Winter Leveraged Finance. Market Update

Transcription

1 Winter 2014 Leveraged Finance Market Update

2 Weaker Stronger William Blair & Company Spotlight on the Leveraged Finance Market The general sentiment in the market suggests that it will be difficult to replicate in 2014 the record leverage lending volume seen in Leveraged lending in 2013 was dominated by opportunistic repricings and dividend recap transactions. Moody s estimates that new money transactions (such as LBOs, expansion financings, etc.) comprised less than half of all transactions in Arrangers believe 2014 loan volume will decline as the market faces fewer refinancing opportunities, regulatory challenges among commercial banks and a thin pipeline for large LBO activity. Refined guidance to banks from the Federal Reserve, OCC and FDIC in 2013 suggests new regulations may compel banks and arrangers to be more judicious in their lending practices (discussed further on the following page). This pressure has the potential to reign in leverage levels and, subsequently, loan volume. With regard to M&A activity, while the pipeline of large LBOs with the ability to soak up substantial swaths of liquidity in a single transaction is currently lagging, middle market ( MM ) M&A activity is forecasted to be a bright spot in Results from a survey conducted by Mergers & Acquisitions show that 71% of respondents believe 2014 will be a better year for MM M&A than Similarly, William Blair s sell-side backlog, which includes a number of MM transactions, is up approximately 45% when compared to the same time last year. The strong backlog is being driven, in part, by a combination of pre-crisis funds reaching the end of their investment periods and the potential risk that rising interest rates may gradually reign in leverage levels and, subsequently, exit multiples. Further evidence of the potential for strong MM M&A activity is the record volume of dry powder PE firms had at the end of Driven by a three year low in LBO activity and strong fundraising efforts during 2013, PE firms enter 2014 with more than $1 trillion available to invest. Although the high-yield (HY) market just missed setting a volume record in 2013, it was still a banner year driven by the same trend in opportunistic transactions that the loan market experienced. HY volume is expected to slide in 2014 as the decline in these types of transactions cannot be offset by M&A activity. Additionally, it will be interesting to see whether companies that have access to both the loan and HY markets elect to take advantage of the HY market s fixed rates in response to the risk of rising rates. Despite views that volume will likely be down in 2014, investors continue to pump cash into the asset class in search of yield. The continued imbalance between supply (inflows from investors) and demand (new money opportunities) has resulted in loans and bonds whose terms are increasingly more borrower and issuer friendly: Robust market conditions resulted in a proliferation of covenant-lite institutional loans in 2013, accounting for a whopping 57% of all new institutional loans, up from 29% in 2012 and less than 5% in As of January 2014, covenant-lite loans now make up slightly more than 50% of all loans in the S&P/LSTA Leveraged Loan Index, the highest level on record. Further, covenantlite loans made up 94% of all new first-lien issuances in January Covenant-lite terms have also crept into the rated MM arena as competition has intensified and investors chase higher yield premiums. At least seven smaller issuers (with EBITDA below $50 million) successfully closed covenant-lite transactions during As we noted last quarter, the HY market has not been immune to increasing pressure to loosen covenants and provide issuers with greater flexibility. Moody s Covenant Quality Index indicates that covenant provisions in new HY issuances are near their weakest levels on record. While HY bonds do not include maintenance covenants like leveraged loans, they do limit actions issuers are permitted to take including restricted payments, debt incurrence, lien subordination, and change of control, among others. It is these types of covenants that are being relaxed in the market today. First-Lien Covenant-Lite Volume Moody s Covenant Quality Index ($ in billions) Scale of 1 to 5, with 1 being strongest and 5 being weakest $258 $97 $3 $3 $8 $57 $ Source: Moody s Leveraged Finance Interest. 1 Moody s Leveraged Finance Interest, January 13, Mergers & Acquisition website, January 22, 2014 Spotlight on the Leveraged Finance Market 1

3 Leveraged Lending Guidelines While the Federal Reserve, OCC and FDIC initially issued their new leveraged lending guidelines in March 2013, the impact of these guidelines is just now beginning to work its way through the leveraged finance market. Most notably, a recent Wall Street Journal article suggested that certain large banks have elected to not pursue select private equity transactions (KKR s acquisition of Brinkman Group Ltd. and Carlyle s acquisition of Johnson and Johnson s blood testing unit are the two most prominent to date) due, in part, to this heightened regulatory focus 3. Observers believe the long-term impact of the heightened regulatory scrutiny will be an increase in conservatism by regulated banks and the exit of some from the leveraged finance marketplace. The guidelines define leveraged loans as having in excess of 3.0x senior secured debt or 4.0x total debt, with second lien debt being counted as senior secured debt. Additionally, regulators have drawn a bright line at 6.0x, stating that leverage levels higher than this for borrowers in most industries raise concerns. Financial institutions are being encouraged to maintain underwriting standards that are consistent with their own risk appetite for those loans the lender expects to syndicate. The guidelines specifically state: The originating institution should be mindful of reputational risks associated with poorly underwritten transactions, as these risks may find their way into a wide variety of investment instruments and exacerbate systemic risks within the general economy. Included in the guidelines are specific considerations regarding a borrower s capacity to repay leveraged loans. Base case cash flow projections should demonstrate the ability of the borrower to fully amortize senior secured debt or repay a significant portion of total debt over the medium term. The guidelines go on to suggest that loans in which the borrower is unable to repay 50% of total debt over 5-7 years will likely be adversely rated. Lower rated loans can result in higher reserves and capital charges for banks, thus negatively impacting returns. The guidelines also provide suggestions on how to factor in the presence of a private equity sponsor in the transaction. A financial institution may consider support from a sponsor in assigning internal risk ratings when the institution can document the sponsor s history of demonstrated support as well as the economic incentive, capacity, and stated intent to continue to support the transaction. An evaluation of a sponsor s financial support should include the following: The sponsor s historical performance in supporting its investments, financially and otherwise; The sponsor s economic incentive to support, including the nature and amount of capital contributed at inception; Consideration of the sponsor s contractual investment limitations; To the extent feasible, a periodic review of the sponsor s financial statements and trends, and an analysis of its liquidity, including the ability to fund multiple deals; Consideration of the sponsor s dividend and capital contribution practices; Lender Perspectives Blair conducted an informal survey of leveraged loan providers to gather perspectives on the impact of the Federal Reserve / OCC guidelines. Below are some general themes that came out of those conversations: These regulations are real and institutions are actively discussing internally how best to modify lending practices with the goal of balancing compliance with remaining competitive in the market. Different institutions are interpreting and reacting to the guidelines in materially different ways, ranging from exiting the leverage loan market to making virtually no changes. Multiple institutions mentioned that they now include specific language and analysis in their credit committee documents to demonstrate that the proposed transaction is in compliance with the guidelines. Multiple larger arrangers mentioned they have seen smaller, regional banks either exit or pull back from the leveraged loan market. Deals that formerly could be approved within the region may now require broader credit approval, which can add complexity and uncertainty to their processes. Transactions that do not meet the guidelines will still get done, but arrangers will more frequently need to demonstrate internally the strategic value (strong industry domain, key relationship, etc.) of the transaction and that the returns on the loan offset any increase in capital charges. Institutions covered under these guidelines expressed some concern that foreign banks and unregulated finance companies may gain a competitive advantage due to the lack of regulatory pressure. 3 WSJ, January 21, Spotlight on the Leveraged Finance Market

4 Leveraged Loan Deal Volume 2013 was a record year for the overall leveraged loan market with $605 billion in volume compared to $466 billion in 2012 and the previous record of $535 billion in Opportunistic transactions, including repricings and dividend recapitalizations, accounted for 57% of total loan volume in 2013 compared to only 28% in While repricing and dividend activity both set volume records in 2013, it appears that a large portion of those issuers in a position to pursue such deals took advantage of the favorable market conditions earlier in the year. As a result, both repricing and dividend transaction volume in 4Q 2013 declined from the lofty levels seen during the beginning of the year. Second-lien issuance also experienced a substantial uptick in The $29 billion of second-lien volume in 2013 was a 63% increase over 2012 and approached the 2007 record high of $30 billion. The boom in activity was mainly driven by the increase in recapitalization transactions, which accounted for 33% of the second-lien volume for the year. Loans supporting LBO and acquisition activity have increased at a measured pace over the last three years to $196 billion in 2013, representing 32% of the total volume and led by two mega-cap LBOs (Dell and Heinz). However, 2013 volume was far short of the record level of $331 billion of LBO and acquisition financing activity in 2007 when it represented 62% of the overall transaction volume of $331 billion. Clearly, the market could use more new-money volume. 4Q 2013 leveraged loan volume was $127 billion bringing the 2H 2013 level to $252 million, down 28% from 1H While slowing in December 2013, loan mutual funds and CLOs continued to experience strong net cash inflows from investors. For all of 2013, investors pumped $152 billion of new money into the loan market, which S&P estimates to have outpaced demand from borrowers by $23 billion. Inflows to the asset class in January 2014 continued to slow but still remained positive at $6.4 billion for the month. Investors remain attracted to the market s continuing low default rates and floating interest rates. Although the average yield on loans and the relative spread to treasuries both compressed during 2013 thanks to robust repricing activity, the Fed s tapering announcement suggests interest rates will be rising in the coming quarters, potentially making loans floating rates more attractive relative to fixed-rate HY bonds. Middle Market Leveraged Loan Volume Large Corporate Leveraged Loan Volume ($ in billions) ($ in billions) $28.7 $8.0 $5.3 $11.4 $14.3 $10.1 $13.4 $535 $157 $77 $236 $377 $466 $605 Institutional Pro Rata Institutional Pro Rata Loan Repricing Volume Recapitalization Loan Volume ($ in billions) ($ in billions) $140 $0 $0 $4 $74 $72 $282 $49 $3 $1 $38 $36 $56 $70 Institutional Pro Rata Spotlight on the Leveraged Finance Market 3

5 Leverage Multiples and Equity Contribution Fueled by relatively light LBO deal flow, low default rates, and significant liquidity, leverage multiples have continued their upward trend. Debt multiples in MM LBOs in 2013 averaged 4.8x, up from 4.3x in 2012 and more than 40% higher than the draconian levels of While leverage is creeping towards the cyclical peak in 2007, the 2013-vintage borrowers have realized solid EBITDA growth since the recession while successfully borrowing at lower rates. This suggests recent borrowers may be better positioned to withstand negative micro or macro events. The percentage of large corporate loan volume in 2013 with leverage greater than 4.0x reached the highest level since However, demonstrating that there is some level of restraint in the market today, the percentage of loans with leverage greater than 5.0x remains approximately 17 percentage points below the 2007 level. With debt multiples moving higher, sponsors in LBOs have been able to reduce equity contribution levels to an average of approximately 37% for all of In Blair s experience, this contribution level should not be viewed as a minimum as it is likely inflated by high purchase multiples coupled with absolute caps on leverage levels. Based on our recent transaction experience (2H 2013), lenders are regularly permitting equity contributions between 30% and 35%, with some strong borrowers seeing levels even lower. LBO Leverage Multiples Average Equity Contributions to Leveraged Buyouts 6.2x 5.6x 4.9x 4.5x 4.0x 3.3x 4.7x 5.2x 5.3x 5.4x 4.2x 4.3x 4.5x 4.8x 33% 43% 51% 44% 42% 39% 37% Large Corporate Middle Market Leveraged Loan Multiples Percentage of Large Corporate Volume with Debt/EBITDA of 4x or Higher 4.9x4.8x 4.3x 3.7x 4.1x 3.4x 3.9x3.7x 4.4x4.2x 4.6x4.3x 4.7x4.8x 77% 63% 50% 32% 35% 20% 51% 31% 57% 38% 67% 73% 45% 46% Large Corporate Middle Market 4x or Higher 5x or Higher 4 Spotlight on the Leveraged Finance Market

6 Loan Pricing Pricing for newly-issued MM first-lien institutional leveraged loans (borrowers with less than $50 million of EBITDA) for all of 2013 averaged L+509bps, an approximately 125 bps premium over large institutional loans. Pricing spreads for institutional single-b first-lien leveraged loans largely remained in the L+375bps to L+400bps range during 2013, down approximately 90bps from 2012 levels. In 2013, approximately 90%-95% of all first-lien loans carried Libor floors with the average level steadily dropping from 127 bps in 2012 to 106 bps in The monthly average Libor floor fell below 100bps in November 2013 and for January2014 came in at 96 bps. Unrated first-lien loans will still occasionally have Libor floors of 125 bps, however 100bps has now become the new standard. Libor spreads on large institutional sized ($50+ million) second-lien loan tranches averaged approximately 800bps in 2013, down from approximately 900bps during 2011 and The spread between first lien and second lien pricing compressed by approximately 25 bps during 2013 to 390bps. In some more recently completed transactions, the spread between first and second lien tranches has fallen as low as 350bps. Institutional second-lien deals for MM transactions during 2013 saw an average Libor spread of approximately 850bps. While taking longer to reflect recent yield levels in the broader market, unitranche facilities are now frequently being priced in L+650bps to 750bps range, although, in some cases, the strongest top-tier sponsored credits and those with outsized equity contributions can secure even tighter pricing. Libor floors for unitranche loans remain mixed between 100 and 125 bps, largely dependent on the type of lender. Pricing in the asset based loan market reflects the value of collateral coverage and robust lender competition on most transactions. Recent pricing has been in the range of L+150bps to L+225bps range, depending on deal size, asset quality, and liquidity. Middle Market Loan Libor Spreads (bps) Large Corporate Loan Libor Spreads (bps) Pro Rata Institutional Pro Rata Institutional Spotlight on the Leveraged Finance Market 5

7 01/07 04/07 07/07 10/07 01/08 04/08 07/08 10/08 01/09 04/09 07/09 10/09 01/10 04/10 07/10 10/10 01/11 04/11 07/11 10/11 01/12 04/12 07/12 10/12 01/13 04/13 07/13 10/13 01/14 William Blair & Company High-Yield Bond Offerings High-yield volume in 2013 of $324 billion was a strong showing, but fell short of 2012 s all-time record of $345 billion. The robust volume in 2013 was mainly driven by continued historically low treasury rates combined with strong investor demand and increased speculation that rates will rise in Refinancings dominated the high-yield market in 2013, representing over 50% of the volume, mainly due to borrowers swapping more expensive debt with lower, fixed rate notes. Moody s predicts the high-yield market will experience a 10%-15% decline in volume for 2014 given the backdrop of significant refinancing volume in 2012 and 2013 and rising rates in H 2013 saw significant inflows into high-yield funds helping move the full year flows into positive territory. At its low point over the summer, HY funds had seen YTD outflows of $7.6 billion. With the strong fourth quarter, 2013 ended with net inflows to HY funds of $1.9 billion. However, the trend has reversed in the first month of 2014 as HY funds experienced net outflows of $0.4 billion. The 2H2013 inflows created a competitive supply environment relative to 1H 2013, pushing new issue yields lower. The current new issue yields for BB and B credits are 5.0% and 7.0%, respectively, which are near all-time lows. Issuance of PIK toggle notes, which permit the issuer to choose to make cash interest payments or add the interest to the existing principal, was the highest since 2008 with $12.0 billion of notes issued in 2013 compared to only $6.7 billion in The increased risk appetite among investors has also been evidenced by an increase in CCC and split B/CCC issuances, up from 17% in 2012 to 22% in 2013 and 24% in 4Q2013. Further, 144A private-for-life issues have comprised 30% of the total volume, allowing companies to take advantage of the HY market without requiring SEC registration. Consistent with the theme of increased risk appetite, multiple sub-$50 million EBITDA companies successfully completed HY issues in Despite coupon rates in the 9%-11%+ range, these issuers have been willing to pay a premium over comparable loan pricing in order to avoid restrictive covenant packages and have access to bullet maturities typical for HY notes. These attributes have been particularly attractive to certain growth and/or cyclical companies that have more variable cash flow. High-Yield Bond Volume Yields of New-Issue Senior Unsecured Bonds ($ in billions) (bps) $287 $345 $324 $144 $164 $218 $68 13% 11% 9% 7% 5% 3% BB B NA 7.05% 5.00% 6 Spotlight on the Leveraged Finance Market

8 Select Leveraged Loan Transactions Company Sponsor(s) Sector Purpose Month Corp. Rating Amount ($MM) Total Revolver 1st Lien TL 2nd Lien TL Libor Spread 1st Lien TL 2nd Lien TL Senior / Total Leverage LBO Transactions Contacts Inc Thomas H. Lee Retail LBO Jan. B/B2 $480 $60 $ x/5.7x Mergermarket BC Partners Printing & Publishing LBO Jan. B/B3 $420 $40 $273 $ x/6.0x Not Your Daughter's Jeans Apparel LLC Crestview Partners Retail LBO Dec. B/B2 $163 $13 $ x/4.1x Hostway Corp Littlejohn & Co LLC Computers & Electronics GlobalLogic Inc Apax Partners Computers & Electronics LBO Nov. --/-- $118 $15 $68 $ x/4.3x LBO Nov. B/B3 $185 $25 $ x/3.0x Drew Marine Inc Jordan Company Chemicals LBO Nov. B/B2 $335 $50 $220 $ x/5.5x Transilwrap Company Jordan Company Chemicals LBO Nov. --/-- $160 $30 $ x/4.0x P2 Energy Solutions Inc Advent International Computers & Electronics LBO Oct. B/B3 $500 $30 $310 $ x/6.7x Dividend Recapitalizations Kronos Inc Hellman & Friedman Computers & Electronics Travel Leaders Group One Equity Partners Entertainment & Leisure Recap /Dividend Recap /Dividend Arby's Restaurant Group Roark Capital Group Restaurants Recap /Dividend Amneal Pharmaceuticals LLC Tarsadia Investments Healthcare Recap /Dividend Other Transactions Nov. B/B2 $ $205 Nov. B+/B2 $185 $15 $170 Oct. B/B3 $370 $35 $335 Oct. B/B2 $475 $60 $ x/7.1x x/3.4x x/4.1x x/4.0x Connolly Inc Advent International Services & Leasing Refinancing Jan. B/B2 $350 $30 $ x/3.0x ATI Physical Therapy KRG Capital Partners Healthcare Refinancing Dec. B/B2 $ $ x/5.2x Remington Outdoor Company Hillman Companies Inc Cerberus Capital Management Oak Hill Capital Partners Entertainment & Leisure Recap/Stock Repurchase Dec. B+/B1 $ $ x/3.3x Building Materials Refinancing Dec. B/B2 $ $ x/6.2x Sheridan Healthcare Inc Hellman & Friedman Healthcare Acquisition Dec. B/B2 $ $155 $ x/6.3x Answers Corporation Summit Partners Computers & Electronics Multi Packaging Solutions Inc Madison Dearborn Partners Printing & Publishing Acquisition Dec. --/-- $195 $20 $175 $ , x/4.3x Merger Nov. B/B2 $452 $50 $ x/4.9x Select High-Yield Note Offerings (Less than $300 million) Company Sponsor(s) Sector Purpose Type Month Issue Rating Size ($MM) Coupon Yield Harland Clarke Corp. -- Services & Leasing Acquisition 144a Jan. B+/B1 $ % 6.875% 6 Harbinger Group Inc. -- Services & Leasing Corp Purpose 144a Jan. CCC+/Caa2 $ % 7.750% 8 Carlisle Transportation Products Inc American Industrial Partners Automotive LBO 144a Dec. B+/B2 $ % 8.250% 6 Headwaters Inc -- Building Materials Acquisition 144a Dec. CCC+/Caa2 $ % 7.250% 5 US Concrete Inc -- Building Materials Refinancing 144a Nov. B/Caa1 $ % 8.500% 5 Beverages & More TowerBrook Capital Partners Retail Food & Drug Recap/General Recap 144a life Nov. CCC+/Caa2 $ % % 5 American Axle & Manufacturing -- Automotive Refinancing Public Nov. B/B2 $ % 5.125% 6 Rue 21 Inc Apax Partners Retail LBO 144a life Oct. CCC/Caa3 $ % % 8 Sally Beauty Holdings Inc -- Retail Refinancing Public Oct. BB+/Ba2 $ % 5.500% 10 Tenor (Yrs.) Spotlight on the Leveraged Finance Market 7

9 Selected Transactions $55,000,000 $400,000,000 $250,000,000 $100,000,000 Specialty Finance Subsidiary Senior Credit Facilities Senior Secured Notes Senior Unsecured Debt Senior Credit Facility $325,000,000 $260,000,000 $83,000,000 $275,000,000 Senior Secured Notes Unitranche Credit Facility Senior Credit Facilities Senior Notes $74,000,000 $150,000,000 $550,000,000 $300,000,000 Emerald Senior Credit Facilities & Subordinated Notes Senior Credit Facilities $425,000,000 Syndicated Term Loan $125,000,000 Revolver Syndicated Term Loan Leveraged Finance and Debt Capital Markets William Blair s Leveraged Finance team structures and arranges debt capital in support of acquisitions, recapitalizations and growth through its well-established relationships with debt capital providers globally. Over 65 transactions closed since 2008, with $4.7 billion arranged since 2012 Specialists who are experts in complex engagements, including those requiring insightful credit positioning and the arrangement of multiple layers of capital Extensive experience in arranging and negotiating terms for a broad range of senior, junior and structured debt products Real-time, proprietary view of the leveraged finance market from Blair s global M&A and debt advisory practices Senior banker attention and unbiased, objective advice; senior bankers average more than 20 years of experience Thoughtful, customized financing processes that produce outstanding outcomes Our Debt Capital Markets team provides clients with access to various debt capital markets, including high yield notes, convertible bonds, syndicated term loans, investment grade notes, preferred stock and other debt securities purchased by institutional investors. Debt underwriting, placement and advisory services related to the public and private/144a markets 40+ institutional sales and trading professionals based in Chicago and New York Market maker in 500 high yield bond and investment grade issues; 400 preferred issues National account coverage of more than 700 tier one institutional buyers and regional investors 8 Spotlight on the Leveraged Finance Market

10 William Blair Leveraged Finance Investment Banking Leveraged Finance Team Kelly Martin is a senior member of the corporate finance team, well experienced across a range of transaction structures and industries. He currently leads Blair s Capital Advisory Group, which includes the Leveraged Finance team. He developed William Blair s private equity placement practice, launched its private equity for public company initiative and currently maintains a variety of client and business development responsibilities. Mr. Martin has completed more than 130 transactions, including private equity placements, mergers & acquisitions, public equity offerings, corporate debt transactions and variety of structured finance and real estate financings. Mr. Martin holds an MBA from the University of Chicago and a BS, with highest distinction, from Penn State University [email protected] Kent Brown joined William Blair & Company in 1989 and has been a Managing Director since Mr. Brown has extensive public and private debt transaction experience across numerous industry segments including specialty finance, consumer & retail, healthcare, technology, and business services. Prior to joining Blair, he spent three years with Arthur Andersen & Co. with the audit and corporate tax groups in Chicago. Mr. Brown holds an MBA from the University of Chicago and a BS from the University of Colorado. He is also a CPA (State of Illinois, inactive) [email protected] Michael Ward joined William Blair in 1997 and is a Managing Director with over 20 years of corporate debt and banking experience. He focuses on providing debt advisory and placement services to private and public clients across a range of sectors including food & beverage, consumer products, industrials, business services and technology. Mr. Ward has extensive experience advising on, structuring and placing a variety of types of debt including bank loans, leveraged loans, second lien loans, mezzanine debt, and high yield notes. Prior to joining Blair, he spent several years at First Chicago NBD in a number of roles, including syndications & placements and credit underwriting. Mr. Ward holds an MBA from the University of Chicago and a BS, with highest honors, from the University of Illinois. He is also a CPA [email protected] Mark Birkett, Vice President, joined William Blair in 2011 in the Corporate Finance Department. Mark is a member of the Capital Advisory Group providing debt advisory services and debt capital raises for both public and private companies in a diverse collection of industries. Prior to joining Blair, Mark spent 8 years at GE Antares Capital, underwriting leveraged loans in support of private equity led buyouts, recapitalizations and refinancings. Additionally, Mark worked at Raytheon Company as a financial analyst. Mark holds an M.B.A. from the University of Michigan and a B.S.B.A. from Villanova University [email protected] William Blair Leveraged Finance Investment Banking 9

11 Disclosures William Blair is a trade name for William Blair & Company, L.L.C. and William Blair International, Limited. William Blair & Company, L.L.C., is a Delaware company and is regulated by the Securities and Exchange Commission, The Financial Industry Regulatory Authority, and other principal exchanges. William Blair International Limited is authorised and regulated by the Financial Services Authority ("FSA") in the United Kingdom. William Blair & Company only offers products and services where it is permitted to do so. Some of these products and services are only offered to persons or institutions situated within the United States and are not offered to persons or institutions outside of the United States. This material has been approved for distribution in the United Kingdom by William Blair International Limited, and is directed only at, professional clients and eligible counterparties (as defined in COBS 3.5 and 3.6 of the FSA Handbook). This advertisement is not intended to be investment advice. William Blair & Company 222 West Adams Street Chicago, Illinois williamblair.com February 12, William Blair Leveraged Finance Investment Banking

12 International Frankfurt William Blair International, Limited An der Hauptwache Frankfurt am Main Germany Headquarters Chicago 222 West Adams Street Chicago, IL [email protected] williamblair.com United States Boston 125 High Street Oliver Street Tower Suite 1901 Boston, MA Hartford Putnam Place 100 Great Meadow Road Suite 606 Wethersield, CT New York 666 Fifth Avenue 14th Floor New York, NY San Francisco 343 Sansome Street 12th Floor San Francisco, CA Wilmington 500 Delaware Avenue Suite 720 Wilmington, DE London William Blair International, Limited The Broadgate Tower 20 Primrose Street 17th Floor London EC2A 2EW United Kingdom Equity Sales: Corporate Finance: William Blair International, Limited 40 Bruton Street London W1J 6QZ United Kingdom Investment Management: São Paulo William Blair do Brasil Assessoria Financeira Ltda. Av. Brigadeiro Faria Lima 3729, room 511 São Paulo, SP Brazil Shanghai William Blair & Company, L.L.C. Shanghai Representative Ofice Unit 16-18, 11th Floor Building One, Corporate Avenue 222 Hubin Road Shanghai P.R. China Zurich William Blair & Company, L.L.C. Stockerstrasse 46 CH-8002 Zurich Switzerland Institutional Sales: Investment Management:

13 About William Blair Investment Banking William Blair s investment banking group combines significant transaction experience, rich industry knowledge, and deep relationships to deliver successful advisory and financing solutions to our global base of corporate clients. We serve both publicly traded and privately held companies, executing mergers and acquisitions, growth financing, special situations and restructuring, and general advisory projects. This comprehensive suite of services allows us to be a long-term partner to our clients as they grow and evolve. In 2012, the investment banking group completed 76 merger-and-acquisition transactions worth more than $13.8 billion in value, involving parties in 21 countries and five continents, and was an underwriter on over 20% of all U.S. initial public offerings.