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Market Update February 2015

SPP’s Middle Market Leverage Cash Flow Market At A Glance

Deal Component February ‘15 January ‘15 February ’14

Cash Flow Senior Debt (x EBITDA)

<$7.5MM EBITDA 1.50x-2.00x >$10.0MM EBITDA 2.00x-3.50x >$25.0MM EBITDA 3.00-4.25x

<$7.5MM EBITDA 1.50x-2.00x >$10.0MM EBITDA 2.00x-3.50x >$25.0MM EBITDA 3.00-4.25x

<$7.5MM EBITDA 1.50x-2.50x >$10.0MM EBITDA 2.00x-3.50x >$25.0MM EBITDA 3.00-4.00x

Total Debt Limit (x EBITDA)

<$7.5MM EBITDA 3.00x-4.00x >$10.0MM EBITDA 3.75x-4.50x >$25.0MM EBITDA 4.00x-5.00x

<$7.5MM EBITDA 3.00x-4.00x >$10.0MM EBITDA 3.75x-4.50x >$25.0MM EBITDA 4.00x-5.00x

<$7.5MM EBITDA 3.00x-4.25x >$10.0MM EBITDA 3.75x-5.00x >$25.0MM EBITDA 4.00x-5.75x

Senior Cash Flow Pricing L+3.00%-4.00% (bank) L+4.50%-6.00% (non-bank)

L+3.00%-4.00% (bank) L+4.50%-6.00% (non-bank)

L+3.00%-4.50% (bank) L+4.50%-6.50% (non-bank)

Second Lien Pricing (Avg) <$7.5MM EBITDA L+8.00%-11.00% floating (1.00% floor) >$10.0MM EBITDA L+6.00%-9.00% floating (1.00% floor) >$25.0MM EBITDA L+5.50%-7.50% floating (1.00% floor)

<$7.5MM EBITDA L+8.00%-11.00% floating (1.00% floor) >$10.0MM EBITDA L+6.00%-9.00% floating (1.00% floor) >$25.0MM EBITDA L+5.50%-7.50% floating (1.00% floor)

<$7.5MM EBITDA L+9.00%-12.00% floating (1.00% floor) >$15.0MM EBITDA L+7.00%-9.00% floating (1.00% floor)

Subordinated Debt Pricing <$7.5MM EBITDA 12.0%-14.0% >$10.0MM EBITDA 11.0%-13.0% >$25.0MM EBITDA 11.0%-12.0% Warrants limited to special situations; Second lien may buy down rate to ~9.0%.

<$7.5MM EBITDA 12.0%-14.0% >$10.0MM EBITDA 11.0%-13.0% >$25.0MM EBITDA 11.0%-12.0% Warrants limited to special situations; Second lien may buy down rate to ~9.0%.

<$7.5MM EBITDA 12.0%-15.0% >$10.0MM EBITDA 11.0%-13.0% >$25.0MM EBITDA 11.0%-12.0% Warrants limited to special situatuions; Second Lien may buy down rate to ~10.0%.

Unitranche Pricing <$7.5MM EBITDA L+8.00%-11.00% (1.00% floor) >$10.0MM EBITDA L+6.50%-8.50% (1.00% floor) >$25.0MM EBITDA L+6.00%-7.50% (1.00% floor) Potential for fixed rate with BDC or mezz lender. Most Unitranche lenders allow a small ABL facility outside of the loan.

<$7.5MM EBITDA L+8.00%-11.00% (1.00% floor) >$10.0MM EBITDA L+6.00%-8.00% (1.00% floor) >$25.0MM EBITDA L+5.50%-7.50% (1.00% floor) Potential for fixed rate with BDC or mezz lender. Most Unitranche lenders allow a small ABL facility outside of the loan.

<$7.5MM EBITDA L+ 9.00%-11.00% floating (1.00% floor) >$10.0MM EBITDA L+7.00%-8.00% floating (1.00% floor) Potential for fixed rate with BDC or Mezz lender.

Libor Floors No Libor floor for most bank deals; 1.00% for non-bank deals, second lien, and floating-rate unitranche.

No Libor floor for most bank deals; 1.00% for non-bank deals, second lien, and floating-rate unitranche.

No Libor floor for most bank deals; 1.00% for non-bank deals, second lien, and floating-rate unitranche.

Mezzanine Opt. Prepayment Though it varies with the lender, there are increasingly no “non-call periods” with a market norm of 3.0% in year one, 2.0% in year two, 1.0% in year three, and par thereafter (SBICS at 105 in Year 1 and then decline); for second lien unitranche, there are more aggressive prepayment schedules (2, 1, par).

Though it varies with the lender, there are increasingly no “non-call periods” with a market norm of 3.0% in year one, 2.0% in year two, 1.0% in year three, and par thereafter (SBICS at 105 in Year 1 and then decline); for second lien unitranche, there are more aggressive prepayment schedules (2, 1, par).

Highly negotiated; as competition for deals grows more intense in the final quarter, more investors are willing to go with “no non-call,” i.e.-3.0% in year one, 2.0% in year two, and 1.0% in year three.

Minimum Equity Contribution 25.0%-35.0% total equity (including rollover); minimum 10.0% new cash combined with rollover or seller notes. Focus continues to be more on aggregate credit metrics (Total Debt/EBITDA, etc.) than on the level of equity contribution. “Promote to Independent Sponsors” will differ but fall in the 5.0%-15.0% range with or without a minimum return to common.

25.0%-35.0% total equity (including rollover); minimum 10.0% new cash combined with rollover or seller notes. Focus continues to be more on aggregate credit metrics (Total Debt/EBITDA, etc.) than on the level of equity contribution. “Promote to Independent Sponsors” will differ but fall in the 5.0%-15.0% range with or without a minimum return to common.

30.0%-35.0% total equity (including rollover); minimum 10.0% new cash combined with rollover or seller notes.

Recap Liquidity While recap liquidity remains quite robust, the cast of characters providing recap capital is becoming increasingly divided. Many commercial banks are beginning to back off recaps that: (i) are unsponsored; (ii) exceed the 3.0x SD/4.0x TD-to-EBITDA metric; or (iii) are with issuers less than $10.0 million EBITDA.

Recap activity is increasing as many sponsors continue to “2-Step” closings. Funds close a deal on an expedited basis with legacy banks and sponsor “bridge” capital (generally structured as mezz or preferred), and then within 120 days, refinance and recap both the bridge capital and additional equity. Strong pricing fundamentals across the credit spectrum.

Recap liquidity is abundant with little or no pricing discrimination concerning the use of proceeds. Generally, more aggressive pricing when recap is combined with an accretive use of proceeds such as an acquisition or expansion.

Story Receptivity Market conditions remain on the quiet side, and accordingly, favorable conditions are still in place for refinancing challenged, storied issuers. New High Risk Borrower (“HRB”) guidance from Fed, OCC, and FDIC pushing banks into a less forgiving lending constituency. Luckily, unitranche and non-bank commercial lenders are picking up the slack.

January and February tend to be quiet months in the market and accordingly, story receptivity is at its best. Perfect time to engage those transactions that need to be remediated or simply switch-out lender groups. There is no better time to get a larger, more receptive audience for a challenging credit than the next 90 days.

Lack of market activity typical for this time of year has created significant capacity for difficult or complex structures, storied financings, and re-structuring scenarios. The message to issuers is crystal clear: if the offering is unique, highly structured, challenged, or generally “storied,” there is real value in moving sooner rather than later. Traditionally, by mid-March, deal flow normalizes and much of the investor slack evaporates.

Tone of the Market The tone of the leveraged lending market is markedly different than Q4 of 2014. Internal credit compliance concerns over HRB exposure have commercial banks decidedly pulling back from the more aggressive lending opportunities as they sort out their own implementation of the new guidance on regs. Bank ambivalence is providing cover for non-bank and unitranche lenders to exact slightly higher rates (see Unitranche pricing above). While pricing is still competitive for stronger issuers and “house” accounts, there is a definitive “shift to the right” among leverage lenders.

The market kicks off 2015 with liquidity conditions that are as robust as they ever have been. Cash flow deal pricings are at all time lows and credit metrics are as aggressive as we have seen them in years. Banks will back off where total debt exceeds 5.00x, but most will aggressively bid middle market deals to 4.50x.

While the market is still comparatively quiet, this more a function of seasonality than any secular trends. SPP anecdotal experience suggests that Q1 deal flow will be significantly above 2013.

*Changes from last month in red

I was born by the river in a little tent Oh and just like the river I've been running ever since It's been a long, a long time coming But I know a change gonna come, oh yes it will It's been too hard living but I'm afraid to die Cause I don't know what's up there beyond the sky It's been a long, a long time coming But I know a change gonna come, oh yes it will

"A Change is Gonna Come,” Sam Cooke

A Change is Gonna Come Though the discussion ensues over the timing of the Fed’s inevitable “lift-off” from the current zero interest rate policy, there is little debate over whether or not it is coming. The lesser known, but ostensibly more profound change, is happening right now in the banking community and can be summed up in three letters: “HRB” (i.e.-High Risk Borrower). Every commercial banker in the senior leveraged lending community is wrestling with the ramifications of HRB implementation into current policies and practices. On January 28th, the Fed issued its first policy statement of 2015 by reiterating the ephemeral effects of lower fuel costs in some recent upbeat macroeconomic reports and upgrading its characterization of US economic expansion from a “moderate pace” to a “solid pace.” However, the fed funds target remains at zero to 0.25%, and the Fed reiterated that “even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run." Not surprisingly, the reference to the Fed waiting a “considerable time” for lift-off (after the end of the taper last October) was expunged from the most recent statement. The Fed statement left pundits in the same place they were prior to its issuance, and essentially handicapped the odds of the first rate increase at some point between March and December of 2015; with each new economic report suggesting either a deferral (the disappointing January ISM Manufacturing Index) or an acceleration (the robust January Employment Report). In short, we are back to that strange dichotomy where bad news is good news for interest rates and good news is bad. Below is a quick summation of the key economic releases over the last few weeks:

Consumer Confidence/Retail Sales: Consumer confidence and retail sales have been something of a mixed bag over the course of the last few weeks. The Conference Board’s January Consumer Confidence Index was up sharply, registering a 102.9 (a recovery best) and a significant bump up from December’s 92.6. The present situation component of the index actually surged 12.7 points (the expectations component was also up a hefty 7.9 points). Consumer spending (which accounts for roughly 70% of GDP), however, recorded its biggest decline since 2009 (as reported in the Commerce Department Report on Consumer Spending for December). The Commerce Department Report suggests that consumers are saving excess cash generated by lower fuel and energy costs. Lower consumer spending metrics were reinforced by the January Gallup Self-Reported Consumer Spending Report. Americans’ daily spending averaged $81 per day in January (down $17 from December’s holiday-fueled spending). The report is still higher than the prior January results, but is not solely representative of a trend.

Average Hourly Earnings

Source: FRED

Existing Home Sales

Source: FRED

Retail Sales

Source: FRED

Consumer Confidence Index

Source: Conference Board

$24.75

$21.00

$21.50

$22.00

$22.50

$23.00

$23.50

$24.00

$24.50

$25.00

5,040

0

1,000

2,000

3,000

4,000

5,000

6,000

Th

ou

san

ds

of

Un

its

187,564

145,000

150,000

155,000

160,000

165,000

170,000

175,000

180,000

185,000

190,000

195,000M

illi

on

s o

f Do

llar

s

102.9

0.0

20.0

40.0

60.0

80.0

100.0

120.0

Inflation: If the Fed sees fit to raise rates, it certainly won’t be because of inflationary influences in the economy. To the contrary, in January, the Labor Department reported that the Consumer Price Index declined 0.4% for December (after falling 0.3% in November). Additionally, the all-items index increased only 0.8% before seasonal adjustment during the prior 12 month period. Although the contraction in CPI can be traced to low energy costs (even when excluding food and energy), consumer price inflation slowed after a modest 0.1% rise in November. Analysts had projected a 0.1% gain. With inflation a full 1.0% below the Fed’s target threshold of 2.0%, any pressure on the Fed to increase its forward guidance is, for all practical purposes, nonexistent and improves consumer spending power. Unfortunately, that additional spending power remains untested. For all of 2014, CPI rose only 0.8%, the slowest pace during a period of economic growth in 50 years.

GDP: The first estimate of 2014 Q4 GDP showed that the US economy has cooled since the strong GDP growth in Q2 and Q3 of 2014. The estimate came in at 2.6% (initial estimates were closer to 3.2%) and was a sharp decline from the 5.2% recorded for Q3 2014. On the bright side, Q1 at +2.6% is a very healthy metric compared to Q1 2014, when harsh weather conditions contributed to a -0.3% contraction in GDP. Much of the shortfall was the result of lower government spending. However, a large drag on the growth can be attributed to the foreign trade gap when crude prices dropped approximately 50% in seven months and the US Dollar rallied approximately 25% during the same period.

Manufacturing: If there were one area of concern in the most recent spate of economic releases, it would be the manufacturing sector. Fortunately, the latest ISM Manufacturing Index came in at a respectable 53.5 in January, and marked the 20th consecutive month that it exceeded 50.0 (index numbers above 50.0 typically signal expansion). Unfortunately, the expectation was closer to 54.5, and the January result is down from a reported 55.5 in December (which was down from 57.6 in November and 57.9 in October). In short, while still growing, manufacturing growth continues to slow. The new order component alarmingly slowed substantially in January and came in at 52.9 (dropping from 57.8 in December), which could portend a further weakening in months to come.

Employment: The most recent Employment Reports are among the strongest of the recovery and support the more hawk-oriented of the Fed members, in respect to a midyear liftoff. January non-farm payrolls increased by 257,000 (consensus was closer to 230,000). In addition, December and November were both revised higher by a combined 147,000 (December up to 329,000 and November up to 423,000). Collectively, this represents the best three months of job growth since November of 1997 (1,009,000 non-farm payroll additions). The good news did not stop there; both wages and the civilian participation rate improved in January as well. Hourly wages ticked up by 0.5% in January and wage growth improved by 2.2% over the past 12 months. Additionally, the number hours worked rose by 3.3%, and, when combined with the wage growth improvement, real cash earnings resultantly increased 5.5%. Although the unemployment rate increased to 5.7%, it was for decidedly good reasons. More than 1.05 million people entered the workforce (703,000 after annual population adjustments), the effect of which pushed the civilian participation rate up from 62.7% to 62.9%. However, there is still room for improvement; the participation rate was approximately 66.0% prior to the recession.

Housing: New Home Sales jumped 11.6% in December to a 481,000 annual rate and Housing Starts rose 4.4% (reversing a 1.6% drop in November). Case-Schiller also reported that the median price rose

CPI and Core CPI

Source: BLS

Quarterly Change in Real GDP

Source: FRED

ISM Manufacturing and Non-Manufacturing Indices

Source: FRED

Unemployment Rate

Source: BLS

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

12

-Mo

nth

Per

cen

t C

han

ge CPI

Core CPI

2.6%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

0

10

20

30

40

50

60

70

Manufacturing

Non-Manufacturing

5.7%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2.2% (to approximately $298,000) and drove the year-on-year housing appreciation to 8.2%. Existing Homes Sales (the largest component of the residential housing market) rose 2.4% in December (annual sales are up 3.5% over the prior year).

In summary, there is certainly enough evidence of economic expansion to support a lift-off as early as June, but with practically no inflationary pressure and some rather significant warning signs on the horizon (including decreasing growth rates in GDP and manufacturing, an increasingly fragile Eurozone political and economic situation, and continuing dysfunction in the energy sector). A strong dollar would only be enhanced by a rate increase (which translates into a corresponding growth in the trade gap). There is more than ample support for the Fed to hold off until later in the year. Although, if they don’t, a change is gonna come.

The Private Market: Introducing HRB, the new HLT In March of 2013, the Fed, the OCC, and FDIC first published the Interagency Guidance in Leverage Lending to provide banks guidance “regarding sound practices for leveraged finance activities” and to assure that “lending activities do not heighten risk in the banking system or the broader financial system through the origination and distribution of poorly underwritten and low-quality loans.” The March 2013 guidance was the first post-recession guidance for the banking community (the last one was issued in 2001). At the time, many market spectators expected greater bank scrutiny for leveraged credits, primarily for enterprise value (cash flow) loans. The SPP Market Update has highlighted guidance on many occasions that predicted that banks would be playing a smaller part in the leveraged lending community, especially for middle market issuers. Conventional wisdom dictates that banks will inevitably shy away from highly-leveraged transactions (“HLTs”). Reality, however, does not always match expectation. The combination of low rates, a dearth of new deal activity, and increasingly intense competition for assets resulted in more aggressive lending practices (i.e.-covenant-light deals, generous EBITDA adjustments, and increasing tolerance for higher debt multiples). In Q4 of 2014, SPP published senior debt and total debt leverage ratios that maxed out at approximately 3.5x and 5.0x, respectively, for issuers with at least $10.0 million of LTM EBITDA. Although covenant-light structures have always been an exception for the middle market, competition for deal flow often relegated senior bank lenders to a de minimis two covenant deal structure (Fixed Charge and TD/EBITDA). That may finally be changing. On November 7th, the three agencies released the Frequently Asked Questions (“FAQs”), relating to the earlier March 2013 Guidance and the Shared National Credit (“SNC”) Program Review (which gives a particular focus to leveraged loans). While there are a number of legal and regulatory issues examined in the SNC Program Review and the FAQs, there are certain caveats that will impact leveraged borrowers. Accordingly, the new acronym that is dominating the discussion in credit committees throughout the country is “HRB” (High Risk Borrowers). While no single debt trait will result in an HRB designation, an HRB generally has several recognizable characteristics:

Leverage is incurred as the result of an event such as a buy-out, acquisition, or capital distribution (recapitalization);

Leverage exceeds 3.0x SD/EBITDA and 4.0x TD/EBITDA; The lender would be recognized in its sector as a highly leveraged

credit (from debt-to-net worth or capacity to amortize at least 50% of its debt over the life of a deal); and

The post-closing leverage exceeds industry norms by debt ratios or industry standards.

As a general proposition, ABL loans are exempt from HRB status if they are secured by tangible collateral (AR, Inventory, Real Estate, and PP&E).

Labor Force Participation Rate

Source: BLS

New One Family Homes Sold

Source: FRED

10-Year Treasury Constant Maturity Rate

Source: FRED

Case-Shiller 20-City Home Price Index

Source: FRED

62.9%

61.5%

62.0%

62.5%

63.0%

63.5%

64.0%

64.5%

65.0%

65.5%

481

0

100

200

300

400

500

600

Th

ou

san

ds

of

Un

its

2.0%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

172.67

0

20

40

60

80

100

120

140

160

180

200

Ind

ex (

Jan

. 2

00

0 =

10

0)

However, if the ABL structure is part of a large, highly leveraged debt structure, it may constitute an HRB. An HRB designation does not rule out a bank’s capacity to book the loan, but the oversight agencies will scrutinize these assets as “non-pass assets” that are “inconsistent with safe and sound lending standards and risk management criteria outlined in the guidance.” SPP anticipates that most commercial banks will loathe underwriting HRB deals and likely limit HRB exposure to preferred clients or situations that generate substantial fee income with the capacity to sell down exposure. As one credit committee officer commented, “Unless you want the examiners living with you for the foreseeable future, you stay away from HRBs.” There is presently more confusion than policy in the banking community, and perhaps even a “chilling effect” on booking anything that seems like a highly levered credit. In a recent recapitalization SPP brought to market, the fact that the issuer would have a negative post-closing net worth was enough to make the credit ineligible to at least two institutions. Luckily, that was not a completely unanimous market consensus, but the example illustrates that there is still an abundance of uncertainty in the banking community.

SPP Tracked Market Activity

Increased avoidance of HRBs has indirectly impacted unitranche lending as pricing for credits with high leverage has become slightly less competitive. Although it is still popular opinion that the Fed may implement changes in the near future and interest rates may soon rise, deal and exit activity levels have revisited pre-recession levels. Despite an evasion of HRBs and signs of a change to come, the lending community should be excited that mergers and acquisitions actually surpassed previous transaction (and pre-recession) highs. According to the Merrill Datasite January 2015 Monthly M&A Insider, the total number of 2014 deals was more than the previous record in 2007 and “Private equity exits also had an unparalleled year as both the volume and value of these deals topped prior records.”

Despite an ever-evolving market environment, the lending community should remain optimistic about the progression of activity that has continued into January 2015. SPP has tracked 242 total deals (which are all PE-backed and US-headquartered) in January 2015; the total rivals figures from some of the hottest months of activity last summer. The total deal count in the past twelve months has exceeded figures from the previous two years by over 25%. SPP also echoes the Merrill Datasite exit information as exit activity was more than 44% higher than the previous January 2014 last-twelve-month period. Additionally, January 2015 totaled a robust 98 exits. In the spirit of February’s romantic holiday, recent market trends are like a box of chocolates, you may not know what you’re going to get, but you can have a fairly good inclination.

Please feel free to call any of the professionals at SPP Capital to discuss a particular financing need, amendment or restructuring situation, or just to get a little more color on the market. You don’t need an imminent or market-ready deal to call us. Our hope is that you use SPP as your go-to resource for any information, analysis, and review of potential transactions.

Stefan Shaffer Managing Partner (212) 455-4502 DISCLAIMER: The "SPP Leveraged Cash Flow Market At-A-Glance" and supporting commentary is derived by the anecdotal experience of SPP Capital Partners, LLC, its specific transactions, discussion with issuers, lenders and investors consistent with its standard operating practices. Any empirical data specifically derived by third parties, or intellectual property or opinions of third parties are expressly attributed when utilized. The factual information provided has been obtained from sources believed to be reliable, but is not guaranteed as to accuracy or completeness. All data, facts, tables or analyses provided by Governmental or other regulatory bodies are deemed to be in the public domain and not otherwise expressly attributed herein. SPP Capital Partners, LLC is a member of FINRA and SIPC. This information represents the opinion of SPP Capital and is not intended to be a forecast of future events, a guarantee of future results or investment advice. It is not intended to provide specific advice or to be construed as an offering of securities or recommendation to invest.

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January Deal Count

Source: Pitchbook

January Exit Activity

Source: Pitchbook

January LTM Deal Count

Source: Pitchbook

January LTM Exit Activity

Source: Pitchbook

-

50

100

150

200

250

300

January 2013 January 2014 January 2015

Total Deals

<500M

<250M

-

20

40

60

80

100

120

January 2013 January 2014 January 2015

Total Exits

<500M

<250M

-

500

1,000

1,500

2,000

2,500

3,000

Jan LTM 2013 Jan LTM 2014 Jan LTM 2015

Total Deals

<500M

<250M

-

200

400

600

800

1,000

1,200

1,400

Jan LTM 2013 Jan LTM 2014 Jan LTM 2015

Total Exits

<500M

<250M

SUPPORTING DATA Historical Senior Debt Cash Flow (x EBITDA) Historical Total Debt Limit (x EBITDA)

Source: SPP’s “MIDDLE MARKET LEVERAGE CASH FLOW MARKET AT A GLANCE” Source: SPP’s “MIDDLE MARKET LEVERAGE CASH FLOW MARKET AT A GLANCE”

Historical Senior Cash Flow Pricing (Bank) Historical Senior Cash Flow Pricing (Non-Bank)

Source: SPP’s “MIDDLE MARKET LEVERAGE CASH FLOW MARKET AT A GLANCE” Source: SPP’s “MIDDLE MARKET LEVERAGE CASH FLOW MARKET AT A GLANCE”

Historical Second Lien Pricing Historical Subordinated Debt Pricing

Source: SPP’s “MIDDLE MARKET LEVERAGE CASH FLOW MARKET AT A GLANCE” Source: SPP’s “MIDDLE MARKET LEVERAGE CASH FLOW MARKET AT A GLANCE”

Historical Minimum Equity Contribution Secondary High Yield Pricing

Source: SPP’s “MIDDLE MARKET LEVERAGE CASH FLOW MARKET AT A GLANCE” Source: Piper Jaffray Debt Capital Markets Update

0.00x

1.00x

2.00x

3.00x

4.00x

5.00x

6.00x

7.00x

< $7.5MM EBITDA > $10MM EBITDA > $25MM EBITDA

0.00x

1.00x

2.00x

3.00x

4.00x

5.00x

6.00x

7.00x

< $7.5MM EBITDA > $10MM EBITDA > $25MM EBITDA

0 bps

100 bps

200 bps

300 bps

400 bps

500 bps

600 bps

700 bps

Bank Lower Bound Bank Upper Bound

0 bps

100 bps

200 bps

300 bps

400 bps

500 bps

600 bps

700 bps

Non-Bank Lower Bound Non-Bank Upper Bound

0%

3%

6%

9%

12%

15%

18%

Lower Bound Upper Bound

LIBOR Floor Lower Bound LIBOR Floor Upper Bound

0%

3%

6%

9%

12%

15%

<$7.5MM EBITDA >10MM EBITDA > $25MM EBITDA

0%

10%

20%

30%

40%

50%

60%

Lower Bound Upper Bound

85.0

90.0

95.0

100.0

105.0

110.0

Secondary High Yield Pricing SPP Value Inflection Point