Credit markets update KPMG Corporate Finance LLC Insights Q2 – 2019
Credit marketsupdateKPMG Corporate Finance LLC Insights
Q2 – 2019
Economic activity in Q2 2019 GDP Growth - annualized change (%)(1,2)
Trends in the credit markets
Leveraged loan volume declined. Volume
decreased by 37% to $239 billion in
H1’2019 volume, compared with $372
billion for the same period last year.
High yield volume increased. Volume
increased by 19% to $132 billion in Q2’2019
from $111 billion for the same period
last year.
Key observations:
(1) Q2’2019 estimates expected to be released by [____] on [date].
(2) Sources: Capital IQ, Federal Reserve Bank of St. Louis LCD Quarterly Leveraged Lending Review: 2Q 2019, and Interactive High Yield Report 2Q 2019
$157
$77
$236
$377
$466
$607
$528
$423
$478
$652$620
$372
$239
$0B
$140B
$280B
$420B
$560B
$700B
Institutional Pro Rata
$68
$164
$287
$218
$345
$322$310
$262
$229
$277
$169
$111$132
$0B
$80B
$160B
$240B
$320B
$400B
Secured Unsecured
U.S. economic growth remains strong.
This is highlighted by Q1’2019 GDP growth
of 3.1%. However, a potential downward
revision of consumer spending data could
suggest that the GDP growth momentum
will be difficult to maintain.(1)
— Slowing global growth and weak
inflation are also clouding the outlook
for the rest of the year, prompting the
U.S. Federal Reserve to contemplate a
reduction in short-term interest rates in
the months ahead.
— The decline in yields reflects investor
expectations that a recession may be
looming, and that central banks will
continue to lower rates to counter an
economic downturn.
Loan volume was significantly lower in
H1’2019. This was driven by (a) decline in
buyout activity as valuations are relatively
high; and (b) investors expecting further
rate declines, causing a capital shift from
loans (float rate) to high yield bonds (fixed
rate).
Borrowers are motivated to issue bonds
to lock in low rates, given the continuing
decline in yields.
Competition among lenders is creating
an optimal issuance environment for
borrowers in terms of lower rates, higher
leverage levels, and more favorable
covenants.
New issue leveraged loan volume – annual
($bn)(2)
High Yield Bond Issuance – Annual ($bn) (2)
2.00%
1.66%
0.49%
(6.0%)
(1.0%)
4.0%
9.0%
Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19
10-Years Treasury CPI PPI-Finished Goods
CPI, PPI and 10-YR Treasury(2)
2.0%1.9%
2.2%2.0%
2.3%2.1%
3.2%
3.5%
2.5%
3.5%
2.9%
1.1%
3.1%
2.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2016 2017 2018 2019
©2019 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability
partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
LIBOR is set to retire and banks need a new rate benchmark
In light of the news that the London interbank offer rate (LIBOR) will end by the end of 2021, there is an intense
focus on replacing it. Across the world, regulators are suggesting alternative rate benchmarks, and in the United
States, the SEC has provided guidance as well. What’s common about the new recommended rate benchmarks is
their use of actual transactions as a benchmark rather than survey data which served as the foundation for LIBOR.
Regulators hope that a more factual approach can prevent rate manipulation.
In the United States, the Secured Overnight Finance Rate (SOFR) has become the recommended option, but there
is some concern about the stability of this rate causing some to wonder if multiple benchmarks will be needed to
accurately set rates moving forward. Another option, the Sterling Overnight Interbank Average (SONIA), which uses
overnight risk-free rates that are compounded in arrears, is also viewed in a positive light by many regulators.
With rate uncertainty looming in the future, banks and borrowers can be proactive today in order to avert future
challenges around rates.
Floating rates present challenges
The elimination of LIBOR leaves the interest rate charged on floating rates in a state of uncertainty. Standard loan
documents often do not address what happens in the event LIBOR becomes unavailable, which could result in
confusion for borrowers and lenders. And when they do address the issue, prime rate is used in lieu of LIBOR,
frequently not adjusting the interest rate spread. As a result the borrower will likely face a higher rate.
Best practices for addressing LIBOR in standard loan documents
Loan documents should identify a replacement benchmark for when LIBOR becomes unavailable, and provide an
adjustment of the interest rate spread based on the difference between LIBOR and the replacement benchmark.
This approach will maintain the interest rate both the borrower and lender intended on initially.
Next steps for borrowers and lenders
Borrowers and lenders should review their loan documents (including any interest rate swap agreements) to
determine which loans utilize LIBOR as a benchmark. For loans that use LIBOR as a benchmark:
1. Determine if they include objective triggers for switching to a replacement benchmark.
2. If they do not, identify an appropriate replacement benchmark.
3. Adjust the interest rate spread to maintain the parties’ intended rate. If these provisions are not included, the
parties should amend the loan documents accordingly.
Whether it's a new or existing loan agreement, borrowers should be taking the appropriate steps to address the
retirement of LIBOR. It is important to consult with your advisors to conduct an assessment of the financing
situation and a full review of the agreements - to address potential issues down the road.
What’s new in the credit markets:
©2019 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability
partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
$157$77
$236
$377
$466
$607$528
$423$478
$652 $620
$372
$239
$0B
$140B
$280B
$420B
$560B
$700B
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19
New Issue Leveraged Loan Volume - Annual ($bn)
Institutional Pro Rata
Refinancing37%
M&A33%
LBO16%
Recap6%
Other8%
Leveraged Loan Issuance by Purpose - 1H'18
Leveraged Loans
Total Volume: $372B Total Volume: $239B
Source: Standard & Poor | Leveraged Commentary & Data.
$3$3 $8
$57
$98
$262 $237$178
$245
$375 $370
$223$116
81%79%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
$0B
$80B
$160B
$240B
$320B
$400B
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19
New-Issue Cov-Lite Loans ($bn)
Volume % of Institutional
5544
11 16 16 1827
43
6654
72
141
120
5362
115
88
126137
189
164
127127
168
159
134
67
94
140
113
7491
128
141
119
210
166
145131
170
202
120119
131
108
$0B
$44B
$88B
$132B
$176B
$220B
2Q
'08
3Q
'08
4Q
'08
1Q
'09
2Q
'09
3Q
'09
4Q
'09
1Q
'10
2Q
'10
3Q
'10
4Q
'10
1Q
'11
2Q
'11
3Q
'11
4Q
'11
1Q
'12
2Q
'12
3Q
'12
4Q
'12
1Q
'13
2Q
'13
3Q
'13
4Q
'13
1Q
'14
2Q
'14
3Q
'14
4Q
'14
1Q
'15
2Q
'15
3Q
'15
4Q
'15
1Q
'16
2Q
'16
3Q
'16
4Q
'16
1Q
'17
2Q
'17
3Q
'17
4Q
'17
1Q
'18
2Q
'18
3Q
'18
4Q
'18
1Q
'19
2Q
'19
New Issue Leveraged Loan Volume - Quarterly ($bn)
Institutional Pro Rata
Refinancing28%
M&A21%LBO
22%
Recap5%
Other24%
Leveraged Loan Issuance by Purpose - 1H'19
©2019 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability
partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
Leveraged Loans (continued)
Source: Standard & Poor | Leveraged Commentary & Data.
223
286
L+100
L+170
L+240
L+310
L+380
L+450
2Q
'08
3Q
'08
4Q
'08
1Q
'09
2Q
'09
3Q
'09
4Q
'09
1Q
'10
2Q
'10
3Q
'10
4Q
'10
1Q
'11
2Q
'11
3Q
'11
4Q
'11
1Q
'12
2Q
'12
3Q
'12
4Q
'12
1Q
'13
2Q
'13
3Q
'13
4Q
'13
1Q
'14
2Q
'14
3Q
'14
4Q
'14
1Q
'15
2Q
'15
3Q
'15
4Q
'15
1Q
'16
2Q
'16
3Q
'16
4Q
'16
1Q
'17
2Q
'17
3Q
'17
4Q
'17
1Q
'18
2Q
'18
3Q
'18
4Q
'18
1Q
'19
2Q
'19
New Issue First Lien Spreads BB/BB- - Quarterly
Pro Rata Institutional
389
395
L+150
L+230
L+310
L+390
L+470
L+550
2Q
'08
3Q
'08
4Q
'08
1Q
'09
2Q
'09
3Q
'09
4Q
'09
1Q
'10
2Q
'10
3Q
'10
4Q
'10
1Q
'11
2Q
'11
3Q
'11
4Q
'11
1Q
'12
2Q
'12
3Q
'12
4Q
'12
1Q
'13
2Q
'13
3Q
'13
4Q
'13
1Q
'14
2Q
'14
3Q
'14
4Q
'14
1Q
'15
2Q
'15
3Q
'15
4Q
'15
1Q
'16
2Q
'16
3Q
'16
4Q
'16
1Q
'17
2Q
'17
3Q
'17
4Q
'17
1Q
'18
2Q
'18
3Q
'18
4Q
'18
1Q
'19
2Q
'19
New Issue First Lien Spreads B+/B - Quarterly
Pro Rata Institutional
©2019 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability
partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
LBO57%Refinancing
24%
Recap17%
M&A2%
Total New-Issue Volume by Purpose - 1H'18
LBO42%
Refinancing27%
Recap6%
M&A17%
Corp Purpose8%
Total New-Issue Volume by Purpose - 1H'19
Leveraged Loans – Middle Market
Total Volume: $4.1BTotal Volume: $5.3B
Source: Standard & Poor | Leveraged Commentary & Data.
Note: Middle market refers to companies with EBITDA of $50 million or less.
$8
$5
$11
$14
$10
$13
$15
$10 $9
$14
$11
$5$4
$0B
$4B
$8B
$12B
$16B
$20B
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19
Leveraged Loan Volume- Annual ($bn)
Institutional Pro Rata
$2
$1
$0$1 $1 $1
$2 $2
$4
$2
$3
$5$5
$3
$2$2
$3 $3$3
$3 $4
$3
$4
$3
$4
$5
$3
$2
$4
$3
$1
$2
$2
$1
$4$4
$3
$5
$3$3
$2
$3
$2
$1
$3
$0B
$2B
$4B
$6B
2Q
'08
3Q
'08
4Q
'08
1Q
'09
2Q
'09
3Q
'09
4Q
'09
1Q
'10
2Q
'10
3Q
'10
4Q
'10
1Q
'11
2Q
'11
3Q
'11
4Q
'11
1Q
'12
2Q
'12
3Q
'12
4Q
'12
1Q
'13
2Q
'13
3Q
'13
4Q
'13
1Q
'14
2Q
'14
3Q
'14
4Q
'14
1Q
'15
2Q
'15
3Q
'15
4Q
'15
1Q
'16
2Q
'16
3Q
'16
4Q
'16
1Q
'17
2Q
'17
3Q
'17
4Q
'17
1Q
'18
2Q
'18
3Q
'18
4Q
'18
1Q
'19
2Q
'19
Leveraged Loan Volume- Quarterly ($bn)
Institutional Pro Rata
©2019 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability
partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
Second-Lien Loans
Source: Standard & Poor | Leveraged Commentary & Data.
$3$2
$5$7
$18
$29
$37
$11 $10
$25$24
$16
$4
0
50
100
150
200
250
$0B
$8B
$16B
$24B
$32B
$40B
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19
Num
ber
of D
eals
Volu
me (
$bn)
Second-Lien Loan New-Issue Volume - Annual ($bn)
Volume ($bn) # of Deals
$1 $1$0 $0 $0
$1$0 $1
$1$0
$3
$1
$4
$1$0
$4$3
$4
$6$5
$11
$6 $7
$12$13
$8
$4
$2$3
$4
$1 $1$1
$3$5
$7
$5
$10
$4
$6
$10
$4$3
$2 $2
$0B
$3B
$6B
$9B
$12B
$15B
2Q
'08
3Q
'08
4Q
'08
1Q
'09
2Q
'09
3Q
'09
4Q
'09
1Q
'10
2Q
'10
3Q
'10
4Q
'10
1Q
'11
2Q
'11
3Q
'11
4Q
'11
1Q
'12
2Q
'12
3Q
'12
4Q
'12
1Q
'13
2Q
'13
3Q
'13
4Q
'13
1Q
'14
2Q
'14
3Q
'14
4Q
'14
1Q
'15
2Q
'15
3Q
'15
4Q
'15
1Q
'16
2Q
'16
3Q
'16
4Q
'16
1Q
'17
2Q
'17
3Q
'17
4Q
'17
1Q
'18
2Q
'18
3Q
'18
4Q
'18
1Q
'19
2Q
'19
Second Lien Loan New-Issue Volume - Quarterly ($bn)
1,069
1,480
1,062 1,085 1,064
928 898
996 968
829 821 814
942
L+0
L+400
L+800
L+1200
L+1600
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19
Average New Issue Second-Lien Spreads
LIBOR Floor Upfront Fee Spread
©2019 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability
partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
LBO Summary
Source: Standard & Poor | Leveraged Commentary & Data.
(1) Middle market refers to companies with EBITDA of $50 million or less.
0
12
24
36
48
60
$0B
$26B
$52B
$78B
$104B
$130B
2Q
'08
3Q
'08
4Q
'08
1Q
'09
2Q
'09
3Q
'09
4Q
'09
1Q
'10
2Q
'10
3Q
'10
4Q
'10
1Q
'11
2Q
'11
3Q
'11
4Q
'11
1Q
'12
2Q
'12
3Q
'12
4Q
'12
1Q
'13
2Q
'13
3Q
'13
4Q
'13
1Q
'14
2Q
'14
3Q
'14
4Q
'14
1Q
'15
2Q
'15
3Q
'15
4Q
'15
1Q
'16
2Q
'16
3Q
'16
4Q
'16
1Q
'17
2Q
'17
3Q
'17
4Q
'17
1Q
'18
2Q
'18
3Q
'18
4Q
'18
1Q
'19
2Q
'19
Num
ber
of D
eals
Volu
me (
$bn)
LBO Transaction Volume - Quarterly ($bn)
LBO Volume Number of Deals
9.1x
7.7x
8.5x 8.8x 8.7x 8.8x
9.7x10.3x 10.0x
10.6x 10.6x9.8x
11.2x
0.0x
2.4x
4.8x
7.2x
9.6x
12.0x
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19
Average Purchase Price Multiple - All LBOs
Senior Debt/EBITDA Sub Debt/EBITDA Equity/EBITDA Others
8.3x
6.6x
8.4x 8.2x 7.9x8.8x
9.6x
10.7x10.2x
11.6x
10.6x 10.6x
12.6x
0.0x
2.8x
5.6x
8.4x
11.2x
14.0x
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19
Average Purchase Price Multiple – Middle Market LBOs(1)
Senior Debt/EBITDA Sub Debt/EBITDA Equity/EBITDA Others
©2019 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability
partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
LBO Summary (continued)
Source: Standard & Poor | Leveraged Commentary & Data.
(1)Large corporate refers to companies with EBITDA of more than $50 million.
(2) Middle market refers to companies with EBITDA of $50 million or less.
(3) LTM 1Q’19 average debt multiple of middle-market LBO loans.
4.9x
4.0x
4.7x5.2x 5.3x 5.4x
5.8x 5.7x 5.5x5.8x 5.9x 5.7x
6.1x
0.0x
2.0x
4.0x
6.0x
8.0x
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19
Average Debt Multiples of Large Corporate LBO Loans(1)
FLD/EBITDA SLD/EBITDA Other Sr. Debt/EBITDA Sub Debt/EBITDA
4.5x
3.3x
4.2x 4.3x4.5x
4.8x
5.3x 5.3x 5.3x5.5x 5.5x 5.4x
5.7x
0.0x
1.2x
2.4x
3.6x
4.8x
6.0x
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19
Average Debt Multiples of Middle-Market LBO Loans(2)
FLD/EBITDA SLD/EBITDA Other Sr. Debt/EBITDA Sub Debt/EBITDA
38.9%
45.7%
41.4%
38.0% 37.7%35.6%
37.0%
40.5% 40.8%42.0%
40.5%39.2%
43.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19
Equity Contribution - All LBOs
©2019 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability
partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
$0.4
$0.3
$2.8$2.5
$0.8
$3.0
$1.8
$1.0
$1.5
$0.5
$1.4
$0.6
$0.2
$0.0B
$0.7B
$1.4B
$2.1B
$2.8B
$3.5B
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
1H
'18
1H
'19
Middle-Market Dividend Related Volume- Annual ($bn)
Institutional Pro Rata
Dividend Recapitalization
Source: Standard & Poor | Leveraged Commentary & Data.
$3 $2
$38 $36
$56
$70
$53
$38
$50
$56
$41
$31
$16
$0B
$20B
$40B
$60B
$80B
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19
Dividend or Stock Repurchase Loan Volume- Annual ($bn)
Institutional Pro Rata
$2$0 $0 $0 $0 $2 $1
$7$5
$8
$19$17
$16
$2 $1
$16
$8
$16$16
$18
$27
$14
$11
$17$18
$13
$4
$7
$15$13
$3$0
$14$13
$22
$20
$7
$15$14
$14
$17
$2
$7 $7$9
$0B
$6B
$12B
$18B
$24B
$30B
2Q
'08
3Q
'08
4Q
'08
1Q
'09
2Q
'09
3Q
'09
4Q
'09
1Q
'10
2Q
'10
3Q
'10
4Q
'10
1Q
'11
2Q
'11
3Q
'11
4Q
'11
1Q
'12
2Q
'12
3Q
'12
4Q
'12
1Q
'13
2Q
'13
3Q
'13
4Q
'13
1Q
'14
2Q
'14
3Q
'14
4Q
'14
1Q
'15
2Q
'15
3Q
'15
4Q
'15
1Q
'16
2Q
'16
3Q
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4Q
'16
1Q
'17
2Q
'17
3Q
'17
4Q
'17
1Q
'18
2Q
'18
3Q
'18
4Q
'18
1Q
'19
2Q
'19
Dividend or Stock Repurchase Loan Volume- Quarterly ($bn)
Institutional Pro Rata
$0.0B
$0.3B
$0.6B
$0.9B
$1.2B
$1.5B
Middle-Market Dividend Related Volume- Quarterly ($bn)
Institutional Pro Rata
©2019 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability
partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
High Yield Bonds
Source: Standard & Poor | Leveraged Commentary & Data.
$68
$164
$287
$218
$345$322
$310
$262
$229
$277
$169
$111$132
$0B
$80B
$160B
$240B
$320B
$400B
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19
High Yield Bond Issuance – Annual ($bn)
Secured Unsecured Subordinated
$0B
$22B
$44B
$66B
$88B
$110B
2Q
'08
4Q
'08
2Q
'09
4Q
'09
2Q
'10
4Q
'10
2Q
'11
4Q
'11
2Q
'12
4Q
'12
2Q
'13
4Q
'13
2Q
'14
4Q
'14
2Q
'15
4Q
'15
2Q
'16
4Q
'16
2Q
'17
4Q
'17
2Q
'18
4Q
'18
2Q
'19
High Yield Bond Issuance – Quarterly ($bn)
Secured Unsecured Subordinated
6.8%
0.0%
2.8%
5.6%
8.4%
11.2%
14.0%
2Q
'08
4Q
'08
2Q
'09
4Q
'09
2Q
'10
4Q
'10
2Q
'11
4Q
'11
2Q
'12
4Q
'12
2Q
'13
4Q
'13
2Q
'14
4Q
'14
2Q
'15
4Q
'15
2Q
'16
4Q
'16
2Q
'17
4Q
'17
2Q
'18
4Q
'18
2Q
'19
New issue High yield Bond yield to Maturity
4.4%13.4% 10.2% 6.8% 10.3% 14.1% 9.9% 9.9% 7.1% 6.0% 7.2% 7.9%2.4%
5.9% 12.5% 15.3%15.6%
15.7% 22.3%29.8%
14.0% 16.2% 15.3% 12.5%
42.9%4.8% 7.1%
5.5%5.2% 3.8%
3.3%
5.8% 4.0% 6.9%5.7%
42.0%
75.5% 62.8%54.4%
58.1% 50.3% 48.5%
46.3%
63.7% 64.9% 61.7% 67.5%
8.3% 5.2%9.8%
16.5%10.5% 14.7% 15.5%
10.6% 9.4% 8.9% 8.9% 6.5%
0%
20%
40%
60%
80%
100%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD'19
High Yield Bond Issuance by Purpose
Corp Purpose M&A/Acquisition M&A/LBO Refinancing Others
©2019 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability
partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
Funds Flows
Source: Standard & Poor | Leveraged Commentary & Data.
(1)Prime Funds Flows represent funds flows from loan participation mutual funds.
(1)
($5)
($9)
($2)
$8
($4)
$6
$2
($6)
($1) ($1)
($7)
($20)
($4)
$1
($20)
$12
$0
($24B)
($12B)
$0B
$12B
2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 4Q'18 1Q'19 2Q'19
Flows into High Yield Bond Funds - Quarterly ($bn)
$29
$19 $20
$8
$18 $20$26
$17
$35$30
$36 $32$37
$32$28 $29
$36
($2) ($7)($13)
($8) ($1)
$3
$14
$16
$4
($1) ($5)
$4
$8
$4
($23)
($11) ($10)
($25B)
($11B)
$3B
$17B
$31B
$45B
2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 4Q'18 1Q'19 2Q'19
Flows into Leveraged Loan Funds - Quarterly ($bn)
CLO Issuance Prime Fund Flows
$12
$54
$83
$124
$99
$72
$118
$129
$67 $65
0
50
100
150
200
250
300
$0B
$25B
$50B
$75B
$100B
$125B
$150B
2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19
Annual CLO Volume ($bn)
Volume Count
©2019 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability
partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
Funds Flows (continued)
Source: Standard & Poor | Leveraged Commentary & Data.
137
0
40
80
120
160
200
2Q
'14
3Q
'14
4Q
'14
1Q
'15
2Q
'15
3Q
'15
4Q
'15
1Q
'16
2Q
'16
3Q
'16
4Q
'16
1Q
'17
2Q
'17
3Q
'17
4Q
'17
1Q
'18
2Q
'18
3Q
'18
4Q
'18
1Q
'19
2Q
'19
Lib
or
+
U.S. CLO Spreads
0.92x
0.81x0.83x
0.86x0.88x
0.94x 0.94x
1.00x0.97x 0.95x
0.91x
0.86x0.90x 0.91x
0.78x
0.91x 0.91x
0.00x
0.30x
0.60x
0.90x
1.20x
Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19
Public BDCs - Price to Book Value Multiple - Quarterly
©2019 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability
partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
Distress and Defaults
Source: Standard & Poor | Leveraged Commentary & Data.
$22
$57
$25
$12 $12
$8
$24
$31
$14
$10
$15 $13
$5
$B
$12B
$24B
$36B
$48B
$60B
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19
Par Amount of Leveraged Loans in Payment Default or Bankruptcy ($bn)
3.7%
10.7%
5.0%
2.3% 2.2%
1.2%
2.9%3.5%
1.6%1.1% 1.3% 1.3%
0.4%
0.0%
2.4%
4.8%
7.2%
9.6%
12.0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19
Percent of Outstanding Leveraged Loans in Default or Bankruptcy
44
74
29
139
129
13 1412
1513
11
0
16
32
48
64
80
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H'18 1H'19
Number of Issuers in Payment Default or Bankruptcy
©2019 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability
partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
Distress and Defaults (continued)
Source: Standard & Poor | Leveraged Commentary & Data.
2.6%
0.0%
4.0%
8.0%
12.0%
16.0%
20.0%
Percent of First-Lien Loans with Secondary Spreads of L+1000 or HigherBy Amount Outstanding
3.4%
0.0%
4.0%
8.0%
12.0%
16.0%
20.0%
Percent of First-Lien Loans with Secondary Spreads of L+1000 or HigherBy Number of Facilities
©2019 KPMG Corporate Finance LLC, a Delaware limited liability company. Member FINRA and SIPC. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability
partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
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