161.5 161.5 161.5 161.5 161.5 161.5 161.5 Second Lien Term Loan 78.0 78.0 78.0 78.0 78.0 78.0 78.0 HY Notes 170.0 170.0 170.0 170.0 170.0 170.0 170.0 Total Financial Debt 512.3 512.3 512.3 436.3 425.0 425.0 756.0 756.0 756.0 756.0 756.0 746.0 735.0 Capitalized Leases 273.2 255.1 254.2 245.7 249.5 249.5 245.7 248.3 247.0 245.7 242.0 236.0 230.0 Subordinated Shareholder Loan 344.3 372.5 381.5 410.4 425.7 425.7 90.4 111.7 112.4 113.1 112.4 112.4 112.4 Total Debt 785.5 767.5 766.6 682.0 674.5 674.5 1,001.7 1,004.3 1,003.0 1,001.7 998.0 982.0 965.0 Net Debt 705.0 670.0 683.1 650.0 656.6 637.6 964.7 961.8 967.2 973.7 971.1 942.7 923.7

RATIOS

Leverage Bank Leverage (gross) 4.1x 4.6x 4.7x 3.9x 4.1x 3.9x 3.8x Cash Pay Leverage (gross) 5.2x 5.9x 6.1x 5.1x 5.3x 5.1x 5.0x Total leverage (gross) 6.9x 7.8x 8.1x 6.7x 7.0x 6.7x 6.6x Total leverage (net) 6.7x 7.5x 7.8x 6.5x 6.8x 6.4x 6.3x Source – BNP Paribas Estimates, Kabel BW

239 European High Yield Research Kabel Deutschland ⎪ January 2006

Aizaz Shaikh +44 20 7595 8607 [email protected] Kabel Deutschland

Bond Description & Market Data, as of 05 January 2006 Next Call Issuer Credit Trend: Stable Description Amount (o/s) Ratings Date Price Price YTW STW

10.625 % Sr Nts due 2010 USD 610mn B2/B- 01-Jul-09 105.313 108 1/2 8.88% 405 bp 10.75 % Sr Nts due 2012 EUR 250mn B2/B- 01-Jul-09 105.375 111 1/2 8.24% 536 bp 10.69 % Sub PIK Nts due 2014 EUR 400mn NA/B- 15-Dec-05 100.000 101 10.90% 780 bp Source – BNP Paribas

Company Profile Kabel Deutschland is the largest Lever 3 cable television operator in Germany. The company was formed in 2003 from the acquisition of six of the nine regional cable television businesses previously owned by Deutsche Telekom AG, together with other network assets. The company currently operates in the northern, southern and eastern regions of Germany, including the major cities of Berlin, Hamburg, Munich and Dresden. The company's network passes approximately 15.3 million homes, of which the company served approximately 9.6 million directly or indirectly. Kabel Deutschland has approximately 48% market share in the German cable television market, measured as a proportion of 20 million cable television subscribers nation-wide. For the twelve months ended September 30, 2005, the company generated total revenues of €1,057mn, and EBITDA of €402mn. Senior cash pay leverage was 4.8x at the end of September 2005 and total leverage was 5.8x.

Investment Recommendation Kabel Deutschland operating performance continues to be stable, but unfortunately lacking growth. Given that most of the FCF will be consumed in spending for growth, credit enhancement is likely to be limited in the medium term. The way the business appears to be running, we think the financial structure will need a boost from either new equity or a relaxation of bank amortization by 2007. In this context we think investors are better rewarded (relative to risk) at the portions of the capital structure closer to the equity; in particular we still remain moderately sanguine about the PIK; the cash bonds are HOLD. Credit trend is STABLE.

Debt Profile Kabel Deutschland's outstanding debt, comprising bonds and bank facility, was put in place in 2004. The company issued €250mn 10.75% senior notes and $610mn 10.625% senior notes and raised €1,370mn in bank funding. Proceeds were used to repay existing bank debt and dividend €475mn to shareholders. In December, proceeds from a further €400mn floating rate PIK notes issue were dividended to shareholders. The company's cash pay bonds were issued by Kabel Deutschland GmbH the intermediate holding company of KDS, which conducts the company's operations and owns subsidiary network and operating assets. These notes have standard high yield covenants, are callable in 2009 (NC5) and are guaranteed on a subordinated basis by KDS. The cash pay notes have the benefit of a second-priority pledge of the partnership interests in KDS. The KDG PIK notes were issued by Kabel Deutschland Holding GmbH and are therefore structurally subordinated to the cash pay bonds. The PIK notes are callable at par in 2005 (NC1) and pay interest at equivalent of Euribor + 850bp in additional notes. Interest on these notes will increase by 200bp if senior leverage (at the bank level) is greater than 3.5x; the company may also elect to permanently pay these notes in cash.

Senior Credit Facility The Senior Facilities Agreement provides for facilities of up to €1,420mn and includes 3 term loans including a 7-year tranche A, in the amount of €690mn, 8-year tranche B of €340mn and 9-year tranche C of €340mn. The facility also includes a 7-year revolver in the amount of €50mn and is secured by KDG's partnership interests in KDS and a pledge of KDS' operating assets. At the end of September, 2005 the company has €1.2bn drawn on its bank facility.

240 European High Yield Research Kabel Deutschland ⎪ January 2006

Kabel Deutschland Structure

Cable Holding S.àr.l.

100%

KDG Holding €400m Subordinated PIK Notes

100%

$610m 10.625% Senior Notes KDG €250m 10.75% Senior Notes

100%

Senior Credit New KDS (1) Facilities

1. The Senior Notes are guaranteed by NewKDS on a senior subordinated basis. NewKDS is the borrower under the Senior Credit Facilities.

Source – Kabel Deutschland

241 European High Yield Research Kabel Deutschland ⎪ January 2006

Bond Covenants EUR 250mn 10.75% Senior Notes 2014 ; USD 610mn 10.625% Senior Notes 2014 Bond description EUR Notes USD Notes Issuing entity Kabel Deutschland GmbH (publ) Ranking Senior notes Position vs. bank debt Structurally subordinated Position vs. other bonds Pari passu Senior subordinated guarantees by Kabel Deutschland Vertrieb and Service GmbH&Co Security/Guarantees Second priority pledge on partnership interest in KDS ! Make Whole – prior to 15 March 2007 ! Make Whole – prior to 15 March 2007 at treasuries/bunds/gilts+50bp at treasuries/bunds/gilts+50bp ! Equity Claw – prior to 15 March 2007 ! Equity Claw – prior to 15 March 2007 max 35% of issue at par + coupon max 35% of issue at par + coupon ! Call Schedule: ! Call Schedule: Optional redemption 01 July 2009 – 105.313% 01 July 2009 – 105.375% 01 July 2010 – 103.542% 01 July 2010 – 103.583% 01 July 2011 – 101.771% 01 July 2011 – 101.792% 01 July 2012 – 100.000% 01 July 2012 – 100.000% Tax redemption Yes at par + accrued and unpaid interest Negative pledge Yes Cross default Yes Fall away covenants Yes Anti-layering Yes Change of control Put at 101%, 50.1% of voting share capital If the asset is at least equal to the fair market value, as determined in good faith by the board of directors, of the shares and assets. If 75% of the consideration received by the issuer is in the form of cash or cash equivalents. Asset sales If the issuer applies 100% of the net available cash from the asset disposal to: ! redeem senior Indebtedness ! acquire additional assets ! offer the holders to buy back notes under the conditions describe in the indenture Debt is permitted if after giving pro forma effect thereto, the consolidated leverage ratio at KDG Holding is less than 5.50 to 1.00 if the Incurrence is prior to the 18-month anniversary of the issue date, or 5.00 to 1.00 after. Carve outs: Debt limit ! Credit facility can not exceed €90mn, if no acquisitions are consummated €100mn. ! CLOs or PMOs can’t exceed if none of the acquisition are consummated €100mn and 5% of the assets, if all €175mn and 3.5%, and partly €100mn + €35mn for Ish, + €30mn KBW, + €10mn if Iesy. If company can raise €1.00 of debt then 50% net income less 100% net loss. Carve outs: ! Payments of dividends following the covenant “Debt Limit”. ! Repurchase of stock from employees up to $3.5mn in any calendar year – in any event Restricted payments up to a total of $10.5mn a year. ! Dividends in any calendar year, up to 6% of aggregate net cash proceeds, from all public offerings. ! Dividends with connection to advisory or consulting up to $2mn a calendar year. ! General basket up to $10mn. All transactions with affiliates should be made in good faith and on an arm’s-length basis, and for transaction involving an aggregate value of €10m or greater the transaction has to Transactions with affiliates be approved by the board of directors; for transactions involving an aggregate value of €50m a written opinion of an independent financial advisor is required (transaction has to be fair on a financial stand point). Source – BNP Paribas, Kabel Deutschland

242 European High Yield Research Kabel Deutschland ⎪ January 2006

Bond Covenant EUR 400mn EURIBOR + 850bp notes 2014 Bond description EUR Notes Issuing entity Kabel Deutschland Holding GmbH Ranking Floating Rate Senior PIK notes Position vs. Bank debt Structurally subordinated Position vs. Other bonds Structurally subordinated The Notes are general unsecured obligations of the Issuer that rank senior in right of Security/guarantees payment to all existing and future Indebtedness that is expressly subordinated in right of payment to the Notes. Call Schedule: 15 December 2005 – 100.000% Optional redemption 15 December 2006 – 102.000% 15 December 2007 – 101.000% 15 December 2008 – 100.000% Tax redemption Yes at par + accrued and unpaid interest Negative pledge Yes Cross default Yes Fall away covenants Yes Anti-layering Yes Change of control Put at 101%, 50% of voting share capital If the asset is at least equal to the fair market value, as determined in good faith by the board of directors, of the shares and assets. Asset sales If 75% of the consideration received by the issuer is in the form of cash or cash equivalents. If the issuer applies 100% of the net available cash from the asset disposal to: redeem senior Indebtedness. Debt is permitted if after giving pro forma effect thereto, the consolidated leverage ratio at KDG Holding is less than 6.00 to 1.00. Carve outs: Debt limit ! Credit facility can not exceed €1,420mn, in case of refinancing of credit facility. ! CLOs or PMOs can’t exceed if none of the acquisition is consummated €100mn and 5% of the assets. ! In case of refinancing, indebtedness can’t exceed €125mn and 5% of total assets. If company can raise €1.00 of debt then 50% net income less 100% net loss. Carve outs: ! The fair market value of property or assets other than cash covered by the preceding sentence shall be the fair market value thereof as determined in good faith by the Issuer Restricted payments ! for property or assets so determined to have a fair market value in excess of €15mn, the fair market value shall be set forth in an Officer’s Certificate; ! if more than €30mn, the fair market value shall be set forth in a resolution approved by at least a majority of the Board of Directors of the Issuer attached to an Officer’s Certificate. ! General basket of €60mn. All transactions with affiliates should be made in good faith and on an arm’s-length basis and, for transaction involving an aggregate value of €10mn or greater the transaction has to Transactions with affiliates be approved by the board of directors; For transactions involving an aggregate value of €50mn, a written opinion of an independent financial advisor is required (transaction has to be fair on a financial stand point). The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, Limitations on liens create, Incur or suffer to exist any Lien upon any of its property or assets. Source – BNP Paribas, Kabel Deutschland

243 European High Yield Research Kabel Deutschland ⎪ January 2006

Kabel Deutschland, Financial Model FYE 31 December Historic Historic Historic Historic Historic Historic Historic Historic Historic Historic Proj’d Proj’d Proj’d EUR mn FY 02 FY 03 Q1 04 Q2 04 Q3 04 Q4 04 FY 04 Q1 05 Q2 05 Q3 05 FY 05 FY 06 FY 07 PROFIT & LOSS

Revenues 913 985 245 255 251 264 1,015 265 267 261 Own work capitalized 13 9 2 3 3 4 13 3 0 0 Change in Work in process 0 0 0 0 0 -1 -1 0 0 0 Other operating income 74 60 12 6 7 12 37 4 3 2 Total revenues 1,000 1,054 259 264 261 280 1,064 272 269 263 1,085 1,107 1,129

COGS -297 -285 -70 -73 -76 -76 -294 -80 -105 -73 320 321 327 Gross profit 703 769 189 191 186 204 770 192 164 190 765 786 801 SG&A -147 -147 -35 -35 -38 -38 -146 -38 -21 -57 -149 -154 -158 Other operating income -247 -213 -47 -52 -41 -79 -219 -50 -40 -29 -197 -210 -214 EBITDA 309 409 108 103 107 86 405 104 102 103 419 422 429 P&L Interest -120 -179 -69 -25 -63 -35 -192 -37 -43 -42 -141 -137 -131

Revenue growth y/y 5.4% -3.2% 2.1% -3.1% 8.0% 1.0% 4.9% 2.1% 0.8% Gross margin 70.3% 73.0% 73.0% 72.3% 71.1% 72.9% 72.4% 70.5% 60.9% 72.1% 70.5% 71.0% 71.0% SG&A / sales 14.7% 13.9% 13.4% 13.4% 14.4% 13.7% 13.7% 13.9% 7.9% 21.8% 13.7% 13.9% 14.0% EBITDA margin 30.9% 38.8% 41.6% 39.1% 41.0% 30.9% 38.0% 38.2% 38.0% 39.2% 38.6% 38.1% 38.0%

CASH FLOW

Cash Interest -120 -179 -69 -25 -63 -35 -192 -37 -43 -42 -141 -137 -131 Change in working capital -5 5.8 -22.7 -21.0 -40.3 -78.2 -82.6 -55.2 63.7 -100 Total other adjustments -27 14.2 -0.6 24.6 -9.7 28.6 135.1 34.1 -110.0 Cash generated from operations 199.6 58.9 54.8 48.5 1.7 163.9 119.0 45.1 26.5 178 285 298

Cash received from disposals 10 8 0 0 0 9 1 0 0 Cash related to acquisition costs and invesment -12 -4 -4 -10 0 -18 0 0 0 Capex -44 -10 -25 -19 -25 -78 -15 -15 -21 -125 -175 -200 Investing cash flow -61 -8 -34 -41 -39 -122 -24 -20 -27 -125 -150 -150

Financing activities -122 28 0 6 -35 -1 -109 0 -1 -179 -86 -100

Change in cash 16 79 21 13 -72 41 -14 25 -1 -126 49 48

BALANCE SHEET

Cash & equivalents 106 185 205 218 147 147 133 158 157 21 69 117

Bank Debt 1,338 1,370 895 1,336 1,336 1,227 1,220 1,216 1,157 1,070 970 10.625% Sr Nts due 2014 492 492 492 492 492 512 500 519 492 492 492 10.75% Sr Nts due 2014 250 252 253 254 255 255 250 250 250 250 250 Total High Yield Bonds 742 744 745 746 747 767 750 769 1,185 1,235 1,292 Total Senior Debt 2,080 2,114 1,640 2,082 2,083 1,994 1,970 1,984 1,899 1,812 1,712 Float Rate Sr PIK Nts due 2014 400 401 400 402 402 443 492 550 Total Financial Debt 2,080 2,114 1,641 2,484 2,487 2,394 2,372 2,386 2,784 2,797 2,812 Shareholder loans 148 0 1 2 3 Total Debt 2,227 2,114 1,642 2,486 2,490 2,394 2,372 2,386 2,784 2,797 2,812 Net Debt 2,080 1,909 1,423 2,337 2,340 2,261 2,214 2,229 2,764 2,728 2,695

RATIOS

Coverage EBITDA- Capex/ Cash Interest 1.7x 2.4x 2.0x 1.9x 2.1x 1.8x 1.7x

Leverage Bank Leverage (gross) 3.3x 2.1x 3.3x 3.3x 3.1x 3.1x 3.1x 2.8x 2.5x 2.3x Senior Notes Leverage (gross) 5.0x 3.8x 5.1x 5.1x 5.0x 4.9x 5.0x 4.5x 4.3x 4.0x Total leverage (gross) 5.0x 3.9x 6.1x 6.2x 6.0x 5.9x 6.0x 6.6x 6.6x 6.6x Total leverage (net) 4.6x 3.3x 5.8x 5.8x 5.6x 5.5x 5.6x 6.6x 6.5x 6.3x

Source – BNP Paribas, Kabel Deutschland

244 European High Yield Research Kabel Deutschland ⎪ January 2006

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245 European High Yield Research Kamps AG ⎪ January 2006

Oleksiy Soroka, CFA +44 20 7595 4878 [email protected] Kamps AG

Bond Description & Market Data, as of 5 January 2006 Next Call Issuer Credit Trend: Negative Description Amount (o/s) Ratings Date Price Price YTW STW 8.5% Senior Notes due 2009 EUR 325mn B2/NR 15-Feb-06 104.25 99.50 8.68% 582bp Source – BNP Paribas

Company Profile Kamps produces and distributes craft and pre-packaged bread and bakery products in Germany. The company is the largest bakery business in the country with strong nationally recognised bakery brands, Golden Toast and Lieken Urkorn. Kamps is owned by the Barilla Group, a major international manufacturer and marketer of pasta and a leading Italian bakery company. In the twelve months ended 30 September 2005, Kamps had continuing (Germany-only) revenues of €1,062mn and EBITDA of €71mn. At the end of third quarter 2005, the company had leverage of 4.4x and coverage of 2.2x. We estimate that, adjusting for operating leases (using the 8x method), Kamps’ lease-adjusted leverage was 7.0x at the end of third quarter 2005. Investment Recommendation

We maintain our REDUCE/Negative Credit Trend recommendation for Kamps’ 8.5% notes due 2009. The company’s bond fell drastically after Kamps reported weak results for third quarter 2005 in November. However, the bond prices have largely recovered since then and are now quoted close to par. We believe that such recovery is premature, given that we expect that Kamps will have one ore more weak quarters before managing to stabilize its performance. We think that the bonds will weaken again on the back of the expected poor results. In the retrospect, we were unpleasantly surprised to discover that material cost savings attained by the company during the first nine months of 2005 (just over €29mn) were not sufficient to off-set the decline in Kamps’ underlying profitability during the period. Our base case scenario assumes that the company’s results will bottom-out some time during the first half of next year. However, we caution that should the weakness persist beyond that point, Kamps’ credit profile will weaken further in a material way. On the more positive note, we feel that, for the moment, the Barilla Group continues to be supportive of Kamps and that Barilla will be prepared to provide the former with necessary liquidity (in the form of intercompany loans) during 2006.

Debt Profile At the end of third quarter 2005, Kamps’ indebtedness consisted primarily of the high yield notes (balance sheet amount of €326.5mn) and the loan from Barilla (€24.8mn). We also understand that the company had an off-balance sheet receivables securitisation programme of up to €100mn (which we believe was fully utilized).

246 European High Yield Research Kamps AG ⎪ January 2006

Kamps Structure

Kamps AG Issuer of the 8% and 8.5% notes Düsseldorf

Logi-K GmbH

Kamps IT Service GmbH

Kamps Brot-und Kamps Bakeries Düsseldorf Backwaren GmbH Garrel

Zimmerman GmbH Kamps Grundstücks- gesellschaft mbH*

Zimmerman GmbH & Co. KG SL Mobilien Leasing Aries GmbH & Co. KG

Julia Vermietungs-GmbH & Co. KG

Nexus Grundstücksverw. GmbH & Co. KG Leasing Companies Degemakro Grundst.- Verw. GmbH & Co. KG

* Immobiliengesellschaft / Real Estate Company Source – Kamps

247 European High Yield Research Kamps AG ⎪ January 2006

Bond Covenant Bond description EUR 325mn 8.5% Senior Notes due 2009 Issuing entity Kamps AG Ranking Unsecured and unsubordinated Position vs. bank debt Assume that pari passu Position vs. other bonds Not applicable Security/Guarantees No ! Equity Clawback – 35% at 108.5 before 15 February 2005 ! Call Schedule: - during the twelve-month period beginning Optional redemption 15 February 2006 – 104.250% 15 February 2007 – 102.125% 15 February 2008 and thereafter – 100.00% Tax redemption Yes Negative pledge Yes Cross default Yes – on €15mn or more of other debt Fall away covenants Yes Anti-layering No Change of control Put at 101% The Issuer cannot sell assets unless: ! The issuer receives a fair market value for them; ! At least 75% of the consideration consists of cash or equivalent or the assumption or release of debt of the Issuer or any of its subsidiaries; ! The proceeds may be applied (to the extent that the Issuer or its Subsidiary elects or is Asset sales required by the terms of any debt) to (a) make permanent repayment of the pari passu indebtedness then outstanding; (b) to reinvest in assets useful in any Permitted Business. Any proceeds not applied as per the above during 360 days in the aggregate amount of €15mn will have to be used to repurchase the bonds at par or any other pari passu debt at 100% of the principal amount, plus accrued interest. Pro forma Consolidated Fixed Charge Coverage Ratio of at least 2.25x. Carve outs: ! Capital leases and Purchase Money Obligations (including mortgage financings) used for investment in the business not to exceed €30mn outstanding at any time (provided Debt limit the investments are made at fair); ! General basket of €50mn; ! Indebtedness owed to the employees in connection with loan stock issued under an employee stock option plan of up to €5mn outstanding at any time; If the company can raise €1.00 of debt then 50% of accumulated net income less 100% accumulated net loss plus 100% of equity or equity-like proceeds Carve outs: Restricted payments ! Purchase of stock options held by employees of up to €2mn in any one fiscal year, not to exceed €5mn in aggregate prior to the maturity of the notes; ! General basket of up to €30mn. Must be conducted on an arms’ length basis. Carve outs: ! Transactions in excess of €10mn need to be approved by an executive officer who is a member of the Management Board (Vorstand) of the Issuer and transactions in Transactions with affiliates excess of €50mn require a written opinion of a nationally recognised investment banking, accounting, valuation or appraisal firm of the Issuer’s choosing stating that such transaction is fair; ! Loans to officers, directors, employees or consultants in the ordinary course of business up to €2mn. Source – BNP Paribas, Kamps

248 European High Yield Research Kamps AG ⎪ January 2006

Kamps AG, Financial Model BNPP BNPP BNPP BNPP BNPP Actual Actual Actual Actual Actual Actual F’cast F’cast F’cast F’cast F’cast EUR mn 2002 2003 2004 Q1 05 Q2 05 Q3 05 Q4 05 2005 2006 2007 2008 P&L SUMMARY Turnover Craft Bakeries 264.3 246.7 234.0 57.5 56.2 44.6 40.3 198.6 161.5 169.0 176.7 % change -10.0% -6.7% -4.8% -5.1% -4.3% -23.1% -3.3% -15.1% 0.9% 4.6% 4.5% Retail Bakeries 1,445.6 1,411.8 1,170.1 267.8 277.0 244.9 210.5 1,000.2 810.2 826.4 851.2 % change 2.7% -2.3% -5.8% -7.8% -7.6% -12.3% -10.0% -14.5% -3.0% 2.0% 3.0% Other Segments 19.9 21.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 % change 192.6% 6.0% -100.0% -100.0% -100.0% -100.0% -100.0% -100.0% 0.0% 0.0% 0.0% Turnover (net) 1,729.8 1,679.6 1,404.1 325.3 333.2 289.5 250.7 1,198.7 971.7 995.4 1,027.9 % change 1.2% -2.9% -5.7% -7.3% -7.1% -14.2% -29.8% -14.6% -18.9% 2.4% 3.3%

EBITDA Craft Bakeries 34.9 27.8 25.1 7.0 4.9 3.9 4.5 20.3 16.2 17.3 19.0 % of revenues 13.2% 11.3% 10.7% 12.2% 8.7% 8.7% 11.2% 10.2% 10.0% 10.3% 10.8% Retail Bakeries 123.9 129.8 87.8 19.3 24.7 13.3 13.0 70.3 55.9 61.2 63.8 % of revenues 8.6% 9.2% 7.8% 7.2% 8.9% 5.4% 6.2% 7.0% 6.9% 7.4% 7.5% Other Segments -19.6 -9.9 -11.3 -1.6 -2.3 -1.6 -1.5 -7.0 -6.8 -6.8 -6.9 Total EBITDA 139.2 147.7 101.6 24.7 27.3 15.6 16.1 83.7 65.3 71.7 76.0 % of net revenues 8.0% 8.8% 7.2% 7.6% 8.2% 5.4% 6.4% 7.0% 6.7% 7.2% 7.4% 65.2 Adjustments for one-time items 21.1 0.0 2.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Operating EBITDA 160.3 147.7 104.2 24.7 27.3 15.6 16.1 83.7 65.3 71.7 76.0 % of net sales 9.3% 8.8% 7.4% 7.6% 8.2% 5.4% 6.4% 7.0% 6.7% 7.2% 7.4%

Total EBIT 22.2 52.8 29.6 8.4 12.3 1.7 3.1 25.5 10.2 14.9 17.6 % of revenues 1.3% 3.1% 2.1% 2.6% 3.7% 0.6% 1.2% 2.1% 1.0% 1.5% 1.7% Net Interest Expense -63.4 -54.2 -43.6 -11.0 -11.8 -11.4 -8.7 -42.9 -30.4 -31.1 -31.1 Profit From Ordinary Activities -41.2 -1.4 -14.0 -2.6 0.5 -9.7 -5.7 -17.5 -20.2 -16.1 -13.5 Net Extraordinary Income (Expense) -57.4 -22.6 -57.0 0.0 0.0 -97.0 0.0 -97.0 0.0 0.0 0.0 Profit Before Taxes -98.6 -24.0 -71.0 -2.6 0.5 -106.7 -5.7 -114.5 -20.2 -16.1 -13.5 Income Taxes and Other Taxes -27.3 -8.5 -4.5 -0.9 -0.7 -1.1 2.0 -0.7 0.9 0.7 0.5 Effective Tax Rate 27.7% 35.4% 6.3% 34.6% -140.0% 1.0% 35.0% -0.6% 5.0% 5.0% 5.0% Partial Transfer of Profits -0.9 -0.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Net Income -126.8 -33.3 -75.5 -3.5 -0.2 -107.8 -3.7 -115.2 -19.4 -15.5 -12.9

CASH FLOW ITEMS EBITDA 160.3 147.7 101.6 24.7 27.3 15.6 16.1 83.7 65.3 71.7 76.0 Net Cash Interest Expense -63.4 -54.2 -43.6 -11.0 -11.8 -11.4 -8.7 -42.9 -30.4 -31.1 -31.1 Cash Taxes -11.9 -8.5 -4.5 -0.9 -0.7 -1.1 2.0 -0.7 0.9 0.7 0.5 Working Capital Effect and Other Operating Cash Items -36.8 -41.8 -23.9 -13.8 58.3 -6.1 2.0 40.4 0.0 0.0 0.0 Operating cash flow (after other assets/liabilities) 48.2 43.2 29.6 -1.0 73.1 -3.0 11.3 80.4 35.8 41.3 45.5 Capex -85.3 -62.5 -74.8 -11.1 -11.6 -18.4 -33.9 -75.0 -53.6 -40.6 -40.6 Free Cash Flow -37.1 -19.2 -45.3 -12.1 61.5 -21.4 -22.6 5.4 -17.8 0.7 4.9

BALANCE SHEET ITEMS Cash Balance 48.3 25.3 31.3 30.9 48.4 20.0 7.7 7.5 9.7 10.4 15.3 "Quasi Cash" 75.0 75.0 75.0 75.0 0.0 0.0 0.0 0.0 0.0 0.0 Debt 8% Nts due 2005 250.0 240.0 240.0 240.0 240.0 0.0 0.0 0.0 0.0 0.0 0.0 8.5% Sr Nts due 2009 325.0 325.0 325.0 325.0 325.0 325.0 325.0 325.0 325.0 325.0 325.0 Convertible Notes 10.6 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 Bonds 585.6 565.3 565.3 565.3 565.3 325.3 325.3 325.3 325.3 325.3 325.3 Bank Liabilities 252.4 0.1 41.6 55.0 0.0 25.4 35.4 35.4 55.4 55.4 55.4 Finance leases 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Interest-Bearing Debt 838.0 565.4 606.9 620.3 565.3 350.7 360.7 360.7 380.7 380.7 380.7 Net Balance Sheet Debt 789.7 540.1 575.6 589.4 516.9 330.7 353.0 353.2 371.0 370.3 365.4 Net Balance Sheet Debt (after subtracting "quasi cash") 789.7 465.1 500.6 514.4 441.9 330.7 353.0 353.2 371.0 370.3 365.4 Off-balance sheet liabilties (ABS programme) 0.0 0.0 0.0 0.0 98.0 90.1 90.1 90.1 90.1 90.1 90.1 Net Debt 789.7 465.1 500.6 514.4 539.9 420.8 443.1 443.3 461.1 460.4 455.5

CREDIT RATIOS EBITDA/Net Interest 2.5x 2.7x 2.3x 2.2x 2.4x 2.2x 1.9x 1.9x 2.1x 2.3x 2.4x Net Balance Sheet Debt/EBITDA 4.9x 3.7x 5.7x 6.0x 4.9x 3.4x 6.8x 6.8x 5.7x 5.2x 4.8x Net Debt (net of quasi cash)/EBITDA 3.1x 4.9x 5.2x 5.1x 4.4x 5.3x 5.3x 7.1x 6.4x 6.0x

Lease Payments (Co's estimates) 76.2 75.0 73.0 77.5 81.4 85.5 89.8 EBITDAR 215.4 222.7 174.6 161.2 146.7 157.2 165.8 Net Lease Adjusted Debt (net of quasi cash)/EBITDAR 6.5x 4.8x 6.2x 7.0x 6.6x 7.6x 7.3x 7.1x Source – BNP Paribas Estimates, Kamps AG Leverage and Coverage are based on the last 12 months’ results. Some of the ratios are adjusted for the effects of acquisitions and disposals. In addition, these 2 measures are usually calculated based on EBITDA adjusted for exceptional or non-recurring items. Leverage is defined as net lease-adjusted debt (x8 operating leases)-to-EBITDAR. Coverage is defined as EBITDAR-to-(net interest+rental expenses).

249 European High Yield Research Klockner Pentaplast ⎪ January 2006

Rick Deutsch +44 20 7595 8840 [email protected] Klöckner Pentaplast

Bond Description & Market Data, as of 06 January 2006 Next Call Description Amount (o/s) Ratings Date Price Price YTW STW 9.375% Sr Nts due 2012 EUR 180mn B2/B 15-Feb-07 104.688 105.00 7.92% 499bp Source – BNP Paribas Company Profile Klöckner Pentaplast is a leading European and North American developer and manufacturer of rigid plastic films. The group produces rolls and sheets of rigid films for packaging pharmaceuticals and medical devices, foods and other products. Klöckner occupies 16 production sites in Europe, North American and South America, and operates directly out of 10 countries. The group generates revenue from a diverse range of customers, products, end-use applications and geographic regions, selling rigid films to more than 4,300 customers in more than 80 countries, with the largest customer accounting for 3.2% of net sales in 2001. For the last twelve months ended June 2005, the group generated net sales of €1,118mn and EBITDA of €127.8mn, translating into an EBITDA margin of 11.4%. Klöckner Pentaplast Structure

Shareholders

€89.4m shares(1) €247.0m Subordinated Shareholder Loan(2)

Klöckner Pentaplast S.A.

€180.0m Proceeds Loan and Klöckner Pentaplast €247.0m Shareholder 100% (3) Intercompany Loan Beteiligungs GmbH Pledge of shares of (Limited Partner) Klöckner Pentaplast Beteiligungs GmbH to the lenders under the Senior Facilities

Klöckner Pentaplast Verwaltungs GmbH(3) 100%(4) (General Partner)

0%(5)

Klöckner Pentaplast €633.0m Senior Facilities(7) GmbH & Co. KG(3)(6)

Other Holding Companies and Operating Subsidiaries(3)

1. The parent, Klöckner Pentaplast Luxembourg S.à r.l., purchased shares for €89.4mn, which it received upon the issuance of €2.8mn ordinary shares and €86.6 million preference shares to Cinven, JP Morgan Partners and executive management. (2) The Subordinated Shareholder Loan is subordinated to the Notes. This figure does not include accreted interest on the Subordinated Shareholder Loan, which, as of January 31, 2002, was €3.3mn. Payments may not be made on the Subordinated Shareholder Loan prior to the full settlement of all claims of the creditors under the Senior Facilities and, subject to certain exceptions, the Notes. (3) Guarantors under the Senior Facilities. (4) KP Beteiligungs GmbH is entitled to 100% of the profits of Klöckner Pentaplast GmbH & Co. KG. (5) Klöckner Pentaplast Verwaltungs GmbH will manage Klöckner Pentaplast GmbH & Co. KG, a limited partnership, and, as the general partner, is fully liable for any claims against Klöckner Pentaplast GmbH & Co. KG but has no other interest or rights to its profits or assets. (6) Borrowers under the Senior Facilities. (7) As of December 31, 2001, €461.0 million had been drawn under the Senior Facilities, but all of the €100.0mn acquisition facility and €65.8mn of the €72.0 mn revolving credit facility were available.

Source – Klöckner Pentaplast

250 European High Yield Research Klockner Pentaplast ⎪ January 2006

Debt Profile

At June 30, 2005 Klöckner’s debt profile was as follows (EUR ‘000):

! Subordinated shareholder loan €228,100 ! Bonds €180,000 ! Liabilities to banks €344,700 ! Other debt €17,800 A further amount of approximately €10mn is expected to fall due within one year owing to an annual cash sweep mechanism implemented in the loan documentation between the Klöckner and the senior lenders.

The Subordinated shareholder loan is an unsecured obligation of Klöckner Pentaplast S.A. which has been given in the form of a discounted loan, granted by financial investors pro rata to their direct or indirect contribution to the equity of the Parent company. The loan accrues interest at a rate of 10% pa. The payment of the principal amount and capitalised interest will be due on 15 December 2012 or earlier on the date of a sale of all or substantially all of the business or assets of Klöckner Pentaplast S.A. or on a change of control. Redemption on 15 December 2012, early redemption subject to certain criteria, will have a redemption price of nominal amount €486.5mn.

The bonds, carrying a coupon of 9.375% semi-annually, are unsecured obligations of Klöckner Pentaplast S.A. which rank equally with or senior in right of payment to all current of future indebtedness of Klöckner Pentaplast S.A., but which effectively rank junior to all indebtedness and other liabilities of the subsidiaries of Klöckner Pentaplast S.A..

Bank liabilities were comprised as follows (updated in September 2004 due to non-provision of detailed updates)

USD loan payable to senior lenders maturing 2008, with max. interest payment of USD-Libor + 2.25%, payable in semi-annual instalments subject to a non-linear increase: €138,235

USD loan payable to senior lenders maturing 2009, with interest payment at USD-Libor + 2.75%, with principal payable in one lump sum on maturing date: €82,023

USD loan payable to senior lenders maturing 2010, with interest payment at USD-Libor + 3.25%, with principal payable in one lump sum on maturing date: €32,256

EUR loan to senior lenders maturing 2010, with interest payment at Euribor + 3.25%, with principal payable in one lump sum on maturing date: €66,677

EUR loan payable to senior lenders maturing 2008, with interest payment at a max. of Euribor + 2.25%, with principal payable in equal semi- annual instalments: €59,930

USD Industrial revenue bond maturing 2014, with interest payment of approx. 2%, with principal payable in annual instalments of USD 350k in December each year and a final instalment of USD 1,450k: €4,015

THB long and short term loans payable to a bank, with variable interest of currently up to 7.25% charges monthly to quarterly, with principal on long term debt payable in quarterly instalments, increasing from time to time, final instalment payable 2009: €5,360

GBP long and short term loans payable to banks, with variable interest of currently up to 7% with monthly interest payments, with principal on the long term debt repayable in equal monthly instalments until 2017: €4,651

RUB revolving loan payable to a bank, secured by an L/C from senior lenders, with variable interest of currently up to 10%, with facility expiring December 2004 (to be rolled over): €2,152

All liabilities payable to the senior lenders must be prepaid upon the occurrence of certain change of control events or may be subject to mandatory earlier repayments, e.g. from the proceeds of certain disposals of if the cash flow of a business year exceeds a certain value.

The revolving credit facility comprises €57mn as of June 2005, with a net available amount of €48.2mn.

251 European High Yield Research Klockner Pentaplast ⎪ January 2006

Bond Covenant Bond description EUR 180mn 9.375% Senior Notes 2012 Issuing entity Klöckner Pentaplast S.A. Ranking Pari passu or senior in right of payment to the other indebtedness of the company. Position vs. bank debt Structurally subordinated Position vs. other bonds Paris passu or senior in right of payment to all other current or future indebtedness. Senior facilities are secured by all of the assets of Klöckner Pentaplast GmbH & Co. KG Security/Guarantees and its material subsidiaries, and by a pledge by the Issuer of all of the capital stock of KP Beteiligungs GmbH, some of its subsidiaries and of the intermediate holding companies. ! Make whole - prior to 15 February 2007 at Bunds +50bp. ! Call Schedule 2007 104.688% Optional redemption 2008 103.125% 2009 101.563% 2010 and thereafter 100.000% Change of control Put at 101% plus accrued and unpaid interest. Tax redemption Yes, at par plus accrued and unpaid interest. Negative pledge Yes Cross default Yes Fall away covenants Not applicable Anti-layering Not applicable Only permitted, if receives at least fair market value and for transactions in excess of €10mn approval by a majority of the members of the board of directors is required. • If at least 75% in cash or equivalents with 30 day conversion period in the case of non- cash consideration with a max. non-cash contribution of €25mn Asset sales • If proceeds are used within 12 months to either prepay any obligation under senior indebtedness, to acquire additional assets, or to reduce the revolving credit facility. • In case of excess proceeds of €20mn, the company will make a purchase offer to all holder of notes at 100% of principal amount plus accrued interest Debt is permitted if after giving pro forma effect thereto, the consolidated coverage ratio would equal to or greater than 2.0x to 1.0x and no default or event of default will be triggered. Carve outs: • Indebtedness not to exceed €633mn • Debt limit Hedging obligations for interest, FX and commodity prices • Capitalised lease obligations and purchase money indebtedness up to €25mn • Payment of dividends if allowed under covenants • Aggregate foreign subsidiary debt of no more than €25mn • General basket of €50mn If the company can incur €1 of debt, then 50% of net income less 100% net loss plus 100% Carve outs: • The purchase or redemption of any capital stock or subordinated obligations • Restricted payments Dividends if allowed under covenants • In default or event of default to continue restricted payments in an aggregate amount not to exceed €20mn • Payments towards public offering of capital stock not to exceed an amount required by applicable law or an amount equal to 50% of consolidated net income Must be done on an arm’s length basis with a resolution of the board of Directors for Transactions with affiliates transactions in excess of €10mn or if in excess of €25mn an independent appraisal is required. Source – BNP Paribas, Klöckner Pentaplast

252 European High Yield Research Klockner Pentaplast ⎪ January 2006

Klöckner Pentaplast Group, Financial Model FYE 31 December Restated Restated Historic Historic Historic Historic Historic Historic Historic Historic ProForma EUR mn FY 02 FY 03 Q1 04 Q2 04 Q3 04 Q4 04 FY 04 Q1 05 Q2 05 Q3 05 LTM PROFIT & LOSS

Total output 930.8 1,004.8 246.7 260.0 273.7 281.9 1,062.3 265.4 283.8 287.0 1,118.0 COGS -736.1 -829.8 -208.0 -211.8 -227.7 -239.0 -886.6 -216.0 -229.0 -234.6 -918.5 Gross profit 194.7 175.0 38.7 48.1 46.0 43.0 175.8 49.4 54.8 52.4 199.5 SG&A -34.5 -35.0 -37.1 -142.0 EBITDA 119.0 134.4 31.1 42.4 39.8 35.2 148.4 28.1 33.9 30.7 127.8 Financial expense, net of income -66.4 -70.9 -17.7 -17.4 -19.8 -16.5 -71.4 -16.0 -15.9 -15.6 -64.0

Revenue growth y/y 6.2% 7.9% 4.5% 0.9% 6.6% -1.4% 5.7% 7.6% 9.2% 4.9% Gross margin 20.9% 17.4% 15.7% 18.5% 16.8% 15.2% 16.5% 18.6% 19.3% 18.3% 17.8% SG&A / sales 13.0% 12.3% 12.9% 12.7% EBITDA margin 12.8% 13.4% 12.6% 16.3% 14.6% 12.5% 14.0% 10.6% 11.9% 10.7% 11.4%

CASH FLOW

Change in working capital 12.0 -4.3 -24.6 2.6 6.8 0.1 -15.0 -16.9 -6.4 14.8 -8.4 Cash from Operating Activities 112.2 87.9 -6.3 29.8 29.1 31.2 83.9 -0.7 15.3 32.5 78.2

Capex -57.4 -46.8 -5.9 -6.6 -10.8 -13.7 -37.0 -9.1 -9.5 -10.4 -42.8 Acquisitions/Disposals -803.7 -81.1 -4.6 -3.7 -9.1 1.2 -16.3 -18.5 -0.9 0.0 -18.2 Cash from Investing Activities -861.1 -128.4 -10.5 -10.4 -19.9 -12.7 -53.5 -27.6 -10.5 -10.4 -61.2

Net movemen/ amortization on borrowings 780.8 25.0 -5.9 -10.5 -7.7 -1.4 -25.5 -17.9 -8.0 -14.9 -42.1 Cash from Financing Activities 842.3 22.4 -5.9 -10.5 -7.7 -1.8 -25.9 -17.9 -7.6 -15.2 -42.6

Effect of FX rate changes on cash -2.6 -4.4 -0.4 -0.1 0.1 -0.3 -0.7 -1.1 0.0 0.1 -1.3

Net Change in Cash 90.9 -22.6 -23.1 8.8 1.6 16.4 3.8 -47.4 -2.8 6.9 -26.8

BALANCE SHEET

Cash & Equivalents 90.9 68.3 45.2 54.0 55.6 72.1 72.1 24.7 21.9 28.8 28.8

Bank Debt 437.1 437.2 408.7 407.3 401.9 395.3 395.3 352.3 359.5 361.2 361.2 Bonds- HY 180.0 180.0 180.0 180.0 180.0 180.0 180.0 180.0 180.0 180.0 180.0 Financial leases, Sub-Notes and other 1.0 2.5 2.0 1.6 1.2 0.8 0.8 0.5 1.5 1.3 1.3

Total Senior Debt 618.1 619.7 590.8 588.8 583.1 576.1 576.1 532.8 541.0 542.5 542.5 Net Senior Debt 527.2 551.4 545.6 534.8 527.4 504.0 504.0 508.1 519.2 513.7 513.7

Shareholders' loans 248.2 273.0 300.3 300.3 300.3 207.3 207.3 228.1 228.1 228.1 228.1

Total Debt 866.2 892.7 891.0 889.1 883.4 783.4 783.4 760.9 769.1 770.6 770.6 Net Debt 775.3 824.4 845.9 835.1 827.7 711.3 711.3 736.2 747.3 741.8 741.8

RATIOS

Coverage Total Coverage 1.8x 1.9x 1.8x 2.4x 2.0x 2.1x 2.1x 1.8x 2.1x 2.0x 2.0x EBITDA- Capex/Interest 0.9x 1.2x 1.4x 2.1x 1.5x 1.3x 1.6x 1.2x 1.5x 1.3x 1.3x

Leverage Bank Leverage (gross) 3.7x 3.3x 3.2x 3.0x 2.8x 2.7x 2.7x 2.4x 2.6x 2.8x 2.8x Senior Notes Leverage (gross) 1.5x 1.3x 1.4x 1.3x 1.3x 1.2x 1.2x 1.2x 1.3x 1.4x 1.4x Total leverage (gross) 7.3x 6.6x 6.9x 6.5x 6.2x 5.3x 5.3x 5.2x 5.6x 6.0x 6.0x Total leverage (net) 6.5x 6.1x 6.5x 6.1x 5.8x 4.8x 4.8x 5.1x 5.5x 5.8x 5.8x Source – BNP Paribas, Klöckner Pentaplast Group

253 European High Yield Research Kronos International ⎪ January 2006

Adam Harnetty, ACA +44 20 7595 8831 [email protected] Kronos International

Bond Description & Market Data, as of 5 January 2006 Next Call Issuer Credit Trend: Positive Description Amount (o/s) Ratings Date Price Price YTW STW 8.875% Sr Sec Nts due 2009 EUR 375mn B2/BB- 30-Dec-05 104.437 104.5 5.56% 330bp Source – BNP Paribas

Company Profile Kronos’s predecessors were the first producers of TiO2 in the world. It is a pigment used to whiten, brighten and add opacity to a variety of end products including paints, plastics and paper. It is an important component of its end products with few effective substitutes but, ultimately, is still a commodity chemical with cyclical characteristics. Six companies dominate global production: Du Pont, Millennium, Huntsman International, NL Industries (owner of Kronos), Kerr-McGee and Ishihara Sangyo Kaisha. Kronos’ five competitors have an estimated aggregate 70% global market share by volume. Some have levels of vertical integration, producing titanium ores as well as TiO2. Kronos is the second largest European TiO2 producer with an estimated 18% European market share by volume.

Kronos International Inc (KII), the issuer, consists of the European assets of Kronos Worldwide, which is listed on NYSE and is itself a subsidiary of NL, also listed on NYSE. KII operates three plants in Germany, one in Belgium and one in Norway, and sells and distributes through additional sites around Europe. TiO2 is somewhat seasonal with higher demand in the first half of the year due to the spring and summer painting season. Barriers to entry are high due to complex production, the need to source multifarious raw materials, often-patented production technologies and a long, expensive plant construction process (3–5 years).

Investment Recommendation Operationally the company is benefiting from improved pricing within the Ti02 industry and credit metrics are improving. The bonds are callable in December and hence any upside would appear limited. In normal circumstances, we would expect the bonds to be called. However, our opinion on the credit is heavily influenced by our concerns regarding the actions of the controlling shareholder. We would not rule out some ‘event’ whereby additional debt is taken on board and the bonds left outstanding. Accordingly, we have a HOLD recommendation. Debt Profile €80mn European Revolving Credit Facility In June 2002, KII’s German, Belgian and Norwegian operating subsidiaries entered into a €80mn secured revolving credit facility that originally matured in June 2005. This facility was extended by three years in June 2005 to June 2008. Draw downs can be in EUR, USD and NOK and bear interest at the applicable interbank offered rate + 1.75%. The facility is secured on receivables and inventories plus a limited pledge on other assets of the Belgian borrower. At the end of September 2005, there was full availability under the revolver.

€375mn 8.875% Senior Secured Notes 2009 The notes are structurally subordinated to the debt and liabilities of KII’s subsidiaries and are secured by a pledge of 65% of the stock or other equity interests of certain of KII’s first tier subsidiaries.

254 European High Yield Research Kronos International ⎪ January 2006

Kronos Structure

NL Industries

Kronos Worldwide

Kronos Kronos Kronos Kronos €375m Sr Sec Nts International Inc USA Canada Louisiana (KII)

Kronos Kronos Kronos Kronos UK Germany Denmark France 65% of the stock or other equity interest of these first-tier subsidiaries is sales & sales & sales & pledged to secure the distribution 3 plants distribution distribution notes. centre g centre centre

Kronos Kronos Belgium Norway €80m Senior plant; sales & d Credit Facilities distribution centre

Kronos Titania A/S Titan A/S

plant ilmenite mine

Source – Kronos, BNP Paribas

255 European High Yield Research Kronos International ⎪ January 2006

Bond Covenant Bond description EUR 375mn 8.875% Senior Secured Notes 2009 Issuing entity Kronos International Inc. Ranking Senior Secured Notes. Position vs. bank debt Structurally Subordinated. Position vs. other bonds – Security/guarantees Secured by pledge of 65% of the stock of the company's first-tier operating subsidiaries. Make Whole – Bunds+50bp before 30 December 2005 Equity Claw – 35% at par + coupon before 30 June 2005 Call Schedule: Optional redemption 30 Dec 2005 - 104.437 30 Dec 2006 - 102.958 30 Dec 2007 - 101.479 30 Dec 2008 - 100.000 Put at 101%, 50% of voting power or majority of board cease to constitute a majority in any Change of control two-year period. Tax redemption No Negative pledge Yes Cross default Yes – on $20mn or more of other debt. Fall away covenants No Anti-layering Yes Pro forma Fixed Charge Coverage of at least 2.5x. Debt limit Carve outs: none

If company can raise $1 of debt, provided that for this clause, the Fixed Charge Coverage Ratios must be greater than 3.0x, then 75% net income less 100% net loss plus 100% of equity proceeds plus any equity contributions from any equity holder plus $25mn. Carve outs: Restricted payments payments of dividends as allowed under the indenture; redemption of subordinated debt funded by equity or refinancing; repurchases of equity from management or employees up to $3mn per year. Company can not sell assets unless: it receives at least fair market value;

Asset sales at least 75% of consideration in cash or equivalent; must use proceeds within a year to pay down senior debt or purchase similar assets; if not, any excess proceeds above $20mn will be used to repay the notes. Company will not consolidate or merge with/into any person or sell substantially all its assets unless: surviving entity is organised laws of US; Merger, consolidation, asset sales the company's consolidated net worth shall increase; surviving entity can incur $1 of debt. Must be done on an arm’s length basis with approval from the board of directors for $2mn+ Transactions with affiliates transactions and approval from an independent financial advisor for $12.5mn+ transactions.

Source – BNP Paribas, Kronos

256 European High Yield Research Kronos International ⎪ January 2006

Kronos, Financial Model FYE 31 December USD mn 2002 2003 Q1 04 Q2 04 Q3 04 Q4 04 2004 Q1 05 Q2 05 Q3 05 PROFIT & LOSS Net sales 579.7 715.9 192.2 208.1 203.4 204.3 808.0 209.5 227.6 206.0 Cost of sales -454.2 -516.9 -142.6 -156.3 -156.1 -154.6 -609.6 -147.2 -157.1 -150.8 Gross margin 125.5 199.0 49.6 51.8 47.3 49.7 198.4 62.3 70.5 55.2 SG&A -72.0 -87.0 -25.4 -25.3 -25.1 -28.3 -104.1 -28.1 -27.9 -26.5 Currency gains/(losses) 12.4 -3.7 0.4 0.1 -0.4 -2.3 -2.2 0.8 1.4 0.2 Disposals of PPE -0.5 -0.4 0.0 0.0 0.0 -0.9 -0.9 0.0 -0.1 -0.3 Royalty income 5.8 6.1 1.4 1.6 1.5 1.5 6.0 1.5 1.9 1.7 Other income 0.3 0.4 0.0 0.1 0.2 0.1 0.4 0.0 0.1 0.3 Income from operations 71.5 114.4 26.0 28.3 23.5 19.8 97.6 36.5 45.9 30.6 Trade interest income 4.3 0.7 0.2 0.2 0.3 0.4 1.1 0.1 0.1 0.2 Interest income from affiliates 22.8 0.0 0.0 0.0 0.0 2.8 2.8 4.9 10.2 4.6 Interest expense to affiliates -18.7 -0.1 0.0 0.0 0.0 0.0 0.0 0.0 Interest expense -16.7 -32.5 -9.1 -8.4 -8.5 -10.7 -36.7 -11.6 -11.2 -10.6 Income before tax & MSI 63.2 82.5 17.1 20.1 15.3 12.3 64.8 29.9 45.0 24.9 Tax -10.8 -0.7 -3.9 243.6 -6.1 27.7 261.3 -11.7 -16.5 -18.5 MSI -0.1 -0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Net income 52.3 81.7 13.2 263.7 9.2 40.0 326.1 18.2 28.5 6.4

Income from operations 71.5 114.4 26.0 28.3 23.5 19.8 97.6 36.5 45.9 30.6 Disposals of PPE 0.5 0.4 0 0 0 0.9 0.9 0 0.1 0.3 D&A 27.1 33.6 9.5 9.2 9.2 9.8 37.7 9.5 9.3 8.8 EBITDA 99.1 148.4 35.5 37.5 32.7 30.5 136.2 46.0 55.3 39.7

Sales Change y/y 4.5% 23.5% 7.9% 13.8% 17.3% 12.6% 12.9% 9.0% 9.4% 1.3% Gross margin 21.6% 27.8% 25.8% 24.9% 23.3% 24.3% 24.6% 29.7% 31.0% 26.8% EBITDA margin 17.1% 20.7% 18.5% 18.0% 16.1% 14.9% 16.9% 22.0% 24.3% 19.3%

CASHFLOW Net income 52.3 81.8 13.2 263.7 9.1 40.0 326.0 18.2 28.6 6.4 D&A 27.1 33.6 9.5 9.2 9.2 9.8 37.7 9.5 9.3 8.8 Other -24.6 37.3 2.0 -245.2 2.5 -30.1 -270.8 5.2 2.6 18.9 Change in working capital 13.4 -47.9 9.2 5.7 28.5 6.0 49.4 -29.5 -30.4 19.3 Net cash from operating activities 68.2 104.8 33.9 33.4 49.3 25.7 142.3 3.4 10.1 53.4

Capex -27.6 -31.5 -4.0 -5.0 -9.2 -15.5 -33.7 -4.8 -5.6 -8.5 Other -2.0 -0.2 0.6 -0.2 0.1 -1.0 -0.5 0.5 3.5 0.2 Net cash used by investing activities -29.6 -31.7 -3.4 -5.2 -9.1 -16.5 -34.2 -4.3 -2.1 -8.3

Net cash used by financing activities -57.5 -54.9 -27.5 -32.5 0.0 -70.0 -130.0 0.0 -13.0 -0.1

Net cashflow -18.9 18.2 3.0 -4.3 40.2 -60.8 -21.9 -0.9 -5.0 45.0

BALANCE SHEET Cash 15.0 37.1 39.1 35.9 76.3 17.5 17.5 16.1 10.4 54.7

Bank Debt 27.1 0.0 0.0 13.6 13.6 12.9 0.0 0.0 HY Notes 296.9 356.1 350.2 519.2 519.2 493.0 461.1 457.6 Other 1.9 0.6 0.3 0.4 0.4 0.3 0.2 0.2 Gross Debt 325.9 356.7 377.8 346.8 350.5 533.2 533.2 506.2 461.3 457.8

Net Debt 310.9 319.6 338.7 310.9 274.2 515.7 515.7 490.1 450.9 403.1

LTM RATIOS Coverage 2.8 4.6 4.4 4.4 4.2 3.7 3.7 3.7 3.9 3.9 EBITDA-Capex/Interest 2.0 3.6 3.5 3.5 3.4 2.8 2.8 2.9 3.1 3.1 Gross leverage 3.3 2.4 2.6 2.3 2.4 3.9 3.9 3.5 2.8 2.7 Net leverage 3.1 2.2 2.3 2.1 1.9 3.8 3.8 3.3 2.7 2.4 Source – BNP Paribas Estimates, Kronos

257 European High Yield Research Legrand ⎪ January 2006

Adam Harnetty +44 20 7595 8831 [email protected] Legrand

Bond Description & Market Data, as of 5 January 2006 Next Call Issuer Credit Trend: Positive Description Amount (o/s) Ratings Date Price Price YTW STW 10.5% Senior Notes due 2013 USD 350mn Ba2/BB- 15-Feb-08 105.25 113 6.25% 149bp 11% Senior Notes due 2013 EUR 277.5mn Ba2/BB- 15-Feb-08 105.50 117.25 4.78% 187bp 8.5% Debentures due 2025 USD 400mn Ba1/BB- NC NC 120 6.64% 161bp Source – BNP Paribas

Company Profile Legrand is a leading international manufacturer of products and systems for low-voltage electrical installations and information networks used in residential, commercial and industrial buildings. The company is headquartered in France with manufacturing and/or distribution subsidiaries and offices in over 55 countries. Legrand’s main markets are France, Italy and the US. For the twelve months ended 30 September 2005, the company had sales of €3,081mn and adjusted EBITDA of €643mn. Investment Recommendation Operationally the company continues to improve with consistent revenue and EBITDA growth. In our view corporate activity is likely to be the most significant driver of Legrand’s bond prices in the near term. Legrand has appointed 4 banks to handle its IPO. Given the potential IPO clawback, we think that the $2013 and €2013 bonds are fully valued and accordingly have a HOLD recommendation. With respect to the $2025 bonds, it is unclear at this stage what form the IPO may take and whether in effect any deleveraging may occur from this. In the event of a secondary LBO, which we think is eminently possible, the bonds could widen significantly. We do not believe investors are rewarded adequately for the downside risks and have a SELL recommendation on the $2025 bonds.

Debt Profile As part of the leveraged buyout in July 2002, a bank facility of €2.2bn was put in place. This comprised a Term A facility of €722mn, Term B of €425mn, Term C of €425mn, a bridge facility of €100mn and a receivables/revolving facility totalling €550mn. Borrowers under the facility are Lumina Financing 1, Legrand SA and various operating subsidiaries. Thus, the facility is structurally senior to the high yield bonds (see below) and benefited from an extensive security package from various group holding companies and operating subsidiaries thus achieving some degree of seniority over the structurally senior $8.5% 2025 debentures. In December 2004, Legrand refinanced the bank facility with a new €1.4bn syndicated bank facility. This comprised a 5 year multicurrency term loan of up to €700mn and a 5 year multicurrency revolving credit facility also for up to €700mn. The facility is guaranteed by various subsidiaries including Legrand SA, Legrand SAS, Legrand Netherlands BV and Legrand Holdings Inc. The shares of Legrand SA are also pledged under the agreement. As at 30 September 2005 €770mn was outstanding under the facility with €630mn available for future borrowings.

Legrand has 3 public bonds outstanding. The $400mn 8.5% 2025 bond is a legacy bond issued by Legrand SA (the original listed entity that was subject to an LBO). The high yield bonds were issued by Legrand Holding SA (formerly FIMEP) an intermediate holding company of Legrand SA. The high yield bonds are subordinated to the bank facility and the $ 8.5% 2025 bonds. At the Legrand Holding SA level, there is subordinated shareholder PIK loan that is fully subordinated to the high yield bonds.

Other debt at 30 September 2005 totalled €317mn, which included €39mn of subordinated notes (TSDI) at Legrand SA.

258 European High Yield Research Legrand ⎪ January 2006

Legrand Structure

Shareholders

€759 million common equity

€1,156 million Subordinated Shareholder PIK Loan

Legrand Holding SA $350million 10.5% Senior Notes 2013 (formerly FIMEP) €277.5m 11% Senior Notes 2013 (Issuer) €1.4bn syndicated loan facility (France)

€759 million common equity €1,757 million Subordinated intercompany funding Loan

Legrand SA (formerly FIMAF) (Acquirer) (France)

Legrand SA $400 million 8.5% debentures (France)

Operating Subsidiaries

Source – Legrand

259 European High Yield Research Legrand ⎪ January 2006

Bond Covenants USD 10.5% Senior Notes due 2013 & EUR 11% Senior Notes due 2013 USD 8.5% Debentures due 2025 Issuing entity Legrand Holding SA ($ 8.5% 2025 Legrand SA) Ranking Senior ($ 8.5% 2025 Senior) Position vs. bank debt Subordinated on both Position vs. other bonds $ 8.5% 2025 structurally senior to the 2013 bonds Security/guarantees Security over inter-company funding loan ($ 8.5% 2025 none) Make whole at T+50 up to 15 February 2008 Equity claw – prior to 15 February 2006 40% at par plus coupon but additional flexibility such that effectively 57% of the $ bonds and 64% of the € bonds may be clawed. Call schedule: Optional redemption 15 Feb 2008 – $105.25/€105.5 15 Feb 2009 – $103.5/€103.667 15 Feb 2010 – $101.75/€101.833 15 Feb 2011 – $100/€100 (No call provision on $ 8.5% 2025)

Tax redemption Yes at par for all issues Yes (limitation on liens but subject to numerous carve outs) Negative pledge $ 8.5% 2025 bonds have limitation on security over plant, property & equipment subject to a carve out

Cross default Yes for all issues Fall away covenants No for all issues Yes (and liens) Anti–layering $ 8.5% 2025 no covenant

Put at 101, based on >50% of the voting power (other than Permitted Holders) or substantial sale of assets to non Permitted Holders (Permitted holders being KKR & Change of control Wendel) $ 8.5% 2025 par put if hostile change of control (one not approved by the Board)

Market value & 75% to be in cash, then within 1 year, re-invest in similar businesses, repay Asset sales debt. Any proceeds remaining (subject to €25mn) must be used to tender for bonds at par. ($ 8.5% 2025 none) Fixed charge coverage ratio must be at least 2:1. Carve outs: Bank debt or guarantees up to €2.12bn (as reduced by any proceeds from asset sales) Debt limit Capital leases & similar to the greater of €75mn or 5% of Total Assets General basket up to €250mn ($ 8.5% 2025 none) Subject to being able to incur €1 of additional debt then: 50% of consolidated net income Repurchase up to €10mn annually of stock from employees (unused amounts carried forward subject to a €20mn annual maximum) Restricted payments Dividends in any calendar year up to 6% of aggregate net cash proceeds received in a public offering €25mn for investments in Unrestricted subsidiaries or associates €50mn general basket ($ 8.5% 2025 none) Must not be materially less favourable than if executed with an unrelated person. If >€15mn Transactions with affiliates requires majority board support and a certificate. ($ 8.5% 2025 none)

Source – BNP Paribas, Legrand

260 European High Yield Research Legrand ⎪ January 2006

Legrand, Financial Model FYE 31 December EUR mn 2003 Q1 04 Q2 04 Q3 04 Q4 04 2004 Q1 05 Q2 05 Q3 05 PROFIT & LOSS Sales 2,761.8 730.4 755.8 717.0 723.1 2,926.3 765.6 817.0 774.9 Cost of sales -1,640.4 -387.9 -402.5 -384.9 -400.0 -1,575.3 -394.1 -432.4 -412.2 Gross Profit 1,121.4 342.5 353.3 332.1 323.1 1,351.0 371.5 384.6 362.7 Admin & selling -733.5 -189.1 -192.0 -181.9 -195.9 -758.9 -202.4 -215.7 -195.5 R&D -258.5 -62.9 -62.8 -60.8 -64.5 -251.0 -64.2 -65.1 -61.9 Other operating Income -22.4 -0.5 3.1 -4.5 -8.0 -9.9 -4.3 -1.7 -11.0 Operating income 107.0 90.0 101.6 84.9 54.7 331.2 100.6 102.1 94.3 Interest expense -293.9 -58.0 -58.9 -54.8 -59.7 -231.4 -47.1 -40.6 -51.6 Other income (expenses) 3.5 -1.3 -7.8 2.0 -37.8 -44.9 -11.9 -12.1 -4.0 Loss before tax -183.4 30.7 34.9 32.1 -42.8 54.9 41.6 49.4 38.7 Tax 21.9 -9.3 -23.2 -18.1 10.1 -40.5 -18.6 -18.7 -19.5 Net loss before minorities & associates -161.5 21.4 11.7 14.0 -32.7 14.4 23.0 30.7 19.2 Minority interests -0.9 -0.3 -0.5 -0.2 -0.2 -1.2 -0.4 -0.8 -0.6 Equity in earnings of investees 2.4 0.3 1.0 0.9 0.4 2.6 0.0 0.4 0.4 Net loss -160.0 21.4 12.2 14.7 -32.5 15.8 22.6 30.3 19.0

Operating income 107.0 90.0 101.6 84.9 54.7 331.2 100.6 102.1 94.3 D&A 302.3 69.3 70.4 68.0 67.7 275.4 62.0 63.5 63.2 (gains)/losses on disposals -1.8 -0.1 -6.2 1.3 -0.3 -5.3 0.8 -0.2 4.3 Restructure costs 28.5 3.6 6.7 4.9 12.5 27.7 9.2 4.7 3.9 Other Adjustments 125.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 EBITDA 561.8 162.8 172.5 159.1 134.6 629.0 172.6 170.1 165.7

Revenue growth y/y 4.3% 9.7% 5.4% 4.4% 6.0% 4.8% 8.1% 8.1% Gross margin 40.6% 46.9% 46.7% 46.3% 44.7% 46.2% 48.5% 47.1% 46.8% EBITDA margin 20.3% 22.3% 22.8% 22.2% 18.6% 21.5% 22.5% 20.8% 21.4%

CASHFLOW Change in working capital -30.0 -23.2 30.0 12.8 39.5 59.1 -116.6 17.2 19.2 Cash from operating activities 271.0 78.4 120.8 110.6 102.5 412.3 -4.9 121.8 133.2

Capex -112.6 -23.8 -19.3 -21.8 -30.8 -95.7 -20.8 -28.5 -26.7 Acquisitions/disposals -73.0 -0.2 1.1 -0.8 -0.2 -0.1 -68.2 -19.9 4.9 Other 300.1 36.8 30.0 17.3 81.2 165.3 12.4 13.6 -2.0 Cash from investing activities 114.5 12.8 11.8 -5.3 50.2 69.5 -76.6 -34.8 -23.8

Net debt repayment -884.9 -89.1 -143.5 -98.2 -150.0 -480.8 84.3 -73.3 -71.5 Other & FX 8.3 2.7 -2.9 2.8 -3.2 -0.6 4.1 1.4 -0.7 Cash from financing activities -876.6 -86.4 -146.4 -95.4 -153.2 -481.4 88.4 -71.9 -72.2

Net change in cash -491.1 4.8 -13.8 9.9 -0.5 0.4 6.9 15.1 37.2

BALANCE SHEET Cash & Equivalents 100.5 81.1 70.9 74.3 81.4 81.4 76.9 92.2 127.5

ST borrowings 103.2 112.8 125.5 118.8 203.6 203.6 236.7 301.3 316.8 Senior credit 1,323.8 1,242.1 1,081.7 1,001.3 847.5 847.5 810.2 690.6 614.5 Other LT Borrowings 77.5 70.4 85.2 83.6 18.4 18.4 120.3 118.1 116.5 8.5% debentures 306.7 316.4 319.3 314.2 285.2 285.2 298.9 320.6 322.3 2013 Notes 555.1 563.4 565.9 561.4 535.7 535.7 547.7 566.6 568.0 Subordinated secs 108.9 99.9 89.2 79.7 68.9 68.9 59.4 48.7 39.2 Total Debt 2,475.2 2,405.0 2,266.8 2,159.0 1,959.3 1,959.3 2,073.2 2,045.9 1,977.3

Net Debt 2,374.7 2,323.9 2,195.9 2,084.7 1,877.9 1,877.9 1,996.3 1,953.7 1,849.8

LTM RATIOS Coverage 1.9 2.1 2.4 2.6 2.7 2.7 2.9 3.1 3.2 EBITDA-Capex/Interest 1.5 1.8 2.1 2.2 2.3 2.3 2.5 2.6 2.7 Gross Leverage 4.4 4.2 3.7 3.5 3.1 3.1 3.2 3.2 3.1 Net leverage 4.0 3.8 3.4 3.2 2.9 2.9 3.1 3.0 2.9 Source – BNP Paribas, Legrand

261 European High Yield Research Lucite ⎪ January 2006

Adam Harnetty, ACA +44 20 7595 8831 [email protected] Lucite

Bond Description & Market Data, as of 5 January 2006 Next Call Issuer Credit Trend: Stable Description Amount (o/s) Ratings Date Price Price YTW STW 10.25% Sr Nts due 2010 EUR 229mn B2/B+ Anytime 105.125 105.75 3.34% 81bp Source – BNP Paribas

Company Profile

Lucite is the leading global producer and seller of methacrylate monomers, the most significant of which is methyl methacrylate (MMA), the principal building block of acrylic materials. Lucite has approximately 25% share of the world acrylic monomer market, by volume. The production of MMA (monomeric building blocks) constitutes Lucite’s upstream business. Lucite also has leading positions in its downstream business, producing and selling acrylic-based sheet materials, polymers, resins and composites. The company had sales of £767mn and EBITDA of £116mn in the 12 months to 30 September 2005.

Debt Profile

Senior Secured Credit Facilities

Lucite’s bank debt consists of an $85mn revolver due October 2006 and £215mn of term loans in three tranches (A, B & C) due 2006–2008. The bank facilities are at the financial holding company Lucite International Finco Limited but benefit from guarantees and security in certain of the operating subsidiaries and each of the four holding companies above the subsidiaries as well. In addition, the revolver borrowing may be directly borrowed by the operating companies. There was $85mn availability under the revolver at the end of September 2005 and £17mn, £65mn and £43mn were outstanding under term loans A, B and C, respectively. Interest is at LIBOR+ 1.25–2% for the revolver and term A and at LIBOR+ 2.5% and 3% for term loans B and C, respectively.

10.25 % Senior Notes Due 2010

The high yield bonds have subordinated guarantees from the two holdcos above the operating subsidiaries and senior guarantees from the next two holdcos above these. All guarantors of the notes are holding companies the assets of which consist primarily of shares in their subsidiaries. Initially, €200mn of high yield bonds were issued followed by an add-on tranche of €50mn in June 2003 which was used to fund future investment in China.

China Bank Loans

Lucite had £42mn in Chinese bank loans outstanding at the end of September 2005. The company’s Chinese bank debt is ring-fenced from the restricted group. It is secured solely on the assets of Lucite International (China) Chemical Company Limited.

262 European High Yield Research Lucite ⎪ January 2006

Lucite Structure

Lucite International Ltd £175m Shareholder Investments (UK) (a) £5m Deep Discounted Bond (b)

20% Lucite International 80% Lucite International Group Holdings Ltd China Holdings Ltd (UK) (UK) (c)

Sr Lucite International Lucite International Guarantees Investment Ltd (China) Chemical (UK) Industry Co Ltd (d)

€250m Sr Nts

Lucite International Holdings Ltd Sr Sub (UK) Security & $85m Revolving Facility Guarantees Guarantees £215m Term Loans

Lucite International Lucite Interational Lucite International Finance Plc Holdco Limited Finco Ltd (UK) (UK)

Operating Subsidiaries (e)

(a) Charterhouse owns 78% of the common stock and 97% of the preferred stock and Directors of Ineos Capital own 11% of the common stock and none of the preferred stock of Lucite International Ltd (b) £5m drawn on Deep Discounted Bond by Lucite International Ltd for investment in new MMA facility in China (c) An unrestricted subsidiary. When funding is completed during 2005, the ownership will be 80% by Lucite International Holdings Ltd and 20% by Lucite International Ltd (d) A wholly owned foreign enterprise established to construct and operate a facility producing MMA for the Chinese market (e) The Operating Subsidiaries can be direct borrowers under the Revolver and some of the Operating Subsidiaries provide Guarantees and Security to the Senior Credit Facilities

Source – Lucite

263 European High Yield Research Lucite ⎪ January 2006

Bond Covenant Bond description EUR 10.25% Senior Notes due 2010 Issuing entity Lucite International Finance Plc Ranking Senior Notes Position vs. bank debt Structurally subordinated to Revolver, contractually subordinated to term loans Position vs. other bonds – Security/guarantees Senior and subordinated guarantees from various holding companies Make Whole – none Equity Claw – expired Call Schedule: Optional redemption Anytime – 105.125 15 May 2006 – 103.417 15 May 2007 – 101.708 15 May 2008 – 100.000 Tax redemption Yes – at par Negative pledge Yes Cross default Yes Fall away covenants No Anti-layering No Put at 101%, 50%+ of voting power, 35% of stock after an IPO, majority of board cease to Change of control constitute a majority in any two year period Company can not sell assets unless: Receive at least fair market value;

Asset sales At least 75% of consideration in cash or equivalent; Must use proceeds within a year to pay down debt or purchase similar assets; If not, any excess proceeds above £10mn will be used to repay the notes. Debt is permitted up to £75mn so long as pro forma coverage exceeds 2.0x Carve outs: Bank term loans up to £215mn and revolver up to $85mn; €200mn of exchange notes; Debt limit Capital lease obligations or purchase money obligations financing construction and improvement of the company up to £15mn; Letters of credit, surety, performance or appeal bonds up to £5mn; General basket of £20mn. If company can raise €1 of debt then 50% net income less 100% net loss plus 100% of equity proceeds Restricted payments Carve outs: Payments of dividends following the covenant ‘permitted payment’; Redemption of sub debt funded by equity or refinancing. Arm’s length basis; Above £1mn an officers’ certificate is needed; Transactions with affiliates Above £5mn approval from majority disinterested directors is needed; Above £10mn on approval from directors and an independent expert.

Source – BNP Paribas, Lucite

264 European High Yield Research Lucite ⎪ January 2006

Lucite, Financial Model FYE 31 December GBP mn 2002 2003 Q1 04 Q2 04 Q3 04 Q4 04 2004 Q1 05 Q2 05 Q3 05 PROFIT & LOSS Turnover 582 694 170 178 180 179 707 190 197 201 operating costs -550 -620 -155 -159 -160 -161 -635 -172 -177 -181 amortisation -5 -5 -1 -1 -2 -1 -5 -1 -1 -2 Operating Profit 27 69 14 18 18 17 67 17 19 18 JV operating profit 0 0 0 0 0 0 0 0 0 0 Net financial -29 -37 2 -6 -12 -11 -27 -2 -7 -10 Profit before tax -2 32 16 12 6 6 40 15 12 8 Tax 2 -6 -3 -3 0 6 0 -2 -6 0 MSI -3 -4 -1 -1 -1 -1 -4 -1 -1 -2 Profit after tax -3 22 12 8 5 11 36 12 5 6

Operating Profit 27 69 14 18 18 17 67 17 19 18 D&A 45 44 11 10 11 12 44 10 10 13 Exceptionals 0 0 0 0 0 0 0 0 0 0 EBITDA 72 113 25 28 29 29 111 27 29 31

Turnover increase y/y 0.9% 19.2% -5.0% 2.3% 2.9% 7.8% 1.9% 11.8% 10.7% 11.7% Operating profit margin 4.6% 9.9% 8.2% 10.1% 10.0% 9.5% 9.5% 8.9% 9.6% 9.0% EBITDA margin 12.4% 16.3% 14.7% 15.7% 16.1% 16.2% 15.7% 14.2% 14.7% 15.4%

CASHFLOW Operating Profit 27 69 14 18 18 17 67 17 19 18 D&A 45 44 11 10 11 12 44 10 10 13 Change in working capital -15 -19 -6 -2 0 -11 -19 -18 -8 11 Cashflow from operations 57 94 19 26 29 18 92 9 21 42

Returns on investment & servicing of -28 -33 -3 -9 -2 -15 -29 -2 -11 -3 finance

Taxtion paid -4 -4 -1 -4 -2 1 -6 -1 -1 -2

Capex & financial investment -28 -32 -7 -7 -9 -15 -38 -9 -11 -20

Acquistions & disposals 0 0 0 0 0 0 0 0 0 0

Net debt repayment -5 -10 -11 -8 4 0 -15 9 -2 4 Other 0 5 0 -4 0 4 0 0 -3 0 Cashflow from financing -5 -5 -11 -12 4 4 -15 9 -5 4

Net change in cash -8 20 -3 -6 20 -7 4 6 -7 21

BALANCE SHEET Cash & equivalents 11 30 27 21 41 33 33 39 33 54

Bank debt 220 170 149 141 142 133 133 133 124 125 10.25% Bonds 15/5/10 130 176 167 167 172 177 177 172 169 170 FL 4 4 4 4 4 3 3 3 4 4 Unamortised issue costs -7 -6 -6 -6 -6 -5 -5 -5 -5 -5 Gross debt ex China loans 347 344 314 306 312 308 308 303 292 294 China loans 4 6 10 16 16 25 37 42 Gross debt inc China loans 347 344 318 312 322 324 324 328 329 336

Net debt ex China loans 336 314 287 285 271 275 275 264 259 240

LTM RATIOS Coverage 2.5 3.1 5.9 7.1 6.2 4.1 4.1 3.6 3.6 3.9 EBITDA-Capex/Interest 1.5 2.2 4.1 4.8 4.0 2.7 2.7 2.4 2.2 2.0 Gross leverage (inc China) 4.8 3.0 2.8 2.7 2.9 2.9 2.9 2.9 2.9 2.9 Net leverage (inc China) 4.7 2.8 2.6 2.6 2.5 2.6 2.6 2.6 2.6 2.4

Net leverage ex China 2.5 2.5 2.4 2.5 2.5 2.3 2.3 2.1 Source – BNP Paribas Estimates, Lucite

265 European High Yield Research MTU Aero Engines ⎪ January 2006

Adam Harnetty +44 20 7595 8831 [email protected] MTU Aero Engines

Bond Description & Market Data, as of 5 January 2006 Next Call Description Amount (o/s) Ratings Date Price Price YTW STW 8.25% Senior Notes due 2014 EUR 165mn Ba3/B+ 1-Apr-09 104.125 114.5 4.61% 156bp Source – BNP Paribas

Company Profile

MTU is one of the world’s largest aircraft engine component manufacturers and a leading provider of maintenance, repair and overhaul (MRO) for commercial jet engines. The company also manufactures components for key European military engine programs and is the major provider of military engines and dedicated services to the German armed forces. As a component manufacturer, the company’s key customers are the aircraft manufacturers OEM’s, such as Pratt & Whitney and Rolls Royce. The company is also involved in joint ventures with other manufacturers to jointly develop and manufacture commercial jet engines. In June 2005, the company successfully undertook an IPO raising gross primary proceeds of €315mn. During the last twelve months ended 30 September 2005, MTU generated revenues of €2,079mn and EBITDA of €215mn.

Debt Profile €250mn Revolving Credit Facility In Q1 2005, MTU repaid the indebtedness incurred under the senior credit facilities. In February 2005 MTU entered into a new €250mn revolving credit facility. As at 30 September 2005, €21.1mn of the facility had been used to issue guarantees.

Finance Leases Outstanding finance leases totalled €53.3mn at 30 September 2005.

8.25% Senior Notes 2014 Following the successful IPO, MTU clawed back €80mn of the notes in Q3 2005. On 21 October 2005 an additional €30mn of the notes was clawed fully utilising the equity clawback.

BNP Paribas was co-manager for the IPO for MTU in May 2005.

266 European High Yield Research MTU Aero Engines ⎪ January 2006

MTU Aero Engines Structure

Public KKR Shareholders

Senior subordinated MTU Aero Engines guarantee Holding AG Second-priority pledge of ownership interests

MTU Aero Engines Investment GmbH Notes

Proceeds Loan

MTU Aero Engines GmbH

Other operating MTU-H MTU-BB subsidiaries

Source – MTU Aero Engines, BNP Paribas

267 European High Yield Research MTU Aero Engines ⎪ January 2006

Bond Covenant Bond description 8.25% Senior Notes due 2014 Issuing entity MTU Aero Engines Investment GmbH & Co KG Ranking Senior Position vs. bank debt Subordinated Position vs. other bonds NA Senior subordinated guarantees from MTU-Sub, MTU-M, MTU-H, MTU-BB and second Security/guarantees priority pledge over a number of subsidiary shares Make whole: Before 1 April 2009 at T+ 50bp Equity Claw: Before 1 April 2007 40% at 108.25% with proceeds from an equity offering (now fully utilised) Call schedule:

Optional redemption 1 April 2009 – 104.125% 1 April 2010 – 102.063% 1 April 2011 – 101.031% 1 April 2012 – 100% Tax redemption Yes at par Limitation on liens but carve outs (main one is over the Senior Facilities and any Negative pledge refinancing) Cross default Yes Fall away covenants No Anti-layering Yes Change of control Put at 101% – 50% of voting power or substantial sale of assets Fair market value and >75% proceeds (except in the case of a permitted asset swap) in Asset sales cash or equivalents. Within 365 days reinvest in similar business or pay down debt. Any remaining proceeds (subject to €15m) must be used to tender fro bonds at par. Fixed charge coverage ratio must exceed 2:1. Carve outs: debt limit Credit facilities up to €620mn (as reduced by any pay down from asset sales); Capital leases & similar to the greater of €50mn or 3% of Total Assets; €125mn general carve out.

Subject to being able to incur €1 of additional debt then: 50% consolidated net income; €10mn p.a. to repurchase employee stock (with carry forward subject to €20mn Restricted payments calendar year limit); 6% of the net proceeds received from a public offering; €25mn general carve out.

Must not be less favourable than if executed in arms length transaction. If greater than Transactions with affiliates €15mn requires a board certificate.

Source – BNP Paribas, MTU

268 European High Yield Research MTU Aero Engines ⎪ January 2006

MTU, Financial Model FYE 31 December P'sor P'sor P'sor IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS GBP mn 2001 2002 2003 Q1 04 Q2 04 Q3 04 Q4 04 2004 Q1 05 Q2 05 Q3 05 PROFIT & LOSS Revenue 2,516.9 2,296.9 1,940.0 430.0 470.8 483.5 533.7 1,918.0 509.8 516.0 519.9 Cost of Sales -2,177.3 -1,852.0 -1,529.2 -373.0 -391.8 -401.0 -519.5 -1,685.3 -445.4 -462.9 -452.0 Gross Margin 339.6 444.9 410.8 57.0 79.0 82.5 14.2 232.7 64.4 53.1 67.9 R&D -85.2 -128.3 -170.6 -19.3 -12.7 -6.1 38.1 0.0 -4.8 -9.8 -6.3 SG&A -97.4 -118.3 -130.9 -66.2 -36.7 -26.4 -26.0 -155.3 -30.9 -24.3 -32.1 Net Other operating Income -53.7 44.1 5.4 0.3 1.5 0.7 1.5 4.0 1.2 4.4 3.8 Financial Result 36.8 14.4 -0.8 -40.2 -8.9 -11.7 5.4 -55.4 -18.7 -14.3 -16.9 JVs accounted for using the equity method -0.7 -0.1 -0.6 -0.4 -1.8 0.0 0.5 1.4 Income from ordinary activities 140.2 256.9 113.9 -69.1 22.1 38.4 32.8 24.2 11.2 9.6 17.8 Extraordinary income 84.8 0.0 2.3 Income tax -97.9 -59.7 -49.5 27.2 -9.5 -15.8 -13.0 -11.1 -4.4 -4.3 -7.6 Minority Interests 2.4 0.0 0.0 Net income before P&L transfer agreement 129.5 197.2 66.7 -41.9 12.6 22.6 19.8 13.1 6.8 5.3 10.2 Profit transfer expense -157.8 -220.1 -535.1 0.0 0.0 0.0 -39.3 -39.3 0.0 0.0 -28.3 -22.9 -468.4 -41.9 12.6 22.6 -19.5 -26.2 6.8 5.3 10.2

Income from ordinary activities 140.2 256.9 113.9 -69.1 22.1 38.4 32.8 24.2 11.2 9.6 17.8 less interest income -26.0 -14.4 -5.2 40.2 8.9 11.7 -5.4 55.4 18.7 14.3 16.9 D&A 58.5 56.7 62.0 31.3 31.5 31.8 38.5 133.1 33.3 33.5 33.6 Unadjusted EBITDA 172.7 299.2 170.7 2.3 62.5 81.9 65.9 212.7 63.2 57.4 68.3 Restructure charges 1.4 11.3 31.2 1.3 0.7 0.8 3.9 6.7 0.1 1.0 0.9 EBITDA 174.1 310.5 201.9 3.6 63.2 82.7 69.8 219.4 63.3 58.4 69.2 Use of R&D provision -24.5 -24.6 -24.5 -24.6 -98.2 -8.3 -8.2 -8.3 Direct transaction costs & other -20.5 14.0 33.6 45.3 0.6 0.1 3.6 49.6 0.0 0.0 0.0 Adjusted EBITDA 153.6 324.5 235.5 24.4 39.2 58.3 48.8 170.8 55.0 50.2 60.9

Sales change y/y -8.7% - 18.6% 9.6% 7.5% 15.5% Gross margin 13.5% 19.4% 21.2% 13.3% 16.8% 17.1% 2.7% 12.1% 12.6% 10.3% 13.1% Adj. EBITDA margin 6.1% 14.1% 12.1% 5.7% 8.3% 12.1% 9.1% 8.9% 10.8% 9.7% 11.7%

CASHFLOW Net Income before extraordinary/transaction 44.7 197.2 64.4 -42.0 12.7 22.7 19.7 13.1 6.8 5.3 10.3 costs Minority Interest -2.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Depreciation 59.3 58.2 61.0 31.3 31.5 31.8 38.5 133.1 33.3 33.5 33.6 Profit/Loss from associates 0.5 0.3 11.9 0.8 0.1 0.6 0.4 1.8 0.0 -0.5 -1.4 Change in accrued pensions 12.0 18.6 20.7 3.8 4.2 4.2 3.8 16.0 6.2 5.2 4.2 Change in other accrued Liabilities 73.3 -125.5 -95.1 -29.4 -7.2 -15.1 -8.6 -60.2 -18.8 15.1 -4.6 Change in deferred Tax assets 0.0 0.0 -0.1 -27.3 -3.7 2.3 27.1 -1.6 -0.4 8.8 7.7 Gain/loss on disposals of non-current assets -4.0 -1.0 0.2 -0.3 -1.3 0.0 -0.1 -1.7 -0.1 0.5 0.6 Change in working capital 182.2 74.4 59.1 124.3 -37.9 2.3 -111.5 -22.8 110.3 46.5 12.4 Cashflow from operations 365.6 222.2 122.3 61.3 -1.6 48.7 -30.8 77.6 137.4 114.4 62.7

Investments in intangibles & PP&E -101.0 -102.7 -66.8 -10.8 -12.5 -13.5 -29.2 -66.0 -11.2 -17.3 -14.4 Acquisition of MTU-Group -766.6 -766.6 Other -10.1 -2.5 223.7 0.5 2.0 0.2 3.4 6.1 0.6 -0.9 -0.1 Cashflow from investing -111.0 -105.2 156.9 -10.3 -10.5 -13.3 -792.5 -826.5 -10.6 -18.2 -14.4

Change in financial Liabilities -0.7 -4.3 0.2 10.2 6.6 -1.8 595.7 610.7 -110.4 -73.1 -116.8 Capital contirbution net of dividends -157.8 -220.1 -548.7 0.0 0.0 0.0 87.7 Other 1.2 -1.5 -2.8 -0.1 0.3 -0.3 -38.7 -38.9 0.9 7.4 -0.5 Cashflow from financing -157.3 -225.9 -551.3 10.0 6.8 -2.1 557.0 571.8 -109.4 -65.7 -29.7

Cashflow for the period 97.3 -108.9 -272.1 61.1 -5.3 33.3 -266.2 -177.1 17.4 30.5 18.6

BALANCE SHEET Cash 223.2 28.5 28.5 45.9 76.4 95.0

Senior Facilities 385.0 174.2 174.2 0.0 0.0 0.0 €250m New Revolver 56.8 0.0 0.0 Finance leases 51.9 51.9 52.6 53.7 53.3 Other 12.4 64.1 64.1 64.8 45.6 14.3 8.25% Senior notes 2014 275.0 275.0 275.0 275.0 275.0 195.0 Accrued interest 5.7 5.7 11.3 5.7 8.0 Gross debt 672.4 570.9 570.9 460.5 380.0 270.6

Net debt 449.2 542.4 542.4 414.6 303.6 175.6

LTM CREDIT STATISTICS Coverage 3.1 3.1 5.9 5.4 4.8 EBITDA-Capex/Interest 1.9 1.9 4.0 3.6 3.2 Gross leverage 2.9 3.3 3.3 2.3 1.8 1.3 Net leverage 1.9 3.2 3.2 2.1 1.5 0.8 Source – BNP Paribas Estimates, MTU

269 European High Yield Research Nalco ⎪ January 2006

Adam Harnetty, ACA +44 20 7595 8831 [email protected] Nalco

Bond Description & Market Data, as of 5 January 2006 Next Call Description Amount (o/s) Ratings Date Price Price YTW STW 7.75% Sr Nts due 2011 USD 665mn B2/B- 15-Nov-07 103.875 102.5 6.99% 221bp 7.75% Sr Nts due 2011 EUR 200mn B2/B- 15-Nov-07 103.875 107.25 5.66% 273bp 8.875% Sr Sub Nts due 2013 USD 465mn Caa1/B- 15-Nov-08 104.438 104.5 7.90% 309bp 9% Sr Sub Nts due 2013 EUR 200mn Caa1/B- 15-Nov-08 104.500 108 7.40% 432bp 9% Sr Disc Nts due 2014 USD 461mn Caa2/B- 1-Feb-09 104.500 75 9.27% 442bp Source – BNP Paribas Company Profile Nalco is a leading global provider of integrated water treatment and process improvement services, chemicals and equipment programs for industrial and institutional applications. The company is organised into three divisions which correspond to the end markets served: Industrial and Institutional Services, Energy Services and Paper Services. Its products and services are typically used in water treatment applications to prevent corrosion, contamination and the build-up of harmful deposits, or in production processes to enhance process efficiency and improve the company customers’ end products. Nalco has a global presence, with over 10,000 employees operating in 130 countries, supported by a comprehensive network of manufacturing facilities, sales offices and research centres. This global presence provides a competitive advantage by enabling the company to offer a consistently high level of service to local, regional and multinational customers. In the last 12 months to 30 September 2005, Nalco had net sales of $3,254mn and Adjusted EBITDA of $593mn.

Debt Profile Senior Credit Facilities The senior credit facilities originally provided financing of up to $1,850mn, consisting of: $250mn revolver due 2009; $300mn term loan A facility due 2009; and $1,300mn term loan B facility due 2010. All obligations under the senior credit facilities are unconditionally guaranteed by Nalco Holdings and, subject to certain exceptions, each of Nalco Company’s existing and future domestic wholly owned subsidiaries (other than Nalco Company’s receivables subsidiaries). Security has also been given over substantially all of the assets of the guarantors. As at 30 September 2005, the term loans totalled $1.2bn and the revolver was undrawn. Receivables Securitisation Nalco has a $100mn receivables securitisation facility of which $79mn was drawn at the end of September 2005 and used to pay down term debt. 6.25% Notes due 2008 Nalco Company has $28mn of 6.25% senior unsecured notes due 2008 outstanding. An initial amount of $150mn of these bonds was issued by Nalco Chemical Company in May 1998. $665mn and €200mn Senior Notes due 2011 Nalco issued the senior notes in connection with the acquisition. The notes are guaranteed by the same subsidiaries that guarantee the senior credit facilities. $465mn and €200mn Senior Subordinated Notes due 2013 The senior subordinated notes were also issued in connection with the acquisition. The notes benefit from a senior subordinated guarantee for the same subsidiaries that guarantee the senior credit facilities. 9% Senior Discount Notes due 2014 Post the acquisition an intermediate holding company issued $694mn at maturity ($445mn gross proceeds) senior discount notes to pay a dividend to the sponsors. Following Nalco’s IPO in November 2004, the Company exercised their equity claw to redeem $223mn (33.6%) of the notes.

270 European High Yield Research Nalco ⎪ January 2006

Nalco Structure

Blackstone, Apollo & Goldman Sachs and Management

Publicly Held Nalco LLC

Nalco Holding Company

Nalco Investment Holdings LLC

99% 100% Nalco Finance Nalco Finance Sr Disc Nts 1% Holdings LLC Holdings II Inc

Guarantees Nalco Finance Holdings Inc Nalco Holdings LLC (Co-Issuer of Sr Disc Nts)

Sr Sec Bank Debt NI Acquisition Co Sr & Sr Sub Nts Nalco Company Receivables Facility

78% 22%

Holding Company US Subsidiaries Non-US Subsidiaries for other Non-US Subsidiaries

Other Non-US Subsidiaries

Source – Nalco, BNP Paribas

271 European High Yield Research Nalco ⎪ January 2006

Bond Covenants Bond description Senior Notes Subordinated Notes Senior Discounted Notes Nalco Finance Holdings LLC Issuing entity Nalco Company Nalco Finance Holdings Inc. Ranking Senior Senior Subordinated Senior Discount Notes Position vs. bank debt Contractually subordinated Contractually subordinated Structurally Subordinated Contractually senior vs. senior Contractually subordinated vs. Structurally subordinated vs. subordinated notes senior notes senior & senior subordinated Position vs. other bonds notes Structurally senior vs. discount Structurally senior vs. discount notes notes Senior guarantees from US Senior subordinated guarantees Security/guarantees None subsidiaries from US subsidiaries Make Whole – prior to Make Whole – prior to Make Whole – prior to 15 November 2007 at 15 November 2008 at 1 February 2009 at T+50bp T+50bp T+50bp Equity Claw – prior to Equity Claw – prior to Equity Claw – prior to 1 February 2007 max 35% 15 November 2006 max 15 November 2006 max of issue at par+coupon 35% of issue at 35% of issue at (partially used already) par+coupon par+coupon Call Schedule: Call Schedule: Call Schedule: 1 February 2009 – 104.5% 15 Nov 2007 – 103.875% USD Notes 1 February 2010 – 103.0% Optional redemption 15 Nov 2008 – 101.938% 15 Nov 2008 – 104.438% 1 February 2011 – 101.5% 15 Nov 2009 – 100.000% 15 Nov 2009 – 102.958% 1 February 2012 – 100.0% 15 Nov 2010 – 101.479% 15 Nov 2011 – 100.000% EUR Notes 15 Nov 2008 – 104.500% 15 Nov 2009 – 103.000% 15 Nov 2010 – 101.500% 15 Nov 2011 – 100.000% Change of control Put at 101%, 50%+ of voting power Tax redemption No Negative pledge Limitation on liens Cross default Yes Fall away covenants No Anti-layering No Debt is permitted up to 2.0x pro forma fixed charge coverage. Carve outs: Bank debt and letters of credit up to $1,950mn (as reduced by any pay down from asset sales); Capital leases and similar up to 3% of total assets; Debt limit General basket up to $175mn; If $1 of additional debt can be incurred, then foreign subsidiaries can incur debt; if $1 of additional debt cannot be incurred, then foreign subsidiaries can incur debt for working capital purposes up to the greater of $125mn and 10% of consolidated assets of the foreign subsidiaries.

Source – Nalco, BNP Paribas

272 European High Yield Research Nalco ⎪ January 2006

Bond Covenants Bond description Senior Notes Subordinated Notes Senior Discounted Notes Subject to being able to incur $1 of additional debt then: 50% of consolidated net income; $15mn per annum to redeem employee stock (with unused amounts carried forward for 2 years); Restricted payments $50mn for investment in unrestricted subsidiaries; 6% per annum of the net proceeds from a public offering of common stock; $50mn general basket. Company can not sell assets unless: it receives at least fair market value; Asset sales at least 75% of consideration in cash or equivalent; must use proceeds within a year to pay down debt or purchase similar assets; if not, any excess proceeds above $20mn will be used to make a par offer on the notes. Above $5mn must be done on an arm’s length basis; Transactions with affiliates Above $20mn, board resolution required.

Source – BNP Paribas, Nalco

273 European High Yield Research Nalco ⎪ January 2006

Nalco, Financial Model FYE 31 Dec 2001 2002 2003 Q1 04 Q2 04 Q3 04 Q4 04 2004 Q1 05 Q2 05 Q3 05 USD mn PROFIT & LOSS Sales 2,623.1 2,644.3 2,766.6 713.3 740.4 774.2 805.4 3,033.3 777.6 836.3 834.9 Cost of product sold -1,286.7 -1,281.8 -1,362.8 -368.2 -365.5 -394.7 -423.8 -1,552.2 -412.4 -479.9 -457.6 Gross Profit 1,336.4 1,362.5 1,403.8 345.1 374.9 379.5 381.6 1,481.1 365.2 356.4 377.3 Selling, admin R&D -1,013.5 -973.6 -1,077.1 -259.5 -268.3 -261.7 -275.8 -1,065.3 -258.5 -263.3 -252.6 Amortisation -181.3 -89.2 -84.3 -24.2 -24.9 -23.9 -23.3 -96.3 -20.6 -20.5 -20.3 Goodwill impairment 0.0 0.0 -244.4 -122.3 0.0 0.0 0.0 -122.3 0.0 0.0 0.0 Business optimisation expenses -172.6 -32.8 -21.1 0.0 0.0 0.0 -1.7 -1.7 -0.8 -17.0 -3.5 Operating profit -31.0 266.9 -23.1 -60.9 81.7 93.9 80.8 195.5 85.3 55.6 100.9 Other income -14.0 0.7 -20.1 -3.5 -1.8 -1.2 -36.8 -43.3 -3.4 -0.1 -0.1 Interest income 9.9 7.8 7.7 2.7 2.7 2.3 2.4 10.1 2.1 2.0 2.1 Interest expense -48.0 -38.5 -82.3 -53.3 -52.7 -53.7 -53.5 -213.2 -62.1 -64.8 -65.8 Earnings before tax -83.1 236.9 -117.8 -115.0 29.9 41.3 -7.1 -50.9 21.9 -7.3 37.1 Tax 2.1 -105.2 -60.4 -3.0 -16.6 -27.2 -0.7 -47.5 -9.7 3.1 -18.1 MSI -3.4 -3.3 -4.1 -1.0 -0.9 -1.7 -2.2 -5.8 -1.2 -1.6 -1.6 Net income -84.4 128.4 -182.3 -119.0 12.4 12.4 -10.0 -104.2 11.0 -5.8 17.4

Operating profit 266.9 -23.1 -60.9 81.7 93.9 80.8 195.5 85.3 55.6 100.9 Other income 0.7 -20.1 -3.5 -1.8 -1.2 -36.8 -43.3 -3.4 -0.1 -0.1 D&A 223.9 208.6 52.9 53.1 47.7 56.9 210.6 53.8 54.0 53.6 Goodwill impairment 0.0 244.4 122.3 0.0 0.0 0.0 122.3 0.0 0.0 0.0 Adjustments 28.6 122.2 25.5 13.4 18.6 48.5 106.0 8.6 23.3 11.7 EBITDA 520.1 532.0 136.3 146.4 159.0 149.4 591.1 144.3 132.8 166.1

Sales Change y/y 0.8% 4.6% 8.4% 6.6% 8.8% 14.6% 9.6% 9.0% 13.0% 7.8% Gross Margin 50.9% 51.5% 50.7% 48.4% 50.6% 49.0% 47.4% 48.8% 47.0% 42.6% 45.2% EBITDA Margin 19.7% 19.2% 19.1% 19.8% 20.5% 18.5% 19.5% 18.6% 15.9% 19.9%

CASHFLOW Net income 128.4 -182.3 -119 12.4 12.4 -10 -104.2 11 -5.8 17.4 D&A 223.9 208.6 52.9 53.1 47.7 56.9 210.6 53.8 54.0 53.6 Impairment 0.0 244.4 122.3 0.0 0.0 0.0 122.3 0.0 0.0 0.0 Other -169.7 -58.4 6.0 0.0 23.5 5.8 35.3 20.7 1.9 20.6 Change in working capital 140.5 20.8 22.3 -24.6 47.2 -71.73 -26.83 -69.8 -36.1 50.8 Net cashflow from operations 323.1 233.1 84.5 40.9 130.8 -19.03 237.17 15.7 14 142.4

Acquistions 2.7 -4,137.2 25.6 -0.3 -2.3 23.0 -3.2 0.0 0.0 Capex -108.3 -101.2 -16.4 -18.5 -22.8 -34.1 -91.8 -12.3 -12.7 -20.3 Other -20.5 81.0 -2.2 1.8 -4.7 1.0 -4.1 -0.4 0.4 0.9 Net cashflow from investing -126.1 -4,157.4 7.0 -16.7 -27.8 -35.4 -72.9 -15.9 -12.3 -19.4

Net debt repayment 2,941.3 -62.3 -62.2 -139.2 21.7 -242.0 5.9 4.4 -115.3 Capital contribution 1,079.6 9.8 1.2 0.0 11.0 Other (incl. FX) -117.1 -0.4 -3.4 0.9 2.8 -0.1 -4.5 -1.2 -0.4 Net cashflow from financing 0.0 3,903.8 -62.7 -55.8 -137.1 24.5 -231.1 1.4 3.2 -115.7

Change in cash 197.0 -20.5 28.8 -31.6 -34.1 -29.9 -66.8 1.2 4.9 7.3

BALANCE SHEET Cash 100.0 128.8 97.2 63.1 33.2 33.2 34.5 39.4 46.7

Overdrafts 19.5 25.0 15.9 12.3 16.9 16.9 24.6 19.9 17.1 Notes payable 1.5 0.2 1.0 0.1 0.0 0.0 0.7 Notes payable to affilitates 1.7 1.7 0.0 0.0 Revolver 15.0 0.0 0.0 0.0 0.0 0.0 24.0 Securitised receivables 0.0 0.0 92.0 47.6 97.3 97.3 95.2 79.4 78.7 Term A due Nov 09 311.2 304.2 224.0 225.6 218.4 218.4 214.4 208.5 120.2 Term B due Nov 10 1,300.0 1,251.8 1,186.0 1,095.9 1,081.0 1,081.0 1,081.0 1,081.0 1,081.0 Unsecured notes due May 08 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 Other 2.6 2.7 3.3 3.9 2.1 2.1 2.2 2.4 1.7 $665m 7.75% senior 2011 665.0 665.0 665.0 665.0 665.0 665.0 665.0 665.0 665.0 €200m 7.75% senior 2011 252.7 245.5 243.2 248.1 272.4 272.4 260.2 241.6 240.8 $465m 8.875% sen sub 2013 465.0 465.0 465.0 465.0 465.0 465.0 465.0 465.0 465.0 €200m 9% sen sub 2013 252.7 245.5 243.2 248.1 272.4 272.4 260.2 241.6 240.8 $694m 9% sen disc notes 2014 0.0 459.8 467.5 477.8 324.2 324.2 331.4 338.5 346.0 Gross debt 3,314.7 3,694.2 3,633.9 3,517.2 3,442.5 3,442.5 3,427.0 3,394.7 3,284.8

Net debt 3,214.7 3,565.4 3,536.7 3,454.1 3,409.3 3,409.3 3,392.5 3,355.3 3,238.1

LTM CREDIT STATISTICS Coverage 2.5 2.5 2.5 2.4 2.4 EBITDA-Capex/Interest 2.1 2.1 2.1 2.1 2.1 Gross Leverage thru Seniors 4.9 4.6 4.4 4.1 4.0 4.0 4.0 4.0 3.8 Gross Leverage thru Subs 6.2 5.9 5.6 5.3 5.3 5.3 5.2 5.2 5.0 Gross Leverage through Disc. Notes 6.7 6.4 6.2 5.8 5.8 5.7 5.8 5.5

Total Net Leverage 6.0 6.5 6.3 6.1 5.8 5.8 5.7 5.7 5.5 Source – BNP Paribas Estimates, Nalco

274 European High Yield Research Nalco ⎪ January 2006

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275 European High Yield Research NTL Cable Plc ⎪ January 2006

Aizaz Shaikh +44 20 7595 8607 [email protected] NTL Cable Plc

Bond Description & Market Data, as of 05 January 2006 Next Call Issuer Credit Trend: Negative

Description Amount (o/s) Ratings Date Price Price YTW STW

8.75 % Sr Nts due 2014 EUR 208n B3/B- 15-Apr-09 104.375 106 3/4 7.38% 431 bp 9.75 % Sr Nts due 2014 GBP 375mn B3/B- 15-Apr-09 104.875 103 9.13% 461 bp 8.75 % Sr Nts due 2014 USD 425mn B3/B- 15-Apr-09 104.375 104 7.93% 310 bp Source – BNP Paribas

Company Profile NTL, after the proposed acquisition of Telewest is the principle national provider of services over cable infrastructure in the UK. The company had sales of £2.1bn and EBITDA of £690mn for the year ended 30 September 2005. The company's services include telephony, television and internet services, provided via its coaxial cable and copper wire local loop network. As of 30 September 2005, the company had 3.1 million customers comprising 1.9 million TV service subscribers, 2.6 million phone service subscribers and 1.6 million broadband internet subscribers.

Investment Recommendation We retain our BUY rating on NTL in advance of the potential "bad news" over the financing structure for the Telewest acquisition. We think that at current valuations the bonds significantly reflect the downside risk of a tax ruling in NTL's favour which would allow more senior debt than currently envisioned. We think there is an equal chance that the ruling does not result in NTL's favour and the upside potential in such case slightly outweighs the potential price deterioration in the downside case. Given the scenarios, we think the best place to hide is the £ bonds. In 2006, we think that NTL will be thoroughly occupied with operational and integration issues related to the Telewest and potentially Virgin Mobile businesses as well as the raising of acquisition finance for its Telewest bid. Nevertheless we do not doubt the company will find time to impress investors with creative “new” downside risks and so the underlying credit trend is now NEGATIVE.

276 European High Yield Research NTL Cable Plc ⎪ January 2006

Debt Profile NTL’s capital structure will change significantly in Q1 with the acquisition and integration of the Telewest (and its capital structure). NTL has significant debt capacity under both its banks and bond indentures though the structure of the acquisition finance has yet to be determined due to some unresolved tax issues. The company's current financial structure was put into place in the first half of 2004, following its debt restructuring and bankruptcy in 2003. The company's total debt of £2.3bn at 30 September 2005, includes £800mn in bonds and £2.2bn in bank debt. The £375mn, €225mn and $425mn bonds, which bear standard high yield covenants, are callable in 2009 (NC5); the company has also issued $100mn in floating rate notes which are currently callable. The senior unsecured bonds are issued by NTL Cable Plc, an intermediate holding company of NTL Group Ltd, which owns the principle NTL operating assets. The bonds benefit senior guarantees from NTL Incorporated and the intermediate holding companies and a senior subordinated guarantee from NTL Investment Holdings Limited. NTL's credit facility of £2,425mn, had £1.4bn outstanding as of 30 September 2005, comprising roughly £500m under the £1.3bn Term A loan and £900m under the fully drawn Term B loan. The senior credit facility has the benefit of a senior secured guarantee from NTL Cable PLC and first priority pledges of the shares and assets of substantially all of the operating subsidiaries of NTL Investment Holdings Limited and of receivables arising under any inter-company loans to those subsidiaries. The lenders under the credit facility further benefit from guarantees of obligations each of those subsidiaries.

Tranche A Amortisation Schedule Repayment Date Amount Repayable 31 March 2006 £ 59,800,000 30 September 2006 £ 59,800,000 31 March 2007 £ 95,300,000 30 September 2007 £ 95,300,000 31 March 2008 £110,900,000 30 September 2008 £148,500,000 31 March 2009 £127,500,000 30 September 2009 £127,500,000 31 March 2010 £127,500,000 30 September 20010 £127,500,000 31 March 2011 £127,400,000 Source - NTL

277 European High Yield Research NTL Cable Plc ⎪ January 2006

Bond Covenants

GBP 375mn 9.75% Senior Notes 2014 USD 425mn 8.75% Senior Notes 2014 EUR 225mn 8.75% Senior Notes 2014 Bond description EUR Notes USD Notes GBP Notes Issuing entity NTL Cable Plc, a holding company Ranking Senior notes Position vs. bank debt Structurally subordinated Position vs. other bonds Pari passu 1) senior guarantees from NTL Inc & intermediate holding companies Security/Guarantees 2) senior sub guarantees from NTL Investment Holdings Ltd 3) banks have senior secured guarantee on inter-company loan ! Make Whole – prior to 15 April 2009 at treasuries + 50bp Optional redemption ! Equity Claw – prior to 15 April 2007 max 40% of issue at par + coupon ! Call Schedule: ! Call Schedule: ! Call Schedule: 15 April 2009 – 104.375% 15 April 2009 – 104.375% 15 April 2009 – 104.875% 15 April 2010 – 102.917% 15 April 2010 – 102.917% 15 April 2010 – 103.250% 15 April 2011 – 101.458% 15 April 2011 – 101.458% 15 April 2011 – 101.625% 15 April 2012 – 100.000% 15 April 2012 – 100.000% 15 April 2012 – 100.000% Change of control Put at 101 put, third party owns more than 50% of voting power Tax redemption Yes – at par Negative pledge Yes Cross default Yes Fall away covenants No Anti-layering Yes (Debt and Liens) No transaction unless: ! Incur indebtedness in amount equal to the attributable debt with respect of the Limitation on indebtedness covenant. Create Lien on such property securing such attributable Debt without equally and ratably securing the notes with respect of the Limitation on Liens covenant. Limitation on sales and leaseback ! The net proceeds of the transaction has to be equal to the fair market value of such property. ! The transfer of such property has to comply with the limitation on Sales of Assets and Subsidiary stock covenant. Limitation on Liens No Carve out 75% cash or cash equivalents. No need to offer to purchase notes unless excess proceeds Asset sales invested or used to pay any revolving facility exceeds £250mn. Debt limit: may not incur debt if pro forma leverage exceeds 5.5x. Carve outs include: ! £2.7bn bank debt Debt limit ! acquisition incurred debt of £1.25bn ! purchase money debt & capital leases no greater than £150mn or 2.75% of total assets receivables securities Restricted payments: carve outs include: a) £10mn equity buy backs per year; b) £55mn Restricted payments upstream for fees and tax expenses; and c) a general basket of £75mn Not less favourable than arms length transaction; if in excess £25mn, resolution of the Transactions with affiliates majority of the members of the board of directors; if in excess of £50mn independent financial advisor opinion on the operation fairness. Source – BNP Paribas, NTL Cable

278 European High Yield Research NTL Cable Plc ⎪ January 2006

NTL Cable, Financial Model FYE 31 December Historic Historic Historic Historic Historic Historic Historic Historic Historic Historic Historic Historic Historic Historic GBP mn FY 02 Q1 03 Q2 03 Q3 03 Q4 03 FY 03 Q1 04 Q2 04 Q3 04 Q4 04 FY 04 Q1 05 Q2 05 Q3 05 PROFIT & LOSS

GROUP Excluding Broadcast Revenue 1,916 482 487 488 505 1,961 514 512 517 532 2,074 517 483 483

EBITDA (segment profit) 538 128 146 155 155 583 167 174 179

GROUP Revenue 2,173 547 551 555 577 2,230 585 584 583 599 2,351 517 483 483 - COGS 1,000 -255 -242 -223 -226 -946 -256 -249 -271 -79 -855 -214 -197 -200 Gross profit 1,173 291 310 332 351 1,284 329 336 312 520 1,496 303 286 283 SG&A -512 -135 -138 -131 -147 -551 -134 -130 -133 -130 -528 -125 -112 -116 EBITDA (segment profit) 648 156 173 183 189 701 197 207 182 182 767 178 164 165 Interest, net -499 -109 -114 -114 -110 -446 -73 -66 -60 -65 -264 -63 -50 -45

Revenue growth y/y 3% 7% 6% 5% 4% 5% -12% -17% -17% Gross margin 54% 53% 56% 60% 61% 58% 56% 57% 53% 87% 64% 59% 59% 59% SG&A / sales 24% 25% 25% 24% 25% 25% 23% 22% 23% 22% 22% 24% 23% 24% EBITDA margin 30% 29% 31% 33% 33% 31% 34% 35% 31% 30% 33% 34% 34% 34%

CASH FLOW

Cash Interest -499 -109 -114 -114 -64 -401 -73 -66 -60 -65 -264 -63 -50 -45 Changes in working capital 56 20 20 -79 -25 -130 Operating cash flow 172 13 133 20 152 319 44 110 136 97 386 138 44 106

Capex -453 -116 -71 -98 -67 -351 -57 -71 -84 -93 -304 -77 -71 -63 Investing cash flow -562 -121 -60 -97 -67 -345 -56 -68 -82 -119 -325 1,140 52 -107

Financing cash flow -2 -1 -1 78 74 -235 -126 -8 -2 -371 -565 -240 -34 FX 24 -3 11 2 38 47 13 -16 1 7 6 -1 11 14

Change in cash -366 -112 82 -77 202 95 -233 -100 47 -16 -304 713 -134 -21

BALANCE SHEET Cash & Equivalents 430 289 369 292 488 487 199 101 148 131 131 844 710 713

Revolver £250m £/$/€ LB+150- 225

Bank Debt 2,785 2,175 2,175 2,167 2,167 2,167 1,637 1,467 1,407 Term A £1275m LB+150-225 1,275 1,275 1,267 1,267 1,267 737 567 507 Term B £900m £/$ LB/EB+275 900 900 900 900 900 900 900 900

Bonds- HY 385 811 818 819 816 816 800 809 826 £375m 9.75% Sr Nts 2014 375 375 376 375 375 375 375 375 $425m 8.75% Sr Nts 2014 231 234 234 232 232 224 226 239 €225m 8.75% Sr Nts 2014 153 155 155 154 154 148 155 155 $100m LB+500 Sr Nts 2012 54 55 55 55 55 53 53 56

Other 41 41 30 30 173 173 66 58 31

Total Debt 3,964 3,211 3,027 3,023 3,016 3,156 3,156 2,503 2,334 2,264 Net Debt 3,534 2,723 2,828 2,922 2,868 3,024 3,024 1,660 1,624 1,551

RATIOS

Leverage Bank Leverage (gross) 4.0x 2.9x 2.8x 2.8x 2.8x 2.8x 2.2x 2.1x 2.0x Total leverage (gross) 4.6x 4.1x 3.9x 3.9x 4.1x 4.1x 3.3x 3.3x 3.3x Total leverage (net) 3.9x 3.8x 3.8x 3.7x 3.9x 3.9x 2.2x 2.3x 2.3x Source – BNP Paribas Estimates, NTL Cable

279 European High Yield Research ONO ⎪ January 2006

Aizaz Shaikh +44 20 7595 8607 [email protected] ONO

Bond Description & Market Data, as of 05 January 2006 Next Call Issuer Credit Trend: Positive Description Amount (o/s) Ratings Date Price Price YTW STW

10.5 % Sr Nts due 2014 EUR 180mn Caa2/CCC 03-Jun-04 105.250 107 1/2 8.92% 591 bp 10.64 % FRNs Nts due 2014 EUR 100mn Caa2/CCC 15-May-06 103.000 105 1/4 9.85% 685 bp Source – BNP Paribas

Company Profile

Ono is the principle cable operator in Spain, providing cable television, telephony and broadband Internet services. The company had sales of €575mn and an EBITDA of €231mn with leverage of 6.5x for the 12 months ended 30 September 2005. This data does not include Auna which is commensurate in size and operations to ONO.

Investment Recommendation We remain BUY on the ONO floating rate notes and the 10.5% notes. We think there is a high likelihood that the company calls the floating rate notes in the 1st half of 2006; after the placement of the new bond issue, we believe the existing 10.5% notes will have some further price appreciation potential (give the small tranche size and the likely temporal seniority to the new bonds. Overall, the credit has experienced significant enhancement in 2005 (especially given the €1bn new equity associated with the Auna merge). Underlying credit trend remains POSITIVE.

Debt Profile The company's debt comprises high yield bonds and bank debt. The outstanding bonds include the €180mn 10.5% notes which are callable in 2009 (NC5) and €100mn floating rate notes callable in 2006 (NC2). The company had significant debt issuance during the 1999-2001 period, of which now only €8mn and $59mn of the 14% 2011 bonds remain outstanding, after successful tender offers. All of the company's bonds rank pari passu, are unsecured, and have been guaranteed by the various operating subsidiaries of Cableeuropa. In December 2005 the company completed syndication of a jumbo bank facility of roughly €3bn to fund the acquisition of Auna and also pay for further capital investments.

280 European High Yield Research ONO ⎪ January 2006

Bond Covenants EUR 180mn 10.500% Senior Notes 2014 EUR 100mn Float Senior Notes 2014 Bond description EUR Notes EUR Notes (float) Issuing entity ONO Finance Plc Ranking Senior notes Position vs. bank debt Subordinated Position vs. other bonds Pari passu Security/Guarantees The guarantees are the unsecured senior subordinated obligations of each guarantor. ! Make Whole – prior to 15 May 2009 at ! Make Whole – prior to 15 May 2006 at bunds + 50bp bunds + 50bp ! Equity Claw – prior to 15 May 2007 ! Equity Claw – prior to 15 May 2006 max 35% of issue at par + coupon max 35% of issue at par + coupon

Optional redemption ! Call Schedule: ! Call Schedule: 15 May 2009 – 105.250% 15 May 2006 – 103.0% 15 May 2010 – 103.500% 15 May 2007 – 102.0% 15 May 2011 – 101.750% 15 May 2008 – 101.0% 15 May 2012 – 100.000% 15 May 2009 – 100.0% Change of control Put at 101, 50%+ of voting power Tax redemption Yes – at par Negative pledge Yes Cross default Yes Fall away covenants No Anti-layering Yes (Debt and Liens) Requires that asset sales be made at fair market value, that at least 75% of the proceeds Asset sales are received in cash, that an officer’s certificate be delivered and that the net proceeds are used to repay debt, invest in the business or are designated as Excess Proceeds. The Issuer, Cableuropa and the Restricted Subsidiaries may incur indebtedness if, after giving pro forma effect to the incurrence, no default or event of default would occur and the debt outstanding on a consolidated basis shall be less than the product of Annualized Pro Forma EBITDA multiplied by 7.0, and 5.5x after May 2006. ! The foregoing does not apply to Permitted Indebtedness, which includes. ! Debt evidenced by the Guarantees, the Multi-Borrower Credit Facilities, the EVC Guarantee and EVC Funding Agreements. Debt limit ! Debt, including under the senior bank facility, any loan and any credit facility, the proceeds of which are used to finance the business. ! Debt owed to and held by a Restricted Subsidiary to Cableuropa or vice versa. ! Currency or interest rate hedging agreements. ! Any debt in an aggregate principal amount outstanding at any one time not to exceed €25mn. ! Permitted Refinancing Debt.

Source – BNP Paribas, ONO

281 European High Yield Research ONO ⎪ January 2006

Bond Covenants EUR 180mn 10.500% Senior Notes 2014 EUR 100mn Float Senior Notes 2014 Cableuropa and the Restricted Subsidiaries cannot make any restricted payment unless: ! No event of default shall have occurred and be continuing. ! Cableuropa could incur at least $1.00 of additional debt under the leverage test; and ! The aggregate amount of such restricted payment does not exceed the sum of (i) 50% of net income accrued from the 1st quarter following the issue date to the most recent quarter ending 45 days prior the restricted payment; (ii) capital stock sale proceeds; iii) net cash proceeds from exchangeable and convertible debt that has been exchanged into capital stock; (iv) aggregate cash proceeds from the incurrence of subordinated shareholder indebtedness after the issue date; (v) dividends to the company from subsidiaries + net assets of unrestricted subsidiaries when designated as restricted Restricted payments subsidiaries ! The following are not Restricted Payments: ! Dividends on capital stock if otherwise permitted under the indenture. ! Repurchases of capital stock deemed to occur upon the exercise of stock options with respect to which payment of the cash exercise price has been forgiven (up to the total amount of proceeds received from the exercise of the options). ! Transactions involving subordinated obligations in exchange for permitted refinancing debt. ! Payments in respect of the equity value certificate guarantee and under the EVC funding agreements. The Issuer, Cableuropa and the Restricted Subsidiaries cannot enter into any transaction with an affiliate unless the transaction is completed on an arm’s length basis and: Transactions with affiliates ! For transactions involving an aggregate of €1.0mn or more, the transaction has been approved by a majority of the board of directors and ! For transactions exceeding €10.0mn, a fairness opinion is received.

Source – BNP Paribas, ONO

282 European High Yield Research ONO ⎪ January 2006

ONO, Financial Model FYE 31 December Historic Historic Historic Historic Historic Historic Historic Historic Historic Historic EUR mn FY 02 FY 03 Q1 04 Q2 04 Q3 04 Q4 04 FY 04 Q1 05 Q2 05 Q3 05 PROFIT & LOSS

Sales 253 359 105 109 110 136 502 144 148 147 COGS -86 -106 -31 -32 -31 -38 -145 -40 -39 -37 Gross profit 168 253 74 77 80 98 357 103 108 110 SG&A -181 -166 -40 -38 -39 -54 -194 -54 -53 -51 Capitalised costs -29 -15 -4 -5 -5 -6 -22 -6 -5 -6 EBITDA 16 102 38 44 45 50 185 55 61 65 P&L Interest -158 -120 -27 -26 -25 -27 -102 -27 -29 -40

Revenue growth y/y 41.5% 32.0% 27.6% 19.2% 34.7% 39.9% 36.9% 35.1% 8.2% Gross margin 66.2% 70.6% 70.4% 70.8% 72.2% 72.1% 71.2% 71.9% 73.4% 74.7% SG&A / sales 71.3% 46.3% 38.6% 35.1% 35.8% 39.7% 38.6% 37.8% 35.6% 34.5% EBITDA margin 6.2% 28.5% 36.0% 40.1% 40.5% 36.8% 36.9% 38.0% 41.5% 43.9%

CASH FLOW

Operating cash flow -231 35 -1 39 22 9 -41 -22 -7 -1

Capex -242 -188 -42 -53 -58 -101 -277 -59 -60 -52 Investing cash flow -244 -385 -43 -54 -60 -52 -147 -26 -49 -30

Financing cash flow 466 350 44 14 38 43 187 44 58 32

BALANCE SHEET

Cash & equivalents 52 26 22 1 10 27 27 12 40 2

Bank Debt 270 515 545 580 625 789 789 850 878 1,013 Bond Debt 974 410 415 450 449 457 457 459 415 345 Shareholder Loan 98 0 0 0 0 1 0 0 0 Short-term & other debt 60 42 55 56 49 75 75 85 154 134 Total Debt 1,304 1,066 1,015 1,086 1,124 1,321 1,322 1,394 1,447 1,492 Net Debt 1,252 1,040 993 1,085 1,113 1,294 1,295 1,383 1,407 1,490

RATIOS

Leverage Bank Leverage (gross) 17.1x 5.0x 4.4x 4.0x 3.9x 4.5x 4.3x 4.4x 4.2x 4.4x Total leverage (gross) 82.5x 10.4x 8.2x 7.6x 7.0x 7.5x 7.1x 7.2x 6.9x 6.5x Total leverage (net) 79.2x 10.2x 8.1x 7.6x 6.9x 7.3x 7.0x 7.2x 6.7x 6.5x Source – BNP Paribas Estimates, ONO

283 European High Yield Research Polypore ⎪ January 2006

Adam Harnetty +44 20 7595 8831 [email protected] Polypore

Bond Description & Market Data, as of 5 January 2006 Next Call Description Amount (o/s) Ratings Date Price Price YTW STW 8.75% Senior Sub Notes due 2012 EUR 150mn Caa2/CCC+ 15-May-08 104.375 92 10.50% 754bp 8.75% Senior Sub Notes due 2012 USD 225mn Caa2/CCC+ 15-May-08 104.375 92 10.49% 567bp 10.5% Senior Disc Notes due 2012 USD 300mn Ca/CCC+ 1-Oct-08 105.25 55.5 15.95% 1111bp Source – BNP Paribas

Company Profile Polypore is a leading developer, manufacturer and marketer of specialised polymer-based membranes used in the separation and filtration processes. The company is organised into two divisions: energy storage and separation media. The energy storage division, which accounts for approximately two thirds of sales, produces various membranes that are used as separators in lead-acid and lithium batteries. The separation media segment produces membranes that are used in various healthcare and industrial applications including haemodialysis, blood oxygenation, ultra pure water degasification and other speciality applications. The company has manufacturing sites in North America, Europe and Asia. For the 12 months ended 1 October 2005, the company had revenues of $436mn and adjusted EBITDA of $133mn.

Debt Profile As part of the acquisition of Polypore Inc., the following principal facilities were put in place:

Senior Secured Credit Facility

PP Acquisition Corp has entered into a $503.4mn facility to provide finance for the acquisition of Polypore. The facility comprises a $370mn term loan facility and a $36mn term loan facility. Both have a maturity of 7.5 years. In addition, there is a $90mn revolving credit facility with a six-year maturity. PP Holding and all of the company’s current and future domestic subsidiaries guarantee the facility. It is secured by a first priority security interest in substantially all of the borrower’s, PP Holdings and current and future domestic subsidiaries existing and future property and assets (subject to certain agreed exceptions). As at 1 October 2004, $367mn was outstanding under the term loans and the $90mn revolver was undrawn.

Foreign Subsidiaries Indebtedness/Finance Leases

The company’s foreign subsidiaries’ indebtedness has been incurred under government grants, overdraft facilities and other lines of credit. As at 1 October 2005, other indebtedness totalled $9mn.

8.75% Senior Subordinated Notes due 2012 USD and EUR

PP Acquisition Corp issued €150mn and $225mn of senior subordinated notes due 2102. These benefit from senior subordinated guarantees from the US subsidiaries.

10.5% Senior Subordinated Discount Notes Due October 2012

In October 2004, Polypore International Inc, an indirect parent company of PP Acquisition Corp issued $300mn Senior Subordinated Discount Notes due 2012 at 64.453%. The notes are not guaranteed or secured.

284 European High Yield Research Polypore ⎪ January 2006

Polypore Structure

Warbury Pincus

PP Holdings LLC Management

97.5% 2.5%

PP Holding Corporation II

Polypore International Inc $300m Senior Subordinated Discount Notes due Oct 2012

PP Holding Corporation

€150m Senior Subordinated Notes due May 2012 Senior Secured Polypore Inc. Credit Facility $225m Senior Subordinated Notes due May 2012

Source – Polypore

285 European High Yield Research Polypore ⎪ January 2006

Bond Covenants 8.75% Senior Subordinated Notes due 2012 Bond description 8.75% USD notes 8.75% EUR notes Issuing entity PP Acquisition Corporation (to be merged with and into Polypore Inc) Ranking Senior Subordinated Position vs. bank debt Subordinated Position vs. other bonds Senior to Discount Notes Security/guarantees Senior subordinated guarantees from most US subsidiaries Make Whole – Prior to 15 May 2008 at T+50bp Equity Claw – Prior to 15 May 2007, maximum 35% of each tranche at 108.75% Call Schedule: Optional redemption 15 May 2008 – 104.375% 15 May 2009 – 102.188% 15 May 2010 – 100% Tax redemption None Limitation on liens – any secured debt must be senior debt. Cannot issue debt senior to the Negative pledge notes/guarantees but subordinate to other debt. Cross default Yes Fall away covenants No Anti-layering No Put at 101 – 40% of voting power (if greater than % held by Permitted Holders at the time) Change of control or substantial sale of assets Fair market value and >75% proceeds in cash or equivalents. Within 365 days reinvest in Asset sales similar business or repay debt. Any proceeds remaining (subject to $15mn) must be used to tender for the bonds at par. Consolidated Fixed Charge Coverage ratio must exceed 2:1. Carve outs: Credit Facilities up to $660mn (as reduced by any pay down from asset sales) less Indebtedness of Securitisation Entities Debt limit Capital leases and similar up to the greater of $20mn and 1.5% of Total Assets $50mn general carve out Indebtedness of foreign subsidiaries up to the greater of $50mn and 3.6% of Total Assets of the foreign subsidiaries

Subject to being able to incur $1 of additional debt then: 50% of consolidated net income (however, if a dividend is being paid and Consolidated Leverage Ratio is >4.5:1 then 75% of consolidated net income); Restricted payments $5mn p.a. to repurchase employee stock (with unused amounts carried forward); 6% of the net proceeds received from a public offering; $30mn general basket.

Must not be less favourable than if executed in an arms length transaction. If greater than Transactions with affiliates $10mn requires independent board member approval or an external certificate. If >$20mn requires a fairness certificate from an external advisor. Source – BNP Paribas, Polypore

286 European High Yield Research Polypore ⎪ January 2006

Polypore, Financial Model

FYE 31 December Pred'sor Pred'sor Pred'sor Pred'sor Combined Actual Actual Combined Actual Actual Actual USD mn 2001 2002 2003 Q1 04 Q2 04 Q3 04 Q4 04 2004 Q1 05 Q2 05 Q3 05 PROFIT & LOSS Sales 245.7 345.4 441.1 140.1 127.9 117.5 104.8 490.3 112.5 112.6 105.7 Cost of sales -154.4 -243.4 -285.6 -86.3 -81.9 -91.8 -75.9 -335.9 -73.6 -72.1 -74.3 Gross Profit 91.3 102.0 155.5 53.8 46.0 25.7 28.9 154.4 38.9 40.5 31.4 SG&A -33.5 -48.8 -69.7 -19.0 -23.8 -32.5 -16.8 -92.1 -18.4 -23.6 -19.0 Operating Income 57.8 53.2 85.8 34.8 22.2 -6.8 12.1 62.3 20.5 16.9 12.4 Interest expense -14.1 -20.9 -21.5 -4.5 -9.9 -13.6 -15.8 -43.8 -14.9 -14.8 -15.1 FX & other -1.0 -1.5 -2.4 1.1 -0.5 -0.5 -0.9 -0.8 1.6 1.8 0.1 Unrealized gain/loss on derivatives -3.1 -2.6 2.3 0.0 1.3 0.0 0.0 1.3 0.0 0.0 0.0 Income before tax 39.6 28.2 64.2 31.4 13.1 -20.9 -4.6 19.0 7.2 3.9 -2.6 tax -16.0 -11.4 -18.8 -10.7 -4.3 8.7 -0.7 -7.0 -1.7 -0.6 4.3 Cum effect of change a/cg & pred div -5.7 -4.3 -1.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Net income attribtable to common 17.9 12.5 44.1 20.7 8.8 -12.2 -5.3 12.0 5.5 3.3 1.7 stock

Interest on disc notes -4.3 -5.4 -5.5 -5.5

Income before tax 39.6 28.2 64.2 31.4 13.1 -20.9 -4.6 19.0 7.2 3.9 -2.6 Interest expense 14.1 20.9 21.5 4.5 9.9 13.6 15.8 43.8 14.9 14.8 15.1 D&A 16.7 30.8 38.7 11.5 10.8 10.9 15.7 48.9 14.3 14.1 13.9 EBITDA 70.4 79.9 124.4 47.4 33.8 3.6 26.9 111.7 36.4 32.8 26.4 Restructure charge 0.0 0.0 0.0 0.0 0.0 15.4 0.3 15.7 5.4 1.5 Write-off in process R&D 0.0 0.0 0.0 0.0 5.3 0.0 0.0 5.3 0.0 Sale of inventory written up to fair value 0.0 0.0 0.0 0.0 8.5 10.0 0.5 19.0 0.0 Other 6.6 7.2 6.5 0.9 -1.7 2.1 3.7 5.0 -0.6 -1.1 1.0 Adj. EBITDA 77.0 87.1 130.9 48.3 45.9 31.1 31.4 156.7 35.8 37.1 28.9

Sales Change y/y 40.6% 27.7% 36.7% 19.0% 7.8% -14.2% 11.2% -19.7% -12.0% -10.0% Gross margin % 37.2% 29.5% 35.3% 38.4% 36.0% 21.9% 27.6% 31.5% 34.6% 36.0% 29.7% Adj. EBITDA margin % 31.4% 25.2% 29.7% 34.5% 35.9% 26.5% 30.0% 32.0% 31.8% 32.9% 27.3%

CASHFLOW Net Income 22.4 16.9 45.3 20.7 8.7 -12.2 -5.3 11.9 5.5 3.3 1.7 D&A 16.7 30.8 38.7 11.5 10.8 10.9 15.7 48.9 14.3 14.1 13.9 Other 9.4 4.9 -3.7 -1.3 -4.2 32.7 -0.5 26.7 -0.9 4.1 2.1 Change in working capital -19.1 31.0 -23.8 -13.8 0.7 -10.1 -13.4 -36.6 10.3 -14.0 6.5 Cashflow from operations 29.4 83.5 56.5 17.1 16.0 21.3 -3.5 50.9 29.2 7.5 24.2

Capex -26.3 -28.8 -33.8 -4.2 -3.5 -4.3 -3.4 -15.4 -3.1 -3.5 -3.4 Other -10.2 -112.6 0.0 1.9 0.0 0.1 0.0 2.0 0.0 0.0 0.0 Cashflow from investing -36.5 -141.4 -33.8 -2.3 -3.5 -4.2 -3.4 -13.4 -3.1 -3.5 -3.4

Net debt repayment 5.7 123.4 -28.0 -6.4 547.9 -0.6 -2.4 538.5 -26.9 -0.5 -22.7 Other -1.8 -40.3 -0.3 -0.1 -565.3 -0.3 -0.4 -566.0 0.0 -0.4 0.0 Cashflow from financing 3.9 83.1 -28.3 -6.5 -17.4 -0.9 -2.8 -27.5 -26.9 -0.9 -22.7

FX 0.2 -14.0 1.1 -1.2 -1.5 0.3 4.0 1.6 -1.3 -1.5 0.1

Net change in cash -3.0 11.2 -4.6 7.1 -6.4 16.5 -5.7 11.6 -2.1 1.6 -1.8

BALANCE SHEET Cash 20.8 37.3 31.7 31.7 29.6 31.2 29.4

Term loans 413.9 413.0 416.9 416.9 389.9 386.7 367.1 Finance leases 0.0 0.0 8.6 8.6 8.3 8.0 7.7 Other 3.9 5.0 5.9 5.9 4.1 3.7 1.3 8.75% Senior Sub Notes 408.0 408.7 429.3 429.3 420.7 406.7 408.4 10.5% Senior Discount Notes 0.0 0.0 204.5 204.5 209.8 215.3 220.7 Gross debt 825.8 826.7 1,065. 1,065. 1,032. 1,020. 1,005. 2 2 8 4 2

Net debt 805.0 789.4 1,033. 1,033. 1,003. 989.2 975.8 5 5 2

LTM CREDIT STATISTICS Coverage* 2.0 1.9 1.8 1.7 EBITDA-Capex/Interest* 1.8 1.7 1.6 1.6 Gross Leverage 5.0 5.1 6.8 6.8 7.2 7.5 7.5 Net Leverage 4.9 4.9 6.6 6.6 7.0 7.3 7.3

Gross Leverage thorugh Seniors 5.0 5.1 5.5 5.5 5.7 5.9 5.9 *Pro forma where applicable Source – BNP Paribas Estimates, Polypore

287 European High Yield Research Preem ⎪ January 2006

Adam Harnetty +44 20 7595 8831 [email protected] Preem

Bond Description & Market Data, as of 5 January 2006 Next Call Issuer Credit Trend: Positive Description Amount (o/s) Ratings Date Price Price YTW STW 10.625% Secured Nts due 2011 EUR 305 mn B3/B 31-Mar-06 105.313 107.5 3.00% 52bp 9% Sr Sub Nts due 2014 EUR 100 mn B2/B 15-May-09 104.25 119.5 4.02% 110bp EB+800bp Sr PIK Nts due 2010 EUR 413 mn NR 01-Apr-06 100.00 101.875 LB+800bp Sr PIK Nts due 2010 USD 150 mn NR 01-Apr-06 100.00 101.875 Source – BNP Paribas Company Profile Preem is one of Europe’s largest independent oil refining companies and the largest Swedish oil company, with its refineries representing approximately 75% and 30% of the refining capacity in Sweden and Scandinavia, respectively. Business is conducted through the wholly owned operating company, Preem Petroleum, which is composed of a supply and refining segment and a marketing segment. Scanraff and Preemraff, Preem’s two wholly owned refineries, have an aggregate capacity of approximately 335,000 barrels per calendar day. In 2004, Preem commenced construction of an iscocracker unit at Scanraff, which is expected to increase its throughput by 10% and also allow for the production and processing of a larger proportion of sour crude oil and sulphur free diesel, both higher margin products, upon the unit’s completion in April 2006. After refining crude oil in Sweden, the Company markets and sells its refined products primarily in Sweden and other northwestern European markets including Scandinavia, the U.K, and Germany. For the twelve months ended 30 September 2005, Preem had revenues of SEK 58.0bn and EBITDA of SEK 5.1bn.

Investment Recommendation From a fundamental credit perspective, we are comfortable with Preem as an investment. Refining margins, albeit highly volatile, are currently at elevated levels and given the worldwide lack of refining capacity, we do not think this is likely to change in the near term. Over the past couple of years Preem has also benefited from inventory gains as the oil price has risen. Should oil prices start to fall, then Preem could be adversely affected by this. However, hedging inventory is an option available to them. Our HOLD recommendation is driven by the already full nature of the bond prices. The 10.625% Senior Notes are callable in March 2006 at which point we would expect them to be refinanced. Since the PIK notes must be refinanced in the event of the senior notes being refinanced, we would expect those to be called as well.

Debt Profile €300mn Revolving Credit and Term Loan Facility In June 2004, and amended in December 2004, Preem Petroleum AB as a borrower entered into a €300mn bank facility. The facility is guaranteed by Preem Holding AB. The facility is split between €150mn of term loans with a final maturity date of 27 June 2009 and a €150mn multi-currency revolver under which all borrowings must be repaid by 27 June 2007. Drawings under the facility may be used to fund the construction of the isocracker or for general corporate purposes. As at 30 September 2005, $50mn was outstanding under the facility. 9% Senior Subordinated Notes due 2014 Although described as subordinated, the €100mn 9% notes are actually the most senior bonds in the structure by virtue of being issued by Preem Petroleum AB. These notes were issued in May 2004 to fund the development of the isocracker at Scanraff. 10.625% Senior Notes due 2011 €250mn of notes were issued in April 2001 to repay existing indebtedness due to Preem’s controlling shareholder. A further €55mn of notes were issued in July 2001. The notes are secured on the shares of Preem Petroleum AB and on a subordinated inter-company loan to Preem Petroleum AB. Floating Rate Split Coupon Notes due 2010 In July 2005, Corral Investment AB, the new direct parent of Preem Holdings AB, issued €410mn and $150mn of FRNs. The coupon is set quarterly at 1.5% in cash and 6.5% in additional notes above EURIBOR/LIBOR. Use of proceeds was to repay a loan to the controlling shareholder. If any of the Preem Holdings AB or Preem Petroleum AB notes are redeemed, then the floating notes must also be redeemed.

288 European High Yield Research Preem ⎪ January 2006

Preem Structure

€413m EB+8% Senior PIK Notes due 2010 Corral Investment $150m LB+8% Senior PIK Notes due 2010

Subordinated Shareholder Loan 100%

Guarantee Preem Holdings AB €305m 10.625% Secured Notes due 2011 Secured on loan & shares in Preem Petroleum AB

100% Subordinated Inter-company Loan

€100m 9% 2014 Notes Preem Petroleum AB

100%

Scanraff Refinery Preemraff Refinery Preem Finans

Source – Preem

289 European High Yield Research Preem ⎪ January 2006

Bond Covenants 10.625% Secured Notes 9% Senior Subordinated EB/LB + 8% PIK Notes Bond description due 2011 Notes due 2014 due 2010 Issuing entity Preem Holdings AB Preem Petroleum AB Corral Investment AB Ranking Senior Subordinated Senior Position vs. bank debt Subordinated Subordinated Subordinated Senior to PIK/Subordinated Position vs. other bonds Senior Subordinated to 9% 2014 Notes Guaranteed on a senior Secured on shares of basis from Preem Holdings Preem Petroleum AB and AB. NB inter-company Secured on the shares of Security/Guarantees inter-company proceeds proceeds loan from Preem Preem Holdings AB. loan from Preem Holdings Holdings AB is subordinated AB to Preem Petroleum AB. to the notes. Make Whole – none Make Whole – none Make Whole – none Equity Claw – expired Equity Claw – prior to Equity Claw – none 15 May 2007 35% at Call Schedule: 109% Call Schedule: 31 March 2006 – 105.313% 1 April 2006 – 100% Optional redemption Call Schedule: 31 March 2007 – 103.542% 1 January 2007 – 102% 15 May 2009 – 104.5% 31 March 2008 – 101.771% 15 May 2010 – 103% 31 March 2009 – 100% 15 May 2011 – 101.5% 15 May 2012 – 100% Tax redemption Yes – at par Yes – at par Yes – at par Negative pledge Limitation on liens Limitation on liens Limitation on liens Cross default Yes Yes Yes Fall away covenants No No No Anti-layering No Yes No Change of control Put at 101% – based on 35% of voting power if greater than Permitted Holders %. Fair market value and > 75% in cash and equivalents. Within 360 days reinvest in similar Asset sales business or repay debt. Any proceeds remaining (subject to €10mn) must be used to tender for the bonds at par. Consolidated coverage ratio Consolidated coverage ratio Consolidated coverage ratio must exceed 2.25x. must exceed 2.25x. must exceed 3.0x, then Preem Holdings and Carve outs: Carve outs: restricted subsidiaries may Credit facilities up to Credit facilities up to borrow. 90% of accounts 90% of accounts Carve outs: receivable and receivable and Debt limit inventory; inventory; Credit facilities up to 90% of accounts Capital leases and Capital leases and receivable and similar up to €20mn; similar up to €30mn; inventory; €25mn general basket. €25mn general basket. Capital leases and similar up to €30mn; €25mn general basket. Subject to being able to incur €1 of additional debt then: 50% of consolidated net income; Restricted payments €5mn to repurchase employee stock (€2.5mn annual maximum); €10mn general basket. Must be no less favourable than if executed in an arm’s length transaction. If greater than Transactions with affiliates €5mn requires majority of independent directors and if greater than €10mn requires a fairness certificate from an investment bank. Source – Preem, BNP Paribas

290 European High Yield Research Preem ⎪ January 2006

Preem, Financial Model FYE 31 December SEK mn 2002 2003 Q1 04 Q2 04 Q3 04 Q4 04 2004 Q1 05 Q2 05 Q3 05 PROFIT & LOSS Revenues 42,178 43,030 10,551 11,785 13,009 12,939 48,284 12,583 15,218 17,222 Excise duties -8,855 -8,241 -2,090 -1,879 -1,924 -2,199 -8,092 -2,057 -2,038 -1,968 Sales revenue 33,323 34,789 8,461 9,906 11,085 10,740 40,192 10,526 13,180 15,254 Cost of goods sold -31,952 -33,303 -7,863 -8,704 -9,636 -10,398 -36,601 -9,387 -11,863 -13,018 Gross Profit 1,371 1,486 598 1,202 1,449 342 3,591 1,139 1,317 2,236 Selling expenses -914 -812 -180 -189 -187 -221 -777 -164 -188 -180 Admin expenses -479 -479 -103 -105 -100 -143 -451 -111 -120 -110 Other operating income net 249 258 69 54 62 84 269 90 80 71 Operating income 227 453 384 962 1,224 62 2,632 954 1,089 2,017 Interest income 47 40 15 11 9 9 44 6 8 7 Interest expense -478 -456 -137 -134 -134 -146 -551 -124 -134 -118 Other financial income/expense net 240 268 -128 75 73 183 203 -131 -271 51 Income before taxes 36 305 134 914 1,172 108 2,328 705 692 1,957 Tax -180 -77 -37 -286 -344 -37 -704 -208 -205 -677 MSI -4 -2 -1 -1 -1 1 -2 -1 -1 0 Net Income -148 226 96 627 827 72 1,622 496 486 1,280

Operating income 227 453 384 962 1,224 62 2,632 954 1,089 2,017 D&A 846 881 262 255 250 277 1,044 237 246 240 EBITDA 1,073 1,334 646 1,217 1,474 339 3,676 1,191 1,335 2,257

Sales revenue growth y/y 4.4% 15.5% 24.4% 33.1% 37.6% Gross margin 4.1% 4.3% 7.1% 12.1% 13.1% 3.2% 8.9% 10.8% 10.0% 14.7% EBITDA margin 3.2% 3.8% 7.6% 12.3% 13.3% 3.2% 9.1% 11.3% 10.1% 14.8%

CASHFLOW Income before taxes 36 305 134 914 1,172 108 2,328 705 692 1,957 D&A 846 881 262 255 250 277 1,044 237 246 240 Unrealised FX -429 -295 140 -85 -67 -152 -164 145 291 -53 Cash taxes -17 -4 0 -2 0 -2 -4 -1 -3 -1 Other -12 -15 2 1 94 122 219 -253 38 -17 Change in working capital -230 -455 1,072 -222 -960 6 -104 21 -1,094 -1,766 Cashflow from operations 194 417 1,610 861 489 359 3,319 854 170 360

Capex -1,029 -720 -84 -285 -259 -588 -1,216 -350 -652 -551 Net acquisitions 13 -1,067 -24 0 0 -70 -94 0 0 0 Other 8 15 0 -70 -14 -15 -99 -2 4 0 Cashflow from investing -1,008 -1,772 -108 -355 -273 -673 -1,409 -352 -648 -551

Net debt repayment 314 1,529 -1,025 -836 -255 384 -1,732 -117 455 313 Other 2 -2 0 -1 0 -86 -87 -845 -3 0 Cashflow from financing 316 1,527 -1,025 -837 -255 298 -1,819 -962 452 313

Net cashflow -498 172 477 -331 -39 -16 91 -460 -26 122

BALANCE SHEET Cash & equivalnents 461 633 1,110 779 740 724 724 264 238 360

Bank Debt 2,344 2,344 2,294 2,905 3,211 Preem Holding AB 10.625% 31/3/11 2,747 2,747 2,787 2,879 2,849 Preem Petroleum €100m 9% 15/5/14 901 901 914 944 934 Gross debt ex PIKs 6,324 7,798 6,902 6,053 5,750 5,992 5,992 5,995 6,728 6,994

Net debt ex PIKs 5,863 7,165 5,792 5,274 5,010 5,268 5,268 5,731 6,490 6,634

Corral Invest 1/7/10 $150mm PIKs 1,162 Corral Invest 1/7/10 €410m PIKs 3,819 PIK Debt 4,981

LTM RATIOS Coverage 2.5 3.2 7.3 7.3 8.4 8.6 10.4 EBITDA-Capex/Interest 0.1 1.5 4.9 4.9 5.4 4.9 6.1 Gross leverage 5.9 5.8 1.6 1.6 1.4 1.6 1.4 Net leverage 5.5 5.4 1.4 1.4 1.4 1.5 1.3

Gross leverage inc PIKs 2.7 2.3 Source – BNP Paribas Estimates, Preem

291 European High Yield Research Rallye ⎪ January 2006

Jean-Yves Coupin, CFA +44 20 7595 8360 [email protected] Rallye

Bond Description & Market Data, as of 9 January 2006 Next Call Description Amount (o/s) Ratings Date Price Price YTW STW 4.625% Stand Alone due March 2006 EUR 300mn NR NR NR NA NA NA 5.375% Stand Alone due January 2009 EUR 500mn NR NR NR 101.7 4.76% 171bp 5.625% Stand Alone due October 2011 EUR 500mn NR NR NR 97.17 6.10% 292bp Source – BNP Paribas Company Profile Rallye is an operating holding company ultimately controlled by Groupe Euris, the investment vehicle of Jean-Charles Naouri. Its main asset is a 51% stake (64% of voting rights) in France’s fifth largest food retailer Casino with a current market value of approximately €3bn. It also owns 72% of Groupe Go Sport – France’s second-largest sporting good retailer – and a diversified portfolio of financial investments with a book value of €312mn as of 30 June 2005. At mid-year 2005, Rallye’s total portfolio was valued at about €3.6bn, representing 1.65 times its net debt. Rallye is listed on the Paris Stock Exchange, with a current market capitalisation of €1.4bn. Investment Recommendation Rallye’s credit quality is supported by its the 51% stake in Casino, France’s fifth largest player with a share of about 13% of the stable through increasingly challenging food retail market. Owing to Rallye’s holding status, we would expect spreads on its bonds to continue to trade at a discount relative to Casino’s issues and exhibit relatively higher volatility. Recent rating pressures suffered by Casino, coupled with the uncertainties related to reform of the Galland Low amid weak consumer demand have prompted GENP spreads to underperform. Debt Profile As of 31 December 2004, Rallye has outstanding debts as follows: ! EUR note due 2006: Fixed rated, 4.625% coupon, nominal amount of €300mn. See covenant analysis below. ! EUR note due 2009: Fixed rated, 5.375% coupon, nominal amount of €500mn. See covenant analysis below. ! EUR note due 2011: Fixed rated, 5.625% coupon, nominal amount of €500mn. See covenant analysis below ! EUR exchangeable note due 2006: Fixed rated, 3.250% coupon, nominal amount of €460mn. ! EUR OCEANE note due 2008: Fixed rated, 3.750% coupon, nominal amount of €264mn. ! EUR exchangeable note due 20136: Fixed rated, 3.250% coupon, nominal amount of €300mn.

As of 31 December 2004, Casino has outstanding debts as follows: ! EUR note due 2006: Fixed rated, 4.750% coupon, with an amount of €500mn (PP, NP, CD) ! EUR note due 2007: Fixed rated, 5.875% coupon, with an amount of €500mn (PP, NP, CD) ! EUR note due 2008: Fixed rated, 6% coupon, with an amount of €1,100mn (PP, NP, CD) ! EUR note due 2010: Fixed rated, 5.25% coupon, with an amount of €500mn (PP, NP, CD) ! EUR note due 2011: Fixed rated, 4.75% coupon, with an amount of €400mn (PP, NP, CD) ! EUR note due 2012: Fixed rated, 6% coupon, with an amount of €700mn (PP, NP, CD) ! USD Private Placement: for an aggregate amount of €265mn ! EUR Private Placement: for an aggregate amount of €483mn ! EUR FRN due 2007 : E3M + 0.45 floating rate, with an amount of €81mn ! EUR FRN due 2008 : E3M + 0.60 floating rate, with an amount of €78mn ! EUR FRN due 2009 : E3M + 0.725 floating rate, with an amount of €76mn ! Syndicated loan : €48mn due 2007 ! Bank loan: €100 due 2007 ! Structure loan: €167 due 2006 PP: Pari Passu, NP: Negative Pledge, CD: Cross Default

292 European High Yield Research Rallye ⎪ January 2006

Rallye Structure as of 31 March 2005

GROUPE EURIS SA

92.40%

FINATIS SA

84.61%

EURIS SA

88.75% FONCIERE EURIS SA

63.27%

RALLYE SA 7.30%

49.70% 71.72%

CASINO GUICHARD GROUPE PERRACHON SA GO SPORT

Source – Rallye

293 European High Yield Research Rallye ⎪ January 2006

Bond Covenant Bond description EUR 300mn 4.625% due March 2006 Issuing entity Rallye SA Ranking Senior Unsecured Position vs. bank debt Pari Passu Position vs. other bonds Pari Passu Security/Guarantees None Optional Redemption No Yes – The issuer may redeem the Notes in whole but not in part if changes in the law Tax redemption impose certain withholding taxes on amounts payable on the Notes. The redemption amount is the principal amount of the Notes plus accrued interests. Negative pledge Yes Cross default No Fall away covenants No Anti-layering No Change of control No Asset sales No Debt Limit No Restricted Payments No Transactions with Affiliates No Source – Rallye

294 European High Yield Research Rallye ⎪ January 2006

Bond Covenant Bond description EUR 400mn 5.375% due January 2009 Issuing entity Rallye SA Ranking Senior Unsecured Position vs. bank debt Pari Passu Position vs. other bonds Pari Passu Security/Guarantees None Optional Redemption No Yes – The issuer may redeem the Notes in whole but not in part if changes in the law Tax redemption impose certain withholding taxes on amounts payable on the Notes. The redemption amount is the principal amount of the Notes plus accrued interests. Negative pledge Yes Cross default No Fall away covenants No Anti-layering No Yes. In the event of a change of control of the issuer, bondholders may require the early redemption of all or part of their bonds. The redemption amount is the principal amount of Change of control the Notes plus accrued interests. Also, In the event of a change of control of Casino, the bondholders may require the early redemption of all or part of their bonds. The redemption amount is 102% of the principal amount plus accrued interests. Asset sales No Debt limit No Restricted payments No Transactions with affiliates No Source – Rallye

295 European High Yield Research Rallye ⎪ January 2006

Bond Covenant Bond description EUR 500mn 5.625% due October 2011 Issuing entity Rallye SA Ranking Senior Unsecured Position vs. bank debt Pari Passu Position vs. other bonds Pari Passu Security/Guarantees None Optional redemption No Yes – The issuer may redeem the Notes in whole but not in part if changes in the law Tax redemption impose certain withholding taxes on amounts payable on the Notes. The redemption amount is the principal amount of the Notes plus accrued interests. Negative pledge Yes Cross default No Fall away covenants No Anti-layering No Yes. In the event of a change of control of the issuer, bondholders may require the early redemption of all or part of their bonds. The redemption amount is the principal amount of Change of control the Notes plus accrued interests. Also, In the event of a change of control of Casino, the bondholders may require the early redemption of all or part of their bonds. The redemption amount is 102% of the principal amount plus accrued interests. Asset sales No Debt limit No Restricted payments No Transactions with affiliates No Source – Rallye

296 European High Yield Research Rallye ⎪ January 2006

Financials – Rallye June-05 Dec-01 Dec-02 Dec-03 Dec-04 IFRS Income Statement Group Turnover 22,863 23,681 23,768 23,835 10,700 Gross Profit 5,969 6,271 6,480 6,490 N/A Gross Margin 26.1% 26.5% 27.3% 27.2% Group Operating Profit 841 954 1,056 1,000 407 Operating Margin 3.7% 4.0% 4.4% 4.2% 3.8% Net Interest Expense (380) (338) (291) (247) (173) Profit before Tax (pre goodwill & excep.) 597 657 782 778 237 Pretax Margin 2.6% 2.8% 3.3% 3.3% 2.2% Exceptionals 18 (21) (7) (91) Net Profit 342 366 426 397 154 Net Margin 1.5% 1.5% 1.8% 1.7% 1.4%

EBITDA before exceptionals 1,307 1,595 1,561 1,697 657 EBITDA Margin 5.7% 6.7% 6.6% 7.1% 6.1% Depreciation (466) (641) (505) (618) N/A EBITA before exceptionals 841 954 1,056 1,079 N/A EBITA Margin 3.7% 4.0% 4.4% 4.5% N/A

Cash Flow Statement Funds From Operations 863 939 924 1,149 N/A (Increase)/Decrease in Working Capital (386) 280 246 (124) N/A Operating Cash Flow 477 1,219 1,170 1,025 N/A Capital Expenditure (1,133) (1,065) (973) (820) N/A Free Operating Cash Flow (656) 154 197 205 N/A Dividends (149) (133) (218) (241) N/A Discretionary Cash Flow (805) 21 (21) (36) N/A

Capitalisation Total Debt 7,523 8,835 8,204 9,306 7,769 Net Debt 5,384 5,953 5,672 6,230 5,434

Equity 4,741 3,412 3,322 3,342 4,324

Leverage & Coverages Net Debt/Net Capitalisation 53.2% 63.6% 63.1% 65.1% 55.7%

EBITDA Net Interest Coverage 3.4x 4.7x 5.2x 5.9x N/A

FFO / Net Debt 16.0% 15.8% 16.3% 18.4% N/A

Source – Rallye, BNP Paribas

297 European High Yield Research Remy Cointreau S.A. ⎪ January 2006

Oleksiy Soroka, CFA +44 20 7595 4878 [email protected] Remy Cointreau S.A.

Bond Description & Market Data, as of 5 January 2006 Next Call Issuer Credit Trend: Stable Description Amount (o/s) Ratings Date Price Price YTW STW 5.2% Senior Notes due 2012 EUR 200mn Ba2/BB- 15-Jan-09 102.60 102.75 4.58% 147bp 6.5% Senior Notes due 2010 EUR 175mn Ba2/BB- 07-Jan-07 103.25 106.89 3.82% 97bp Source – BNP Paribas Company Profile Rémy Cointreau is one of the leading international manufacturers and distributors of premium alcoholic beverages. In terms of volume of sales, it has the #2 market positions in both the global cognac market and the European liqueurs markets. Rémy Cointreau is also the leader in a number of niche product and geographical markets. The company owns a comprehensive portfolio of powerful global and niche brands, including Rémy Martin, Cointreau, Passoã, Bols, Metaxa and Piper-Heidsieck. Rémy Martin is the world’s second best selling cognac brand and Cointreau is the third best selling liqueur brand in Europe (both measured in terms of volume). The company also is the fourth largest producer of champagne in the world. The company has a global presence and reach with its proprietary distribution platform and through the Maxxium joint venture. For the twelve months ended 30 September 2005, Remy Cointreau generated continuing turnover of €835mn and continuing EBITDA of €162mn. At the end of the period, the company had leverage of 5.0x and coverage of 2.5x.

Investment Recommendation We maintain our HOLD/Stable Credit Trend recommendation for Remy Cointreau’s 6.5% senior notes due 2010 and the 5.2% senior notes due 2012. We believe the bonds will tighten from the current levels in 2006, but we do not think the tightening upside is material to warrant a change in our recommendation. Remy Cointreau has been performing well so far in 2005/06 and we think that it will be a positive year for the company. We note that in conjunction with the release of the first- half results, Remy Cointreau mentioned to the press and to analysts that they are in talks with the purpose of potentially disposing of its Bols liqueur portfolio. We estimate that the company may get €100-150mn for those brands. It is not yet a done deal but we believe that the management is in a position to hold out for the best price. We think that the company would then use the proceeds and its existing sources of liquidity to take care of its convertible, which matures in April 2006. We also note that given the recent equity price rally, there is a chance the convertibles may end up being converted into equity. We think that a disposal of all of the smaller, secondary brands would position Remy Cointreau well to participate more actively in the current wave of consolidation in the branded alcoholic beverage segment. We have long felt that Remy Cointreau is an attractive acquisition target. In particular, for trade buyers, such as Diageo or Brown-Forman. Remy Cointreau is still majority privately-owned and a decision to sell Remy Cointreau will ultimately depend on the will of the original shareholders to do so. We do not believe that a trade sale is imminent in the short-term, but feel that it should happen longer-term (say in 2007). We believe that it is less likely that Remy Cointreau will pursue an independent expansion strategy post the potential disposal. We note that Remy Cointreau’s reported results are very sensitive to large swings in the EUR/USD exchange rate (the stronger the EUR, the weaker the company’s reported earnings).

298 European High Yield Research Remy Cointreau S.A. ⎪ January 2006

Debt Profile As of 30 September 2005, Remy Cointreau had a total indebtedness of €829mn. This comprised 6.5% Senior Notes due 2010, 5.2% Senior Notes due 2012, 3.5% OCEANEs due 2006, amounts outstanding under the bank credit facilities, and subordinated perpetual notes (TSDI) nearing redemption. Credit Facilities The company’s syndicated facility was originally divided into a €250.0mn amortising term facility (of which €37.5mn was paid on 10 June 2004 in accordance with the facility’s amortisation schedule) and a €250.0mn revolving facility. On 28 December 2004, the bank facility was amended, effective 10 January 2005, to convert it into a fully revolving facility but maintaining the term facility’s amortisation schedule. The principal amount of the revolving facility was €212.5mn (the availability was reduced by €43.8mn on 10 June 2005) and its terms are otherwise substantially the same as the previously existing €250.0mn revolving facility. Such facilities are committed and denominated in EUR, though borrowings may be drawn in USD or certain other specified currencies. The facilities will mature on 10 June 2008. The maximum amount that may be borrowed under the new revolving facility will amortise as follows: €50.0mn on 10 June 2006, €56.3mn on 10 June 2007 and €62.5mn on 10 June 2008. Borrowings under the revolving facilities are to be repaid on the last day of the interest period. OCEANEs On 30 January 2001, Remy Cointreau issued €300.0mn principal amount of notes convertible into new or existing shares (OCEANEs) which mature on 1 April 2006. The notes have a nominal value of €43.50 each. They bear interest at a rate of 3.50% per annum and must be redeemed on 1 April 2006 at €48.53, which includes a premium of 11.56% on their nominal value. OCEANE’s are ranked pari passu with the high yield notes.

Remy Cointreau Structure

Heriard Dubreuil Family

Andromede Group Pierre Cointreau

100% 50.82%

49.18% General Public Orpar Recopart

40.36% 44.48% 13.68%

Treasury Shares Remy Cointreau 1.47%

Source – Remy Cointreau

299 European High Yield Research Remy Cointreau S.A. ⎪ January 2006

Bond Covenants Bond description EUR 175mn 6.5% Senior Notes EUR 200mn 5.2% Senior Notes Issuing entity Remy Cointreau S.A. Ranking General unsecured senior obligations of the Issuer Position vs. bank debt Pari passu with the bank facility; structurally subordinated to the subsidiary debt Position vs. other bonds Pari passu Security/Guarantees No Call Schedule Call Schedule During the twelve-month period starting: During the twelve-month period starting: 15 January 2009 - 102.60% 1 July 2007 - 103.250% 15 January 2010 - 101.30% 1 July 2008 - 101.625% 15 January 2011 and thereafter - 1 July 2009 and thereafter - 100.000%. 100.00%.

Make-Whole Optional redemption At any time prior to 1 July 2007, at a Make-Whole redemption price of 100% of the principal At any time prior to 15 January 2009, at a amount plus the Applicable Premium redemption price of 100% of the principal (calculated at Bund+50bp). amount plus the Applicable Premium (calculated at Bund+50bp). Equity Clawback Equity Clawback Prior to 1 July 2007, up to 35% of the notes at a redemption price of 106.5. Prior to 15 January 2008, up to 35% of the notes at a redemption price of 105.2%. Tax redemption Yes – at par Negative pledge Yes Cross default Yes – on €15mn or more of other debt Fall away covenants Yes Anti-layering No Change of control Put at 101% The Issuer cannot sell assets unless: The issuer receives a fair market value for them; At least 75% of the consideration is in cash or equivalent. 100% of the Net Available Cash from the Asset Disposition will have to be used within 365 days from the date of the sale or from the day of the receipt of the cash proceeds as follows: (a) to prepay or reduce any Indebtedness which is not junior or subordinated to the Notes and, in the case of any pari passu or senior Indebtedness under any Revolving Credit Facility, effect an equivalent permanent reduction in the availability under such Revolving Credit Facility; Asset sales (b) to acquire all or substantially all of the assets of, or a majority of the Voting Stock of, another Permitted Business; (c) to make a capital expenditure; (d) to acquire other long-term assets that are used or useful in a Permitted Business. If the proceeds are not used for one of the above purposes, on the 365th day after an Asset Sale the Notes will be tendered for on a pro-rata basis for the unutilised amount of proceeds at a price equal to 100% of the principal amount of the Notes to be purchased, plus accrued and unpaid interest thereon. The Issuer or such Restricted Subsidiary, as the case may be, may defer the Net Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer Amount equal to or in excess of €20.0mn (at which time, the entire unutilized Net Proceeds Offer Amount, and not just the amount in excess of €20.0mn, shall be applied as required pursuant to this paragraph). Source – BNP Paribas, Remy Cointreau S.A.

300 European High Yield Research Remy Cointreau S.A. ⎪ January 2006

Bond Covenants Bond description EUR 175mn 6.5% Senior Notes EUR 200mn 5.2% Senior Notes Debt is permitted up to 2.0x Fixed Charge Coverage Ratio.

In addition, the Issuer’s Restricted Subsidiaries are not allowed at any time to (1) have outstanding an aggregate amount of Specified Indebtedness which exceeds 50% of the total consolidated indebtedness or (2) have outstanding an aggregate amount of Indebtedness of its Restricted Subsidiaries (other than any such Indebtedness held by the Issuer or any of its Restricted Subsidiaries) which exceeds 25% of the total consolidated indebtedness of the Debt limit Issuer.

Special Indebtedness consists of (1) all unsecured Indebtedness of the Restricted Subsidiaries and (2) all Indebtedness of the Issuer and/or its Restricted Subsidiaries which is secured, in which such security does not equally and rateably secure the Notes.

The Issuer will not incur any subordinated indebtedness unless it is made expressly subordinated to the Notes. The Parent can make Restricted Payments in the amount equal to the sum of:

50% of Cumulative Net Income (if Cumulative Net Income is a loss, then minus 100% of such loss) earned subsequent to 31 March 2003 and on or prior to the end of the Restricted payments Issuer’s most recently ended period for which internal financial statements are available at the time of such Restricted Payment; 100% of equity proceeds; General basket of up to €50mn. Any such transaction has to be at an arm’s-length basis. In addition, transactions in excess of €5.0mn must be approved by the Executive Board of the Issuer or such Restricted Transactions with affiliates Subsidiary. Transactions with an aggregate value of more than €30.0mn also require the favourable opinion of an independent financial advisor. Source – BNP Paribas, Remy Cointreau S.A.

301 European High Yield Research Remy Cointreau S.A. ⎪ January 2006

Remy Cointreau S.A., Financial Model French French GAAP GAAP IFRS IFRS IFRS IFRS IFRS IFRS IFRS Actual Actual Actual Actual Actual Actual Actual Actual EUR mn, year ends 31 March FY 02/03 FY 03/04 H1 04/05 H2 04/05 FY 04/05 H1 05/06 H2 05/06 FY 05/06 P&L SUMMARY

Revenue 1,000.1 888.3 386.9 436.9 823.8 397.8 450.0 847.8 % change -1.9% -11.2% 2.8% 3.0% 2.9% Cost of sales -181.6 -203.4 -385.0 -194.4 -218.3 -412.7 Gross profit 205.3 233.5 438.8 203.4 231.8 435.2 gross margin 53.1% 53.4% 53.3% 51.1% 51.5% 51.3%

Distribution costs -107.7 -113.3 -221.0 -105.6 -112.5 -218.1 % of sales 27.8% 25.9% 26.8% 26.5% 25.0% 25.7% Administrative expenses -41.2 -46.7 -87.9 -39.1 -45.0 -84.1 % of sales 10.6% 10.7% 10.7% 9.8% 10.0% 9.9% Other income from operations 3.9 8.2 12.1 5.7 10.0 15.7 Operating profit on ordinary activities 213.8 173.5 60.3 81.7 142.0 64.4 84.3 148.7 % of sales 21.4% 19.5% 15.6% 18.7% 17.2% 16.2% 18.7% 17.5%

Depreciations and amortisation 20.3 20.4 7.9 8.2 16.1 7.5 7.8 15.3 EBITDA 234.1 193.9 68.2 89.9 158.1 71.9 92.1 164.0 % of sales 23.4% 21.8% 17.6% 20.6% 19.2% 18.1% 20.5% 19.3%

Provisions for impairment 0.0 -28.8 -28.8 0.0 0.0 0.0 Other operating income -9.6 11.3 1.7 0.0 0.0 0.0 Operating profit 50.7 64.2 114.9 64.4 84.3 148.7 % of sales 13.1% 14.7% 13.9% 16.2% 18.7% 17.5%

Finance costs -26.4 -27.4 -53.8 -32.5 -33.0 -65.5 Other financial income and expenses 0.0 -2.0 -2.0 0.0 0.0 0.0 Net financial expenses -66.7 -64.1 -26.4 -29.4 -55.8 -32.5 -33.0 -65.5 Profit before tax 147.1 109.4 24.3 34.8 59.1 31.9 51.3 83.2 Income tax expense -50.5 -38.3 -8.3 -2.2 -10.5 -10.2 -16.4 -26.6 effective tax rate 34.3% 35.0% 34.2% 6.3% 17.8% 32.0% 32.0% 32.0% Share of profit of associates 1.3 6.1 7.4 2.3 Profit from continuing operations 17.3 38.7 56.0 24.0 Profit from discontinuing operations 2.8 -3.5 -0.7 15.1 Profit for the period 20.1 35.2 55.3 39.1 Attributable to minority interests -1.4 -4.1 -5.5 3.8 Net profit - Group share 18.7 31.1 49.8 42.9

CASH FLOW ITEMS Cash effect from changes in working capital -51.1 28.6 -31.3 61.1 29.8 -55.9 65.0 9.1 Cash generated from operations 43.1 22.5 163.6 186.1 Other operating cash expenses paid -5.1 -4.4 -5.0 -9.4 Interest paid -54.3 -54.1 -26.5 -17.8 -44.3 -28.3 -7.8 -36.1 Income taxes paid -53.1 -46.9 -14.8 -24.1 -1.9 -16.4 -18.3 Net cash from operating activities 62.9 99.3 -3.3 125.4 122.1 -12.1 134.3 122.2 Purchases of property, plant and equipment -31.0 -20.5 -6.6 -28.2 -34.8 -9.0 -10.0 -19.0 Free cash flow 31.9 78.8 -9.9 97.2 87.3 -21.1 124.3 103.2 Dividends paid to shareholders -39.6 -43.9 -44.1 0.0 -45.1 -45.1 Free cash flow (after dividend payments) -7.7 34.9 43.2 -21.1 79.3 58.2

BALANCE SHEET ITEMS Cash and cash equivalents 18.7 68.1 33.6 53.6 53.6 20.8 70.1 70.1

3.5% Convertible Bond 300.0 Other short-term borrowings 70.3 Short-term borrowings and accrued interest 189.0 170.0 170.0 400.3 370.3 370.3

5.2% Senior Notes due 2012 200.0 200.0 200.0 200.0 6.5% Senior Notes due 2010 175.0 175.0 175.0 175.0 Other long-term borrowings 53.9 53.9 53.9 Long-term borrowings 781.4 746.5 746.5 428.9 428.9 428.9 Total debt 884.1 944.0 970.4 916.5 916.5 829.2 799.2 799.2 Net debt 865.4 875.9 936.8 862.9 862.9 808.4 729.1 729.1

CREDIT RATIOS Total debt/EBITDA 3.8x 4.9x 5.8x 5.1x 4.9x 4.9x Net debt/EBITDA 3.7x 4.5x 5.5x 5.0x 4.4x 4.4x

EBITDA/Net cash interest 4.3x 3.6x 3.6x 3.5x 4.5x 4.5x Source – BNP Paribas Estimates, Remy Cointreau S.A. Leverage and Coverage are based on the last 12 months’ results. Some of the ratios are adjusted for the effects of acquisitions and disposals. In addition, these 2 measures are usually calculated based on EBITDA adjusted for exceptional or non-recurring items.

302 European High Yield Research Remy Cointreau S.A. ⎪ January 2006

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303 European High Yield Research Rexel ⎪ January 2006

Oleksiy Soroka, CFA +44 20 7595 4878 [email protected] Rexel

Bond Description & Market Data, as of 5 January 2006 Next Call Issuer Credit Trend: Positive Description Amount (o/s) Ratings Date Price Price YTW STW 9.375% Senior Subordinated Notes due 2015 EUR 600mn Caa1/CCC+ 15-Mar-10 104.688 106.75 8.11% 500bp Source – BNP Paribas Company Profile Rexel is a leading international distributor of low and ultra-low voltage electrical products. The company has a global presence and is organised across three geographical areas, Europe, the Americas and Asia-Pacific. Rexel believes it occupies a top-three market position in each of the three regions. The company sells products into three main markets: (1) the industrial market (approximately 40% of sales in 2004); (2) the non-residential market (approximately 30% of sales in 2004) and (3) the residential market (30% of sales in 2004). The industrial market involves maintenance, repair and operating activities involving electrical equipment in factories, plants and other industrial installations. The non-residential market comprises the use of the electrical equipment in the construction or renovation of non-residential buildings, such as hotels, offices, public buildings, stores and transportation infrastructure. Finally, the residential segment involves the use of electrical products in the construction of the residential property. The company is owned by the private equity investors, including Clayton, Dubilier & Rice (31.5%), Eurazeo (30.5%), Merrill Lynch Global Private Equity (24.0%) as well as by other smaller investors (14%). For the twelve months ended 30 September 2005, Rexel had sales of €7,032mn and EBITDA of €391mn. At the end of the period, the company had net balance sheet leverage of 5.7x and coverage of 2.0x. Investment Recommendation We maintain our BUY/Positive Credit Trend recommendation for Rexel’s high yield notes. Given that we expect that the company will report positive fourth-quarter 2005 earnings, we think that the bonds should subsequently tighten somewhat further following the announcement. In addition, we believe there is a greater upside for the bonds longer term. We believe that Rexel’s operating performance will continue to be positive in 2006 as well. We also think that the company has a good free cash flow generation and deleveraging potential, assuming there is no big releveraging acquisition. Currently, we expect that Rexel will be pursuing bolt-on or mid-sized acquisitions during the next couple of years, with the acquisition budget of approximately €60-100mn on average per annum. We admit that a larger acquisition is also possible over this time horizon. However, we expect that any such purchase will be either only slightly releveraging or will keep the pro forma leverage at the pre-acquisition level. We feel that given Rexel’s current aggressive credit profile, including a high senior leverage of 5.0x, any major acquisition would have to contain an equity contribution from the company’s shareholders to have a realistic chance of engaging new lenders. Therefore, while a major acquisition does pose certain risks for the company’s bondholders, we do not believe that such risks are excessive. We acknowledge that Rexel (at the Ray Acquisition level) has a fairly high level of leverage – a ratio of net debt-to-EBITDA of 5.7x at the end of the first half of 2005 (the leverage is even higher, at 6.0x, if you adjust net debt for pension liabilities and for the off-balance sheet operating lease commitments). This aggressive credit profile is reflected in the current agency ratings for the notes – Caa1 (Stable Outlook) from Moody’s and CCC+ (Stable Outlook) from S&P. While we expect that Rexel will delever gradually over the next two-three years, we do not think that the agency ratings are upwardly mobile in the next six to twelve months. Given a cyclical nature of Rexel’s business and the aforementioned relatively high level of leverage, we feel that there may be a risk that the company’s operating performance will trough at the same point as the debt repayments ramp up and the covenants on the bank facility tighten. We believe that such risk is of a relatively longer-term nature (in our view, such situation is not likely to come to the fore until 2008) and we think that the risk will be mitigated somewhat by the expected cash inflow from the company’s working capital if the turnover were to decline.

304 European High Yield Research Rexel ⎪ January 2006

Debt Profile Ray Acquisition SCA (Ray Acquisition SCA is the issuer of the bonds and the direct parent company of Rexel S.A.)’s debt comprises a securitisation programme, senior credit facility, finance leases, high yield bonds and some additional indebtedness. The securitisation programme (which may ultimately reach €800mn) is the most senior piece of indebtedness. As of 30 September 2005, Ray Acquisition had €2,250.8mn available under its Senior Credit Facility. The facility comprises five term loan facilities (total availability of €1,327mn, including a dedicated €200mn acquisition facility), a revolving credit facility (€300mn availability) and a borrowing base facility (€624mn availability). The bank debt tranches mature between 2008 and 2012. As of 30 September 2005, €1,710.4mn was utilised under the facility. The Senior Credit Facility benefits from a security package, including pledges over assets, share pledges over the borrower and certain subsidiaries, and guarantees from material subsidiaries accounting for about 90% of the group’s consolidated EBITDA (Source: S&P). We believe that the senior credit facility, as well as finance leases and some additional indebtedness at the subsidiary level will have a priority over the high yield bonds, effectively making the latter the most junior piece of the capital structure. The company has €600mn of high yield bonds outstanding. They have a form of senior subordinated notes and mature in March 2015. The bonds are secured by a second priority security interest in the shares of Rexel owned by the issuer. The second ranking pledge securing the notes may be released and re-granted under certain circumstances, which may impair the security granted in favour of the notes. Rexel Structure

MLGPE investment CD&R investment funds Eurazeo Other Equity Investors funds

(1) 30.5% (1) 31.5%(1) 24.0% 14.0%(1)

Ray Investment S.à.r.l.

100.0%

Ray Holding SAS Senior

subordinated (7) (2) (3) Ray Acquisition SAS notes €1,604 million 100.0% €600 million Ray Acquisition SCA(4) Senior Credit Facilities(5) €76 million(6) up to €2,427 million 100.0%

Up to €2,351 million(6) Rexel S.A.

Subsidiaries

1. Interests held through one or more intermediate holding companies. The other Equity investors are expected to be either one or two separate investment funds. 2. Provided to the issuer by way of equity capital and a subordinated shareholder loan. 3. Except for a small number of qualifying shares held by members of the supervisory board of the issuer. 4. The issuer is a newly-formed company created for the purpose of acquiring Rexel. The issuer will pledge its equity interests in Rexel to secure obligations under the Senior Credit Facilities on a first priority basis and to secure the notes and parallel debt obligations owing to the trustee on a second priority basis. In connection with the granting of a security interest in the shares of Rexel to secure new debt, the second ranking pledge securing the notes may be released and re-granted. 5. The obligations of Rexel and Rexel’s subsidiaries under the Senior Credit Facilities are guaranteed by the issuer. The guarantee ranks senior in right of payment to the notes and will, subject to certain terms and conditions, be released once the issuer is no longer a borrower under the Senior Credit Facilities, or any refinancing thereof. To secure its direct obligations under and guarantee of the Senior Credit Facilities, the issuer, in addition to the share pledge, has granted security over its rights under the share sale and purchase agreement with PPR and Saprodis for the purchase of Rexel, certain intercompany loans owing to the issuer from its subsidiaries and certain of its bank accounts. Certain indebtedness under the Senior Credit Facilities is further guaranteed by Rexel and by certain subsidiaries of Rexel. 6. The issuer may borrow up to €100mn under the revolving portion of the Senior Credit Facilities in the first two years after the consummation of the Transactions. If it does so, such borrowing would reduce the amount of revolving loans available to Rexel and its subsidiaries. Any such borrowing would count towards the €400mn limit on the aggregate principal amount the issuer may have outstanding as a borrower under the Senior Credit Facilities on a basis senior in right of payment to the notes. 7. General partner (associ e commandit ) and general manager (g´erant) of Ray Acquisition SCA.

Source – Rexel

305 European High Yield Research Rexel ⎪ January 2006

Bond Covenant Bond description EUR 600mn 9.375% Senior Subordinated Notes due 2015 Issuing entity Ray Acquisition SCA (Rexel parent company) Ranking Senior subordinated notes Position vs. bank debt Structurally and contractually subordinated Position vs. other bonds Not applicable The notes are secured by a second priority security interest in the shares of Rexel owned by the issuer. The issuer may pledge its equity interests in Rexel in connection with future debt Security/Guarantees issuances by it or certain of its subsidiaries to the extent such debt is permitted under the indenture. The second ranking pledge securing the notes may be released and re-granted, which may impair the security granted in favour of the notes. Make Whole – prior to 15 March 2010 at bunds + 50bp Equity Claw – prior to 15 March 2008 max 35% of issue at par + coupon Call Schedule: Optional redemption 15 March 2010 – 104.688% 15 March 2011 – 102.344% 15 March 2012 – 101.172% 15 March 2013 – 100.000% Tax redemption Yes at par + accrued and unpaid interest Negative pledge Yes – limitation on liens Cross default Yes, if the total amount of the unpaid indebtedness is greater than €35mn. Fall away covenants No Anti-layering Yes Change of control Put at 101%, 50% of voting share capital The company cannot sell assets unless: The company receives a fair market value for them; Asset dispositions in excess of €15mn must be determined to be in good faith by the Board of Directors, and 75% of the consideration must be received in the form of cash or cash equivalents; Asset sales 100% of the net available cash from the asset disposition must be applied first to repurchase or prepay indebtedness or reinvest in additional assets within 365 days, second to offer to repurchase notes and to purchase, redeem or repay any other senior subordinated indebtedness of the company or a guarantor, and third to fund any general corporate purpose. Debt is permitted if, after giving pro forma effect thereto, the consolidated coverage ratio is greater than 2.00 to 1.00. Carve outs: Indebtedness under any credit facility and indebtedness of any non-French subsidiaries incurred other than under a credit facility, and any refinancing indebtedness cannot exceed €2,500mn, in any case. CLOs or PMOs cannot exceed €100mn plus the number of calendar years that have Debt limit commenced since the closing date multiplied by €15mn. Indebtedness incurred for working capital purposes can’t exceed an amount equal to the sum of 90% of receivables of all non-French subsidiaries and 75% of inventory of all non-French subsidiaries. Indebtedness of the company or any restricted subsidiary cannot exceed €150mn. Any other indebtedness incurred in relation with the sale and leaseback arrangements with IBM or any of its affiliates cannot exceed €72mn at any time.

Source – BNP Paribas, Rexel

306 European High Yield Research Rexel ⎪ January 2006

Bond Covenant Bond description EUR 600mn 9.375% Senior Subordinated Notes due 2015 If company can raise €1.00 of debt then 50% net income less 100% net loss. Carve outs: Any loans, advances, dividends or distributions by the company to any parent or any entity formed for the purpose of investing in capital stock cannot exceed €20mn plus €5mn multiplied by the number of calendar years that have commenced since the closing date. Restricted payments Payment by the company of dividends on the common stock or equity following an IPO cannot exceed 6% of the aggregate gross cash proceeds received by the company in the form of common equity. Payment by the company to holders of capital stock of the company or any parent in lieu of issuance of fractional shares of such capital stock cannot exceed €100k. General basket of €35mn.

All transactions with affiliates should be made in good faith and on an arm’s-length basis Transactions with affiliates and, for transactions involving an aggregate value of €20m or greater, the transaction has to be approved by the majority of the disinterest directors. Source – BNP Paribas, Rexel

307 European High Yield Research Rexel ⎪ January 2006

Rexel, Financial Model French French French GAAP GAAP GAAP IFRS IFRS IFRS IFRS BNPP BNPP BNPP BNPP BNPP EUR mn, year ends 31 December Actual Actual Actual Actual Actual Actual Actual Forecast Forecast Forecast Forecast Forecast French GAAP, IFRS 2002 2003 2004 H1 2004 2004 H1 2005 Q3 2005 Q4 2005 2005 2006 2007 2008 P&L SUMMARY Sales 7,374.4 6,658.4 6,804.9 3,308.1 6,804.9 3,535.1 1,851.0 2,069.4 7,455.5 7,486.1 7,545.1 7,514.5 % change -7.3% -9.7% 2.2% 0.0% 6.9% 9.0% 9.6% 9.6% 0.4% 0.8% -0.4% % change (organic basis) -5.0% -2.8% 5.0% 3.4% 5.0% 6.3% 7.4% 6.8% 6.7% 3.2% -0.9% -2.0%

Cost of goods sold -5,560.7 -5,005.6 -5,089.4 -2,472.3 -5,083.6 -2,641.4 -1,390.8 -1,529.9 -5,562.1 -5,577.5 -5,613.5 -5,598.3 Gross profit 1,813.7 1,652.8 1,715.5 835.8 1,721.3 893.7 460.2 539.4 1,893.3 1,908.6 1,931.5 1,916.2 gross margin 24.6% 24.8% 25.2% 25.3% 25.3% 25.3% 24.9% 26.1% 25.4% 25.5% 25.6% 25.5% Operating exp. (distribution & admin) -1,521.7 -1,404.8 -1,408.5 -708.6 -1,424.0 -729.9 -364.8 -403.8 -1,498.5 -1,504.7 -1,520.3 -1,517.9 % of sales 20.6% 21.1% 20.7% 21.4% 20.9% 20.6% 19.7% 19.5% 20.1% 20.1% 20.1% 20.2% Net operating income before other income 292.0 248.0 307.0 127.2 297.3 163.8 95.2 135.6 394.8 403.9 411.3 398.3 % of sales 4.0% 3.7% 4.5% 3.8% 4.4% 4.6% 5.1% 6.6% 5.3% 5.4% 5.5% 5.3% Other income/expense -14.0 -17.7 -27.9 -5.2 -6.9 -40.0 0.0 0.0 0.0 Net operating income 292.0 248.0 307.0 113.2 279.6 135.9 90.0 128.7 354.8 403.9 411.3 398.3 % of sales 4.0% 3.7% 4.5% 3.4% 4.1% 3.8% 4.9% 6.2% 4.8% 5.4% 5.5% 5.3%

Depreciation and amortisation 56.6 51.1 47.5 29.5 58.6 27.5 13.7 13.8 55.0 58.0 61.0 64.0 EBITDA 348.6 299.1 354.5 156.7 355.9 191.3 109.0 149.4 449.8 461.9 472.3 462.3 % of sales 4.7% 4.5% 5.2% 4.7% 5.2% 5.4% 5.9% 7.2% 6.0% 6.2% 6.3% 6.2%

Net financial expense -97.6 -69.1 -55.7 -25.4 -48.8 -58.8 -28.6 -29.1 -116.5 -115.0 -112.0 -110.0 Non-recurring items, net -162.7 -20.3 -21.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Income before tax 31.7 158.6 230.1 87.8 230.8 77.1 61.4 99.5 238.2 288.9 299.3 288.3 Income tax -27.7 -50.4 -71.3 -25.3 -64.3 -28.3 -19.1 -36.0 -83.4 -101.1 -104.7 -100.9 effective tax rate 87.4% 31.8% 31.0% 28.8% 27.9% 36.7% 31.1% 36.2% 35.0% 35.0% 35.0% 35.0%

Minority interests 0.0 -0.3 -0.2 0.0 -0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Amortization of goodwill -35.2 -32.1 -30.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Net income -31.2 75.8 128.1 62.5 166.3 48.8 42.3 63.6 154.9 187.8 194.5 187.4

P&L SUMMARY - RAY ACQUISITION SCA (PF) Sales 6,804.9 3,535.1 1,851.0 2,069.4 7,455.5 7,486.1 7,545.1 7,514.5 Cost of goods sold -5,083.6 -2,641.5 -1,390.8 -1,529.8 -5,562.1 -5,577.5 -5,613.5 -5,598.3 Gross margin 1,721.3 893.6 460.2 539.5 1,893.3 1,908.6 1,931.5 1,916.2 % of sales 25.3% 25.3% 24.9% 26.1% 25.4% 25.5% 25.6% 25.5% - - - - - Operating expenses 1,366.4 -703.8 -351.6 -380.0 1,435.4 1,441.3 1,456.4 1,454.3 % of sales 20.1% 19.9% 19.0% 18.4% 19.3% 19.3% 19.3% 19.4% EBITDA 354.9 189.8 108.6 159.5 457.9 467.2 475.1 461.9 % of sales 5.2% 5.4% 5.9% 7.7% 6.1% 6.2% 6.3% 6.1% Depreciation -58.6 -27.5 -13.7 -13.8 -55.0 -58.0 -61.0 -64.0 EBITA 296.3 162.3 94.9 145.6 402.8 409.2 414.1 397.9 % of sales 4.4% 4.6% 5.1% 7.0% 5.4% 5.5% 5.5% 5.3% Other operating income/expenses -17.7 -1.3 -5.2 -3.0 -9.5 0.0 0.0 0.0 Operating income 278.6 161.0 89.8 142.6 393.4 409.2 414.1 397.9 % of sales 4.1% 4.6% 4.8% 6.9% 5.3% 5.5% 5.5% 5.3% Net financial expenses -261.6 -88.0 -63.3 -50.4 -201.7 -195.0 -190.0 -180.0 Profit before tax 17.0 73.0 26.5 92.2 191.6 214.2 224.1 217.9 Income taxes -2.3 -47.8 -19.1 -5.9 -72.8 -81.4 -85.2 -82.8 effective tax rate 13.5% 65.5% 72.4% 6.4% 38.0% 38.0% 38.0% 38.0% Minority interest -0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Net income 14.5 25.2 7.3 86.3 118.8 132.8 139.0 135.1

CASH FLOW ITEMS EBITDA 299.1 354.5 156.7 191.3 109.0 149.4 449.8 461.9 472.3 462.3 Net cash interest -66.5 -54.5 -25.6 -59.9 -25.5 -64.5 -149.9 -156.7 -153.1 -147.6 Cash taxes -23.3 -48.3 -15.9 -36.1 -15.2 -68.2 -83.4 -101.1 -104.7 -100.9 Change in working capital 0 1.7 3.5 13.0 -32.9 24.9 5.0 -30.0 10.0 20.0 Other operating cash items -46.8 -37.5 -16.9 -18.4 -4.8 4.8 -18.4 0.0 0.0 0.0 Operating cash flow 248.7 162.5 215.9 101.8 89.9 30.6 46.4 203.1 174.1 224.5 233.8 Capex -82.7 -58 -51.9 -15.2 -13.2 -10.7 -31.1 -55.0 -60.0 -60.0 -60.0 Free cash flow 166.0 104.5 164.0 86.6 76.7 19.9 15.3 148.1 114.1 164.5 173.8 Acquisitions 0.0 0 -60.0 -60.0 -100.0 -100.0 -75.0 Free cash flow after acquisitions 76.7 19.9 -44.7 88.1 14.1 64.5 98.8

BALANCE SHEET ITEMS Cash and cash equivalents (Ray Acquisition SCA) 192.9 221.7 338.2 353.5 353.5 337.6 357.0 395.8 Source – BNP Paribas Estimates, Rexel Leverage and Coverage are based on the last 12 months’ results. Some of the ratios are adjusted for the effects of acquisitions and disposals. In addition, these 2 measures are usually calculated based on EBITDA adjusted for exceptional or non-recurring items. Leverage is defined as net lease-adjusted debt (x8 operating leases)-to-EBITDAR. Coverage is defined as EBITDAR-to-(net interest+rental expenses).

308 European High Yield Research Rexel ⎪ January 2006

Rexel, Financial Model French French French GAAP GAAP GAAP IFRS IFRS IFRS IFRS BNPP BNPP BNPP BNPP BNPP EUR mn, year ends 31 December Actual Actual Actual Actual Actual Actual Actual Forecast Forecast Forecast Forecast Forecast French GAAP, IFRS 2002 2003 2004 H1 2004 2004 H1 2005 Q3 2005 Q4 2005 2005 2006 2007 2008 Indebtedness (Rexel S.A.) Bond 52.4 52.3 52.3 52.3 52.3 52.3 52.3 Bank loans 28.0 28.2 28.2 28.2 28.2 28.2 28.2

Tranche A Tranche 2A (EUR158mn - Rexel) 158.0 156.3 156.3 156.3 126.3 81.3 21.3 Tranche 2A (EUR20mn - Rexel Inc.) 22.3 22.4 22.4 22.4 22.4 22.4 22.4 Tranche 2B (EUR86mn - Rexel North America) 93.3 98.8 98.8 98.8 98.8 98.8 98.8 Tranche 2C (EUR62mn - Rexel) 62.0 66.1 66.1 66.1 66.1 66.1 66.1 Tranche B Tranche B1 (EUR150mn - Rexel) 150.0 150.0 150.0 150.0 150.0 150.0 150.0 Tranche B1 (EUR95mn - Rexel Inc.) 105.8 106.2 106.2 106.2 106.2 106.2 106.2 Tranche B2 (EUR55mn Rexel North America) 59.6 63.2 63.2 63.2 63.2 63.2 63.2 Tranche C Tranche C1 (EUR150mn - Rexel) 150.0 150.0 150.0 150.0 150.0 150.0 150.0 Tranche C1 (EUR95mn - Rexel Inc.) 105.8 106.2 106.2 106.2 106.2 106.2 106.2 Tranche C2 (EUR55mn - Rexel North America) 59.6 63.2 63.2 63.2 63.2 63.2 63.2 Tranche D (EUR200mn - Rexel) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Tranche E (EUR125mn - Rexel) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Revolver (EUR200mn - Rexel) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Borrowing Base Facility (EUR800mn - Rexel & subsidiaries) 103.8 619.5 619.5 619.5 619.5 619.5 619.5 Accrued interest 5.1 0.0 0.0 0.0 0.0 0.0 0.0 Senior Credit Facility (Rexel S.A.) 1,075.3 1,601.9 1,601.9 1,601.9 1,571.9 1,526.9 1,466.9 Bank overdrafts and other credit facilities 47.6 28.1 28.1 28.1 28.1 28.1 28.1 Securitisation 567.2 170.3 170.3 170.3 170.3 170.3 170.3 Finance lease obligations 114.8 101.1 101.1 101.1 101.1 101.1 101.1 Total Indebtedness (Rexel S.A.) 1,885.3 1,981.9 1,981.9 1,981.9 1,951.9 1,906.9 1,846.9 Tranche A 76.0 76.0 76.0 76.0 76.0 76.0 76.0 Revolver 7.5 32.5 32.5 32.5 32.5 32.5 32.5 Total Bank Debt (Ray Acquisition SCA) 83.5 108.5 108.5 108.5 108.5 108.5 108.5 Total Senior Debt 2,637.3 1,968.8 2,090.4 2,090.4 2,090.4 2,060.4 2,015.4 1,955.4 High Yield Bonds 2,444.4 600.0 600.0 600.0 600.0 600.0 600.0 600.0 Total Indebtedness (Ray Acquisition SCA)* 116.7 2,568.8 2,690.4 2,690.4 2,690.4 2,660.4 2,615.4 2,555.4 Net Indebtedness 360.3 2,347.1 2,352.2 2,336.9 2,336.9 2,322.8 2,258.4 2,159.6 Provisions and other post employment benefits liabilities 113.8 114.2 115.0 115.0 115.0 115.0 115.0 Operating lease commitments 329.0 360.3 370.0 370.0 381.1 392.5 404.3

CREDIT RATIOS Total Senior Debt/EBITDA 5.0x 5.1x 4.6x 4.6x 4.4x 4.2x 4.2x Net Senior Debt/EBITDA 4.5x 4.3x 3.8x 3.8x 3.7x 3.5x 3.4x

Total Indebtedness/EBITDA 6.6x 6.6x 5.9x 5.9x 5.7x 5.5x 5.5x Net Indebtedness/EBITDA 6.0x 5.7x 4.3x 4.3x 4.2x 4.0x 3.8x Net Adjusted Indebtedness**/EBITDA 6.2x 6.0x 5.8x 5.8x

FFO/Net Debt 8.5% 8.8% 9.5% 9.9%

EBITDA/Net cash interest 2.2x 2.0x 2.3x 2.3x 2.4x 2.5x 2.6x (EBITDA-Capex)/Net cash interest 1.9x 3.3x 2.6x 2.6x 2.6x 2.7x 2.7x Source – BNP Paribas Estimates, Rexel Leverage and Coverage are based on the last 12 months’ results. Some of the ratios are adjusted for the effects of acquisitions and disposals. In addition, these 2 measures are usually calculated based on EBITDA adjusted for exceptional or non-recurring items. Leverage is defined as net lease-adjusted debt (x8 operating leases)-to-EBITDAR. Coverage is defined as EBITDAR-to-(net interest+rental expenses).

309 European High Yield Research Rhodia ⎪ January 2006

Adam Harnetty +44 20 7595 8831 [email protected] Rhodia

Bond Description & Market Data, as of 5 January 2006 Next Call Description Amount (o/s) Ratings Date Price Price YTW STW 6.000% Sr EMTNs due 2006 EUR 54mn B3/CCC+ NC NC 100 5.86% 338bp 7.625% Sr Nts due 2010 USD 200mn B3/CCC+ 01-Jun-07 103.810 99.125 7.86% 308bp 8.000% Sr Nts due 2010 EUR 700mn B3/CCC+ 01-Jun-07 104.000 105.375 6.57% 355bp 10.250% Sr Nts due 2010 USD 648mn B3/CCC+ NC NC 109 7.79% 301bp 10.500% Sr Nts due 2010 EUR 181mn B3/CCC+ NC NC 114.75 6.58% 356bp 8.875% Sr Sub Nts due 2011 USD 385mn Caa1/CCC+ 01-Jun-07 104.440 101.25 8.58% 377bp 9.250% Sr Sub Nts due 2011 EUR 300mn Caa1/CCC+ 01-Jun-07 104.620 107.125 7.61% 457bp Source – BNP Paribas

Company Profile Rhodia is a leading manufacturer of specialty chemicals, with sales in over 130 countries. For the twelve months ended 30 September 2005, Rhodia had sales of €5.7bn and EBITDA before restructuring costs at €549mn. The company has 113 production sites and six principal research and development centres. Rhodia offers tailor-made solutions to its customers based on the cross-fertilisation of different technologies. The company conducts its operations through 8 divisions, the largest being polyamide, novecare, silcea and coatis. In recent years Rhodia has embarked on a series of disposals and cost cutting measures. The disposal program is broadly complete and management is focused on improving operational performance going forward.

Debt Profile €54mn Senior EMTNs Rhodia has a €1.8bn Euro Medium Term Note (EMTN) program. Following a series of tenders and maturities the only amount outstanding is €54mn of the 6% 2006 bond. Senior Notes Due 2010 The senior high yield notes are senior unsecured obligations of the company. Rhodia issued $200mn 7.625% of senior notes and €200mn of 8.0% senior notes in May 2003, followed by a €500mn tap issue of the 8% senior note in February 2005. In May 2004 Rhodia issued a further $647.5mn of 10.25% senior notes and €181mn of 10.5% senior notes. The senior notes are pari passu with the EMTNs. The main difference between the original senior notes and in the notes issued in May 2004 is that the later have no call provision other than the IPO claw. €615mn Senior Subordinated Notes Due 2011 The senior subordinated notes, $385mn at 8.875% and €300mn at 9.25%, were issued in May 2003 and are contractually subordinated to the EMTNs and other senior notes. Bank Debt: As at 30 September 2005, Rhodia had drawn bank debt of €398mn. The major bank line is a €300mn multicurrency revolving facility due 30 June 2008. Rhodia and Rhodia Inc. have granted security interests in connection with this facility. Additionally, certain unspecified subsidiary liabilities have been subordinated to this facility. Securitisation Programs As at 30 September 2005, Rhodia had drawn €260mn under various securitisation programs in Europe and North America. Other Debt As at 30 September 2005 Rhodia had capital leases outstanding totalling €139mn and other debt of €71mn.

BNP Paribas is acting as a joint lead manager in the share capital increase through a rights issue for Rhodhia S.A.

310 European High Yield Research Rhodia ⎪ January 2006

Rhodia Structure

Public Aventis Shareholders

85% 15% Security

€300m Revolving Credit Facility Rhodia SA EMTN Notes (Holding Company) Senior Notes Senior Subordinated Notes

Operating €300m Receivables Subsidiaries Securitisation Programs

Source – BNP Paribas, Rhodia

311 European High Yield Research Rhodia ⎪ January 2006

Bond Covenants Bond description Old 8.000% & 7.625% Sr Nts New 10.25% & 10.50% Sr Nts Sr Sub Nts Issuing entity Rhodia SA Ranking Senior Notes Senior Subordinated Notes Position vs bank debt Contractually Subordinated Position vs other bonds Contractually Senior Contractually Subordinated Security/guarantees – Optional redemption Make Whole – none Make Whole – none Make Whole – none Equity Claw – 35% at Equity Claw – 35% at Equity Claw – 35% at par+coupon before par+coupon before par+coupon before 1 June 2006 1 June 2006 (n.b. €471mn 1 June 2006 Call Schedule: rights issue on Call Schedule: USD Notes 7 May 2004 is excluded) USD Notes 1 Jun 2007 – 103.813 Call Schedule: 1 Jun 2007 – 104.438 1 Jun 2008 – 101.906 None 1 Jun 2008 – 102.219 1 Jun 2009 – 100.000 1 Jun 2009 – 100.000 EUR Notes EUR Notes 1 Jun 2007 – 104.000 1 Jun 2007 – 104.625 1 Jun 2008 – 102.000 1 Jun 2008 – 102.313 1 Jun 2009 – 100.000 1 Jun 2009 – 100.000 Change of control Put at 101, 50%+ of voting power Tax redemption Yes – at par Negative pledge Yes Cross default Yes Fall away covenants Yes Anti-layering – Yes Debt limit Pro Forma Fixed Charge Coverage at least 2.25x Carve outs: €1.3bn bank debt CLOs, mortgages & purchase money obligations up to 5% of consolidated net tangible assets hedges (for business), surety or appeal bond general basket €125mn Restricted payments If can raise €1 of debt then 50% If can raise €1 of debt then 50% net If can raise €1 of debt then 50% net income less 100% net loss plus income less 100% net loss plus net income less 100% net loss plus 100% equity proceeds. 100% equity proceeds. 100% equity proceeds. Carve outs: Carve outs: Carve outs: dividends if allowed under dividends if allowed under dividends if allowed under covenants covenants covenants sub debt funded from equity sub debt funded from equity sub debt funded from equity sales or refinancing sales or refinancing sales or refinancing €3mn per year of equity €3mn per year of equity €3mn per year of equity interests from directors or interests from directors or interests from directors or employees employees employees receivables fees receivables fees receivables fees €40mn (but no more than €20mn (but no more than 40mn (but no more than €20mn in one year) €10mn in one year) €20mn in one year) Asset sales Company can not sell assets unless: it receives at least fair market value at least 75% is cash, replacement assets or a combination must use proceeds within a year to pay down senior debt, fund capex or purchase similar assets

Merger, consolidation, Company will not consolidate or merge with/into any person or sell substantially all its assets unless: asset sales surviving entity is organised under EU, Canadian or US laws surviving entity can incur €1 of debt

Transactions with Must be done on an arm's length basis with a certificate provided for €10–€50mn transactions and a Board affiliates resolution for €50mn+ transactions Source – BNP Paribas, Rhodia

312 European High Yield Research Rhodia ⎪ January 2006

Rhodia, Financial Model

French French French French French French French FYE 31 December GAAP GAAP GAAP GAAP GAAP GAAP GAAP IFRS IFRS IFRS IFRS EUR mn 2002 2003 Q1 04 Q2 04 Q3 04 Q4 04 2004 2004 Q1 05 Q2 05 Q3 05 PROFIT & LOSS Sales 6,617 5,453 1,348 1,411 1,289 1,233 5,281 5,486 1,458 1,495 1,323 Cost of Sales -4,844 -4,218 -1,043 -1,094 -1,043 -967 -4,147 -4,825 -1,221 -1,330 Gross Profit 1,773 1,235 305 317 246 266 1,134 661 237 165 SG&A -749 -612 -135 -144 -129 -126 -534 -546 -142 -153 R&D -201 -187 -46 -40 -39 -31 -156 -158 -35 -37 D&A -447 -524 -97 -112 -100 -251 -560 0 0 0 Restructuring -25 -71 -23 -56 -27 -126 -232 -187 -5 -28 Operating Income 351 -159 4 -35 -49 -268 -348 -230 55 -53 Financial expense net -123 -250 -66 -82 -54 -61 -263 -227 -115 -96 Other income -72 -98 -8 183 77 8 260 -51 0 -16 PBT 156 -507 -70 66 -26 -321 -351 -508 -60 -165 Tax -66 -142 -21 -17 -41 22 -57 -102 -8 -28 Discontinued operations 0 0 0 0 0 0 0 110 -6 -3 Associates -38 -95 -11 -2 -14 -31 -58 3 0 0 Goodwill -47 -602 -5 -4 -5 -137 -151 -135 0 0 MSI -9 -5 -1 -1 -5 -2 -9 -9 2 -1 Net income -4 -1,351 -108 42 -91 -469 -626 -641 -72 -197

EBITDA pre restructure 823 436 124 133 78 109 444 483 154 156 104

Revenue growth y/y -17.6% -5.6% 0.3% -0.8% -6.4% -3.2% na 10.8% 7.9% -2.0% Gross margin 26.8% 22.6% 22.6% 22.5% 19.1% 21.6% 21.5% 12.0% 16.3% 11.0% 0.0% EBITDA margin 12.4% 8.0% 9.2% 9.4% 6.1% 8.8% 8.4% 8.8% 10.6% 10.4% 7.9%

CASHFLOW Change in working capital -30 -173 -272 24 52 24 -172 -110 -220 -3 Net cash from operating 506 -27 -266 34 26 56 -150 -32 -169 51 activities

Capital expenditures -374 -233 -40 -38 -46 -75 -199 -221 -53 -56 -77 Disposals 363 92 10 347 251 44 652 652 24 4 Other -49 -215 189 -120 -213 9 -135 -151 22 127 Net cash from investing -60 -356 159 189 -8 -22 318 280 -7 75 activities

Net debt (repaid)/drawn -462 782 -72 -533 -189 -2 -796 -891 114 -114 Other -36 -22 0 446 0 0 446 446 0 0 Net cash from financing -498 760 -72 -87 -189 -2 -350 -445 114 -114 activities

FX -38 -7 4 -3 0 -5 -4 -4 8 24

Net change in cash -90 370 -175 133 -171 27 -186 -201 -54 36

BALANCE SHEET

Cash & marketable securities 251 766 409 522 561 602 602 612 517 425

Revolver & other bilateral 1,025 1,074 581 311 317 317 406 412 398 loans Capital leases 264 272 230 207 193 193 244 137 139 Other 281 176 51 70 86 86 70 35 71 Securitisation 0 0 334 315 260 EMTN 2005 31/5/05 500 500 49 49 49 49 49 49 0 EMTN 2006 26/3/06 300 300 300 300 300 300 304 54 54 $7.625%Senior 1/6/10 158 164 165 161 147 147 143 154 162 €8% senior 1/6/10 200 200 200 200 200 200 198 700 701 $10.25% senior 1/6/10 0 0 533 521 475 475 448 499 507 €10.5% senior 1/6/10 0 0 181 181 181 181 171 181 171 $8.875% Senior sub 1/6/11 305 315 317 310 283 283 276 297 311 €9.25% Senior sub 1/6/11 300 300 300 300 300 300 297 300 297 Gross debt 2,384 3,333 3,301 2,907 2,610 2,531 2,531 2,940 3,133 3,071

Net debt 2,133 2,567 2,892 2,385 2,049 1,929 1,929 2,328 2,616 2,646 2,533

LTM RATIOS Coverage 6.7 1.7 1.5 1.3 1.3 1.7 1.7 2.1 1.9 2.0 1.8 Adj. Coverage 3.7 0.8 0.8 0.7 0.7 0.9 0.9 1.2 1.1 1.1 0.9 Gross balance sheet leverage 2.9 7.6 7.5 6.5 5.8 5.7 5.7 6.1 6.1 5.7 5.3 Net balance sheet leverage 2.6 5.9 6.6 5.4 4.6 4.3 4.3 4.8 5.1 4.9 4.6 Gross leverage inc off bsheet 4.2 9.2 9.0 7.7 6.9 6.8 6.8 6.1 6.1 5.7 5.3 Net leverage inc off bsheet 3.9 7.4 8.0 6.6 5.6 5.4 5.4 4.8 5.1 4.9 4.6 Source – BNP Paribas Estimates, Rhodia

313 European High Yield Research Rockwood ⎪ January 2006

Adam Harnetty +44 20 7595 8831 [email protected] Rockwood

Bond Description & Market Data, as of 5 January 2006 Next Call Description Amount (o/s) Ratings Date Price Price YTW STW 7.625% Sr Sub Nts due 2014 EUR 375mn B3/B- 15-Nov-09 103.813 103.5 7.09% 385bp 7.500% Sr Sub Nts due 2014 USD 200mn B3/B- 15-Nov-09 103.750 99.25 7.62% 276bp 10.625% Sr Sub Nts due 2011 USD 273mn B3/B- 15-May-07 105.313 109.375 7.02% 225bp Source – BNP Paribas

Company Profile Rockwood is a global specialty chemicals producer whose product range consists mostly of inorganic (non-petrochemical) chemicals and solutions and engineered materials, often in niche markets and customised to client needs. The company’s business profile benefits mainly from a high level of diversity – diversity in customers (approximately 60,000), raw materials, products and end-markets. Rockwood operates globally through 93 manufacturing facilities in 24 countries. Following the acquisition of Dynamit Nobel, Rockwood operates through seven business segments: performance additives, speciality compounds, electronics, speciality chemicals, titanium dioxide pigments, advanced ceramics and Groupe Novasep. In August 2005, Rockwood Holdings Inc successfully completed an IPO following which part of the 2011 bonds were redeemed.

Debt Profile Bank Debt In connection with the acquisition of Dynamit Nobel, Rockwood signed new senior secured credit facilities consisting of a $250mn revolver and $1,728mn in four tranches of term loans. Rockwood may, under certain circumstances and subject to approval from the lenders, increase the aggregate amount available by $250mn. Most of the bank debt is at Rockwood Specialties Group Inc, at the same level as the cash pay bonds, and secured by first priority interests in substantially all the assets of the company. The interest rate on the bank debt is mostly at LIBOR (adjusted for statutory reserves) +2.5% or Federal Funds +1.75%. The tranches mature between 2010–2012. As at 30 September 2005, $1,721.7mn was outstanding under the term loans and the revolver was undrawn save for $22mn issued under letters of credit.

Assumed Debt Rockwood assumed certain debt lent to subsidiaries of Dynamit Nobel as part of the acquisition. This consisted of several tranches of term loans in multiple currencies, capital leases, sold receivables and preferred stock. This debt ranks ahead of the bonds.

2011 and 2014 Bonds These notes are pari passu with each other and are contractually subordinated to the bank debt. They benefit from senior subordinated upstream guarantees from the group’s US subsidiaries, which represent approximately 33% of net sales and 42% of total assets.

314 European High Yield Research Rockwood ⎪ January 2006

Rockwood Structure

Rockwood Holdings Inc

Rockwood Specialities Consolidated Inc

Rockwood Specialities International Inc

$375m 10.625% Sr Sub Nts 2011 $1,972m Senior Sec Bank Debt Rockwood Specialities (approx. 90% at Group Inc) Group Inc €375m 7.625% Sr Sub Nts 2014 $200m 7.500% Sr Sub Nts 2014

89.6%

Other Rockwood Other Knight Lux I Sarl Foreign America Inc Foreign including other RW Holding Corp Subsidiaries (US) Subsidiaries subsidiaries

UK Dynamit Nobel Dynamit Nobel Subsidiaries Non-US Subsidiaries US Subsidiaries 10.4% Rockwood RS Funding Specialities Inc Corporation US Subsidiaries Sr Guarantors of the bank debt Sr Sub Guarantors of the bank debt

Source – Rockwood

315 European High Yield Research Rockwood ⎪ January 2006

Bond Covenants Bond description EUR 375mn 7.625% 2014 USD 200mn 7.5% 2014 USD 375mn 10.625% 2011 Issuing entity Rockwood Specialties Group Inc Ranking Senior Subordinated Position vs. bank debt Contractually Subordinated Position vs. other bonds Pari passu Security/guarantees Senior subordinated guarantees from Rockwood and Dynamit Nobel's US subsidiaries. Optional redemption Make Whole – prior to Make Whole – prior to 15 Make Whole – none 15 November 2009 at T+50bp November 2009 at T+50bp Equity Claw – prior to Equity Claw – prior to Equity Claw – prior to 15 May 2006 max 35% of issue 15 November 2007 max 40% of 15 November 2007 max 40% of at par+coupon issue at par+coupon issue at par+coupon Call Schedule: Call Schedule: Call Schedule: 15 May 2007 – 105.313% 15 Nov 2009 – 103.813% 15 Nov 2009 – 103.750% 15 May 2008 – 103.542% 15 Nov 2010 – 102.542% 15 Nov 2010 – 102.500% 15 May 2009 – 101.771% 15 Nov 2011 – 101.271% 15 Nov 2011 – 101.250% 15 May 2010 – 100.000% 15 Nov 2012 – 100.000% 15 Nov 2012 – 100.000% Change of control Put at 101 based on 50% + of voting power Tax redemption – Negative pledge Limitation on liens Cross default Yes Fall away covenants – Anti-layering Yes Fixed Charge Coverage must exceed 2:1 provided that debt incurred by non- Fixed Charge Coverage must guarantor restricted subsidiaries shall not exceed $150mn at any time exceed 2:1 provided that debt Carve outs: incurred by non-guarantor restricted Credit facilities up to $2.05bn provided that non-guarantor subsidiaries shall not exceed $75mn restricted group debt does not exceed $300mn; at any time Leases and similar up to greater of $150mn and 4% of total assets; Carve outs: Credit facilities up to $565mn General carve out of $250mn plus the proceeds of Equity issuance that provided that non-guarantor has not been applied to make restricted payments provided that the restricted group debt does not amount of non-guarantor restricted subsidiaries’ debt may not exceed exceed $200mn; $150mn; Leases and similar up to greater Acquisition related debt provided that pro forma fixed charge coverage is of $50mn and 3.5% of total Debt limit at least 2.0x or that this ratio improves. assets; General carve out of $115mn plus the proceeds of Equity issuance that have not been applied to make restricted payments provided that the amount of non-guarantor restricted subsidiaries debt may not exceed $75mn; Acquisition related debt provided that pro forma fixed charge coverage is at least 2.0x or that this ratio improves. Subject to being able to incur $1 of additional debt then: Subject to being able to incur $1 of 50% of consolidated net income; additional debt then: $15mn per annum to redeem employee stock with carry forward of 50% of consolidated net unused amount (subject to $30mn annual maximum); income; Investments in unrestricted subsidiaries up to $75mn; $10mn per annum to redeem Dividends following an IPO up to 6% of the net proceeds; employee stock with carry General basket of $75mn. forward of unused amount Restricted payments (subject to $20mn annual maximum); Investments in unrestricted subsidiaries up to $25mn; Dividends following an IPO up to 6% of the net proceeds; General basket of $30mn. Source – Rockwood, BNP Paribas

316 European High Yield Research Rockwood ⎪ January 2006

Bond Covenants Bond description EUR 375mn 7.625% 2014 USD 200mn 7.5% 2014 USD 375mn 10.625% 2011 Company can not sell assets unless: It receives at least fair market value; At least 75% of consideration in cash or equivalent; Asset sales Must use proceeds within a year to pay down debt, purchase assets into the restricted group, properties or fund capex; If not, any excess proceeds above $15mn will be used to make a par offer on the notes. Above $5mn must be done on an arm’s length basis; Transactions with affiliates Above $10mn, must deliver a resolution approved by the majority of Board of Directors to the Trustee. Source – BNP Paribas, Rockwood

317 European High Yield Research Rockwood ⎪ January 2006

Rockwood, Financial Model FYE 31 December 2002 2003 Q1 04 Q2 04 Q3 04 Q4 04 2004 Q1 05 Q2 05 Q3 05 USD mn PROFIT & LOSS Net sales 759.9 797.3 227.4 267.0 533.6 715.5 1,743.5 769.7 817.4 771.7 Cost of goods sold -542.5 -581.3 -165.0 -188.4 -403.0 -511.2 -1,267.6 -544.1 -554.4 -538.2 Gross profit 217.4 216.0 62.4 78.6 130.6 204.3 475.9 225.6 263.0 233.5 SG&A -162.9 -153.1 -35.2 -35.9 -106.1 -161.5 -338.7 -150.2 -157.5 -153.8 Restructuring -1.3 -1.8 0.0 -0.1 -0.1 -0.9 -1.1 -2.9 -2.9 -2.9 Operating Income 53.2 61.1 27.2 42.6 24.4 41.9 136.1 72.5 102.6 76.8 Net interest -88.2 -85.8 -16.6 -12.4 -45.1 -53.6 -127.7 -48.2 -55.7 -48.5 Refinancing expenses 0.0 -38.3 0.0 0.0 -1.8 -24.3 -26.1 0.0 0.0 -13.3 FX net -24.6 -18.5 12.3 -3.6 -40.9 -81.0 -113.2 41.9 58.6 4.2 Other net -1.2 0.0 0.0 -4.0 0.0 -0.3 -4.3 0.0 0.0 0.0 Loss before tax -60.8 -81.5 22.9 22.6 -63.4 -117.3 -135.2 66.2 105.5 19.2 Tax 5.5 9.5 -7.8 -11.8 13.4 -6.8 -13.0 -24.9 -16.8 -11.8 MSI 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.8 0.9 0.6 Net Loss -55.3 -72.0 15.1 10.8 -50.0 -124.1 -148.2 42.1 89.6 8.0

Operating Income 53.2 61.1 27.2 42.6 24.4 41.9 136.1 72.5 102.6 76.8 Restructuring 1.3 1.8 0.0 0.1 0.1 0.9 1.1 2.9 2.9 2.9 D&A 96.3 87.4 13.8 14.4 32.2 65.8 126.2 53.2 52.0 49.5 Other adjustments -0.5 -0.9 0.1 1.0 38.4 29.6 69.1 4.6 3.0 10.8 EBITDA 150.3 149.4 41.1 58.1 95.1 138.2 332.5 133.2 160.5 140.0

Sales change y/y 4.9% 26.2% 25.5% 167.1% 249.7% 118.7% 238.5% 206.1% 44.6% PF Sales Change y/y 10.1% 9.7% 8.1% Gross margin 28.6% 27.1% 27.4% 29.4% 24.5% 28.6% 27.3% 29.3% 32.2% 30.3% EBITDA margin 19.8% 18.7% 18.1% 21.8% 17.8% 19.3% 19.1% 17.3% 19.6% 18.1%

CASHFLOW Net loss -55.2 -72.0 15.0 10.8 -50.0 -124.0 -148.2 42.1 89.6 8.0 D&A 96.3 87.4 13.8 14.4 32.2 65.8 126.2 53.2 52.0 49.5 Other 29.3 50.2 -9.6 6.5 18.2 117.0 132.1 -29.4 -52.5 3.1 Change in working capital -73.4 -19.9 -17.9 11.7 41.3 34.4 69.5 -73.2 -18.7 57.3 Cashflow from -3.0 45.7 1.3 43.4 41.7 93.2 179.6 -7.3 70.4 117.9 operations

Capex -36.0 -34.3 -6.7 -6.6 -25.5 -74.0 -112.8 -35.7 -41.1 -46.2 Acquisitions -7.3 -17.7 0.0 0.0 -2,058.5 -79.4 -2,137.9 0.0 0.0 -16.1 Other 12.9 3.5 0.0 0.0 0.8 0.0 0.8 0.2 0.0 0.0 Cashflow from investing -30.4 -48.5 -6.7 -6.6 -2,083.2 -153.4 -2,249.9 -35.5 -41.1 -62.3

Net debt repayment -19.5 -96.3 -4.5 0.0 1,748.3 -21.0 1,722.8 169.1 -184.7 -130.4 Equity contibutions & FX 2.6 98.9 -0.4 -0.9 406.8 10.7 416.2 -0.4 0.1 115.6 Cashflow from -16.9 2.6 -4.9 -0.9 2,155.1 -10.3 2,139.0 168.7 -184.6 -14.8 financing

Net change in cash -50.3 -0.2 -10.3 35.9 113.6 -70.5 68.7 125.9 -155.3 40.8

BALANCE SHEET Cash 42.9 42.7 32.3 68.3 181.9 111.4 111.4 237.3 82.0 122.8

Bank debt 1,521.1 1,803.3 1,803.3 1,949.4 1,731.4 1,721.7 Other inc leases 1,050.6 236.1 236.1 225.4 201.9 190.2 10.625% 2011 Notes 375.0 375.0 375.0 375.0 375.0 273.4 7.5% 2014 Notes 0.0 200.0 200.0 200.0 200.0 200.0 7.625% 2014 Notes 0.0 509.7 509.7 487.4 454.0 452.1 Gross debt 876.2 833.0 824.2 822.6 2,946.7 3,124.1 3,124.1 3,237.2 2,962.3 2,837.4

Net debt 833.3 790.3 791.9 754.3 2,764.8 3,012.7 3,012.7 2,999.9 2,880.3 2,714.6

LTM RATIOS Coverage 1.7 1.7 2.0 2.5 2.4 2.6 2.6 2.7 2.6 2.8 EBITDA-Capex/Interest 1.3 1.3 1.6 2.1 2.0 1.7 1.7 1.8 1.7 1.8 Gross leverage 5.8 5.6 5.1 4.6 12.5 9.4 9.4 7.6 5.6 5.0 Net leverage 5.5 5.3 4.9 4.2 11.7 9.1 9.1 7.1 5.5 4.7

PF Net leverage 5.6 5.6 5.5 5.1 4.8 Source – BNP Paribas, Rockwood

318 European High Yield Research Rockwood ⎪ January 2006

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319 European High Yield Research Safilo ⎪ January 2006

Oleksiy Soroka, CFA +44 20 7595 4878 [email protected] Safilo

Bond Description & Market Data, as of 5 January 2006 Next Call Issuer Credit Trend: Positive Description Amount (o/s) Ratings Date Price Price YTW STW 9.625% senior notes due 2013 EUR 300mn Caa2/CCC+ 15-May-08 104.81 111.00 6.43% 354bp Source – BNP Paribas

Company Profile Safilo designs, manufactures and distributes high-quality eyewear products, including prescription frames, sunglass frames and lenses, sport goggles and other accessories. The company is the second largest wholesale eyewear producer in the world and the global leader in the premium eyewear market segments in terms of revenues and units sold. Safilo manufactures and distributes eyewear products under its own and third-party designer brands under license agreements. The company’s licensed brands include Georgio Armani, Emporio Armani, Gucci, Yves Saint Laurent, Bottega Veneta, Diesel, Dior, Polo Ralf Laurent, Hugo Boss, Kate Spade, Liz Clairbonne, Max Mara, Nine West, Oliver, Pierre Cardin, Saks Fifth Avenue, Stella McCartney and Valentino. Safilo’s own brands include Safilo, Oxydo, Carrera, Smith and Blue Bay. In 2004, sales of sunglasses represented approximately 50% of the company’s turnover, sales of prescription frames accounted for 46% and the balance was from the sport goggles and other accessory sales. In 2004, the geographical breakdown was as follows: 50% of Safilo’s sales came from Europe (including 15% of the total turnover from Italy alone), 35% came from the North America and 15% from the Far East, Japan, Australia and other countries.

On 5 December 2005, Safilo completed an initial public offering in Italy. Prior to the offering, Safilo was jointly owned by the Tabacchi family and CSFB Private Equity. After the offering, the Tabacchi family has retained as stake of over 36% in the company. Total net proceeds from the IPO amounted to €659mn (€739mn with the fully exercised “greenshoe” option) and the company’s market capitalisation was approximately €1.4bn (at €4.9 per share). We understand that Safilo will use €298mn of the net IPO proceeds to repay its debt.

For the twelve months ended 30 September 2005, the company had sales of €1,004mn and EBITDA of €166mn. At the end of third quarter 2005, Safilo had leverage* of 4.8x and coverage* of 2.0x.

Investment Recommendation We maintain our HOLD/Positive Credit Trend for Safilo’s notes. The notes have appreciated substantially over the last twelve months, when we have recommended buying them, and we believe that further short-term tightening potential is limited from the current, much tighter levels. We understand that Safilo intends to use approximately €298mn of the net IPO proceeds to prepay some of its indebtedness. In particular, we expect that the company will exercise an equity clawback provision of the bond indenture and will buy back 35% of the bonds outstanding at a price of 109.625. We assume that Safilo will use the remainder of the proceeds to prepay a portion of its bank debt (we expect that the company will subsequently sign a new bank agreement under more favourable conditions). As a result of such debt reduction and based on our projections (full-year 2005 EBITDA of €165mn), we expect that the company will have leverage of 3.0x at the end of 2005. Clearly, the current agency bond ratings are out of touch with reality and will be revised upwards, at least to B-/B3 and possibly higher. We believe that longer-term tightening upside for the notes depends on how well the company performs in 2006. If Safilo’s profitability continues to expand aggressively during the next several quarters, then the bonds will probably appreciate modestly. Currently, we understand that we have less aggressive profit growth expectations for the company than its management. In our view, a loss of a major license (such as the Ralph Lauren one) represents the main risk for Safilo’s notes. Also, we think that the bonds price in a positive operating performance by the company in 2006. If, due to adverse economic conditions in Safilo’s major markets or due to other reasons, the company’s results have a negative trend, the bonds will soften from the current levels.

320 European High Yield Research Safilo ⎪ January 2006

Debt Profile At the end of third quarter 2005, Safilo had total balance sheet debt of €813mn, comprising approximately €82mn of short- term borrowings and €731mn of long-term borrowings. The company’s long-term borrowings included high yield bonds with nominal value of €300mn, senior credit facility (with two Italian banks, UBM and San Paolo IMI) and other long-term debt (including property-related financial leases and long-term loans sponsored by the Italian Government). Short-term borrowings included current portions of the aforementioned long-term debt arrangements and a very small amount of bank overdraft (€0.5mn). Certain companies in the Safilo Group, including Safilo S.p.A., a guarantor of the high yield notes, have guaranteed the borrowers’ obligations under the senior secured credit facilities and, where possible, have granted in favour of the lenders under the senior secured credit facilities a security interest over their operating assets, including a charge over their properties, bank accounts, proceeds of insurance policies, commercial contracts and intellectual property. In addition, either the shares of Safilo S.p.A. and the shares of certain of its direct and indirect subsidiaries have been pledged, or legal mortgages over them have been granted, in favour of the lenders under the senior secured credit facilities. In addition, at the end of third quarter 2005, Safilo had Retirement benefit obligations of €36.7mn. Safilo Structure

Shareholders

Pledge of Safilo S.p.A. Shares Safilo Holding S.p.A.(1) 1st priority - Senior Credit Facilities (Italy) 2nd priority - Senior Notes

€55m equity(8)

(1,2) Safilo S.p.A. Senior credit facilities(1,6) (Italy)

€300m senior Safilo Capital International S.A. Safilo International B.V.(3,4) notes(1,9) (Luxembourg) €300m (Netherlands) subordinated issuer loan agreement(7) Safilo Optical UK Limited(4) (England) Operating Subsidiaries(10) Safilo America Inc.(2,5) Guarantor of Notes (U.S.A.)

1. The shares of Safilo S.p.A. and the issuer loan agreement were pledged, on a first priority basis, to secure the group’s obligations with respect to the senior credit facilities. Holders of the notes benefit from a second priority security interest in those shares and the issuer loan agreement. 2. Borrower and a guarantor under the senior credit facilities and a guarantor of the notes. See also note 9 below. 3. Borrower under the issuer loan agreement. 4. Guarantor of the senior credit facilities and the notes. See also note 9 below. 5. 50.3% of the issued and outstanding shares of Safilo America, Inc. is owned by Safilo S.p.A. directly, and 49.7% is owned by Safint Optical UK Limited. 6. Represents senior credit facilities made available to Safilo S.p.A. and certain of its subsidiaries comprising term advances, a revolving credit facility and a capex facility. 7. The issuer loan agreement from Safilo Capital International S.A. to Safilo International B.V. is pledged to secure the senior credit facilities and the notes and is subordinated in right of payment to all obligations of Safilo International with respect to the senior credit facilities and the notes. See also footnote 1 above. 8. Safilo Holding made a €55m equity contribution to Safilo. 9. The guarantees of the notes are subordinated to all senior indebtedness of each guarantor, including with respect to such guarantor’s guarantee of, or borrowings under, the senior credit facilities and such guarantees of the notes are not due unless certain conditions have been satisfied. In addition to the guarantors of the notes referred to above, certain of Safilo S.p.A.’s other operating subsidiaries are guarantors of the senior credit facilities. 10. Directly and indirectly owned by Safilo S.p.A. A number of operating subsidiaries are guarantors of, and have granted security interests over their assets in favor of, the senior credit facilities and the Group’s principal U.S. operating subsidiary, Safilo U.S.A., Inc., is a borrower under and a guarantor of, and has granted security interests over its assets in favor of, the senior credit facilities.

Source – Safilo

321 European High Yield Research Safilo ⎪ January 2006

Bond Covenant Bond description EUR 300mn 9.625% senior notes due 2013 Issuing entity Safilo Capital International S.A. Ranking Senior Unsubordinated Position vs. bank debt Effectively subordinated Position vs. other bonds Not applicable. Senior subordinated guarantees from parent (Safilo S.p.A) and certain subsidiaries. The obligations of the issuer under the notes and the indenture, and of the guarantors under the Security/Guarantees guarantees, are secured by a second priority security interest in the shares of Safilo pursuant to the issuer share charge and a second priority security interest in the issuer loan agreement pursuant to a security assignment of the issuer loan agreement. Make Whole – prior to 15 May 2008 at Bund+50bp Equity Claw – prior to 15 May 2006 max 35% of issue at 109.625% Call Schedule: Optional redemption 15 May 2008 – 104.8125% 15 May 2009 – 103.2083% 15 May 2010 – 101.6042% 15 May 2011 and thereafter – 100.0000% Tax redemption Yes- at par Negative pledge Yes Cross default Yes – on over €10mn of other debt Fall away covenants No Anti-layering Yes Change of control Put at 101% The Issuer cannot sell assets unless: The issuer receives a fair market value for them; 75% of the consideration received by the issuer is in the form of cash or equivalent. Asset sales 100% of the net available cash from the asset disposal is applied to: (1) redeem senior Indebtedness; (2) acquire additional assets; (3) make an offer to buy back the high yield notes and other pari passu debt to the extent of the balance of over €10mn left after the first two applications. Consolidated Coverage Ratio of 2.0x. Carve outs: Indebtedness of up to €45mn incurred for working capital or capital expenditures Debt limit (including in respect of new and renewed licenses); General basket of up to €50mn. A non-guarantor Restricted Subsidiary indebtedness should be less than €35mn. If company can raise €1.00 of debt then 50% net income less 100% net loss plus 100% cash from equity. Carve outs: Dividends, distributions and other payments to fund payments in connection with the stock option plan of up to €3mn times years since the issue (determined by adding Restricted payments 1/12 of such amount on each monthly anniversary of the issue); Following an IPO payment of dividends on such shares up to 6% per annum form cash received from the offering; Repurchase of stock of the company only if the payment is excluded from restricted payment; General basket up to €7mn. The transaction is on an arm’s-length basis.

Transactions with affiliates If a transaction involves an amount in excess €5mn, the resolution of the Board of Directors should confirm that the transaction is on fair terms and, in addition, if a transaction for an amount of over €15mn a written opinion from an Independent Qualified Party is required. Source – BNP Paribas, Safilo

322 European High Yield Research Safilo ⎪ January 2006

Safilo, Financial Model IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS Actual Actual Actual Actual Actual Actual Actual F’cast F’cast F’cast F’cast EUR ‘000 2002 2003 2004 Q1 05 Q2 05 Q3 05 Q4 05 2005 2006 2007 2008 P&L SUMMARY 894,052 900,130 944,739 280,961 280,880 214,885 234,133 1,010,859 1,054,291 1,080,773 1,119,032 % change 5.8% 0.7% 7.6% 10.3% 6.8% 2.8% 7.6% 4.3% 2.5% 3.5% Cost of sales -347,947 -375,243 -381,529 -112,567 -110,557 -85,552 -97,282 -405,958 -419,608 -432,309 -447,613 Gross profit 546,105 524,887 563,210 168,394 170,323 129,333 136,851 604,901 634,683 648,464 671,419 gross margin 61.1% 58.3% 59.6% 59.9% 60.6% 60.2% 58.5% 59.8% 60.2% 60.0% 60.0% Selling and marketing expenses -283,868 -300,672 -344,067 -102,274 -102,135 -83,197 -79,605 -367,211 -381,653 -392,321 -407,328 % of net sales 31.8% 33.4% 36.4% 36.4% 36.4% 38.7% 34.0% 36.3% 36.2% 36.3% 36.4% General and admin expenses -119,116 -124,414 -106,879 -26,325 -28,105 -25,052 -27,920 -107,402 -110,701 -112,930 -114,701 % of net sales 13.3% 13.8% 11.3% 9.4% 10.0% 11.7% 11.9% 10.6% 10.5% 10.4% 10.3% Other income/(expense), (net) -34 -60 -866 85 277 12 0 374 0 0 0 Operating profit 143,087 99,741 111,398 39,880 40,360 21,096 29,325 130,661 142,329 143,213 149,391 operating margin 16.0% 11.1% 12.5% 14.2% 14.4% 9.8% 12.5% 12.9% 13.5% 13.3% 13.4%

EBITDA 175,787 131,573 142,700 48,575 49,129 29,735 38,020 165,459 179,961 183,678 192,689 % of net sales 19.7% 14.6% 15.1% 17.3% 17.5% 13.8% 16.2% 16.4% 17.1% 17.0% 17.2%

Share of results of associated companies -42 -9 223 1,318 -1,000 532 0 0 0 Interest income/(expense) and other financial charges -70,858 -68,091 -66,149 -18,920 -23,178 -26,828 -26,605 -95,531 -62,338 -59,452 -58,999 Extraordinary income/(expense), (net) 937 -7,121 Amortisation of goodwill -23,850 -23,333 Income before taxation 49,316 1,196 45,207 20,951 17,405 -4,414 1,720 35,130 79,991 83,762 90,392 Tax expense -35,598 -8,540 -20,474 -12,447 137 -921 -1,032 -14,263 -35,996 -37,693 -40,676 marginal tax rate 72.2% 714.0% 45.3% 59.4% -0.8% -20.9% 60.0% 40.6% 45.0% 45.0% 45.0% Net income/(loss) before minority shareholders 13,718 -7,344 24,733 8,504 17,542 -5,335 0 20,711 32,918 48,294 101,923 Income attributable to minority shareholders -3,396 -3,589 0 -1,182 -832 -417 -500 -2,931 -4,659 -6,835 -14,424 Net income 10,322 -10,933 24,733 7,322 16,710 -5,752 -500 17,780 28,259 41,459 87,499

CASH FLOW ITEMS Net cash flow operating activities 112,649 23,939 -33,227 45,655 25,485 6,883 44,796 75,126 80,034 86,514 Acquisition of intangible assets -48,815 -34,921 -391 -565 -397 -450 -1,803 -5,000 -5,000 -5,000 Capital expenditures -58,350 -80,428 -5,171 -6,053 -5,222 -8,554 -25,000 -35,000 -35,000 -35,000 Free cash flow 5,484 -91,410 -38,789 39,037 19,866 -2,121 17,993 35,126 40,034 46,514

BALANCE SHEET ITEMS Cash and cash equivalents 51,443 38,741 33,795 25,630 52,492 50,094 49,310 49,310 14,072 6,255 -401 Short-term borrowings 16,082 51,506 43,398 73,897 110,970 81,640 82,078 82,078 59,563 64,883 39,427 Loans (less current portion) 525,915 469,833 405,489 412,725 402,361 419,057 235,321 235,321 187,471 134,301 106,587 High Yield Notes 299,229 300,000 300,000 300,000 300,000 300,000 195,000 195,000 195,000 195,000 195,000 Other providers of financing (less current portion) 9,666 12,260 11,055 11,160 10,991 11,307 11,307 11,307 11,307 11,307 11,307 Other long-term debt 388 2,208 1,462 1,256 1,069 864 864 864 864 864 864 Long-term borrowings 835,198 784,301 718,006 725,141 714,421 731,228 442,492 442,492 394,642 341,472 313,758 Total balance sheet debt 851,280 835,807 761,404 799,038 825,391 812,868 524,570 524,570 454,205 406,355 353,185 Factoring programme 32,000 35,000 28,500 28,500 28,500 28,500 28,500 28,500 28,500 28,500 28,500 Total debt* 883,280 870,807 789,904 827,538 853,891 841,368 553,070 553,070 482,705 434,855 381,685 Net debt* 831,837 832,066 756,109 801,908 801,399 791,274 503,760 503,760 468,633 428,600 382,086 Pension benefit obligations 35,693 36,706 36,734

CREDIT RATIOS Net debt/EBITDA 4.7x 6.3x 5.3x 5.0x 4.9x 4.8x 3.0x 3.0x 2.6x 2.3x 2.0x EBITDA/Net interest expense 2.5x 1.9x 2.2x 2.4x 2.3x 2.0x 1.7x 1.7x 2.9x 3.1x 3.3x Source – BNP Paribas Estimates, Safilo Leverage and Coverage are based on the last 12 months’ results. Some of the ratios are adjusted for the effects of acquisitions and disposals. In addition, these 2 measures are usually calculated based on EBITDA adjusted for exceptional or non-recurring items. Leverage is defined as net lease-adjusted debt (x8 operating leases)-to-EBITDAR. Coverage is defined as EBITDAR-to-(net interest+rental expenses).

323 European High Yield Research SAS ⎪ January 2006

Oleksiy Soroka, CFA +44 20 7595 4878 [email protected] SAS

Bond Description & Market Data, as of 5 January 2006 Next Call Issuer Credit Trend: Positive Description Amount (o/s) Ratings Date Price Price YTW STW 6 % Sr Unsub Nts due 2008 EUR 500mn B2/NR NC NC 102.50 4.87% 188bp Source – BNP Paribas Company Profile SAS AB is the Scandinavia’s largest airlines and one of the leading airlines in Europe, as measured by passengers carried. SAS operates flights from, to and in Scandinavia and across Europe and to and from North America and Asia. Scandinavian Airlines is a member of the world’s biggest airline alliance - Star Alliance™. The SAS group comprises the following airline operators: Scandinavian Airlines (Scandinavian Airlines Sverige, Scandinavian Airlines Danmark, SAS Braathens and Scandinavian Airlines International), Spanair, Blue1, Widerøe, airBaltic and Estonian Air. The group also has companies that support airline operations (SAS Ground Services, SAS Technical Services and SAS Cargo) as well as a business area that operates more than 200 hotels across the world (Rezidor SAS Hospitality; the hotels operate under five brands – Radisson SAS, Park Inn, Regent, Country Inn and Cerruti). As of 30 June 2005, the governments of Sweden, Denmark and Norway owned 21.4%, 14.3% and 14.3% of SAS AB, respectively. In the twelve months ended 30 September 2005, SAS had operating revenues of SEK 60,540mn and EBITDA of SEK 2,702mn. At the end of the year, the company had lease-adjusted leverage of 7.5x and lease-adjusted coverage of 1.4x. Investment Recommendation We maintain our HOLD/Positive Credit Trend recommendation for SAS’s 6% bonds due 2008. We believe that at these levels, SAS’s bonds have largely had their run and that further near-term spread reduction prospects are limited. The company reported positive results for the third quarter of 2005 and we expect that SAS’s earnings will also show improvement in the final quarter of the year. We expect that the company’s leverage will continue to decline progressively during 2006. SAS’ reduction in leverage during the last couple of years has been achieved due to improvements in profitability and, most importantly, due to a release of cash through disposals of certain non-core assets as well as through the sale and leaseback of some aircraft. The company intends to continue to raise cash from the sale of redundant aircraft, aircraft engines, spare parts and some non-core businesses. While we recognize that the new operating model launched by the Scandinavian Airlines at the beginning of September 2005 (comprising one-way fares, relaxation of certain restrictions related to the purchased tickets, seasonal adjustment of capacity, further cost reductions, etc.), is fraught with execution risks, we think that was a step in the right direction. We have long thought that SAS was slow off the mark in terms of reducing costs and adopting best practices from its low-cost carrier rivals. Now it appears that the airline is gradually catching up and is becoming more proactive in this respect. By the end of third quarter 2005, SAS has achieved SEK 13.5bn in cost savings of the SEK 14.0bn targeted under the Turnaround 2005 initiative. It is encouraging that the company does not stop there and intends to achieve further cost reductions (SEK 2bn in savings have been already identified, on a preliminary basis, for 2006-2007). Risks to our positive credit view include the aforementioned execution risks, a potential further hike in fuel prices and continued competition for the low cost carriers. The company is also not completely immune from the terror risk, as the recent blast in the Radisson SAS hotel in Amman, Jordan, illustrated.

324 European High Yield Research SAS ⎪ January 2006

Debt Profile As of 30 September 2005, SAS had total indebtedness of SEK 27,332mn. The company finances itself through syndicated bank borrowings, direct bank borrowings, bond financings, debenture loans and finance and operating leases. SAS does not publish in its accounts the full and detailed breakdown of its liabilities, highlighting only the major components of its indebtedness. Bank Debt A portion of SAS’s bank debt is secured and the remainder is unsecured. The secured portion largely pertains to aircraft financings, including a $1.0bn (SEK6.7bn) loan facility and a $240mn (SEK 1.6bn) loan facility. Both facilities were fully drawn at the end of 2004. We understand that SAS also has certain other secured bank facilities, but of smaller size. The unsecured bank debt includes a €400mn revolving credit facility, which matures in May 2007. In addition to the above mentioned facilities, SAS also had three other bank facilities of SEK 2,300mn, which matured in 2004 and were rolled over for another year. Bonds SAS has several bond tranches issued under the same Euro Medium Trade Note (EMTN) programme and a perpetual bond, which is subordinated to the company’s other indebtedness. The notes issued under the EMTN are senior unsecured obligations of SAS Consortium, the entity from which substantially all of SAS’s debt is issued. The 6% notes due 2008 are not callable or putable. Along with other notes under the EMTN programme, they benefit from negative pledge and cross default clauses, but, due to SAS being a fallen angel, lack many typical high yield covenants, including change of control, equity claw, debt limit, restricted payments, merger and asset sale covenants. SAS also issued one EUR-denominated private placement, one CZK and three JPY bonds under the same EMTN programme. Each of these tranches is individually no greater than €55mn and is, therefore, illiquid. The company also issued a 3.625% CHF 200mn perpetual bond of which CHF 127mn is outstanding. This bond is subordinated to all other debt and can be called every fifth year. The coupon is fixed for 10-year periods and was set at 3.625% in 1996. Management has indicated that it has little interest at present in redeeming this debt. Liquidity We believe that SAS’ current liquidity position is a adequate, with liquid funds of SEK 8,360mn on the company’s balance sheet as of September 2005 and with SEK 4,750mn unutilised under its credit facilities. SAS Structure

SAS AB

Spanair S.A

Wideree’s Flyveselskap AS

SAS Danmark A/S SAS Norge AS SAS Sverige AB Blue 1

SAS Consortium ISSUER of the airBaltic EMTNs

Estonian Air

SAS Technical Services SAS Scandanavian SAS Scandanavian SAS Braathens AS Airlines Danmark A/S Airlines Sverige AB SAS Ground Services

SAS Cargo Group

SAS Flight Academy Holding AB

Jetpak Group AB

SAS Business Opportunities AB

Rezidor SAS Hospitality A/S

Others

Source – SAS

325 European High Yield Research SAS ⎪ January 2006

Bond Covenant Bond description EUR 500mn 6% Senior EMTN due 2008 Issuing entity SAS Consortium Ranking Senior unsubordinated A secured portion of SAS’s bank debt is effectively senior to the bonds (by virtue of the Position vs. Bank debt security), while the rest is pari passu with them Position vs. Other bonds Pari passu SAS Consortium, the issuer of the bonds, has downstream guarantees from the main Security/guarantees holding company, SAS AB. Optional redemption Non-callable Change of control No Tax redemption Yes Negative pledge Yes Cross default Yes – on over €50mn of debt. Fall away covenants No Anti-layering No Debt limit No Restricted payments No Transactions with affiliates No Asset sales No Source – BNP Paribas, SAS

326 European High Yield Research SAS ⎪ January 2006

SAS, Financial Model BNPP BNPP BNPP BNPP BNPP FYE 31 December Actual Actual Actual Actual Actual Actual F'cast F'cast F'cast F'cast F'cast SEK mn FY 02 FY 03 FY 04 Q1 05 Q2 05 Q3 05 Q4 05 FY 05 FY 06 FY 07 FY 08 P&L SUMMARY Operating revenue 64,944 57,754 58,073 13,016 16,017 16,567 15,358 60,958 63,469 65,855 67,619 change y/y 26.3% -11.1% 0.6% 3.6% 5.8% 7.4% 2.8% 5.0% 4.1% 3.8% 2.7% Payroll expenses 22,352 21,927 19,585 4,974 5,138 4,949 5,038 20,099 20,881 21,601 22,111 Payroll expenses / sales 34.4% 38.0% 33.7% 38.2% 32.1% 29.9% 32.8% 33.0% 32.9% 32.8% 32.7% Other operating expenses 35,298 32,066 34,105 7,863 8,686 9,507 8,831 34,887 36,177 37,472 38,441 Other operating expenses / sales 54.4% 55.5% 58.7% 60.4% 54.2% 57.4% 57.5% 57.2% 57.0% 56.9% 56.9% Aircraft leasing costs 3,747 2,935 2,689 686 766 843 753 3,048 3,173 3,293 3,381 Aircraft leasing costs / sales 5.8% 5.1% 4.6% 5.3% 4.8% 5.1% 4.9% 5.0% 5.0% 5.0% 5.0% Depreciation 2,953 3,046 2,702 583 564 553 570 2,270 2,212 2,150 2,100 Share of income in affiliates -409 39 157 20 45 59 60 184 185 175 175 Income from sale of equity in subsids/affils 817 651 5 0 -2 35 0 33 0 0 0 Income from sale of aircraft & buildings -320 649 113 22 43 -7 0 58 80 0 0 EBIT 682 -881 -733 -1,048 949 802 227 930 1,290 1,515 1,760

EBITDA 3,547 826 1,694 -507 1,427 1,268 737 2,925 3,237 3,490 3,685 EBITDA margin 5.5% 1.4% 2.9% -3.9% 8.9% 7.7% 4.8% 4.8% 5.1% 5.3% 5.5% 2,702 EBITDAR 7,294 3,761 4,383 179 2,193 2,111 1,490 5,973 6,410 6,783 7,066 EBITDAR margin 11.2% 6.5% 7.5% 1.4% 13.7% 12.7% 9.7% 9.8% 10.1% 10.3% 10.5%

Income from shares & participations -180 -1 1 0 48 0 0 48 0 0 0 Net financial items 952 588 1,042 242 407 257 255 1,161 978 925 872

CASH FLOW ITEMS Operating cash flow 2,138 -1,167 -1,536 -1,023 1,644 -303 1,187 1,210 2,259 2,565 2,813 Capex (incl prepay to aircraft suppliers) -9,654 -4,454 -3,155 -272 -465 -355 -182 -1,100 -1,500 -2,000 -2,500 Free cash flow -7,516 -5,621 -4,691 -1,295 1,179 -658 1,006 110 759 565 313

BALANCE SHEET ITEMS Liquid assets (cash & ST investments) 10,721 9,066 8,595 7,659 8,680 8,360 9,366 9,607 12,366 12,931 13,244 Total Debt 29,782 28,866 27,280 26,410 28,198 27,332 27,332 26,433 26,433 26,433 26,433 Net Debt 19,061 19,800 18,685 18,751 19,518 18,972 17,967 16,826 14,067 13,502 13,189

CREDIT RATIOS EBITDA / Financial Costs 3.7x 1.4x 1.6x 1.9x 2.1x 2.3x 2.5x 2.5x 3.3x 3.8x 4.2x EBITDAR / Financial Costs+Rentals 1.6x 1.1x 1.2x 1.2x 1.3x 1.4x 1.4x 1.4x 1.5x 1.6x 1.7x

Net Debt / EBITDA 5.4x 24.0x 11.0x 10.0x 7.9x 7.0x 5.8x 5.8x 4.3x 3.9x 3.6x Net Lease-Adj Debt (x8) / EBITDAR 6.7x 11.5x 9.2x 8.8x 7.9x 7.5x 6.9x 6.9x 6.2x 5.9x 5.7x Source – BNP Paribas Estimates, SAS Leverage and Coverage are based on the last 12 months’ results. Some of the ratios are adjusted for the effects of acquisitions and disposals. In addition, these 2 measures are usually calculated based on EBITDA adjusted for exceptional or non-recurring items. Leverage is defined as net lease-adjusted debt (x8 operating leases)-to-EBITDAR. Coverage is defined as EBITDAR-to-(net interest+rental expenses).

327 European High Yield Research Saur ⎪ January 2006

Aizaz Shaikh +44 20 7595 8607 [email protected] Saur

Bond Description & Market Data, as of 05 January 2006 Next Call Issuer Credit Trend: Positive Description Amount (o/s) Ratings Date Price Price YTW STW

8.375% Senior Notes due 2015 EUR 265mn B1/B+ 30-Apr-09 108.375 114 5.55% 223 bp Source – BNP Paribas Company Profile SAUR is one of the three leading and established providers of outsourced services for local authorities in the water and waste management industries in France. In addition, the company has developed a strong position in the engineering and construction of water treatment plants. The company has grown from a local operator focused on water services contracts to an established provider of water and waste management services. SAUR has also developed its expertise in water treatment plant engineering and construction across France and overseas, and broadened its customer base to include both local authorities and industrial customers. For the 9 months ending in September 2005, the company had net sales of €1,021.8mn and EBITDA of €126.1mn. The company’s operations are conducted primarily in France, which accounted for 93% of the company’s net sales as of September 2005. Investment Recommendation We remain BUY on Saur post the Q3 results though upside is now limited to 1-2 bond points. Operationally, the company is ahead of plan. Debt Profile In April 2005, the company issued €265mn 8.375% Senior Notes due 2015 as part of LBO recapitalization. The bond have a senior subordinated guarantee from Novasaur and second ranking pledge of the shares of Finasaur, the holding company of the Saur operating company.

As part of the 2005 buyout of the company by PAI, the company entered into a senior credit agreement which provides for loans up to €690mn as follows. At Finasaur, the company has a term A facility in a maximum aggregate principal amount of €175mn with a 2012 maturity and a Term B and C facilities in maximum aggregate principal amounts of €145mn each with 2013 and 2014 maturities respectively. At Saur SA, the company has an acquisition/capex facility of €75mn. The company also has a revolving credit facility of €45mn maturing 2006. Novasaur and Finasaur and certain subsidiaries of Novasaur guarantee the obligations under the senior credit facility and also have granted first-ranking security interests in favour of the lenders under the senior facilities agreement over the shares of Finasaur and Saur S.A. and over certain bank accounts and other assets. At 30 September 2005, the company had €460mn drawn under its senior credit facilities.

Subordinated shareholder debt: On the closing date of the LBO, Finasaur issued €226mn of redeemable bonds maturing 2020, with capitalized (non-casb) annual interest of 7.5%, which were subscribed for by PAI and Bouygues. The Finasaur ORAN are redeemable in cash, in Novasaur shares, and/or in bonds to be issued by Novasaur.

Term A Facility Amortisation Schedule Date Amount (EUR) 15 February 2006 5,000,000 15 August 2006 11,000,000 15 February 2007 11,000,000 15 August 2007 12,500,000 15 February 2008 12,500,000 15 August 2008 12,500,000 15 February 2009 12,500,000 15 August 2009 14,000,000 15 February 2010 14,000,000 15 August 2010 16,500,000 15 February 2011 16,500,000 15 August 2011 18,500,000 15 February 2012 18,500,000 Source - Saur

328 European High Yield Research Saur ⎪ January 2006

Saur Structure

Shareholders Issuer of the notes

Guarantor of the notes

100%

Novasaur S.A.S.(5) 100%

Senior 5% 95% FG4 S.A. Notes(1) (€265 million)

Senior Term Finasaur S.A.S.(2) Loans Note proceeds loan

100%

Revolving Acquisition/ Facilities Saur S.A. Capex Facility

Operating Subsidiaries

1. The notes will be secured by a first-ranking pledge over the note proceeds loan, as well as a first-ranking pledge over certain dedicated bank accounts of Finasaur and Novasaur. 2. The notes are guaranteed on a senior subordinated basis by each of Novasaur and Finasaur. The guarantee of Novasaur is secured by a second-ranking pledge over the shares of Finasaur and FG4. The guarantee of Finasaur is secured by a second-ranking pledge over the shares of Saur S.A.

Source – Saur

329 European High Yield Research Saur ⎪ January 2006

Bond Covenant Bond description EUR 265mn 8.375% Senior Notes due 2015 Issuing entity FG4 S.A. Ranking Senior Notes Position vs. bank debt Structurally subordinated Position vs. other bonds Not applicable The Senior Notes are guaranteed by: a senior subordinated guarantee from Novasaur, which is subject to enforcement standstill and payment blockage; and a senior subordinated guarantee from Finasaur, which is subject to enforcement standstill and payment blockage. Security for the Guarantees: The senior subordinated guarantee from Novasaur is secured by a ‘silent’ second-ranking pledge over the shares of Finasaur and a ‘silent’ second-ranking pledge over the shares of FG4. The senior subordinated guarantee from Security/Guarantees Finasaur is secured by a ‘silent’ second-ranking pledge over the shares of Saur SA. Security for the Senior Notes: The Senior Notes are secured by: a first-ranking pledge of FG4’s rights under the €265 million senior subordinated inter-company loan from FG4 to Finasaur; and a first-ranking pledge over certain dedicated bank accounts of Finasaur and Novasaur into which any soulte payable in connection with a judicial attribution of the shares of Saur S.A. and Finasaur will be paid. ! Equity Claw-back - up to 35% at par plus coupon, for the first three years; ! Make-whole - redemption prior to the 4th anniversary: redemption price of 100% + 50bp After the 4th anniversary: beginning on the 4th anniversary of the issue date, the notes can be redeemed at: 100% + [half of coupon] ! Call Schedule: Optional redemption 30 April 2009 – 108.3750 30 April 2010 – 104.1875 30 April 2011 – 102.7917 30 April 2012 – 100.5234 30 April 2013 – 100.0000 Tax redemption Yes at par + accrued and unpaid interest Negative pledge Yes Cross default Yes - on €15mn or more of other debt. Fall away covenants Yes Anti-layering Yes Change of control 101% plus accrued and unpaid interest Except for permitted assets swap, at least 75% of the consideration must be in the form of Asset sales cash or cash equivalents (which includes transfer of liabilities, securities convertible into cash within 180 days and Permitted Non-Cash Consideration). Debt is permitted if, after giving pro forma effect thereto, the consolidated coverage ratio is greater than 2.00 to 1.00. Carve outs: Debt limit • Bank Basket: €700mn subject to reduction with (i) asset sale proceeds and (ii) borrowings under Receivables Facilities; • CLOs, PMD obligations up to €40nm or 2% of Total Assets; • General indebtedness basket: €35mn. Source – BNP Paribas, Saur

330 European High Yield Research Saur ⎪ January 2006

Bond Covenant Bond description EUR 265mn 8.375% Senior Notes due 2015 If company can raise €1.00 of debt then 50% net income less 100% net loss. Carve outs: ! Dividends in any calendar year, up to 6% of aggregate net cash proceeds, from all public offerings. ! General JV Investment basket of €10mn for JVs in Permitted Business. Restricted payments ! The purchase of Equity Interests held by or for the benefit of any future, present or former employee pursuant to any equity, share or options plan, not to exceed €3mn in any calendar year (unused amounts can be carried over to succeeding years to a max of €5.0mn. ! General permitted investment basket: any investment up to €10mn. ! General basket up to €35mn.

All transactions with affiliates should be made in good faith and on an arm’s-length basis, and for transaction involving an aggregate value of €5mn or greater the transaction has to Transactions with affiliates be approved by the board of directors; for transactions involving an aggregate value of €30mn a written opinion of an independent financial advisor is required (transaction has to be fair on a financial stand point). Limitation on liens Yes - basket for Permitted Liens €20mn. Source – BNP Paribas, Saur

331 European High Yield Research Saur ⎪ January 2006

Saur, Financial Model FYE 31 December Historic Historic Historic Historic Historic Historic Historic ProForma Historic Historic Historic Proj’d Proj’d Proj’d

EUR mn FY 02 FY 03 Q1 04 Q2 04 Q3 04 Q4 04 FY 04 FY 04 Q1 05 Q2 05 Q3 05 FY 05 FY 06 FY 07 PROFIT & LOSS

Revenue 1,630 1,592 284 329 342 615 1,570 1,284 309 347 366 1,344 1,438 1,470 COGS -735 -674 -106 -121 -111 -346 -683 -491 -117 -134 -105 -504 -536 -544 Gross profit 895 917 178 209 230 270 887 792 192 213 261 840 901 926 SG&A -740 -721 -162 -177 -165 -229 -734 -701 -183 -167 -194 -682 -735 -762 Taxes other than Inc Tax -64 -53 -10 -10 -8 -29 -57 -42 -10 -10 -9 -39 -44 -4 Other Operating Revenue 148 79 4 13 -4 78 90 61 14 5 6 37 39 42 Revenue under common control 3 3 1 1 1 1 3 3 1 1 1 3 3 3 EBITDA 241 226 11 35 54 90 190 115 14 43 66 159 166 206 D&A 132 138 15 14 15 56 99 48 11 19 20 65 69 72 P&L Interest -30 -20 -7 0 -9 -15 -16 -50 -47 -46

Revenue growth y/y -2.3% -1.4% 4.7% 6.9% 2.3% Gross margin 54.9% 57.6% 62.8% 63.3% 67.4% 43.8% 56.5% 61.7% 62.2% 61.4% 71.4% 62.5% 62.7% 63.0% SG&A / sales 45.4% 45.3% 57.2% 53.6% 48.4% 37.3% 46.7% 54.6% 59.4% 48.0% 53.1% 50.8% 51.1% 51.8% EBITDA margin 14.8% 14.2% 3.9% 10.7% 15.7% 14.6% 12.1% 8.9% 4.5% 12.3% 18.0% 11.8% 11.5% 14.0%

CASH FLOW

Change in working capital 108 -94 96 95 -78 76 10 10 10 Cash from Operating Activities 279 83 238 102 -49 123 95 138 160

Capex 195 137 83 -10 -8 25 55 55 55 Acquisitions/Disposals 13 444 80 -1,053 0 0 0 0 -50 Cash from Investing Activities 114 386 165 -1,045 -11 -10 40 83 55

Debt Repayment 0 0 0 0 0 0 -5 -22 -25 Cash from Financing Activities -123 -143 -373 1,053 13 17 -8 -25 -28

Net Change in Cash -8 243 -208 9 2 8 32 58 27

BALANCE SHEET

Cash & Equivalents 96 313 75 178 130 261 128 187 214

Bank Debt 263 179 28 460 460 460 460 438 413 Old Bonds 24 0 0 0 0 0 0 0 New HY Bonds 0 0 265 265 265 265 265 265 Other 299 23 7 53 0 0 Total Debt 586 202 35 778 725 725 725 703 678 Net Debt 490 -110 -40 600 596 464 597 516 464 ORAN 0 0 229 213 217

RATIOS

Leverage Bank Leverage (gross) 4.0x 2.9x 2.6x 2.0x Total leverage (gross) 6.8x 4.6x 4.2x 3.3x Total leverage (net) 5.2x 3.8x 3.1x 2.3x

Source – BNP Paribas Estimates, Saur

332 European High Yield Research Saur ⎪ January 2006

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333 European High Yield Research Seat Pagine Gialle ⎪ January 2006

Aizaz Shaikh +44 20 7595 8607 [email protected] Seat Pagine Gialle

Bond Description & Market Data, as of 05 January 2006 Next Call Issuer Credit Trend: Positive Description Amount (o/s) Ratings Date Price Price YTW STW

8 % Sr Nts due 2014 EUR 1,300mn B3/B 30-Apr-09 104.000 107 1/2 6.53% 342 bp Source – BNP Paribas

Company Profile Seat Pagine Gialle is the number one provider of directory advertising and associated products and services in Italy with a 95% market share. The company is also the number two provider of classified directory advertising in the UK with a 14% market share. In addition, the company is the number two providers of directory assistance services in Germany. These businesses make it one of the largest directories businesses in Europe based on revenues and EBITDA. The directories market is part of the local advertising market that includes various media such as newspapers, radio, television, Internet, billboards and direct marketing. For the twelve months ended September 2005, the company generated consolidated revenues and EBITDA of € 1,410mn and €626mn, respectively. At year-end, the company’s leverage was 6.0x. Investment Recommendation We remain Buyers of SEAT post the recent results. The company is deleveraging slowly but surely. We expect more of the same in 2006, but as the debt comes down deveraging should accelerate.

Debt Profile The company's debt was issued as part of a leveraged buyout by BC Partners, CVC Capital, Investitori Associati and Permira during 2003 and 2004. The company issued an 8% high yield bond of €1.3bn, with standard high yield covenants, and structured bank debt in the amount of roughly €3bn, which have been refinanced since then. The Notes are callable in 2009 (NC5) and are guaranteed on a senior subordinated basis by the company and each future restricted subsidiary and certain of the company’s future holding companies. The guarantees are senior subordinated obligations of each guarantor; the notes have second priority pledges from intermediate companies and SEAT, the operating company. Senior Credit Facilities

At the beginning of 2005, the company refinanced its credit facility which was structured as part of the LBO during 2003 and 2004. The new senior credit facility of €2,620mn is comprised of a 7-year amortizing (semi-annually) term Loan A of €1,930mn, an 8-year non-amortizing (bullet) term loan B of €600mn and a 7-year senior revolving facility of €90mn for working capital purposes. As of the end of September 30, 2005, the total amount outstanding under the credit facility was €2,431mn.

The new senior credit facility benefits from the same guarantees and has the same ranking than the previous one. Therefore, the senior credit facilities are guaranteed on a senior basis by Sub Silver S.A., and if required by any subsidiary of Sub Silver S.A. whose EBITDA equals or exceeds 5% of the EBITDA of the group, subject to certain conditions. Sub Silver S.A. granted a first-priority security interest in the share capital of New SEAT. A first-priority assignment of the notes proceeds loan was given to New SEAT by the issuer in favour of the lender under the senior credit facilities. In addition, the notes benefit from a first-priority security interest of New SEAT over the share capital over certain of its subsidiaries. New SEAT has also pledged certain of its assets.

334 European High Yield Research Seat Pagine Gialle ⎪ January 2006

Seat Pagine Gialle Structure

Funds advised by Funds advised by Funds advised by Funds advised by CVC Capital BC Partners Investitori Associati Permira Partners

Société de Participations Silver S.A.

Second-Priority Share Pledge 100%

Sub Silver S.A.

Second-Priority Share Pledge Public €1,300 million 51% Senior Notes Shareholders Second-Priority Loan Assignment 49% Notes £2,431 million Senior Proceeds Credit Facilities Lighthouse Loan Outstanding International Company S.A. SEAT Senior Subordinated Guarantee

100%

Operating Subsidiaries

Source – Seat Pagine Gialle

335 European High Yield Research Seat Pagine Gialle ⎪ January 2006

Bond Covenant Bond description EUR 1,300mn 8% Senior Notes due 2014 Issuing entity Lighthouse international Company SA Ranking Senior notes Position vs. Bank debt Structurally and contractually subordinated Position vs. Other bonds No other bond outstanding Second priority security interest in the share capital of New SEAT held by Sub Silver SA. Second priority security interest in the share capital of Sub Silver SA, or its successors, held Security/guarantees by Societe de participations Silver SA. Second priority assignment of the notes proceeds loan agreement. ! Make Whole – prior to 30 April 2009 (100%) + at treasuries/bunds/gilts + 50bp ! Equity Claw – prior to 30 April 2007 max 35% of issue at 108% + coupon, if 65% of the notes remain outstanding ! Call Schedule: Optional redemption 30 April 2009 – 104.000% 30 April 2010 – 102.667% 30 April 2011 – 101.333% 30 April 2012 – 100.000% Tax redemption Yes at par + accrued and unpaid interest Negative pledge Yes Cross default Yes Fall away covenants No Anti-layering Yes (Debt only) Change of control Put at 101%, 30% of the total voting power FMV + 75% cash + 100% of the Net Available Cash from such Asset Disposition is applied (if > €20mn) by the Company: A) to reduce Senior Indebtedness of the Company/subsidiaries within 1 year Asset sales B) After application to acquire Additional Assets within 1 year After application of proceeds to (A) and (B), to make a purchase offer to Holders of Notes.

Max consolidated leverage ratio

Source – BNP Paribas, Seat Pagine Gialle

336 European High Yield Research Seat Pagine Gialle ⎪ January 2006

Bond Covenant Bond description EUR 1,300mn 8% Senior Notes due 2014 Carve out: ! If no default, €1 of debt can be incurred, leverage ≤ 6.0x, and <50% of net Income + 10% Net Cash Proceeds + 100% any cash capital contribution. ! Does not prohibit: ! Payment of the Net Cash Proceeds of the concurrent sale of Capital Stock; ! Redemption of Subordinated Obligations; ! Dividend Payment within 60 days after the declaration date; ! If no default repurchase or acquisition of share of Capital Stock with an amount <€7mn in any calendar year and €15mn in total; ! Any permitted Investment; ! Dividend paid to employees; ! Dividend paid in respect of management fees < €3mn; Restricted payments ! Any payment of transaction fee to the Investor Group; ! Payment of regularly scheduled or accrued dividends to holders; ! Payment to the issuer or the holding company of the company; ! Redemption of TDL bonds; ! Any earn out payment related to the acquisition of TDL Infomedia Limited; ! Payment of dividend if: ! The sum < 3% of EMC (Equity Market Capitalisation) + an amount of 6% multiplied by the Net Cash Proceeds; ! After payment of such dividend + no default + after pro forma effect: the company can issued €1 of indebtedness if the aggregate dividend amount < 3% of EMC, this amount shall be increased by 4% of EMC, or 6% if the Consolidated leverage Ratio = 4.0x after pro forma effect at this date. ! Any payment if the aggregate amount < €50mn.

Not less favourable than arms length transaction; if in excess of €5mn, resolution of majority Transactions with affiliates of non employee disinterested directors; if in excess of €25mn, fairness opinion.

Source – BNP Paribas, Seat Pagine Gialle

337 European High Yield Research Seat Pagine Gialle ⎪ January 2006

Seat Pagine Gialle, Financial Model Pro FYE 31 December Historic Historic Historic Historic Historic Historic Historic Historic Historic Historic Proj’d Proj’d Proj’d Forma EUR mn FY 02 FY 03 FY 03 Q1 04 Q2 04 Q3 04 Q4 04 FY 04 Q1 05 Q2 05 Q3 05 FY 05 FY 06 FY 07 INCOME DATA

Sales & service revenue 1,445 1,450 1,450 188 372 394 454 1,408 190 366 400 1,422 1,443 1,465 Other adjustments 9 10 10 0 0 0 0 0 0 0 0 0 0 0 Outside Services and Raw materials 581 552 553 90 130 133 175 528 90 116 126 555 560 565 Labour 244 226 227 44 51 48 58 201 44 62 53 203 228 255

Gross operating margin 628 681 679 54 191 213 221 679 56 188 221 664 655 645 Other operating expenses 73 77 77 18 20 13 16 67 16 15 14 24 -13 -56

EBITDA 556 604 602 35 171 200 205 612 40 173 208 639 668 701 38.5 41.7 41.5 18.8 46.0 50.7 45.3 43.4 21.2 47.3 51.9 47.9 EBITDA margin % % % % % % % % % % % 45.0% 46.3% %

Interest 83 126 294 13 43 73 96 224 65 78 65 251 251 249

CASH FLOW

Working Capital -18 -146 -146 52 53 -81 -107 -83 92 12 -55 20 10 10 Interest -88 -124 -293 -11 -32 -71 -108 -222 -65 -72 -62 -251 -249 -251 Tax -115 -116 -13 0 0 0 0 0 0 0 0 -160 -220 -220 Extraordinary expense / other -137 -69 -2 26 -84 -92 94 -56 -27 60 -146 0 0 0 Provision for doubtful accounts 40 41 41 0 0 0 0 0 0 0 12 0 0 0 Write up/down of assets 60 15 15 9 9 0 0 62 0 0 0 Operating cash flow 297 205 205 102 108 -45 94 259 40 173 20 248 209 240

Capex -13 -9 -9 0 0 0 0 -10 -10 -7 -11 -40 -50 -50 Free cash flow 284 197 197 249 31 166 9 208 159 190

Cash flow from investing activities -18 -3,107 -38 4 -142 -147 -10 -7 9 -40 -50 -50

Cash flow from financing activities -295 3,047 -86 0 -3,578 -3,578 0 -336 -19 -175 -125 -175 Of which debt financing -77 -66 3,380 0 0 0 0 0 0 Of which equity financing 11 3,113 0 0 0 0 0 0 0 Of which dividends -229 0 -3,466 0 -3,578 -3,578 0 0 0 -175 -125 -175

Change in cash -16 144 81 106 -3,613 -3,466 51 -105 10 33 34 15

BALANCE SHEET

Cash 22 166 103 203 208 183 122 122 47 75 85 155 190 205

Bank Debt 3,005 3,005 2,875 2,494 2,748 2,748 2,621 2,574 2,431 2,388 2,108 1,828 Bond Debt 1,150 1,150 1,300 2,494 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300

Total Debt 1,293 634 4,155 4,155 4,175 4,161 4,048 4,048 3,921 3,874 3,731 3,688 3,408 3,128 Net Debt 1,271 468 4,052 4,052 3,967 3,977 3,926 3,926 3,874 3,799 3,646 3,532 3,218 2,923

RATIOS

EBITDA / Interest 2.0x 5.0x 4.1x 3.2x 2.7x 2.7x 2.2x 2.0x 2.1x 2.5x 2.7x 2.8x EBITDA-Capex / Interest 2.0x 4.8x 3.8x 3.0x 2.5x 2.8x 1.8x 2.0x 2.1x 2.4x 2.5x 2.6x

Total Bank Debt / EBITDA 5.0x 4.9x 4.7x 4.0x 4.5x 4.5x 4.3x 4.2x 3.9x 3.7x 3.2x 2.6x Net Bank Debt / EBITDA 4.8x 4.6x 4.4x 3.7x 4.3x 4.3x 4.2x 4.0x 3.7x 3.5x 2.9x 2.3x

Total Debt / EBITDA 6.9x 6.8x 6.9x 6.7x 6.6x 6.6x 6.4x 6.3x 6.0x 5.8x 5.1x 4.5x Net Debt / EBITDA 6.7x 6.6x 6.6x 6.4x 6.4x 6.4x 6.3x 6.1x 5.8x 5.5x 4.8x 4.2x

Source – BNP Paribas Estimates, Seat Pagine Gialle

338 European High Yield Research Seat Pagine Gialle ⎪ January 2006

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339 European High Yield Research Sicpa ⎪ January 2006

Oleksiy Soroka, CFA +44 20 7595 4878 [email protected] Sicpa

Bond Description & Market Data, as of 5 January 2006 Next Call Issuer Credit Trend: Stable Description Amount (o/s) Ratings Date Price Price YTW STW 9.75% Senior Notes due 2011 EUR 160mn B3/B- 15-Jul-07 109.75 115.00 5.16% 222bp Source – BNP Paribas Company Profile SICPA Holding S.A., headquartered in Prilly, Switzerland, is a family-owned manufacturer of security inks. The company has two business lines: Security Ink and Product Security. SICPA is the worldwide leader in the market for bank note inks which is open to competition and is the only producer of optically variable inks (OVI®), a popular security feature of high-value bank notes. We believe that SICPA, through its innovative products, helped create the open market for secure bank note inks. Product Security business helps manufacturers of branded goods in limiting counterfeiting and assists governments in the collection of excise, particularly tobacco and liquor, taxes. SICPA has recently disposed of its Packaging Ink business. We estimate that in the twelve months ended 30 September 2005, SICPA had continuing sales of CHF 447mn and continuing EBITDA before exceptional items of CHF 110mn. We also calculate that at the end of the period, SICPA had continuing leverage of 2.0x and continuing coverage of 2.9x. Investment Recommendation: We maintain our BUY/Stable Credit Trend recommendation for Sicpa’s notes. The company’s bonds have appreciated substantially since October 2004 when we initially assigned our recommendation. Consequently, we believe that a near-term price appreciation upside is rather limited from the current levels. Yet, we feel that the bonds still might be attractive for those investors who favour short-dated paper. We believe that the bonds will be refinanced as soon as they become callable, starting from 15 July 2007. We also note that if the company maintains positive operating momentum and continues to generate fee cash flow, then further capital appreciation can be expected even from the current tight levels. On another positive note, we would like to point out that, due to the recent repayment of the term portion of the bank facility, there is very little senior debt ahead of the bonds at this point. On a more negative note, we believe that there is a number of risks that may trigger some decline in Sicpa’s bond prices during the next twelve months. Firstly, we would like to highlight that banknote ink business can be quite lumpy. The company may benefit from some big orders during a particular quarter, which creates a very demanding comparative backdrop for the same period of the following year. So far, ever since issuing the bonds, Sicpa has managed to maintain a positive reported year-on-year momentum in its Banknote Ink business. However, sooner or later there will be a quarter, which will display declines in revenues and earnings year-on-year. From our view, one such quarter alone should not act as a negative catalyst for the bonds. Clearly, we would be more concern if we establish a negative trend over several quarters. Conversely, we accept that some investors may get unnerved even by one weak quarter and may use it as an excuse to take profits in the name. In addition to this reporting risk, we can think of a few other potential negative triggers for the bond prices. One of them would be a big releveraging acquisition. Conversely, we believe that the company will only pursue small bolt-on acquisitions, which would only have a minor effect on the level of debt. We are also mindful of a litigation with one of Sicpa’s former bank lenders, which is still ongoing and may ultimately lead to material payments on the part of the company. Debt Profile As of 30 September 2005, Sicpa had total debt of CHF274mn, comprising of high yield bonds of approximately CHF 249mn (€160mn), bank overdrafts of CHF1.3mn, finance leases (lease financings for real estate) of CHF 2.1mn and amounts outstanding under bank facilities. During third quarter 2005, Sicpa used the cash proceeds from the sale of its Packaging Inks business to repay the entire amount outstanding under its CHF 170mn term loan facility and some other bank debt (total repayment of borrowings of approximately CHF 185mn). Senior Credit Facility We understand that after the prepayment of the aforementioned term portion of the bank facility, Sicpa’s senior credit facility now consists of a CHF 50mn revolving credit facility. The company’s obligations under the facility are guaranteed by Sicpa’s various operating subsidiaries. The senior credit facility also benefits from a first-priority security interest in the shares of SICPA Holding and security interests in the material subsidiaries and the majority of the assets of the SICPA group, including first-priority security interests over the real property of the SICPA group companies in Finland, France, Mexico and Switzerland and second-priority security interests over the real property of the SICPA group companies in Belgium, Canada and the United States. The revolving credit facility will mature on 31 March 2009 and each revolving credit loan is repayable in full on the last day of its term.

340 European High Yield Research Sicpa ⎪ January 2006

Sicpa Structure

Shareholders(1)

NOMA Holding S.A.

Edler Ltd.(2)

NOMA Senior notes Luxembourg S.A. Second- priority security Intercompany interest(4) loan Second- Senior priority share subordinated pledge(3) guarantee(5) SICPA Holding Senior Credit S.A. Facility(6)

Non-Swiss Swiss Subsidiaries Subsidiaries

1. Maurice A. Amon, Philippe Amon and Monique Cohen-Amon together own and control indirectly the equity capital of NOMA Luxembourg. 2. Edler Ltd. is a holding company incorporated in Gibraltar for the purposes of the Refinancing and will be liquidated subsequent to the offering of the notes. Edler Ltd. holds 99,001 shares of NOMA Luxembourg, while NOMA Holding holds the remaining 999 shares of NOMA Luxembourg. 3. The holders of the notes will benefit from a second-priority pledge over the shares of SICPA Holding. Lenders under the senior credit facility will have a first-priority pledge over the shares of SICPA Holding. 4. The holders of the notes will benefit from a second-priority security interest in the intercompany loan from NOMA Luxembourg to SICPA Holding the principal amount of which will be equal to the proceeds of the offering of the notes. Lenders under the senior credit facility will have a first-priority security interest in that loan. 5. The holders of the notes will benefit from senior subordinated guarantees of certain non-Swiss subsidiaries, although not all non-Swiss subsidiaries of NOMA Luxembourg will guarantee the notes. Each of these subsidiaries has also provided a senior guarantee in favor of the lenders under the senior credit facility. Due to Swiss tax considerations, none of the Swiss subsidiaries will provide a guarantee of the notes but some of them have provided senior guarantees in favour of the lenders under the senior credit facility. 6. The senior credit facility now includes a CHF 50mn revolving credit facility.

Source – Sicpa

341 European High Yield Research Sicpa ⎪ January 2006

Bond Covenant Bond description EUR 160mn 9.75% senior notes due 2011 Issuing entity Noma Luxembourg S.A. Ranking Senior secured obligations. Position vs. Bank debt Structurally subordinated. Position vs. Other bonds Not applicable Senior subordinated guarantees from certain non-Swiss subsidiaries. Second-ranking pledge of the shares of the bank borrower. Security/guarantees Second-ranking security interest in intercompany loan of proceeds of offering to the bank borrower. Make Whole – Bund+50bp before 15 July 2007 Equity Clawback – 35% at 109.75% before 15 July 2007 Call Schedule: - during the twelve-month period beginning 15 July 2007 – 109.750% Optional redemption 15 July 2008 – 104.875% 15 July 2009 – 102.437% 15 July 2010 and thereafter – 100.000%. Tax redemption Yes – at par Negative pledge Yes Cross default Yes – on more than CHF15mn of other debt Fall away covenants No Anti-layering Yes Change of control Yes – at 101% Except for permitted assets swaps (described below), at least 75% of the consideration must be in the form of cash or cash equivalents (including the assumption of liabilities and securities converted into cash or cash equivalents within 90 days). Asset sales The issuer is permitted to engage in asset swaps and receive as consideration assets used in similar or complimentary business (other than in case of a transaction under the UBS Warrant Agreement). Consolidated coverage ratio of 2.5x. Only up to CHF100mn of ratio debt can be incurred at non-guarantor subsidiaries (other than the bank borrower). Carve outs: Debt limit Capital lease and purchase money basket of CHF15mn; General indebtedness basket of CHF15mn; Acquired debt if not in violation of the consolidated coverage ratio; Deeply subordinated shareholder funding. 50% of consolidated net income from 1July 2004, plus 100% of the net cash proceeds of sales of capital stock of the issuer and cash capital contribution from shareholders to the issuer, plus amount of balance sheet debt reduction as a result of conversion into capital stock of the issuer, up to the net cash proceeds received from the issuance of such convertible debt; and amount equal to the net reduction in restricted investments. Carve outs: Restricted payments Parent company fees and expenses of up to CHF1mn in a calendar year for payment of parent company overhead and taxes; Payments under the UBS Warrant Agreement are permitted but count against the net income basket; Share repurchase of up to CHF500,000 annually; General basket of CHF5mn. The transaction on an arm’s-length basis. If the transaction involves an amount in excess CHF5mn, the majority of the disinterested members of the Board of Directors should Transactions with affiliates confirm that the transaction is on fair terms and, in addition, if a transaction for an amount of over CHF15mn a written opinion from an Independent Qualified Party is required. Source – BNP Paribas, Sicpa

342 European High Yield Research Sicpa ⎪ January 2006

Sicpa, Financial Model BNPP BNPP BNPP Year ends 31 December, IFRS Actual Actual Actual Actual Actual Actual F'cast F'cast F'cast CHF mn 2002 2003 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 2005 2006 P&L SUMMARY Revenues Security Sales 316.9 343.2 405.6 114.4 105.3 105.6 120.1 445.4 458.7 change year-on-year -13.6% 8.3% 18.2% 4.7% 7.6% 29.0% 3.0% 9.8% 3.0% Other 1.3 1.3 6.0 change year-on-year 66.9% Continuing Sales 114.4 105.3 106.8 121.4 447.9 464.7 change year-on-year 29.4% 3.8% Packaging Inks Sales 670.0 643.7 620.6 150.0 166.2 113.0 0.0 429.1 0.0 change year-on-year -6.9% -3.9% -3.6% -4.2% 7.2% -27.4% -100.0% -30.8% -100.0% Total Sales 987.0 986.9 1,026.1 264.4 271.5 219.8 120.1 874.5 458.7 change year-on-year -9.2% 0.0% 4.0% -0.6% 7.4% -7.7% -55.5% -14.8% -47.5% 447 Operating profit Security 49.6 70.8 101.0 35.4 29.0 21.0 31.2 116.6 119.3 operating margin 15.6% 20.6% 24.9% 30.9% 27.6% 19.9% 26.0% 26.2% 26.0% Other -0.8 -0.8 -2.5 operating margin -41.7% Unallocated costs -11.3 -14.5 -17.0 -4.7 -3.2 -2.8 -3.0 -13.8 -12.0 Continuing operating profit 30.7 25.8 17.4 28.2 102.0 104.8 operating margin 16.2% 23.3% 22.8% 22.5% Packaging Inks 21.2 3.4 -6.5 -1.9 -1.3 1.0 0.0 -2.3 0.0 operating margin 3.2% 0.5% -1.0% -1.3% -0.8% 0.9% 0.0% -0.5% 0.0% Total operating profit 59.5 59.8 77.5 28.8 24.4 18.3 28.2 100.5 104.8 operating margin 6.0% 6.1% 7.6% 10.9% 9.0% 8.3% 6.0% 11.5% 22.8%

Net financial expense 49.6 41.5 42.6 9.9 23.7 5.0 4.5 43.1 22.1 Share of results of associates 0.2 0.6 1.2 0.3 0.3 0.3 0.1 0.6 0.5 Net profit before taxes 10.1 18.9 36.1 19.2 2.5 7.9 23.8 58.1 83.1 Income taxes 15.0 18.3 24.8 8.6 4.6 1.5 11.9 26.7 37.4 effective tax rate 148.9% 97.3% 68.8% 45.0% 183.7% 18.9% 50.0% 45.9% 45% Minority interests -1.8 -1.8 -2.4 0.0 0.0 5.8 0.0 0.0 0.0 Net profit -6.7 -1.3 8.9 10.5 -2.1 12.2 11.9 31.4 45.7

Reconciliation Between Operating Profit and Adjusted EBITDA Operating profit 59.5 59.7 77.5 28.8 24.4 18.3 28.2 99.8 104.8 Depreciation and amortisation 47.7 46.6 41.0 7.7 8.0 6.1 2.7 24.5 11.0 Asset impairment 0.0 4.0 3.1 0.0 0.0 0.0 0.0 0.0 0.0 EBITDA 107.2 110.3 121.7 36.4 32.4 24.5 30.9 124.2 115.8 Adjustments -14.5 7.5 14.1 0.0 0.0 0.0 0.0 0.0 0.0 Adjusted EBITDA 88.3 117.8 135.8 36.4 32.4 24.5 30.9 124.2 115.8 % of sales 8.9% 11.9% 13.2% 13.8% 11.9% 11.1% 11.0% 14.2% 25.2%

CASH FLOW ITEMS Adjusted EBITDA 107.2 110.3 135.8 36.4 32.4 24.5 30.9 124.3 124.3 Cash effect from changes in working capital 4.9 7.4 23.0 -10.4 -1.1 -11.5 -5.0 -27.9 -13.0 Cash interest -49.6 -41.5 -19.0 -9.9 -23.7 -18.2 -4.5 -37.1 -22.1 Cash taxes -13.9 -13.9 -34.3 -3.9 -3.2 -5.1 -11.9 -24.2 -37.4 Cash exceptional items 17.0 -18.0 -11.7 0.0 0.0 0.0 0.0 -3.7 0.0 Other operating cash items -3.6 35.2 -30.0 0.4 0.0 11.5 0.0 0.0 0.0 Cash flow from operating activities 62.0 79.4 63.8 12.7 4.4 1.1 9.5 31.4 51.7 Capital expenditure -43.6 -46.3 -28.7 -10.3 -13.8 -8.2 -5.0 -37.3 -20.0 Free cash flow 18.4 33.1 35.1 2.4 -9.4 -7.1 4.5 -5.9 31.7 Dividends paid -0.5 -1.8 -1.3 0.0 -0.4 -0.8 0.0 -1.2 -5.0 Other cash flow items 11.2 -53.4 -13.4 -17.5 -9.4 31.4 0.0 4.5 -31.1 Net change in cash position 29.0 -22.1 20.4 -15.1 -19.2 23.5 4.5 -2.6 -4.4

BALANCE SHEET ITEMS Cash and cash equivalents 71.8 46.9 67.4 57.5 44.9 55.0 59.5 59.5 55.1 Total debt 487.2 442.1 443.2 449.7 461.1 273.5 273.5 273.5 243.7 Net debt 415.4 395.2 375.9 392.2 416.2 218.5 214.0 214.0 188.6

CREDIT RATIOS Net Debt / Adjusted EBITDA 4.7x 3.4x 2.8x 3.0x 3.4x 2.0x 1.7x 1.7x 1.6x Adjusted EBITDA / Net interest expense 3.0x 3.7x 3.2x 2.9x 2.5x 2.9x 2.9x 2.9x 5.2x Source – BNP Paribas Estimates, Sicpa Leverage and Coverage are based on the last 12 months’ results. Some of the ratios are adjusted for the effects of acquisitions and disposals. In addition, these 2 measures are usually calculated based on EBITDA adjusted for exceptional or non-recurring items. Leverage is defined as net lease-adjusted debt (x8 operating leases)-to-EBITDAR. Coverage is defined as EBITDAR-to-(net interest+rental expenses).

343 European High Yield Research Smurfit Kappa Group⎪ January 2006

Rick Deutsch +44 20 7595 8840 [email protected] Smurfit Kappa Group

Bond Description & Market Data, as of 06 January 2006 Next Call Issuer Credit Trend: Stable Description Amount (o/s) Ratings Date Price Price YTW STW 10.125% Sr Nts due 2012 EUR 349mn B3/B-/* 01-Oct-07 105.063 108.50 7.84% 493bp 7.75% Sr Sub Nts due 2015 EUR 218mn Caa1/B-/* 01-Jan-10 103.875 87.75 9.79% 668bp 7.75% Sr Sub Nts due 2015 USD 200mn Caa1/B-/* 01-Jan-10 103.875 86.00 10.11% 523bp Source – BNP Paribas Company Profile Smurfit Kappa Group combines the operations of former companies Jefferson Smurfit and Kappa Packaging. The merged group is a world leader in corrugated, a European leader in containerboard and also has several other leading market positions, in both paper grades, in Latin America. More specifically, the group combines now JSG’s leading positions in Latam, Westren and Southern Europe as well as Kappa’s leading positions in Northern and Eastern Europe. As of December 2005, the group employed approximately 43,000 people and generated combined revenues of €7.6bn for the full year 2004 with a combined EBITDA of €1,01bn. The group operates in 23 European and nine Latin American countries, with a combined capacity of producing 6.1 million tonnes of containerboard and 5.1 million tonnes of corrugated. Investment Recommendation With no guidance on plant closings and regulatory forced divestments, we have had to fly in the dark. No guidance has been provided by the company. In any case, the market tends to look through these one-time charges to the ongoing benefits of the restructuring. Even given a moderate sector upturn, accompanied by a moderate level of synergies, leverage will remain fairly high. This is not a hugely profitable or cash generative business. So why invest in the company now? While we would prefer to wait for more clarity on the merger implications we are concerned that more clarity means the bonds become more expensive. S&P recently affirmed the company’s ratings after placing it on watch negative, which provides some comfort that the merged company is moving in the right direction. We recommend buying the 10.125% of 2012.

Debt Profile/ Capital Structure The merger was completed through the issue of shares by Jefferson Smurfit Group, the payment of a cash consideration of around €300mn and a €75mn subordinated promissory note to Kappa’s shareholders. The final value of the cash and promissory note consideration will not be known until certain closing adjustments have been completed. JSG’s shareholders will own 58.3% of the merged entity while Kappa’s former shareholders own 41.7%.

Refinancing As part of the merger, the newly formed group will redeem the 10.625% Senior Subordinated Notes due 2009 and the 12.5% Senior Subordinated Discount Notes due 2009 issued by Kappa Beheer B.V. and both JSG’s and Kappa’s Senior Credit Facilities are being refinanced. On the other, the following debt related instruments will remain in place: the 11.5% Senior Notes due 2015 issued by JSG Holdings plc, the 9.625% and 10.125% Senior Notes due 2012 and the 7.75% Senior Subordinated Notes due 2015 issued by JSG Funding plc together with the Guaranteed Debentures due 2025 issued by Smurfit Capital Funding Ltd, the Receivables Securitisation Floating Rate Notes due 2011 issued by Smurfit Receivables plc and other certain local debt.

Merger Financing Costs related with the merger (incl. cash considerations, refinancing of the JSG and Kappa Notes, related expenses) have been financed by way of a new Senior Credit Facility. The new Senior Credit Facility comprises a drawn amount of ca. €2,930mn. The new Facility is comprised of a €500mn amortising A Tranche maturing 2012, a €1,1215mn B Tranche maturing 2013 and a €1,215mn C Tranche maturing 2014. Furthermore, Smurfit Kappa Group has committed undrawn facilities of €875mn, including a €600mn Revolving Credit Facility.

BNP Paribas has currently a participation in the share capital of Smurfit SISA of more than 1%.

344 European High Yield Research Smurfit Kappa Group⎪ January 2006

Jefferson Smurfit Structure (excl. Kappa Packaging)*

Shareholders

JSG Packaging Limited (“parent”) Intercompany loan(10) JSG Holdings plc €325mn 11.5% senior PIK notes due 2015(1) (“JSG Holdings”)

Jefferson Smurfit Group Limited (2) Arlonberg Limited (“JSL”) and Subsidiaries (“newcos”) €350mn 10.125% senior notes due 2012 $750mn 9.625% senior notes due 2012 JSG Funding plc €218mn 7.75% senior subordinated notes Subordinated Newco credit facility (2) (“issuer” or “JSG Funding”) guarantees €0mn $200mn 7.75% senior subordinated notes of 9.625% 15.5% subordinated notes due 2013(5) senior notes due 2012 and 10.125% Senior Credit Facility Borrowings(7): senior notes €24mn tranche A term loan due 2012 JSG Acquisitions €349mn tranche B term loan (2)(3) (“JSG Acquisitions”) €353mn tranche C term loan

€8mn loan notes(8)

Smurfit Packaging Corporation Limited (“JSG”)(2)(3)(4)

€537mn of Other Holding Companies and Operating Subsidiaries(2)(3)(4) other indebtedness (net of cash)(9)

1. Concurrently with the completion of this offering of notes, JSG Holdings intends to complete the offering of the PIK notes. As of September 30, 2004, on a pro forma basis giving effect to the refinancing transactions, the Munksjö Specialties Disposal, the JSG Holdings offering and the application of the net proceeds therefrom, JSG Holdings and its consolidated subsidiaries would have had outstanding indebtedness of €3,154mn. 2. Guarantors under the senior credit facility, JSL and JSG Funding have also provided a first priority security interest over all their tangible and intangible assets (other than the intercompany loan) to the lenders under the senior credit facility. 3. Borrowers under the senior credit facility. 4. In addition to JSL, JSG Funding and JSG Acquisitions, certain of our operating subsidiaries are guarantors of the senior credit facility. 5. Includes original issuance of €100mn of existing 15.5% subordinated notes and $150mn of existing 15.5% subordinated notes plus approximately €40.7mn and $61.1mn, respectively, of existing 15.5% subordinated notes issued as interest payments. On January 13, 2005, we commenced a tender offer to purchase for cash all outstanding existing 15.5% subordinated notes, and we expect the tender to result in our purchase of substantially all of these notes. We intend to redeem all the existing 15.5% subordinated notes not tendered pursuant to the tender offer in accordance with the terms of the indentures governing the existing 15.5% subordinated notes. 6. Upon completion of the tender offer, the intercompany loans will be equal to principal amount of 9.625% senior notes due 2012, 10.125% senior notes due 2012, any remaining 15.5% subordinated notes due 2013 and the notes offered hereby. 7. JSG had approximately €425mn of additional borrowing availability under the revolving credit facility and approximately €187mn of additional borrowing availability under term loans as of September 30, 2004. 8. As part of the JSG Acquisition, certain shareholders of JSG were able to elect to receive some or all of their consideration in the form of a loan note. 9. Includes indebtedness under our 6.75% notes due 2005, 7.50% debentures due 2025, certain local bank borrowing, capital lease obligation, bank overdrafts and securitization notes. 10. The intercompany loan will be equal to the principal amount of the PIK notes.

Source – Jefferson Smurfit *A new structure of the merged entity has so far not been provided.

345 European High Yield Research Smurfit Kappa Group⎪ January 2006

Bond Covenants

EUR 349mn 10.125% Senior Notes 2012

EUR 218mn & USD 200mn 7.75% Senior Subordinated Notes 2015 Bond description EUR Senior Notes 10.125% EUR & USD Senior Sub Notes 7.75% Issuing entity MDP Acquisitions plc. JSG Funding plc. Ranking Senior Notes Senior Subordinated Notes Position vs. bank debt Structurally subordinated Structurally subordinated Position vs. other bonds Pari passu Subordinated Security/Guarantees No subsidiary guarantees No subsidiary guarantees ! Up to October 1, 2007, the company ! Up to January 31, 2008, the company can redeem all the notes at a can redeem up to 35% of EUR and redemption price of 100% plus USD Notes at a redemption price of applicable premium. 107.75% ! Call Schedule: ! Call Schedule: Optional Redemption 01 Oct 2007 - 105.063% 01 Jan 2010 - 103.875% 01 Oct 2008 - 103.375% 01 Jan 2011 - 102.583% 01 Oct 2009- -101.688% 01 Jan 2012 - 101.212% 01 Oct 2010 and thereafter - 100.000% 01 Jan 2013 and thereafter - 100.000% Change of control Put at 101% plus accrued and unpaid interest and certain other amounts. Tax redemption Yes, at par plus accrued and unpaid interest. Negative pledge Yes Yes Cross default Yes Yes Fall away covenants Not applicable Not applicable Anti-layering Not applicable Yes Company cannot sell assets unless, receives at least fair market value, as determined in good faith by the board of directors, and at least receives at least 75% in cash or equivalents or replacement assets. Proceeds must be used within a year to pay down debt, Asset sales fund capex or ourchase similar assets. Any excess proceeds above €25mn will be used to offer to repurchase notes and other indebtedness that is pari passu. Restricted use of asset swaps. Source – Jefferson Smurfit, BNP Paribas

346 European High Yield Research Smurfit Kappa Group⎪ January 2006

Bond Covenants Bond description EUR Senior Notes 10.125% EUR & USD Senior Sub Notes 7.75% Debt is permitted if after giving pro forma thereto, the consolidated coverage ratio would equal to or greater than 2.0x to 1.0x and no default or event of default will be triggered. Carve outs: ! Indebtedness not to exceed €2.525mn less the outstanding amount of specified existing indebtedness and less the aggregate amount of all net proceeds of assets sale. Debt Limit ! Capital lease obligations, mortgage financing or purchase money obligations of up to 3.5% of total assets as of the date of incurrence and €50mn at any time outstanding. ! Indebtedness by restricted subsidiary or other foreign subsidiary not to exceed €50mn in aggregate. ! Incurrence of additional indebtedness in an aggregate principal amount, incl. all permitted refinancing indebtedness, not to exceed €150mn. If company can raise €1 of debt then 50% net income less 100% net loss plus 100% of equity proceeds. Carve outs: Restricted Payments ! Dividends if allowed under covenants; ! The purchase or redemption of any capital stock or subordinated obligations; ! In default or event of default to continue restricted payments in an aggregate amount not to exceed €35mn. Must be done on an arm’s length basis with a resolution of the board of Directors for Transactions with Affiliates transactions in excess of €10mn or if in excess of €25mn an independent appraisal is required. Source – Jefferson Smurfit, BNP Paribas

347 European High Yield Research Jefferson Smurfit ⎪ January 2006

Kappa’s Financials EUR mn 2003 Q1 04 Q2 04 Q3 04 Q4 04 2004 Q1 05 Q2 05 Q3 05 Q4 05 2005 2006 2007 Sales 2,841.7 702.1 717.2 693.9 673.0 2,786.2 669.9 729.7 700.1 671.7 2,771.4 2,632.8 2,672.3 Net change in WIP & finished goods (10.0) 8.8 (1.8) (2.5) 4.1 8.6 20.7 (1.7) (9.4) (5.0) 4.6 5.0 5.0 Total group sales 2,831.7 710.9 715.4 691.4 677.1 2,794.8 690.6 728.0 690.7 666.7 2,776.0 2,637.8 2,677.3 Raw materials (1,003.7) (252.6) (255.7) (245.7) (246.6) (1,000.6) (242.9) (267.1) (250.8) (246.1) (1,006.9) (946.5) (960.7) External services (524.8) (135.4) (131.9) (131.9) (130.2) (529.4) (141.4) (145.2) (144.9) (129.9) (561.4) (490.2) (497.6) Gross profit 1,303.2 322.9 327.8 313.8 300.3 1,264.8 306.3 315.7 295.0 290.6 1,207.6 1,201.0 1,219.0 Labor costs (702.6) (171.1) (176.0) (169.0) (174.7) (690.8) (174.0) (177.8) (172.4) (176.4) (700.6) (658.6) (668.5) Depreciation and amortisation (210.3) (47.8) (48.7) (55.1) (55.0) (206.6) (49.7) (46.2) (47.5) (56.6) (200.0) (195.2) (198.2) Other operating costs (183.3) (43.6) (46.4) (45.2) (47.2) (182.4) (44.2) (32.1) (43.0) (45.0) (164.3) (162.0) (164.4) Operating result 207.0 60.4 56.7 44.5 23.4 185.0 38.4 59.6 32.1 12.6 142.7 185.2 187.9 Net financial items (237.8) (58.3) (59.1) (55.4) (57.4) (230.2) (55.9) (58.3) (55.0) (57.0) (226.2) (135.9) (174.3) Result before taxation (30.8) 2.1 (2.4) (10.9) (34.0) (45.2) (17.5) 1.3 (22.9) (44.4) (83.5) 49.3 13.6 Taxation 6.5 (4.9) (3.2) 4.4 (30.2) (33.9) (2.9) (6.7) (2.9) (3.0) (15.5) (32.0) (32.4) Income from participations 0.4 0.1 0.1 0.1 (0.5) (0.2) 0.5 0.1 0.0 0.0 0.6 (0.2) 0.4 Minority interests (0.1) 0.0 0.0 0.0 (0.1) (0.1) 0.0 0.1 0.0 0.0 0.1 (0.1) (0.1) Net result (24.0) (2.7) (5.5) (6.4) (64.8) (79.4) (19.9) (5.2) (25.8) (47.4) (98.3) 16.9 (18.5)

EBITDA reconciliation Operating result 207.0 60.4 56.7 44.5 23.4 185.0 38.4 59.6 32.1 12.6 142.7 185.2 187.9 Depreciation and amortisation (210.3) (47.8) (48.7) (55.1) (55.0) (206.6) (49.7) (46.2) (47.5) (56.6) (200.0) (195.2) (198.2) Exceptional items 24.0 0.0 4.1 0.6 9.8 14.5 0.0 (6.5) 4.0 0.0 (2.5) 0.0 0.0 EBITDA before exceptional items 441.3 108.2 109.5 100.2 88.2 406.1 88.1 99.3 83.6 69.2 340.2 380.4 386.1 EBITDA Margin 15.6% 15.2% 15.3% 14.5% 13.0% 14.5% 12.8% 13.6% 12.1% 10.4% 12.3% 14.4% 14.4% Gross margin 46.0% 45.4% 45.8% 45.4% 44.4% 45.3% 44.4% 43.4% 42.7% 43.6% 43.5% 45.5% 45.5%

CAPEX (141.4) (22.9) (35.6) (29.9) (60.7) (149.1) (51.9) (46.6) (35.3) (30.0) (163.8) (141.2) (133.7) Income tax (15.6) (3.0) (1.2) (3.8) (3.1) (11.1) (3.2) (0.9) (1.7) (3.0) (8.8) (10.5) (14.7) Cash interest (152.4) (29.6) (40.7) (29.6) (39.1) (139.0) (38.1) (37.8) (44.5) (38.0) (158.4) (131.6) (144.1)

End Cash 131.9 52.7 32.0 36.9 (14.7) 106.9 (5.1) 14.0 2.1 (1.8) 9.2 97.2 93.5

Debt information Cash & Equivalents 240.7 226.5 169.4 208.9 244.6 244.6 101.5 80.1 66.7 68.8 75.9 173.0 266.6 Total debt 2,002.7 2,007.6 1,944.5 1,937.0 1,876.6 1,876.6 1,866.6 1,798.6 1,796.0 2,084.1 2,084.1 2,084.1 2,084.1 Net debt 1762.0 1781.1 1775.1 1728.1 1632.0 1632.0 1765.1 1718.5 1729.3 2015.3 2008.2 1911.1 1817.5 Total debt / LTM EBITDA 4.5x 4.6x 4.5x 4.6x 4.6x 4.6x 4.8x 4.8x 5.0x 6.1x 6.1x 5.5x 5.4x Net debt / LTM EBITDA 4.0x 4.1x 4.1x 4.1x 4.0x 4.0x 4.6x 4.6x 4.8x 5.9x 5.9x 5.0x 4.7x EBITDA / FCC 2.9x 3.7x 2.7x 3.4x 2.3x 2.9x 2.3x 2.6x 1.9x 1.8x 2.1x 2.9x 2.7x Source – BNP Paribas, Kappa

348 European High Yield Research Jefferson Smurfit ⎪ January 2006

JSG’s Financials EUR mn 2003 Q1 04 Q2 04 Q3 04 Q4 04 2004 Q1 05 Q2 05 Q3 05 Q4 05 2005 2006 2007 Sales continuing operations 4,159.2 1,199.9 1,226.2 1,186.3 1,071.9 4,293.5 1,040.1 1,085.1 1,045.3 1,069.8 4,240.3 3,604.3 3,712.4 Sales discontinued operations 587.1 120.7 511.5 11.5 11.5 0.0 0.0 0.0 0.0 0.0 Total group sales 4,746.3 1,199.9 1,226.2 1,186.3 1,192.6 4,805.1 1,051.6 1,096.6 1,045.3 1,069.8 4,263.4 3,604.3 3,784.5 Cost of sales (3,419.8) (870.2) (877.6) (864.0) (861.5) (3,473.3) (763.2) (793.1) (761.3) (772.8) (3,090.4) (2,565.0) (2,642.0) Gross profit 1,326.5 329.8 348.6 322.3 331.1 1,331.8 288.4 303.5 284.0 297.0 1,172.9 1,039.2 1,142.5 Net operating expenses (982.3) (261.9) (264.0) (249.1) (235.5) (1,010.6) (240.8) (234.9) (233.4) (211.3) (920.4) (750.4) (780.8) Reorganisation and restructuring costs (35.0) 0.0 (5.7) (3.0) (30.8) (39.4) (9.6) (2.2) (1.8) (2.0) (15.6) 0.0 0.0 Operating profit subsidiaries 309.1 67.8 78.9 70.2 64.8 281.8 38.0 66.4 48.8 83.7 237.0 288.8 361.7 Share of associates' operating profit 12.2 2.7 3.4 3.0 3.6 12.6 1.1 2.4 1.4 1.4 6.3 5.0 5.0 Total operating profit 321.3 70.5 82.3 73.3 68.4 294.4 39.1 68.9 50.2 85.1 243.3 293.8 366.7 Profit on sale of assets 5.6 0.0 15.1 0.0 7.1 22.2 37.0 8.4 1.2 0.0 46.5 0.0 0.0 Interest income 11.6 3.2 8.3 3.6 3.1 4.9 1.2 12.9 8.6 12.8 Interest expense (309.4) (69.8) (72.6) (71.1) (80.8) (299.3) (66.4) (59.8) (56.9) (54.8) (237.9) (232.3) (232.3) Loss from early extinguishment of debt (76.4) (4.0) 0.0 0.0 (80.4) 0.0 0.0 Share of associates' net interest (2.1) (0.1) (0.4) (0.5) (0.3) (1.3) (0.2) (0.3) (0.3) (0.3) (1.1) (0.3) 0.0 Total net interest (299.8) (69.9) (73.0) (71.5) (77.9) (292.3) (139.4) (61.1) (52.2) (53.9) (306.6) (232.6) (219.5) Other financial expense (15.3) (4.0) (3.9) (3.8) (4.0) (15.7) (3.3) (3.2) (3.2) (3.2) (12.9) (13.0) (13.0) Profit/ Loss before taxation 11.8 (3.4) 20.4 (2.0) (6.4) 8.6 (66.7) 13.0 (4.0) 28.0 (29.8) 48.2 134.3 Group taxation (59.3) (19.8) (2.9) (4.4) 2.7 (24.4) (8.9) (10.0) (7.8) (8.4) (35.1) (29.8) (30.7) Share of associates taxation (3.1) 0.1 (1.0) (0.8) (0.9) (2.6) 0.0 (0.6) (0.5) (0.1) (1.2) (1.1) (1.1) Profit/ Loss after taxation (50.6) (23.1) 16.6 (7.3) (4.6) (18.4) (75.7) 2.3 (12.3) 19.5 (66.1) 17.2 102.4 Equity minority interests (16.8) (3.7) (3.4) (4.0) (5.0) (16.1) (1.7) (3.7) (4.1) (3.1) (12.5) (13.5) (13.9) Retained profit/ Net loss (67.3) (26.8) 13.2 (11.3) (9.6) (34.5) (77.3) (1.3) (16.4) 16.4 (78.6) 3.8 88.5 EBITDA reconciliation Retained profit/ Net loss (67.3) (26.8) 13.2 (11.3) (9.6) (34.5) (77.3) (1.3) (16.4) 16.4 (78.6) 3.8 88.5 Equity minority interests (16.8) (3.7) (3.4) (4.0) (5.0) (16.1) (1.7) (3.7) (4.1) (3.1) (12.5) (13.5) (13.9) Taxation (62.4) (19.7) (3.9) (5.2) 1.8 (27.0) (8.9) (10.6) (8.3) (8.4) (36.3) (30.9) (31.8) Share of associates' operating profit 12.2 2.7 3.4 3.0 3.6 12.6 1.1 2.4 1.4 1.4 6.3 5.0 5.0 Profit on sale of assets 5.6 0.0 15.1 0.0 7.1 22.2 37.0 8.4 1.2 0.0 46.5 0.0 0.0 Reorganisation and restructuring costs (35.0) 0.0 (5.7) (3.0) (30.8) (39.4) (9.6) (2.2) (1.8) (2.0) (15.6) 0.0 0.0 Total net interest (299.8) (69.9) (73.0) (71.5) (77.9) (292.3) (139.4) (61.1) (52.2) (53.9) (306.6) (232.6) (219.5) Depreciation, depletion & amortisation (298.0) (78.2) (77.7) (76.5) (68.1) (300.5) (64.3) (63.9) (65.2) (65.2) (258.7) (218.7) (229.6) EBITDA before exceptional items 626.9 142.0 158.4 146.0 159.7 606.0 108.6 129.3 112.6 147.7 498.2 494.5 578.3 EBITDA margin 13.2% 11.8% 12.9% 12.3% 13.4% 12.6% 10.3% 11.8% 10.8% 13.8% 11.7% 13.7% 15.3% Gross margin 27.9% 27.5% 28.4% 27.2% 27.8% 27.7% 27.4% 27.7% 27.2% 27.8% 27.5% 28.8% 30.2%

CAPEX (207.0) (39.0) (42.0) (60.0) (65.0) (206.0) (38.0) (45.0) (33.0) (75.0) (191.0) (164.0) (172.2) Income tax (59.0) (19.0) (4.0) 3.0 (17.0) (37.0) (14.0) (6.0) (13.0) (10.0) (43.0) (50.0) (50.0) Cash interest (250.4) (56.8) (58.4) (57.3) (58.8) (231.3) (34.4) (51.8) (53.9) (50.0) (190.1) (175.0) (170.4)

End Cash 110.5 27.1 53.9 31.7 18.9 131.7 22.2 26.5 12.7 12.7 74.2 105.5 185.7

Debt Information Cash & Equivalents 179.1 161.4 170.2 201.2 248.0 248.0 207.3 131.1 141.1 153.8 215.2 320.7 506.4 Total debt 3,280.1 3,279.4 3,244.2 3,192.2 3,161.0 3,161.0 2,828.3 2,630.1 2,581.1 2,581.1 2,581.1 2,581.1 2,581.1 Net debt 3101.0 3118.0 3074.0 2991.0 2913.0 2913.0 2621.0 2499.0 2440.0 2427.3 2365.8 2260.4 2074.7 Total debt / LTM EBITDA 5.2x 5.3x 5.4x 5.3x 5.2x 5.2x 4.9x 4.8x 5.1x 5.2x 5.2x 5.2x 4.5x Total net debt / LTM EBITDA 4.9x 5.1x 5.2x 5.0x 4.8x 4.8x 4.6x 4.6x 4.8x 4.9x 4.7x 4.6x 3.6x EBITDA / FCC 2.5x 2.5x 2.7x 2.5x 2.7x 2.6x 3.2x 2.5x 2.1x 3.0x 2.6x 2.8x 3.4x Source – BNP Paribas, JSG

Pro Forma Smurfit Kappa Group EUR mn 2003 Q1 04 Q2 04 Q3 04 Q4 04 2004 Q1 05 Q2 05 Q3 05 Q4 05 2005 2006 2007 Sales 7,578.0 1,910.8 1,941.6 1,877.7 1,869.7 7,599.9 1,742.2 1,824.6 1,736.0 1,736.4 7,039.3 6,242.1 6,461.8 Gross profit 2,629.7 652.7 676.4 636.1 631.4 2,596.6 594.7 619.2 579.0 587.6 2,380.6 2,240.3 2,361.5 EBITDA 1,068.2 250.2 267.9 246.2 247.9 1,012.1 196.7 228.6 196.2 216.9 838.4 874.9 964.4

Gross margin 34.7% 34.2% 34.8% 33.9% 33.8% 34.2% 34.1% 33.9% 33.4% 33.8% 33.8% 35.9% 36.5% EBITDA margin 14.1% 13.1% 13.8% 13.1% 13.3% 13.3% 11.3% 12.5% 11.3% 12.5% 11.9% 14.0% 14.9%

CAPEX (348.4) (61.9) (77.6) (89.9) (125.7) (355.1) (89.9) (91.6) (68.3) (105.0) (354.8) (305.2) (305.9) Income tax (74.6) (22.0) (5.2) (0.8) (20.1) (48.1) (17.2) (6.9) (14.7) (13.0) (51.8) (60.5) (64.7) Cash interest (402.8) (86.4) (99.1) (86.9) (97.9) (370.3) (72.5) (89.6) (98.4) (88.0) (348.5) (306.6) (314.5)

End Cash 242.4 79.8 85.9 68.6 4.2 238.6 17.1 40.5 14.8 10.9 83.3 202.6 279.2

Consolidated Debt Information Cash & Equivalents 419.8 387.9 339.6 410.1 492.6 492.7 308.8 211.2 207.8 222.6 291.1 493.7 773.0 Total debt 5,282.8 5,287.0 5,188.7 5,129.2 5,037.6 5,037.6 4,694.9 4,428.7 4,377.1 4,665.2 4,665.2 4,665.2 4,665.2 Net debt 4,863.0 4,899.1 4,849.1 4,719.1 4,545.0 4,545.0 4,386.1 4,217.5 4,169.3 4,442.6 4,374.1 4,171.4 3,892.2 Total debt / LTM EBITDA 4.9x 5.1x 5.1x 5.0x 5.0x 5.0x 4.9x 4.8x 5.0x 5.6x 5.6x 5.3x 4.8x Total net debt / LTM EBITDA 4.6x 4.7x 4.7x 4.6x 4.5x 4.5x 4.6x 4.6x 4.8x 5.3x 5.2x 4.8x 4.0x EBITDA / FCC 2.7x 2.9x 2.7x 2.8x 2.5x 2.7x 2.7x 2.6x 2.0x 2.5x 2.5x 2.9x 3.1x Source – BNP Paribas, Kappa & JSG

349 European High Yield Research Sol Melia ⎪ January 2006

Oleksiy Soroka, CFA +44 20 7595 4878 [email protected] Sol Melia

Bond Description & Market Data, as of 5 January 2006 Next Call Issuer Credit Trend: Stable Description Amount (o/s) Ratings Date Price Price YTW STW 6.25% notes due 2006 EUR 340mn NR/BB NC NC 100.30 2.59% 17bp Source – BNP Paribas

Company Profile Sol Melia is an international hotel group headquartered in Palma de Majorca, Spain. As of 30 September 2005, the company ran 328 hotels in 27 countries. As of that date, Sol Melia owned 90 of those hotels. The company is the leading hotel operator in Spain, Latin America and the Caribbean and one of the largest hotel companies in Europe. Sol Melia is also the largest resort hotel operator in the world. The company’s main brand names include Sol Hotels, Melia Hotels, Paradisus Resorts and Tryp. Sol Melia acquired Tryp in 2000 for €300mn. Sol Melia has three main divisions: European cities, European Resorts and Latin America. The company has a very strong presence in Spain, its home market, and a wide hotel and resort network in continental Europe, the Mediterranean, the Caribbean and in Latin America. The Escarrer family owns approximately 60% of Sol Melia’s equity, with the rest of it in free float (the stock is listed on the Madrid Stock Exchange). The group was founded in 1956 when Gabriel Escarrer Julia opened his first hotel in Palma de Majorca, Spain. In the twelve months ended 30 September 2005, Sol Melia had revenues of €1,116mn and EBITDA of €276mn. As of the end of first half 2005, the company had lease-adjusted leverage of 4.9x.

Investment Recommendation We maintain our REDUCE/Stable Credit Trend for Sol Melia’s bonds. The bonds should be repaid in February 2006, therefore, they are currently trading to maturity. With regards to the company’s credit default swaps (CDS), we do not anticipate that they will widen substantially from the current levels. We think that the current very tight CDS valuations are underpinned by the substantial value of the real estate owned by Sol Meila, which more than covers the company’s balance sheet indebtedness. Therefore, we think that Sol Melia’s CDS will be driven primarily by the market-wide movements in credit spreads. In terms of its operating performance, the company had consistent and positive results for the first three quarters of 2005. We expect that Sol Melia will also fare reasonably well in 2006. Therefore, our REDUCE recommendation is motivated primarily by the current valuations of the company’s bonds and CDS. Debt Profile As of 30 June 2005, Sol Melia had total balance sheet debt of €1,158mn (presented under the Spanish GAAP), which included €340mn outstanding under the EMTN programme (plus accrued interest), €150mn of convertible bonds, €112mn of other short-term loans and €547mn of other long-term loans. At the end of first half 2005, when calculated under the IFRS, Sol Melia’s net balance sheet debt was €1,057mn.

In December 2004, Sol Melia signed a syndicated credit facility for €175mn. The facility has a 5-year maturity and has an interest of EURIBOR plus 0.6% to 1.0%, depending on the basket of financial ratios. The purpose of the facility is to partially refinance the €340mn of bonds maturing in February 2006..

In addition, Sol Melia has outstanding €150mn of 4.3% convertible bonds due 2008. The notes are issued by Sol Melia Europe B.V. and are guaranteed on an unsecured unsubordinated basis by Sol Melia, S.A. These bonds are pari passu with the 6.25% notes due 2006.

350 European High Yield Research Sol Melia ⎪ January 2006

Sol Melia, Financial Model BNPP BNPP EUR mn Actual Actual Actual Actual Actual Actual Actual Actual F'cast F'cast FYE 31 Dec FY 01 FY 02 FY 03 Q1 04 Q204 Q304 Q404 FY 04 FY 05 FY 06 P&L SUMMARY Hotel Revenues 902.2 899.1 869.2 890.1 194.2 232.3 281.8 209.9 918.2 939.1 % change -0.3% -3.3% 2.4% 2.5% 2.1% 2.5% 5.9% 3.2% 2.3% Management Fees 40.1 40.4 39.0 42.9 43.1 12.0 39.1 20.0 114.2 117.6 % change 0.7% -3.5% 10.0% 326.7% 17.6% 198.5% 110.5% 5.0% 3.0% Other Revenues 74.0 70.7 79.6 105.7 24.9 25.9 23.0 38.2 112.0 117.6 % change -4.5% 12.6% 32.8% -14.4% 16.7% 0.9% 21.0% 6.0% 5.0% Total Revenue 1,016.3 1,010.5 987.8 1,038.7 262.2 270.2 343.9 268.2 1,144.5 1,174.4 % change -0.6% -2.2% 5.2% 14.7% 4.0% 10.6% 12.1% 10.2% 2.6%

Raw materials 129.6 127.6 119.5 133.0 34.3 31.5 40.5 35.6 141.9 143.9 % of sales 12.8% 12.6% 12.1% 12.8% 13.1% 11.7% 11.8% 13.3% 12.4% 12.3% Personnel expenses 327.8 326.6 322.2 334.0 80.0 93.4 94.7 86.7 354.8 364.1 % of sales 32.3% 32.3% 32.6% 32.2% 30.5% 34.6% 27.5% 32.3% 31.0% 31.0% Change in operating provisions 5.1 5.6 7.8 4.1 0.0 0.0 0.0 0.0 0.0 0.0 Rental expenses 57.7 67.5 63.8 67.6 11.7 16.9 17.5 13.8 59.9 60.0 Other operating expenses 254.8 249.9 252.1 266.8 65.3 76.8 78.6 71.1 291.8 299.5 % of sales 25.1% 24.7% 25.5% 25.7% 24.9% 28.4% 22.9% 26.5% 25.5% 25.5%

EBITDA 241.3 233.3 222.3 233.1 70.9 51.6 112.6 61.0 296.1 307.0 % of sales 23.7% 23.1% 22.5% 22.4% 27.0% 19.1% 32.7% 22.7% 25.9% 26.1% EBITDAR 299.0 300.8 286.1 300.8 82.6 68.5 130.1 74.7 355.9 367.0 % of sales 29.4% 29.8% 29.0% 29.0% 31.5% 25.4% 37.8% 27.9% 31.1% 31.3%

CASH FLOW ITEMS Operating cash flow before working capital 176 167 129 166 55 36 217 237 Cash effect from changes in working capital 7 -9 -7 0.0 0.0 0.0 0.0 0.0 Operating cash flow 197 132 120 166 55 36 217 237 Total capex -269 -181 -168 -77 -19 -19 -83 -90 Free cash flow -72 -49 -48 89 36 17 134 147

BALANCE SHEET ITEMS Cash and cash equivalents 179.8 133.6 245.2 122.9 101.5 157.1 209.6 Total debt 1,390.4 1,262.1 1,353.8 1,110.7 1,158.4 1,030.7 958.7 Net debt 1,210.9 1,131.3 1,108.6 987.8 1,056.9 873.6 749.1

CREDIT RATIOS EBITDA / Interest 3.7x 4.4x 3.9x 4.6x 5.1x 6.8x Net Debt / EBITDA 5.0x 4.9x 5.0x 4.2x 4.2x 3.0x 2.4x

EBITDAR / (Interest + Rentals) 2.4x 2.5x 1.9x 2.5x 3.0x 3.5x

Total debt + 8x Leases / EBITDAR 6.2x 6.0x 6.5x 5.5x 5.3x 4.2x 3.9x Net lease-adjusted debt (x8 rentals) / EBITDAR 5.6x 5.6x 5.7x 5.1x 4.9x 3.8x 3.3x Source – BNP Paribas Estimates, Sol Melia Leverage and Coverage are based on the last 12 months’ results. Some of the ratios are adjusted for the effects of acquisitions and disposals. In addition, these 2 measures are usually calculated based on EBITDA adjusted for exceptional or non-recurring items. Leverage is defined as net lease-adjusted debt (x8 operating leases)-to-EBITDAR. Coverage is defined as EBITDAR-to-(net interest+rental expenses).

351 European High Yield Research Tele Columbus ⎪ January 2006

Aizaz Shaikh +44 20 7595 8607 [email protected] Tele Columbus

Bond Description & Market Data, as of 05 January 2006 Next Call Issuer Credit Trend: Stable Description Amount (o/s) Ratings Date Price Price YTW STW

5.894% Float Nts due 2010 EUR 245mn B1/B 15-Apr-05 102.000 99 1/2 6.37% 388 bp 9.375% Sr Sub Nts due 2012 EUR 230mn B3/B- 15-Apr-08 104.688 104 8.24% 531 bp Source – BNP Paribas

Company Profile Tele Columbus is one of the largest Level 4 cable operators in Germany. In July 2005, Telecolumbus was acquired by Iesy/Ish (now renamed Unity Media) a major Level 3 cable operator in Western Germany. The integration of Tele Columbus into Iesy/Ish is still pending.

Tele Columbus provides cable television and radio services to approximately 2.6 million subscribers principally under exclusive agreements with housing associations. The company generally sources television and radio transmission signals either from Network Level 3 or through its own satellite head-ends and subsequently provides cable services directly to the premises of the company's subscribers. For the twelve months ended 30 September 2005, Tele Columbus generated sales of €269mn and EBITDA of €99mn. At the end of that period the company's net leverage was 5.6x on an LQA basis.

Investment Recommendation We have a BUY rating on the Telecolumbus floating rate notes and HOLD rating on the TeleColumbus fixed rate notes. While it is too early to determine the full impact of the proposed merger, we doubt that the fixed rate notes will be taken out via a make-whole call. The merger improved Tele Columbus’ operating story by mitigating the Level 4 risks, giving us some comfort with the underlying business platform. On the floating rate notes, our ratings are based on the contractual seniority and their shorter duration, given the likely call. While short call protection is ordinarily viewed negatively for bondholders, the likelihood that these bonds are refinanced in the near term should keep them anchored near their 102 call price, while providing good running yield. Credit trend is Stable.

Debt Profile The company's debt comprises a senior secured revolver, senior unsecured floating rate notes in the amount €245mn and €230mn in senior (unsecured) subordinated notes. The 9.375% senior subordinated notes are callable in 2008 (NC4); the floating rate notes pay interest quarterly at EURIBOR + 375bp and are callable in 2005 at 102 (NC1). Both bonds and the senior credit facility were issued by Telecolumbus AG, the holding company of Telecolumbus operating assets. The company is owned principally by BC Partners.

The company’s revolving credit facility consists of a €100mn facility, including €40mn of ancillary facilities to cover the day-to- day banking requirements of subsidiary companies including overdrafts, letters of credit, performance bonds and guarantees. Obligations under the Revolving Credit Facility are secured by a first ranking charge over the shares of the Issuer’s wholly- owned subsidiaries, by a first ranking charge over certain of its bank accounts and by an assignment of certain of its receivables. At 30 September 2005, the company had €68mn in bank funding drawn.

352 European High Yield Research Tele Columbus ⎪ January 2006

Tele Columbus Structure

Tele Columbus Kabel Holding GmbH

Finakabel Holding GmbH

€100 million Revolving Tele Columbus AG & Co. €245 million Senior FRN Credit Facility KG €230 million 9.375% Senior Subordinated Notes

Operating and Holding Company Subsidiaries

Source – Tele Columbus

353 European High Yield Research Tele Columbus ⎪ January 2006

Bond Covenants EUR 245mn Float Senior Notes 2010; EUR 230mn 9.375% Senior Subordinated Notes 2012 Bond description EUR Notes EUR Notes (Floating rate) Issuing entity Tele Columbus AG & Co KG Ranking Senior notes Senior Subordinated Notes Position vs. Bank debt Contractually Subordinated Position vs. Other bonds Senior Subordinated 1) The Floating Rate Notes will be unsecured, unsubordinated indebtedness. 2) The notes rank equally in right of payment with all unsecured, unsubordinated indebtedness of the Issuer.3) The notes Senior Subordinated will be senior in right of payment to all Security/guarantees subordinated indebtedness of the Issuer, including indebtedness represented by the Senior Subordinated Notes.4) The notes will be effectively junior to any secured indebtedness of the Issuer, including obligations under the New Revolving Credit Facility, to the extent of the assets securing such indebtedness. ! Make Whole – prior to 15 April 2005 at ! Equity Claw – prior to 15 April 2005 bunds+50bp max 35% of issue at par + coupon ! Equity Claw – prior to 15 April 2007 ! Call Schedule: max 35% of issue at par + coupon 15 April 2005 – 102.0% Optional redemption ! Call Schedule: 15 April 2006 – 101.0% 15 April 2008 – 104.688% 15 April 2007 – 100.0% 15 April 2009 – 102.344%

15 April 2010 – 100.000% Tax redemption Yes – at par Negative pledge Yes Cross default Yes Fall away covenants No Anti-layering Yes (Liens) Change of control Put at 101, 35%+ of voting power Yes - Must be fair market value; at least 75% of consideration in cash or cash equivalents Asset sales for 365 days, proceeds may be used: to repay senior indebtedness, to make investments/capex Debt is permitted up to 6x pro forma consolidated leverage or in case of an incurrence of Senior Leverage Ratio Debt then if the senior leverage ratio is equal or less than 3.5x. Carve outs: Debt limit ! Revolving credit facility can not exceed €100mn less permanent repayments and asset sale proceeds. ! CLOs, mortgage & purchase money obligations up to €15mn and 2.5% of total assets. ! General basket up to €30mn and 5% of total assets. If company can raise €1.00 of debt then 50% adjusted net income less 100% net loss. Carve outs: ! Payments of dividends following the covenant “Debt Limit”. ! Repurchase of dividend or make distribution to a parent up to less than €2.5mn in any Restricted payments calendar year – and the aggregate amount of restricted payments permitted pursuant to this clause in prior calendar years and €5.0mn. ! Dividends in any calendar year, up to 6% of aggregate net cash proceeds, from all public offerings. ! General basket up to €15mn. Limitation on affiliate transactions unless: (i) Transaction is not less favourable to the company or such restricted subsidiaries; (ii) transaction involves an aggregate consideration Transactions with affiliates in excess of €5mn, majority of the board of director is required; (iii) transaction involves an aggregate consideration in excess of €15mn, fairness opinion is needed. Not applicable: Sales or issuance of restricted subsidiaries stocks to the issuer or one its Limitation on capital stock of restricted subsidiaries; Sales or issuance to directors of capital stock of a restricted subsidiary to be subsidiaries Issuance and sales held by a third parties. Source – BNP Paribas, Tele Columbus

354 European High Yield Research Tele Columbus ⎪ January 2006

Tele Columbus, Financial Model FYE 31 December Historic Historic Historic Historic Historic Historic Historic Historic Historic Historic Proj’d Proj’d Proj’d EUR millions FY 02 FY 03 Q1 04 Q2 04 Q3 04 Q4 04 FY 04 Q1 05 Q2 05 Q3 05 FY 05 FY 06 FY 07 PROFIT & LOSS

Total Revenues 237 260 67 68 68 70 274 68 66 65 284 294 306 COGS -96 -112 -30 -31 -28 -30 -120 -30 -32 -22 -122 -127 -133 Gross profit 142 148 37 37 40 40 154 38 33 43 162 167 173 SG&A -29 -32 -8 -9 -8 -8 -32 -8 -8 -8 -33 -33 -34 Other expenses -29 -50 -5 -4 -5 -6 -21 -6 0 -11 -21 -24 -28 EBITDA 84 66 24 24 26 26 100 24 25 24 108 110 112 P&L Interest -15 -28 -10 -10 -10 -11 -40 -10 -10 -10 -45 -45 -45

Revenue growth y/y 10% 5% 1% -4% -4% 4% 3% 4% Gross margin 60% 57% 55% 54% 58% 57% 56% 56% 51% 66% 57% 57% 57% SG&A / sales 12% 12% 12% 13% 12% 11% 12% 12% 12% 13% 12% 11% 11% EBITDA margin 35% 25% 36% 36% 39% 36% 37% 35% 38% 37% 38% 38% 37%

CASH FLOW

Cash interest -15 -28 -5 -9 -4 -14 -31 -5 -15 -5 -45 -45 -45 Change in working capital -1 20 7 -30 -16 21 -18 -1 -7 -13 -20 -14 -13 Non-cash charges/ non recurring items -1 6 -1 -19 -5 -2 -26 -1 -1 -1 -5 0 0 Net cash provided by operating activities 61 58 23 -35 0 27 15 16 0 4 40 51 54

Capex -41 -74 -9 -9 -11 1 -28 0 -8 -5 -20 -30 -35 Investing cash flow -48 -288 -9 -9 -10 -9 -37 -11 -8 -2 -20 -30 -35

Increase / Decrease in LT Debt -2 264 4 196 0 0 200 -1 -1 -1 Increase / Decrease in Shareholders loans 4 -75 0 -168 0 0 -168 0 0 0 Financing activities -7 224 4 28 3 -17 18 5 1 -3 8 -3 -6

Change in Cash 5 -5 18 -16 -7 1 -4 10 -8 -2 28 18 13

BALANCE SHEET

Cash & equivalents 14 8 26 10 3 4 4 14 6 5 32 50 62

Bank Debt 71 86 61 61 66 67 68 70 68 64 Senior Notes (Floating Rate) 245 245 245 245 245 245 245 245 245 245 Senior Sub Notes 230 230 230 230 230 230 230 230 230 230 Total financial debt 74 335 536 546 561 536 536 541 542 543 545 543 539 Shareholder loans 154 168 0 0 0 1 1 1 0 0 0 0 0 Total Debt 228 503 536 546 561 537 537 542 542 543 545 543 539 Net Debt 214 495 510 536 558 532 532 528 536 539 513 493 477

RATIOS

Coverage Total Coverage 2.5x 2.7x 2.3x 2.5x 2.4x 2.6x 2.4x 2.4x 2.5x 2.5x EBITDA- Capex/Interest 1.5x 1.6x 2.4x 1.8x 2.4x 1.7x 1.9x 2.0x 1.8x 1.7x

Leverage Bank Leverage (gross) 0.7x 0.8x 0.6x 0.6x 0.7x 0.7x 0.7x 0.6x 0.6x 0.6x Senior Notes Leverage (gross) 3.3x 3.1x 3.0x 3.0x 3.2x 3.1x 3.2x 2.9x 2.8x 2.8x Total leverage (gross) 5.6x 5.8x 5.3x 5.3x 5.6x 5.4x 5.6x 5.0x 4.9x 4.8x Total leverage (net) 5.5x 5.3x 5.2x 5.3x 5.5x 5.3x 5.5x 4.7x 4.5x 4.3x Source – BNP Paribas Estimates, Tele Columbus

355 European High Yield Research Telenet ⎪ January 2006

Aizaz Shaikh +44 20 7595 8607 [email protected] Telenet

Bond Description & Market Data, as of 05 January 2006 Next Call Issuer Credit Trend: Positive Description Amount (o/s) Ratings Date Price Price YTW STW

9 % Sr Nts due 2013 EUR 500mn B2/B- 15-Dec-08 104.500 111 6.26% 334 bp 11.5 % Disc Nts due 2014 USD 363mn Caa1/CCC+ 15-Dec-08 105.750 79 1/2 10.06% 524 bp Source – BNP Paribas

Company Profile

Telenet is the largest cable TV operator in Belgium; the company's network passes roughly 95% of homes in Belgium. In its key Flanders region, roughly 94% of the homes connected by Telenet's network take TV service. The company had sales of €719mn and EBITDA of €324mn for the year ended 30 September 2005. Total net leverage was 3.9x and net cash pay leverage was 3.6x at 30 September 2005 at which time the company had 2.65 million customers, comprising 1.55 million cable TV subscribers, 340,000 telephony subscribers and 576,000 broadband internet subscribers.

Investment Recommendation We think it is only a matter of time till Liberty/UPC folds the business into UPC’s existing Benelux operations and Telenet’s capital structure into UPC. We are HOLD on the Telenet senior bonds and BUY on the zero coupon bonds, which remain mildly interesting after the IPO and clawback. Credit trend remains POSITIVE. Telenet provides safe haven within the cable sector, and so we expect steady performance from the seniors. The company may be slightly aggressive in rolling out (and therefore spending on) new services, but we are not anticipating the capex to be destabilising. The equity has traded badly (-20%) since the IPO, but we attribute this to a mispriced transaction rather than any company specific factors.

356 European High Yield Research Telenet ⎪ January 2006

Debt Profile The company's current outstanding debt was issued in December 2003 refinancing. The company issued €500mn 9% senior notes due 2013 and callable in 2008 (NC5) and $558mn 11.5% senior discount notes due 2014 and callable in 2008 (NC5). The discount notes, which were issued at 57% of the $558mn maturity value, accrete until 2008 and subsequently pay cash coupons until maturity; 35% of these notes were redeemed after Telenet’s IPO so roughly €210mn (accreted value) remain outstanding. The discount notes were issued by Telenet Group Holding NV, the holding company of the issuer of the senior notes, Telenet Communications NV. The senior notes are secured on a second lien basis by shares in Telenet Bidco, Telenet Operaties and MixtICS.

Senior Credit Facility The senior credit facility was raised at the level of Telenet Bidco and Telenet Operaties, the direct and indirect holders of companies owning Telenet operating assets including Telenet Operaties, Telenet Vlaanderen, MixtICS, Telenet Holding and Merrion Communications. The facility is secured by a first ranking pledge of shares and assets of material subsidiaries of Telenet Bidco. Of the outstanding amount of €635mn in senior credit facilities at 30 September 2005, tranches A and B are amortising term loans and have €219mn and €11mn outstanding, respectively. Tranche C and Tranche D, a €100mn revolving credit facility, do not have drawn amounts. Tranche E, a non-amortising term loan facility, currently has €405mn outstanding.

Amortisation Schedule Tranche A & Tranche B Repayment Dates Installment (EUR mn) 31 December 2005 12.4 31 March 2006 19.2 30 June 2006 24.0 30 September 2006 26.4 31 December 2006 26.4 31 March 2007 26.4 30 June 2007 26.4 30 September 2007 26.4 31 December 2007 26.4 31 March 2008 26.4 30 June 2008 26.4 30 September 2008 26.4 31 December 2008 26.4 31 March 2009 26.4 30 June 2009 26.4 30 September 2009 28.8 31 December 2009 28.8 Tranche C-2 Repayment Dates Installment (EUR mn) 30 June 2010 55.0 31 December 2010 55.0 Source - Telenet

357 European High Yield Research Telenet ⎪ January 2006

Telenet Structure

Senior Discount Telenet Group Guarantee of Notes Notes Holding NV Borrower/Guarantee under senior credit facility and guarantee of the Notes

Junior Subordinated Guarantee under senior credit facility only Telenet Senior Notes Parent Intercompany Loan Communications NV Borrower under the senior credit facility and MixICS Proceeds Loan and guarantor of the Operaties Proceeds Loan and of borrowings BIDCO Proceeds Loan by Telenet Operaties under the senior credit facility Existing Intercompany Loan Senior Credit Facility Telenet BIDCO NV

Operaties Telenet Holding NV Proceeds Loan

Telenet Operaties NV Telenet Vlaanderen

MixICS Proceeds Loan

MixtICS NV PayTVCo Codenet NV

Source – Telenet

358 European High Yield Research Telenet ⎪ January 2006

Bond Covenants

EUR 500mn 9.000% Senior Notes 2013 USD 363mn 11.500% Senior Discount Notes 2014

Bond description EUR Notes USD Notes Issuing entity Telenet Communications NV Ranking Senior notes Senior Discount Notes Position vs. Bank debt Structurally subordinated Position vs. Other bonds Structurally senior Structurally subordinated ! Telenet Group Holding will provide a full and unconditional senior guarantee of the Notes. ! Receivables arising under the Junior Subordinated Parent Intercompany Loan will be pledged on a first priority basis to secure Telenet Group Holding’s obligations under its Security/guarantees guarantee of the Notes. ! Receivables arising under the Bidco Proceeds Loan, Operaties Proceeds Loan and MixtICS Proceeds Loan will be pledged to secure the Notes on a second priority basis. ! Shares of Telenet Bidco, Telenet Operaties and MixtICS will be pledged to secure the Notes on a second priority basis. ! Make Whole – prior to 15 December ! Equity Claw – prior to 15 December 2008 at bunds+50bp 2006 max 35% of issue at par + ! Equity Claw – prior to 15 December coupon 2006 max 35% of issue at par + ! Call Schedule: coupon 15 December 2008 – 105.750% Optional redemption ! Call Schedule: 15 December 2009 – 103.833% 15 December 2008 – 104.5% 15 December 2010 – 101.917% 15 December 2009 – 103.0% 15 December 2011 – 100.000% 15 December 2010 – 101.5% 15 December 2011 – 100.0% Change of control Put at 101, 50%+ of voting power Tax redemption Yes – at par Negative pledge Yes Cross default Yes Fall away covenants No Anti-layering Yes Yes - Must be fair market value; at least 75% of consideration in cash or cash equivalents Asset sales for 365 days, proceeds may be used: to repay senior indebtedness, to make investments/capex Debt is permitted up to 6.0x Leverage Ratio Debt is permitted up to 7.0x Leverage Ratio (Total Debt on a consolidated basis over (Total Debt on a consolidated basis over Pro forma EBITDA annualized). Pro forma EBITDA annualized). Carve outs: Carve outs: Debt limit ! Credit facility can not exceed €880mn ! Credit facility can not exceed €880mn less. less. ! CLOs, mortgage & purchase money ! CLOs, mortgage & purchase money obligations up to €50mn. obligations up to €50mn. ! General basket up to €50mn. ! General basket up to €50mn. Source – BNP Paribas, Telenet

359 European High Yield Research Telenet ⎪ January 2006

Bond Covenants

EUR 500mn 9.000% Senior Notes 2013 USD 558mn 11.500% Senior Discount Notes 2014 Bond description EUR Notes USD Notes If company can raise €1.00 of debt then 50% net income less 100% net loss. Carve outs: ! Payments of dividends following the covenant “Debt Limit”. ! Repurchase, purchase, redeem, retire any capital stock. Restricted payments ! Dividends in any calendar year, up to 6% of aggregate net cash proceeds, from all public offerings. ! Dividends with connection to advisory or consulting up to €5mn a calendar year. ! General basket up to €25mn. Limitation on affiliate transactions unless: ! Transaction is not less favourable to the company or such restricted subsidiaries; ! Transaction involves an aggregate consideration in excess of €10mn, majority of the Transactions with Affiliates board of director is required; ! Transaction involves an aggregate consideration in excess of €25mn, fairness opinion must be provided by an independent financial advisor.

Limitation on Liens No Carve out No sale or other disposal of any share of capital stocks except: Limitation on the sale or Issuance of ! To the issuer or another restricted subsidiaries; Capital Stock of restricted subsidiaries ! The issuance and sale to a director of such restricted subsidiary.

Source – BNP Paribas, Telenet

360 European High Yield Research Telenet ⎪ January 2006

Telenet, Financial Model FYE 31 December Historic Historic Historic Historic Historic Historic Historic Historic Historic Historic Proj'd Proj'd Proj'd EUR mn FY 02 FY 03 Q1 04 Q2 04 Q3 04 Q4 04 FY 04 Q1 05 Q2 05 Q3 05 FY 05 FY 06 FY 07 PROFIT & LOSS Sales 307 502 166 169 171 175 681 177 182 185 715 751 788 250.7 - 289.1 - sequential change % 67.0% 2.1% 0.7% 2.5% % 74.0% 2.4% 2.1% Operating costs -133 -164 -60 -59 -61 -67 -248 -64 -63 -71 -250 -263 -276 Operating costs / Sales 43.3% 32.7% 36.3% 35.0% 36.0% 38.1% 36.4% 35.9% 34.5% 38.2% 35.0% 35.0% 35.0% SG&A -91 -108 -35 -29 -35 -35 -134 -31 -31 -34 -129 -135 -142 SG&A / Sales 29.8% 21.5% 21.0% 17.2% 20.3% 20.0% 19.6% 17.5% 17.3% 18.3% 18.0% 18.0% 18.0%

EBITDA 83 230 71 81 75 73 300 83 87 81 336 353 371 EBITDA margin 26.9% 45.8% 42.6% 47.8% 43.7% 41.8% 44.0% 46.6% 48.2% 43.5% 47.0% 47.0% 47.0%

D&A -146 -513 -47 -49 -48 -51 -195 -46 -47 -48 EBIT -63 -283 24 31 27 23 105 36 40 33

Interest, net -134 -172 -57 -26 -36 -38 -157 -44 -37 -34 FX, net 1 -24 -1 -9 7 -2 -5 -12 -4 -1 Other 129 0 0 0 1 1 2 3 4

EBT -197 -479 -34 -3 -2 -17 -57 -20 -1 -3

CASH FLOW Cash interest -46 -91 -46 -15 -25 -28 -25 -23 -89 -85 -81

Chg in working capital 11 21 -13 2 6 -14 Other -36 -60 0 3 -1 Operating cash flow 11 99 57 52 43 151 223 42 68 63 233 268 290

Capex -55 -85 -22 -30 -29 -29 -36 -36 -145 -170 -190 Acquisitions & Disposals -403 -43 -5 -1 -1 -2 -1 -11 -20 Investing cash flow -458 -128 -26 -31 -29 -86 -141 -30 -37 -47 -125 -170 -190

Free cash flow -43 14 35 22 14 223 13 31 27 88 98 100 Financing cash flow 455 181 -104 -2 1 -106 -107 -110 -3 0 -124 -56 -55

Change in cash 8 153 -74 19 14 -41 -26 -98 28 16 -16 42 45

Cash beginning 10 18 171 97 116 130 171 145 47 74 145 129 171 Cash & equivalents end 18 171 97 116 130 89 145 47 74 90 129 171 216

BALANCE SHEET

€1.25bn Bank facilities 910 840 740 740 740 740 740 635 635 635 616 560 505 Tranche A: €825m EB+3.25% '09 825 409 314 314 314 314 314 219 219 219 200 150 100 Tranche B: €125m EB+3.25% '09 25 21 16 16 16 16 16 11 11 11 11 5 0 Tranche C1 & C2 60 110 110 110 110 110 110 0 0 0 Tranche E: €300m 300 300 300 300 300 300 405 405 405 405 405 405 High Yield Bonds 756 771 779 781 781 781 784 813 824 716 741 770 Senior Notes 500 500 500 500 500 500 500 500 500 500 500 501 Senior Discount Notes 256 271 279 281 281 281 284 313 324 216 241 269 Other Debt 462 Clientele Fee 30 42 45 44 44 44 44 44 42 42 40 40 41 Annuity Fee 30 49 57 45 59 78 78 54 54 54 52 52 53 Capital lease obligations 27 28 28 28 28 28 28 27 27 27 25 25 26 Other cash pay Debt 549 119 130 117 130 149 149 125 123 123 117 117 120 Other non-cash pay Debt 462 0 0 0 0 0 0 0 0 0 0 0 0 Total Sr Debt 1,459 1,459 1,370 1,357 1,370 1,389 1,389 1,260 1,258 1,258 1,233 1,177 1,126 Net Sr Debt 1,441 1,288 1,273 1,241 1,240 1,300 1,244 1,213 1,184 1,168 1,104 1,006 910 Total Debt 1,459 1,716 1,641 1,636 1,651 1,670 1,670 1,544 1,572 1,582 1,332 1,301 1,275 Net Debt 1,441 1,545 1,544 1,520 1,521 1,581 1,525 1,497 1,497 1,492 1,203 1,130 1,059 Less: unamortised discounts 104 0 0 0 0 0 0 0 0 0 0 1 Less CP of unamortised discounts 23 6 6 6 7 7 7 7 6 6 7 Total LTD 1,332 1,710 1,635 1,630 1,645 1,670 1,670 1,537 1,564 1,574 1,327 1,296 1,267

RATIOS

EBITDA / Interest, net 1.3x 1.2x 3.1x 2.1x 1.9x 1.9x 1.9x 2.3x 2.4x Bank Debt / EBITDA 0.9x 2.6x 2.3x 2.5x 2.5x 0.6x 1.9x 1.8x 2.0x 1.8x 1.6x 1.4x Net Sr Debt / EBITDA 5.6x 4.5x 3.8x 4.2x 4.4x 4.2x 3.7x 3.4x 3.6x 3.3x 2.8x 2.5x Net Total Debt / EBITDA 6.7x 5.5x 4.7x 5.1x 5.4x 5.1x 4.5x 4.3x 4.6x 3.6x 3.2x 2.9x

Source – BNP Paribas Estimates, Telenet

361 European High Yield Research Tim Hellas ⎪ January 2006

Aizaz Shaikh +44 20 7595 8607 [email protected] Tim Hellas

Bond Description & Market Data, as of 05 January 2006 Next Call Issuer Credit Trend: Description Amount (o/s) Ratings Date Price Price YTW STW Senior Secured FRNs due 2012 EUR 925mn (P)B1/B 15-Oct-06 102 100 1/2 5.59% 243 bp 8.5% Senior Notes due 2013 EUR 355mn B3/B- 15-Apr-09 104.25 107 1/2 6.78% 371 bp Source – BNP Paribas Company Profile TIM Hellas is the 3rd (of 3) mobile network operators in Greece, providing voice and data services via its GSM network. The company provides services under the TIM brand, having received its initial license in Greece in 1992 and having commenced services in 1993. The company also has 1 of 3 licences to provide UMTS service in Greece. As of 30 September, 2005 TIM had 2.4 million mobile subscribers comprising roughly 790 postpay and 1,460 prepay subscribers. For the 12 months ended September 2005, the company had revenue of €817mn and EBITDA of €192mn; LQA net total cash pay leverage at the end of September was 4.4x. An 81% stake in TIM Hellas was acquired by Apax and TPG via a leveraged buyout in June 2005 from TIM Italia. Investment Recommendation We maintain our ratings on the TIM Hellas senior secured FRNs at HOLD and the TIM Hellas senior unsecured fixed notes at BUY. Pro forma for the Q-Telecom acquisition, we anticipate leverage at the secured level is just inside 4x while leverage at the unsecured level is roughly 1/2 turn higher in the mid-5x range. We prefer the fixed rate notes primarily for the 3 additional years of call protection in comparison to the FRNs; we think the Hellas story is largely based on the near-term sale of the business, in which scenario the fixed rate bonds should derive materially higher value from the credit enhancement. We think a strategic asset sale is more likely than a secondary LBO, but note that in the case of the latter the bonds are likely to drift around par. After the recent runup in prices, investors could take some profits in the fixed rate notes, however longer term we believe our above mentioned thesis retains further upside potential.

Debt Profile

Revolving Credit Facility A revolving credit facility was entered into on 3 April 2005 (subsequently amended and restated on 15 July 2005) which matures on 15 June 2012. The revolving credit facility provides for commitments of up to €200mn in the form of a revolving facility and a domestic facility and it is guaranteed by Hellas II, Hellas IV, Hellas V, Hellas VI and TIM Hellas. As of 30 September 2005, no amounts were drawn under the facility. Senior Secured Floating Rate Notes On 7 October 2005, Hellas V issued senior secured floating rate notes in an initial principal amount of €925mn which mature on 15 October 2012. The notes are secured by liens ranking junior to the 1st priority liens securing the Revolving Credit Facility over substantially all of the assets of Hellas II, Hellas III, Hellas IV, Hellas V and TIM Hellas. The notes are guaranteed by Hellas II, Hellas IV, Hellas VI and TIM Hellas. 8.5% Senior Notes On 7 October 2005, Hellas III issued senior notes in an initial principal amount of €355mn which mature on 15 October 2013. The notes are secured by liens ranking junior to the 1st priority liens and the liens securing the Senior Secured Notes, all intercompany corporate bond loans owed to Hellas III and the bank accounts of Hellas III. The notes are guaranteed on a senior subordinated basis by Hellas II, Hellas IV, Hellas VI and TIM Hellas. 11.5% PIK Loans On 7 October 2005, a loan was made to Hellas Finance, a direct subsidiary of Hellas I, by various lenders in the amount of €110mn. The payment obligations of Hellas Finance under the PIK Loan Agreement are guaranteed by Hellas I. Hellas Finance can elect to pay interest on this loan either in cash or by capitalizing such interest and adding it to the aggregate amount standing of the loan on each interest payment date. The loan matures and is repayable on 15 October 2014.

362 European High Yield Research Tim Hellas ⎪ January 2006

TIM Hellas Structure

Hellas

100% Guarantors Hellas I 100% Intercompany Corporate Bond Loans 100% PIK Loan Facility Hellas Finance €110 million

Hellas II 100%

100% Hellas IV

Tim Hellas Telecommunications 100%

99% Hellas VI Revolving 1% Credit Facility 1% Senior Notes Hellas V 99% Hellas III €355 million Senior Secured Notes €925 million

Source – TIM Hellas

363 European High Yield Research Tim Hellas ⎪ January 2006

Bond Covenants EUR 925mn Senior Secured FRNs due Bond description EUR 355mn 8.5% Senior Notes due 2013 2012 Issuing entity Hellas V Hellas III Ranking Senior Secured Senior Position vs. bank debt Junior Ranking Security 3rd Priority Liens Position vs. other bonds Senior Guarantees Subordinated Guarantees Secured by liens ranking junior to the 1st Secured by liens ranking junior to the 1st priority liens securing the Revolving Credit priority liens and the liens securing the Facility over substantially all of the assets of Senior Secured Notes, all intercompany Hellas II, Hellas III, Hellas IV, Hellas V and corporate bond loans owed to Hellas III, and Security/Guarantees TIM Hellas. the bank accounts of Hellas III. Guaranteed by Hellas II, Hellas IV, Hellas Guaranteed on a senior subordinated basis VI and TIM Hellas. by Hellas II, Hellas IV, Hellas VI and TIM Hellas.

! Call Schedule: ! Equity Claw – prior to 15 October 2008 max 35% of issue at 108.5% 15 October 2006 – 102.0% ! Call Schedule: 15 October 2007 – 101.0% 15 October 2009 – 104.250% Optional redemption 15 October 2008 – 100.0% 15 October 2010 – 102.125% 15 October 2011 – 100.000%

Tax redemption Yes – at par Negative pledge Yes Cross default Yes Fall away covenants No Anti-layering No Change of control Put at 101% The Company will not permit any asset disposition unless: ! Receive at least FMV as determined in good faith by the Board of Directors; ! At least 75% of the consideration received is in cash; Asset sales ! 100% of the net available cash from such asset disposition is used within 365 days to a) prepay or repay senior indebtedness or to make investments/capex, provided that Hellas II will equally and ratably offer to purchase a pro rata portion of the Senior Secured Notes at par, or b) offer to purchase Senior Secured Notes if the net cash available is greater than €15mn. Source – BNP Paribas, TIM Hellas

364 European High Yield Research Tim Hellas ⎪ January 2006

Bond Covenants EUR 925mn Senior Secured FRNs due Bond description EUR 355mn 8.5% Senior Notes due 2013 2012 Hellas II, Hellas V, any Subsidiary Guarantor (Hellas IV, Hellas VI and Tim Hellas) or Hellas III may incur indebtedness if the pro forma consolidated leverage ratio is less than 4.75x. In the case of senior indebtedness, the consolidated senior leverage ratio for Hellas II must be less than 4x, provided that any guarantee of indebtedness of Hellas III by Hellas II or any of its subsidiaries shall be subordinated to the guarantee of amounts outstanding under the Senior Secured Notes on substantially identical terms to the guarantee by Hellas II of the Senior Notes. Carve outs: ! Credit facilities cannot exceed €250mn;

Debt limit ! CLOs or PMOs cannot exceed the greater of €40mn and 4% of total assets; ! Indebtedness entered for hedging purposes; ! Indebtedness used to finance the acquisition of a related business cannot exceed €200mn in aggregate, provided that the pro forma Consolidated Leverage Ratio at the time of such acquisition is less than 5.25x and, if the indebtedness to be incurred is senior indebtedness, the pro forma Consolidated Senior Leverage Ratio is less than 4.25x. In addition, if the Indebtedness is incurred by a Restricted Subsidiary that is not a Subsidiary Guarantor, Hellas III or Hellas V, then no portion of such indebtedness may be guaranteed by the Hellas II, any Subsidiary Guarantor, Hellas III or Hellas V in any way. ! General basket of the greater of €40mn and 4% of total assets. If Hellas II can raise €1.00 of debt then 50% of consolidated net income (or less 100% net loss) plus 100% of equity or equity-like proceeds, plus dividends from an unrestricted subsidiary, plus the portion of the FMV of the net assets of an Unrestricted Subsidiary re- designated as a Restricted Subsidiary, plus 100% of the aggregate net cash proceeds or the FMV in the case of the sale of a Restricted Investment. Carve outs: ! Repurchase of shares of capital stock or subordinated obligations from employees, directors or consultants of less than €7.5mn p.a., with unused amounts carried to Restricted payments succeeding years subject to a maximum of €15mn in any calendar year; ! Dividends on the common stock of Hellas II or any parent company following a public offering of common stock not to exceed in any fiscal year the greater of a) 6% of the net cash proceeds, b) 7% of the market capitalization provided the consolidated leverage ratio is less than 4.5x, c) 5% of the market capitalization provided the consolidated leverage ratio is less than 5.0x; ! Purchase of capital stock for contribution to an employee stock ownership plan of Hellas II or a parent company not to exceed €10mn in aggregate; ! General basket of €30mn. Terms must be no less favourable than in the case of a comparable arm’s length transaction. Transactions in excess of €10mn require a majority approval of the Transactions with affiliates disinterested members of the Board of Directors, whereas transactions in excess of €20mn additionally require a written fairness opinion from an independent financial advisor. Source – BNP Paribas, TIM Hellas

365 European High Yield Research Tim Hellas ⎪ January 2006

Tim Hellas, Financial Model FYE 31 December Actual Actual Actual Actual Actual Actual Actual Actual Forecast Forecast Forecast

EUR mn 2002 2003 H1 04 Q3 04 Q4 04 2004 H1 05 Q3 05 2005 2006 2007 PROFIT & LOSS Revenue 690 809 408 229 192 829 395 231 815 880 898 COGS -253 -331 -186 -105 -95 -386 -195 -105 -389 -397 -405 Gross profit 438 477 223 124 97 444 200 125 426 483 493 SG&A -298 -303 -164 -73 -80 -317 -154 -81 -308 -317 -320 EBITDA 231 276 118 49 16 244 104 72 232 285 293 P&L Interest -14 -11 -5 -2 -2 -10 -10 -27 -89 -110 -103

Revenue growth y/y 14.6% 2.5% -1.7% 7.4% 2.0% Gross margin 63.4% 59.0% 54.5% 54.0% 50.7% 53.5% 50.6% 54.4% 52.2% 54.9% 54.9% SG&A / sales 43.2% 37.5% 40.2% 32.0% 41.6% 38.3% 38.9% 35.0% 37.8% 36.0% 35.7% EBITDA margin 33.4% 34.1% 29.0% 21.6% 8.6% 29.4% 26.2% 31.3% 28.4% 32.4% 32.6%

CASH FLOW Change in working capital -2 11 -33 -69 -40 -7 -25 Cash from Operating Activities 193 230 66 146 48 26 117 175 190

Capex -105 -138 -55 -141 -28 -30 -125 -135 -145 Acquisitions/Disposals 0 -350 0 Cash from Investing Activities -105 -138 -55 -141 -26 -30 -125 -485 -145

Proceeds from ST borrowings from related Cie 0 20 -20 Proceeds from ST borrowings, net of repayments -63 0 -60 Proceeds from LT debt 100 0 166 Debt Repayment -109 -48 -74 -74 -100 Cash from Financing Activities -82 -61 -75 -57 -23 0 350 0 0

Net Change in Cash 6 31 -64 -53 0 -8 40 45 -8

BALANCE SHEET Cash & Equivalents 67 14 19 14 99 12 54 144

Senior Secured FR Notes 925 925 1,175 925 Senior Unsecured Notes 355 355 355 355 Notes (Junior/PIK) 116 116 132 149 Total Debt 167 186 252 172 1,396 1,396 1,662 1,429 Net Debt 100 172 233 158 1,297 1,385 1,608 1,285

RATIOS Leverage Senior Secured Leverage (gross) 4.0x 4.1x 3.2x Cash pay Leverage (gross) 5.5x 5.4x 4.4x Total leverage (gross) 6.0x 5.8x 4.9x Total leverage (net) 6.0x 5.6x 4.4x Source – BNP Paribas Estimates, Tim Hellas

366 European High Yield Research Tim Hellas ⎪ January 2006

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367 European High Yield Research TUI ⎪ January 2006

Oleksiy Soroka, CFA +44 20 7595 4878 [email protected] TUI

Bond Description & Market Data, as of 5 January 2006 Next Call Issuer Credit Trend: Stable Description Amount (o/s) Ratings Date Price Price YTW STW 5.875% Nts due 2006 EUR 750mn NR/NR NC NC 102.19 2.99% 21bp 6.625% Sr Nts due 2011 EUR 625mn Ba2/BB NC NC 108.34 4.84% 171bp 5.125% Sr Nts due 2012 EUR 450mn Ba2/BB NC NC 100.06 5.11% 190bp Source – BNP Paribas Company Profile TUI AG (TUI) has two main business divisions: Tourism and Shipping. In terms of turnover, TUI is the largest integrated tourism group in Europe, with leading market positions in Germany, the United Kingdom and France (Europe’s three largest tourist source markets). The company also has leading market positions in nine other European countries. TUI’s Tourism business is based on the fully-integrated business model, which comprises travel agencies (Lunn Poly, Nouvelles Frontiers, FIRST, TUI Reisecenter, etc.), tour operators (TUI, Thomson Holidays, Nouvelles Frontiers, Holland International, Jetair, etc.), airlines (Hapag-Lloyd Express, Britannia Airways, Corsair, Thomsonfly, etc.), hotels and destination services. In terms of the Shipping business, TUI owns two large container shipping operators, Hapag-Lloyd and CP Ships (acquired in the second half of 2005), and a passenger cruise line, Hapag-Lloyd Kreuzfahrten. Combined operations of Hapag-Lloyd and CP Ships would represent a top-five container ship operator in the world, in terms of operated capacity. TUI is a publicly listed company and is part of the DAX30, an index of thirty leading companies listed in Germany. We calculate that in the twelve months ended 30 September 2005, including CP Ships results on a pro forma basis by simple addition, TUI had turnover of €22,044mn (including €13,963mn in Tourism and €6,405mn in Shipping) and adjusted EBITDA of €1,490mn. As of that date, we estimate that the company had lease-adjusted leverage of 4.8x and lease-adjusted coverage of 1.9x. Investment Recommendation We maintain our HOLD/Stable Credit Trend for TUI’s bonds. In turn, we view more favourably the newly-issued perpetual instrument due to its superior relative value parameters, compared to the other bonds issued by the company. We believe that TUI is well-positioned to eventually cross over to the investment grade status. However, we do not think that this is a near-term propsect and we think that the company will have a chance of getting upgraded to that level only towards the end of 2007. We believe that any further upgrades of TUI’s ratings from the current levels are predicated on the good operating performance by the company during the next twelve-eighteen months and on its ability to generate free cash flow and to reduce debt. At this point, we have mixed feelings with regards to an outlook for TUI in 2006. Almost certainly, next year will be tougher for the container shipping business, compared to 2005. It is widely expected that shipping rates will decline, due to an anticipated commissioning of a large number of newly built ships in 2006. Clearly, this should have an adverse effect on the results of TUI’s container shipping business. We currently expect that the Tourism business will have another positive year in 2006, after a good 2005. However, we caution that we do not have a great visibility for the business for the imporatn summer season at this stage. In terms of other risks, we recognize that both tourism and container shipping businesses are quite cyclical and may experience a downturn at the same time (as it happened in 2001-2002). Tourism business is also subject to an event risk, ie terror attacks or outbreaks of diseases. This may be especially harmful for TUI if such calamities involves some of the destinations where the company’s operations are very concentrated (such as Spain or Greece). The integration of CP Ships also poses certain execution risk for Hapag-Lloyed, even though we do not think that this will necessarily pose a major challenge. Finally, we note that TUI’s bonds still suffer from a degree of structural and contractural subordianation (relative to the operating subsidiary-based bank facilities and finance leases).

368 European High Yield Research TUI ⎪ January 2006

Debt Profile TUI has just completed a sizeable bond placement, raising €1.3bn through three different bond tranches. The proceeds from the issuance will go towards financing the acquisition of CP Ships and repayment of the latter’s indebtedness. Therefore, we will be discussing TUI’s debt on a pro forma basis, including the effects of the recent bond issues, aggregating the small residual amount of CP Ship’s balance sheet debt and excluding the indebtedness of the company’s discontinuing operations (including PNA Group with €69mn of debt and VTG AG with €73mn of debt, outstanding as of the end of third quarter 2005). Thus, based on the 30 September 2005, balance sheet amounts and adjusting for the aforementioned transaction, TUI had total debt of approximately €4,567mn. In this amount, we also included €300mn of the Perpetual Subordinated Fixed to Floating Rate Bonds (or Hybrid Capital Securities), which will be treated as equity for the purposes on TUI’s balance sheet, in accordance with the IFRS. After the recent issuance, TUI now has six bond tranches outstanding, including 5.875% Eurobonds due 2006 (due in October this year – par value of €750mn), 4% Convertible Bonds due 2008 (€350mn), 6.625% Senior Notes due 2011 (€625mn), Floating Rate Notes due 2009 (the three-month EURIBOR+210bp; €400mn), Floating Rate Notes due 2010 (the three-month EURIBOR+1.55%; €550mn) and 5.125% Senior Notes due 2012 (€450mn). We understand that all the six aforementioned notes are pari passu with each other. In addition, on a pro forma basis, as of the same date, TUI had €790mn outstanding under various senior credit facilities (including a short-term portion of €261mn). We understand that €634mn of the amounts outstanding under the credit facilities are borrowed by TUI AG’s various operating subsidiaries and, therefore, are structurally senior to the bonds, which are all issued by the holding company. At the same time, €157mn of the outstanding amounts resides at the same level as the bonds and is unsecured. In addition, as of 30 September 2005, TUI AG had access to €800mn of bilateral credit lines, which were not utilized as of that date. Finally, with regards to bank facilities, TUI AG also aimed to secure a €1.75bn syndicated revolving credit facility by the end of December 2005 (we assume that this facility will be unsecured, but do not know this for a fact). TUI’s pro forma indebtedness also includes €373mn of finance leases. We understand that these leases and both structurally and contractually senior to TUI’s unsubordinated bonds. Finally, as we have already mentioned in December 2005, TUI also issued €300mn of subordinated hybrid securities. These instruments are subordinated to TUI’s other indebtedness and will be treated as part of equity in the company’s accounts. The hybrid bonds are rated B1/B+, two notches, below the ratings of TUI’s other bonds. (The hybrid notes have a number of special features, a discussion of which goes beyond the nature of this summary.) S&P considers that the notes have an “intermediate” equity content, taking into account “the bond’s absence of maturity, optional deferability for an unlimited period and deep subordination”. On the other hand, Moody’s treats the instrument as 25% equity and 75% debt. We have decided to include the perpetual into our total debt and account for the hybrid notes when calculating TUI’s leverage.

369 European High Yield Research TUI ⎪ January 2006

TUI Structure

€400 million Senior Floating Rate Notes due 2009 €625 million 6.625% Senior Notes due 2011 €385 million Convertible Bond due 2008 €750 million Eurobond due 2006 Approx. €800 million of bilateral credit lines TUI AG (€0 million utilised) €157 million of other long-term debt(1) €1.75 billion syndicated revolving credit facility(2) €450 million 5.125% Senior Notes due 2012 €550 million Senior Floating Rate Notes due 2010 €300 million Perpetual Subordinated Fixed to Floating Rate Bonds

Various subsidiaries incl.: Hapag-Lloyd Fluggesellshaft PNA Group, Hapag-Lloyd AG mbH, Corsair S.A., TUI Northern VTG AG(2) CP Ships Limited(5) Inc. HLCL GmbH(1)(4) Europe Ltd., TUI Airlines Nederland, RIU Group and Magic Life Group

US$250 million €68 million finance €368 million finance US$5 million revolver loan leases lease obligations (€4 million) finance leases (US$83 million €5 million €634 million other (€69 million) bank debt bank debt utilised)

Discontinuing Operations Continuing Operations

1. As of 30 October 2005, TUI AG replaced Hapag-Lloyd Container Linie GmbH as the borrower under two long-term bilateral loans in the aggregate amount of €117mn. The loans, which were initially provided to Hapag-Lloyd Container Linie GmbH on a secured basis, were assumed by TUI AG on an unsecured basis. 2. TUI intends to increase the facility to €1.75bn. This facility is expected to close during December. The commitments under this facility are still subject to documentation. 3. The sale of VTG AG is subject to antitrust clearance and is expected to close in December 2005. 4. On September 30, 2005 TUI cancelled the €600mn syndicated bank financing facility for Hapag-Lloyd Container Linie GmbH, its container shipping line subsidiary. The outstanding amount under this facility was repaid with the proceeds of a new bilateral loan provided to TUI AG in the amount of €300mn and with available cash. 5. As of September 30, 2005, CP Ships had outstanding $200mn (€165mn) aggregate principal amount of Senior Notes due 2012, $200mn (€165mn) aggregate principal amount of 4% Convertible Senior Subordinated Notes due 2024 and $191mn (€158mn) of finance leases and other bank debt (as derived from CP Ships’ financial information prepared on the basis of Canadian GAAP). TUI intends to use CP Ships’ existing cash resources and a portion of the proceeds from the offering of the Notes and the parallel offering of Hybrid Capital Securities to fund the redemption of any and all CP Ships’ Senior Notes due 2012 under a mandatory redemption on 13 December 2005 and a change of control tender offer for all of the outstanding 4% Convertible Senior Subordinated Notes due 2024, which will expire on December 14, 2005 (unless required to be extended) and to repay $186mn (€154mn) of CP Ships’ existing bank debt and finance leases. CP Ships intends to cancel its Senior Notes due 2012 after they have been redeemed and to cancel its 4% Convertible Senior Subordinated Notes after they have been repurchased.

Source – TUI

370 European High Yield Research TUI ⎪ January 2006

TUI, Financial Model BNPP BNPP BNPP BNPP BNPP FYE 31 December Actual Actual Actual Actual Actual Actual F’cast F’cast F’cast F’cast F’cast EUR mn 2002 2003 2004 Q1 Q2 Q3 Q4 2005 2006 2007 2008 P&L SUMMARY Sales Tourism 12,416 12,671 13,123 2,516 3,493 5,286 2,779 14,073 14,614 15,000 15,397 % change -2.7% 2.1% 3.6% 6.7% 4.2% 8.4% 9.6% 7.2% 3.8% 2.6% 2.6% Shipping 2,687 669 765 873 1,398 3,705 6,317 6,564 7,249 % change 12.8% 16.4% 13.8% 20.4% 8.0% 37.9% 70.5% 3.9% 10.4% Central operations 308 396 480 44 84 64 50 242 225 225 225 Continuing operations 14,949 15,449 16,289 3,228 4,342 6,223 3,601 18,020 21,156 21,789 22,871 % change 3.3% 5.4% 8.0% 6.1% 8.1% 4.3% 10.6% 17.4% 3.0% 5.0% Trading 3,150 2,056 972 246 250 252 300 1,048 0 0 0 Special logistics 1,552 1,534 786 107 110 109 50 375 0 0 0 % change 3.3% -1.2% -48.8% -67.4% -43.0% -33.5% -51.3% -52.2% 0.0% 100.0% 200.0% Other divestments 651 177 0 0 0 0 0 0 0 0 0 Discontinuing operations 5,353 3,767 1,757 353 359 361 350 1,423 0 0 0 Total Sales 20,302 19,215 18,046 3,581 4,701 6,584 3,951 19,443 21,156 21,789 22,871 Earnings by division (EBTA) Tourism 336 208 362 -192 94 590 -82 410 451 467 483 % of sales 2.7% 1.6% 2.8% -7.6% 2.7% 11.2% -2.9% 2.9% 3.1% 3.1% 3.1% Shipping 121 262 279 25 85 89 87 286 253 394 580 % of sales 5.4% 11.0% 10.4% 3.7% 11.1% 10.2% 11.3% 9.3% 4.0% 6.0% 8.0% Central operations -149 370 -146 -94 -47 -21 -45 -207 -250 -240 -230 Continuing operations 308 840 496 -261 132 658 -39 490 454 621 833 % of sales 2.1% 5.4% 3.0% -8.1% 3.0% 10.6% -1.1% 2.7% 2.1% 2.8% 3.6% Trading 51 4 116 16 9 9 12 46 0 0 0 % of sales 1.6% 0.2% 11.9% 6.5% 3.6% 3.6% 4.0% 4.4% Special logistics 78 62 11 10 48 12 1 71 0 0 0 % of sales 5.1% 4.0% 1.3% 9.4% 43.8% 11.0% 1.0% 18.8% Divestments 137 9 0 0 0 35 0 35 0 0 0 % of sales 4.4% 0.4% 0.0% 0.0% 0.0% 13.9% 0.0% 0.0% Total EBTA 575 913 622 -235 189 714 -27 641 454 621 833 % of sales 2.8% 4.8% 3.4% -6.6% 4.0% 10.8% -0.7% 3.3% 2.1% 2.8% 3.6% Unusual expense and income -353 -654 132 -27 49 55 0 77 0 0 0 Adjusted EBTA 222 260 490 -208 140 659 -27 718 454 621 833 % of sales 1.1% 1.4% 2.7% -5.8% 3.0% 10.0% -0.7% 3.7% 2.1% 2.8% 3.6%

Depreciation 687 651 565 117 113 123 113 466 557 567 583 Net interest 239 158 196 47 48 36 49 179 263 292 276 Adjusted EBITDA 1,149 1,069 1,250 -44 301 817.1 198 1,272 1,522 1,732 1,983 % of sales 5.7% 5.6% 6.9% -1.2% 6.4% 12.4% 5.0% 6.5% 7.2% 7.9% 8.7%

Operating rental expenses 555 675 702 189 188 234 258 870 1,154 1,166 1,178 Adjusted EBITDAR 1,703 1,743 1,952 145 489 1,051 456 2,141 2,676 2,898 3,161 % of sales 8.4% 9.1% 10.8% 11.0% 12.6% 13.3% 13.8%

CASH FLOW ITEMS EBITDA 1,501.1 1,722.2 1,382.2 -44 301 817 198 1,271.7 1,521.8 1,732.1 1,983.0 Cash taxes 185.8 -68.9 89.7 17 -69 -48 -82 -139 Cash interest -304.2 -210.8 -220.1 -40 -159 -263 -292 -276 Cash effect from changes in working capital 411.4 -12.1 -125.3 -10 -100 25 25 25 Other operating cash items -707.4 -739.0 -383.1 0 0 0 0 0 Cash flow from operating activities 1,086.7 691.4 743.4 213 685 557 -510 944 1,236 1,383 1,593 Capex -748 -590 -667 -246 -192 -106 -106 -650 -700 -750 -750 Free cash flow 339 102 77 -33 493 450 -616 294 536 633 843 Dividends from TUI -137.1 -137.1 -137.4 -138 -138 -138 -138 Dividends from subsidiaries to other shareholders -18.7 -17.1 -19.6 -20 -20 -20 -20 Free cash flow (after dividends) 183 -53 -80 136 378 475 685

BALANCE SHEET ITEMS Cash position 367 349 481 486 765 1,729 413 413 102 127 12 Current financial liabilities 3,394.4 1,467.1 402.9 399 260 371 306 306 300 300 300 Non-current financial liabilities 2,416.9 2,710.2 3,328.8 3,294 3,345 2,957 3,961 3,961 4,161 3,711 2,912 Total indebtedness 5,811 4,177 3,732 3,693 3,605 3,328 4,267 4,267 4,461 4,011 3,212 Net debt 5,445 3,829 3,251 3,208 2,840 1,598 4,153 4,153 4,660 4,184 3,500 Provisions for pensions and similar obligations 683 645 668 629 642 651 650 650 650 650 650 Net debt adjusted for pension obligations 6,128 4,474 3,918 3,837 3,482 2,249 4,803 5,310 4,834 4,150

CREDIT RATIOS Net debt adjusted for pensions/Adjusted EBITDA 4.7x 4.2x 3.1x 2.8x 2.0x 3.8x 3.8x 3.5x 2.8x 2.1x Adjusted EBITDA/Net interest expense 4.8x 6.7x 6.4x 7.2x 6.7x 7.1x 7.1x 5.8x 5.9x 7.2x

Net lease-adjusted debt/Adjusted EBITDAR 6.2x 5.7x 4.9x 4.7x 4.5x 5.5x 5.5x 5.4x 4.9x 4.3x Adjusted EBITDAR/(Interest expense + Rentals) 2.1x 2.1x 2.2x 2.2x 2.0x 2.0x 2.0x 1.9x 2.0x 2.2x Source – BNP Paribas Estimates, TUI Leverage and Coverage are based on the last 12 months’ results. Some of the ratios are adjusted for the effects of acquisitions and disposals. In addition, these 2 measures are usually calculated based on EBITDA adjusted for exceptional or non-recurring items. Leverage is defined as net lease-adjusted debt (x8 operating leases)-to-EBITDAR. Coverage is defined as EBITDAR-to-(net interest+rental expenses).

371 European High Yield Research TVN Finance ⎪ January 2006

Aizaz Shaikh +44 20 7595 8607 [email protected] TVN Finance

Bond Description & Market Data, as of 05 January 2006 Next Call Issuer Credit Trend: Stable Description Amount (o/s) Ratings Date Price Price YTW STW

9.5 % Sr Nts due 2013 EUR 235mn B3/B- 15-Dec-08 104.750 116 5.08% 213 bp Source – BNP Paribas

Company Profile TVN S.A. Group is the leading privately owned television broadcaster in Poland. The company's revenue derives principally from the sale of TV advertising. TVN currently owns and operates eight television channels, primarily in Poland: TVN, TVN7, TVN24, TVN Meteo, TVN Turbo, ITVN, TVN Style and TVN Gra. In addition to its 10 year terrestrial broadcasting license (awarded in 2004), the Company holds separate licenses to broadcast all of its channels by cable and satellite. TVN, its principal free-to-air channel, is a leading entertainment news and current affairs program provider and accounts for roughly 85% of the group’s revenue. Principal shareholders as at 30 September 2005 were: 54% ITI Group (one of the largest media and entertainment groups in Poland); 8% Bank Austria Creditanstalt; and 5% Fidelity International. For the last 12 months ended 30 September 2005, TVN had revenues and EBITDA of PLN 801.5mn and PLN 250.7mn, respectively.

Investment Recommendation We maintain our HOLD rating on TVN bonds. While the company has experienced improving sector dynamics with steady deleveraging in recent quarters, the upside appears to be priced into valuations.

Debt Profile TVN issued € 235mn 9.5% senior unsecured notes in December 2003; the notes are callable in 2008 (NC5). The notes were issued by TVN Finance, a financing SPV, and guaranteed by the company and its principal subsidiary, TVN 24. The company successfully completed an IPO in the fourth quarter of 2004; proceeds of the IPO remain outside the TVN capital structure.

On 30 June 2005, the group entered into a $17mn multi-currency revolver BPH, undrawn as at 30 September 2005. The facility is secured over trade receivables, television and broadcasting equipment and programming rights with a total net book value of PLN 167.7mn as at 30 September 2005.

TVN owns a €131mn bond issued by ITI (asset for TVN) which bears interest at an effective rate of 10.02% per annum and will mature and be payable in full including interest on 15 January 2014. ITI is authorized to prepay all or part of the current compound accreted value at any time without penalty or premium. The bond is secured by a pledge of the shares of Strateurop, which in turn owns 29.58% of TVN’s shares (effectively controlled by ITI Group).

On 3 August 2005, TVN signed debt accession and set-off agreements with ITI, Strateurop International and N-Vision. Pursuant to the share buyback offer, Strateurop International and N-Vision agreed to sell 988,198 of their shares to TVN at the aggregate purchase price of PLN 64.5mn. The parties agreed to have the purchase price payable by TVN offset against the value of the portion of the ITI bond assumed by Strateurop BV International and N-Vision. In addition, TVN purchased PLN 55mn (in cash) of shares from minority shareholders which were subsequently redeemed.

372 European High Yield Research TVN Finance ⎪ January 2006

TVN Finance Structure

TVN SA Senior guarantee €235 million senior notes (Poland)

Polish Television TVN Finance El-Trade Pro Cable TVN 24 Finance Corp Corporation plc (Poland) (Poland) (Poland) (Netherlands) (England)

TVN Turbo Newsroom (Poland) (Poland)

Source – TVN Finance

373 European High Yield Research TVN Finance ⎪ January 2006

Bond Covenant EUR 235mn 9.5% Senior Notes due 2013 Bond description EUR Notes Issuing entity TVN Finance Corporation Plc Ranking Senior unsecured notes Position vs. bank debt Subordinated to the extent of security given Position vs. other bonds No other bond outstanding Security/Guarantees Senior unsecured guarantee from TVN SA and its principal subsidiary, TVN 24 ! Equity Claw – prior to 15 December 2006 max 35% of issue at 109.5% + coupon, if 65% of the notes remain outstanding ! Call Schedule: Optional redemption 15 December 2008 – 104.750% 15 December 2009 – 103.167% 15 December 2010 – 101.583% 15 December 2011 – 100.000% Tax redemption Yes at par + accrued and unpaid interest Negative pledge Yes Cross default Yes Fall away covenants No Anti-layering Yes (on Liens) Change of control Put at 101%, 35% of voting share capital ! FMV, 75% cash or cash equivalents, 100% of Net Available Cash from Asset Disposition must be applied to repurchase Indebtedness, invest invest in additional Asset sales Assets, constitute Excess Proceeds (if Excess Proceeds > €5mn, then Asset Disposition Offer)

Consolidated leverage ratio

No Dividends except: ! Those payable in Capital Stock; ! Distributions to the Company or a Restricted Subsidiary. No Redemption of Subordinate Obligations prior to maturity Carveout: If no default, €1 of debt can be incurred and <50% of Net Income+Net Cash Proceeds from Restricted payments issue of Capital Stock+Debt Reduction from conversion of convertible debt+reduction in Restricted Investments Does not prohibit: ! Redemption of Capital Stock/Subordinated Obligations by exchange/concurrent sale of Capital Stock; ! Redemption of Capital Stock in exchange for the ITI Media bond, if no event of default if no Event of Default, Restricted Payments in an aggregate amount < €5.0mn.

Arms length transaction; if > €1mn, resolution of majority of the management board; if Transactions with affiliates >€5mn, fairness opinion. Source – BNP Paribas, TVN Finance

374 European High Yield Research TVN Finance ⎪ January 2006

TVN Finance, Financial Model FYE 31 December Historic Historic Historic Historic Historic Historic Historic Historic Historic Historic Historic Historic Historic Historic PLN mn FY 02 Q1 03 Q2 03 Q3 03 Q4 03 FY 03 Q1 04 Q2 04 Q3 04 Q4 04 FY 04 Q1 05 Q2 05 Q3 05 PROFIT & LOSS

Revenue 556 140 165 107 176 587 159 203 139 216 717 194 218 173 COGS -340 -89 -98 -79 -82 -348 -89 -110 -108 -138 -445 -115 -112 -122 Gross profit 216 51 67 28 93 239 69 93 31 79 272 79 106 52 SG&A -86 -19 -15 -14 -37 -86 -29 -25 -16 -23 -92 -24 -25 -24 EBITDA 158 35 56 19 58 169 48 71 24 68 212 63 92 28 P&L Interest -32 -20 -1 -12 -12 -44 -14 9 13 54 62 -12 7 16

24.4 Revenue growth y/y 5.6% 13.7% 23.1% 29.7% 23.2% 22.1% 22.2% 7.5% % 29.8 Gross margin 38.8% 36.5% 40.5% 26.3% 53.2% 40.8% 43.8% 45.7% 22.6% 36.4% 38.0% 40.8% 48.7% % 13.8 SG&A / sales 15.6% 13.8% 9.3% 13.5% 20.9% 14.6% 18.1% 12.5% 11.2% 10.5% 12.9% 12.2% 11.4% % 16.0 EBITDA margin 28.5% 25.4% 33.9% 17.9% 33.2% 28.8% 30.6% 35.1% 16.9% 31.7% 29.5% 32.4% 42.1% %

CASH FLOW

Cash from Operating Activities 68 35 51 -24 32 94 50 17 24 53 143 44 73 26

Capex -9 0 0 0 -34 -34 -164 0 0 91 -74 -9 -17 -11 Change in restricted cash -28 0 6 -1 -166 -161 170 4 9 3 187 0 -61 55 Cash from Investing Activities -40 -10 1 -9 -792 -810 -22 -23 -20 -3 -67 -10 -75 44

Cash from Financing Activities -17 0 0 0 788 788 -12 0 0 -102 -115 0 -53 -56

FX effect 0 0 2 -2 -5 -5 0 -1 1 0 0 0 -22 22

Net Change in Cash 12 24 53 -34 23 67 15 -7 5 -52 -38 34 -77 35

BALANCE SHEET

Cash & Equivalents 37 61 114 81 104 104 119 112 117 66 66 99 22 57

Bank Debt 186 0 Bonds- HY 0 1,109 1,115 1,095 989 894 894 919 887 881 Related party borrowings 44 5 0 Total Debt 230 1,113 1,115 1,095 989 894 894 919 887 881 Net Debt 194 1,010 996 982 871 828 829 819 865 823

RATIOS

Leverage Total leverage (gross) 1.5x 6.6x 6.6x 6.1x 5.6x 4.9x 4.2x 4.2x 4.1x 3.6x 3.5x Total leverage (net) 1.2x 5.9x 6.0x 5.5x 5.0x 4.3x 3.9x 3.9x 3.6x 3.5x 3.3x Source – BNP Paribas Estimates, TVN Finance

375 European High Yield Research United Biscuits ⎪ January 2006

Oleksiy Soroka, CFA +44 20 7595 4878 [email protected] United Biscuits

Bond Description & Market Data, as of 5 January 2006 Next Call Issuer Credit Trend: Positive Description Amount (o/s) Ratings Date Price Price YTW STW 10.625% Senior Subordinated Notes due 2011 EUR 193mn B3/CCC+ 15-Apr-06 105.31 106.75 4.79% 232bp 10.750% Senior Subordinated Notes due 2011 GBP 165mn B3/CCC+ 15-Apr-06 105.38 106.14 7.24% 267bp Source – BNP Paribas

Company Profile United Biscuits is a leading manufacturer and marketer of biscuits in the UK and Continental Europe. In biscuits manufacturing, the company is the market leader in the UK, the largest European market for biscuits. United Biscuits also has leading market positions in France, Spain, Portugal, The Netherlands and Belguim. The company is the second-largest manufacturer and marketer of savoury snacks, crisps and packaged nuts in the UK. United Biscuits’ leading brands are McVitie’s, Penguin, go ahead!, Jacob’s Cream Crackers, Tuc, Club, Ritz, McVitie’s Jaffa Cakes, Cheddars, Mini Cheddars, Hoola Hoops, Thai Bites, Twiglets, KP Nuts, BN, Delacre, Chiquilin, Fontaneda, Marbu Dorada, McCoy’s, Hookie, Clasicas, Waferland and Corintia. In addition, the company has an exclusive license to manufacture and market key Nabisco’s brands (such as Oreo and Chips Ahoy!) in Europe and North Africa. In the twelve months ended 8 October 2005, United Biscuits had turnover of £1,281mn and EBITDA before operating exceptional items of £185mn. By the end of the last reported quarter, the company had leverage of 4.4x and coverage of 2.7x.

Investment Recommendation

We maintain our HOLD/Positive Credit Trend recommendation for United Biscuits’ bonds. We believe that there is no tightening upside left in the bonds from the current offer levels due to our expectations that the company will exercise a call provision of the notes and will buy the bonds back at the respective call prices as soon as April 2005. United Biscuits has improved its operating performance during the second and third quarter of 2005, in line with our original expectations. There have been a number of press reports suggesting that the company plans to have an initial public offering of shares, possibly as soon as first quarter 2006. United Biscuits refused to confirm those reports. We believe that it is quite likely that United Biscuits will indeed pursue the IPO. We think that the call provision will be exercised and the bonds will be refinanced regardless of whether there is an IPO or not.

Debt Profile As of 8 October 2005, United Biscuits had total third-party indebtedness of £901mn, comprising £605mn outstanding under the senior credit facility, £296mn of high yield notes and £0.3mn of finance lease obligations. On 20 September 2004, the company refinanced its senior credit facility, which consisted of the revolving credit facility of £50mn and the term tranches (A of £267mn, B of £100mn and €65mn and C of £150mn and €50mn). Regentrealm Limited acts as borrower of tranches A, B and the revolver and United Biscuits (UK) Limited is a borrower of Tranche C. The senior credit facilities are guaranteed by all the material members of United Biscuits Group (Investment) Limited and the senior facilities are secured by the company’s assets in and outside of the UK and by share charges over shares in the material members of the United Biscuits Group and their respective holding companies. The high yield bonds are both structurally and contractually subordinated to the credit facilities. In addition, United Biscuits has sizeable retirement benefit obligations (£354mn as of 8 October 2005).

376 European High Yield Research United Biscuits ⎪ January 2006

United Biscuits Structure

Equity Sponsors(1) (excluding Nabisco)

£2m Common Equity (1) United Biscuits Group (Investments) Limited Warrants to Nabisco (1) (UB Parent) (2)

£400m Deep Solvecorp Deluxestar £145m Dual Convertible Discounted Bonds (1) Limited (2) Limited (2) Discounted Preferred Securities (1)

75%(3) 25%(3)

Runecorp Limited (2)

United Biscuits Senior Subordinated Notes Finance plc(2) Equity (Issuer) Investment Senior Subordinated Notes (5) Loan(4) Regentrealm Proceeds Intercompany Loans Limited (6) (Regentrealm) £682.4m Senior Credit Facility

Finalrealm Limited(2)

United Biscuits (Holdings) Limited(2)

Operating Subsidiaries(2)

1. The investment interests of Equity Sponsors are represented by £400.0mn initial aggregate principal amount of deep discounted bonds issued by Solvecorp Limited to PAI, Cinven and MidOcean, dual convertible discounted preferred securities issued for £145.0mn by Deluxestar Limited to Nabisco and £2.0mn of equity invested by Cinven, PAI and MidOcean through United Biscuits (Equity) Limited, a Cayman Islands company, which holds and beneficially owns 95% of the shares of UB Parent. The remaining 5% are owned by senior management. Nabisco also holds warrants exercisable upon certain events for shares of UB Parent. 2. Guarantors of the senior credit facility. 3. Represents equity ownership in Runecorp. 4. £545.0mn of proceeds from the investments made by the Equity Sponsors were loaned from Runecorp to UB Finance, from UB Finance to Regentrealm and from Regentrealm to Finalrealm Limited for use in the acquisition of United Biscuits. Cash interest under these intercompany loans is not payable until their maturity in 2049, subject to the occurrence of specified events which may result in the acceleration of their maturity. The intercompany loan from Runecorp to UB Finance is subject to a subordination agreement pursuant to which no enforcement action may be taken, and no payments may be made, before the maturity or repayment of the senior subordinated notes, other than payments permitted under the indenture. 5. UB Finance loaned the proceeds from the original and new senior subordinated notes offerings to Regentrealm under intercompany loan agreements. Regentrealm used the proceeds from the original senior subordinated notes offering, in April 2000, to repay an existing intercompany loan from UB Finance. UB Finance used the proceeds from the loan repayment, along with borrowings under our senior credit facility, the proceeds from the sale of interest in Young’s Bluecrest Limited and cash on hand, to repay the senior subordinated bridge facility. Regentrealm used the proceeds from the new senior subordinated notes offering, in February 2004, to prepay £40.0mn of Term Loan A under the senior credit facility, pay the transaction fees from the offering and to finance the €39.2mn acquisition of Triunfo in August 2004. 6. The senior credit facility at inception amounted to £625.0mn and included a £90.0mn revolving credit facility. This facility was reduced to £475.0mn in April 2003 and included a £225.0mn revolving credit facility. On September 20, 2004 the facility, was refinanced. New funds of £252.5mn were raised to finance the acquisition of Jacob’s. An amount of £243.5mn of the new funds was drawn down and utilised to finance the acquisition totalling £207.7mn, fund the related costs of acquisition and costs of financing totalling an estimated £15.2mn and the remainder was made available to fund working capital requirements. Of the amount drawn down, £200.0mn was borrowed directly by United Biscuits (UK) Limited, the operating subsidiary that acquired Jacob’s. The facility now amounts to £682.4mn and comprises £632.4mn fully drawn term loans and a £50.0mn revolving credit facility of which £9.5mn has been provided as ancillary facilities and a letter of credit and the remainder is undrawn. An unfavourable Euro exchange movement has increased the balance outstanding at January 1, 2005 by £4.6mn.

Source – United Biscuits

377 European High Yield Research United Biscuits ⎪ January 2006

Bond Covenants GBP 165mn 10.750% Senior Subordinated Notes due 2011 EUR 193mn 10.625% Senior Subordinated Notes due 2011 Bond description GBP Notes EUR Notes Issuing entity United Biscuits Finance plc United Biscuits Finance plc Ranking Unsecured senior subordinated obligations. Unsecured senior subordinated obligations. Position vs. Bank debt Structurally and contractually subordinated Structurally and contractually subordinated Position vs. Other bonds Pari passu Regentrealm Ltd will guarantee the Notes on a senior subordinated basis. Regentrealm’s guarantee of the Notes does not become due unless and until a payment default in respect of the Notes has Security/guarantees occurred and either 179 days have elapsed since the occurrence of such payment default or certain dissolution or winding-up events have occurred with respect to Regentrealm.

Call Schedule: Call Schedule: 15 April 2006 - 105.375% 15 April 2006 - 105.313% Optional redemption 15 April 2007 - 103.583% 15 April 2007 - 103.542% 15 April 2008 - 101.792% 15 April 2008 - 101.771% 15 April 2009 and thereafter - 100.000% 15 April 2009 and thereafter - 100.000% Tax redemption Yes – at par Yes – at par Negative pledge Yes Yes Cross default Yes – on £10mn or more of other debt. Fall away covenants No No Anti-layering No No Change of control Put at 101% Put at 101% The Issuer cannot sell assets involving considerations of over £5mn unless: The issuer receives a fair market value for them; At least 75% of the consideration is in cash or equivalent; Asset sales Must use proceeds within 360 days to pay down senior debt, subsidiary debt and to make investments in assets and properties. Net proceeds from an Asset Sale not used for the above will constitute Excess Proceeds an when the aggregate amount reaches £10mn the Issuer shall make a pro rata offer in accordance to the Asset Sale Offer to the holders of the notes or any other pari passu debt. Pro forma Consolidated Coverage Ratio of at least 2.0x. Debt limit Carve outs: £50mn basket (which may include debt under Senior Credit Facility). If company can raise €1.00 of debt then 50% of accumulated net income less 100% accumulated net loss plus 100% of equity or equity-like proceeds. Carve outs: Up to £3mn per year to buy back shares from employees or directors of the company not to Restricted payments exceed £10mn in the aggregate; Payments to shareholders for any advisory and like services of up to £2mn per annum; Dividends following a Public Equity Offering in an amount not to exceed of up to 6% of the gross proceeds from such offering; General basket of £10mn in the aggregate. Transactions of over £5mn have to be at fair terms and require resolution of the Board of Transactions with affiliates Directors. Transaction of over £15mn require an opinion as to the fairness by an investment banking, appraisal or accounting firm of national standing. Source – BNP Paribas, United Biscuits

378 European High Yield Research United Biscuits ⎪ January 2006

United Biscuits, Financial Model BNPP BNPP BNPP BNPP BNPP Actual Actual Actual Actual Actual Actual F’cast F’cast F’cast F’cast F’cast Ficsal Ficsal Ficsal Fiscal Fiscal Fiscal Fiscal GBP mn 2002 2003 2004 Q1 05 Q2 05 Q3 05 Q4 05 2005 2006 2007 2008 P&L SUMMARY Segmenal sales UK Biscuits and Snacks 756.5 734.4 775.5 216.2 188.7 196.9 241.7 843.5 877.2 894.8 912.6 % change -2.9% 5.6% 2.2% 16.2% 20.5% 1.5% 8.8% 4.0% 2.0% 2.0% Northern Europe Biscuits 157.6 179.8 169.6 47.1 36.6 38.9 38.8 161.4 155.8 157.3 160.5 % change 14.1% -5.7% -9.2% 2.8% -5.1% -5.5% -4.8% -3.5% 1.0% 2.0% Southern Europe Biscuits 161.2 185.6 200.0 50.6 51.0 55.5 55.3 212.4 216.7 221.0 225.4 % change 15.1% 7.8% 11.9% 6.0% 3.7% 4.0% 6.2% 2.0% 2.0% 2.0% International operations 79.4 70.9 65.0 9.7 13.3 24.3 20.8 68.1 69.5 70.2 70.9 % change -10.7% -8.3% -8.5% 18.8% 5.7% 3.0% 4.8% 2.0% 1.0% 1.0% Total sales 1,154.7 1,170.7 1,210.1 323.6 289.6 315.6 356.6 1,285.4 1,319.1 1,343.3 1,369.4 % change 1.4% 3.4% 1.3% 12.6% 12.4% 1.1% 6.2% 2.6% 1.8% 1.9% 1,281.40 Segmental EBITDA* UK Biscuits and Snacks 134.5 114.3 100.0 21.4 30.9 33.1 43.5 128.9 133.3 135.1 136.9 % of sales 16.4% 14.4% 12.9% 9.9% 16.4% 16.8% 18.0% 15.3% 15.2% 15.1% 15.0% Northern Europe Biscuits 12.0 22.2 24.0 1.5 3.2 8.5 7.9 21.1 20.3 20.3 20.5 % of sales 7.6% 12.3% 14.2% 3.2% 8.7% 21.9% 20.4% 13.1% 13.0% 12.9% 12.8% Southern Europe Biscuits 23.6 31.3 36.6 9.0 10.0 11.4 11.3 41.7 42.3 42.5 42.8 % of sales 14.6% 16.9% 18.3% 17.8% 19.6% 20.5% 20.5% 19.6% 19.5% 19.3% 19.0% International Sales 18.0 15.8 13.0 2.6 3.0 4.0 2.6 12.2 13.0 13.3 13.5 % of sales 22.7% 22.3% 20.0% 26.8% 22.6% 16.5% 12.5% 17.9% 18.7% 19.0% 19.0% Central -12.2 -12.7 -12.1 -3.9 -2.6 -3.6 -3.5 -13.6 -13.5 -13.8 -14.0 Total EBITDA before operating exceptionals* 175.9 170.9 161.5 30.6 44.5 53.4 61.9 190.4 195.3 197.5 199.7 % of sales 15.2% 14.6% 13.3% 9.5% 15.4% 16.9% 14.3% 14.8% 14.8% 14.7% 14.6%

CASH FLOW ITEMS Cash EBITDA before exceptionals 175.1 166.8 144.8 13.0 49.2 53.4 61.9 177.5 195.3 197.5 199.7 Change in working capital -46.1 3.4 3.2 7.9 -11.4 -6.8 15.0 4.7 0.0 0.0 0.0 Non-cash restructuring charges 16.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Restr & other charges related to Carlisle factory flood 17.6 -4.7 7.2 0.0 20.1 0.0 0.0 0.0 Restructuring & other cash payments from provisions -31.0 -31.0 -37.3 -13.7 -4.4 -4.9 -12.0 -35.0 -20.0 -15.0 -15.0 Adjustments 7.1 7.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Cash generated from operations 105.1 146.2 127.5 24.8 28.7 48.9 64.9 167.3 175.3 182.5 184.7 Interest paid -56.2 -24.2 -9.8 -14.5 -30.0 -78.5 -76.9 -72.0 -69.0 Interest received 2.6 1.1 0.3 0.7 1.0 3.1 4.0 4.0 4.0 Net cash interest -63.2 -56.5 -53.6 -23.1 -9.5 -13.8 -29.0 -75.4 -72.9 -68.0 -65.0 Cash taxes 12.5 -1.6 -1.9 0.3 -0.5 -0.3 -2.3 -2.8 -7.5 -10.0 -10.0 Other non-operating items 0.9 -1.1 -0.9 -5.3 0.0 -7.3 0.0 0.0 0.0 Net cash flow from operating activities 54.4 88.1 72.9 0.9 17.8 29.5 33.6 81.8 94.9 104.5 109.7 Capex -54.1 -58.5 -54.1 -8.4 -10.1 -8.3 -12.2 -45.0 -45.0 -45.0 -45.0 Free cash flow 0.3 29.6 18.8 -7.5 7.7 21.2 21.4 36.8 53.9 63.5 68.7

BALANCE SHEET ITEMS Cash and short-term deposits 21.2 31.4 77.6 48.1 55.9 80.2 93.8 87.8 104.5 117.2 125.5 Revolving credit facility (up to £50m) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Tranche A 264.8 256.0 256.1 256.2 248.5 248.5 211.2 160.4 100.0 Trance B (£) 98.3 87.3 87.4 87.5 87.3 87.3 87.3 87.3 87.3 Trance B (Eur) 66.5 64.2 64.7 64.8 64.2 64.2 64.2 64.2 64.2 Trance C (£/Eur) 197.3 195.6 196.3 196.5 195.6 195.6 195.6 195.6 195.6 New senior credit facility 626.9 603.1 604.5 605.0 595.6 595.6 558.3 507.5 447.1 10.750% £ sr sub notes due 2011 120.0 164.5 164.6 164.6 164.6 164.6 164.6 164.6 164.6 164.6 10.625% Eur sr sub notes due 2011 112.8 135.1 130.3 131.4 131.5 128.3 128.3 128.3 128.3 128.3 High yield bonds 232.8 299.6 294.9 296.0 296.1 292.9 292.9 292.9 292.9 292.9 Finance lease obligations 3.1 1.4 0.9 0.5 0.3 0.3 0.3 0.0 0.0 0.0 Less: Issue costs -10.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total third-party debt 684.2 665.1 927.9 898.9 901.0 901.4 888.8 888.5 851.2 800.4 740.0 Net third-party debt 663.0 633.7 850.3 850.8 845.1 821.2 795.0 800.7 746.8 683.2 614.6 Net pension liability (IFRS) 373.6 346.9 355.8 385.5 353.8 390.0 390.0 375.0 365.0 355.0

CREDIT RATIOS Net debt/EBITDA 3.8x 3.7x 5.3x 5.3x 4.9x 4.4x 4.2x 4.2x 3.8x 3.5x 3.1x Net pension-adjusted debt/EBITDA 5.9x 7.4x 7.6x 7.2x 6.4x 6.2x 6.3x 5.7x 5.3x 4.9x EBITDA/Net cash interest 2.8x 3.0x 3.0x 2.5x 2.7x 2.7x 2.5x 2.5x 2.7x 2.9x 3.1x Source – BNP Paribas Estimates, United Biscuits Leverage and Coverage are based on the last 12 months’ results. Some of the ratios are adjusted for the effects of acquisitions and disposals. In addition, these 2 measures are usually calculated based on EBITDA adjusted for exceptional or non-recurring items. Leverage is defined as net lease-adjusted debt (x8 operating leases)-to-EBITDAR. Coverage is defined as EBITDAR-to-(net interest+rental expenses).

379 European High Yield Research Unity Media ⎪ January 2006

Aizaz Shaikh +44 20 7595 8607 [email protected] Unity Media (Iesy/Ish)

Bond Description & Market Data, as of 05 January 2006 Next Call Issuer Credit Trend: Stable Description Amount (o/s) Ratings Date Price Price YTW STW

8.75 % Sr Nts due 2015 EUR 215mn Caa1/CCC+ 15-Feb-10 104.375 99 1/4 8.87% 569 bp 10.125% Sr Nts due 2015 EUR 235mn Caa1/CCC+ 15-Feb-10 105.063 104 9.56% 628 bp 10.375% Sr Nts due 2015 USD 151mn Caa1/CCC+ 15-Feb-10 105.188 103 9.78% 493 bp Source – BNP Paribas

Company Profile Unity Media is the renamed entity comprising Iesy, Ish, and Telecolumbus. Iesy is the principle Level 3 cable television operator in the German state of Hessen and, via the 2005 acquisition of Ish, in the German state of Nordrhein Westphalia. The company provides basic and premium cable television services, as well as broadband Internet access. Together Iesy and Ish had approximately 5.2 milion basic cable subscribers, 88k digital subscribers and 30k high-speed internet subscribers at September 30, 2005. Based on the quarter ended 30 September 2005, the company generated LQA total revenues of €548mn and LQA adjusted EBITDA of €268mn. Net total LQA leverage at 30 September 2005 is 6.1x.

As part of the company’s acquisitions in 2005, the Iesy and Ish financial and operating structures have been merged; the merger of the Telecolumbus capital and operating structures into Iesy/Ish is still pending.

Investment Recommendation Two quick mergers and Iesy is looking a lot like KDG. Currently, Iesy is trading roughly 150 basis points behind the Kabel Deutschland seniors, with less than 2 turns additional leverage. We would expect this spread to compress over time, but note that 2006 is likely to be a year of operational headaches and slow deleveraging. Still, we remain comfortable with the credit pending the ultimate plans vis-à-vis Telecolumbus, which should add further credit enhancement. We remain BUY on both Iesy bonds with a STABLE credit trend.

Debt Profile

The company's debt comprises a €215mn 8.75%, $151mn 10.375% and €235mn 10.125% bond issues, with standard high yield covenants. The 10.375% and 10.125% bonds were issued to fund the acquisition of Ish in July 2005 and rank equally with the 8.75% bonds. The bonds were all issued by Iesy Repository, an intermediate holding company of Iesy operations; the bonds are callable in 2010 (NC5).

Senior Credit Facilities

Iesy's credit facilities are issued at Iesy Hessen, which owns and conducts principally all of the Iesy's operations. The €230mn senior credit facility provides for senior secured term loans in total amount of €200.0mn and a revolving credit facility in an aggregate principal amount equal to €30.0mn.

A first ranking fixed security has been given by Iesy Hessen over substantially all of its assets and participations to creditors under bank facility agreement. In addition, Iesy Repository, the issuer of the high yield bonds, has pledged all the equity interests it owns in New Iesy, Iesy Hessen and Iesy GP and a charge over the proceeds of any loan made by it to New Iesy, Iesy Hessen or any of its subsidiaries. New Iesy and Iesy GP, and other subsidiaries have also provided a senior guarantee of the obligations under the Senior Credit Facilities (guarantors together must represent 85% of the consolidated EBITDA).

380 European High Yield Research Unity Media ⎪ January 2006

Iesy Structure

Shareholders Guarantor of Senior Credit Facilities and Senior Notes

Luxembourg Holding Company

100% €215m 8.75% Senior Notes

€235m 10.125% Senior Notes iesy Repository 0.8% $151m 10.375% Senior Notes 100%

New iesy 99.2%

0.02% 99.98% iesy GP

€230m Senior iesy Hessen Credit Facilities

100%

Kabelnetz iesy Services

Source – Iesy

381 European High Yield Research Unity Media ⎪ January 2006

Bond Covenant Bond description EUR 215mn 8.75% Senior Notes Feb 15 Due 2015 Issuing entity Iesy Repository GmbH Ranking Senior Notes Position vs. bank debt Structurally subordinated Position vs. other bonds No other bonds outstanding The notes are general secured obligations of the issuer that rank senior in right of payment to all existing and future indebtedness that is expressly subordinated in right of payment of Security/Guarantees the notes. The Notes have the benefit of a second-priority pledge of the Capital Stock in New Iesy, Iesy Hessen and Iesy GP and of the Issuer’s rights under the Proceeds Loan. ! Make Whole – prior to 15 Feb 2010 at bunds+50bp ! Equity Claw – prior to 15 Feb 2008 max 35% of issue at par + coupon (108.75%) ! Call Schedule: Optional redemption 11 Feb 2010 – 104.375% 11 Feb 2011 – 102.188% 11 Feb 2012 – 101.094% 11 Feb 2013 – 100.000% Tax redemption Yes – at par + accrued and unpaid interest Negative pledge Yes Cross default Yes Fall away covenants Yes Anti-layering Yes Limitation on Liens Yes Change of control Put at 101%, 50%+ of voting power Not less that current market fair value, if above €15mn then authorisation from the Asset sales supervisory board is required. At least 75% of the consideration received need to be in cash, debt, replacement asset etc. Debt is permitted up to 7.0x pro forma coverage prior to the 30-month anniversary, then 6.0x. Carve outs: Debt limit ! Credit facility incurrence up to €230mn; ! CLOs, mortgage & purchase money obligations up to €25mn, and 25% of consolidated EBITDA; ! General basket up to €25mn and 25% of consolidated EBITDA. If company can raise €1.00 of debt then, 50% net income less 100% net loss, if the leverage ratio remains less than 5.25x. Carve outs: ! Payments of dividends following the covenant “Debt Limit”. ! Cash payments instead of issuing fractional shares following the exchange of Restricted payments securities in connection with any stock dividend, distribution, stock split merger, etc. ! Repurchase of stock out of the net cash proceeds of an issuance of shares up to €10mn; ! After IPO, dividend payment up to 6% of the net cash proceeds; ! General basket up to €25mn. If greater than €10mn, needs to be approved by the majority of the members of the board of Transactions with affiliates directors. If greater than €20mn, then needs a written opinion from an independent financial advisor. Source – BNP Paribas, Iesy

382 European High Yield Research Unity Media ⎪ January 2006

Bond Covenants EUR 235mn 10.125% Senior Notes 2015 ; USD 151mn 10.375% Senior Notes 2015 Bond description EUR Notes USD Notes Issuing entity Iesy Repository GmbH Ranking Senior notes Position vs. bank debt Structurally subordinated Position vs. other bonds Pari passu The Notes are secured by pledges of the equity interests in New iesy, iesy Hessen and iesy GP, and of the Issuer’s rights under the inter-company loans it made to iesy Hessen with the Security/Guarantees gross proceeds from the offering of the Notes and the offering of the Existing Notes on a second priority basis, which in each case are pledged or will be pledged, as the case may be, on a first priority basis to secure debt under the Senior Credit Facilities. ! Make Whole – prior to 15 February 2010 at bunds+50bp ! Equity Claw – prior to 15 February 2008 max 35% of issue at par + coupon ! Call Schedule: EUR USD Optional redemption 15 February 2010 – 105.063% – 105.188% 15 February 2010 – 103.375% – 103.458% 15 February 2010 – 101.688% – 101.729% 15 February 2010 – 100.000% – 100.000% Tax redemption Yes at par + accrued and unpaid interest Negative pledge Yes – limitation on Liens Cross default Yes – on €20mn or more of other debt Fall away covenants Yes Anti-layering Yes Change of control Put at 101%, 50% of voting share capital If the asset is at least equal to the fair market value, as determined in good faith by the board of directors, of the shares and assets. If 75% of the consideration received by the issuer is in the form of cash or cash equivalents. Asset sales If the issuer applies 100% of the net available cash from the asset disposal to: ! redeem senior Indebtedness ! acquire additional assets Debt is permitted if after giving pro forma effect thereto, the consolidated leverage ratio is less than 7.00 to 1.00 if the Incurrence is prior to the 30-month anniversary of the issue date, or 6.00 to 1.00 after. Carve outs: Debt limit ! Credit facility can not exceed €90mn, if no acquisitions are consummated €230mn. ! CLOs or PMOs can’t exceed if none of the acquisition are consummated €25mn and 25% of consolidated EBITDA for the most recently completed fiscal year. ! General basket of €25mn or 25% of consolidated EBITDA for the most recent completed fiscal year. If company can raise €1.00 of debt then 50% net income less 100% net loss. Carve outs: ! Payments of dividends following the covenant “Debt Limit”. ! Repurchase of stock from employees up to €10mn in any calendar year. Restricted payments ! Dividends in any calendar year, up to 6% of aggregate net cash proceeds, from all public offerings. ! Dividends with connection to advisory or consulting up to $2mn a calendar year. ! General basket up to €25mn. All transactions with affiliates should be made in good faith and on an arm’s-length basis, and for transaction involving an aggregate value of €10mn or greater the transaction has to Transactions with affiliates be approved by the board of directors; for transactions involving an aggregate value of €20mn a written opinion of an independent financial advisor is required (transaction has to be fair on a financial stand point). Source – BNP Paribas, Iesy

383 European High Yield Research Unity Media ⎪ January 2006

Iesy, Financial Model FYE 31 December Iesy Iesy Iesy Iesy Iesy Iesy Iesy Iesy/Ish Iesy Iesy Iesy/Ish EUR mn Historic 9 mths Historic 9 mths Historic PF Historic Historic Historic GAAP FY 02 30/09/03 Q4 03 FY 03 30/09/04 Q4 04 FY 04 FY 04 Q1 05 Q2 05 Q3 05 PROFIT & LOSS

Revenues 109 94 32 126 97 33 129 531 32 39 133 Own work capitalized 2 0 0 1 1 1 1 7 0 1 2 Other operating income 9 7 4 11 3 2 5 22 1 1 3 Total revenues 119 101 36 138 101 35 136 560 33 41 137 y-o-y change 0.9% 15.6% -0.7% -1.4%

COGS -28 -21 -6 -28 -19 -7 -26 -118 -6 -8 -29 Gross profit 91 80 30 110 82 28 110 442 27 33 108 Gross margin 76.2% 79.0% 82.2% 79.8% 81.0% 80.9% 81.0% 79.0% 80.7% 81.4% 78.9% SG&A -20 -18 -5 -23 -15 -7 -22 -88 -5 -6 -19 SG&A / Total revenues 16.6% 17.3% 14.8% 16.7% 15.1% 19.5% 16.2% 15.7% 15.9% 15.1% 13.5% Other expenses -60 -26 -5 -31 -22 -9 -32 -114 -6 -8 -23 Other opex / Total revenues 50.1% 25.7% 14.0% 22.6% 22.0% 26.6% 23.2% 20.4% 17.3% 18.9% 16.8%

EBITDA 11 37 19 56 44 12 56 240 16 19 67 EBITDA margin 9.5% 36.0% 53.4% 40.6% 43.9% 34.9% 41.6% 42.9% 47.6% 47.3% 48.6%

EBITDA adjusted 11 37 19 56 44 24 68 262 16 16 67 EBITDA Adj margin 9.5% 36.0% 53.4% 40.6% 43.9% 68.1% 50.2% 46.8% 49.1% 40.0% 48.6%

CASH FLOW

Consolidated Gain/Loss -8 3 -5 5 -1 4 -12 -67 -46

Payment relating to extraordinary expenses 53 28

Loss attributable to minority interest -1 1 -1 2 0 2 0 0 0 D&A 30 10 40 32 11 42 11 15 65 Change in working capital -12 4 -8 -5 5 0 20 22 -16 Cash from operations 5 9 18 27 34 14 48 19 22 32

Cash Interest -7 -7 -29 -197 -7 -7 -7

Net cash from operating activities 27 7 19 12 15 25

Capex -2 -1 -3 -3 -4 -7 -47 -3 -6 -10

Investing cash flow -24 22 -1 21 -3 -4 -7 -3 -949 -10

Free cash flow 7 17 23 31 10 42 16 16 22

Financing activities 31 10 0 10 -55 -1 -56 121 753 -21

Change in cash 12 41 17 58 -24 9 -15 137 -173 0

BALANCE SHEET

Cash & equivalents 46 41 58 35 43 43 8 181 24 24

Bank Debt 50 150 150 200 200 200 950 200 950 958 8.75% sr Nts 215 215 215 215 216 215 215 10.125% & 10.375% Nts 360 360 360 Other debt 165 110 110 Total Debt 50 150 150 415 415 415 1,690 416 1,635 1,643 Net Total Debt 4 109 92 380 372 372 1,682 235 1,611 1,619

RATIOS

Total Debt / LTM EBITDA Adj 6.4x 6.3x 6.2x 6.3x Net Total Debt / LTM EBITDA Adj 6.4x 3.6x 6.1x 6.2x

Source – BNP Paribas, Iesy

384 European High Yield Research Unity Media ⎪ January 2006

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385 European High Yield Research Vendex KBB ⎪ January 2006

Oleksiy Soroka, CFA +44 20 7595 4878 [email protected] Vendex KBB

Bond Description & Market Data, as of 5 January 2006 Next Call Issuer Credit Trend: Stable Description Amount (o/s) Ratings Date Price Price YTW STW 7.875% senior notes due 2014 EUR 275mn B3/B 8-Oct-08 107.88 102.00 7.56% 433bp Source – BNP Paribas Company Profile Vendex KBB is the leading non-food retailer in The Netherlands, with a significant and growing presence in other continental European countries, including Belgium, Denmark, France, Germany, Luxembourg and Spain. Vendex KBB has six major business units: HEMA, V&D, Bijenkorf, DIY, Fashion and Consumer Electronics. As of 31 January 2004, Vendex KBB operated 15 retail formats with 1,766 stores. In the twelve months ended 31 October 2005, the company had sales of €3,998mn and adjusted EBITDA of €253mn. We calculate that Vendex KBB had lease-adjusted leverage and coverage of 5.3x and 1.6x, respectively, as of the end of October 2005.

Investment Recommendation We maintain a BUY/Stable Credit Trend recommendation for Vendex KBB’s 7.875% senior notes due 2014. The bonds have appreciated substantially during the latter part of 2005, in line with our recommendation. We believe that further price appreciation upside is much more limited from the current, much tighter, levels. However, we still remain supportive of the company, given that we expect that Vendex KBB’s operating performance will continue to improve gradually during the next year.

The company had performed exactly in line with our expectations in 2005, achieving substantial reduction in its working capital and stabilizing earnings. Encouragingly, the company’s management believes it can still achieve further reductions in Vendex KBB’s working capital. We also would like to point out that there has been certain pick-up in the Dutch retail environment during the last reported quarter (the country’s retail sales were up 0.7% year-on-year in third quarter 2005, including +3.3% in August and +2.2% in September). We remark that a year-on-year improvement in retail sales in The Netherlands next year represents an upside to our base-case scenario (which assumes a slight deterioration).

We continue to note that Vendex KBB’s notes have a relatively risky profile and that the technical support for the bonds is fairly weak. Another risk to our favourable outlook for the company’s bonds lies in a possibility that Vendex KBB may use a substantial cash position (of approximately €384mn) it had accumulated by the end of its fiscal third quarter to make a releveraging acquisition or to repay material amounts of shareholder loans. According to Vendex KBB’s management, the company is considering its options in respect of the use of the excess cash on its balance sheet at the moment. We presently assume that the company will use the bulk of the excess cash to prepay its senior bank debt.

Debt Profile As of 31 October 2005, Vendex KBB had total indebtedness pertaining to the restricted group of €944mn, comprising €611mn of credit facilities, €275mn of high yield notes and €49mn of other indebtedness. Senior Credit Facilities At their inception, Vendex KBB’s Senior Credit Facilities provided for facilities of up to €890mn, through a revolving credit facility of €265mn and term loans of up to €625mn. VDXK, Vendex KBB and certain of their direct and indirect subsidiaries have guaranteed on a senior basis the borrowers’ obligations under the Senior Credit Facilities and VDXK, Vendex KBB and certain of their direct and indirect subsidiaries have granted in favour of the lenders under the Senior Credit Facilities a first ranking security interest over certain of their assets. In addition, a first ranking pledge over the shares in VDXK and in Vendex KBB and certain of its direct and indirect subsidiaries, and a first ranking security interest over the funding loan, have been granted in favour of the lenders under the Senior Credit Facilities.

386 European High Yield Research Vendex KBB ⎪ January 2006

Vendex KBB Structure

Consortium(1)

100%

Victoria Acquisition II B.V.

100%

€275m Notes Victoria Acquisition III B.V.

100%

(3)(5)(6) Funding VDXK Acquisition B.V. Loan (2) Senior Credit Facilities 99.56%

€625m Term Loans Koninklijke Vendex KBB B.V.(4)(5)(6) Revolving Credit Facility 100%

Unrestricted Subsidiaries

€600m Mortgage Loan Propcos Non-Guarantors Guarantors (5)

Guarantors under the Indenture

1. The Consortium consists of a group of investment funds advised by KKR, Cinven, Permira and AlpInvest. The Board of Management of Vendex KBB and approximately 50 other managers have made an indirect equity investment in Vendex KBB. 2. The gross proceeds of the sale of the notes were loaned to Vendex KBB pursuant to a funding loan. The funding loan has the same principal amount and repayment terms as the notes. The funding loan is an obligation of Vendex KBB and is subject to a second priority pledge in favour of the holders of the notes and certain restrictions under the intercreditor agreement in favour of the lenders under the Senior Credit Facilities. 3. The notes are secured by a second priority pledge over the shares of VDXK Acquisition B.V. 4. The notes are secured by a second priority pledge over the shares of Koninklijke Vendex KBB B.V. 5. The Guarantors consist of HEMA Belgique B.V., M&S Mode Nederland B.V., Schaap en Citroen B.V., Vroom & Dreesmann Warenhuizen B.V., Vendex KBB Speciaalzaken B.V., Vendex KBB Nederland B.V., Vendex KBB DIY Group B.V., M&S Mode France B.V., M&S Mode International B.V., M&S Mode Spain B.V., Modehuizen Claudia Str¨ater B.V., Praxis Doe-het-Zelf Center B.V., Praxis Groep B.V., IMpact Retail B.V., IMpact Retail Holding B.V., KBB Buitenland B.V., Magazijn ‘‘De Bijenkorf’’ B.V., Dixons B.V., Formido Bouwmarkten B.V., HEMA B.V., Hunkem¨oller B.V., Koninklijke Vendex KBB B.V., Divisie Bijenkorf B.V., Divisie HEMA B.V., Divisie Vroom & Dreesmann B.V. and VDXK Acquisition B.V. As of 1 August 2004 and for the 12 Months to that date, the subsidiaries of Vendex KBB that are Guarantors collectively held approximately 81% of the assets of Vendex KBB excluding the Propcos, generated approximately 79% of the revenues of Vendex KBB excluding the Propcos and 74% of the adjusted EBITDA of Vendex KBB excluding the Propcos. The Guarantors guarantee the notes on a senior subordinated basis. The Guarantees are subject to a 179-day standstill on enforcement in certain circumstances and are also subject to release upon certain circumstances.

Source – Vendex KBB

387 European High Yield Research Vendex KBB ⎪ January 2006

Bond Covenant Bond description EUR 275mn 7.875% senior notes due 2014 Issuing entity Victoria Acquisition III B.V. Ranking Senior Notes Position vs. Bank debt Contractually and contractually subordinated Position vs. Other bonds Not applicable The notes are guaranteed on a senior subordinated basis by the Guarantors (the subsidiaries of Vendex KBB) that collectively held approximately 81% of the assets of Vendex KBB excluding the retail property owned by the Propcos, generated approximately 79% of the revenues of Vendex KBB excluding the Propcos and 74% of the adjusted Security/guarantees EBITDA of Vendex KBB excluding the Propcos for the twelve months ended 1 August 2004. The notes are secured by a second priority pledge over the funding loan and a second priority pledge over the shares of VDXK and Vendex KBB. The security granted in favor of the notes may be released in certain circumstances. Make Whole – Bunds+50bp before 1 October 2008 Equity Clawback – 40% at 107.875% before 1 October 2007 Call Schedule: - during the twelve-month period beginning 1 October 2008 – 107.875% Optional redemption 1 October 2009 – 103.938% 1 October 2010 – 102.625% 1 October 2011 – 101.313% 1 October 2012 and thereafter – 100.000% Change of control Put at 101% Tax redemption Yes – at par Negative pledge Yes Cross default Yes – on €25mn or more of other debt Fall away covenants Yes Anti-layering Yes The Issuer cannot sell assets unless: The issuer receives a fair market value for them; At least 75% of the consideration is in cash or equivalent (including a transfer of the Issuer’s debt, cash equivalents, accumulated non-cash proceeds not to exceed the greater of €200mn or 15% of Total Assets); Must use proceeds within 365 days to pay down senior or restricted subsidiary debt, Asset sales pay down the pari passu indebtedness (only if accordance with provisions of an Asset Sale offer), purchase of businesses so that they become the Restricted Subsidiaries, investments in assets and properties, to buy out or purchase a release from lease obligations on existing retail stores (up to €25mn per annum and up to €150mn on an cumulative basis). Net proceeds from an Asset Sale not used for the above will constitute Excess Proceeds an when the aggregate amount reaches €25mn the Issuer shall make a pro rata offer for the portion of the bonds and of other pari passu indebtedness outstanding in accordance to the Asset Sale Offer. Source – BNP Paribas, Vendex KBB

388 European High Yield Research Vendex KBB ⎪ January 2006

Bond Covenant Bond description 7.875% senior notes due 2014 Pro forma Fixed Charge Coverage Ratio of at least 2.0x. Carve outs: Capital leases, mortgage and other financings incurred for the purpose of improvement or purchase of PP&E not to exceed the greater of €100mn and 5.0% of Total Assets Debt limit as of the date of such incurrence; General basket of €225mn; Indebtedness incurred in a Qualified Receivables Financing that is not recourse to the Issuer or its Restricted Subsidiaries other than a Receivables Subsidiary. If company can raise €1.00 of debt then 50% of accumulated net income less 100% accumulated net loss plus 100% of equity or equity-like proceeds Carve outs: Payments to fund the acquisition of shares in connection with share option or other management or employee benefit plan of up to €10mn in any calendar year (with unused amounts being carried over to succeeding calendar years up to a maximum of €20mn in any calendar year; Repurchase of equity interests upon exercise of options, warrants or other securities; Restricted payments Following a Public Offering, to pay dividends on the common stock not to exceed in any fiscal year the greater of (A) an amount equal to the greater of (x) 5% of the Market Capitalization and (y) 5% of the IPO Market Capitalization, provided that such payment will not exceed the net cash proceeds of any such Public Offerings and provided further that after giving pro forma effect for the payment, the Leverage Ratio shall be no greater than 4.00x and (B) 6% per annum of the net cash proceeds received in any Public Offerings; Investments in Unrestricted Subsidiaries made in good faith not to exceed €40mn; General basket not to exceed €60mn. Transactions of over €10mn have to be at fair terms and, in addition, for transactions over €15mn must be approved by a majority of the members of the Board of Directors. Carve outs: Payment of customary annual management, consulting, monitoring and advisory fees and related expenses to the shareholders; Payment of reasonable and customary fees to the company officers, directors, employees or consultants; Transactions as to which the Issuer or the relevant Restricted Subsidiary delivers to the Trustee a letter from an Independent Financial Advisor stating that such Transactions with affiliates transaction is fair; Payments or loans to any Management Equity Subsidiary and/or management, employees or consultants, which are approved by a majority of the members of the Board of Directors in good faith; Obligations under the terms of any shareholders’ agreement to which the Issuer was a party as of the Issue Date; The issuance of the Shareholder Debt as approved by a majority of the members of the Board of Directors of the Issuer; Transactions effected as part of a Qualified Receivables Financing or a Permitted Propco Transaction. Source – BNP Paribas, Vendex KBB

389 European High Yield Research Vendex KBB ⎪ January 2006

P&L SUMMARY Net Turnover HEMA 924 911 918 912 220 209 237 245 911 935 % change -1.4% 0.8% -0.7% -0.5% 0.0% -0.4% 0.5% -0.1% 2.6% V&D 890 855 812 690 154 143 174 172 643 630 % change -3.9% -5.0% -15.0% -9.9% -10.1% -0.6% -0.5% -6.9% -2.0% Bijenkorf 406 389 399 387 83 80 104 107 374 368 % change -4.2% 2.6% -3.0% -6.7% -1.2% -2.8% -2.1% -3.5% -1.6% DIY 737 1,063 1,220 1,299 319 365 327 306 1,317 1,334 % change 44.2% 14.8% 6.5% -0.6% -2.4% 5.5% 5.1% 1.4% 1.3% Apparel 424 456 457 459 106 134 114 116 470 491 % change 7.5% 0.2% 0.5% -1.9% 8.1% 0.9% 1.6% 2.4% 4.4% Consumer electronics 590 615 603 268 60 67 67 81 275 298 % change 4.2% -2.0% -7.6% -4.8% 0.0% 6.3% 7.9% 2.6% 8.3% Other activities/holding company 47 38 42 43 5 6 8 10 29 40 % change -19.1% 10.5% 2.4% -58.3% -50.0% -11.1% 0.0% -32.6% 37.9% Net Turnover from continued activities 4,018 4,327 4,451 4,058 947 1,004 1,031 1,037 4,019 4,095 % change 7.7% 2.9% -8.8% -3.9% -2.1% 1.6% 2.1% -1.0% 1.9% Net Turnover from Discontinued Activities 940 360 0 326 0 0 0 0 0 0 Net Turnover 4,958 4,687 4,451 4,384 947 1,004 1,031 1,037 4,019 4,095 % change -5.5% -5.0% -1.5% -3.9% -2.1% 1.6% 2.1% -8.3% 1.9%

Adjusted EBITDA from continued activities HEMA 54 58 61 71 9 13 17 31 70 72 % of net turnover 5.8% 6.4% 6.6% 7.8% 4.1% 6.2% 7.2% 12.5% 7.6% 7.6% V&D 40 6 0 5 -7 -10 6 -2 -13 -6 % of net turnover 4.5% 0.7% 0.0% 0.7% -4.5% -7.0% 3.4% -1.0% -2.0% -1.0% Bijenkorf 29 15 15 13 0 -1 9 9 17 17 % of net turnover 7.1% 3.9% 3.8% 3.4% 0.0% -1.3% 8.7% 8.5% 4.6% 4.5% DIY 70 100 107 115 25 39 29 31 124 127 % of net turnover 9.5% 9.4% 8.8% 8.9% 7.8% 10.7% 8.9% 10.2% 9.4% 9.5% Apparel 56 61 54 54 8 26 9 10 53 55 % of net turnover 13.2% 13.4% 11.8% 11.8% 7.5% 19.4% 7.9% 8.5% 11.2% 11.3% Consumer Electronics 21 26 25 15 2 2 3 5 12 13 % of net turnover 3.6% 4.2% 4.2% 5.6% 3.3% 3.0% 4.5% 6.0% 4.3% 4.4% Other -2 -11 -9 -9 -1 -5 0 -4 -10 -10

Adjusted EBITDA from continued activities (restricted group) 268 255 253 264 36 64 73 80 253 267 % of net turnover 6.7% 5.9% 5.7% 6.0% 3.8% 6.4% 7.1% 7.7% 6.3% 6.5%

Net rental expense 225 260 269 275 70 71 70 74 285 296 Adjusted EBITDAR (restricted group) 493 515 522 539 106 135 143 154 538 563 % of net turnover 9.9% 11.0% 11.7% 12.3% 11.2% 13.4% 13.9% 14.8% 13.4% 13.7%

CASH FLOW ITEMS Cash EBITDA (continued activities) 340 289 238 267 51 77 84 41 253 267 Cash effects from changes in working capital -18 51 -20 69 54 67 41 13 175 20 Other operating cash items/adjustments for non-cash costs -58 -20 24 -52 -12 -16 -7 0 -35 -20 Cash flow from operations (continued activities) 264 320 242 284 92 129 118 54 393 267 Net cash interest expense -52 -53 -49 -91 -26 -23 -19 -5 -73 -70 Cash taxes -1 -23 -19 1 -1 -4 -2 2 -5 -5 Capital expenditures -176 -173 -193 -144 -29 -31 -27 -63 -150 -150 Free cash flow 35 71 -19 50 36 71 70 -12 165 42 Financial costs related to the acquisition of Vendex 0 0 0 0 0 0 0 Acquisitions -8 -150 -81 -4 0 0 0 0 0 0 Net disposals 27 312 -6 16 0 0 0 0 0 0 Net disposals of participating interests 8 -8 8 3 0 0 0 0 0 0 Cash flow after acquisitions and disposals 62 225 -98 65 36 71 70 -12 165 42 Borrowings/(Repayments) -23 -150 171 567 -11 -7 -4 -14 -36 -43 Equity -48 -19 -1 1,495 0 0 0 0 0 0 Dividends -37 -35 -38 0 0 0 0 0 0 0 Other investing and financing items -5 -12 -3 -11 0 0 0 0 0 0 Change in net cash position -51 9 31 2,116 25 64 66 -26 129 -1

Net cash at beginning of the period 72 21 30 61 229 254 318 384 0 254 Net cash flow -51 9 31 168 25 64 66 -26 129 -1 Net cash at the end of the period 21 30 61 229 254 318 384 358 129 253

Source – BNP Paribas Estimates, Vendex KBB Leverage and Coverage are based on the last 12 months’ results. Some of the ratios are adjusted for the effects of acquisitions and disposals. In addition, these 2 measures are usually calculated based on EBITDA adjusted for exceptional or non-recurring items. Leverage is defined as net lease-adjusted debt (x8 operating leases)-to-EBITDAR. Coverage is defined as EBITDAR-to-(net interest+rental expenses).

390 European High Yield Research Vendex KBB ⎪ January 2006

Vendex KBB, Financial Model Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma Restr. Restr. Restr. Restr. Restr. Restr. Restr. Group Group Group Group Group Group Group FYE late January-early February Actual Actual Actual Actual Actual Actual Actual BNPP F'cast BNPP F'cast BNPP F'cast Dutch GAAP Fiscal 2001 Fiscal 2002 Fiscal 2003 Fiscal 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Fiscal 2005 Fiscal 2006 EUR mn 01-Feb-02 31-Jan-03 31-Jan-04 31-Jan-05 31-Jan-06 31-Jan-07 BALANCE SHEET ITEMS Cash (pro forma restricted group) 67 42 61 210 248 318 384 358 358 247 Short term loans from lending institutions -46 -12 0 6 Net cash at the end of the period 21 30 210 358 253 Indebtedness Revolving Credit Facility (availability of Eur265m) Current portion of term loans Current portion of other debt Short-term debt 318 271 16 0 0 0 Term loan A 300 290 286 286 277 277 234 Term loan B 163 163 163 163 163 163 163 Term loan C 163 163 163 163 163 163 163 Senior Credit Facilities 625 615 611 611 602 602 559 High Yield Notes 275 275 275 275 275 275 275 Other indebtedness 11 11 10 10 9 9 9 Lease commitments 40 40 40 39 35 35 35 Long-term debt 577 460 887 951 940 936 935 921 921 878 Total Third-Party Debt (pro forma restricted group) 895 731 903 951 940 936 935 921 921 878 Net Third-Party Debt (pro forma restricted group) 828 689 842 741 692 618 551 563 563 631 Mortgage loan to PropCos 600 600 597 0 0 0 0 Total Debt 1,551 1,540 1,533 935 921 921 878

Adjustment for leases (x8 rental expenses) 1,296 1,552 1,632 2,200 2,208 2,264 2,272 2,277 2,277 2,367 Lease-adjusted Total Debt 2,191 2,283 2,535 3,151 3,148 3,200 3,207 3,197 3,197 3,245 Lease-adjusted Net Debt 2,124 2,241 2,474 2,941 2,900 2,882 2,823 2,839 2,839 2,998

CREDIT RATIOS Net Debt/Adjusted EBITDA (restricted group) 2.4x 2.1x 2.7x 2.8x 2.7x 2.4x 2.2x 2.2x 2.2x 2.4x Adjusted EBITDA (restricted group)/Net cash interest expense 6.5x 6.2x 6.5x 4.2x 3.5x 3.7x 4.1x 3.5x 3.5x 3.8x

Lease-adjusted Total Debt/Adjusted EBITDAR (Restricted Group) 5.8x 5.9x 5.8x Lease-adjusted Net Debt/Adjusted EBITDAR (restricted group) 5.5x 5.4x 5.4x 5.3x 5.3x 5.3x 5.3x Adjusted EBITDAR (restricted group)/Net cash interest and rental expenses 1.5x 1.5x 1.5x 1.6x 1.8x 1.8x 1.9x Source – BNP Paribas Estimates, Vendex KBB Leverage and Coverage are based on the last 12 months’ results. Some of the ratios are adjusted for the effects of acquisitions and disposals. In addition, these 2 measures are usually calculated based on EBITDA adjusted for exceptional or non-recurring items. Leverage is defined as net lease-adjusted debt (x8 operating leases)-to-EBITDAR. Coverage is defined as EBITDAR-to-(net interest+rental expenses).

391 European High Yield Research Warner Music ⎪ January 2006

Aizaz Shaikh +44 20 7595 8607 [email protected] Warner Music

Bond Description & Market Data, as of 05 January 2006 Next Call Issuer Credit Trend: Stable Description Amount (o/s) Ratings Date Price Price YTW STW

7.375 % Sr Sub Nts due 2014 USD 465mn B2/B- 15-Apr-09 103.688 100 7.37% 279 bp 8.125 % Sr Sub due 2014 GBP 100mn B2/B- 15-Apr-09 104.063 100 1/2 8.02% 348 bp 9.5% Sr Disc Nts due 2012 USD 170mn B3/B- 15-Dec-09 104.75 Source – BNP Paribas

Company Profile Warner Music is one of the four major global recorded music and music publishing companies. The company's operations are comprised of two businesses: Recorded Music and Music Publishing. Warner is the world’s third largest recorded music company and the world’s second largest music publishing company. Warner Music generates over half of its revenues in more than 50 countries outside of the US. For the twelve months ended September 2005, the company generated revenues of $3.5bn and pro forma Adjusted EBITDA of $471mn. During that period the company's leverage was 5.4x.

Investment Recommendation We rate the Warner bond BUY with STABLE credit rating. The extra spread on Warner senior subordinated bonds relative to EMI bonds is attractive, given the similar underlying credit trends. We remain somewhat sceptical about the rumours of an ultimate merger with EMI.

Debt Profile High Yield bonds Warner's bonds consist of two senior subordinated bonds issued during the leveraged buyout by Warner Music Group, the issuing entity of the company's bank debt, and one deeply subordinated bond issued from a holding company. The company issued these latter $700mn bonds, of which $170mn were outstanding as at 30 September 2005, from a holding company of Warner Music Group, WMG Holdings Corp in December 2004. The proceeds of this sale were distributed to shareholders as dividends. The senior subordinated notes are general unsecured obligations of Warner Music Group, subordinated in right of payment to the senior debt of Warner Music. The guarantees are general unsecured obligations of such guarantor, subordinated in right of payment to senior debt of such guarantor.

Senior secured credit facility The senior secured credit facility consists of a $1.150bn term loan portion and a $250mn revolving credit portion, maturing 2011. All obligations under the senior secured credit facility are unconditionally guaranteed by Holdings and, subject to certain exceptions, each of the company's existing and future domestic wholly owned subsidiaries, referred to, collectively, as US guarantors. All obligations are secured by substantially all the assets of Warner Holdings, and each US guarantor, including, a pledge of 100% of Warner Music Group capital stock, 100% of the capital stock of each U.S. Guarantor and 65% of the capital stock of foreign subsidiaries that are directly owned by Warner Music Group or one of the US guarantors; a security interest in substantially all tangible and intangible assets of Warner Holdings, Warner Music Group and each US guarantor.

392 European High Yield Research Warner Music ⎪ January 2006

Warner Music Structure

Investor Group

100%

WMG Parent Corp.

100%

WMG Holdings Corp. $258m 9.5% Sr Disc Nts 2014

100% $250m senior secured revolving credit facility WMG Music Group $1.15bn senior secured term loan facility (Issuer) $465m 7.375% Sr Sub Nts 2014 $100m 8.125% Sr Sub Nts 2014

Recorded Music Recorded Music Music Publishing Music Publishing Subsidiaries Subsidiaries Subsidiaries Subsidiaries (U.S.)(1) (Non-U.S.) (U.S.)(1) (Non-U.S.)

1. Only wholly owned domestic subsidiaries that guarantee the senior secured credit facility guarantee Warner Music Group’s existing notes. Such guarantees are on a senior subordinated basis.

Source – Warner Music

393 European High Yield Research Warner Music ⎪ January 2006

Bond Covenants

USD 465mn 7.375% Senior Subordinated Notes due 2014 GBP 100mn 8.125% Senior Subordinated Notes due 2014 Bond description USD Notes GBP Notes Issuing entity Warner Music Group Ranking Senior Subordinated notes Position vs. bank debt Contractually subordinated Position vs. other bonds Structurally senior Each of the company domestic subsidiaries that guarantee the obligations under the Security/Guarantees company senior secured credit facility will jointly and severally and unconditionally guarantee the notes on an unsecured, senior subordinated basis. ! Make Whole – prior to 15 April 2007 at ! Make Whole – prior to 30 April 2009 at treasuries + premium gilts + premium ! Equity Claw – prior to 15 April 2007 ! Equity Claw – prior to 30 April 2007 max 35% of issue at 108% + coupon, if max 35% of issue at 108% + coupon, if 65% of the notes remain outstanding 65% of the notes remain outstanding Optional redemption ! Call Schedule: ! Call Schedule: 15 April 2009 – 103.688% 15 April 2009 – 104.063% 15 April 2010 – 102.458% 15 April 2010 – 102.708% 15 April 2011 – 101.229% 15 April 2011 – 101.354% 15 April 2012 – 100.000% 15 April 2012 – 100.000% Tax redemption Yes at par + accrued and unpaid interest Negative pledge Yes Cross default Yes Fall away covenants No Anti-layering Yes (Debt and Liens) Change of control Put at 101%, 30% of voting share capital 75% cash or cash equivalents. No need to offer to purchase notes unless excess proceeds Asset sales not invested or used to pay senior debt exceeds £20mn. Issuer may incur Indebtedness (including Acquired Indebtedness) and restricted subs may incur Acquired Indebtedness or Non-Public Indebtedness if Fixed Charge Coverage Ratio for the Issuer's most recently ended four full fiscal quarters for which financials available ≥ 2.0 to 1 on a pro forma basis (as if incurred at beginning of such period)

Debt limit Carve outs: ! CLOs incurred by Warner Music to finance the purchase of lease or improvement property in the limit of $50mn and 4% of consolidated tangible assets. ! Indebtedness of the group (general basket) can’t exceed £100mn at any time or 10% of the consolidated tangible assets of the foreign subsidiaries.

Source – BNP Paribas, Warner Music

394 European High Yield Research Warner Music ⎪ January 2006

Bond Covenants

USD 465mn 7.375% Senior Subordinated Notes due 2014 GBP 100mn 8.125% Senior Subordinated Notes due 2014 Bond description USD Notes GBP Notes No dividend except: ! Those payable in equity interest; ! Redemption of equity interest; ! Redemption of any indebtedness prior to any scheduled. Carve out: If no default, $1 of debt can be incurred (on a pro forma basis with a coverage ratio of ≥ 2.0x and 50% net income + 100% net cash proceeds + 100% cash and FMV (FMV determined in good faith by the board of directors) Does not prohibit: ! Dividend payment within 60 days after the declaration date; ! Redemption of Equity Interest; ! Redemption of Indebtedness subordinated to the Notes; ! Restricted payment for the repurchase of common Equity Interest; Restricted payments ! Payment of dividend on Disqualified Stock; ! Payment of dividend on Designated Preferred Stock; ! Investment in unrestricted Subsidiaries; ! Redemption of Equity Interest deemed to occur upon exercise of stock options or warrants; ! Payment of dividends after the first IPO; ! Cash dividends and other distributions on holdco’s; ! Distributions of Securitization Fees and purchase of Securitization Assets; ! Redemption for value of any Subordinated Indebtedness; ! Restricted Payment prior to 2009 if giving pro forma effect: ! Net Indebtedness to EBITDA ratio < 3.75x; ! Net Senior Indebtedness to EBITDA ratio < 2.5x; ! Payment of dividend to Holco of up to $150mn. Not less favorable than arms length transaction; if in excess of €5mn, resolution of majority Transactions with affiliates of non employee disinterested directors; if in excess of €75mn, fairness opinion. Source – BNP Paribas, Warner Music

395 European High Yield Research Warner Music ⎪ January 2006

Bond Covenants USD 170mn 9.5% Senior Discount Notes due 2014 Bond description Sr Discount Notes Issuing entity WMG Holdings Corp Ranking Senior Discount Notes Position vs. Bank debt Structurally subordinated Position vs. Other bonds Structurally subordinated The notes are senior unsecured obligations of Holdings and: ! rank equally in right of payment to all of Holdings’ unsecured senior indebtedness; ! rank senior in right of payment to any of Holdings’ future senior subordinated Security/guarantees unsecured indebtedness and future subordinated unsecured indebtedness; ! be effectively subordinated in right of payment to all of Holdings’ existing and future secured debt. No guarantees ! Make Whole – prior to 15 Dec 2009 at treasuries + premium ! Equity Claw – prior to 15 Dec 2007 max 35% of issue at 109.5% + coupon, if 65% of the notes remain outstanding ! Call Schedule: Optional redemption 15 Dec 2009 – 104.750% 15 Dec 2010 – 103.167% 15 Dec 2011 – 101.584% 15 Dec 2012 – 100.000% Tax redemption Yes at par + accrued and unpaid interest Negative pledge Yes Cross default Yes Fall away covenants No Limitation on Liens No carve out Anti-layering No Change of control Put at 101%, 50% of voting share capital ! Holdco receives consideration at the time of the Asset Sale at least equal to the fair market value of the assets; ! in the case of Asset Sales involving consideration in excess of $10.0mn, the fair market Asset sales value is determined by Holdco’s Board of Directors ! except for any Permitted Asset Swap, at least 75% of the consideration received in the Asset Sale by Holdco or such Restricted Subsidiary is in the form of cash or Cash Equivalents.

Source – BNP Paribas, Warner Music

396 European High Yield Research Warner Music ⎪ January 2006

Bond Covenants USD 170mn 9.5% Senior Discount Notes due 2014 Bond description Sr Discount Notes Issuer may incur Indebtedness (including Acquired Indebtedness) and restricted subs may incur Acquired Indebtedness or Non-Public Indebtedness if Fixed Charge Coverage Ratio for the Issuer's most recently ended four full fiscal quarters for which financials available ≥ 2.0 to 1 on a pro forma basis (as if incurred at beginning of such period) Carve outs: Debt limit ! CLOs incurred by Warner Music to finance the purchase of lease or improvement property in the limit of $50mn and 4% of consolidated tangible assets. ! Indebtedness of the group (general basket) cannot exceed $150mn at any time or 10% of the consolidated tangible assets of the foreign subsidiaries. No dividend except: ! Those payable in equity interest; ! Redemption of equity interest; ! Redemption of any indebtedness prior to any scheduled. Carve out: If no default, $1 of debt can be incurred (50% net income + 100% net cash proceeds + 100% cash and FMV (FMV determined in good faith by the board of directors) Does not prohibit: ! Dividend payment within 60 days after the declaration date; ! Redemption of Equity Interest; ! Redemption of Indebtedness subordinated to the Notes; Restricted payments ! Restricted payment for the repurchase of common Equity Interest, if less then $20mn; ! Payment of dividend on Disqualified Stock; ! Payment of dividend on Designated Preferred Stock; ! Investment in unrestricted Subsidiaries, not greater than $25mn or 2% of consolidated tangible Assets; ! Other restricted payment in a aggregate amount not to exceed $75mn; ! Cash dividends and other distributions on holdco’s; ! Distributions of Securitization Fees and purchase of Securitization Assets; ! Redemption for value of any Subordinated Indebtedness; ! Restricted Payment prior to 2009 if giving pro forma effect: not to exceed 4.25x EBITDA ratio. Not less favourable than arms length transaction; if in excess of $15mn, resolution of majority of the board of directors of the Holdco; if in excess of $75mn, fairness opinion by an Transactions with affiliates Independent Financial Advisor.

Source – BNP Paribas, Warner Music

397 European High Yield Research Warner Music ⎪ January 2006

398 European High Yield Research Warner Music ⎪ January 2006

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399 European High Yield Research Wind ⎪ January 2006

Aizaz Shaikh +44 20 7595 8607 [email protected] Wind

Bond Description & Market Data, as of 05 January 2006 Next Call Issuer Credit Trend: Stable Description Amount (o/s) Ratings Date Price Price YTW STW 9.75% Senior Notes due 2015 EUR 825mn (P)B3/B- 1-Dec-10 104.875 104 9.23% 590 bp 10.75% Senior Notes due 2015 USD 500mn (P)B3/B- 1-Dec-10 105.375 103.25 10.13% 527 bp Source – BNP Paribas Company Profile Wind is a leading Italian telecommunications operator offering mobile, fixed-line voice and Internet products and services to consumer and corporate subscribers. The company’s mobile business is the third largest in Italy based on number of subscribers, with 13mn subscribers. The company’s fixed-line business, which includes voice, data and Internet services, is essentially a CLEC, but is the second largest fixed line operator in Italy based on revenues and has 2.3mn voice subscribers, over 2.6mn Internet subscribers and over 20mn registered Internet portal users as of 30 September 2005. For the twelve months ended September 30, 2005, Wind generated total revenues of €4,663mn and adjusted EBITDA of €1,452mn.

Investment Recommendation We initiate coverage of Wind with a BUY rating on the senior notes and HOLD rating on the 2nd Lien paper with a STABLE underlying credit rating. We feel that at current market valuations there is no further upside in the 2nd lien paper; conversely the bonds could run significantly higher on evidence of credit enhancement. We anticipate that the difference in the call protection of the 2 securities will become increasingly evident in valuations by 2007. While we believe that the prospect of near term news flow being negative is quite significant, given the highly competitive nature of the Italian telecoms market, we have greater comfort through the 2007 timeframe and based on the strong underlying asset value of the mobile business.

In a downside scenario, however, the downside in bond price terms is minimal given the high coupon value of the bonds. Given the size of the bond issue, investors should be able to find opportune timing to enter the situation based on market volatility.

400 European High Yield Research Wind ⎪ January 2006

Debt Profile Wind’s debt was put in place in 2005 as part of the acquisition of the company by Naguib Sawaris’ Orascom. The leverage buyout was financed by sizeable tranches of senior, second lien, subordinated and deeply subordinated debt. The company issued €825mn 9.75% Senior Notes and $500mn 10.75% Senior Notes both due 2015. These notes have standard high yield covenants and are callable in 2010 (NC5). Both Notes were issued at the Wind Acquisition Finance S.A level and are therefore structurally subordinated to the Credit Facility. Both Notes benefit from (1) a first-ranking security interest in the capital stock of the Issuer; (2) a third-ranking security interest in the capital stock of Wind held by the Issuer; (3) a first-ranking security interest in the Initial Proceeds Loan; and (4) a first-ranking security interest in certain bank accounts and receivables of the Issuer.

The senior credit agreement provides for three term loan facilities, in an aggregate principal amount of €6,450mn, and a revolving credit facility as follows: a term loan A facility of €3,375mn in aggregate, consisting of a €2,925mn term A loan sub- facility and a €450mn term A loan and letter of credit sub-facility, a term loan B and C facilities of the equivalent each of €1,538mn in aggregate, consisting of a €1,476mn term loan sub-facility and a $75mn term loan sub-facility for both, and a revolving credit loan facility of up to €400mn in aggregate.

In support of the obligations under the company senior credit facilities:

! The company has given security over the shares of Wind, pledged certain intellectual property rights and assigned its rights in respect of certain insurance, trade and inter-company loan receivables; ! Wind, Enel.net and Delta have entered into a master security agreement, pursuant to which they haven given security given over certain shares (or other ownership interests) or real estate acquired by them in the future; ! Each of Wind, Delta and Enel.net has granted a privilegio speciale over certain of its movable assets pursuant to Article 46 of the Italian Banking Act; and ! Wind Finance SL S.A. has assigned the benefit of the Second Lien Proceeds Loan.

In September 2005, the company completed the refinancing of the €700mn second lien term loan facility. In support of the obligations under the second lien notes:

! The company has given security over the shares of Wind it acquired upon completion of the Acquisition and gave security over the shares of Wind it acquired under the Second Closing; ! Wind, Enel.net and Delta have entered into a master security agreement, pursuant to which they gave security over certain shares or real estate acquired by them in the future; ! Wind has pledged shares in Wind Finance SL S.A.; ! Wind has assigned its rights in respect of insurance, trade and inter-company loan receivables; and ! Wind Finance SL S.A. has assigned the benefit of the second lien proceeds loan. The security given in support of the second lien notes ranks second in priority, behind the company senior credit facilities.

In connection with the Transactions, a €500mn facility was made available to Wind Acquisition Holding Finance S.A. pursuant to a PIK bridge facility agreement. If not refinanced, the margin and overall cap also is increased by a set number of basis points per annum if the PIK bridge facility is rated CCC+ or lower by S&P or Caa1 or lower by Moody’s. The PIK bridge facility matures on 11 August 2006 but can be extended through November 2015 through conversion to term loans and/or exchange notes if certain conditions are met. The PIK bridge facility is secured by a pledge of the shares of PIKco and the proceeds loan relating to the proceeds from the PIK bridge facilities.

401 European High Yield Research Wind ⎪ January 2006

Wind Structure

Weather Investments II S.à.r.l.(1) Other equity Enel 91.2% investors

5.2% 3.6%

Weather Investments S.r.l.

100% 100% PIK Wind Wind Acquisition Holdings Proceeds PIK bridge Weather Capital Loan Acquisition Finance S.p.A. facility S.à.r.l.(2) Holdings (“PIKco”) €500 million(4) Finance S.A.(3)

50.0% + 1 share 100%

€825 million Wind Acquisition Finance S.p.A. Proceeds Wind 9.75% Senior Nts (5) (6) Orascom Telecom (the “Company”) Loan Acquisition due 2015 Holdings, S.A.E. guarantor Finance S.A. $500 million (Prior to Post-Closing Merger) (the “Issuer”) 10.75% Senior Nts due 2015 62.75% Intercompany Second (7) Loan Wind Telecomunicazioni S.p.A. Lien Second lien notes Proceeds (8) Wind (“Wind”) (9) €700mn Senior credit facilities Loan Finance SL €3,375.0mn term loan A guarantor (equivalent) S.A. €1,537.5mn term loan B (After Post-Closing Merger) due 2014 €1.537.5mn term loan C €400.0mn revolving

credit facility Restricted Group under the Indenture as of the date of Operating Subsidiaries Indenture (i.e., the Issuer, the Company and its Restricted Subsidiaries)

Entities to be merged in the Post-Closing Merger

1. Weather Investments II S.à.r.l. is controlled by Mr. Naguib Sawiris through investment vehicles. 2. Weather Capital S.à.r.l. is the borrower under a loan comprised of a €500 million tranche and an $871 million tranche which is collateralized by, among other things, 50% plus a fractional interest (i.e., a majority-in-interest) of the equity of Weather Investments S.r.l. 3. Wind Acquisition Holdings Finance S.A. is owned 73% by a charitable trust and 27% by PIKco. 4. The PIK bridge facility is guaranteed on a senior basis by PIKco and secured by a pledge on the share capital of PIKco and an assignment of the PIK proceeds loan, in each case, on a first-priority basis. 5. The Company guarantees the Notes on a senior basis and a security interest over the share capital of the Company was created for the benefit of the holders of the Notes. 6. The Proceeds Loan refers to an intercompany loan from the Issuer to the Company that was assigned for the benefit of the holders of the Notes on a first- priority basis prior to the Post-Closing Merger and on a third-priority basis on and after the Post-Closing Merger. 7. The intercompany loan between the Company and Wind, which is subordinated to the senior debt, was assigned as security for the Notes. 8. A third-ranking security interest over the 62.75% of the share capital of Wind was created for the benefit of the holders of the Notes, and upon completion of the Second Closing, a third-ranking security interest over the remaining share capital of Wind was created for the benefit of the holders of the Notes. After the Post-Closing Merger, Wind guarantees the Notes on a senior subordinated basis. 9. The second lien proceeds loan was assigned for the benefit of the creditors under our senior credit facilities and second lien notes. Upon completion of the Post-Closing Merger, the second lien proceeds loan was assigned for the benefit of the holders of the Notes on a third-ranking basis.

Source – Wind

402 European High Yield Research Wind ⎪ January 2006

Bond Covenants EUR 825mn 9.75% Senior Notes due 2015 USD 500mn 10.75% Senior Notes due 2015 Issuing entity Wind Acquisition Finance S.A. Ranking Senior Notes Position vs. bank debt Structurally Subordinated Position vs. other bonds Pari passu Guaranteed by Wind Acquisitions Finance (the Issuer) prior to the Post-Closing Merger and by Wind Telecomunicazioni S.p.A. (Wind) thereafter on a senior subordinated basis. The Notes and Note Guarantee are secured by: (1) a first-ranking security interest in the capital stock of the Issuer; (2) a third-ranking security interest in the capital stock of Wind held by the Issuer; (3) a first-ranking security interest in the Initial Proceeds Loan; and (4) a first-ranking security interest in certain bank accounts and receivables of the Issuer. Upon completion of the Post-Closing Merger and thereafter, the Notes and each Note Security/Guarantees Guarantee will be secured by: (1) a third-ranking security interest in the capital stock of Wind; (2) a third-ranking security interest in the Initial Proceeds Loan and the Second Lien Proceeds Loan. In addition, the Notes and each Note Guarantee will be secured by (1) a security interest in the Issuer-Wind International Company Loan (which will be eliminated upon completion of the Post-Closing Merger to the extent not paid prior to such time); and (2) a security interest in receivables under the Sale and Purchase Agreement and the Put and Call Option.

! Make Whole – Bund+50bp prior to 1 ! Make Whole – Treasuries+50bp prior December 2010 to 1 December 2010 ! Equity Claw – 35% at 109.75% prior to ! Equity Claw – 35% at 110.75% prior to 1 December 2008 1 December 2008 ! Call Schedule: ! Call Schedule: Optional Redemption 1 December 2010 – 104.875% 1 December 2010 – 105.375% 1 December 2011 – 103.250% 1 December 2011 – 103.583% 1 December 2012 – 101.625% 1 December 2012 – 101.792% 1 December 2013 – 100.000% 1 December 2013 – 100.000% Tax redemption Yes – at par Negative pledge Yes Cross default Yes – on €25mn or more of other debt Fall away covenants No Anti-layering Yes Change of control Put at 101%, 50%+ of voting power The Company will not sell assets unless: ! The Company receives fair market value for them as determined by the principal financial officer or, in the case of assets having a value in excess of €15mn, as determined by the Board of Directors; ! At least 75% of of the consideration received is in the form of cash and/or equivalents;

Asset sales ! Net proceeds must be used within 365 days to (1) repay, prepay, redeem or purchase Senior Debt followed by revolving credit indebtedness, (2) to aquire a permitted business if it will subsequently become a restricted subsidiary, (3) to make a capital expenditure, or (4) to acquire other non-current assets that are useful in a permitted business; Any net proceeds that are not applied as per above will constitute Excess Proceeds. When the aggregate amount of Excess Proceeds exceeds €25mn, the Issuer must make an offer to repurchase the notes and pari passu indebtedness. Source – BNP Paribas, Wind

403 European High Yield Research Wind ⎪ January 2006

Bond Covenants EUR 825mn 9.75% Senior Notes due 2015 USD 500mn 10.75% Senior Notes due 2015 If the pro forma consolidated leverage ratio is less than 5.5x before 31 December 2006 and less than 5x thereafter, then: ! Wind Acquisition Finance may, upon completion of the Second Closing, guarantee capital markets debt of a finance vehicle, incur a capital markets proceeds loan and incur other indebtedness in an aggregate principal amount not to exceed €100mn; ! Wind and any subsidiary guarantor may incur indebtedness. Carve outs: ! Credit facilities not to exceed €6.85bn less the aggregate amount of all repayments of the principal of any term indebtedness and the amount of reductions with respect to Debt limit revolving borrowings under a credit facility since the date of the indenture; ! Incurrence by Wind or any restricted subsidiary that is a guarantor of second lien note indebtedness not to exceed €700mn less repayments; ! Indebtedness represented by CLOs, mortgage financings or PMOs, incurred for the purposed of investment in PP&E not to exceed €250mn; ! Indebtedness by Wind-PPC Holding NV, Tellas Telecommunications and any of its restricted subsidiaries of indebtedness that is non-recourse with respect to the Issuer, the Company and each of its restricted subsidiaries cannot exceed €40mn; ! General basket of €200mn, provided that no more than €25mn can be incurred by restricted subsidiaries of Wind that are not guarantors. If the Company can incur €1 of additional debt then 50% of consolidated net income (less 100% of net loss); plus 100% of equity or equity-like proceeds; plus cash received from the sale of any restricted investment (only in the case that the investment was made after the date of the indenture); plus the fair market value of an unrestricted subsidiary re-designated as a restricted subsidiary; plus 50% of dividends or distributions received from an unrestricted subsidiary. Carve outs: Restricted payments ! Redemption, repurchase, retirement or other acquisition of any equity interests of the Company held by employees or management of up to €7.5mn in any twelve-month period, with unused amounts being carried over to any subsequent twelve month period subject to a maximum of €15mn being available in any twelve-month period; ! Dividends of up to 6% per annum of the net cash proceeds received by the Company in the event of an equity offering; ! General basket of €50mn. Affiliate transactions must be on terms that are no less favourable than those that could be obtained in a comparable arm’s length transaction. Transactions in excess of €10mn Transactions with affiliates require the approval of the majority of members of the Board of Directors who are disinterested with respect to such a transaction. Transactions in excess of €25mn require a fairness opinion issued by an accounting, appraisal, investment banking or valuation firm. Source – BNP Paribas, Wind

404 European High Yield Research Wind ⎪ January 2006

D Wind, Financial Model FYE 31 December Historic Historic Historic BNPP Proj’d

EUR mn FY 02 FY 03 9 months FY 04 9 months 2005 2006 2007 PROFIT & LOSS

Revenue 3,921 4,383 3,533 4,715 3,481 4,822 4,910 4,999 COGS -1,518 -1,540 -522 -1,395 -471 -1,046 -1,088 -1,121 Network related costs -1,426 -1,381 -1,546 -1,346 -1,508 -1,683 -1,809 -1,899 Gross profit 977 1,462 1,465 1,974 1,502 2,093 2,013 1,979 Other costs -20 -77 -169 -43 -81 -135 -101 -76 SG&A -343 -375 -278 -377 -271 -386 -398 -408 EBITDA 614 1,010 1,018 1,554 1,150 1,572 1,514 1,496 P&L Interest -346 -32 -229 -309 -222

Revenue growth y/y 10.5% 7.0% -1.5% 2.2% 1.8% 1.8% Gross margin 24.9% 33.4% 41.5% 41.9% 43.1% 43.4% 41.0% 39.6% SG&A / sales 8.7% 8.6% 7.9% 8.0% 7.8% 8.0% 8.1% 8.2% EBITDA margin 15.7% 23.0% 28.8% 33.0% 33.0% 32.6% 30.8% 29.9%

CASH FLOW

Change in working capital 268 -865 151 318 -248 -120 -50 0 Cash Interest -341 -320 -229 -308 -222 -500 -475 -451 Cash from Operating Activities 363 12 609 930 585 912 939 974

Capex -1,559 -685 -407 -726 -374 -850 -900 -765 Investment in Intangible -493 -179 -78 -180 -266 Cash from Investing Activities -2,058 -853 -440 -873 -634 -850 -900 -765

Cash from Financing Activities 1,752 793 -142 -82 382 152 -40 -402

Net Change in Cash 57 -48 27 -25 333 214 -1 -193

BALANCE SHEET

Cash & Equivalents 84 36 63 11 344 225 223 31

Bank Debt 5,865 6,261 6,298 6,298 5,501 5,271 5,231 4,829 Senior A 2,425 2,425 2,155 1,753 Senior B 1,538 1,538 1,538 1,538 Senior C 1,538 1,308 1,538 1,538 Second Lien 700 700 700 700 Bonds- HY 1,250 1,250 1,250 1,250 Notes (Junior/PIK) 500 500 550 649 Other Indebtedness 646 164 168 168 30 61 0 0 Total Debt 6,511 6,425 6,466 6,466 7,981 7,782 7,731 7,428 Net Debt 6,427 6,389 6,403 6,455 7,637 7,557 7,508 7,397

RATIOS

Leverage 1st Lien Leverage (gross) 3.4x 3.5x 3.2x 2nd Lien Leverage (gross) 3.8x 3.9x 3.7x Cash pay Leverage (gross) 4.6x 4.7x 4.5x Total leverage (gross) 5.0x 5.1x 5.0x Total leverage (net) 4.8x 5.0x 4.9x

Source – BNP Paribas Estimates, Wind

405 European High Yield Research World Directories ⎪ January 2006

Aizaz Shaikh +44 20 7595 8607 [email protected] World Directories

Bond Description & Market Data, as of 05 January 2006 Next Call Issuer Credit Trend: Stable Amount Description Ratings Date Price Price YTW STW (o/s)

8.375% Sr Nts due 2014 USD 200mn Caa1/CCC+ 01-Dec-09 104.188 97 1/2 8.78% 390 bp 8.500% Sr Nts due 2014 EUR 395mn Caa1/CCC+ 01-Dec-09 104.250 99 1/2 8.58% 540 bp 13.750% Sr PIK Nts due 2015 EUR 100mn NR 01-Dec-05 103.000 Source – BNP Paribas Company Profile World Directories is a leading publisher of print and online directories in Belgium, The Netherlands, Portugal, Ireland and Romania and the company has significant minority interests in the leading directory publishers in South Africa and Puerto Rico. For the last twelve months ended 30 September 2005, the company generated net operating revenues and EBITDA of €472mn and €210mn, respectively, supporting an EBITDA margin of 46.5%. At the end of the period the company’s net leverage was 8.1x. Investment Recommendation While the company will be challenged to reduce leverage in the near term, we feel the returns associated with the company’s bonds are attractive at current valuations. We rate each of the bonds and the PIK note BUY. Our preferred piece is the $ cash pay bond, currently bid in the mid-90s or roughly 485bp to the 2014 maturity. The WDAC Eurobond trades currently at a 580bp spread to the 2014 maturity (in contrast SEAT is currently at the 350bp to the 2012 maturity). The mid-teens return of the PIK level is interesting, though we note its lack of liquidity. While overall leverage is high and the operations are likely to change slowly, we have confidence in the underlying businesses and believe that valuations reward investors for the medium term operational risk. Debt Profile World Directories’ debt comprises three high yield notes amounting to €670mn, and outstanding bank facilities of €1,076mn at the end of September 2005. The two high yield bonds have a standard covenant package and are callable beginning in 2009 (NC4). The PIK Note, which was issued in tandem with the senior bonds, is callable in December 2005. (NC1). The two Senior Notes were issued by WDAC Subsidiary Corp, one of the intermediate companies owned by WDAC Intermediate Corp, the issuer of the PIK Notes. The bonds due 2014 benefit from a guarantee on a senior subordinated basis by the following subsidiaries: WDAC, World Directories, Promedia, Publimedia, Publitec and World Directories CVBA, but also a first- priority pledge of the WDAC Proceeds Loan; a second-priority pledge of 65% of the shares of each of WDAC, World Directories and Promedia; and a second-priority pledge of the World Directories Proceeds Loan, Promedia Proceeds Loan and the Dutch Antilles Newco Proceeds Loan. Senior Credit Agreement The Senior Facilities Agreement provides for facilities of up to €1,215mn of which €1,076mn and €42mn was drawn as of 30 September 2005. These facilities consist of three fully drawn (as of 30 September 2005) term loans: a €540mn seven-year term loan A, a €268mn eight year term loan B, a €268mn nine year term loan C, and a €100mn multi-currency revolving credit facility to service working capital needs, where the amount of €32mn initially drawn has been repaid on 13 April 2005.

The senior credit agreement bears a first-ranking security in favour of the lenders over certain assets as follows: A pledge of 65% of the shares in World Directories, a lien in respect of all personal property inclusive of any inter-company loans; a pledge of certain of its shares in Promedia and certain security over its bank accounts and intellectual property rights; World Directories CVBA bank accounts, receivables, real property, and certain other business assets; 65% of the shares in Publimedia and certain of the shares in World Directories CVBA; a pledge of 100% of the shares in Publitec and 65% of the shares in WD Dutch Holding B.V. and certain security over its bank accounts, its receivables, and on certain other registered and unregistered business assets; a pledge over shares in Gouden Gids and Golden Pages and certain security over its bank accounts and its receivables; certain security over WD Antilles inter-company loans and its bank accounts; certain security over the receivables, the bank accounts and certain business assets of Publitec, Golden Pages, and Gouden Gids.

406 European High Yield Research World Directories ⎪ January 2006

World Directories’ Structure

Shareholders

100% WDAC PIK Notes (1) Intermediate Corp. (Delaware) Parent Junior Subordinated 100% Intercompany Loan WDAC Subsidiary Corp. Senior Notes (2) (Delaware) WDAC Proceeds Loan 100% World Directories Senior Facilities (4) Acquisition Corp.(3) (Delaware) World Directories 100% Proceeds Loan World Directories(3)(4) (Delaware)

WD Antilles Promedia Proceeds Proceeds 100% 40% (9) Loan Note Promedia(3)(4) VIS-PR (Belgium) (Puerto Rico)

100% 33.3% Publimedia Proceeds (3)(4) Loan Publimedia TDS (The Netherlands) (South Africa)

50%(12) 99.2% 100% 100% Páginas WD Dutch WD Antilles Pagini Aurii Publitec(3) (Netherlands (4) Amarelas (Romania) Holding B.V. (The Netherlands) Antilles) (Portugal) (The Netherlands)

100% 99.4%

Subsidiary Guarantor Golden Pages Gouden Gids (Ireland) (The Netherlands)

1. The €100.0mn of unsecured PIK Notes were offered in order to refinance indebtedness under the PIK Facility incurred in connection with the Acquisition. 2. The Senior Notes are guaranteed by certain subsidiaries of WDAC Subsidiary Corp. The Senior Notes and the Senior Notes guarantees have the benefit of security in the form of a first-priority pledge of the WDAC Proceeds Loan – a second-priority pledge of 65% of the shares of each of World Directories Acquisition Corp., World Directories and Promedia and a second-priority pledge of each of the World Directories Proceeds Loan, Promedia Proceeds Note and the WD Antilles Proceeds Loan. 3. The Senior Notes are guaranteed on a senior subordinated basis by World Directories Acquisition Corp., World Directories, World Directories CV BA, Promedia, Publimedia and Publitec. 4. Following the closing of the Acquisition, substantial parts of the debt under the Senior Facilities were loaned to the company subsidiaries, including World Directories, Promedia, Publimedia and WD Dutch Holding B.V.

Source – World Directories

407 European High Yield Research World Directories ⎪ January 2006

Bond Covenants EUR 395mn 8.500% Senior Notes 2014 USD 200mn 8.375% Senior Notes 2014 Bond description EUR Notes USD Notes Issuing entity WDAC Subsidiary Corp, a holding company Ranking Senior notes Senior notes Position vs. bank debt Structurally subordinated Position vs. Other bonds Senior in right to the PIK Note ! The note are guaranteed on a senior subordinated basis by the following subsidiaries: WDAC, Target, Promedia, Publimedia, Publitec and World Directories CVBA. ! a first-priority pledge of the WDAC Proceeds Loan; Security/guarantees ! a second-priority pledge of 65% of the shares of each of WDAC, the Target and Promedia; and ! a second-priority pledge of the Target Proceeds Loan, Promedia Proceeds Loan and the Dutch Antilles Newco Proceeds Loan. ! Equity Claw – prior to 01 December ! Equity Claw – prior to 01 December 2007 max 40% of issue at 108.500% 2007 max 40% of issue at 108.375% ! Call Schedule: ! Call Schedule: Optional redemption 01 December 2009 – 104.250% 01 December 2009 – 104.188% 01 December 2010 – 102.125% 01 December 2010 – 102.094% 01 December 2011 – 101.063% 01 December 2011 – 101.047% 01 December 2012 – 100.000% 01 December 2012 – 100.000% Tax redemption Yes – at par + accrued and unpaid interest Negative pledge Yes Cross default Yes Fall away covenants Yes (if achievement of High Grade status) Anti-layering Yes (Debt and Liens) Change of control Put at 101, 50%+ of voting power The company will not permit any Asset disposition unless: The company receives consideration al least equal to fair market value as determined in Asset sales good faith by the board of directors. Equal 75%of the consideration from such asset disposition. Equal to 100% of the net available cash from such asset disposition. The company may not incur debt if pro forma leverage exceeds 7.5x prior to the first anniversary of the issue date and 7.0x thereafter. Carve outs: ! Credit facility and refinancing Indebtedness can not exceed €1.075bn less. Debt limit ! Hedging: interest rates, currency or commodities. ! CLOs, PMO obligations up to €25mn. ! Indebtedness required to be incurred by a joint venture, in a limit of €5mn.

Source – BNP Paribas, World Directories

408 European High Yield Research World Directories ⎪ January 2006

Bond Covenants EUR 395mn 8.500% Senior Notes 2014 USD 200mn 8.375% Senior Notes 2014 Bond description EUR Notes USD Notes If company can raise €1.00 of debt then 50% net income less 100% net loss. Carve outs: ! Repurchase of stock, loans, advances, dividends or distributions do not exceed an amount equal to €15mn, plus €7.5mn multiplied by the number of calendar years that have commenced since the Issue Date, plus the Net Cash Proceeds received by the Restricted payments Issuer since the Issue Date ! Dividends in any calendar year, up to 6% of aggregate net cash proceeds, from all public offerings. ! Dividends, loans and advances to any parent up to €500,000. ! General basket up to €15mn.

The company will not permit any transaction with affiliates company unless: ! If the transaction is materially less favourable than those that could be obtained in comparable transaction with another person Transactions with affiliates ! If the transaction involves an aggregate amount in excess of €10mn, transaction has to be approved by the majority of the board of directors. ! Any transaction involves an aggregate amount in excess of €40mn, transaction has to received a written opinion from an independent Financial Advisor.

Source – BNP Paribas, World Directories

409 European High Yield Research World Directories ⎪ January 2006

Bond Covenants EUR 100mn 13.750% PIK Notes 2015 Bond description EUR Notes USD Notes Issuing entity WDAC Subsidiary Corp, a holding company Ranking PIK notes Senior notes Position vs. Bank debt Structurally subordinated Position vs. Other bonds Structurally subordinated Security/guarantees None ! Call Schedule: 01 December 2005 – 103.000% + accrued and unpaid interest

Optional redemption 01 December 2006 – 101.000% + accrued and unpaid interest

After 01 December 2007 – 100.000%

Tax redemption Yes – at par + accrued and unpaid interest Negative pledge Yes Cross default Yes Fall away covenants Yes (if achievement of High Grade status) Anti-layering Yes (Debt and Liens) Change of control Put at 101, 50%+ of voting power The company will not permit any Asset disposition unless: ! The company receives consideration al least equal to fair market value as determined Asset sales in good faith by the board of directors. ! Equal 75%of the consideration from such asset disposition. ! Equal to 100% of the net available cash from such asset disposition

The company may not incur debt if pro forma leverage exceeds 8.25x prior to the second anniversary of the issue date and 7.75x thereafter. Carve outs: ! Credit facility and refinancing Indebtedness can not exceed €1.075 billion less.

Debt limit ! Hedging: interest rates, currency or commodities. ! CLOs, PMO obligations up to €25mn. ! Indebtedness of Holdco and its restricted subsidiaries in aggregate outstanding amount, when taken together with refinancing Indebtedness can not exceed €50mn. ! Indebtedness required to be incurred by a joint venture, in a limit of €5mn. If company can raise €1.00 of debt then 100% of cumulative EBITDA less 1.4x cumulative interest expenses. Carve outs: ! Repurchase of stock, loans, advances, dividends or distributions do not exceed an amount equal to €15mn, plus €7.5mn multiplied by the number of calendar years that Restricted payments have commenced since the Issue Date, plus the Net Cash Proceeds received by the Holdco since the Issue Date ! Dividends in any calendar year, up to 7% of aggregate net cash proceeds, from all public offerings. ! Dividends, loans and advances to any parent up to €500,000. ! General basket up to €30mn. The company will not permit any transaction with affiliates company unless: ! If the transaction is materially less favourable than those that could be obtained in comparable transaction with another person Transactions with affiliates ! If the transaction involves an aggregate amount in excess of €10mn, transaction has to be approved by the majority of the board of directors. ! Any transaction involves an aggregate amount in excess of €40mn, transaction has to received a written opinion from an independent Financial Advisor. Source – BNP Paribas, World Directories

410 European High Yield Research World Directories ⎪ January 2006

World Directories, Financial Model FYE 31 December Historic Historic Historic Historic Historic Historic Historic Historic Proj’d Proj’d Proj’d EUR mn FY 02 FY 03 9M Q4 04 FY 04 Q1 05 Q2 05 Q3 05 FY 05 FY 06 FY 07 PROFIT & LOSS

Revenue 492 495 329 154 483 27 149 142 492 502 514 COGS -76 -70 -52 -22 -74 -7 -25 -20 -69 -73 -74 Gross profit 416 425 277 132 409 19 125 122 423 430 439 SG&A -125 -132 -108 -26 -134 -33 -37 -35 -135 -138 -144 Other expenses -52 -83 -27 -40 -67 -13 -23 -23 -74 -66 -60 EBITDA 243 215 141 74 215 3 67 66 214 225 236 P&L Interest -117 -108 -74 -29 -104 -39 -41 -42 -110 -108 -109

Revenue growth y/y 0.7% -2.9% -1.8% -2.5% 1.8% 2.2% 2.2% Gross margin 84.5% 85.8% 84.2% 85.6% 84.7% 72.8% 83.4% 85.7% 86.0% 85.5% 85.5% SG&A / sales 25.4% 26.7% 33.0% 16.6% 27.8% 124.3% 24.6% 24.5% 27.5% 27.5% 28.0% EBITDA margin 49.4% 43.4% 43.0% 48.0% 44.6% 12.8% 44.6% 46.5% 43.5% 44.8% 45.9%

CASH FLOW

Change in working capital -51 26 7 8 15 63 -32 -18 15 0 0 Cash from Operating Activities 24 88 64 11 75 55 -9 25 39 27 27

Capex -5 -10 0 -6 -6 -1 -2 -2 -11 -14 -17 Acquisitions/Disposals -188 -20 0 0 0 -257 -27 0 0 0 0 Cash from Investing Activities -197 -18 -4 -286 -290 -271 -34 -2 -11 -14 -17

Proceeds from and L&ST Debt-on- balance 172 -59 -27 1,985 1,958 258 -25 0 0 0 0 Repayment of LT and ST debt 0 0 0 -2,206 -2,206 0 0 0 0 0 0 Dividends paid -3 -2 0 0 0 0 0 0 0 0 0 Cash from Financing Activities 169 -53 -27 299 271 257 -25 0 -32 -35 -50

Foreign currency translation differences & other charges 15 -10 0 -1 -1 0 -3 -1 0 0 0

Net Change in Cash 11 7 33 22 55 42 -71 22 -4 -22 -39

BALANCE SHEET

Cash & Equivalents 21 29 62 84 126 55 77 80 58 19

Bank Debt 1,150 1,010 1,102 1,025 1,118 1,059 1,017 967 Bonds- HY 556 545 550 561 561 550 550 550 (Euro Tranches) 395 395 395 395 395 395 395 395 (USD Tranches) 161 150 155 166 166 155 155 155 Notes (Junior/PIK) 100 100 103 107 109 114 129 147 Total Debt 1,807 1,655 1,755 1,693 1,788 1,723 1,697 1,664 Net Debt 1,745 1,571 1,630 1,637 1,711 1,643 1,638 1,645

RATIOS

Coverage Total Coverage 1.9x 2.1x 1.5x NA 1.4x 1.9x 2.1x 2.2x EBITDA- Capex/Interest 1.9x 2.0x NA NA 1.3x 1.8x 2.0x 2.0x

Leverage Bank Leverage (gross) 8.1x 4.7x 5.1x NA 5.3x 5.0x 4.5x 4.1x Cash Pay Leverage (gross) 3.9x 7.2x 7.6x NA 8.0x 7.5x 7.0x 6.4x Total leverage (gross) 8.7x 7.7x 8.1x NA 8.5x 8.1x 7.5x 7.1x Total leverage (net) 8.4x 7.3x 7.5x NA 8.1x 7.7x 7.3x 7.0x Source – BNP Paribas Estimates, World Directories

411 European High Yield Research Yell Finance BV ⎪ January 2006

Aizaz Shaikh +44 20 7595 8607 [email protected] Yell Finance BV

Bond Description & Market Data, as of 05 January 2006 Next Call Issuer Credit Trend: Stable Description Amount (o/s) Ratings Date Price Price YTW STW

10.75 % Sr Nts due 2011 GBP 163mn B1/B+ 01-Aug-06 105.375 107 2/5 6.61% 203 bp 13.50 % Sr discount Nts due 2011 USD 187mn B1/B+ 01-Aug-06 106.750 107 1/2 6.74% 204 bp 10.75 % Sr Nts due 2011 USD 130mn B1/B+ 01-Aug-06 105.375 98 3/4 11.27% 649 bp Source – BNP Paribas

Company Profile Yell is the leading provider of printed directories, comprising classified advertising, and associated products and services in the United Kingdom. The company also has significant directories businesses in the US. The company had sales of £1,392mn and an EBITDA of £430mn for the year ended 30 September 2005, at the end of which period leverage was 2.7x. Approximately 95% of the company revenues are derived from selling advertising in printed classified directories to its advertisers, which are principally small- and medium-sized enterprises. The company core business consists of the Yellow Pages directories in the United Kingdom and the Yellow Book directories in the United States.

Investment Recommendation Prior to the announcement of the Transwestern acquisition in May, our rating on Yell bonds had been HOLD, in anticipation of just such an event. With the acquisition now complete, we are raising our rating on Yell's bonds to BUY, with the anticipation that each of the three bonds tranches will be redeemed at their first call in August 2006. Given the roughly 150bp spread to the less than 1-year call, we find these bonds moderately attractive; given the still reasonable credit profile post- acquisition, we expect investors would be happy to own these bonds (with their high coupon value) even post the first call.

Debt Profile Yell’s debt issued in 2001 as part of the LBO of the company by Apax and Hicks Muse. The company originally issued $488mn and £230m in high yield bonds; upon completion of the company’s IPO in 2003, Yell redeemed 35% of the bonds.

On 15 July 2005, Yell successfully syndicated a new £2bn credit facility to fund the acquisition of TransWestern and to refinance the entire £877mn of bank debt outstanding at that date, in the case of the revolving credit facility, also for general corporate and working capital purposes of the Yell Group. The Facilities Agreement is comprised of a term loan facility and a revolving credit facility. The term loan facility constituted by the New Facilities provides for a five-year sterling and USD term loan facility in an aggregate principal amount of up to £1.4bn. The five-year revolving credit facility constituted by the New Facilities provides for revolving advances in an aggregate principal amount of up to £600mn. The New Facilities are guaranteed by certain subsidiaries of the company and also benefit from certain charges over shares granted by Yell Holdings 2 Limited. As of September 2005, the company had roughly £1.6bn in outstanding bank debt and £328mn in outstanding bond debt. The company’s bonds are split as follow: £162.5mn of 10.75% Senior Notes due 2011, £73mn 10.75% USD Senior Notes due 2011 and £94mn of 13.50% USD Senior Discounted Notes due 2011. Each bond benefit from a guarantee from by Yellow Pages limited.

412 European High Yield Research Yell Finance BV ⎪ January 2006

Yell Finance BV Structure

Yell Group Limited

£163m 10.75% Sr Nts Yell Finance BV $187m 13.5% Sr Disc Nts $130m 10.75% Sr Nts

Yellow Pages Limited

Yell Holdings Limited

Security and guarantees from certain holding and UK Luxembourg and US operating companies UK Operating Company for the benefit of Holding Company Subsidiary senior credit facilities Subsidiary

US Holding Company Subsidiary

US Operating Company Subsidiary

Source – Yell Finance BV

413 European High Yield Research Yell Finance BV ⎪ January 2006

Bond Covenants GBP 250mn 10.75% Senior Notes due 2011 USD 130mn 10.75% Senior Notes due 2011 USD 187mn 10.50% Senior Discount Notes 2011 Bond description EUR Notes USD Notes Issuing entity Yell Finance Bv Ranking Senior notes Position vs. bank debt Structurally subordinated Position vs. Other bonds Pari passu Security/guarantees Guaranteed by Yellow Pages limited ! Equity Claw – prior to 01 August 2004 ! Equity Claw – prior to 01 August 2004 max 35% of issue at 110.75% + max 35% of issue at 113.50% + coupon, if 65% of the notes remain coupon, if 65% of the notes remain outstanding outstanding ! Call Schedule: ! Call Schedule: Optional redemption 01 August 2006 – 105.375% 01 August 2006 – 106.750% 01 August 2007 – 103.583% 01 August 2007 – 104.500% 01 August 2008 – 101.792% 01 August 2008 – 102.250% 01 August 2009 – 100.000% 01 August 2009 – 100.000% Tax redemption Yes at par + accrued and unpaid interest Negative pledge Yes Cross default Yes Fall away covenants No Anti-layering No Change of control Put at 101%, 35% of voting share capital 80% cash or cash equivalents, productive assets, assumption of liabilities, securities and Asset sales other obligations converted to cash within 30 days. No need to offer to purchase notes unless excess proceeds not invested or used to pay senior debt exceeds £20mn Debt is permitted if after giving pro forma effect thereto, the consolidated leverage ratio is equal or less than 6.5 to 1.00 prior to 6 August 2004, otherwise 6.00 to 1.00. Carve outs: ! Credit facility can not exceed £957mn, and the revolving loan facility £100mn; Debt limit ! Limited to FMV on date of incurrence; aggregate basket limited to £25mn plus extra £10mn related to autos (at any time outstanding); ! Indebtedness after permitted acquisition can’t exceed a leverage ratio of 7.00 to 1.00; ! Indebtedness of the group (general basket) can’t exceed £100mn at any time.

Source – BNP Paribas, Yell Finance BV

414 European High Yield Research Yell Finance BV ⎪ January 2006

Bond Covenants GBP 250mn 10.75% Senior Notes due 2011 USD 130mn 10.75% Senior Notes due 2011 USD 187mn 10.50% Senior Discount Notes 2011 Bond description EUR Notes USD Notes Not to exceed the sum of: ! 50% (minus 100% of any deficit) of consolidated Net Income (period ending on the last day of the issuer’s last fiscal quarter prior to the payment). ! Net cash proceeds from capital contributions to/sales by issuer in respect of qualified capital stock (including sales or exercise of options) or subordinated shareholder loans other than if used to make permitted restricted payments or financed by loans from issuer or a sub until loan repaid in cash ! Net cash proceeds of conversion of debt securities or redeemable capital stock of issuer or a restricted sub into qualified capital stock of the issuer plus, if such securities issued after the issue date, the net cash proceeds from their issuance other than if financed by loans from issuer or a sub until loan repaid in cash. ! Net reduction in an investment that had been a restricted payment resulting from purchase or redemption of such investment, repayments of such investments or the re- designation of unrestricted subs as restricted subs (up to lesser of FMV of interest in such unrestricted sub and amount of investment made in such sub) to the extent that Restricted payments such amount was included in the amount of restricted payments but only if not already included in consolidated net income. Carve outs: ! the repurchase, redemption, defeasance, retirement, refinancing, acquisition for value or payment of principal of any Subordinated Indebtedness ca be qualified as Permitted Refinancing Indebtedness; ! the payment by the Issuer of dividends or distributions to enable the purchase of Capital Stock from employees or directors of the Issuer or its Restricted Subsidiaries not to exceed £10.0mn in any 12-month period, provided that payments do not exceed £20.0mn in the aggregate; ! following a Public Equity Offering, payments of dividends or distributions in respect of the Issuer’s or any parent entity’s Capital Stock in an amount not to exceed the greater of up to 6% per annum of the gross proceeds of such Public Equity Offering contributed or loaned to the Issuer; ! any other Restricted Payment which, together with all other Restricted Payments made since the Issue Date, does not exceed £10.0mn. All in writing; not less favourable than arms length transaction; if in excess of £5mn, Transactions with affiliates resolution of majority of disinterested directors or fairness opinion; if in excess of £20mn, fairness opinion Source – BNP Paribas, Yell Finance BV

415 European High Yield Research Yell Finance BV ⎪ January 2006

Yell Finance BV, Financial Model FYE 31 March Historic Historic Historic Historic Historic Historic Historic Historic ProForma Historic Historic GBP mn FY 02 FY 03 FY 04 Q1 05 Q2 05 Q3 05 Q4 05 FY 05 FY 05 Q1 05 Q2 05 PROFIT & LOSS

Revenue 865 1,114 1,187 281 324 293 387 1,285 1,474 314 398 COGS -387 -510 -553 -128 -144 -139 -182 -592 -698 -143 -181 Gross profit 478 604 634 153 180 154 206 693 776 171 216 Distribution cost -26 -12 -38 -49 -9 -12 SG&A -327 -421 -484 -94 -107 -78 -131 -410 -452 -62 -86

D&A 91 121 120 31 31 30 30 122 123 6 0 EBITDA 243 304 270 90 103 80 93 366 397 105 118 EBITDA Adjusted 246 323 360 87 119 80 117 403 519 100 133 P&L Interest -164 -237 -195 -24 -23 -23 -22 -91 -91 -28 -33

Revenue growth y/y 28.7% 6.5% 7.1% 5.6% 7.6% 12.1% 8.3% 24.2% 11.6% 22.8% Gross margin 55.3% 54.2% 53.4% 54.5% 55.6% 52.6% 53.1% 53.9% 52.6% 54.4% 54.4% SG&A / sales 37.8% 37.8% 40.7% 33.4% 33.1% 26.7% 33.8% 31.9% 30.7% 19.8% 21.6% EBITDA margin 28.4% 29.0% 30.3% 31.1% 36.6% 27.3% 30.1% 31.3% 35.2% 31.9% 33.4%

CASH FLOW

Cash Interest -95 -140 -120 -15 -23 -11 -23 -72 -72 -12 -33 Change in working capital -47 0 -27 -16 -8 10 0 -14 -10 -13 0 Cash from Operating Activities 52 144 124 54 63 72 64 254 288 70 105

Capex -26 -16 -25 -4 -5 -7 -8 -24 -25 -5 -5 Acquisitions/Disposals -1,583 -471 -109 0 0 0 -32 -32 -32 -5 -905 Cash from Investing Activities -1,608 -487 -133 -4 -5 -7 -40 -56 -57 -10 -910

Dividend paid 0 0 -21 0 -42 -30 0 -71 -71 0 -59 Issue of ordinary share capital 1 0 434 0 1 1 1 3 3 0 0 New loans issued 2,544 486 1,036 0 0 0 0 0 399 0 1,676 Debt Repayment -872 -212 -1,418 -23 -23 0 -40 -85 -325 0 -884 Cash from Financing Activities 1,632 274 1 -23 -63 -35 -39 -159 -1 0 720

Net Change in Cash 75 -69 -9 28 -5 31 -15 39 230 61 -85

BALANCE SHEET

Cash & Equivalents 100 30 19 48 42 69 56 56 0 121 35

Revolver availability 100 100 195 0 0 0 0 0 0 0 0

Bank Debt 955 1,126 942 925 904 881 851 851 1,650 851 1,658 Bonds- HY 505 495 299 304 308 309 310 310 310 309 328 10.75% Sr Nts £250m 2011 250 250 158 158 159 159 160 160 160 160 161 10.75% Sr Nts $200m 2011 140 127 68 69 70 70 68 68 68 67 73 13.50% Sr Disc Nts $288m 2011 115 118 73 77 80 80 82 82 82 82 94 Other 1 1 1 0 0 0 0 0 0 1 2 Total Debt 1,460 1,621 1,242 1,229 1,211 1,190 1,161 1,161 1,960 1,162 1,987 Net Debt 1,360 1,591 1,223 1,181 1,169 1,122 1,105 1,105 1,960 1,041 1,952

RATIOS

Coverage Cash Interest Coverage 2.6x 2.3x 3.0x 5.6x NA Total Coverage 1.5x 1.4x 1.9x 4.4x NA EBITDA- Capex/Interest 2.3x 2.2x 2.8x 5.2x NA

Leverage Bank Leverage (gross) 3.9x 3.5x 2.6x 2.5x 2.4x 2.3x 2.1x 2.1x 3.2x 2.0x 3.9x Total leverage (gross) 5.9x 5.0x 3.4x 3.3x 3.2x 3.1x 2.9x 2.9x 3.8x 2.8x 4.6x Total leverage (net) 5.5x 4.9x 3.4x 3.2x 3.1x 2.9x 2.7x 2.7x 3.8x 2.5x 4.5x Source – BNP Paribas Estimates, Yell

416 European High Yield Research The High Yield Handbook ⎪ 09 January 2006

European Credit Research – Contacts

Rick Deutsch: Head of European Credit Research +44 20 7595 8840

High Yield Credit Research

Aizaz Shaikh, Head of High Yield Research TMT/Utilities London +44 20 7595 8607 [email protected] Cyril Benayoun, Senior Credit Analyst Autos London +44 20 7595 8642 [email protected] Olivier Casasoprana, Junior Credit Analyst High Yield London +44 20 7595 8218 [email protected] Tran Toan Dang, CFA, Credit Analyst High Yield London +44 20 7595 8291 [email protected] Rick Deutsch, Senior Credit Analyst Packaging London +44 20 7595 8840 [email protected] Adam Harnetty, ACA, Senior Credit Analyst Industrials/Chemicals London +44 20 7595 8831 [email protected] Hunter Martin, Junior Credit Analyst High Yield London +44 20 7595 8491 [email protected] Oleksiy Soroka, CFA, Senior Credit Analyst Food/Consumer/Retail/Transport London +44 20 7595 8077 [email protected]

Investment Grade Credit Research

Rick Deutsch, Senior Credit Analyst European Telecoms/Media/Technology London +44 20 7595 8840 [email protected] Oliver Burrows, Junior Credit Analyst Banks/Insurance London +44 20 7595 8395 [email protected] Cyril Benayoun, Senior Credit Analyst Autos/Industrials London +44 20 7595 8642 [email protected] Jean-Yves Coupin, CFA, Senior Credit Analyst Consumer/Retail/Services London +44 20 7595 8360 [email protected] Otto Dichtl, Senior Credit Analyst Banks London +44 20 7595 8192 [email protected] Jean-Yves Guibert, Senior Credit Analyst European Telecoms/Media/Technology London +44 20 7595 8308 [email protected] Frances Hutt, Credit Analyst Utilities/Industrials/Autos London +44 20 7595 8869 [email protected] Ricardo Kleinbaum, Senior Credit Analyst Banks/SSA New York +1 212 841 2047 [email protected] Heiko Langer, Senior Credit Analyst Covered Bonds London +44 20 7595 8569 [email protected] Oleg Ledovskoy, Junior Credit Analyst Utilities London +44 20 7595 8445 [email protected] Marie-Charlotte Masy, Credit Analyst Consumer/Retail/Services London +44 20 7595 8299 [email protected] Tiago Parente, Senior Credit Analyst Banks London +44 20 7595 8591 [email protected] Michel Ramon, Junior Credit Analyst European Telecoms/Media/Technology London +44 20 7595 8186 [email protected] Rafael Villarreal, Senior Credit Analyst Insurance London +44 20 7595 8918 [email protected] Marc Watton, Senior Credit Analyst Utilities/Aerospace/Defence London +44 20 7595 8185 [email protected]

Credit Portfolio Strategy

Vivek Tawadey, Head of Credit Portfolio Strategy London +44 20 7595 8894 [email protected] Simon Ballard, Senior Credit Strategist London +44 20 7595 8201 [email protected] Mehernosh Engineer, Senior Credit Strategist London +44 20 7595 8338 [email protected] Luc Hardy, Junior Credit Strategist London +44 20 7595 3575 [email protected] Hans Peter Lorenzen, Credit Strategist London +44 20 7595 8296 [email protected] Rajeev Shah, Credit Strategist London +44 20 7595 8175 [email protected]

Production

Murielle Clarke, Publishing/Editing London +44 20 7595 8336 [email protected] Sharon Francis, Publishing London +44 20 7595 8357 [email protected] Barbara Hickling, Publishing London +44 20 7595 8599 [email protected] Fiona Morrison, Credit Research Editor London +44 20 7595 8806 [email protected] Sally-Jo Yolland, Publishing/Editing London +44 20 7595 8983 [email protected]

417 European High Yield Research The High Yield Handbook ⎪ 09 January 2006

IMPORTANT DISCLOSURES: Recommendation System: Type Terminology Horizon Credit Trend (1) Positive/Stable/Negative 6 months Relative Value (2) Outperform/Market Perform/Underperform 1 month Investment Recommendation (3) Buy/Hold/Reduce/Sell (*) Up to 6 months (1) Credit Trend is based on underlying Credit fundamentals, business environment and industry trends; (2) Relative Value is based on expected market performance relative to sector; (3) Investment Recommendation is based on BNPP Credit Trend and Relative Value opinions; (*) Buy: Overweight exposure within industry sector, based on strong financial profile, conservative risk and/or solid relative value considerations, outperforming or demonstrating average performance within peer group; Hold: Exhibits solid to strong credit fundamentals, but average total return characteristics within peer group; Reduce: Credit exposure should be pared down based on weakening fundamentals and/or below average relative value characteristics within peer group; Sell: Sell exposure largely based on deteriorating credit fundamentals and/or negative headline or event risk. The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty, express or implied, is made that such information is accurate or complete and it should not be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other investment. Information and opinions contained in the report are published for the assistance of recipients, but are not to be relied upon as authoritative or taken in substitution for the exercise of judgement by any recipient, they are subject to change without notice and not intended to provide the sole basis of any evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. No BNP Paribas Group Company accepts any liability whatsoever for any direct or consequential loss arising from any use of material contained in this report. All estimates and opinions included in this report constitute our judgements as of the date of this report. BNP Paribas and their affiliates (collectively “BNP Paribas”) may make a market in, or may, as principal or agent, buy or sell securities of the issuers mentioned in this report or derivatives thereon. BNP Paribas may have a financial interest in the issuers mentioned in this report, including a long or short position in their securities, and or options, futures or other derivative instruments based thereon. BNP Paribas, including its officers and employees may serve or have served as an officer, director or in an advisory capacity for any issuer mentioned in this report. BNP Paribas may, from time to time, solicit, perform or have performed investment banking, underwriting or other services (including acting as adviser, manager, underwriter or lender) within the last 12 months for any issuer referred to in this report. BNP Paribas, may to the extent permitted by law, have acted upon or used the information contained herein, or the research or analysis on which it was based, before its publication. BNP Paribas may receive or intend to seek compensation for investment banking services in the next three months from an issuer mentioned in this report. Any issuer mentioned in this report may have been provided with sections of this report prior to its publication in order to verify its factual accuracy. BNP Paribas is incorporated in France with Limited Liability. Registered Office 16 boulevard des Italiens, 75009 Paris. This report was produced by a BNP Paribas Group Company. This report is for the use of intended recipients and may not be reproduced (in whole or in part) or delivered or transmitted to any other person without the prior written consent of BNP Paribas. By accepting this document you agree to be bound by the foregoing limitations. Analyst Certification: Each analyst responsible for the preparation of this report certifies that (i) all views expressed in this report accurately reflect the analyst’s personal views about any and all of the issuers and securities named in this report, and (ii) no part of the analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed herein. United States: This report is being distributed to US persons by BNP Paribas Securities Corp., or by a subsidiary or affiliate of BNP Paribas that is not registered as a US broker-dealer to US major institutional investors only. BNP Paribas Securities Corp., a subsidiary of BNP Paribas, is a broker-dealer registered with the Securities and Exchange Commission and a member of the National Association of Securities Dealers, the New York Stock Exchange and other principal exchanges. BNP Paribas Securities Corp. accepts responsibility for the content of a report prepared by another non-US affiliate only when distributed to US persons by BNP Paribas Securities Corp. United Kingdom: This report has been approved for publication in the United Kingdom by BNP Paribas London Branch, a branch of BNP Paribas whose head office is in Paris, France. BNP Paribas London Branch, 10 Harewood Avenue, London NW1 6AA is authorised by CECEI & AMF and the Financial Services Authority, and is regulated by the Financial Services Authority for the conduct of its investment business in the United Kingdom. BNP Paribas London Branch is registered in England & Wales under No. FC13447. This report is prepared for professional investors and is not intended for Private Customers in the United Kingdom as defined in FSA rules and should not be passed on to any such persons. Japan: This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited, Tokyo Branch, or by a subsidiary or affiliate of BNP Paribas not registered as a securities firm in Japan, to certain financial institutions defined by article 2, item 1 of the Cabinet Order concerning Foreign Securities Firms. BNP Paribas Securities (Japan) Limited, Tokyo Branch, a subsidiary of BNP Paribas, is a securities firm registered according to the Securities & Exchange Law of Japan and a member of the Japan Securities Dealers Association. BNP Paribas Securities (Japan) Limited, Tokyo Branch accepts responsibility for the content of a report prepared by another non-Japan affiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited, Tokyo Branch. Some of the foreign securities stated on this report are not disclosed according to the Securities & Exchange Law of Japan. Hong Kong: This report is being distributed in Hong Kong by BNP Paribas Hong Kong Branch, a branch of BNP Paribas whose head office is in Paris, France. BNP Paribas Hong Kong Branch is regulated as a Licensed Bank by Hong Kong Monetary Authority and is deemed as a Registered Institution by the Securities and Futures Commission for the conduct of Advising on Securities [Regulated Activity Type 4] under the Securities and Futures Ordinance Transitional Arrangements. © BNP Paribas (2006). All rights reserved.

418 European High Yield Research