credit-markets-update-q2 - kpmg corporate finance llc · ©2019 kpmg corporate finance llc, a...

Credit marketsupdateKPMG Corporate Finance LLC Insights

Q2 – 2019

Economic activity in Q2 2019 GDP Growth - annualized change (%)(1,2)

Trends in the credit markets

Leveraged loan volume declined. Volume

decreased by 37% to $239 billion in

H1’2019 volume, compared with $372

billion for the same period last year.

High yield volume increased. Volume

increased by 19% to $132 billion in Q2’2019

from $111 billion for the same period

last year.

Key observations:

(1) Q2’2019 estimates expected to be released by [____] on [date].

(2) Sources: Capital IQ, Federal Reserve Bank of St. Louis LCD Quarterly Leveraged Lending Review: 2Q 2019, and Interactive High Yield Report 2Q 2019

$157

$77

$236

$377

$466

$607

$528

$423

$478

$652$620

$372

$239

$0B

$140B

$280B

$420B

$560B

$700B

Institutional Pro Rata

$68

$164

$287

$218

$345

$322$310

$262

$229

$277

$169

$111$132

$0B

$80B

$160B

$240B

$320B

$400B

Secured Unsecured

U.S. economic growth remains strong.

This is highlighted by Q1’2019 GDP growth

of 3.1%. However, a potential downward

revision of consumer spending data could

suggest that the GDP growth momentum

will be difficult to maintain.(1)

— Slowing global growth and weak

inflation are also clouding the outlook

for the rest of the year, prompting the

U.S. Federal Reserve to contemplate a

reduction in short-term interest rates in

the months ahead.

— The decline in yields reflects investor

expectations that a recession may be

looming, and that central banks will

continue to lower rates to counter an

economic downturn.

Loan volume was significantly lower in

H1’2019. This was driven by (a) decline in

buyout activity as valuations are relatively

high; and (b) investors expecting further

rate declines, causing a capital shift from

loans (float rate) to high yield bonds (fixed

rate).

Borrowers are motivated to issue bonds

to lock in low rates, given the continuing

decline in yields.

Competition among lenders is creating

an optimal issuance environment for

borrowers in terms of lower rates, higher

leverage levels, and more favorable

covenants.

New issue leveraged loan volume – annual

($bn)(2)

High Yield Bond Issuance – Annual ($bn) (2)

2.00%

1.66%

0.49%

(6.0%)

(1.0%)

4.0%

9.0%

Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19

10-Years Treasury CPI PPI-Finished Goods

CPI, PPI and 10-YR Treasury(2)

2.0%1.9%

2.2%2.0%

2.3%2.1%

3.2%

3.5%

2.5%

3.5%

2.9%

1.1%

3.1%

2.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2016 2017 2018 2019

©2019 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability

partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

LIBOR is set to retire and banks need a new rate benchmark

In light of the news that the London interbank offer rate (LIBOR) will end by the end of 2021, there is an intense

focus on replacing it. Across the world, regulators are suggesting alternative rate benchmarks, and in the United

States, the SEC has provided guidance as well. What’s common about the new recommended rate benchmarks is

their use of actual transactions as a benchmark rather than survey data which served as the foundation for LIBOR.

Regulators hope that a more factual approach can prevent rate manipulation.

In the United States, the Secured Overnight Finance Rate (SOFR) has become the recommended option, but there

is some concern about the stability of this rate causing some to wonder if multiple benchmarks will be needed to

accurately set rates moving forward. Another option, the Sterling Overnight Interbank Average (SONIA), which uses

overnight risk-free rates that are compounded in arrears, is also viewed in a positive light by many regulators.

With rate uncertainty looming in the future, banks and borrowers can be proactive today in order to avert future

challenges around rates.

Floating rates present challenges

The elimination of LIBOR leaves the interest rate charged on floating rates in a state of uncertainty. Standard loan

documents often do not address what happens in the event LIBOR becomes unavailable, which could result in

confusion for borrowers and lenders. And when they do address the issue, prime rate is used in lieu of LIBOR,

frequently not adjusting the interest rate spread. As a result the borrower will likely face a higher rate.

Best practices for addressing LIBOR in standard loan documents

Loan documents should identify a replacement benchmark for when LIBOR becomes unavailable, and provide an

adjustment of the interest rate spread based on the difference between LIBOR and the replacement benchmark.

This approach will maintain the interest rate both the borrower and lender intended on initially.

Next steps for borrowers and lenders

Borrowers and lenders should review their loan documents (including any interest rate swap agreements) to

determine which loans utilize LIBOR as a benchmark. For loans that use LIBOR as a benchmark:

1. Determine if they include objective triggers for switching to a replacement benchmark.

2. If they do not, identify an appropriate replacement benchmark.

3. Adjust the interest rate spread to maintain the parties’ intended rate. If these provisions are not included, the

parties should amend the loan documents accordingly.

Whether it's a new or existing loan agreement, borrowers should be taking the appropriate steps to address the

retirement of LIBOR. It is important to consult with your advisors to conduct an assessment of the financing

situation and a full review of the agreements - to address potential issues down the road.

What’s new in the credit markets:



$157$77

$236

$377

$466

$607$528

$423$478

$652 $620

$372

$239

$0B

$140B

$280B

$420B

$560B

$700B

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19

New Issue Leveraged Loan Volume - Annual ($bn)


Refinancing37%

M&A33%

LBO16%

Recap6%

Other8%

Leveraged Loan Issuance by Purpose - 1H'18

Leveraged Loans

Total Volume: $372B Total Volume: $239B

Source: Standard & Poor | Leveraged Commentary & Data.

$3$3 $8

$57

$98

$262 $237$178

$245

$375 $370

$223$116

81%79%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

$0B

$80B

$160B

$240B

$320B

$400B

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19

New-Issue Cov-Lite Loans ($bn)

Volume % of Institutional

5544

11 16 16 1827

43

6654

72

141

120

5362

115

88

126137

189

164

127127

168

159

134

67

94

140

113

7491

128

141

119

210

166

145131

170

202

120119

131

108

$0B

$44B

$88B

$132B

$176B

$220B

2Q

'08

3Q

'08

4Q

'08

1Q

'09

2Q

'09

3Q

'09

4Q

'09

1Q

'10

2Q

'10

3Q

'10

4Q

'10

1Q

'11

2Q

'11

3Q

'11

4Q

'11

1Q

'12

2Q

'12

3Q

'12

4Q

'12

1Q

'13

2Q

'13

3Q

'13

4Q

'13

1Q

'14

2Q

'14

3Q

'14

4Q

'14

1Q

'15

2Q

'15

3Q

'15

4Q

'15

1Q

'16

2Q

'16

3Q

'16

4Q

'16

1Q

'17

2Q

'17

3Q

'17

4Q

'17

1Q

'18

2Q

'18

3Q

'18

4Q

'18

1Q

'19

2Q

'19

New Issue Leveraged Loan Volume - Quarterly ($bn)


Refinancing28%

M&A21%LBO

22%

Recap5%

Other24%

Leveraged Loan Issuance by Purpose - 1H'19



Leveraged Loans (continued)


223

286

L+100

L+170

L+240

L+310

L+380

L+450

2Q

'08

3Q

'08

4Q

'08

1Q

'09

2Q

'09

3Q

'09

4Q

'09

1Q

'10

2Q

'10

3Q

'10

4Q

'10

1Q

'11

2Q

'11

3Q

'11

4Q

'11

1Q

'12

2Q

'12

3Q

'12

4Q

'12

1Q

'13

2Q

'13

3Q

'13

4Q

'13

1Q

'14

2Q

'14

3Q

'14

4Q

'14

1Q

'15

2Q

'15

3Q

'15

4Q

'15

1Q

'16

2Q

'16

3Q

'16

4Q

'16

1Q

'17

2Q

'17

3Q

'17

4Q

'17

1Q

'18

2Q

'18

3Q

'18

4Q

'18

1Q

'19

2Q

'19

New Issue First Lien Spreads BB/BB- - Quarterly

Pro Rata Institutional

389

395

L+150

L+230

L+310

L+390

L+470

L+550

2Q

'08

3Q

'08

4Q

'08

1Q

'09

2Q

'09

3Q

'09

4Q

'09

1Q

'10

2Q

'10

3Q

'10

4Q

'10

1Q

'11

2Q

'11

3Q

'11

4Q

'11

1Q

'12

2Q

'12

3Q

'12

4Q

'12

1Q

'13

2Q

'13

3Q

'13

4Q

'13

1Q

'14

2Q

'14

3Q

'14

4Q

'14

1Q

'15

2Q

'15

3Q

'15

4Q

'15

1Q

'16

2Q

'16

3Q

'16

4Q

'16

1Q

'17

2Q

'17

3Q

'17

4Q

'17

1Q

'18

2Q

'18

3Q

'18

4Q

'18

1Q

'19

2Q

'19

New Issue First Lien Spreads B+/B - Quarterly

Pro Rata Institutional



LBO57%Refinancing

24%

Recap17%

M&A2%

Total New-Issue Volume by Purpose - 1H'18

LBO42%

Refinancing27%

Recap6%

M&A17%

Corp Purpose8%

Total New-Issue Volume by Purpose - 1H'19

Leveraged Loans – Middle Market

Total Volume: $4.1BTotal Volume: $5.3B


Note: Middle market refers to companies with EBITDA of $50 million or less.

$8

$5

$11

$14

$10

$13

$15

$10 $9

$14

$11

$5$4

$0B

$4B

$8B

$12B

$16B

$20B

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19

Leveraged Loan Volume- Annual ($bn)


$2

$1

$0$1 $1 $1

$2 $2

$4

$2

$3

$5$5

$3

$2$2

$3 $3$3

$3 $4

$3

$4

$3

$4

$5

$3

$2

$4

$3

$1

$2

$2

$1

$4$4

$3

$5

$3$3

$2

$3

$2

$1

$3

$0B

$2B

$4B

$6B

2Q

'08

3Q

'08

4Q

'08

1Q

'09

2Q

'09

3Q

'09

4Q

'09

1Q

'10

2Q

'10

3Q

'10

4Q

'10

1Q

'11

2Q

'11

3Q

'11

4Q

'11

1Q

'12

2Q

'12

3Q

'12

4Q

'12

1Q

'13

2Q

'13

3Q

'13

4Q

'13

1Q

'14

2Q

'14

3Q

'14

4Q

'14

1Q

'15

2Q

'15

3Q

'15

4Q

'15

1Q

'16

2Q

'16

3Q

'16

4Q

'16

1Q

'17

2Q

'17

3Q

'17

4Q

'17

1Q

'18

2Q

'18

3Q

'18

4Q

'18

1Q

'19

2Q

'19

Leveraged Loan Volume- Quarterly ($bn)




Second-Lien Loans


$3$2

$5$7

$18

$29

$37

$11 $10

$25$24

$16

$4

0

50

100

150

200

250

$0B

$8B

$16B

$24B

$32B

$40B

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19

Num

ber

of D

eals

Volu

me (

$bn)

Second-Lien Loan New-Issue Volume - Annual ($bn)

Volume ($bn) # of Deals

$1 $1$0 $0 $0

$1$0 $1

$1$0

$3

$1

$4

$1$0

$4$3

$4

$6$5

$11

$6 $7

$12$13

$8

$4

$2$3

$4

$1 $1$1

$3$5

$7

$5

$10

$4

$6

$10

$4$3

$2 $2

$0B

$3B

$6B

$9B

$12B

$15B

2Q

'08

3Q

'08

4Q

'08

1Q

'09

2Q

'09

3Q

'09

4Q

'09

1Q

'10

2Q

'10

3Q

'10

4Q

'10

1Q

'11

2Q

'11

3Q

'11

4Q

'11

1Q

'12

2Q

'12

3Q

'12

4Q

'12

1Q

'13

2Q

'13

3Q

'13

4Q

'13

1Q

'14

2Q

'14

3Q

'14

4Q

'14

1Q

'15

2Q

'15

3Q

'15

4Q

'15

1Q

'16

2Q

'16

3Q

'16

4Q

'16

1Q

'17

2Q

'17

3Q

'17

4Q

'17

1Q

'18

2Q

'18

3Q

'18

4Q

'18

1Q

'19

2Q

'19

Second Lien Loan New-Issue Volume - Quarterly ($bn)

1,069

1,480

1,062 1,085 1,064

928 898

996 968

829 821 814

942

L+0

L+400

L+800

L+1200

L+1600

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19

Average New Issue Second-Lien Spreads

LIBOR Floor Upfront Fee Spread



LBO Summary


(1) Middle market refers to companies with EBITDA of $50 million or less.

0

12

24

36

48

60

$0B

$26B

$52B

$78B

$104B

$130B

2Q

'08

3Q

'08

4Q

'08

1Q

'09

2Q

'09

3Q

'09

4Q

'09

1Q

'10

2Q

'10

3Q

'10

4Q

'10

1Q

'11

2Q

'11

3Q

'11

4Q

'11

1Q

'12

2Q

'12

3Q

'12

4Q

'12

1Q

'13

2Q

'13

3Q

'13

4Q

'13

1Q

'14

2Q

'14

3Q

'14

4Q

'14

1Q

'15

2Q

'15

3Q

'15

4Q

'15

1Q

'16

2Q

'16

3Q

'16

4Q

'16

1Q

'17

2Q

'17

3Q

'17

4Q

'17

1Q

'18

2Q

'18

3Q

'18

4Q

'18

1Q

'19

2Q

'19

Num

ber

of D

eals

Volu

me (

$bn)

LBO Transaction Volume - Quarterly ($bn)

LBO Volume Number of Deals

9.1x

7.7x

8.5x 8.8x 8.7x 8.8x

9.7x10.3x 10.0x

10.6x 10.6x9.8x

11.2x

0.0x

2.4x

4.8x

7.2x

9.6x

12.0x

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19

Average Purchase Price Multiple - All LBOs

Senior Debt/EBITDA Sub Debt/EBITDA Equity/EBITDA Others

8.3x

6.6x

8.4x 8.2x 7.9x8.8x

9.6x

10.7x10.2x

11.6x

10.6x 10.6x

12.6x

0.0x

2.8x

5.6x

8.4x

11.2x

14.0x

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19

Average Purchase Price Multiple – Middle Market LBOs(1)

Senior Debt/EBITDA Sub Debt/EBITDA Equity/EBITDA Others



LBO Summary (continued)


(1)Large corporate refers to companies with EBITDA of more than $50 million.

(2) Middle market refers to companies with EBITDA of $50 million or less.

(3) LTM 1Q’19 average debt multiple of middle-market LBO loans.

4.9x

4.0x

4.7x5.2x 5.3x 5.4x

5.8x 5.7x 5.5x5.8x 5.9x 5.7x

6.1x

0.0x

2.0x

4.0x

6.0x

8.0x

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19

Average Debt Multiples of Large Corporate LBO Loans(1)

FLD/EBITDA SLD/EBITDA Other Sr. Debt/EBITDA Sub Debt/EBITDA

4.5x

3.3x

4.2x 4.3x4.5x

4.8x

5.3x 5.3x 5.3x5.5x 5.5x 5.4x

5.7x

0.0x

1.2x

2.4x

3.6x

4.8x

6.0x

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19

Average Debt Multiples of Middle-Market LBO Loans(2)

FLD/EBITDA SLD/EBITDA Other Sr. Debt/EBITDA Sub Debt/EBITDA

38.9%

45.7%

41.4%

38.0% 37.7%35.6%

37.0%

40.5% 40.8%42.0%

40.5%39.2%

43.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19

Equity Contribution - All LBOs



$0.4

$0.3

$2.8$2.5

$0.8

$3.0

$1.8

$1.0

$1.5

$0.5

$1.4

$0.6

$0.2

$0.0B

$0.7B

$1.4B

$2.1B

$2.8B

$3.5B

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

1H

'18

1H

'19

Middle-Market Dividend Related Volume- Annual ($bn)


Dividend Recapitalization


$3 $2

$38 $36

$56

$70

$53

$38

$50

$56

$41

$31

$16

$0B

$20B

$40B

$60B

$80B

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19

Dividend or Stock Repurchase Loan Volume- Annual ($bn)


$2$0 $0 $0 $0 $2 $1

$7$5

$8

$19$17

$16

$2 $1

$16

$8

$16$16

$18

$27

$14

$11

$17$18

$13

$4

$7

$15$13

$3$0

$14$13

$22

$20

$7

$15$14

$14

$17

$2

$7 $7$9

$0B

$6B

$12B

$18B

$24B

$30B

2Q

'08

3Q

'08

4Q

'08

1Q

'09

2Q

'09

3Q

'09

4Q

'09

1Q

'10

2Q

'10

3Q

'10

4Q

'10

1Q

'11

2Q

'11

3Q

'11

4Q

'11

1Q

'12

2Q

'12

3Q

'12

4Q

'12

1Q

'13

2Q

'13

3Q

'13

4Q

'13

1Q

'14

2Q

'14

3Q

'14

4Q

'14

1Q

'15

2Q

'15

3Q

'15

4Q

'15

1Q

'16

2Q

'16

3Q

'16

4Q

'16

1Q

'17

2Q

'17

3Q

'17

4Q

'17

1Q

'18

2Q

'18

3Q

'18

4Q

'18

1Q

'19

2Q

'19

Dividend or Stock Repurchase Loan Volume- Quarterly ($bn)


$0.0B

$0.3B

$0.6B

$0.9B

$1.2B

$1.5B

Middle-Market Dividend Related Volume- Quarterly ($bn)




High Yield Bonds


$68

$164

$287

$218

$345$322

$310

$262

$229

$277

$169

$111$132

$0B

$80B

$160B

$240B

$320B

$400B

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19

High Yield Bond Issuance – Annual ($bn)

Secured Unsecured Subordinated

$0B

$22B

$44B

$66B

$88B

$110B

2Q

'08

4Q

'08

2Q

'09

4Q

'09

2Q

'10

4Q

'10

2Q

'11

4Q

'11

2Q

'12

4Q

'12

2Q

'13

4Q

'13

2Q

'14

4Q

'14

2Q

'15

4Q

'15

2Q

'16

4Q

'16

2Q

'17

4Q

'17

2Q

'18

4Q

'18

2Q

'19

High Yield Bond Issuance – Quarterly ($bn)

Secured Unsecured Subordinated

6.8%

0.0%

2.8%

5.6%

8.4%

11.2%

14.0%

2Q

'08

4Q

'08

2Q

'09

4Q

'09

2Q

'10

4Q

'10

2Q

'11

4Q

'11

2Q

'12

4Q

'12

2Q

'13

4Q

'13

2Q

'14

4Q

'14

2Q

'15

4Q

'15

2Q

'16

4Q

'16

2Q

'17

4Q

'17

2Q

'18

4Q

'18

2Q

'19

New issue High yield Bond yield to Maturity

4.4%13.4% 10.2% 6.8% 10.3% 14.1% 9.9% 9.9% 7.1% 6.0% 7.2% 7.9%2.4%

5.9% 12.5% 15.3%15.6%

15.7% 22.3%29.8%

14.0% 16.2% 15.3% 12.5%

42.9%4.8% 7.1%

5.5%5.2% 3.8%

3.3%

5.8% 4.0% 6.9%5.7%

42.0%

75.5% 62.8%54.4%

58.1% 50.3% 48.5%

46.3%

63.7% 64.9% 61.7% 67.5%

8.3% 5.2%9.8%

16.5%10.5% 14.7% 15.5%

10.6% 9.4% 8.9% 8.9% 6.5%

0%

20%

40%

60%

80%

100%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD'19

High Yield Bond Issuance by Purpose

Corp Purpose M&A/Acquisition M&A/LBO Refinancing Others



Funds Flows


(1)Prime Funds Flows represent funds flows from loan participation mutual funds.

(1)

($5)

($9)

($2)

$8

($4)

$6

$2

($6)

($1) ($1)

($7)

($20)

($4)

$1

($20)

$12

$0

($24B)

($12B)

$0B

$12B

2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 4Q'18 1Q'19 2Q'19

Flows into High Yield Bond Funds - Quarterly ($bn)

$29

$19 $20

$8

$18 $20$26

$17

$35$30

$36 $32$37

$32$28 $29

$36

($2) ($7)($13)

($8) ($1)

$3

$14

$16

$4

($1) ($5)

$4

$8

$4

($23)

($11) ($10)

($25B)

($11B)

$3B

$17B

$31B

$45B

2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 4Q'18 1Q'19 2Q'19

Flows into Leveraged Loan Funds - Quarterly ($bn)

CLO Issuance Prime Fund Flows

$12

$54

$83

$124

$99

$72

$118

$129

$67 $65

0

50

100

150

200

250

300

$0B

$25B

$50B

$75B

$100B

$125B

$150B

2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19

Annual CLO Volume ($bn)

Volume Count



Funds Flows (continued)


137

0

40

80

120

160

200

2Q

'14

3Q

'14

4Q

'14

1Q

'15

2Q

'15

3Q

'15

4Q

'15

1Q

'16

2Q

'16

3Q

'16

4Q

'16

1Q

'17

2Q

'17

3Q

'17

4Q

'17

1Q

'18

2Q

'18

3Q

'18

4Q

'18

1Q

'19

2Q

'19

Lib

or

+

U.S. CLO Spreads

0.92x

0.81x0.83x

0.86x0.88x

0.94x 0.94x

1.00x0.97x 0.95x

0.91x

0.86x0.90x 0.91x

0.78x

0.91x 0.91x

0.00x

0.30x

0.60x

0.90x

1.20x

Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19

Public BDCs - Price to Book Value Multiple - Quarterly



Distress and Defaults


$22

$57

$25

$12 $12

$8

$24

$31

$14

$10

$15 $13

$5

$B

$12B

$24B

$36B

$48B

$60B

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19

Par Amount of Leveraged Loans in Payment Default or Bankruptcy ($bn)

3.7%

10.7%

5.0%

2.3% 2.2%

1.2%

2.9%3.5%

1.6%1.1% 1.3% 1.3%

0.4%

0.0%

2.4%

4.8%

7.2%

9.6%

12.0%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19

Percent of Outstanding Leveraged Loans in Default or Bankruptcy

44

74

29

139

129

13 1412

1513

11

0

16

32

48

64

80

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19

Number of Issuers in Payment Default or Bankruptcy



Distress and Defaults (continued)


2.6%

0.0%

4.0%

8.0%

12.0%

16.0%

20.0%

Percent of First-Lien Loans with Secondary Spreads of L+1000 or HigherBy Amount Outstanding

3.4%

0.0%

4.0%

8.0%

12.0%

16.0%

20.0%

Percent of First-Lien Loans with Secondary Spreads of L+1000 or HigherBy Number of Facilities



• Primary Service Offerings

Deb

tan

deq

uity

cap

ital

raises

— Senior debt financing, refinancing or amendments

— Acquisition and growth capital

— Dividend recapitalizations and minority buyouts

— Mezzanine/junior subordinated financing

— Structured and minority equity

— Project financing

— Capital for special situations, including bankruptcies

We are a leading global financial advisor with real time

knowledge of the capital markets. We advise on a wide range of

transactions involving both debt and equity, including raising

financing for acquisitions, buyouts, dividend recapitalizations,

growth capital, special situations, and DIP and exit financing in

bankruptcies

We maintain close relationships with debt, mezzanine and equity

capital providers, including banks, BDCs, specialty finance

companies, insurance companies, family offices, credit and

equity funds and other private investors

Capital Advisory Practice Primary Service Offerings

KPMG Investment Banking – Capital

Advisory

Corporate finance services, including Financing, Debt Advisory, andValuation Services, are not performed by all KPMG

member firms and are not offered by member firms in certain jurisdictions due to legal or regulatory constraints.

For more information, contact:

Doug Christensen

Vice President

Capital Advisory

312-665-2960

[email protected]

Pablo Escobar

Director

Capital Advisory

212-872-3060

[email protected]

Michael Rudolph

Managing Director

Capital Advisory

312-665-1442

[email protected]

Value Added Advisor

— Unbiased and objective advice

— Local market insight with strong relationships across all tranches

of capital

— Experienced deal team

www.kpmgcorporatefinance.com

Capital Advisory Transactions

$72 million

2016

Debt Advisory

Financial advisor and

placement agent to

Burke America Parts

Group in a capital raise

$21 million

2015

Debt Advisory

Acted as financial

advisor to TriVero

Group on raising

acquisition financing

for the purchase of

BTM Company

Debt Advisory

Acted as financial

advisor and placement

agent to Heckler &

Koch on a refinancing

$170 million

2017

$175 million

2016

Debt Advisory

Acted as financial

advisor in raising

acquisition for the

purchase of Irvin

Automotive, a

subsidiary of Takata

Not Disclosed

2017

Debt Advisory

Acted as exclusive

financial advisor to

Razzoo’s, Inc. in a debt

capital raise

O2 Investment partners

Has completed a capital

raise (senior debt and

equity co-investment) to

fund the acquisition of 1

Priority Environmental

Services

Debt Advisory

Not Disclosed

2018

Acted as the exclusive

financial advisor to The

Markets in connection

with refinancing a senior

secured asset-based

revolving credit facility

Debt Advisory

Not Disclosed

2018

Acted as the exclusive

financial advisor to

Smartlink in connection

with securing a new

credit facility

Debt Advisory

Not Disclosed

2018

— Flexible and innovative approach

— Fully integrated service offering

— KPMG global advisory network



Important notice

The information contained in this newsletter is of a general nature and is not intended

to address the circumstances of any particular individual or entity including their

investment objectives or financial needs. In preparing this newsletter, we have relied

upon and assumed, without independent verification, the accuracy and completeness

of all information available from public sources. Although we endeavor to provide

accurate and timely information, there can be no guarantee that such information is

accurate as of the date it is received or that it will continue to be accurate in the future.

No one should act or rely on the information in this newsletter without appropriate

professional advice after a thorough examination of the particular situation. The

information contained in this newsletter does not constitute a recommendation, offer,

or solicitation to buy, sell or hold any security of any issuer. Past performance does not

guarantee future results.

credit-markets-update-q2 - kpmg corporate finance llc · ©2019 kpmg corporate finance llc, a...

Documents