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REFINANCING2013:

EUROPEAN

REFINANCING

OUTLOOK

MAY 2013

EUROPE



CONTENTS

Foreword 3

Note From The Sponsors 4

Borrower Survey 5

Lender Survey 19

Case Study: Techem 33

Case Study: Centrotherm Photovoltaics AG 35About & Contacts 36



FOREWORD

A hefty EUR 70bn of high yield issuance last year and a urry of amend and extend

deals has taken a signicant chunk out of the 2014-2015 maturity wall, easing

concerns over an overcrowded re market. Inows into high yield funds seem

unstoppable, maintaining appetite for new deals. But the bank market, which is

still in deleveraging mode, will contract substantially in the second half of this year

as the lion’s share of the European CLO market switches to repaying its original

investors, while the emergence of Cyprus as the next sovereign debt ashpointserves as a reminder that the crisis remains far from resolved and retains the ability

to shutter primary markets.

Debtwire’s 2013 Renancing Report surveyed market respondents in both

the borrower and lender communities. The ndings reveal that companies

have taken some big steps to improve their maturity schedules, especially

private equity backed rms. Markets are in full swing as companies tackle

the remaining maturity wall but next year looks set to be even busier, with

debt maturities as well as renancing to peak in 2014, the report shows.

A sizeable number of borrowers are taking advantage of liquidity-addled

markets to raise additional capital while dealing with their maturities. Most

of the extra cash is earmarked for acquisitions but around half of

the respondents are planning to make debt-funded dividend payments.

This is the third Debtwire Renancing Report, presenting detailed results

of a survey of 50 representatives from the borrower community (split

between private equity rms and corporates) and 50 representatives from

the lender community, with their views of market conditions ahead of their

renancing plans. We hope you nd it a useful resource.

Robert Schach

Managing Editor

Debtwire Europe

[email protected]

F O R E W O R D



NOTE FROM THE SPONSORS

Despite continued volatility, the past 12 months have demonstrated a renewed

resilience within European debt markets with participants now looking better-

adapted to the regular swings in condence triggered by each unfolding political

crisis. Over the past year the nance community has had to negotiate the fallout

from indecisive Italian elections and the collapse of Cyprus’s banking system, but

both of these events had a less pronounced impact on debt markets than would

have been likely if they had occurred in prior years.

Although companies continue to be affected by weak levels of growth,

balance sheets are generally looking healthier and there is an expectation

that the number of defaults will star t to come down. That said, timing

remains of critical importance when negotiating a renancing and the need

to avoid coinciding with a fresh bout of uncertainty should encourage rms

to renance early, so as to avoid being forced to conduct negotiations

when the market is unfavourable. Private equity borrowers have so far

been more pro-active in this respect, with many rms having extended

their debt maturities out beyond 2017, which has helped deliver stability

and improved condence levels for this subset of borrowers.

A signicant proportion of banks are now well prepared for the new

capital requirements of Basle III. However, many still need to raise

additional capital and reduce their loan exposure and this will continue

to put pressure on renancing. While banks remain the primary source of

nancing, alternative capital providers are growing in prominence, with

private equity in particular emerging as an important source of nance.

PE rms holding large cash piles are willing to offer exible terms in the

search for a return and are increasingly also setting up new funds to better

tap this expanding opportunity.

Against this backdrop, and with signicant volumes of European debt

maturing over the next two years, Debtwire’s 2013 Renancing Report

provides some interesting insights into the perspective of both borrowers

and lenders on timing, sources of funding as well as the key challenges

and opportunities anticipated for the next 12 months.

Alex Mitchell

Banking Partner

Freshelds Bruckhaus Deringer

[email protected]

Klaus Kremers

Senior Partner

Roland Berger Strategy Consultants

[email protected]



B O R R O WE R S U R V E Y

BORROWER SURVEY

In early 2013, Debtwire canvassed the opinions of 50 representatives

from the borrower community – 25 corporate issuers and 25 private

equity fund managers in Europe – regarding their outlook for the European

renancing market. Respondents were questioned on the subjects of

upcoming debt maturities, renancing plans, market conditions and their

relationship choices in a renancing scenario. Interviews were conductedover the telephone and respondents were granted anonymity. Their

responses are presented in the following pages in aggregate. Further

details regarding respondents can be found in the Appendix at the end

of the report.

METHODOLOGY



BORROWER SURVEY

Nearly half of borrower respondents expect over

EUR 1trn to be renanced in next three years

Some 46% of borrowers surveyed expect more than EUR 1trn in debt to

come up for renancing over the next three years. This compares to just

33% of lenders who expect that level of debt quantum to hit the market,

suggesting that borrowers seem more cognisant of the competitive challenges

within the renancing space than lenders.

“Over the next three years the debt maturing and coming for renancing

will be high – above a trillion euros. Some of this debt will be repaid by

the companies that have managed to grow their revenues, but the majority

of rms will seek a maturity extension or a renancing,” said a French

private equity respondent.

“In the last three years we have only seen an increase in accumulation of

debt and no signicant debt repayment,” added a Polish corporate borrower.

“In the next three years we will see all the debt renanced rather than

repaid and this will continue unless the market improves signicantly.”

“In relation to recent years, it appears that most borrowers

now recognise the scale of the renancing challenge

that still remains and appear to be more in line withlenders’ expectations.”

Klaus Kremers, Roland Berger Strategy Consultants

How much debt do you expect to come up for renancing

in the market over the next three years?

8%

22%

24%

46%

Corporates expected to account for majority

of upcoming maturities

The vast majority of respondents believe that corporates will account for

the majority of debt renancing, with close to three-quarters expecting a

26-50% PE / 50-64% corporate split and one fth expecting a 0-25% PE

/ 50-74% corporate split. Only 6% of respondents anticipate that private

equity will require more renancing than corporates.

“Borrower nancing expectation will also signicantly

depend on its business focus. With European growthexpected to be very slow, companies with signicant

business inside and outside Europe might have the

mismatch of managing a restructuring in Europe but

funding growth in other regions.”


Percentage wise, how do you see the split of that debt

between private equity-related debt and corporate debt?

6%

74%

20%

€150bn-€299.9bn €300bn-€499.9bn €500bn-€1 Trillion Above €1 Trillion 26-50% PE / 50-74% Corp 0-25% PE / 75-100% Corp 51-75% PE / 25-49% Corp




Financial services expected to account for

bulk of renancings

The Financial Services sector will account for the largest proportion of debt to

be renanced, according to nearly a quarter of respondents, while some 14%

point to Auto/Auto Parts, Energy and Property & Construction respectively.

“Financial services owe the bulk of the debt that will be maturing in the next

three years and most of this debt will be renanced. The sector is evolving

and central banks are playing a major role in safeguarding nancial services

so that liquidity is maintained and the market does not go into a double dip

recession,” suggested an Italian private equity respondent.

The auto sector is expected to account for the largest proportion of debt

(24%) to be renanced by corporates, but represents a negligible share

of private equity company debt (4%), respondents said.

“Debt levels in the auto sector will continue to rise as the car market

is expected to remain weak due to high interest rates, more expensive

fuel prices and an uncertain economy,” suggested a Finnish corporate

respondent. “These companies are facing pressure from both sides,

demand is declining continuously and at the same time operational and

inventory cost is increasing.”

In which sector do you expect the bulk of renancing

to take place?

0% 20% 40% 60% 80% 100%

Overall

Private equity firm

Corporate 20%

28% 4% 12% 16% 16% 8% 4% 4%4%4%

24% 16% 12% 12% 8% 4%4%

24% 14% 14% 14% 10% 1 0% 6 % 4%

2%

2%

Borrowers face maturity spike in 2014

Both groups of borrowers have a signicant chunk of debt due for

renancing in 2014, with 40% of corporate borrowers and 44% of

private equity companies hitting their maturity peak next year. But while

corporate borrowers face another year of peak maturities in 2015, private

equity borrowers have a more manageable schedule with modest volumes

in 2015 and 2016.

When does the bulk of the debt you are planning to renance

come up for maturity?

0% 20% 40% 60% 80% 100%

Overall

Private equity firm

Corporate 12% 40% 44% 4%

44% 12% 4% 32%8%

10% 42% 28% 18%2%

Financial Services Auto/Auto Parts Energy Property & Construction

Consumer/Retail Industries Basic Technology Utilities

Media Transport

2013 2014 2015 2016 Beyond 2016

Percentage of respondents Percentage of respondents



BORROWER SURVEY

Majority of respondents plan to renance

in 2H13 or 2014

Just over a quarter (26%) of all respondents are planning to renance this

debt in 2H13, while nearly a third (32%) will wait until 2014. Corporate

borrowers are in more of a rush to re, with 28% aiming to deal with their

maturity schedules in the second half of this year and 40% next year. The

longer maturity proles of the debt held by private equity rms means they

are under less pressure – just 24% plan to re in 2H13 and 24% in 2014,

while some 32% are not planning to tackle their maturities until beyond 2015.

“We were able to renance our debt when market conditions were worse

and the eurozone crisis was at its peak. Now the market is relatively stable

and liquidity has improved, we will renance our debt close to our debt

maturities and I don’t think we will face any difculty this time,” said a

private equity respondent.

“I think now is a good time to renance as bank lending has improved

and interest rates are down,” added a Spanish corporate respondent. “We

are looking to early renancing because of two reasons – we want to take

advantage of the low interest rates and at the same time we want to avoid

any possible setback at the last moment.”

When are you planning to renance this debt?

0% 20% 40% 60% 80% 100%

Grand Total

Private equity firm

Corporate 8% 28% 40% 16% 8%

8% 24% 24% 12% 32%

8% 26% 32% 14% 20%

Optimal renancing conditions expected

in 2014

Just over one third (34%) of all respondents expect market conditions

for renancing to be optimal in 2H13 while nearly half (48%) expect

conditions to be even better in 2014. The majority of corporate borrowers

(52%) think conditions will be best in 2014, but private equity borrowers

are split with equal numbers plumping for both 2H13 and 2014 as the

ideal time to come back to the market.

“After the rst half of 2013 I feel most of the uncertainties in the market

will have been overcome and there will be renewed condence. Appetite

for lending will greatly increase so it will be the right time for renancing,”

an Italian private equity respondent commented.

“The market is all set to leave behind the crises and by next year we will

again see growth coming,” suggested a corporate respondent in Poland.

“Companies will be in a bet ter position to negotiate a renancing deal.

Although the market has improved a lot there is some level of restriction

because of the uncertainties, which should end by next year.”

“The number of government elections taking place last

year created extra uncertainties alongside the state of theeconomy. As the overall level of uncertainty reduces, more

and more companies will look to renance.”


When do you see the market conditions as optimal

for renancing?

0% 20% 40% 60% 80% 100%

Corporate

Private equity firm

Overall 12% 24% 52% 12%

8% 44% 44% 4%

10% 34% 48% 8%

H1 2013 H2 2013 Not until 2014 Not until 2015 Beyond 2015 H1 2013 H2 2013 Not until 2014 Not until 2015 Beyond 2015





Periodic shutting down of markets seen

as biggest factor impacting renancing

Near three-quarters of respondents (74%) said that funding costs rose as a

result of the sell-off in secondary, sparked by concerns over the sovereign

debt crisis. But nearly half (48%) of respondents felt the primary impact of

the crisis is a reduced opportunity to renance due to bouts of uncertainty

periodically shutting down markets. The impact of sovereign downgrades

on corporate ratings was seen as the most important fallout by some 38%

of respondents, while banks’ inability to rollover loans due to exposure to

sovereign debt was cited by 18% of borrowers surveyed.

“It is because of the prevailing uncertainty that companies are often

not able to get renancing. Elections in European countries, currency

uctuations etc do not allow for easy access to renancing capital as

lenders become concerned about the macroeconomic situation and

volatility,” said a private equity respondent.

“Many European countries have a sovereign debt crisis and in these

countries even those companies which are doing good business and are

able to withstand the deteriorating economic conditions are not able to

get renancing because the rating of these companies are downgraded,”

added a Finnish corporate respondent.

“The sovereign debt crisis is certainly not over but the level

of uncertainty and concern has reduced slightly.”

Bernd Brunke, Roland Berger Strategy Consultants

What impact is the sovereign debt crisis having on

borrowers’ ability to renance?

0% 10% 20% 30% 40% 50% 60% 70% 80%

Negative impact only in respect of certain lower

rated credits / sectors / financing sizes

Sovereign rating downgrades result in corporate

downgrades, increasing funding costs

Exposure to sovereign debt is limiting banks’ ability

to roll over loans

Bouts of uncertainty periodically shutting markets,

reducing the window of opportunity to refinance

Increased uncertainty is sparking a sell-off in the

secondary markets, thereby pushing up primary

market pricing and resulting in higher funding costs

74%

4%

48%

72%

62%

18%

62%

28%

8%

2%

Smoothing out maturity schedules most

important reason for renancing

Loans approaching maturity was cited as a factor in raising capital by

68% of respondents, with nearly a quarter (24%) stating that it was the

primary reason for renancing. This marks a signicant shift from last

year, when 44% of respondents picked it as a primary reason, highlighting

that many borrowers feel under less pressure from upcoming maturities.

Renancing at lower costs was cited by nearly two thirds (66%) of

borrowers, with 22% seeing it as the primary reason. Some 60% of the

borrower’s surveyed cited smoothing out a maturity schedule as a reason for

renancing, with a substantial 36% seeing it as the most important reason.

“We are not under pressure to renance our debt. We will do it to smooth

out a maturity schedule and will do it only when we approach maturity,”

said a UK private equity respondent.

“Our primary reason for early renancing is the lower cost of renancing.

We feel that the cost will increase in the next year,” a UK corporate

borrower commented. “An early renancing will give us time and we can

then start focusing on our business without any worries. The market is not

strong enough to be overcondent and renance at the last moment.”

“Many corporate borrowers have already taken steps to tackle

approaching maturities and so are now able to focus more

generally on their maturity prole and opportunistically take

advantage of good market conditions.”

Martin Hutchings, Freshelds Bruckhaus Deringer

Why are you planning to renance this debt?

0% 10% 20% 30% 40% 50% 60% 70% 80%

To meet rating agency

requirements

To raise additional capital

To smooth out a maturity

schedule

To refinance at lower cost

To meet an approaching

maturity

68%

24%

66%

22%

60%

36%

38%

16%

18%

2%

Overall Primary Impact Overall Primary Impact




BORROWER SURVEY

M&A the standout reason for raising additional

capital but dividend recaps on the rise

Easy nancing conditions in the primary markets are emboldening

borrowers. All of the respondents looking to raise fresh capital were

planning to use the new money to fund M&A, up from 62% last year.

Meanwhile, half of respondents were also planning to use the additional

funding to perform a dividend recapitalisation, up from just 14% last year.

But expansion abroad looks to be slowing – only a quarter of the borrowers

said they would use incremental debt to fund expansion into emerging

markets, down from 57% last year.

“We have acquisition plans and want to raise additional capital for it,”

commented a director of strategy at a Finnish corporate. “We do not want

to overspend from our balance sheet as we want to keep money safe for

our capital expenditures. Thus additional nancing in the form of debt or

equity is what we are looking for to nance our acquisition over the next

12 months.”

If answered “To raise additional capital”, why do you need

additional nancing?

0% 20% 40% 60% 80% 100%

Expansion into emerging

Dividend recap

M&A 100%

50%

25%

Amend and extend becomes default option

for borrowers

Amend and extend has become the preferred route for borrowers needing

to re with some 60% of respondents planning to go down this route.

Just 20% expect to renance with a combination of both new and existing

lenders, down from 73% last year. Sixteen percent of borrowers expect to

renance with existing lenders while only 4% expect to raise the necessary

capital with new lenders.

“We are not looking to renance for any acquisitions or business

expansion, we just want to renance our debt and do not want to raise

any additional capital so we would prefer to amend and extend,” said a

Spanish corporate respondent.

“New lenders are very sceptical and do not easily provide renancing.

Using current relationships and obtaining renancing from the existing

lenders is usually the best option as a new lender will take much longer for

approval and there is no guarantee that it will happen,” added a director at

an Italian private equity rm.

How do you expect to do the renancing?

0% 20% 40% 60% 80% 100%

Overall

Private equity firm

Corporate 56% 20% 20% 4%

64% 20% 12% 4%

60% 20% 16% 4%

Amend and extend instead Renance with a combination of both Renance with existing lenders

Renance with new lenders





Senior secured and unsecured bond structures

and pari passu bank and bond structure to

lead renancing

For planned renancings over the next 12 months, senior secured and

unsecured bond structures are expected to be most popular alongside pari

passu bank and bond structures, with 38% of respondents selecting each

option. All bond structures with a super senior RCF are making inroads

though – roughly a quarter (24%) of borrowers chose this option, up

from just 11% last year.

“Senior secured and unsecured bond structures provide exibility and are

done at low cost. There is strong market demand for both senior secured

credit facilities and senior unsecured notes allowing businesses to lock in

very favourable rates,” a UK private equity respondent said.

“There is a lot of demand for senior secured bond structures, which is

natural considering the volatile market means investors are looking for

a secure mode of investments. But even unsecured bonds are gaining

prominence among a specic class of investors who have higher appetite

for risk and are looking for higher returns,” a corporate respondent added.

What bank/bond structure do you think will be most popular for

renancings over the next 12 months?

0% 20% 40% 60% 80% 100%

Overall

Private equity firm

Corporate 40% 36% 24%

36% 40% 24%

38% 38% 24%

Banks and bond market key renancing routes

Banks are expected to remain the key providers of capital, with 96% of

respondents selecting them as a renancing route and 48% anticipating that

they will be the primary providers. But bonds are gaining in importance with

82% of respondents choosing them as a renancing option as well (up from

60% in last year’s survey), and 22% tipping them as the primary route (up

from 16%).

“I think 2013 will be a boom year for the corporate bond market,”

suggested a partner at a UK private equity rm. “Momentum is very high

with some deals heavily oversubscribed motivating companies to issue

bonds for renancing.”

Who will be providing the renancing?

0% 20% 40% 60% 80% 100%

The Stock Markets

Non-bank lenders /

Alternative capital providers

Private equity

The Bond Markets

Banks96%

48%

82%

22%

58%

20%

58%

10%

12%

Senior secured and unsecured bond structure Pari passu bank and bond structure

All bond structure with super senior RCF

Overall Primary




BORROWER SURVEY

More respondents expect lenders to roll into

new debt

Some 53% of respondents expect more than half of loan providers to roll

over during renancing, while 20% of those surveyed expect more than

half of bondholders to do the same. This is slightly up on last year, when

46% of respondents expected more than half of loan providers to roll over

and 18% thought that more than half of bondholders would switch into

new bonds in a renancing.

“Now there is not much difference between bank lending and the bond

market. Issuing bonds is the easiest route for renancing as there are

many investors looking for investment opportunities which are secure and

liquid too,” suggested a head of nance at a Luxembourg-based corporate.

“Bank lending is holding steady for highly regarded and highly rated

companies, but with companies which are in distress and have lower

ratings the bond market is helping them to raise capital.”

What % of existing lenders do you expect to roll into

new debt?

0% 20% 40% 60% 80% 100%

Loan providers

Bondholders 26% 54% 16% 4%

4% 44% 20% 30% 2%

Shift towards bond market continues

Borrowers expect the bond market to play a more important role in

providing funding, with 42% of those surveyed anticipating that they

will increasingly source capital in the bond market. In contrast only 26%

expect an increased proportion from the bank market while just under a

third (32%) anticipated no change in allocation.

“There is high demand for investment grade bonds and when a highly

regarded company issues bonds it receives huge interest from lenders.

Even junk and non investment grade bonds are now attractive to lenders,”

a Spanish corporate respondent commented.

“All of the factors that helped in improving bond market performance in

the past two years remain rmly in place, which will keep the bond market

active in funding,” added a partner at a UK private equity rm.

“Many European corporates have increasingly sought to

diversify their funding sources by tapping the bond market

so as not to be overly reliant on bank nancing. In the US,

corporates are funded 70% in the capital markets. Whilst

European corporates have some way to go to reach theselevels, there has been a shift in focus over the last 5 years.”

Martin Hutchings, Freshelds Bruckhaus Deringer

How do you expect your funding mix to change between

loans and bonds?

0% 20% 40% 60% 80% 100%

Overall

Private equity firm

Corporate 44%

40%

42% 32% 26%

32% 28%

32% 24%

Below 15% 16% – 30% 31% – 50% 51% – 60%

61% – 75% Above 75%

Increased proportion from the bond market No change anticipated

Increased proportion from the bank market





Bank debt followed by senior secured bonds

most popular instruments in 2013

Some 23% of respondents expect to use bank debt to renance more than

half of their debt in 2013, while another 27% anticipate using bank debt for

renancing between 40% and 49% of their debt. Senior secured bonds are

the next most popular option, with almost half of the respondents (45%)

planning to use the instruments to renance between 30% and 49% of their

debt and another 45% to re between 20% and 29% of their debt.

What percentage of debt do you expect to be renanced with

the following instruments during 2013?

0% 10% 20% 30% 40% 50% 60% 70% 80%

Private placements (%)

PIK debt (%)

Unsecured bonds (%)

Equity (%)

Mezzanine debt (%)

Senior secured bonds (%)

Bank debt (%)17%

33%27%

23%

45%45%

6%

2%

2%33%

50%17%

36%43%

14%

37%56%

7%

50%50%

63%31%

6%

7%

Covenant pressures and dodging sovereign risk

volatility biggest challenges when renancing

Covenant pressures moved to the top of the list of challenges faced by

borrowers when negotiating a renancing from second place last year,

with close to three-quarters (72%) of respondents citing it as a challenge

and 22% as the main obstacle. Timing to avoid sovereign risk volatility

jumped to second place from third last year with 68% of respondents

picking it and 24% tipping it as the primary challenge. Timing to achieve

optimum market conditions, the most widely selected challenge last

year, slipped to third place with 40% picking it as a challenge, and 24%

considering it the main difculty, down from 38% the prior year.

“The sovereign debt crisis in Europe weighs heavily on companies

negotiating a renancing,” suggested a Spanish corporate respondent.

“Because of the crisis banks can be reluctant to extend credit to renance

debt even when it’s investment grade.”

“How far the current market will sustain optimal conditions is not known.

Considering the volatile history of the European economy in the last four years

and frequent changes in the banking system I think it is very difcult to get

the right timing for renancing,” suggested a German private equity borrower.

“With European economies’ continuing struggle to drive

growth there will be a lot of pressure negotiating covenants

as lenders look to keep as tight a control as possible in

such uncertain times.”


What are the biggest challenges you encounter when negotiating

a renancing?

0% 10% 20% 30% 40% 50% 60% 70% 80%

Potential to tap into

US markets

Obtaining appropriate rating

Timing to avoid competing

deals

Timing to achieve optimum

market conditions

Timing to avoid sovereign

risk volatility

Covenant pressures72%

22%

24%

24%

10%

18%

20%

2%

62%

64%

68%

68%

1 – 19 20 – 29 30 – 39 40 – 49 50 & Above Overall Primary




BORROWER SURVEY

Sovereign debt crisis is key macro trend

inuencing renancing

The sovereign debt crisis is the key macro trend affecting renancing,

with 90% of respondents seeing it as having an impact and 28% citing

it as the primary inuencing factor. Fears over a prolonged period of

below normal growth have increased, with 70% of respondents selecting

it and 26% expecting it to have biggest impact, up from 52% and 18%

respectively last year. Similarly, concerns over a double-dip in Europe are

rising, with 66% of respondents seeing it as a deterrent to renancing and

30% as the main one, up from 44% and 0% respectively last year.

“The sovereign debt crisis is the biggest enemy for renancing. There is

still huge amount of sovereign debt held by European countries which

automatically puts strain on the ability of the banks to provide lending,”

suggested a UK-based private equity respondent.

“Concerns of another recession loom large and this is affecting renancing

as we are either required to give strong guarantees or required to pay

higher prices,” added a Polish corporate borrower.

What macro trends are affecting your plans to renance?

0% 20% 40% 60% 80% 100%

Currency issues

Reduced bank liquidity

ahead of Basle 3

Concerns of a double-dip

Prolonged period of

below normal growth

Sovereign debt crisis90%

70%

66%

48%

24%

2%

14%

30%

26%

28%

Borrowers plan step-up in operational

changes to their business during renancing

Both corporate and private equity rms are planning to operationally

restructure when renancing, with just over three-quarters (76%) of

corporate respondents and (92%) of private equity borrowers planning

to make operational changes to their businesses alongside their plans to

tackle their maturities. It marks a signicant shif t among private equity

companies, where just 24% had planned to restructure operationally

concurrently with renancing last year.

“The trends have changed and so has demand,” a Spanish corporate

respondent commented. “We will restructure our business and will focus

on the core areas.”

“We are planning to divest some assets in the domestic market and take

on new products in foreign markets,” added a German corporate borrower.

“There has been a signicant shift towards combining

operational and strategic improvements alongside nancial

restructuring in a much more holistic approach. This is

key to give the borrower the best chance of successfully

renancing with the best possible conditions.” Nick Parker, Roland Berger Strategy Consultants

Alongside the renancing of the business, are you planning

to make any operational changes to the business?

0% 20% 40% 60% 80% 100%

Overall

Corporate

Private equity firm 92% 8%

76% 24%

84% 16%

Overall Primary Impact Yes No





Move towards paying down CLOs to have

moderate impact on renancing

The majority (54%) of respondents expect the switching of many CLOs

towards paying down their liabilities to make renancing slightly more

difcult in 2H13. The concerns are more pronounced among private

equity borrowers, where 64% anticipate tougher conditions as a result

of disappearing CLO liquidity.

“With the likelihood of a material reduction in CLO investments in the

second half of 2013 there will be a signicant funding gap between the

renancing needs of speculative grade companies and available capital

from traditional high yield bond and leveraged loan funding sources,”

noted a UK-based private equity respondent. “The funding gap will likely

be most acute in the leveraged loan market given the diminishing capacity

of CLO investments.”

Do you expect renancing to become more difcult in the second

half of 2013 when a number of CLOs switch repayment cashinto pay down instead of reinvesting in new deals?

0% 20% 40% 60% 80% 100%

Overall

Private equity firm

Corporate 36% 44% 20%

28% 64% 8%

32% 54% 14%

Drop in active CLOs likely to push up amend

and extend requests

There is limited consensus among borrowers on the impact of the expected

reduction in active CLOs, with just under a third (32%) of respondents

suggesting it will lead to increased amend and extend requests, some 28%

believing that it will drive renancing via alternative capital providers and 26%

stating that it will lead to increased renancing through high yield bonds.

“Alternative capital providers will now become the primary source of

renancing,” suggested a Spanish corporate borrower. “As the primary

lenders are unable to meet their commitments towards renancing,

alternative capital providers will take the lead and renancing through

these routes will greatly increase during this year.”

What impact will the drop in active CLOs during 2013

have on the market?

0% 20% 40% 60% 80% 100%

Overall

Private equity firm

Corporate 44% 32% 16% 8%

20% 24% 36% 20%

32% 28% 14%26%

No impact Slightly more difcult Signicantly more difcult Increased amend and extend requests Increased renancing via alternative capital providers

Increased renancing via high yield bonds Increased renancing with banks




BORROWER SURVEY

Reduction in active CLOs to have moderate

impact on liquidity this year

Just over a third (34%) of respondents think that the reduction in

active CLOs will reduce liquidity by less than EUR 5bn. Ten percent of

respondents think that the trend will reduce liquidity by EUR 5bn-10bn,

while 28% think that it will shrink by EUR 10bn-20bn and a further 28%

think that liquidity will reduce by more than EUR 20bn.

How much CLO liquidity do you expect will disappear in 2013?

0% 20% 40% 60% 80% 100%

Overall

Private equity firm

Corporate 36% 8% 24% 16% 16%

32% 12% 32% 8% 16%

34% 10% 12% 16%28%

More pronounced impact on liquidity in 2014

Borrowers expect more of an impact in 2014, with 38% expecting the

reduction in active CLOs to reduce liquidity by more than EUR 20bn and

almost a quarter by more than EUR 30bn next year.

How much CLO liquidity do you expect will disappear in 2014?

0% 20% 40% 60% 80% 100%

Overall

Private equity firm

Corporate 32% 12% 12% 16% 28%

32% 8% 28% 12% 20%

32% 10% 14% 24%20%

Less than €5bn €5bn-€10bn €10bn-€20bn €20bn-€30bn €30bn plus Less than €5bn €5bn-€10bn €10bn-€20bn €20bn-€30bn €30bn plus





No major CLO comeback anticipated in 2013

A minority of respondents anticipate a comeback for CLOs in 2013.

Almost half do not expect new CLOs to come to the market until next year,

and another 30% think it won’t happen until the following year. However,

just 4% of respondents expect the asset class to disappear completely,

while some 16% expect CLOs to raise a EUR 1bn plus this year.

“CLOs will cer tainly come back in 2013 or in early 2014,” suggested a

Polish corporate borrower, “Because of CLO constraints the market is

already in very bad shape and there is a strong argument for removing

some restrictions and bringing down the regulations to improve the market

and keep a balance between debt and renancing.”

Do you expect CLOs to make a comeback in Europe in 2013?

0% 20% 40% 60% 80% 100%

Overall

Private equity firm

Corporate 12% 4% 4% 48% 32%

8% 8% 4% 28%44% 8%

10% 6% 46% 30% 4%4%

PE funds have money for deployment in 2013

Some 40% of private equity respondents indicate that they have raised

EUR 200m-300m that they will need to deploy during 2013. Just under a

third (32%) need to deploy EUR 100m-200m this year, while a fth of the

private equity respondents will be looking to invest EUR 300m-500m.

“We have raised funds but not big ones. We now have a focus on small

companies and thus have raised funds accordingly,” noted an Italian

private equity investor.

What level of funds have you raised that you will need to deploy

during 2013?

0% 5% 10% 15% 20% 25% 30% 35% 40%

€100million-€200million



€500million plus 8%

20%

40%

32%

Raise more than €5bn in 2013 Raise more than €1bn in 2013 Raise €0-€1bn in 2013

Not until 2014 Not until 2015 The asset class will disappear




BORROWER SURVEY

Turnover in leveraged loan universe expected

to decrease

Just over two-thirds (68%) of respondents do not think that turnover in the

leverage loan universe will resume in 2013, while just under a third (32%)

think that secondary buyouts will pick up again.

Secondary buyouts have dried up during 2012. Do you expect

turnover in the leveraged loan universe, a key driver of deal owhistorically, to resume in 2013?

32%

68%

Yes No



L E ND E R S U R V E Y

LENDER SURVEY

In early 2013, Debtwire canvassed the opinions of 50 representatives from

the lending community in Europe regarding their outlook for the European

renancing market. Respondents were questioned on their expectations

regarding the amount of debt coming to market for renancing and which

sectors and countries will be most impacted. In some instances, and

in order to present results for comparison, respondents were asked thesame questions as those from the borrower survey. The interviews were

conducted over the telephone and respondents were granted anonymity.

Their aggregate responses are presented over the following pages. Further

details regarding respondents can be found in the Appendix at the end of

the report.

METHODOLOGY



LENDER SURVEY

A third of lender respondents expect over EUR

1trn to be renanced in next three years

Some 33% of lenders surveyed expect more than EUR 1trn in debt to

come up for renancing over the next three years. That compares to 46%

of the borrowers surveyed, suggesting that lenders are more relaxed over

the maturity wall.

“In the next three years we have a huge maturity wall and much of the debt

maturing will come for renancing because in the current environment and

given the capital position of companies, rms generally aren’t in a position

to pay down the debt,” suggested a commercial banker.

“Lenders continue to be more negative over the challenges

facing the renancing wall compared to borrowers and are

much more sensitive to the specic sectors and geographies.”


How much debt do you expect to come up for renancing

in the market over the next three years?

9%

6%

26%

33%

26%

Private equity steals a march on corporates

in tackling debt maturities

More than three quarters (77%) of the respondents expect 26-50% of the

renancing to come from private equity deals and 50-74% to come from

corporates. This down from 55% last year, suggesting that some private

equity owned rms have tackled their debt maturities in the interim.

“Corporates continue to face challenges and many companies are still in

distress because of the lack of demand. They are not able to meet their

debt obligations and at the same time tight lending conditions are a big

hurdle. Private equity players are in a bet ter position and have built huge

cash reserves and are in fact buying assets,” an investment banker noted.

“The rate of corporate debt maturing is higher than the rate of private

equity debt in the next three years. Firstly, because private equity rms

have already taken debt extensions and their new debt will now mostly

mature after 2017. Secondly, private equity rms have already cleared

debt and they are not facing as much tension now like the corporates,”

a prop desk trader added.

“Private equity rms have been very focused on managing

their business’ debt maturities over the last few yearsthrough amend and extend transactions and bank/bond

renancings. Corporate debt maturities will be a key focal

point for the market in the next 12 months.”

Alex Mitchell, Freshelds Bruckhaus Deringer

Percentage wise, how do you see the split of that debt

between private equity-related debt and corporate debt?

0% 20% 40% 60% 80% 100%

2012

2013 8% 77% 15%

23% 55% 22%

Percentage of respondents

<€150bn €150bn-€299.9bn €300bn-€499.9bn €500bn-€1 Trillion

Above €1 Trillion

0-25% PE / 75-100% Corp 26-50% PE / 50-74% Corp 51-75% PE / 25-49% Corp

76-100% / 0-24% Corp




Renancing peak expected in 2013

Lenders expectations of when the bulk of renancing gets done are

running ahead of borrowers’ plans. Some 46% of lender respondents think

that the majority of renancing will take place in 2013, whereas just 34%

of borrowers plan to tackle their maturities this year. Similarly just 2% of

lenders think the re peak will be in 2015 and none thereafter, whereas

14% of borrowers aim to re in 2015 and 20% the following year or later.

“Companies will try to squeeze as much renancing as possible into 2013

itself,” suggested a fund of funds manager. “For companies looking for

renancing, now is the right time because interest rates are very low and

credit conditions have improved.”

“I think the majority of the renancing will happen in 2014 as we saw a

signicant number of maturities extended in 2012 – the majority by two

years,” a Swiss respondent commented. “It will be hard to extend these

maturities again so we will instead see renancings happening.”

When do you expect the majority of renancings

to take place?

12%2%

14%

32%

40%

Financial Services and Property/Construction

to account for bulk of renancings

Financial Services and Property & Construction are the two sectors

expected to account for the bulk of upcoming renancing, with both

sectors tipped by 24% of respondents each. This was broadly in line

with last year.

“The crisis is still looming large for Europe’s struggling construction and

real estate companies as they face a race to renance a huge amount of

debt by the end of the year. Weak consumer condence and poor property

demand continues to strain the sector,” a prop desk trader commented.

Autos, selected by just 6% of respondents last year, jumped to third place

with 18% of the lenders surveyed citing it as the sector that they expect to

provide most of the renancing.

“The automotive industry globally needs some serious renancing because

the crisis has worsened the problem for companies who are struggling

with production overcapacity. There is an imminent need for restructuring

to survive,” added a corporate banker.

In which sector do you expect the bulk of renancing

to take place?

0% 20% 40% 60% 80% 100%

2012

2013 24% 24% 18% 14% 8 % 4% 2%

2% 2%

30% 15% 6% 11% 11% 12% 9% 2%

2%

2%

2%


They already have H1 2013 H2 2013 Not until 2014 Not until 2015 Financial Services Property & Construction Auto / Auto parts Consumer / Retail

Energy Media Technology Infrastructure

Chemicals and Materials Transport Basic Industries



LENDER SURVEY

Germany to account for lion’s share of

renancing

Germany will account for the largest share of renancing, according to 38%

of respondents, (up from 32% last year). Just under a quarter (24%) expect

the UK to represent the largest number of renancings, well down from

the 38% last year. Some 16% think that Spain will account for the biggest

volume of debt coming up for renancing while 12% point to France.

“Renancing largely depends on the capacity of the domestic market and

overall sentiment, and the current capacity and sentiment in Germany is very

positive and this will increase renancing,” an investment banker commented.

“Just because a country has the highest amount of debt maturing does not

mean the bulk of renancing will happen there. Considering the economic

environment I think German businesses will be able to renance the most

even though companies in some other countries are holding higher debt

with closer maturities,” agreed a prop desk trader.

“With current lack of growth in European economies, it

is not too surprising that expectations are for Germany to

account for the largest share of renancing, but this will

also be very much sector specic.” Nils Von Kuhlwein, Roland Berger Strategy Consultants

In which country do you expect the bulk of renancing

to take place?

0% 20% 40% 60% 80% 100%

2012

2013 38% 24% 16% 12% 10%

32% 38% 10% 6% 8% 6%

Closing of markets seen as biggest factor

impacting renancing

For lenders the most damaging impact of the sovereign crisis on

renancing is seen as the periodic shutting of markets, with 86% of

respondents citing it as having an impact and 40% selecting it as the

most important effect.

“Because of sovereign debt crises any foundation laid for economic

recovery is weak,” suggested a prop desk trader in the Netherlands.

“There is always uncertainty which shuts the market and decreases

the chances of renancing.”

“Despite the current benign credit environment, market

uncertainty can return quickly and unexpectedly. Preparation

and exibility remain key to executing a successful

renancing strategy.”


What impact is the sovereign debt crisis having on borrowers’

ability to renance?

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Negative impact only in respect of certain

lower rated credits / sectors / financing sizes

Increased uncertainty is sparking a sell-off in the

secondary markets, thereby pushing up primary

market pricing and resulting in higher funding costs

Sovereign rating downgrades result in corporate

downgrades, increasing funding costs

Exposure to sovereign debt is limiting banks’

ability to roll over loans

Bouts of uncertainty periodically shutting markets,

reducing the window of opportunity to refinance

86%

40%

70%

18%

68%

28%

64%

14%

6%


Germany UK Spain France Italy Ireland Overall Primary




Amend and extend will be most common

option for renancing

Over half (54%) of lenders surveyed think that amend and extend

arrangements will be the most common option for borrowers facing

renancing while just under a quarter (24%) think that renancing with

a combination of existing and new lenders will be the most utilised route.

“Amend and extend is currently the favoured option for borrowers,”

a respondent in Finland suggested. “They do not have to spend a long time

negotiating and it is the most favourable mode of renancing.”

“Amend and extend transactions have proven to be a very

efcient and relatively inexpensive way for borrowers to

manage their debt maturities, while maintaining the benet

of their existing lender relationships. We expect them to

remain a key nancing tool in the future.”


“The key issue with amend and extend is that it is

much easier not to address potential root causes of

underperformance. Combining with operational and

strategic reviews as part of a holistic restructuring isthe only way to ensure long term competitiveness.”


How do you expect borrowers to renance?

Banks still the key route to renancing but

private equity makes inroads

Banks are still expected to be the primary source of capital when renancing,

according to half (50%) of respondents. Overall some 96% of the respondents

expect bonds to play a role, followed by 84% for banks, 68% for private

equity and 58% for alternative capital providers.

“Banks are still the largest lenders and they are the primary source of

renancing for many companies. Interest rates have come down and

banks are now more open while their lending conditions have also eased

a bit,” an investment banker commented.

Private equity leapfrogged bonds into second place as likely primary

provider of renancing, with 22% of respondents picking private equity

ahead of 20% selecting bonds.

“Private equity is emerging as the leading source of capital as they

are now holding huge cash piles and are very active in renancing

businesses,” suggested a prop desk trader.

“Private equity rms, credit funds and other alternative

capital providers have very signicant amounts of capital available and are taking increasingly large direct lending

positions. They have an advantage over banks in the current

regulatory environment and we expect them to be a key

source of funding for renancings in the coming years.”


Who will be providing the renancing?

0% 20% 40% 60% 80% 100%

The Stock Markets

Non-bank lenders /


Private equity

Banks

The Bond Markets

96%

20%

84%

50%

68%

22%

8%

34%

58%

10%

12%

24%

54%


Renance with new lenders Renance with existing lenders

Renance with a combination of both Amend and extend instead

Overall Primary



LENDER SURVEY

Banks set to continue driving renancing

Some 35% of respondents expect banks to account for more than 50%

of new debt during renancing in 2013, while a quarter (25%) anticipate

that banks will provide 40% and 49% of the capital. Eleven percent of

respondents see the bond markets accounting for more than 50% of the

new debt in a renancing, and some 7% think private equity will provide

50% or above of the new capital.

“Bonds are still regarded as one of the most viable sources of renancing

with more favourable terms and accessibility,” suggested a prop desk

trader. “Private equity is also emerging as a big renancing source as PE

rms are showing considerable interest and are being exible because this

is an opportunity for them to strike valuable deals.”

Between all those that you mentioned, what will be the

likely split?

0% 10% 20% 30% 40% 50% 60%

The Stock Markets

Non-bank lenders /


Private equity

The Bond Markets

Banks13%

28%25%

35%

4%33%33%

20%11%

18%32%

25%18%

7%

4%4%

22%33%

37%

36%50%

7%7%

Loans remain most popular debt instrument

when renancing

A fth of respondents expect bank debt to account for more than 50% of

debt renancing in 2013, while 27% anticipate that bank debt will be used

for between 40% and 49% of the debt being renanced. Seven percent of

respondents see senior secured bonds being used to renance more than

50% of debt while 41% anticipate that senior secured bonds will be used to

renance between 30% and 49% of the debt due for renancing.

What percentage of debt do you expect to be renanced

with the following instruments during 2013?

0% 20% 40% 60% 80% 100%

Equity

Unsecured bonds

Mezzanine debt

Private placements

PIK debt

Senior secured bonds

Bank debt30%

23%27%

20%2%

50%25%

16%7%

13%54%

25%

17%63%

21%

19%71%

10%

100%

50%

8%

43%7%


1 – 19 20 – 29 30 – 39 40 – 49 50 & Above 1 – 19 20 – 29 30 – 39 40 – 49 50 & Above




Senior secured and unsecured bond structures

to dominate

Senior secured and unsecured bond structures are expected to be the

most popular when renancing during the next 12 months, according to

46% of respondents. All bond structures with super senior RCF are the

next most likely to be used, tipped by 28%, followed by pari passu bank

and bond arrangements, chosen by 26% of lenders surveyed.

“Secured loans are highly regarded by lenders as they provide security

and are very liquid,” a director at a mezzanine fund noted. “Bank bond

structures are not liquid and have strict terms and are therefore difcult

for the companies to issue. Senior secured bond structures have gained

prominence and proven to be a successful element for renancing.”

What bank/bond structure do you think will be most popular

for renancings over the next 12 months?

26%

28%

46%

Timing to achieve optimum market conditions

biggest challenge but dodging sovereign risk

volatility increasingly important

Timing to achieve optimum market conditions remains the biggest

challenge when negotiating a renancing, cited by 72% of respondents as

a factor and by 24% as the primary challenge. Timing to avoid sovereign

risk volatility moves up into joint second place with covenant pressures,

with 64% seeing them as issues and 24% as the primary challenge.

“Avoiding sovereign risk volatility will signicantly benet issuers when

renancing and it will also help companies in improving their credit rating,”

a mezzanine fund manager commented. “However, avoiding sovereign risk

is not easy and can put signicant pressure on companies and their ability

to renance.”

What are the biggest challenges you encounter when negotiating

a renancing?

0% 10% 20% 30% 40% 50% 60% 70% 80%

Potential to tap

into US markets

Timing to avoid

competing deals

Obtaining appropriate rating

Covenant pressures

Timing to avoid sovereign

risk volatility

Timing to achieve optimum

market conditions

72%

24%

64%

24%

64%

24%

64%

12%

58%

14%

38%

2%


Pari passu bank and bond structure All bond structure with super senior RCF

Senior secured and unsecured bond structure

Overall Primary



LENDER SURVEY

Default rates expected to fall this year

Half of the lenders surveyed anticipate a decline in default rates over

the next 12 months, while just under a quarter (24%) expect default

rates to increase and the remainder for them to remain the same.

“Default rates will come down,” suggested a commercial banker. “Although

the amount of debt coming for maturity will be as high as a trillion euros,

generally companies are in a healthy position with good balance sheets.

Thus companies will be able to renance and avoid defaults even if they

are not able to pay down their debt.”

“I think default rates will come down as the market has generally emerged

from uncertainty and compared to earlier companies will be able to get

renancing and extend maturities,” added a prop desk trader.

“However, due to more complex nancing structures out

of court solutions are becoming more difcult which could

temper any expected reduction in default rates.”


How do you expect default rates to develop over the next

12 months?

50%

26%

24%

Renancing in the US an attractive option

for many

Forty percent of lenders surveyed expect more than EUR 20bn of

European debt to be renanced in the US market in 2013. Just under a

third (30%) of respondents think the number will be closer to EUR 10bn-

20bn while just under a quarter (24%) anticipate that the gure will be in

the region of EUR 5bn-10bn.

“European issuers are keener on renancing debt in the US than in Europe

due to the improving state of the economy in the US,” noted a prop desk

trader. “The situation in the US is not as grim as it is in Europe and that is

driving European issuers to renance debt in the US.”

What volume of debt will European issuers renance in the

US market in 2013?

40%

30%

6%

24%

Decrease Remain the same Increase €20bn plus €10bn-€20bn €5bn-€10bn €1bn-€5bn




Private placements expected to account for

15-20% of US renancing

Just under half (48%) of lender respondents expect that between 15-20%

of the debt renanced in the US will be done through private placements.

Some 36% think that private placements will account for 10-15% of these

renancings while 16% think that the proportion will be in the 20-25% range.

What percentage of this will be in the form of

private placements?

48%

36%

16%

Banks planning to raise further capital and

cut lending to boost ratios

Thirty-six percent of respondents from banks say that they do not need

to make any further preparations in anticipation of the new capital

requirements of Basle III. But 29% say that they will both raise additional

capital and reduce their loan exposure while 21% plan only to raise more

capital and 15% just to reduce lending.

“We are already prepared for the new regulatory requirements under Basle

III and it is the right time for us to be opportunistic,” said an investment

banker. “The market is improving and we have taken adequate steps so

that we are not restricted because of the new regulatory requirements.”

“Like any other bank we are looking to reduce our loan exposure,” noted

a German commercial banker. “However, we do not have plans to curb

lending as investment opportunities in some segments of the market are

still attractive.”

“The regulatory impact on capital costs for the banks

will mean that certain products will either become more

expensive for borrowers, be offered by fewer banks, or only

be offered where there is sufcient ancillary work available

(and therefore returns for the banks) to justify it.” Martin Hutchings, Freshelds Bruckhaus Deringer

What preparations does your institution still need to make to

meet the new regulatory capital requirements under Basle III?

36%

29%

14%

21%

Decrease Remain the same Increase None, we are already prepared Plan to both raise further capital and reduce loan exposure

Plan to raise more capital Plan to reduce lending further



APPENDIX

BORROWER SURVEY RESPONDENTS’ INFORMATION

Are you a corporate or private equity investor?

50%50%

Private equity rm Corporate

In which European sub-region are you primarily based?

28%

22%

12%

10%

8%

6%

6%

4%4%

UK & Ireland Germanic Nordic France Italy

Iberia Benelux CEE SEE



A P P E ND I X

3131

LENDER SURVEY RESPONDENTS’ INFORMATION

In which market are you primarily involved:

50%50%

The leveraged market The corporate market



F r e s h f e l d s B r u c k h a u s D e r

i n g e r L L P

freshelds.com

For your most complex matters, you need the

best legal minds to solve your problems.

Freshelds leads the way on Europe’s most intricate nancingsfor borrowers and sponsors, funds and arrangers. We advised

on Techem’s and Stork’s bank/bond renancings, and on

Center Parcs’ rst-of-a-kind £1.2bn renancing. We have

the experience and creativity to get your deal through.

Freshelds will make sure you get the best possible

outcome – we’re with you every step of the way.



C A S E S T U D Y : T E C H E M

CASE STUDY: TECHEM

Techem is a leading global provider of energy billing and energy

management services, principally owned by Macquarie. The initial

acquisition had been nanced by traditional senior and mezzanine bank

debt and, whilst the business was well able to service the ongoing

obligations, the upcoming maturities in 2015 required a renancing.

The company needed to renance €1.3bn of existing debt and required

ongoing capex/acquisition and working capital revolving credit facilities,

and judged that the market appetite for a renancing justied the decision

to seek a renancing in 2012.

Given the nature of the business of the group and its long term nancing

needs, the management wanted to put in place a nancing which reected

the need for exibility in building out and developing its metering business,

and which was designed around the cashows of the business. The group

also wanted to design a debt package with staggered maturities and the

ability to independently renance individual elements of the debt package

to broaden its renancing options going forward.

This led the company and its advisers to design a mixed debt package

with a blend of products including:

• €550,000,000 senior facilities agreement maturing in 2017;

• €410,000,000 senior secured notes due in 2019;

• €325,000,000 senior subordinated notes due in 2020.

This mix of debt types and maturities facilitates opportunistic renancings

by the group and the ability to switch debt products in the future in order

to meet its maturity obligations. It also avoids exposure to any one debt

product and enables the company to ensure that it is already achieving the

best pricing.

This exibility was also reected in other terms of the capital structure, in

particular:

• The limitations on debt incurrence in both the bank and bond debt was

limited to achieving a particular leverage position but with a free ability

as to the type and nature of the debt (subject to certain ceilings on the

economic terms) thereafter;

• The ability to renance the facilities and the notes by means of new

facilities, new notes or other debt instruments is not fettered other than

in respect of certain of the economic requirements;

• The intercreditor agreement and security package was designed to

accommodate full or partial renancings and various different types

of debt including, in the event that an all bond structure is put in

place, allowing the structure and the ICA to “ip” to an all bond style

ICA without bondholder consent and without needing a new security

structure (an “evergreen” feature);

• The hedging is not tied to any one particular product but provided on ageneric basis in order to enable the hedging to apply to renanced debt

going forward.

This uid capital structure permits renancing of the various classes of

debt from a number of sources and minimises execution risk of renancing

the current structure by avoiding the need for further consents or

amendments to the capital documents (in particular with respect to the

ICA). In addition, the bond covenants provide exibility going forward for

the purpose of the payment of dividends if certain leverage requirements

are met.

The transaction also saw the development of certain features addressingthe rights of the bank and bond investors in the capital structure where:

• Enforcement voting is on a euro for euro basis; but

• If the relevant event of default is continuing under the facilities

agreement but not the notes, then the relevant instructing group will

consist of the lenders under the facilities agreement only; and

• There are certain prohibitions on amendments in respect of the terms of

the bonds where they would be stricter than the terms of the facilities

agreement.

These arrangements enshrine the pari passu treatment of the senior

secured debt but preserve the differential terms of the bank debt versus

the bond debt.



Our key restructuring focus areas

> Cash management > Business planning > Interim management / CRO > Stakeholder negotiation > Restructuring targeting > Implementation support,including measuremanagement

> Due diligence > Investments / divestments

STRATEGIC RESTRUCTURING

OPERATIONAL RESTRUCTURING

FINANCIAL RESTRUCTURING

Supported by

Integrated in business plan

COMPANY PROFILERoland Berger Strategy Consultants, founded in 1967, is one of the world’s leadingstrategy consultancies. With 2,700 employees working in 51 offices in 36 countriesworldwide, we generate the majority of our business internationally.

Roland Berger is an independent partnership owned by about 250 Partners. Itsglobal Competence Centres specialise in specific industries or functional issues.We handpick interdisciplinary teams from these Competence Centres to devisetailor-made solutions.

At Roland Berger, we develop customised, creative strategies together with ourclients. Providing support in the implementation phase is particularly importantto us, because that’s how we create real value for our clients. Our approach isbased on the entrepreneurial character and individuality of our consultants – “It’scharacter that creates impact”.

CONSULTING SERVICESWe provide top management and investors / creditors with outstanding restructuringconcepts, having performed more than 2,100 cases: strategic, operational andfinancial restructuring is where we truly excel. In addition, we support the entireimplementation process and ensure that necessary actions are taken quickly.Further topics include structural realignment, liquidity management, insolvencyissues, business planning and interim management.

For corporate excellence projects, we offer advice in strategic positioning, portfoliomanagement, transformation, PMI, process reengineering, cost reduction and

working capital optimisation. Key organisational topics include headquartersorganisation, HR management, change management, shared services, corporategovernance, overhead optimisation and reviewing management structures andprocesses. This process is always heavily supported by our industry experts.

REFERENCESFundamentally restructuring companies, consulting on mergers, acquisitions andfinancing issues, developing strategic concepts and implementing comprehensiveprogrammes as well as optimising organisations and processes – these projectsset the basis for a company’s future.

Our Corporate Performance Competence Centre taps the expertise of RolandBerger Strategy Consultants to support our clients in tackling these key businessissues. This expertise is built on over 40 years of relevant project work and studieswith clients from all industries.

CONTACT Klaus Kremers

SENIOR PARTNER Tel: +44 (0)20 3075 1100Mob: +44 (0)79 6767 4871 +49 (160) 744 3420Fax: +44 (0)20 7224 [email protected]

www.rolandberger.com



C A S E S T U D Y : C E NT R O T H E R MP H O T O V O L T A I C S A G

CASE STUDY: CENTROTHERM

PHOTOVOLTAICS AG

Experience with the new insolvency law in Germany

One of the most prominent ESUG cases to date concerns a global leading

technology and equipment provider covering the entire photovoltaic value

chain. The provider went public in 2007 and has since expanded rapidly,

driven mainly by market growth and acquisitions. In 2011, the company

generated revenues of EUR 700m, with 95% of its sales outside of

Germany and with Asia as its most important region. The company had

approximately 2,000 employees.

In 2012, the market for photovoltaic equipment shrank by approximately

70%. The sudden turmoil in the market triggered a severe drop in the

company's prots and a high cash burn rate by the beginning of Q2/2012.

In light of developments in the photovoltaic industry as a whole, major

banks responded to the company's situation by suspending its credit lines.

The company also faced high risks and nancing needs resulting from

ongoing large-scale projects. Finally, at the beginning of Q3/2012, the

company's trade credit insurance policies were cancelled. At this point,

the board concluded that, even though the company still had EUR 80m

in cash at its disposal, it was not possible to obtain the nancing needed

to take the requisite restructuring actions and survive the crisis that was

affecting the entire photovoltaic industry.

The company led for insolvency in combination with protective shield

proceedings and self-administration (Eigenverwaltung). Its request was

granted by the district court, giving the company a three-month window

in which to further drive restructuring and develop an insolvency plan

showing how creditor claims could best be satised. The district court

named a trustee to supervise self-administration, which was the option

adopted by the company's board and stakeholders.

In the three months that followed, the company developed a restructuring

concept and a bankruptcy plan. The cornerstones of the plan were to

continue operations, focus on the company's core business and remain

as a public company. The plan also envisaged a deferral of payments, a

cut in shares and a debt-to-equity swap. Creditors would own 80% of the

business, and the company would be obliged to sell shares on the best

possible terms and settle creditors' claims out of the proceeds. The plan

was approved by the creditors at the beginning of 2013.

Within the allotted time frame, management was able to stabilize

business operations. No orders were cancelled due to nancial collapse.

Furthermore, the company was able to negotiate with potential new clients

and to actually generate order income. Employees felt reassured by the

safety net procedure It helped them believe in the future of the company.

In addition, the company received debtor-in-possession nancing.Restructuring actions were implemented as planned, which improved the

company's liquidity situation.

The success factors in an insolvency under the new ESUG law are:

1. Make sure that management is both experienced and autonomous

2. Involve creditors early on when applying for self-administration

3. Prepare the certicate required by Section 270b of the German Statute

on Insolvency (InsO) early on and quickly get it agreed/approved

Contacts:Klaus Kremers, Senior Partner

Roland Berger Strategy Consultants

[email protected]

Jan von Schuckmann, CEO

Centrotherm Photovoltaics AG

[email protected]



A B O U T & C O NT A C T S

ROLAND BERGER STRATEGY CONSULTANTS

Klaus Kremers

Partner, London / Berlin

+44 20 3075 1100

[email protected]

Rene Seyger

Partner, Amsterdam

+31 20 7960 620

[email protected]

Bernd Brunke

Partner, Berlin

+49 30 399 27 3527

[email protected]

Uwe Johnen

Partner, Berlin

+49 30 39927 3520

[email protected]

Max Falckenberg

Partner, Düsseldorf

+49 211 43 892 301

[email protected]

Nils Von Kuhlwein

Partner, Düsseldorf

+49 211 43 892 122

[email protected]

Sascha Haghani

Partner, Frankfurt

+49 69 29924 6444

[email protected]

Jorge Delclaux

Partner, Madrid

+34 91 564 7361

[email protected]

Roberto Crapelli

Partner, Milan

+39 2 2950 1235

[email protected]

Uwe Kumm

Partner, Moscow

+7 495 287 92 46

[email protected]

Gerd Sievers

Partner, Munich

+49 89 9230 8543

[email protected]

Emmanuel Bonnaud

Partner, Paris

+33 1 53670 983

[email protected]

Jan Beckemann

Partner, Stockholm

+46 8 410438 – 91

[email protected]

Rupert Petry

Partner, Vienna

+43 1 53602 100

[email protected]

Beatrix Morat

Partner, Zurich

+41 43 336 – 8630

[email protected]

Roland Berger Strategy Consultants, founded in 1967, is one of the

world’s leading strategy consultancies. With roughly 2,700 employees

working in 51 ofces in 36 countries worldwide, we have successful

operations in all major international markets. The s trategy consultancy

is an independent partnership exclusively owned by about 250 Partners.



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