Specialty FinanceIndustry InsightsA review of M&A activity and public market valuation in the consumer and commercial specialty inance sectors
November 2013
William Blair’s investment banking group combines signi icant transaction experience, rich industry knowledge, and deep relationships to deliver successful advisory and inancing solutions to our global base of corporate clients. We serve both publicly traded
and privately held companies, executing mergers and acquisitions, growth inancing, 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 ive continents, and was an underwriter on over 20% of all U.S. initial public offerings.
About William Blair Investment Banking
William Blair
Specialty Finance Industry Insights Table of Contents
Table of Contents
Introduction .....................................................................................................................................................................................................................................................1
Consumer Specialty Finance .....................................................................................................................................................................................................................2
M&A Trends .................................................................................................................................................................................................................................................2
Select M&A Transactions .......................................................................................................................................................................................................................3
Public Valuation Update .........................................................................................................................................................................................................................4
Commercial Specialty Finance ..................................................................................................................................................................................................................7
M&A Trends .................................................................................................................................................................................................................................................7
Select M&A Transactions .......................................................................................................................................................................................................................8
Public Valuation Update .........................................................................................................................................................................................................................9
Capital Markets Transactions ................................................................................................................................................................................................................ 12
Recent Equity Offerings ....................................................................................................................................................................................................................... 12
Recent Debt Offerings .......................................................................................................................................................................................................................... 14
Recent Preferred Equity Offerings .................................................................................................................................................................................................. 15
Financial Services & Technology Analysts and Coverage .......................................................................................................................................................... 16
Investment Banking Team Biographies ............................................................................................................................................................................................ 17
Select William Blair Transactions ........................................................................................................................................................................................................ 18
Notes ................................................................................................................................................................................................................................................................ 19
Disclosures ..................................................................................................................................................................................................................................................... 20
William Blair
Specialty Finance Industry Insights Introduction 1
Introduction
Specialty finance can be broadly characterized as any financing activity that takes place outside the traditional banking system. Typically, specialty finance firms are thought of as non-bank lenders that make loans to consumers and small to midsize businesses that cannot otherwise obtain financing. This report covers trends in M&A activity, transaction multiples, and public company valuations in the consumer and commercial specialty finance sectors. Specifically, consumer specialty finance includes auto finance, collection, alternative financial services, credit card, and mortgage companies. Commercial specialty finance includes business development companies (BDCs), commercial finance, commercial real estate lending, and leasing companies. We hope you enjoy this report and we welcome any feedback.
Market Overview
The outlook for the global economy remains mixed, with significant uncertainty surrounding the United States, Europe, and China. We believe this lack of confidence will dampen growth in overall M&A activity in 2014, as sellers and buyers proceed cautiously. However, large strategic acquirers with healthy war chests will likely continue to pursue companies with differentiated solutions, go-to-market strategies, and proven strong growth and profitability. We expect this trend to persist in 2014, which should keep M&A activity strong for high-quality companies in the specialty finance sector.
Private equity firms remain highly active in the specialty finance sector. On the supply side, aging portfolio companies of private equity firms may create liquidity opportunities in the near to midterm and will continue to fuel middle-market M&A activity. According to PitchBook, Inc., approximately 60% of private-equity-owned portfolio companies (not only specialty-finance-related) are more than four years old. There has already been strong activity thus far in 2013, as private equity owners have initiated discussions to begin exiting specialty finance businesses purchased before or during the downturn. On the demand side, the significant overhang of undeployed private equity capital (approximately $350 billion in total), the ready availability of credit, and historically low interest rates will contribute to sustained financial buyer interest.
Summary of M&A Activity
Specialty finance companies generate high margins and recurring cash flows. In addition, these companies have meaningful operating leverage. As a result, M&A transactions in the sector are generally completed at attractive multiples. Since 2002, approximately 50% of the aggregate deals in the consumer specialty finance sector have been completed at above 10.0 times LTM net income, and over 16% have been completed at more than 3.00 times LTM book value. On the commercial specialty finance side, approximately 60% of the aggregate deals since 2002 have been completed between 5.0 and 10.0 times LTM net income, and 33% have been completed between 1.50 and 3.00 times LTM book value. Acquirers in the sector are most often strategic parties that are able to pay more because of the significant revenue synergies generated by pushing new or stronger finance products through an established distribution platform. In addition, many private equity funds have developed a differentiated level of industry knowledge and expertise, and as a result have established strong reputations in the sector.
In 2013, M&A activity in the sector has remained strong, driven primarily by strategic acquirers looking for new product/segments, differentiated platforms, and strong growth. Examples include WSFS Financial Corporation’s acquisition of Array Financial Group, Cash America International’s acquisition of TDP Superstores Corp., Umpua Holdings Corporation’s acquisition of Financial Pacific Holding, and Element Financial Corporation’s acquisition of GE Capital’s fleet portfolio. While global economic uncertainty may cause the broad universe of buyers and sellers to proceed more cautiously in 2014, we expect activity in the specialty finance sector to be on par with or slightly above activity in 2013. In addition, we remain optimistic that capital markets activity will remain strong for solid performing businesses.
Robert Metzger + 312 364 8517 [email protected]
J.P. Young +1 312 364 8160 [email protected]
Kegan Greene +1 312 364 8113 [email protected]
Consumer Specialty Finance Sector
William Blair
Specialty Finance Industry Insights 2 Consumer Specialty Finance
Consumer Specialty Finance
M&A Trends
Year-to-date aggregate M&A transaction volume is running slightly behind the comparable period in 2012, although disclosed dollar volume is meaningfully lower over the same period.
Over 50% of the aggregate deals since 2002 have been completed at above 10.0 times LTM net income, and over 16% have been completed at more than 3.00 times LTM book value.
Historical Transaction Volume
Historical Transaction Dollar Volume ($ in millions)
LTM Net Income Multiple Breakdown LTM Book Value Multiple Breakdown
LTM Net Income Multiple by Transaction Size LTM Book Value Multiple by Transaction Size
Sources: SNL and William Blair’s market analysis Note: Year-to-date as of November 1, 2013
47 41
79
53 75
54 32 33
46 50 42 33 31
020406080
100
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2012YTD
2013YTD
Average: 50 (3.1%)
$17,055 $26,075
$8,866
$51,379
$16,926
$2,090 $3,299 $2,754
$12,024
$43,055
$10,519 $6,033 $1,700
-
$20,000
$40,000
$60,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2012YTD
2013YTD
($ in millions) Average: $17,640 (71.4%)
52.1%31.3%
16.7%
Greater than 10.0x5.0x to 10.0xLess than 5.0x
16.4%
26.2%57.4%
Greater than 3.00x1.50x to 3.00xLess than 1.50x
5.0x
7.1x5.7x
0.0x
5.0x
10.0x
<$50mm $50mm - $100mm >$100mm
1.00x
1.18x
1.09x
0.90x
1.00x
1.10x
1.20x
1.30x
<$50mm $50mm - $100mm >$100mm
William Blair
Specialty Finance Industry Insights Consumer Specialty Finance 3
Select M&A Transactions Transaction Value /
Announced Date Sub-Sector Buyer Name / Target Name
Transaction Value
LTM Net Income
LTM Book Value
11/07/13 Mortgage Stonegate Mortgage Corporation/ Wholesale Lending Channel - - -
10/25/13 Mortgage Banc of California, Inc./ CS Financial, Inc. $8.5 - -
10/25/13 AFS Blackstone Group L.P./ Imperial Holdings structured settlements business $12.0 - -
10/25/13 Mortgage Highlands Bancorp, Inc./ Secured Lending Solutions, Inc. - - -
10/11/13 AFS Undisclosed buyer/ BB&T Corp. consumer lending subsidiary - - -
10/07/13 Mortgage Coastal Carolina Bancshares, Inc./ Investors Mortgage Company Inc. - - -
10/01/13 Collection Shellpoint Partners, LLC/ Resurgent Mortgage Servicing - - -
10/01/13 Mortgage Wintrust Financial Corporation/ Certain assets and liabilities of mortgage banking business - - -
09/30/13 AFS First Cash Financial Services, Inc./ Baja Unlimited, LLC $12.5 - -
09/26/13 AFS Connexus Credit Union/ Financial Institution Lending Options, LLC - - -
08/28/13 AFS Cash America International, Inc./ 34 pawn lending locations $62.0 - -
08/21/13 Mortgage loanDepot.com LLC/ imortgage.com, Inc. - - -
08/05/13 Mortgage Realty Finance Corporation/ ClearVue Management, Inc. $26.0 - -
07/31/13 Mortgage Triumph Bancshares, Inc./ M&P Bank Home Loans and Community Bankers Mortgage Group - - -
07/29/13 Mortgage Investor group/ Urban Financial Group, Inc. $80.0 - -
07/29/13 Mortgage WSFS Financial Corporation/ Array Financial Group Inc. - - -
07/08/13 Mortgage CIB Marine Bancshares, Inc./ Certain assets and liabilities of Avenue Mortgage Corp. - - -
07/01/13 Mortgage Impac Mortgage Holdings, Inc./ Amerihome Mortgage Corporation $1.5 - -
06/30/13 Collection Artisans' Bank/ Gilpin Financial Services Inc. - - -
06/25/13 AFS First Cash Financial Services, Inc./ O'Pak Credit LP / Pro Pawn LP / Milar Credit LP $70.2 - -
06/20/13 AFS Cash America International, Inc./ TDP Superstores Corp. $102.5 - -
05/31/13 AFS Warburg Pincus/ Mariner Finance, LLC - - -
05/28/13 AFS CFAM Financial Services, LLC/ Consumer finance business - - -
05/21/13 Mortgage Capital Markets Cooperative, LLC/ CMCF Inc - - -
05/14/13 Mortgage Ares Commercial Real Estate Corporation/ Alliant Capital, LLC $62.8 11.2x 1.83x
05/06/13 AFS Nationstar Mortgage Holdings Inc./ GreenLight Financial Services, Inc. $75.0 1.2x 0.91x
04/30/13 Collection Two Harbors Investment Corp./ Matrix Financial Services Corporation - - -
04/26/13 Mortgage Louise Bancshares, Inc./ Hancock Mortgage Partners, LLC - - -
04/11/13 AFS Undisclosed buyer/ SLM Student Loan Trust 2006-2 securitization - - -
03/19/13 Mortgage Enterprise Financial Services Corp/ Gorman & Gorman Residential Mortgage Services - - -
03/06/13 AFS Encore Capital Group, Inc./ Asset Acceptance Capital Corp. $203.2 18.6x 1.33x
02/26/13 Collection Wingspan Portfolio Advisors, LLC/ Mortgage servicing operation - - -
02/14/13 Mortgage Ocwen Financial Corporation/ ClearPoint Funding, Inc. - - -
02/13/13 AFS Undisclosed buyer/ SLM Student Loan Trust 2007-4 securitization - - -
01/31/13 Mortgage Altisource Portfolio Solutions S.A./ Fee-based businesses associated with the Homeward $87.0 3.8x -
01/31/13 Collection Altisource Portfolio Solutions S.A./ ResCap fee-based businesses $128.8 5.7x -
01/31/13 AFS Prospect Capital Corporation/ Nationwide Acceptance Corporation - - -
01/30/13 Mortgage Annaly Capital Management, Inc./ CreXus Investment Corp. $875.8 10.4x 1.09x
01/07/13 Collection Walter Investment Management Corp./ Residential mortgage servicing platform $1.0 - -
12/31/12 AFS Walter Investment Management Corp./ Security One Lending, Inc. $31.0 - -
12/28/12 Mortgage Carlile Bancshares, Inc./ Goldome Financial LLC - - -
12/28/12 AFS Investor group/ Credit Central $47.9 - -
12/22/12 Mortgage HomeBancorp, Inc./ Mortgage Investors Corporation - - -
12/21/12 Collection Portfolio Recovery Associates, Inc./ Consumer bankruptcy claims $115.3 - -
12/20/12 AFS EZCORP, Inc./ Twelve Pawn & Jewelry stores $23.0 - -
12/17/12 Mortgage Bexil Corporation/ Undisclosed mortgage bank - - -
12/03/12 Mortgage MVB Financial Corp./ Potomac Mortgage Group, LLC $19.0 - 2.27x
11/30/12 Mortgage Solera National Bancorp, Inc./ Residential Mortgage of Colorado, LLC $0.5 - -
11/21/12 AFS General Motors Financial Company, Inc./ International operations of Ally Financial Inc. $4,200.0 - 1.02x
11/20/12 AFS EZCORP, Inc./ Hayfield Investment Partners, LLC $50.0 - -
11/15/12 AFS Parthenon Capital Partners/ White River Capital, Inc. $79.4 8.8x 1.02x
10/31/12 Mortgage CIVC Partners, LP/ Shelter Mortgage Company, LLC - - -
10/26/12 Mortgage Ocwen Financial Corporation/ Genworth Financial Home Equity Access, Inc. $22.0 - -
10/23/12 AFS Royal Bank of Canada/ Canadian auto finance and deposit business of Ally Financial Inc. $3,823.7 - 1.11x
William Blair
Specialty Finance Industry Insights 4 Consumer Specialty Finance
Public Valuation Update
Auto Finance
Indexed Price / LTM Earnings Ratios as of 11/1/2013
Public Company Valuations
Ticker
Stock Price 11/1/13
Equity Market Cap.
Debt / Equity
Stock Price / Asset CAGR ROAA ROAE
Net Income
EPS TBVPS 3-Yr CAGR Margin
Company LTM FY2013 LTM 07'-12' LTM LTM LTM LTM
America's Car-Mart CRMT $46.16 $416.2 0.5x 13.9x 13.8x 1.98x 12.4% 9.6% 16.0% 4.4% 6.6%
Carfinco Financial Group CFN $10.73 $284.0 2.5x 13.2x 12.1x 4.39x 15.1% 9.9% 36.8% 8.8% 46.6%
Consumer Portfolio Services CPSS $7.01 $156.1 NMF NMF 10.9x 1.90x (14.6%) 7.0% NMF NA NMF
Credit Acceptance CACC $118.93 $2,824.4 2.1x 11.7x 11.4x 4.08x 17.8% 11.0% 38.4% 14.8% 42.8%
Nicholas Financial NICK $15.24 $185.9 1.0x 9.6x NA 1.38x 8.2% 7.2% 13.9% 12.2% 30.3%
Mean $773.3 1.5x 12.1x 12.0x 2.75x 7.8% 8.9% 26.3% 10.0% 31.6%
Median $284.0 1.5x 12.4x 11.7x 1.98x 12.4% 9.6% 26.4% 10.5% 36.5%
Collection
Indexed Price / LTM Earnings Ratios as of 11/1/2013
Public Company Valuations
Ticker
Stock Price 11/1/13
Equity Market Cap.
Debt / Equity
Stock Price / Asset CAGR ROAA ROAE
Net Income
EPS TBVPS 3-Yr CAGR Margin
Company LTM FY2013 LTM 07'-12' LTM LTM LTM LTM
Asta Funding ASFI $8.52 $110.5 0.3x NMF NA 0.66x (16.7%) 1.7% 1.4% NA 5.2%
Encore Capital Group ECPG $47.38 $1,196.4 3.2x 16.6x 13.0x NMF 19.4% 6.4% 14.5% 18.8% 10.6%
Performant Financial PFMT $10.24 $491.1 2.1x 14.6x 13.8x NMF NA 19.9% NMF NA 13.7%
Portfolio Recovery Associates PRAA $59.02 $2,936.1 0.5x 18.3x 16.9x 4.22x 22.0% 13.1% 22.0% 36.3% 23.5%
Mean $1,183.5 1.5x 16.5x 14.6x 2.44x 8.2% 10.3% 12.7% 27.6% 13.2%
Median $843.8 1.3x 16.6x 13.8x 2.44x 19.4% 9.8% 14.5% 27.6% 12.2%
6.0x
8.0x
10.0x
12.0x
14.0x
Nov 2008 Nov 2009 Nov 2010 Nov 2011 Nov 2012 Nov 2013
Current: 10.0x
2.0x
6.0x
10.0x
14.0x
18.0x
22.0x
Nov 2008 Nov 2009 Nov 2010 Nov 2011 Nov 2012 Nov 2013
Current: 17.5x
William Blair
Specialty Finance Industry Insights Consumer Specialty Finance 5
Alternative Financial Services
Indexed Price / LTM Earnings Ratios as of 11/1/2013
Public Company Valuations
Ticker
Stock Price 11/1/13
Equity Market Cap.
Debt / Equity
Stock Price / Asset CAGR ROAA ROAE
Net Income
EPS TBVPS 3-Yr CAGR Margin
Company LTM FY2013 LTM 07'-12' LTM LTM LTM LTM
Cash America International CSH $39.42 $1,107.8 0.6x 8.7x 9.5x 3.24x 15.0% 7.3% 13.7% 6.9% 7.7%
DFC Global DLLR $11.74 $463.0 2.4x NMF 6.5x NMF 16.0% 7.1% (2.2%) NA (0.9%)
EZCORP EZPW $15.52 $841.7 0.3x 14.6x 8.0x 1.99x 37.1% 6.8% 6.6% (29.5%) 3.4%
First Cash Financial Services FCFS $60.20 $1,740.0 0.4x 20.6x 21.1x NMF 11.7% 14.7% 24.6% 17.7% 13.2%
QC Holdings QCCO $2.37 $41.2 0.3x 11.2x NA 0.72x (2.5%) 6.7% 4.4% NA (0.9%)
Regional Management RM $32.41 $407.9 2.3x 14.9x 13.6x 2.70x NA 7.9% 20.1% NA 18.1%
World Acceptance WRLD $101.29 $1,106.7 1.4x 12.3x 12.7x 3.23x 12.3% 13.7% 27.5% 7.4% 17.0%
Mean $838.7 0.8x 14.5x 11.1x 1.98x 15.5% 8.6% 9.3% (16.2%) 4.8%
Median $841.7 0.4x 14.2x 8.4x 1.98x 15.0% 7.1% 6.6% (11.3%) 3.4%
Credit Card
Indexed Price / LTM Earnings Ratios as of 11/1/2013
Public Company Valuations
Company Ticker
Stock Price 11/1/13
Equity Market Cap.
Debt / Equity
Stock Price / Asset CAGR ROAA ROAE
Net Income
EPS TBVPS 3-Yr CAGR Margin
LTM FY2013 LTM 07' - 12' LTM LTM LTM LTM
Alliance Data Systems ADS $236.78 $11,541.4 NMF 34.3x 24.0x NMF 23.6% 6.0% NMF 35.0% 11.1%
American Express AXP $82.16 $88,015.6 2.9x 19.4x 16.7x 4.59x 0.4% 3.1% 24.2% 8.1% 15.4%
Discover Financial Services DFS $52.00 $24,908.0 2.0x 11.7x 10.5x 2.99x 15.0% 3.2% 26.0% 22.5% 34.5%
MasterCard MA $737.48 $88,776.1 NMF 29.2x 28.0x 15.04x 14.8% 21.7% 42.4% 21.6% 38.2%
Visa V $199.16 $127,073.4 NMF 26.2x 26.3x 33.11x 55.6% 11.9% 18.3% 18.9% 42.3%
Mean $68,062.9 2.5x 24.2x 21.1x 13.93x 21.9% 9.2% 27.7% 21.2% 28.3%
Median $88,015.6 2.5x 26.2x 24.0x 9.82x 15.0% 6.0% 25.1% 21.6% 34.5%
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
Nov 2008 Nov 2009 Nov 2010 Nov 2011 Nov 2012 Nov 2013
Current: 10.7x
6.0x
12.0x
18.0x
24.0x
Nov 2008 Nov 2009 Nov 2010 Nov 2011 Nov 2012 Nov 2013
Current: 17.6x
William Blair
Specialty Finance Industry Insights 6 Consumer Specialty Finance
Mortgage
Indexed Price / LTM Earnings Ratios as of 11/1/2013
Public Company Valuations
Company Ticker
Stock Price 11/1/13
Equity Market Cap.
Debt / Equity
Stock Price / Asset CAGR ROAA ROAE
Net Income
EPS TBVPS 3-Yr CAGR Margin
LTM FY2013 LTM 07'-12' LTM LTM LTM LTM
Ellington Financial EFC $22.72 $577.5 2.2x 5.8x 7.2x 0.92x NMF 3.6% 15.8% 30.0% NMF
Federal Agricultural Mortgage AGM $34.85 $370.9 NMF 5.7x 7.2x 1.24x 20.5% 0.6% 12.0% 35.4% NMF
Heritage Financial Group HBOS $17.05 $133.6 1.1x 12.5x 14.2x 1.08x 18.6% 0.9% 8.5% NMF 16.0%
Nationstar Mortgage Holdings NSM $50.52 $4,575.4 NMF 13.7x 11.0x 4.64x NMF 2.9% NMF NMF 21.4%
Ocwen Financial OCN $53.36 $7,247.5 1.6x 30.6x 17.4x NA 18.8% 8.9% 15.3% 89.3% 14.8%
PHH PHH $24.31 $1,389.2 3.6x 11.1x 38.6x 0.89x 0.5% 2.1% 12.3% NMF 5.1%
Stonegate Mortgage SGM $17.79 $439.5 2.1x 6.3x 10.8x 1.70x NMF NMF NMF NMF 23.9%
Tree.Com TREE $28.62 $318.3 NMF NA 32.5x 4.41x (20.2%) 2.5% 0.6% NMF 5.1%
Mean $1,881.5 2.1x 12.2x 17.4x 2.13x 7.6% 3.1% 10.7% 51.6% 14.4%
Median $508.5 2.1x 11.1x 12.6x 1.24x 18.6% 2.5% 12.1% 35.4% 15.4%
0.0x
10.0x
20.0x
30.0x
40.0x
Nov 2008 Nov 2009 Nov 2010 Nov 2011 Nov 2012 Nov 2013
Current: 15.4x
Commercial Specialty Finance Sector
William Blair
Specialty Finance Industry Insights 7 Commercial Specialty Finance
Commercial Specialty Finance
M&A Trends
Year-to-date aggregate M&A transaction volume is running behind that of the comparable period in 2012, although disclosed dollar volume is meaningfully higher over the same period.
As shown below, approximately 63% of the aggregate deals since 2002 have been completed between 5.0 and 10.0 times LTM net income, and 33% have been completed between 1.50 and 3.00 times LTM book value.
Transactions less than $50 million were completed at an average of 7.0 times LTM net income, slightly lower than LTM net income multiples on deals above $100 million.
Historical Transaction Volume
Historical Transaction Dollar Volume
LTM Net Income Multiple Breakdown LTM Book Value Multiple Breakdown
LTM Net Income Multiple by Transaction Size LTM Book Value Multiple by Transaction Size
Sources: SNL and William Blair’s market analysis Note: Year-to-date as of November 1, 2013
39
26
45 40 43 42
29 22
28
16
29 24
17
01020304050
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2012YTD
2013YTD
Average: 33 (29.2%)
$1,551
$7,885 $9,126 $6,484 $5,702
$11,162
$15,423
$2,453 $1,780 $240
$7,802
$3,134 $6,118
$0$3,000$6,000$9,000
$12,000$15,000$18,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2012YTD
2013YTD
($ in millions) Average: $6,328 95.3%
12.5%
62.5%
25.0% Greater than 10.0x
5.0x to 10.0x
Less than 5.0x
33.3%
66.7%
1.50x to 3.00x
Less than 1.50x
7.0x10.4x
8.4x
0.0x
5.0x
10.0x
15.0x
<$50mm $50mm - $100mm >$100mm
1.00x
1.69x
0.91x
0.00x
1.00x
2.00x
<$50mm $50mm - $100mm >$100mm
William Blair
Specialty Finance Industry Insights Commercial Specialty Finance 8
Select M&A Transactions
Transaction Value /
Announced Date Sub-Sector Buyer Name / Target Name
Transaction Value
LTM Net Income
LTM Book Value
09/30/13 Commercial Finance
Solar Capital/ Gemino Healthcare Finance, Incorporated - - -
09/06/13 Leasing General Finance Corporation/ Canadian Storage Containers Inc. $1.7 - -
08/16/13 Commercial Real Estate
Capital One Financial Corporation/ Beech Street Capital, LLC - - -
08/01/13 Leasing General Finance Corporation/ Harper Hot Shot Service, Inc. $3.0 - -
07/08/13 Commercial Finance
CIM Urban REIT, LLC/ PMC Commercial Trust - - -
07/01/13 Commercial Finance
Bank of America Corporation/ MuniMae TE Bond Subsidiary, LLC $78.5 - -
06/25/13 Leasing Element Financial Corporation/ Bush Truck Leasing Inc. / Bush Specialty Vehicles, Inc. - - -
06/12/13 Commercial Real Estate
Hunt Companies, Inc./ Centerline Holding Company $56.1 - 0.35x
06/03/13 Leasing Umpqua Holdings Corporation/ Financial Pacific Holding Corp. $158.0 8.2x 2.64x
05/31/13 Commercial Finance
Element Financial Corporation/ GE Capital's fleet portfolio $570.0 - -
05/09/13 Commercial Real Estate
KeyCorp/ CMBS special servicing business - - -
05/07/13 Commercial Finance
Fifth Street Finance Corp./ Healthcare Finance Group, LLC $110.0 - -
04/07/13 Commercial Real Estate
UnionBanCal Corporation/ CRE lending division $3,700.0 - -
03/28/13 Leasing BancVue, Ltd/ BancLeasing, LLC - - -
02/18/13 Commercial Real Estate
Walter Investment Management Corp./ Business lending mortgage operation of Ally Bank $0.1 - -
01/23/13 Commercial Real Estate
Starwood Property Trust Inc./ LNR Property LLC $1,052.9 2.7x 0.99x
01/18/13 Leasing Ontario Teachers' Pension Plan Board/ SeaCube Container Leasing Ltd. $466.6 10.0x 1.89x
01/16/13 Commercial Finance
Midland Financial Co./ Presidential Financial Corporation - - -
12/28/12 Leasing MB Financial, Inc./ Celtic Leasing Corporation $58.7 - 2.26x
12/21/12 Commercial Finance
CertusHoldings, Inc./ Resource Financial Services, Inc. - - -
12/20/12 Commercial Finance
Varde Partners, Inc./ FirstCity Financial Corporation $106.9 3.5x 0.82x
12/17/12 Commercial Finance
Solar Capital Ltd./ Crystal Capital Financial Holdings, LLC $275.0 - -
12/09/12 Leasing New China Trust Co./ International Lease Finance Corporation $4,227.5 15.0x 0.67x
11/08/12 Leasing Colford Capital Holdings, LLC/ Equilease Financial Services, Inc. - - -
11/08/12 Leasing Element Financial Corporation/ CoActiv Capital Partners - - -
10/30/12 Commercial Finance
CertusHoldings, Inc./ Quadrant Financial, Inc. - - -
William Blair
Specialty Finance Industry Insights 9 Commercial Specialty Finance
Public Valuation Update
Business Development Companies (BDCs)
Indexed Price / LTM Earnings Ratios as of 11/1/2013
Public Company Valuations
Ticker
Stock Price 11/1/13
Equity Market Cap.
Debt / Equity
Stock Price / Asset CAGR ROAA ROAE
Net Income
EPS TBVPS 3-Yr CAGR Margin Dividend Yield Company LTM FY2013 LTM 07'-12' LTM LTM LTM LTM
Apollo Investment AINV $8.51 $1,912.5 0.6x 13.0x 10.2x 1.03x (4.7%) 5.3% 7.7% 37.2% 38.6% 9.4%
Ares Capital ARCC $17.31 $4,834.9 0.7x 8.4x 11.1x 1.06x 28.5% 5.3% 12.8% (4.3%) 61.6% 8.8%
BlackRock Kelso Capital BKCC $9.39 $697.1 0.6x 11.2x 10.7x 1.00x (0.6%) 3.9% 9.1% (9.5%) 46.4% 11.1%
Fidus Investment FDUS $20.37 $279.4 0.7x 9.6x 14.1x 1.28x NA 4.5% 13.8% NA 68.9% 7.5%
Fifth Street Finance FSC $10.19 $1,393.6 0.6x 10.2x 9.6x 1.03x NA 5.4% 10.2% 60.8% 49.6% 11.3%
Full Circle Capital FULL $7.79 $59.0 0.8x 14.4x 10.0x 0.97x NA 4.3% 6.7% NA 31.6% 11.9%
Garrison Capital GARS $14.53 $243.5 0.7x 15.8x 11.8x 0.96x NA NA NA NA 45.4% 9.6%
Golub Capital BDC GBDC $17.57 $751.9 0.7x 12.6x 13.4x 1.16x NA 3.8% 8.8% 15.9% 55.7% 7.3%
Harvest Capital Credit HCAP $15.20 $92.5 - 5.5x 14.4x 1.02x NA NA NA NA NMF 8.9%
Hercules Technology Growth Capital, HTGC $15.42 $951.2 0.9x 9.1x 13.2x 1.48x 15.7% 5.9% 17.9% 286.6% 74.2% 7.3%
Horizon Technology Finance HRZN $13.50 $129.4 0.9x NMF 9.7x 0.90x NA 5.1% 2.4% (35.6%) 11.0% 10.2%
KCAP Financial KCAP $8.33 $277.5 0.7x 8.8x 9.0x 1.04x (9.7%) 6.2% 12.8% NA 64.8% 12.0%
Main Street Capital MAIN $30.06 $1,173.5 0.5x 10.4x 14.7x 1.50x 42.7% 5.3% 14.9% 48.6% NMF 6.4%
Medallion Financial TAXI $15.05 $330.6 1.5x 12.9x 15.7x 1.48x (5.5%) 2.4% 11.7% 211.1% NMF 5.8%
Medley Capital MCC $13.72 $538.2 0.7x 11.5x 9.2x 1.08x NA 5.8% 9.9% NA 41.8% 10.8%
Monroe Capital MRCC $12.80 $125.2 0.7x NA 11.1x NA NA NA NA NA NA 10.6%
OFS Capital OFS $11.92 $114.8 0.7x 11.2x 15.3x 0.81x NA 2.9% 10.1% 147.0% 58.4% 11.4%
PennantPark Floating Rate Capital PFLT $13.14 $193.3 0.6x 9.7x 12.1x 0.94x NA 3.2% 8.7% NA 64.5% 8.0%
PennantPark Investment PNNT $11.17 $742.8 0.5x 8.1x 10.8x 1.06x NA 4.9% 13.4% 77.1% 71.0% 10.0%
Prospect Capital PSEC $11.34 $3,156.7 0.6x 10.3x 7.6x 1.06x 43.0% 7.0% 10.6% 70.0% 41.3% 11.7%
Saratoga Investment SAR $19.20 $90.8 0.8x 8.5x NA 0.81x NA 4.7% 9.5% 2.3% 49.9% 13.8%
Solar Capital SLRC $22.04 $975.8 0.2x 13.7x 11.7x 0.99x NA 5.6% 7.5% (20.7%) 41.1% 7.3%
Solar Senior Capital SUNS $18.02 $207.7 0.2x 25.5x 15.4x 1.01x NA 3.6% 4.0% NA 38.3% 7.8%
TCP Capital TCPC $16.89 $514.4 0.2x 9.8x 10.4x NA NA NA NA NA NA 9.0%
THL Credit TCRD $16.18 $548.6 0.3x 11.0x 11.1x 1.21x NA 6.0% 10.4% NA 57.6% 8.9%
TICC Capital TICC $9.99 $525.8 0.9x 8.6x 9.5x 1.01x 13.8% 4.4% 12.8% 4.9% 65.5% 11.6%
Triangle Capital TCAP $29.25 $807.3 0.8x 10.2x 13.0x 1.83x 42.3% 6.9% 18.4% 44.0% 76.0% 7.4%
Mean $802.5 0.6x 11.2x 11.7x 1.11x 16.6% 4.9% 10.6% 58.5% 52.4% 9.5%
Median $525.8 0.7x 10.3x 11.1x 1.03x 14.7% 5.1% 10.2% 40.6% 52.8% 9.4%
6.0x
8.0x
10.0x
12.0x
14.0x
Nov 2010 Nov 2011 Nov 2012 Nov 2013
Current: 11.6x
William Blair
Specialty Finance Industry Insights Commercial Specialty Finance 10
Commercial Finance
Indexed Price / LTM Earnings Ratios as of 11/1/2013
Public Company Valuations
Ticker
Stock Price 11/1/13
Equity Market Cap.
Debt / Equity
Stock Price / Asset CAGR ROAA ROAE
Net Income
Company
EPS TBVPS 3-Yr CAGR Margin Dividend Yield LTM FY2013 LTM 07'-12' LTM LTM LTM LTM
CapitalSource CSE $13.40 $2,580.0 4.4x 17.8x 21.1x 1.86x (13.9%) 1.8% 9.2% NA 37.3% 0.3%
CIT Group CIT $48.20 $9,654.6 3.9x 12.9x 13.2x 1.14x (13.4%) NA NA NMF 30.5% 0.8%
MB Financial MBFI $29.58 $1,625.8 5.9x 16.4x 16.3x 1.88x 4.1% 1.1% 7.7% NMF 23.0% 1.6%
NewStar Financial NEWS $16.36 $795.2 3.0x 36.4x 33.6x 1.31x (3.8%) 1.1% 4.1% NA 29.3% NA
SVB Financial Group SIVB $95.16 $4,340.1 7.0x 20.9x 21.5x 2.23x 27.7% 2.0% 16.5% 28.3% 17.6% NA
Mean $3,799.1 4.8x 20.9x 21.1x 1.68x 0.1% 1.5% 9.4% 28.3% 27.6% 0.9%
Median $2,580.0 4.4x 17.8x 21.1x 1.86x (3.8%) 1.4% 8.4% 28.3% 29.3% 0.8%
Commercial Real Estate Lending
Indexed Price / LTM Earnings Ratios as of 11/1/2013
Public Company Valuations
Ticker
Stock Price 11/1/13
Equity Market Cap.
Debt / Equity
Stock Price / Asset CAGR ROAA ROAE
Net Income
Company
EPS TBVPS 3-Yr CAGR Margin Dividend Yield LTM FY2013 LTM 07'-12' LTM LTM LTM LTM
Manhattan Bridge Capital LOAN $2.23 $9.5 0.7x 17.2x NMF 1.07x NMF 3.8% 6.4% 15.8% 31.4% 1.8%
Resource America REXI $8.61 $172.2 0.1x NMF 136.7x 1.17x (27.3%) (1.5%) (0.6%) NMF (2.3%) 1.9%
Walker & Dunlop WD $12.79 $446.9 1.4x 10.5x NA 1.32x NA 2.8% 11.5% (6.4%) 12.6% NA
Mean $209.5 0.8x 13.8x 136.7x 1.19x (27.3%) 1.7% 5.8% 4.7% 13.9% 1.8%
Median $172.2 0.7x 13.8x 136.7x 1.17x (27.3%) 2.8% 6.4% 4.7% 12.6% 1.8%
10.0x
15.0x
20.0x
25.0x
30.0x
Nov 2010 Nov 2011 Nov 2012 Nov 2013
Current: 23.3x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
Nov 2011 Nov 2012 Nov 2013
Current: 6.0x
William Blair
Specialty Finance Industry Insights 11 Commercial Specialty Finance
Leasing
Indexed Price / LTM Earnings Ratios as of 11/1/2013
Public Company Valuations
Company Ticker
Stock Price 11/1/13
Equity Market Cap.
Debt / Equity
Stock Price / Asset CAGR ROAA ROAE
Net Income
EPS TBVPS 3-Yr CAGR Margin Dividend Yield LTM FY2013 LTM 07'-12' LTM LTM LTM LTM
AerCap Holdings AER $20.26 $2,301.8 2.6x 9.8x 8.4x 0.98x 14.3% 3.7% 10.4% 10.1% 23.7% NA
AeroCentury ACY $20.31 $31.3 1.3x 5.0x 6.2x 0.62x 3.8% 0.9% 13.5% 11.9% 27.6% NA
Air Lease AL $29.96 $3,048.5 2.2x 18.4x 16.7x 1.24x NA 3.5% 7.2% NA 21.5% 0.3%
Aircastle AYR $18.87 $1,524.3 2.2x NMF 18.0x 0.95x 5.6% 3.8% 0.7% NMF 1.6% 4.2%
CAI International CAP $22.08 $491.0 2.9x 7.4x 7.7x 1.24x 31.0% 4.8% 19.5% 46.4% 31.7% NA
GATX GMT $51.92 $2,398.7 2.9x 16.9x 15.8x 1.97x 5.1% 2.4% 11.5% 20.7% 11.2% 2.4%
Marlin Business Services MRLN $26.44 $328.0 NA 20.8x 20.0x 2.06x (8.9%) 2.6% 9.9% 52.0% 24.5% 1.7%
MicroFinancial MFI $8.56 $123.6 0.8x 13.0x 13.0x 1.42x 19.0% 5.8% 11.6% 24.0% 28.2% 3.3%
Mobile Mini MINI $36.11 $1,642.9 0.7x NMF 30.6x NMF 10.9% 4.1% 2.8% 7.6% 5.8% NA
Ryder System R $66.28 $3,485.9 2.4x 14.9x 13.8x 2.91x 3.9% 3.6% 14.8% 36.5% 3.6% 2.1%
TAL International Group TAL $48.70 $1,623.3 4.2x 11.2x 11.6x 2.72x 16.8% 5.5% 23.0% 56.4% 23.0% 5.7%
Textainer Group Holdings Limited TGH $37.97 $2,138.4 2.3x 10.9x 11.3x 2.05x 25.2% 5.2% 19.3% 23.4% 38.1% 5.0%
Willis Lease Finance WLFC $17.46 $148.9 3.6x 17.5x NA 0.72x 4.4% 2.6% 5.0% 7.6% NA NA
Mean $1,483.6 2.2x 13.3x 14.4x 1.85x 10.9% 3.7% 11.5% 24.7% 20.0% 3.1%
Median $1,623.3 2.3x 13.0x 13.4x 1.42x 8.3% 3.7% 11.5% 22.1% 23.3% 2.8%
3.0x
8.0x
13.0x
18.0x
Nov 2008 Nov 2009 Nov 2010 Nov 2011 Nov 2012 Nov 2013
Current: 14.6x
Capital Markets Transactions
William Blair
Specialty Finance Industry Insights 12 Capital Markets Transactions
Capital Markets Transactions
Recent Equity Offerings
Initial Public Offerings
Pricing Date Company Price Shares Amount
Market Cap. at Pricing /
LTM EPS LTM Book Value
11/08/13 JGWPT Holdings $14.00 13.9 $195.0 - -
11/06/13 StoneCastle Financial $25.00 6.3 $157.1 - -
10/15/13 Springleaf Holdings $17.00 21.0 $357.8 - -
10/09/13 Stonegate Mortgage $16.00 7.1 $113.6 14.1x 2.48x
10/03/13 Cherry Hill Mortgage Investment $20.00 6.5 $130.0 - -
09/24/13 Capitala Finance $20.00 4.0 $80.0 - -
07/11/13 Fifth Street Senior Floating Rate $15.00 6.7 $100.0 - -
05/08/13 PennyMac Financial Services $18.00 11.1 $200.0 - -
05/02/13 Harvest Capital Credit $15.00 3.4 $51.0 - -
05/01/13 Ellington Residential Mortgage REIT $20.00 6.5 $129.0 - 5.75x
03/26/13 Garrison Capital $15.00 5.3 $80.0 - -
03/21/13 Five Oaks Investment $15.00 4.0 $60.5 22.2x 3.32x
02/14/13 Orchid Island Capital $15.00 2.4 $35.4 - -
02/07/13 ZAIS Financial $21.25 5.7 $120.1 - -
12/04/12 WhiteHorse Finance $15.00 6.7 $100.0 - -
11/07/12 OFS Capital $15.00 6.7 $100.0 - 2.35x
11/07/12 Stellus Capital Investment $15.00 8.0 $120.0 - -
10/24/12 Monroe Capital Corporation $15.00 5.0 $75.0 - -
Notes: Dollar amount and shares amount are in millions and exclude overallotment Sources: SNL and William Blair’s market analysis
William Blair
Specialty Finance Industry Insights Capital Markets Transactions 13
Recent Equity Offerings (cont’d)
Follow-On Offerings
Pricing Date Company Price Shares Amount
Market Cap. at Pricing /
LTM EPS LTM Book Value
10/29/13 Colony Financial $20.21 14.3 $288.8 - -
10/11/13 New Mountain Finance $14.34 6.0 $86.0 13.6x 1.15x
09/26/13 TCP Capital $15.76 3.8 $59.9 12.2x 0.92x
09/26/13 Ares Capital $16.98 11.0 $186.8 9.2x 1.11x
09/24/13 Arbor Realty Trust $7.08 6.0 $42.5 22.4x 0.75x
09/19/13 Regional Management $27.50 3.5 $95.7 13.1x 2.45x
09/19/13 Fifth Street Finance $10.31 15.5 $159.8 13.6x 1.17x
09/12/13 Golub Capital BDC $16.95 3.0 $50.9 17.1x 1.22x
09/10/13 Starwood Property Trust $24.04 25.0 $601.0 16.9x 1.11x
09/04/13 Medley Capital $13.00 6.0 $78.0 16.4x 1.24x
08/13/13 Main Street Capital $29.75 4.0 $119.0 11.1x 1.76x
08/13/13 PennyMac Mortgage Investment Trust $22.11 11.3 $249.8 6.6x 1.05x
08/06/13 NorthStar Realty Finance $9.60 35.0 $336.0 - 1.05x
07/17/13 Monroe Capital $14.05 4.0 $56.2 - -
07/16/13 PennantPark Floating Rate Capital $14.20 4.4 $62.5 22.1x 1.48x
06/21/13 Ares Commercial Real Estate $13.50 18.0 $243.0 - 0.74x
06/20/13 Home Loan Servicing Solutions $23.00 13.0 $299.0 - 1.78x
06/19/13 THL Credit $14.62 6.6 $96.5 16.1x 1.41x
06/18/13 New Mountain Finance $14.55 6.0 $87.3 13.6x 1.19x
06/11/13 Newcastle Investment $4.92 35.0 $172.2 - 0.69x
05/30/13 Air Lease $26.75 8.0 $214.0 19.6x 1.19x
05/22/13 Blackstone Mortgage Trust $25.50 22.5 $573.8 - 4.20x
05/21/13 TCP Capital $15.63 4.5 $70.3 11.1x 0.90x
05/15/13 Apollo Investment $8.60 19.0 $163.4 12.4x 1.17x
05/08/13 JAVELIN Mortgage Investment $19.30 6.0 $115.8 - -
05/08/13 Ellington Financial $25.12 5.0 $125.6 - 0.99x
05/08/13 Stonegate Mortgage $18.00 5.6 $100.0 - -
05/07/13 Golub Capital BDC $17.47 6.0 $104.8 19.5x 1.40x
05/01/13 Ellington Residential Mortgage REIT $20.00 1.1 $21.0 - 5.75x
04/29/13 New York Mortgage Trust $6.96 13.6 $94.7 12.7x 1.11x
Notes: Dollar amount and shares amount are in millions and exclude overallotment Sources: SNL and William Blair’s market analysis
William Blair
Specialty Finance Industry Insights 14 Capital Markets Transactions
Recent Debt Offerings Date Company Offering Description Amount Maturity Date
10/21/13 Toyota Motor Credit 2.000% Series B unsecured medium-term notes, due Oct 24, 2018 $1,500.0 10/24/18
10/15/13 Resource Capital 6.000% Convertible senior unsecured notes, due Dec 1, 2018 $100.0 12/01/18
09/26/13 Ford Motor Credit Company 2.875% Senior unsecured notes, due Oct 1, 2018 $1,000.0 10/01/18
09/17/13 American Capital 6.500% Senior unsecured notes, due Sept 15, 2018 $350.0 09/15/18
09/17/13 SLM 5.500% Series A unsecured medium-term notes, due Jan 15, 2019 $1,250.0 01/15/19
09/12/13 GSV Capital 5.250% Senior convertible unsecured notes, due Sept 15, 2018 $60.0 09/15/18
09/04/13 Brookfield Asset Management 5.040% Medium-term notes, due Mar 8, 2024 $300.0 03/08/24
08/27/13 Caterpillar Financial Services Floating rate series G medium-term notes, due Aug 28, 2015 $250.0 08/28/15
08/13/13 PACCAR Financial 1.150% Series N medium-term notes, due Aug 16, 2016 $500.0 08/16/16
08/07/13 Portfolio Recovery Associates 3.000% Senior unsecured convertible notes, due Aug 1, 2020 $250.0 08/01/20
08/06/13 PHH 6.375% Senior unsecured notes, due Aug 15, 2021 $350.0 08/15/21
07/25/13 CIT Group 5.000% Senior unsecured notes, due Aug 1, 2023 $750.0 08/01/23
07/24/13 American Express Credit Floating rate series E senior unsecured medium-term notes, due July 29, 2016 $1,200.0 07/29/16
07/16/13 Ares Capital 4.375% Senior unsecured convertible notes, due Jan 15, 2019 $250.0 01/15/19
07/16/13 WhiteHorse Finance 6.500% Senior unsecured notes, due July 31, 2020 $30.0 07/31/20
07/15/13 Ally Financial 3.500% Senior unsecured guaranteed notes, due July 18, 2016 $1,000.0 07/18/16
07/09/13 General Electric Capital Floating rate series A senior unsecured medium-term notes, due July 12, 2016 $1,350.0 07/12/16
06/25/13 Full Circle Capital 8.250% Senior unsecured notes, due June 30, 2020 $18.8 06/30/20
06/14/13 NorthStar Realty Finance 5.375% Senior unsecured exchangeable notes, due June 15, 2033 $300.0 06/15/33
06/10/13 Apollo Investment 6.875% Senior unsecured notes, due July 15, 2043 $135.0 07/15/43
05/30/13 National Rural Utilities Cooperative Finance
2.350% Collateral trust bonds, due June 15, 2020 $400.0 06/15/20
05/21/13 Springleaf Finance 6.000% Senior unsecured notes, due June 1, 2020 $300.0 06/01/20
05/08/13 Cash America International 5.750% Senior unsecured notes, due May 15, 2018 $300.0 05/15/18
05/07/13 General Motors Financial 2.750% Senior unsecured notes, due May 15, 2016 $1,000.0 05/15/16
05/07/13 iStar Financial 4.875% Senior unsecured notes, due July 1, 2018 $300.0 07/01/18
05/02/13 Saratoga Investment 7.500% Senior unsecured notes, due May 31, 2020 $42.0 05/31/20
04/24/13 Arlington Asset Investment 6.625% Senior unsecured notes, due May 1, 2023 $25.0 05/01/23
04/24/13 PennyMac 5.375% Senior exchangeable unsecured notes, due May 1, 2020 $200.0 05/01/20
04/11/13 Fannie Mae 0.875% Benchmark notes, due May 21, 2018 $5,500.0 05/21/18
04/05/13 Colony Financial 5.000% Convertible senior unsecured notes, due Apr 15, 2023 $175.0 04/15/23
03/27/13 Fifth Street Finance 6.125% Senior unsecured notes, due Apr 30, 2028 $75.0 04/30/28
03/26/13 Main Street Capital 6.125% Senior unsecured notes, due Apr 1, 2023 $80.0 04/01/23
03/13/13 Medley Capital 6.125% Senior unsecured notes, due Mar 30, 2023 $60.0 03/30/23
03/08/13 Prospect Capital 5.875% Senior unsecured notes, due Mar 15, 2023 $250.0 03/15/23
03/06/13 Freddie Mac 0.500% Reference notes, due May 13, 2016 $3,500.0 05/13/16
03/06/13 IAS Operating Partnership LP 5.000% Senior exchangeable unsecured notes, due Mar 15, 2018 $350.0 03/15/18
03/06/13 International Lease Finance 3.875% Senior unsecured notes, due Apr 15, 2018 $750.0 04/15/18
03/06/13 John Deere Capital Floating rate series E senior medium-term notes, due Jan 12, 2015 $600.0 01/12/15
02/28/13 Redwood Trust 4.625% Senior convertible unsecured notes, due Apr 15, 2018 $250.0 04/15/18
02/19/13 MVC Capital 7.250% Senior unsecured notes, due Jan 15, 2023 $70.0 01/15/23
02/19/13 Ryder System 2.350% Unsecured medium-term notes, due Feb 26, 2019 $250.0 02/26/19
02/13/13 Blackrock Kelso Capital 5.500% Senior convertible unsecured notes, due Feb 15, 2018 $100.0 02/15/18
02/11/13 Starwood Property Trust 4.550% Convertible unsecured senior notes, due Mar 1, 2018 $525.0 03/01/18
02/04/13 Nationstar Mortgage LLC 6.500% Senior unsecured notes, due July 1, 2021 $400.0 07/01/21
01/29/13 Air Lease 4.750% Senior unsecured notes, due Mar 1, 2020 $400.0 03/01/20
Notes: Dollar amount in millions and excludes overallotment Sources: SNL and William Blair’s market analysis
William Blair
Specialty Finance Industry Insights Capital Markets Transactions 15
Recent Preferred Equity Offerings
Date Company Amount Call Date Dividend Date
07/16/13 Farm Credit Bank of Texas $300.0 09/15/23 6.8%
06/13/13 Oxford Lane Capital $20.0 06/30/16 7.5%
05/29/13 General Electric Capital $1,000.0 06/15/23 5.3%
05/28/13 New York Mortgage Trust $75.0 06/04/18 7.8%
05/08/13 Capstead Mortgage $150.0 05/13/18 7.5%
05/06/13 Arbor Realty Trust $30.0 05/09/18 7.8%
04/23/13 CYS Investments $200.0 04/30/18 7.5%
04/15/13 CoBank, ACB $200.0 07/01/18 6.1%
04/11/13 Dynex Capital $50.0 04/30/18 7.6%
04/08/13 MFA Financial $175.0 04/15/18 7.5%
04/03/13 NorthStar Realty Finance $175.0 04/10/18 8.5%
03/12/13 iStar Financial $175.0 03/15/18 4.5%
02/07/13 ARMOUR Residential REIT $135.0 02/12/18 7.9%
01/29/13 Arbor Realty Trust $35.0 02/01/18 8.3%
01/29/13 MuniMae TE Bond Subsidiary $74.0 04/30/28 5.0%
01/14/13 Federal Agricultural Mortgage $60.0 01/17/18 5.9%
01/10/13 KKR Financial Holdings $325.0 01/15/18 7.4%
11/19/12 Oxford Lane Capital $15.0 12/31/14 8.5%
10/09/12 Discover Financial Services $500.0 12/01/17 6.5%
10/03/12 NorthStar Realty Finance $125.0 10/11/17 8.9%
09/25/12 Resource Capital $25.0 10/02/17 8.3%
09/20/12 AG Mortgage Investment Trust $100.0 09/27/17 8.0%
09/13/12 Apollo Residential Mortgage $150.0 09/20/17 8.0%
09/06/12 Annaly Capital Management $400.0 09/13/17 7.5%
08/16/12 Hatteras Financial $250.0 08/27/17 7.6%
07/27/12 CYS Investments $75.0 08/03/17 7.8%
07/27/12 AG Mortgage Investment Trust $45.0 08/03/17 8.3%
07/25/12 Dynex Capital $50.0 07/31/17 8.5%
07/25/12 Apollo Commercial Real Estate Finance $75.0 08/01/17 8.6%
07/24/12 General Electric Capital $1,750.0 12/15/22 6.3%
07/19/12 Invesco Mortgage Capital $135.0 07/26/17 7.8%
07/10/12 Colony Financial $102.7 03/20/17 8.5%
07/09/12 NorthStar Realty Finance $63.3 02/07/12 8.3%
06/13/12 Avangard Capital Group $0.9 01/00/00 4.5%
Notes: Dollar amount in millions and excludes overallotment Sources: SNL and William Blair’s market analysis
William Blair
Specialty Finance Industry Insights 16 Financial Services & Technology Analysts and Coverage
Financial Services & Technology Analysts and Coverage
Insurance Brokers and Property and Casualty Insurance
Adam Klauber, CFA
Financial Technology and Specialty Finance
Robert Napoli
Asset Management and Financial Technology
Chris Shutler, CFA
Allstate Corporation (The) (ALL)
American International Group (AIG)
AmTrust Financial Services (AFSI)
Aon (AON)
Argo Group International Holdings (AGII)
Arthur J. Gallagher & Co. (AJG)
Brown & Brown (BRO)
Chubb Corporation (The) (CB)
Crawford & Company (CRD.B)
eHealth (EHTH)
Erie Indemnity Company (ERIE)
Fortegra Financial Corporation (FRF)
HCC Insurance Holdings (HCC)
Kemper Corporation (KMPR)
Markel Corporation (MKL)
Marsh & McLennan Companies (MMC)
National Financial Partners (NFP)
National Interstate Corporation (-TL)
Progressive Corporation (The) (PGR)
RLI Corp. (RLI)
Tower Group (TWGP)
Travelers Companies (The) (TRV)
Willis Group Holdings (WSH)
Alliance Data Systems (ADS)
American Express Company (AXP)
Asset Acceptance Capital (AACC)
CAI International (CAP)
Capital One Financial (COF)
Cardtronics (CATM)
DFC Global (DLLR)
Discover Financial Services (DFS)
Encore Capital Group (ECPG)
Financial Engines (FNGN)
Garrison Capital (GARS)
Green Dot Corporation (GDOT)
Marlin Business Services (MRLN)
MasterCard (MA)
MoneyGram International (MGI)
Monroe Capital Corporation (MRCC)
Performant Financial Corporation (PFMT)
Portfolio Recovery Associates (PRAA)
Visa (V)
WageWorks (WAGE)
Western Union Company (The) (WU)
WEX (WXS)
Affiliated Managers Group (AMG)
Artisan Partners Asset Management (APAM)
Cardtronics (CATM)
Envestnet (ENV)
Euronet Worldwide (EEFT)
Fiserv (FISV)
Global Payments (GPN)
Heartland Payment Systems (HPY)
Higher One Holdings (ONE)
Invesco (IVZ)
LPL Financial (LPLA)
MSCI (MSCI)
NetSpend Holdings (NTSP)
Schwab (The Charles Schwab Corporation) (SCHW)
T. Rowe Price Group (TROW)
TD Ameritrade Holding Corporation (AMTD)
Vantiv (TROW)
William Blair
Specialty Finance Industry Insights Investment Banking Team Biographies 17
Investment Banking Team Biographies
William Blair & Company Financial Services Investment Banking
Robert Metzger, managing director and head of financial services investment banking, joined William Blair in 1999. While at William Blair and in his prior position at ABN AMRO, he focused on the corporate finance needs of insurance, financial technology, and specialty finance companies. Mr. Metzger graduated in 1989 with highest honors from the University of Illinois, receiving a B.S. in accountancy. In 1995, he graduated with distinction from Northwestern University’s J.L. Kellogg Graduate School of Management, receiving an M.B.A. in finance and strategy. He is a Certified Public Accountant.
+1 312 364 8517
J.P. Young, director, is a member of the financial services industry group, where he focuses on the corporate finance needs of banks, broker–dealers, and specialty finance companies. Mr. Young joined William Blair’s investment banking group in 2009 from Macquarie Capital and began his investment banking career in 2000 at Piper Jaffray. He has extensive experience providing M&A advisory services and raising public and private equity capital for clients. Mr. Young received a B.S. from Lehigh University and an M.S. from the University of Chicago.
+1 312 364 8160
Kegan E. Greene, associate, joined William Blair in 2010. Before joining William Blair, Kegan worked at Babcock & Brown, Goldman Sachs, and Deloitte’s transaction services department. Kegan holds an M.B.A. in finance and entrepreneurship from the University of Chicago, a J.D. from DePaul University, and a B.A. in English from DePauw University.
+1 312 364 8113
William Blair
Specialty Finance Industry Insights 18 Select William Blair Transactions
Select William Blair Transactions
$30,000,000
Project POLARIS(In Process)
M&A Sell-sideSub Debt FacilitySubprime Auto
$90,000,000
Project NORMANDY(In Process)
M&A Sell-sideSub Debt Facility
VSC Financing
$100,000,000
Project DRIVE(Under Exclusivity)
M&A Sell-sideSenior & Junior Debt
FacilitiesBHPH Dealer
Not Disclosed
Project SMOKEY(In Process)
M&A BuysideSubprime Auto
$50,000,000
Follow-on Offering
Not Disclosed
Has acquired
$100,000,000
Senior Credit Facility
$34,000,000
Initial Public Offering
$287,500,000
Convertible Senior, Unsecured Notes
$75,000,000
Follow-on Offering
$18,750,000
Junior Unsecured Notes
$115,000,000
Preferred EquityOffering
$438,600,000
has been acquired by
$51,000,000
Initial Public Offering
£525,000,000
has been acquired by
$42,000,000
Baby Bond Offering
$78,000,000
Follow-on Offering
$92,000,010
Initial Public Offering
$97,980,000
Follow-on Offering
$35,000,000
Senior Subordinated Notes Preferred Equity
$75,000,000
Initial Public Offering
$125,000,000
Senior Secured CreditFacility
$230,000,000
Convertible Offering
$74,000,000
Senior Credit Facility & Subordinated Notes
Not Disclosed
has been acquired by
Manheim
$30,000,000
Second Lien Loan
$102,212,920
Initial Public Offering
$75,469,000
Follow-on Offering
188,893,000
Follow-on Offering
$228,433,000
Follow-on Offering
$15,000,000
Second Lien Term Loan
COLLINS FINANCIAL SERVICES, INC.
INNOVATION COMPLIANCE INTEGRITY
C F S I
£28,000,000
has sold a minority stake to
Investcorp
$34,875,000
Follow-on Offering
$143,750,000
Initial Public Offering
$271,860,000
Follow-on Offering
$15,000,000
Junior Debt
$87,000,000
Initial Public Offering
$25,000,000
Junior Debt
$146,625,000
Initial Public Offering
Not Disclosed
has been acquired by
Sallie Mae
$67,447,500
Follow-on Offering
William Blair
Specialty Finance Industry Insights Notes 19
Notes
William Blair
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 60606 | +1 312 236 1600 | williamblair.com November 22, 2013 Specialty Finance Industry Insights 20 Disclosures
Disclosures
International
FrankfurtWilliam Blair International, Limited An der Hauptwache 760313 Frankfurt am MainGermany+49 69 509527 600
LondonWilliam Blair International, LimitedThe Broadgate Tower20 Primrose Street17th FloorLondon EC2A 2EWUnited KingdomEquity Sales: +44 20 7868 4400Corporate Finance: +44 20 7868 4444
William Blair International, Limited40 Bruton StreetLondon W1J 6QZUnited KingdomInvestment Management: +44 20 7297 4700
São PauloWilliam Blair do Brasil Assessoria Financeira Ltda.Av. Brigadeiro Faria Lima 3729, room 511São Paulo, SPBrazil04538-905+55 11 3443 6472
ShanghaiWilliam Blair & Company, L.L.C. Shanghai Representative Of�iceUnit 16-18, 11th FloorBuilding One, Corporate Avenue222 Hubin RoadShanghai 200021P.R. China+86 21 2327 2222
ZurichWilliam Blair & Company, L.L.C. Stockerstrasse 46CH-8002 ZurichSwitzerlandInstitutional Sales: +41 44 287 9020Investment Management: +41 44 287 90 30
HeadquartersChicago222 West Adams StreetChicago, IL 60606+1 312 236 1600+1 800 621 [email protected]
United States
Boston125 High StreetOliver Street TowerSuite 1901Boston, MA 02110+1 617 235 7500
HartfordPutnam Place100 Great Meadow RoadSuite 606Wethers�ield, CT 06109+1 800 596 2028
New York666 Fifth Avenue14th FloorNew York, NY 10103+1 212 237 2700
San Francisco343 Sansome Street12th FloorSan Francisco, CA 94104+1 415 986 5596
Wilmington500 Delaware AvenueSuite 720Wilmington, DE 19801+1 302 573 5000
Specialty FinanceIndustry InsightsA review of M&A activity and public market valuation in the consumer and commercial specialty finance sectors
June 2013
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.
About William Blair Investment Banking
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