Norway Ship & Offshore Finance Forum Presented by Pål Rokke, Citi Country Officer Norway Marine Money, Oslo 4 th June 2015 Citi Institutional Clients Group
Norway Ship & Offshore Finance Forum Presented by Pål Rokke, Citi Country Officer Norway
Marine Money, Oslo
4th June 2015
Citi Institutional Clients Group
Table of Contents
Overview 1
Loan Market 3
Export Credit Agency 6
High Yield Market 8
Equity Capital Markets 12
Conclusion 15
Overview
Global Shipping & Offshore Market Increased regulatory pressure and the exit of certain institutions from the market has lead to a constrain on the availability of traditional bank financing.
Alternative sources of funding (namely debt / equity capital markets and export credit agency financings) have therefore become increasingly important to the shipping and offshore industry
Key Credit Considerations for Lenders in the Shipping / Offshore Space
Overall fleet collateral value / loan-to-value i
Committed revenue backlog and contract tenor ii
Vessel quality, type and age iii
Management’s operating history iv
Market outlook for vessel supply & demand v
Existing Capital Structure (i.e. receipt of ship mortgages, limitations on additional debt, liens etc.) vi
1 Overview
Syndicated Bank Facility Export Credit Agency Financing Senior Secured Notes / Institutional Term Loan Unsecured Notes
Description • Senior secured bank funded term loan facility
• Senior Secured ECA financing (may include commercial bank funded tranches)
• Secured notes or Term Loan, syndicated to high yield investors in the U.S.
• Unsecured notes, syndicated to high yield investors in the U.S.
Collateral • A first priority lien on the specified vessels, evidenced by ship mortgages
• A first priority lien on the specified vessels, evidenced by ship mortgages
• A first priority lien on the specified vessels, evidenced by ship mortgages
• None
Tenor • 5 – 7 years
• Up to 12 years • Up to 8 years – Investors prefer shorter tenor in
current environment
• Up to 8 years – Investors prefer shorter tenor in
current environment
Repayment • Amortising term loan based with a repayment profile of up to 20 years
• ECA Tranche: Based on a 12-year repayment profile
• Commercial Tranche: up to a 20 year repayment profile
• Senior Secured Notes: Bullet • Term Loan B: De minimis (1% per
annum)
• Bullet
Ratings Requirements
• None
• None • S&P / Moody’s • S&P / Moody’s
Maintenance Covenants
• Dependent – usually in line with existing covenants, and may include Leverage Interest Coverage
• Dependent – usually in line with existing covenants, and may include Leverage Interest Coverage
• None – Incurrence covenants only
• None
Pre-Payment Penalty
• None
• None • Dependent on type • Dependent on type
Benefits ▲ Long amortisation profile achievable ▲ Ability to leverage existing
relationship banks ▲ Most flexible market with respect to
prepayments and amendments
▲ Lowest Pricing ▲ Long tenor ▲ Ability to leverage existing banking
and ECA relationships
▲ Fixed coupon ▲ Longest tenor ▲ No / minimal amortization
▲ No additional liens on assets ▲ Fixed coupon ▲ Longest tenor ▲ No amortization requirement
Considerations ▼ Shorter duration than that available in the bond & ECA markets
▼ Financial maintenance covenants
▼ Sizeable amortizations ▼ Financial maintenance covenants
▼ Possible call protection ▼ High interest expense
▼ Possible call protection ▼ Highest interest expense
Timeline • 7 – 8 weeks • 24 weeks
• 7 – 8 weeks
• 7 – 8 weeks
Summary - Debt Financing Alternatives
2 Overview
Loan Market
1,084
605 466 687
877
455 564 884
175 163
368
130 98
75
141
119 173
165
22 20
295
185
101
127
156
145
189
148
23 37
49%
40%
14%
17% 14%
19%
14%
25%
16%
27%
0%
10%
20%
30%
40%
50%
0.00
400.00
800.00
1,200.00
1,600.00
2,000.00
2007 2008 2009 2010 2011 2012 2013 2014 Q12014
Q12015
0%
5%
10%
15%
20%
25%
Swed
bank
SHB
SEB
Nor
dea
Dan
ska
UB
SIn
tesa MS
Lloy
dsD
nBM
edio
bBP
Mila
noC
aixa
Ban
kG
oldm
anD
euts
che
Bank
iaU
BI
Saba
dell
ING
Nat
ixis
Popo
lare
RB
SH
SBC
Stan
Cha
rtC
itiBa
rlcay
sW
ells
Far
goPo
pula
rC
redi
t Ag
BBVA
BNPP
SocG
enJP
M CS
Uni
Cre
dit
RB
IBA
ML
Sant
ande
rC
omm
erz
EMEA Loan Market Summary & Key Trends Q1 2015 saw a sharp increase in EMEA event driven volumes over Q1
2014 - despite overall volumes being relatively flat
Q1 2015 saw a significant increase in the proportion of event-driven financings as part of overall deal volumes
Despite the total deal volumes being relatively high, banks remain asset hungry
Gen
eral
Tre
nds
EMEA Event-driven loan volumes were up 114% in 2014 – the highest since 2008 – with lenders heavily supporting all major event-driven transactions which came to market during the year
EMEA lenders continue to be very asset hungry – particularly to support core client relationships and for drawn (or bridge) facilities
Sum
mar
y R
esul
ts /
Posi
tion
Refinancing (incl. amend & extend) volumes remained robust in 2014 as borrowers capitalized on attractive market conditions to refresh pricing and tenor
Banks balance sheets continued to improve - with European bank stress testing keeping the industry focused on increasing capital ratios
Discipline of returns based lending continues to prevail, as banks shareholders focus on returns on equity/assets (meaning ancillary business key)
Banks increase focus on meeting capital targets will influence lending policies
US$bn
Source: Dealogic
EM
EA
Ann
ual L
oan
Vol
umes
High-Grade Leveraged
Emerging Markets % Total Event-Driven
Banks balance sheets expected to improve significantly and demand for exposure expected to remain strong into 2015
% of E
vent-Driven Transactions
9.2% 12.0%
Average Tier-1 Capital Ratio (2008) Average Tier-1 Capital Ratio (2014)
Tier-1 Capital Ratios (%) Source: Company reports
Tier
-1 C
apita
l Rat
ios
(%)
Tier-1 Capital Ratio (2014)
3 Loan Market
Current Acquisition Financing Landscape
Source: Dealogic, Citi
2014 was the third-strongest year ever recorded for Global M&A volume, behind only 2006 and 2007. Global M&A volume was up 47% compared to 2013, with a 75% increase in $10bn+ deals year-on-year. This has continued into 2015, recording the strongest Q1 since 2007, up 23% quarter-on-quarter vs. Q1 2014. Markets remain supportive for transformational financings.
Global M&A Volumes Surging Current M&A Cycle in Historical Perspective
Since the start of 2014, global strategic M&A activity has surged, increasing at the fastest pace seen over the past 14 years. It has
continued in 2015 with Q1 up 23% q-o-q
Over the past 18 months, EMEA has seen a breakout in major M&A transactions, after a relatively subdued period since 2011
Corporates are seeking to pursue transformational M&A transactions which is leading to a rise of ‘jumbo’ acquisition financing transactions
EMEA Event-driven loan volume totalled $263bn in 2014, up 114% annually and the highest since volume 2008 ($410bn). Q1 2015 saw a sharp increase in EMEA event driven volumes over Q1 2014 up 84% -
despite overall volumes being relatively flat
M&A Volumes & Emerging Trends
EMEA Loan Volumes Key Takeaways
+47%
EMEA Loan Event Driven Financing Continues to Expand 1
2
3
4
Vol
ume
by re
gion
(bn)
Global D
eal Volum
e (bn)
Dea
l Vol
umes
(bn)
40%
14% 17%
14% 19%
14%
25%
16%
27%
0%
10%
20%
30%
40%
50%
$0
$200
$400
$600
$800
$1,000
$1,200
2008 2009 2010 2011 2012 2013 2014 Q1 2014 Q1 2015Western Europe CEEMEA % Event driven
$2,876
$1,997
$2,433 $2,512 $2,546 $2,364
$3,485
$684 $840
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$0$200$400$600$800
$1,000$1,200$1,400$1,600$1,800$2,000$2,200
2008 2009 2010 2011 2012 2013 2014 Q1 2014 Q1 2015
EMEA Deal Value Non-EMEA Deal Value Total Deal Value
+23% vs.
Q1’14
$0.4$0.3
$0.3$0.4
$0.5$0.9
$1.1$1.6
$2.5
$3.3$3.4
$1.7
$1.2$1.3
$1.9
$2.7
$3.6
$4.1
$2.9
$2.0$2.4
$2.5$2.5
$2.4
$3.5
$0.7$0.9
(33%)(23%)6%25%
24%71%
20%48%
52%
30%4%
(50%)(29%)11%
41%
42%
35%14%
(30%)
(31%)
22%3% 1%(7%)
47%
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Q114
Q115
4 Loan Market
Global Shipping and Offshore Loan Overview Deal activity picked up 2013-14, but 2015YTD has been slower… …Deal sizes have retracted in 2015YTD…
… Appetite for longer tenors are increasing Market Overview
$251 $268 $249
$245 $267
$235 $296
$290
$228
$0
$50
$100
$150
$200
$250
$300
$350
2007 2008 2009 2010 2011 2012 2013 2014 2015YTD
Average Size of Deals ($mn)
Source: Dealogic – Global syndicated loans excluding ECA financings, 31 May 2015
25% 37% 32%
50% 59% 61% 56% 53% 60%
75% 63% 68%
50% 41% 39% 44% 47% 40%
2007 2008 2009 2010 2011 2012 2013 2014 2015YTD
> 5yr ≤ 5yrs
70 60
25 33 35 39
49 52
20 13
31
25
6
14 22 11
17 41
11 7
340
272
113
178 206
188 207
236
99
30
0
50
100
150
200
250
300
350
400
0
20
40
60
80
100
120
2007 2008 2009 2010 2011 2012 2013 2014 2014YTD2015YTD
Total Offshore Deal Value($bn)
Total Shipping Deal Value($bn)
Total Number Of Deals
• 2015 issuance YTD has been lower than 2014 YTD and offshore issuance is expected to drag down total issuance for the rest of the year
• After seeing deal sizes increase the last two years we have started to see a return to smaller clubs and bilaterals
• While 2015YTD issuance has seen shorter tenors come back in the syndicated loan market, we generally are seeing appetite from banks to provide longer tenors
Lenders’ Overview • The sector has benefitted from continued support from Nordics, French and
Japanese banks over the years
• Select number of key lenders continue to play across a variety of sectors provided deal structure is robust, with strong underlying collateral and appropriate LTV’s
• Pockets of regional liquidity continues to exist depending on the borrower location, particularly in Middle East and Asia
• On the whole, lenders tend to be active in certain pockets/sectors rather than across the entire shipping sector
5 Loan Market
Export Credit Agency
Key Facts about Citi Export and Agency Finance • Long standing relationships with over 65 agencies globally
• 49 professionals focusing on seamless transaction execution through direct engagement with agencies and clients in native language
• Portfolio includes transactions supported by export credit agencies (ECAs), development finance institutions (DFIs), and multilateral agencies (MLAs)
• Our approach is unique insofar as:
− Citi excels in coordination of larger syndications with broad range of investors across banks and non-banking institutions
− Citi’s distribution team is well known in the market for having one of the widest distribution networks
− Transactions often incorporate embedded structured derivatives
− Citi is Borrower focused and thus not biased towards any particular agency or exporter
• Broad industry experience: Public Sector, Financial Institutions, Oil & Gas, Power, Metals & Mining, Telecoms, Infrastructure, Aviation, Shipping & Transportation amongst others
Citi Export and Agency Finance Overview
Highlights • In 2014, Citi’s EAF business arranged more than US$12 billion in Official
Agency-supported transactions across 32 countries • Citi topped the ECA financing mandated lead arranger ranking in 2014 • Transactions executed by Citi in 2013 won 12 Deal of the Year Awards • Citi’s global presence is unparalleled: Citi’s Export Agency Finance team
operates via four hubs in New York, London, Hong Kong, and Tokyo as well as nine additional offices in Washington D.C., Zurich, Dubai, Seoul, Beijing, Singapore, Lagos, Nairobi, and Miami. Furthermore, Citi has a presence in over 100 countries, and conducts business in over 160 countries
Citi’s EAF team has significant experience with a wide range of key Official Agencies globally. EAF consistently leads the league tables for export credit agency (ECA) supported financing and receives market recognition for its focus on innovation in export and agency finance
Rankings for ECA Supported Loans (2010-2014)
Source: Dealogic data as of February 5th, 2015
2010 - 2014 (in USD MM)
Global Export and Agency Finance Regional Offices
New York Washington D.C.
London
Dubai Hong Kong
Tokyo
Singapore Lagos
Seoul Zurich
Nairobi
Miami Beijing
6 Export Credit Agency
General Benefits of ECA Financing
Benefits / Features to Borrowers
Capacity: ECAs may support large projects for up to several billion US$/EUR
Stable Credit Costs: ECA risk premia do not fluctuate in line with commercial market pricing ECA premia are primarily determined by tenor profile, country risk and availability period
ECAs are influenced by borrower credit risk, but their corporate spread curve is not as steep as the commercial market’s
Diversification of Funding Sources and Preservation of Bank Lines: ECAs provide guarantees for 95%-100% of the debt, transforming the credit profile of the debt for bank. The association of government entities in the debt mix is also a beneficial feature for all clients
Fixed Interest Rate: Many ECAs offer Commercial Interest Reference Rate (CIRR), offering arbitrage opportunities without swap cost or credit lines. Borrowers can monetise rate benefits embedded in a CIRR
Stable Deal Execution: ECAs provide reliable liquidity to the market and as they are funded by governments, they are not impacted as much by market liquidity issues
Long Tenors: Under OECD guidelines, ECA repayment periods (exclusive of construction periods) are between up to 5 and 15 years depending on country and purpose
Long Availability Period and Drawdown Flexibility – set to match payments under the commercial contract
Reach back: Can finance past as well as future CAPEX
There are many benefits to ECA financing for borrowers; ECAs can provide consistent support in good times as well as during more challenging market environments
7 Export Credit Agency
High Yield Market
200
250
300
350
400
450
May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15
bps
Series 21 Series 22 Series 23
Current High Yield Market Conditions Weekly HY US Mutual Fund Flows iTraxx 5-yr Crossover
Government Bond Yields
288 US
fund
flow
s ($
m)
Source: Bloomberg and Citi
200
300
400
500
600
700
Sep-12 Apr-13 Oct-13 Apr-14 Oct-14 May-15
bps
Series 18 Series 19 Series 20 Series 21 Series 22 Series 23
-8,000-7,000-6,000-5,000-4,000-3,000-2,000-1,000
01,0002,0003,0004,0005,000
May
-12
Jul-1
2
Sep-
12
Nov
-12
Jan-
13
Mar
-13
May
-13
Jul-1
3
Sep-
13
Nov
-13
Jan-
14
Mar
-14
May
-14
Jul-1
4
Sep-
14
Nov
-14
Jan-
15
Mar
-15
May
-15
0.00
1.00
2.00
3.00
4.00
5.00
6.00
May-05 May-07 Apr-09 May-11 Apr-13 May-15
Yie
ld (%
)
10-yr Avg.: 3.410% 10-yr Avg.: 3.223% 10-yr Avg.: 2.721%
Current: 1.813% Current: 2.104% Current: 0.487%
German BundUK Gilt US Treasury
8 High Yield Market
$60.
5$1
6.9
$32.
9$1
7.3
$54.
7$2
7.2
$31.
1$2
4.9 $3
0.9
$21.
3$4
6.0
$56.
9$4
6.5
$45.
5$2
7.3
$4.5
$47.
2$3
0.2
$28.
8$1
5.3
$26.
5$4
0.8
$56.
7$4
8.8
$36.
4
0
10
20
30
40
50
60
70
May
-13
Jul-1
3
Sep-
13
Nov
-13
Jan-
14
Mar
-14
May
-14
Jul-1
4
Sep-
14
Nov
-14
Jan-
15
Mar
-15
May
-15
US
Dol
lars
in b
illio
nsHigh Yield New Issue Volume
European New Issuance Global New Issuance
European Monthly Issuance
Source: LCD, Newsrun and Citi
Global Monthly Issuance
$41.
0
$64.
0 $110
.0
$140
.0
$103
.0
$51.
5
$84.
1
$61.
5 $140
.0
$154
.8
$112
.9 $178
.9
$160
.0
$57.
0
$188
.8
$317
.1
$276
.2
$367
.5
$415
.0
$400
.3
$209
.2
0
50
100
150
200
250
300
350
400
450
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
US
Dol
lars
in b
illio
ns
$3.3
$3.1
$6.2
$15.
6
$17.
7
$13.
5
$6.7
$4.1
$17.
3
$24.
8
$21.
3
$38.
6
$26.
4
$0.0
$41.
1 $6
6.1
$67.
5
$79.
3
$121
.3
$144
.3
$80.
2
0102030405060708090
100110120130140150
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
US
Dol
lars
in b
illion
s
Dollar Denominated Non $ Denominated
$ 16
.3$
5.1
$ 12
.2$
0.4
$ 10
.5$
8.8 $
11.5
$ 6.
6$
11.8
$ 7.
4$
16.7
$ 32
.2$
17.0 $
21.9
$ 13
.6$
2.0
$ 11
.2$
5.7
$ 2.
1$
2.8
$ 13
.1$
13.7
$ 25
.0$
20.6
$ 7.
7
0
5
10
15
20
25
30
35
May
-13
Jul-1
3
Sep-
13
Nov
-13
Jan-
14
Mar
-14
May
-14
Jul-1
4
Sep-
14
Nov
-14
Jan-
15
Mar
-15
May
-15
US
Dol
lars
in B
illio
ns
9 High Yield Market
Current Interest Rate Environment
Source: Citi Yieldbook. Note: Dotted lines represent 20 yr. Average
10 High Yield Market
US Leveraged Loan Market Update
11 High Yield Market
Equity Capital Markets
Major Asset Valuations: Bubble Time? Our strategists see European credit in bubble territory, but equities still have much further to run and commodities look cheap vs history.
Credit Approaching Bubble Territory, but Equities have Further to Go
-2
-1
0
1
2
3
4
Glo
bal T
MT
(200
0)
EM (2
007)
Japa
n (1
989)
10yr
BTP
10yr
Bon
os
10yr
OA
T
EUR
Inv
Gra
de
10yr
Bun
d
US
Inv
Gra
de
EUR
HY
10yr
US
T
US
HY
DM
Equ
ities
EMBI
Gol
d
EM E
quiti
es
Base
Met
als
Cru
de O
il
Z-Scores
Previous Bubbles
Expensive Rel to History
Cheap Rel to History
Bubble Threshold
Easy Monetary Policy… Global Excess Liquidity (Global Money Supply Growth less Nominal GDP)
…has Taken Net Issuance to Zero Net Issuance of New Securities Minus Central Bank Interventions, 12m Rolling, $tn
Further Upside for European Equities Price to Book Value: Standard Deviation From 10y Average
Source: Citi
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15
-3
-2
-1
0
1
2
3
4
5
03 05 07 09 11 13 15
Central BankInterventions
Net
Govt.
Non-finBonds
SharesFin. Bonds
GSEs
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
USA
Glo
bal
Eurx
UK
Japa
n
UK
Aust
ralia EM
Market ex financials
Bubble Threshold
12 Equity Capital Markets
84
334
61
277
60
260
45
245
iBoxx € Corp iBoxx € HY iTraxx Main iTraxx Xover
Current 2015F
Market Outlook for 2015
Source: Factset, as of May 2015, Citi Research
Citi Equity Strategists See Positive Outlook for Equities in 2015
ECB Policy Action and continued inflows into European equity funds should support economic and earnings growth and therefore positive European equity performance in 2015. Credit spreads are also expected to rally considerably across the IG and HY space.
Key Themes for 2015
Tighter European Credit Outlook… “Where Will Spreads End 2015?” – Citi Credit Survey Nov-14/Feb-15
Citi Credit Forecasts for 2015
Index Target Upside Index Target Upside
Stoxx 600 450 10% Topix Japan 1,650 2%S&P 500 2,200 4% MSCI EM 1,100 5%FTSE 100 7,700 10% MSCI AC World 525 20%
• Citi equity strategists remain optimistic on European equities – there are 3 “QEs” influencing stock prices right now – Supportive oil price environment resulting in lower raw materials costs – EUR / USD development which support US into Europe assets flows – Actual ECB QE programme
• European equities have re-rated sharply since mid-12, from 10x P/E to 17-18x – but some upside still remains – Stoxx 600 year end target of 550
Citi End 2015 Target Indicates further upside potential especially in Europe
Oil Prices: Stable in 2015, Rally in 2016
3
ECB QE (Driving Search for Yield)
1
Greek Debt Financing (Long Term Effects)
2
Economic Growth: Europe vs US
5
Timing of US rate hikes 4
Concerns over low inflation 7
Weak Euro/Strong USD 6
M&A financing to assume a position of prevalence
8 -50
0
50
100
150
200
Jan 13 Apr 13 Aug 13 Dec 13 Apr 14 Aug 14 Dec 14 Apr 15Cum
ulat
ve F
low
to E
quity
Fun
ds ($
bn)
North America Europe
March witnessed the highest level of inflows since 1996, which will continue to underpin relative outperformance.
Cumulative Asset Inflows from US into Europe
13 Equity Capital Markets
Italy18%
France13%
Germany12%
Spain11%
UAE9%
Nordics6%
SA3%
Other26%
Equity-Linked Market Low rates, rising equity markets and a supply/demand imbalance in the European CB market has resulted in increasing valuations across primary and secondary markets and has allowed issuers to achieve very attractive terms.
Source: Citi, Bloomberg
EMEA Structural Net Supply / Demand Imbalance Overhang
Date Issuer Rating Country Type Size (mm) YTM Premium 20 May 15 Ablynx NR Belgium CB €100 3.250% 26.5% 20 May 15 AMX / KPN A2/A-/A Mexico EB €3,000 0.000% 45.0% 12 May 15 Maurel et Prom NR France CB €115 2.750% 37.0% 06 May 15 Salvepar NR France CB €150 1.625% 37.5% 06 May 15 Haniel / Metro Ba1/BB+ Germany EB €500 -0.540% 37.0% 06 May 15 Tikehau NR France Pre-IPO CB €200 1.300% 35.0% 27 Apr 15 Aroundtown NR Cyprus Pre-IPO CB €431 4.240% 30.7% 09 Apr 15 Unibail-Rodamco NR/A France CB €500 -0.070% 37.0% 25 Mar 15 Heidelberger Druck. B3/B Germany CB €58.6 5.250% 30.0% 24 Mar 15 Market Tech NR UK CB £112.5 4.250% 16.5% 23 Mar 15 Aabar / UniCredit NR UAE EB €1,000 1.000% 40.0% 23 Mar 15 Aabar / UniCredit NR UAE EB €1,000 0.500% 40.0% 19 Mar 15 Telecom Italia Ba1/BB+ Italy CB €2,000 1.125% 70.0% 24 Feb 15 Abengoa / ABY B2/B Spain EB $279 5.125% 20.0% 18 Feb 15 Outokumpu NR Finland CB €250 3.250% 30.0% 11 Feb 15 RAG / Evonik NR Germany EB €500 -0.170% 35.0% 03 Feb 15 Orpar / Remy NR France EB €170 0.500%1 32.5% 12 Dec 14 Carillion NR UK CB £170 2.500% 25.0% 10 Dec 14 FCA B1/BB- Italy MCB $2,875 7.875% 17.5% 14 Nov 14 J Sainsbury NR UK CB £450 1.250% 32.5% 12 Nov 14 Playtech NR UK CB €297 0.500% 27.5% 07 Nov 14 PrimeCity Inv. NR Cyprus CB €100 5.750% n/a 23 Sep 14 BKW NR Switz. CB CHF163 0.125% 22.5% 23 Sep 14 E.ON / BKW A3/A- Germany EB €113 -0.248% 22.5% 17 Sep 14 Meyer Burger NR Switz. CB CHF100 4.000% 27.5% 11 Sep 14 Telefonica Baa2/BBB Spain MCB €1,500 4.900% 22.5% 05 Sep 14 SAF Holland NR Germany CB €100 1.000% 20.0%
Note(1) Premium redemption bond, hence zero coupon
Key Issue Trends Geographical Split 2014-2015YTD
A18%
BBB12%
BB14%B
13%CCC1%
NR42%
Premium
Rating of New Issues 2014-2015YTD
Coupon Primary CB Valuation Metrics Have Continued to Improve
2.4%2.1%2.6% 2.7% 2.4%
5.4% 4.8%4.0% 4.6%
3.1% 2.6%1.8%
1.7%
53 2 3
50 0 0
10 3
11
5
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
AverageNo. of Zero Coupon Deals Surge of zero
coupon deals
Negative Yield
38%29%
23% 23%31%
26% 28% 27%20%
28% 28% 29%
56%
100%
65%51%
60% 55% 55%
41%38% 40%
45% 43% 46%
70%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Average MaxAlcatel 4.750% €1.0bn CB
Telecom Italia 1.125% €2.0bn CB 19.5
28.441.2
23.031.9
14.9 8.816.9
23.3 20.2
10.4
36.926.0
16.6 20.4 19.7 21.7 16.4 16.3 11.922.3 19.7
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
EU
R b
n
Issuance Redemptions Net Flow
Recent Equity-Linked New Issue Supply
14 Equity Capital Markets
Conclusion
Key Takeaways
Bank capital remains constrained. Differential between banks looking to exit the market and “asset-hungry” banks looking to grow their loan books i
Export Credit Agency Financing remains an indispensable source of funding for shipping & offshore asset owners ii
High Yield Market current characterised by high volumes and historically low yields – growing source of financing for shipping & offshore companies iii
Equity upside in Europe versus growing risk of a credit bubble iv
Attractive pricing for equity-linked instruments driven by supply / demand imbalance v
Key Takeaways / Considerations
15 Conclusion
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