U.S. Syndicated Loan Market Review

Changes in Wholesale Lending: 2007 versus 2013

April 2013

2

U.S. Syndicated Loan Volume ─ 2012 Issuance at ‘05/’06 Levels

Source: Thomson Reuters LPC

Loan Pricing Corporation (LPC) places a syndicated financing in either category based on issuer credit ratings or the transactions drawn spread over

LIBOR. The Leveraged credit profile is a senior debt rating of BB+/Ba1 or lower and/or a pricing margin of LIBOR+175 or higher

3

U.S. Syndicated Commercial Real Estate Loan Volume – Nearing ‘05/’06 levels/REIT issuance above

Source: Thomson Reuters LPC

4

U.S. Leveraged Loan Volume Returning to ‘06 Levels

Excludes Existing Tranches of Add-ons and Amendments & Restatements with No New Money

These numbers comprise loans U.S. dollar denominated

Source: S&P Capital IQ

5

U.S. Syndicated Loan Volume – New Money Issuance below ‘05/’06 levels*

* Measured as a % of Total Issuance

Source: Thomson Reuters LPC

2012 new money issuance of 29% remains below levels seen in 2005 (34%) and 2006 (45%)

6

Investment Grade Pricing – Declining, but still above ‘05/’06 levels

Source: Thomson Reuters LPC

7

Investment Grade Tenors – 5 Year Terms Dominate

Source: Thomson Reuters LPC

8

Source: Thomson Reuters LPC

Investment Grade – Covenant Levels Essentially Unchanged

9

Leveraged Pricing ─ Declining, but still above ‘05/’06 levels

Source: S&P Capital IQ

10

Leveraged – Covenant Levels Remain Relatively Stable

Source: Thomson Reuters LPC

11

Average Debt Multiples − Climbing / Equity Contributions − Declining

Criteria: Pre-1996: L+250 and Higher; 1996 to Date: L+225 and Higher;

Prior to 2011, media and telecom deals were excluded.

Source: S&P Capital IQ

Equity includes common equity and preferred stock as well as holding company debt and seller note proceeds down streamed to the operating company as common equity

12

New Issue Volume ─ Second-Lien / Covenant-Lite Loans

Excludes Existing Tranches of Add-ons and Amendments & Restatements with No New Money

These numbers comprise loans denominated in all currencies and are subject to revision as Standard & Poor’s LCD collects additional data.

Source: S&P Capital IQ

Excludes Existing Tranches of Add-ons and Amendments & Restatements with No New Money

Excludes DIP, second liens and unsecured transactions

These numbers comprise loans U.S. dollar denominated

13

Leveraged Lending ─ Institutional Segment Dominates

Source: Standard & Poor’s LCD / Thomson Reuters LPC / market sources

A growing trend in leveraged lending is springing maintenance provisions in revolvers

These are typically leverage covenants that become effective only when revolver draws occur

US Bank tracked 23 recent transactions that have incorporated springing covenants

Of the nearly $40 billion in facilities (details below), only $5 billion (14%) represent revolvers, with the balance representing Covenant-Lite Term Loan B, Second-Lien and/or Term Loan C tranches (institutional oriented tranches)

Financing Purpose

# of Deals

Total Financing Package

Revolver Amount

Term Loan B Amount

Second Lien Amount

Term Loan C Amount

% Revolver

Acquisition 4 $3,479 $245 $2,459 $775 7%

Dividend 3 $1,520 $165 $950 $405 11%

Leveraged Buyouts 7 $18,149 $2,125 $13,144 $2,880 12%

Refinancings 9 $15,753 $2,895 $10,259 $410 $2,189 18%

Total 23 $38,901 $5,430 $26,812 $4,470 $2,189 14%

$ in Millions

14

Net Chargeoff Rate – Top 100 Banks

Commercial & Industrial and Commercial Real Estate loans continue to track to historical credit cycles

The new comer to credit cycles is residential mortgages