a debtwire middle market special report 2q17 bdc qta...debtwire.com an acuris company 2q17 bdc...
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Debtwire.com
An Acuris Company2Q17
BDC Quarterly Trends and Analysis An Acuris Company
A Debtwire Middle Market Special Report
2Q17
BDC Quarterly Trends and Analysis
Debtwire.com
Quarterly Overview of Alternative Lenders to the Middle Market
Debtwire.com
An Acuris Company2Q17
BDC Quarterly Trends and Analysis An Acuris Company
Debtwire.com
BDC Quarterly Trends and Analysis
Page 2
2Q17 | Primary Issuance Overview
1AINV 22TCRD2ARCC 23TICC3BKCC 24TSLX4CPTA 25TCAP
5FDUS 26WHF
6FSC 27MRCC
7FSIC 28ABDC
8GARS 29GBDC9GLAD 30TPVG
10GSBD 31PFLT11HCAP 32FSFR12HTGC 33SUNS
13HRZN 34CSWC
14KCAP 35OHAI
15MAIN 36SCM16MCC 37CMFN17NMFC 38OFS18PNNT 39ACSF19PSEC 40GAIN
20SLRC 41 CGBD21TCPC
BDCs Under Coverage as of 2Q17CONTENTS
METHODOLOGY: 3
FIRST LIEN QUARTERLY TRENDS, CHARTS AND ANALYSIS: 4-5
SUBORDINATE QUARTERLY TRENDS, CHARTS AND ANALYSIS: 6-7
UNITRANCHE QUARTERLY TRENDS, CHARTS AND ANALYSIS: 8-9
INDUSTRY BREAKDOWN AND ANALYSIS: 10-13
CONTACT INFO: 14
APPENDIX2Q17 PRIMARY ISSUANCE WATCH (2Q17 ENTRANCE AND EXITS OF ALL BDCS UNDER COVERAGE)
PDF (CLICK HERE)
EXCEL (CLICK HERE)
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An Acuris Company2Q17
BDC Quarterly Trends and Analysis An Acuris Company
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2Q17
BDC Quarterly Trends and Analysis
Page 3
Methodology
Debtwire Middle Market’s BDC Trends and Analysis reportcalculates average spreads and tenor, on a quarterly basis,for the leveraged loans issued by ~40 BDCs under coverage.
BDCs are permanent capital vehicles that return 90% of theirnet operating income to shareholders in the form of adividend in exchange for no corporate tax. There areestimated to be roughly 57 public BDCs, of which we track~40 that have the most heavily trafficked marketcapitalization.
The BDCs we track tend to define their loans differently,but we’ve grouped them into three categories—first lien loans,subordinated debt and unitranche—and tracked both theaverage spread and tenor in all three groups. The
subordinated debt basically encompasses second lien,mezzanine and unsecured debt. Each BDC either originatedthe loan, was the sole holder of the loan or participated in alarger loan issuance underwritten by a third party.
The first two charts under each of the three categoriesencompass the average first lien coupon on all of theissuances and exits over the last eight quarters. The loans aregrouped by applicable margin above LIBOR, cash interest,applicable margin above prime and applicable margin abovethe base rate. The second group of charts shows the averagefirst lien issuance price and the average first lien exit price.The last two charts show total deals issued per quarter andtotal exits.
Debtwire.com
An Acuris Company2Q17
BDC Quarterly Trends and Analysis An Acuris Company
Debtwire.com
BDC Quarterly Trends and Analysis
AVERAGE FIRST LIEN ISSUANCE PRICE
Source: Debtwire, SEC filings
AVERAGE FIRST LIEN EXIT PRICE
Source: Debtwire, SEC filings
AVERAGE FIRST LIEN RATE FOR EXITS
Source: Debtwire, SEC filings
AVERAGE FIRST LIEN COUPON
Source: Debtwire, SEC filings
Page 4
2Q17 | First Lien
ISSUANCES EXITS
7.0%
Avg L +
6.8%6.9%
Avg cash int
8.5%
5.2%
Avg P+
6.4%5.9%
Avg B+
4.3%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
9.5%
10.0%
10.5%
3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Inte
res
t R
ate
/ C
ou
po
n (%
, Qo
Q)
Average First Lien Coupon For Exits Avg cash int Avg P+ Avg B+
95.2%
Average First Lien Exit Price
96.6%
89.0%
91.0%
93.0%
95.0%
97.0%
99.0%
101.0%
3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Pri
ce
(%, Q
oQ
)
6.9% Avg L+
6.4%
8.2%
Avg cash int
8.1%
6.8%
Avg P+
6.7%
6.4%
Avg B+
7.5%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
9.5%
10.0%
10.5%
3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Inte
rest
Rat
e /
Co
up
on
(%, Q
oQ
)
Avg L+ Avg cash int Avg P+ Avg B+
97.9%
Average First Lien Issuance Price 98.3%
92.0%
93.0%
94.0%
95.0%
96.0%
97.0%
98.0%
99.0%
3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Pri
ce
(%, Q
oQ
)
Debtwire.com
An Acuris Company2Q17
BDC Quarterly Trends and Analysis An Acuris Company
Debtwire.com
BDC Quarterly Trends and Analysis
FIRST LIEN EXITS & AMOUNT EXITED
Source: Debtwire, SEC filings
FIRST LIEN PRIMARY DEALS & PRINCIPAL AMOUNT
Source: Debtwire, SEC filings
Page 5
2Q17 | First Lien
ISSUANCES EXITS
FIRST LIEN OVERVIEW:
In 2Q17, the average first lien cash coupon increased 35 basis points QoQ to 8.1%. The increase comes after 4 straight
quarters of tightening in the average cash coupon.
Deal volume remains very heavy as of 2Q17. Nonetheless, there was a net outflow in first lien deals amongst the
BDCs. Total entrances and exits were both up significantly YoY, illustrating the high level of activity in the current
market.
The total count of first lien issuances (212) decreased slightly QoQ, but the USD 2.3bn in total deal value was the
highest over the last 8 quarter period. Total deal value continues to climb sequentially. The average price (fair
value/principal) for first lien entrances increased QoQ to 98.3%, from 96.7% in 1Q17.
The average price at exit increased by 68 basis points QoQ to 96.6%.
1,606,597
Total amount exited (left axis),
3,700,298
903,482
1,341,601 1,205,718
1,633,1621,386,460
2,398,218161
Total exits (right axis)
377
104
150130
193
215 220
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
0
50
100
150
200
250
300
350
400
To
tal e
xits
To
tal a
mo
un
t (U
SD
00
0's
)
Total amo unt exited (left axis ) Total exits (right axis)
1,383,258
Total amount (left axis)
2,010,7141,615,206 1,251,197
1,727,8951,980,898
2,238,116 2,302,125
119
Total primary deals (right axis)
178
100
155 178 188
225 212
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
0
50
100
150
200
250
300
350
400
To
tal
pri
ma
ry d
ea
ls
To
tal a
mo
un
t (U
SD
00
0's
)
Total amount (left axis) Total primary deals (right axis)
Debtwire.com
An Acuris Company2Q17
BDC Quarterly Trends and Analysis An Acuris Company
Debtwire.com
BDC Quarterly Trends and Analysis
AVERAGE SUBORDINATE ISSUANCE PRICE
Source: Debtwire, SEC filings
AVERAGE SUBORDINATE EXIT PRICE
Source: Debtwire, SEC filings
AVERAGE SUBORDINATE COUPON FOR EXITS
Source: Debtwire, SEC filings
AVERAGE SUBORDINATE COUPON
Source: Debtwire, SEC filings
Page 6
2Q17 | Subordinated Loans
ISSUANCES EXITS
97.5%
Average Subordinate Issuance Price
100.2%
92.5%
93.5%
94.5%
95.5%
96.5%
97.5%
98.5%
99.5%
3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Pri
ce
(%, Q
oQ
)
8.9%
Avg L+
8.4%
10.7%
Avg cash int
9.8%
8.0%
8.5%
9.0%
9.5%
10.0%
10.5%
11.0%
11.5%
12.0%
3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Inte
res
t R
ate
/ C
ou
po
n (
%,
Qo
Q) Avg L+ Avg cash int
8.8%Avg L+ 8.9%
10.9% Avg cash int 10.9%
14.2%Avg PIK only
11.7%
6.5%
8.5%
10.5%
12.5%
14.5%
16.5%
18.5%
20.5%
3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Inte
rest
ate
/ c
ou
po
n (%
, Qo
Q)
Avg L+ Avg cash in t Avg PIK only
89.5%
Average Subordinate Exit Price
90.7%
85.0%
87.0%
89.0%
91.0%
93.0%
95.0%
97.0%
99.0%
3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Pri
ce
(%, Q
oQ
)
Debtwire.com
An Acuris Company2Q17
BDC Quarterly Trends and Analysis An Acuris Company
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BDC Quarterly Trends and Analysis
SUBORDINATE EXITS & AMOUNT EXITED
Source: Debtwire, SEC filings
SUBORDINATE PRIMARY DEALS & PRINCIPAL AMOUNT
Source: Debtwire, SEC filings
Page 7
2Q17 | Subordinated Loans
ISSUANCES EXITS
SUBORDINATED LIENS OVERVIEW:
The quantity of subordinated loan entrances continue to increase QoQ, and significantly YoY, to 68 deals for USD 827m in
total value in 2Q17. However, there was a net outflow, as the BDCs exited 76 positions for USD 968m in value.
Average cash coupon and LIBOR spread continued its decline on both a QoQ and YoY basis, to 9.8% and 8.4%,
respectively in 2Q17.
The average issuance price increased significantly QoQ to 100.2%, after remaining relatively unchanged last quarter. On
the contrary, the average price at exit decreased considerably QoQ to 90.7%, the lowest since 1Q16.
553,516
Total amount (left axis)
641,767
488,767
477,314
642,462
974,892
630,792
826,94938 40 Total primary
deals (right axis)
28
36 40
74
60
68
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
0
10
20
30
40
50
60
70
80
To
tal p
rim
ary
dea
ls
To
tal a
mo
un
t U
SD
(00
0's
) Total amount (left axis) Total primary deals (right axis)
508,093
Total amount exited (left axis)
821,821
659,024
823,469
1,002,153872,205
964,340
968,01839
Total exits (right axis)
55
39
49
59
70
56
76
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
0
10
20
30
40
50
60
70
80
To
tal e
xit
s
To
tal a
mo
un
t (U
SD
00
0's
)
Total amount exited (left axis) Total exits (right axis)
Debtwire.com
An Acuris Company2Q17
BDC Quarterly Trends and Analysis An Acuris Company
Debtwire.com
BDC Quarterly Trends and Analysis
AVERAGE UNITRANCHE ISSUANCE PRICE
Source: Debtwire, SEC filings
AVERAGE UNITRANCHE EXIT PRICE
Source: Debtwire, SEC filings
AVERAGE UNITRANCHE COUPON FOR EXITS
Source: Debtwire, SEC filings
AVERAGE UNITRANCHE COUPON
Source: Debtwire, SEC filings
Page 8
2Q17 | Unitranche Loans
ISSUANCES EXITS
97.3%
Average Unitranche Issuance Price
97.3%
93.0%
94.0%
95.0%
96.0%
97.0%
98.0%
99.0%
100.0%
101.0%
3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Pri
ce
(%, Q
oQ
)
100.0%
Average Unitranche Exit Price
99.1%
84.0%
86.0%
88.0%
90.0%
92.0%
94.0%
96.0%
98.0%
100.0%
102.0%
3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Pri
ce (%
, Qo
Q)
9.1%
Avg L+ 6.7%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
9.5%
3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Pri
ce (%
, Qo
Q)
7.4%
10.8%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
9.5%
10.0%
10.5%
11.0%
3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Inte
rest
Rat
e /
Coup
on (
%, Q
oQ)
Avg Cash Int.
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BDC Quarterly Trends and Analysis An Acuris Company
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BDC Quarterly Trends and Analysis
UNITRANCHE EXITS & AMOUNT EXITED
Source: Debtwire, SEC filings
UNITRANCHE PRIMARY DEALS & PRINCIPAL AMOUNT
Source: Debtwire, SEC filings
Page 9
2Q17 | Subordinated Loans
ISSUANCES EXITS
UNITRANCHE LOANS OVERVIEW:
After seeing minimal unitranche activity in 1Q17, we observed an uptick in transactions, amongst the BDCs, this quarter.
We tracked 16 entrances, for a total principal value of USD 125.9m. There was also a surge in unitranche exits (15).
Average price for issuances decreased QoQ to 97.3%, while the average price of exits increased QoQ to 99.1%.
In 2Q17, the average LIBOR spread on unitranche entrances tightened 56 basis points QoQ to 6.7%
Total amount (left axis)
27,500
28,65318,499
100,434
22,655 25,860 14,697 125,8951
5
Total primary deals (right axis)
4
33
4 4 4
16
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
0
5
10
15
20
25
30
35
To
tal p
rim
ary
dea
ls
To
tal a
mo
un
t (U
SD 0
00'
s)
Total amount (left axis) Total primary deals (righ t axis)
41,698
Total amount exited (left axis)
57,14435,005
45,140 36,02017,053
0
100,769
6
7
4
Total exits (right axis)
11
7
5
0
15
0
20,000
40,000
60,000
80,000
100,000
120,000
3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
0
2
4
6
8
10
12
14
16
To
tal e
xit
s
To
tal a
mo
un
t e
xit
ed
Total amount exited (left axis) Total exits (right axis)
Debtwire.com
An Acuris Company2Q17
BDC Quarterly Trends and Analysis An Acuris Company
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BDC Quarterly Trends and Analysis
INDUSTRY BREAKDOWN OF ENTRANCES AND EXITS
Source: Debtwire, SEC filings
Page 10
2Q17 | Industry Breakdown
INDUSTRY BREAKDOWN OVERVIEW:
The graph above illustrates the total volume and fair value of entrances and exits per industry (top 10 shown), as classifiedbyDebtwire, for the BDCs under our coverage in 2Q17.
In 2Q17, the services (other), healthcare and computer services industries had the highest amount of total fair value ofentrances (USD 1.6bn total).
We continue to see BDCs express a cautious approach to retail and energy. Retail sector inflows continued to declineQoQ to USD 105m, from USD 118m last quarter. In retail, we saw more than twice as much outflow (of total fair value)for exits when compared to entrances (USD 136m net outflow). Energy sector deal flow decreased to 13 entrances, from19 last quarter.
718
519
388
175 175
105
190
128 102 104
551
350
414
253
187
240
127
162 173
128
-
10
20
30
40
50
60
-
100
200
300
400
500
600
700
800
Services (other) Healthcare Co mputer services Financial Services Co nsumer: Oth er Retail Media Techn ology Teleco mmun icatio ns Manufacturin g
(other)
USD
m
Entrance Fair Value Exits Fair Value Entrance count Exits count
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An Acuris Company2Q17
BDC Quarterly Trends and Analysis An Acuris Company
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BDC Quarterly Trends and Analysis
TOTAL PRINCIPAL AND DEAL COUNT OF FIRST LIEN ENTRANCES PER SECTOR, 2Q17 (USD 000'S)
Source: Debtwire, SEC filings
Page 11
2Q17 | Industry Analysis – First Lien
OVERVIEW:
We continue to track the largest total deal inflow in the following sectors (as classified by Debtwire): healthcare, servicesand computer related technology. This quarter we saw less inflow from retail, energy and industrial products, whencompared to 1Q17.
38,160Sum of Principal
39,485
391,489
27,836 127,51650,537 43,633
2,742
77,096
178,226
526,658
134,755 59,160104,517
191,547
11,254106,600
730,053
133,621101,378 54,212 20,925
5
Deal Count
6
35
4
9 8
4
2
13 12
42
88
13
17
1
13
53
15
12
53
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
Au
tom
oti
ve
Ch
em
ica
ls a
nd m
ate
ria
ls
Co
mp
ute
r se
rvic
es
Co
nst
ruct
ion
& H
om
eb
uild
ing
Co
nsu
me
r P
rod
uct
s
Co
nsu
me
r: O
ther
De
fen
se
Ele
ctro
nic
s
En
erg
y
Fin
anci
al s
erv
ices
He
alth
care
Ind
ust
rial
pro
du
cts
and
ser
vic
es
Lie
sure
Man
ufa
ctu
rin
g
Med
ia
Min
nin
g
Ret
ail
Ser
vice
s (o
the
r)
Te
chn
olo
gy
Te
leco
mm
un
ica
tio
n
Tra
nsp
ort
atio
n
Uti
lity
0
10
20
30
40
50
60Sum of Principal Deal Count
Debtwire.com
An Acuris Company2Q17
BDC Quarterly Trends and Analysis An Acuris Company
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BDC Quarterly Trends and Analysis
AVERAGE FIRST LIEN CASH COUPON PER SECTOR, 2Q17
Source: Debtwire, SEC filings
Page 12
2Q17 | Industry Analysis – First Lien
OVERVIEW:
The graph above illustrates the average first lien cash coupon per industry, originated by the BDCs in 2Q17. Construction &homebuilding loans had the highest cash interest rate at 11.3%, in 2Q17. The interest rate on mining and financialservices loans were also relatively high this quarter.
6.1%
6.4%
8.8%
11.3%
7.1%
6.7%
7.5%
8.4%
9.7%
8.8%
7.6%
5.5%
6.5%
8.8%
10.8%
6.9%
8.8%
8.7%
9.3%
8.9%
8.3%
5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0%
Automotive
Chemicals and materials
Computer services
Construction & Homebuilding
Consumer Products
Defense
Electronics
Energy
Financial services
Healthcare
Industrial products and services
Liesure
Manufacturing
Media
Minning
Retail
Services (other)
Technology
Telecommunication
Transportation
Utility
Debtwire.com
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BDC Quarterly Trends and Analysis An Acuris Company
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BDC Quarterly Trends and Analysis
AVERAGE FIRST LIEN PRICE AT ISSUANCE, PER SECTOR, 2Q17
Source: Debtwire, SEC filings
Page 13
2Q17 | Industry Analysis – First Lien
OVERVIEW:
In 2Q17, the chemicals and materials industry had the lowest average first lien price (fair value/principal) at 90.6%. All othersectors were reasonably close to 100%.
98.7%
90.6%
98.9%
96.8%
99.4%
99.9%
101.3%
98.1%
98.2%
99.1%
100.3%
99.8%
99.7%
99.0%
98.3%
98.4%
97.3%
98.0%
101.1%
99.9%
101.2%
5.0% 25.0% 45.0% 65.0% 85.0% 105.0% 125.0%
Automotive
Chemicals and materials
Computer services
Construction & Homebuilding
Consumer Products
Defense
Electronics
Energy
Financial services
Healthcare
Industrial products and services
Liesure
Manufacturing
Media
Minning
Retail
Services (other)
Technology
Telecommunication
Transportation
Utility
Debtwire.com
An Acuris Company2Q17
BDC Quarterly Trends and Analysis An Acuris Company
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2Q17
Contacts
BDC Quarterly Trends and Analysis
Debtwire Middle Market Editorial Debtwire Middle Market Research Sales
Jon Berke, Middle Market Editor, Debtwire North America+1 212 686 2741, [email protected]
Suneet Chandvani, Head of Mid-Market Research+1 646 378 3170, [email protected]
Jonathan Reed, Managing Director+1 212 686 5418, [email protected]
Bill Weisbrod, Reporter+1 212-500-1399, [email protected]
Alex Federbusch, Analyst+1 212 500 7554, [email protected]
Brian Fitzgerald, Head of Debtwire Sales Americas+1 212 686 5277, [email protected]
Rachel Butt, Energy Reporter+1 212-500-1387, [email protected]
Amol Shinde, Middle Market Analyst+91-22-61331670, [email protected]
Tanvi Acharya, Reporter+1 646-378-3142, [email protected]
Rahul Ramaswamy, Middle Market Analyst+91-22-62351533, [email protected]
Page 14
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BDC Quarterly Trends and Analysis
Debtwire reports on corporate debt situations before credit ratings are changed. Offering unique insights, credit analysis, debt data, and analytics for distressed debt and leveraged finance markets.
Subscribers choose Debtwire for speed and depth of coverage they can’t get anywhere else. Our reporters talk to an impressive range of contacts every day to bring you valuable early insight into fast evolving situations.
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EMEA10 Queen Street PlaceLondonEC4R 1BEUnited Kingdom+44 203 741 [email protected]
AsiaSuite 1602-6Grand Millennium Plaza 181 Queen’s Road, Central Hong Kong+ 612 9002 [email protected]
Americas330 Hudson St. 4th FloorNew York, NY 10013 USA+1 212 500 [email protected]
Disclaimer
We have obtained the information provided in this report in good faith from sources that we consider to be reliable, but we do not independently verify the information. The information is not intended to provide tax, legal or investment advice. We shall not be liable for any mistakes, errors, inaccuracies or omissions in, or incompleteness of, any information contained in this report. All such liability is excluded to the fullest extent permitted by law. Data has been derived from company reports, press releases, presentations and Debtwire intelligence.