1. Joseph V. Rizzi Amsterdam Institute of Finance December, 2013

2. 22 Cash Flow Impacts default risk Balance Sheet Determines Loss in Event of Default (LIED) Liquidity Valuation Amsterdam Institute of Finance December, 2013

3. 3 Business Risk: EBITDA Volatility ◦ Industry Characteristics ◦ Firm Characteristics Financial Risk: EBITDA Relative to Debt Structural Risk ◦ Issues  Priority of claim on assets and income  Control ◦ Focus  Covenants, Seniority, Security Amsterdam Institute of Finance December, 2013

4. 4 Quantitative ◦ Capitalization  Cash Equity>25%  Total Debt<6.0x  Senior Debt (1) <4.5x  First Lien<4.0x  Second Lien<0.5x ◦ Cash Flow  LTM EBITDA / PFI>2:1  7 x LTM FFOCF / TLA (2) >1:1 ◦ Liquidity  Cash + MS + RCA / P+I (3) > 1.5 : 1 1:- TLA usually >20% of senior debt and amortizes at least 30% by year 5 2:- FFOCF = LTM EBITDA - (WCI + CAPEX + Taxes + PF Interest) 3:- Liquidity tested day 1. MS (Marketable Securities). RCA (Revolving Credit Availability). Revolver usually set at 1 x EBITDA Amsterdam Institute of Finance December, 2013

5. 5 Debt capacity is derived from firm’s assets ◦ Operating Cash Flows ◦ Asset Sales / Asset Quality ◦ Leveragability Market Conditions Target financing structure Credit curve shifts over time depending on the economy Rating Rates 2H 07 Cris is Overheated 1H07 Amsterdam Institute of Finance December, 2013

6. 6  There are two different approaches to designing the capital structure: 20% 30% 50% Cash Flow Model Balance Sheet Model Senior Debt Sub Debt Equity 3 - 4x EBITDA 4 - 6x EBITDA Equity Amsterdam Institute of Finance December, 2013

7. 7 Ratio Approach Cash Flow Advance Rate Amsterdam Institute of Finance December, 2013

8. 8 Market ◦ Maximum senior debt and total debt ratios ◦ Vary over cycle Peers ◦ Identify ◦ Rating Classification ◦ Key Ratios Rating Agencies ◦ Credit Statistics Amsterdam Institute of Finance December, 2013

9. 9 Amsterdam Institute of Finance December, 2013

10. 10  Important:Loan Market Evolution from a bank to an institutional market (back to a bank market?)  Impact:Majority of syndicated loans are rated  Pricing:Affected by rating Amsterdam Institute of Finance December, 2013

11. Category (x)BB+BBBB-B+BB- __________________________________________________________________________________ Total Debt with Equity Credit/ Operating EBITDA3.13.82.94.55.36.0 Long Term Secured Debt/ Operating EBITDA0.00.81.01.12.62.6 Total Adjusted Debt/ Operating EBITDAR3.53.93.34.95.47.0 FFO Adjusted Leverage3.74.23.75.16.46.7 FCF/Total Adjusted Debt0.00.00.10.00.00.0 Operating EBITDA/ Gross Interest Expense5.54.15.33.22.51.8 Amsterdam Institute of Finance December, 2013 11

12. 2013 LBO’s Funded by (YTD 17/09/13) Amsterdam Institute of Finance December, 201312 Bonds Only Bonds + Drawn Bank Debt Bank Debt Only Number of Deals in Sample6423 Ave. Transaction Size (M) € 789.9 € 2,957.0 € 1,228.4 Ave. PPM8.5x9.4x8.6x Ave. Equity Contribution44.8%29.9%43.9% Ave. HY Bond/Total Sources54.9%22.9%0.0% Ave. Bank Debt/Total Sources0.0%47.2%52.8% Ave Total Debt/Total Sources54.9%70.1%54.5% Ave. Debt/EBITDA Source S&P Financial Services 4.9x6.6x4.6x

13. CharacteristicsLTM20122011 Total Volume (€ B)7.151.743.17 Total Deal Count1269 Avg. Pro Rata Spread (E+)N/A475.0403.6 Avg. Wtd. Avg. Inst. Spread (E+)430.6591.7459.4 Avg. Deal Size (€ MM)595.5289.2352.5 Avg. Pro Rata Term (Years)N/A5.96.0 Avg. Institutional Term (Years)5.85.76.8 Avg. Pro Forma TrailingLTM20122011 Revenues (€ MM)5,117.29N/A466.5 EBITDA (€ MM)315.32 N/A62.86 Adj. EBITDA (€ MM)320.35 N/A62.86 Amsterdam Institute of Finance December, 201313

14. Financial Ratios (Trailing Pro Forma)LTM Avg.Max.Min.St. Dev. Debt/EBITDA5.226.024.20.77 Sr. Debt/EBITDA4.805.504.18.64 EBITDA/Cash Interest3.554.212.76.72 EBITDA-Miant CapEx/InterestN/AN/AN/AN/A EBITDA-CapEx/InterestN/AN/AN/AN/A Purchase Price MultipleN/AN/AN/AN/A Equity ContributionN/AN/AN/AN/A Amsterdam Institute of Finance December, 2013 14

15. 15 To access the data points underlying the chart, double-click on the chart. Copyright© 2012 by Standard & Poor’s Financial Services LLC (S&P) a subsidiary of The McGraw-Hill Companies, Inc. Wtd. Avg. ProRata spread is the average RC/TLA spread weighted by sizes of the RC and TLA tranches. Wtd. Avg. Institutional Spread is the average TLB/TLC spread weighted by the sizes of the TLB and TLC tranches. Amsterdam Institute of Finance December, 2013

16. Amsterdam Institute of Finance December, 2013 16

17. Revolver Term Loans A B C Second Lien Cov Lite Mezzanine PIK Preferred Stock 17 Amsterdam Institute of Finance December, 2013

18. R/CT/LaT/LbT/Lc2ndL  2013 (9 mo) 14%22%64%--  2012 14%30%56%--  2011 15%28%57%--  2010 14%32%54%--  2009 15%31%54%--  2008 12%31%40%17%-  2007 12%19%42%17%10%  2006 13%28%31%3%5%  2005 14%40%25%20%5%  2004 15%40%26%--  2003 15%45%23%--  2002 16%46%26%--  2001 16%54%20%--  2000 20%50%20%--  Source: Standard & Poor’s Financial Services Amsterdam Institute of Finance December, 201318

19.  2013 (9 mo)8.0  20128.9  20118.4  20108.6  20098.9  20089.3  20079.3  20068.4  20057.9  20047.2  20036.5  20026.6  20016.1  20006.9  Source: Standard & Poor’s Financial Services Amsterdam Institute of Finance December, 201319 Amsterdam Institute of Finance December, 2013

20.  2013 (9 mo)43%  201250%  201147%  201050%  200950%  200845%  200735%  200635%  200535%  200436%  200338%  200239%  200139%  200038%  Source: Standard & Poor’s Financial Services Amsterdam Institute of Finance December, 201320

21.  EuropeU.S.  RC10.7%16.1%  T / LA22.1% 1.1%  T / LB62.7% 71.7%  T/Lc -.2%  2nL - 10.9%  Other 4.4% -   Source Standard & Poor’s Financial Services LLC. All rights reserved Amsterdam Institute of Finance December, 201321

22.  LTM 9/30/132012   Bank Debt47.8%38.4%  2 nd L1.8%1.2%  Secured HY0.5%1.7%  Sen Unsecur HY 0.8% 0.6%  Mez 0.5% 4.2%  Vendor Note- 0.7%  Shareholder Loan 1.4% 7.2%  Rollover Eq 1.0% 3.8%  Common Eq 44.3%41.1%  Total Eq46.8%52.7%  Other0.4%1.2%  Bridge to HY 1.5%  Source: Standard & Poor’s Financial Services Amsterdam Institute of Finance December, 201322

23. 23  Maximum debt capacity formula:- MDC = f(operations, amortization, rate, asset sales) MDC = [EBIT / (i+ 1/n)] + AS + RF EBIT- Earnings Before Interest and Taxes i - Interest Rate n- Straight line loan amortization AS- Proceeds from Asset Sales RF- Refinancing Amsterdam Institute of Finance December, 2013

24.  Opening Balance Sheet  Adjustments – from sources and uses – including purchase price assumptions  Proforma balance Sheet ◦ Income Statement ◦ Cash Flow Statement Capitalization table/transaction structure Debt Schedule Term sheet(s) Valuation/maximum purchase price Returns Analysis – IRR and MOC 24 Amsterdam Institute of Finance December, 2013

25. 25  Issues ◦ Adjustments (beware of solving for cash flows to justify price) ◦ Normalization  Cyclicality  Bad Management  Value Test ◦ Projections implied price  Reverse Engineer - Management implied forecast ◦ Firms ◦ Peers  Tie Into ◦ Compensation ◦ Covenants Amsterdam Institute of Finance December, 2013

26. 26  Macro/Market Level ◦ Determine rating target ◦ Use target rating level financial characteristics  Funded Debt/EBITDA  EBITDA/Interest Expense  Funded Debt/Total Cap  Example: (A) Target RatingBB (B) EBITDA/Int for Target Ratingc3.0x (C) Firm EBITDA$300mln (D) Interest Rate for Target Rating10% (E) Maximum Debt Capacity= (C/B)/D = (300/3)/10% = $1,000 Amsterdam Institute of Finance December, 2013

27.  2013 ( 9 mo ) 9%  2013 7%  201312%  2011 7%  2010 9%  2009 5%  Source: Standard & Poor’s Financial Services  Amsterdam Institute of Finance December, 201327

28. 28 To access the data points underlying the chart, double-click on the chart. Copyright© 2012 by Standard & Poor’s Financial Services LLC (S&P) a subsidiary of The McGraw-Hill Companies, Inc. Share of Credit Issue in Distress Based on CountShare of Credit Issue in Distress Based on Share of Sr. Par Issue Distressed credits are issues rated D or restructuring. Charts reflect share of credits issued each year that eventually went into distress. Year of Credit Issue Amsterdam Institute of Finance December, 2013