An Acuris Company March 18 2020 Coronavirus impact on US leveraged loan & high yield bond markets Colm (CJ) Doherty Global Head of Primary Market Analysis +1 212 390 7838 [email protected] Vincent Daigger Senior Market Analyst +1 212 574 7876 [email protected] An Acuris Company Key statistics: Leveraged loans: • Leveraged loan prices are down nearly 12 points to 84.41. • Loan prices are now much more heavily concentrated in the sub-90 category, which accounts for 70% of the market, up from 11% on February 21. • The sub-80 share is at 16%, up from 5.5%. • Looking at the magnitude of prices declines, 64% of loans have dropped by more than 10 points, with 6% posting a severe decline of 20 points or more. • The oil & gas and entertainment & leisure sectors have been hit hardest in the recent downturn. The oil & gas average bid has fallen to 56.86 from 81.74, while entertainment & leisure is down to 78.92 from 99.23. • The share of oil & gas and entertainment & leisure loans bid at 90 cents on the dollar or lower exceeds 90%, while the par-plus share of the market has fallen to 0% in both sectors from 13% for oil & gas and 51% for entertainment & leisure loans • The biggest decliners are loans for California Resources (now bid at 12.4, down from 62), Donnelley Financial Solutions (bid at 17 from 67.1), VIP Cinema (bid at 16.67 from 54) and Save A Lot (bid at 7 from 19.58). (For a more extensive list, see page 13). • Loan retail funds have posted outflows of USD 4.36bn in the last two weeks ending March 11. High yield bonds: • High yield bond prices are down 15 points on average since February 21. • HY bond index yields have widened sharply to 9.17% from 5.02% in the same time period. • High yield bond funds have posted outflows of USD 10.07bn in the last two weeks ending March 11. • The biggest decliners since January 31 are bonds for Windstream Services, EP Energy, Bruin EP Partners and Chesapeake Energy Corp. (For a more extensive list, see pages 14-16). 2 An Acuris Company Volatility continues to shake leveraged loan and HY bond markets 100 50 0 -50 -100 -150 -200 Leveraged Loans HY Bonds -250 Daily change in secondary market average average (bps) market secondary price in Daily change -300 -350 -400 Source: Debtwire Par, Markit, ICE BofA 3 An Acuris Company Secondary loan market prices plummet nearly 12 points 80% 98 70% 96 60% 94 Weighted Avg. Bid Share of loans bid >=100 50% 92 40% 90 30% Weighted Avg. bid (% of par) of (% bid Avg. Weighted 88 ofShare loans >=100 bid (%) 20% 86 10% 84 0% Source: Debtwire Par, Markit 4 Source: Debtwire Par, Markit Share of loans in the secondary market (%) 10% 20% 30% 40% 50% 60% 70% 0% 21-Sep-18 06-Oct-18 21-Oct-18 05-Nov-18 20-Nov-18 05-Dec-18 20-Dec-18 04-Jan-19 Sub 19-Jan-19 03-Feb-19 - 90 share of loan market spikes to90 70%share spikes of loan market 18-Feb-19 Loans priced 80-90 Loan priced <80 Loans priced <80 and 80-90 combined 05-Mar-19 20-Mar-19 04-Apr-19 19-Apr-19 04-May-19 19-May-19 03-Jun-19 18-Jun-19 03-Jul-19 18-Jul-19 02-Aug-19 17-Aug-19 01-Sep-19 16-Sep-19 01-Oct-19 16-Oct-19 31-Oct-19 15-Nov-19 30-Nov-19 15-Dec-19 An Acuris Company 30-Dec-19 14-Jan-20 29-Jan-20 13-Feb-20 28-Feb-20 14-Mar-20 5 An Acuris Company Distribution of secondary loan prices changes dramatically 45% 21-Feb-20 17-Mar-20 40% 35% 30% 25% 20% Share of loans 15% 10% 5% 0% Avg. Bid (% of par) Source: Debtwire Par, Markit 6 An Acuris Company Magnitude of change in secondary market loan prices: (Feb. 21 to March 17 time period) 16% 14% 12% 10% 8% 14% Share of loans 6% 12% 10% 9% 4% 7% 6% 6% 2% 3% 3% 2% 2% 2% 1% 1% 1% 1% 1% 1% 0% 0.01%0.02% 0.03% 0% Secondary market price change (points) Source: Debtwire Par, Markit 7 An Acuris Company Oil & gas and entertainment & leisure loans hit hardest 105 18% 21-Feb-20 17-Mar-20 % share of market 16% 95 14% 12% 85 10% 8% 75 Share of market of Share 6% Weighted avg.par) bid (%of 4% 65 2% 55 0% Source: Debtwire Par, Markit 8 An Acuris Company Oil & gas secondary loan prices plummet 100 90% 95 80% 90 70% 85 Avg. bid 60% 90 share (%)90 share Par-plus share - 80 50% Sub-90 share 75 40% plus and share sub - 70 30% Oil & gas avg. par) avg. bid term Oilloan gas (% & of 65 20% Oil & gas par 60 10% 55 0% 9 Source: Debtwire Par, Markit An Acuris Company Entertainment & leisure secondary loan prices sink amid coronavirus outbreak 105 90% 100 80% 95 70% 90 share 90 share (%) 90 - Avg. bid 60% 85 Par-plus share 50% Sub-90 share 80 plus share sub and - 40% 75 30% 70 20% 65 Entertainmentleisure & par Entertainment leisure Entertainment & par) avg. of bid term loan (% 60 10% 55 0% 10 Source: Debtwire Par, Markit An Acuris Company HY bond yields top 9% 10 9 8 7 6 Yield (%) 5 4 3 2 1 0 Source: ICE BofA US High Yield Bond Index 11 An Acuris Company HY bond and leveraged loan funds see surge in outflows High yield bond fund flows* Leveraged loan fund flows* 5 3 4 3 2 2 1 1 0 0 -1 -2 -1 Loan fund flowsbn) (USD -3 HY fund bond flowsbn) (USD -4 -2 -5 -6 -3 *Based on funds that report weekly flows Source: Lipper 12 An Acuris Company Leveraged Loan Biggest Decliners: (Feb. 21 to March 17) Initial Initial Current Current Bid as of Change in LoanX ID Issuer Deal name Facility Ccy Country Industry Maturity Depth % change amount spread Bid Offer 02/21/20 points California Resources 8/16 LX154198 CA RES CORP TL USD United States Oil & Gas 1000 31-Dec-21 1037.5 12.4 21.4 5 62 -49.6 -80.00% Second-Out Cov-Lite Donnelley Financial Solutions LX169586 LSC Comms Inc TLB USD United States Printing & Publishing 312.5 30-Sep-22 550 17 20.833 3 67.1 -50.1 -74.66% (LSC) 11/17 LX160062 VIP CINEMA HLDGS INC VIP Cinema 3/17 TL USD United States Home Furnishings 165 01-Mar-23 600 16.667 25 3 54 -37.333 -69.14% LX157028 Moran Foods LLC Save A Lot 12/16 TL USD United States Retail Food & Drug 740 05-Dec-23 600 7 11 thin 19.583 -12.583 -64.25% Southern Graphic Systems LX169591 SOUTHERN GRAPHICS INC TL USD United States Printing & Publishing 105 31-Dec-23 750 10.833 15.5 3 25.2 -14.367 -57.01% 12/17 2nd Lien Cov-Lite Chesapeake Energy 12/19 LX184560 Chesapeake Engy Corp TL USD United States Oil & Gas 1500 24-Jun-24 800 42.5 49.7 5 98.688 -56.188 -56.93% FILO Class A Cov-Lite Marshall LX135384 SEADRILL OPER LP Seadrill Partners 2/14 TL USD Oil & Gas 1800 21-Feb-21 600 18.75 23.05 10 40.333 -21.583 -53.51% Islands Gavilan Resources 2/17 2nd LX160201 GAVILAN RES LLC TL USD United States Oil & Gas 450 01-Mar-24 600 17.333 25.333 3 36.25 -18.917 -52.18% Lien Cov-Lite Murray Energy 6/18 LX174687 Murray Energy Corp TLB3 USD United States Metals & Mining 159.43 17-Oct-22 775 8.5 12 thin 16.5 -8 -48.48% Superpriority LX173060 FIELDWOOD ENERGY LLC Fieldwood Energy 4/18 Exit TL USD United States Oil & Gas 1142.69 11-Apr-22 525 45 53.333 3 83.429 -38.429 -46.06% Professional & Business LX162379 CONSTELLIS HLDGS LLC Constellis 4/17 Cov-Lite TLB USD United States 872.5 21-Apr-24 500 9.625 14.375 4 17.5 -7.875 -45.00% Services Computers & LX167188 Peak 10 Hldg Corp Peak 10 7/17 Cov-Lite 2nd Lien TL USD United States 310 01-Aug-25 725 33 37.667 3 59.464 -26.464 -44.50% Electronics Jo-Ann Stores 5/18 2nd Lien LX173310 JoAnn Stores LLC TL USD United States Retailing 225 21-May-24 925 22.5 27.5 thin 39.667 -17.167 -43.28% Cov-Lite California Resources 11/17 LX169569 CA RES CORP TL USD United States Oil & Gas 1300 31-Dec-22 475 50.6 58.2 5 89 -38.4 -43.15% Cov-Lite Sungard AS 5/19 2nd Lien PIK Computers & LX180431 SUNGARD AS NEW HLDGS III LLC TL USD United States 300 03-Nov-22 650 31.167 37.5 3 53.5 -22.333 -41.74% (Takeback) Electronics Computers & LX161401 CO BUYER INC Cyxtera 5/17 Cov-Lite 2nd Lien TL USD United States 310 01-May-25 725 34.571 42.571 7 57.333 -22.762 -39.70% Electronics IPC Information Systems 2/15 LX142853 IPC SYSS INC TL USD United States Telecommunications 305 04-Feb-22 950 15 22 3 24.833 -9.833 -39.60% 2nd Lien Cov-Lite IPC Information Systems 11/19 LX184893 IPC CORP TL USD United States Telecommunications 171.46 06-Feb-22 1150 15 22 3 24.833 -9.833 -39.60% 2nd Lien PIK Entertainment And LX185521 CROWN FIN US INC Cineworld 2/20 Incremental TL USD United States 1932.2 05-Feb-27 300 59.75 65.75 4 98.542 -38.792 -39.37% Leisure LX172320 KCA DEUTAG US FIN LLC KCA 4/18 TLB USD United States Oil & Gas 414.57 28-Feb-23 675 42.781 45.906 8 70.125 -27.344 -38.99% Professional & Business LX174181 EXELA INTER LLC Exela Technologies 6/18 TLB USD United States 373.44 12-Jul-23 650 26.333 30.667 3 42.6 -16.267 -38.19% Services Entertainment And LX171023 CROWN FIN US INC Cineworld 2/18 (USD) Cov-Lite TL USD United States 3325 28-Feb-25 250 60.75 65.583 6 97.545 -36.795 -37.72% Leisure Cineworld 9/19 Incremental Entertainment And LX182972 CROWN FIN US INC TL USD United States 650 30-Sep-26 250 61 65.8 5 97.875 -36.875 -37.68% Cov-Lite Leisure LX172971 Peabody Engy Corp Peabody Energy 4/18 TL USD United States Metals & Mining 400 31-Mar-25 275 50 55.625 4 79.5 -29.5 -37.11% 13 Source: Markit An Acuris Company HY Bond Biggest Decliners : (Jan.