Secured Commercial LendingSenior, Cashflow, High Yield & Sub Debt
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Moderator: Andrew Luetchford Managing Director – Corporate Finance
Panelists:
James Logan Senior DirectorCIBC Commercial Banking
Ellis Gaston Managing DirectorGE Corporate Finance
Joe Mattina Managing DirectorHead of Debt Capital Markets CanadaMacquarie Capital
Paul Redmond Managing DirectorNational Client Group RBC Royal Bank
Daniel Leslie Vice President, Specialized IndustriesTD Commercial National Accounts
$12 billion2011 Revenue
14.7%Tier 1 Capital Ratio
$353 billion2011 Total Assets
43,000Employees Worldwide
Canadian Imperial Bank of Commerce (CIBC) 2012 Strongest Bank in Canada as ranked by Bloomberg Markets
Ranked #1 in total syndicated loan deals and #2 in total value in September YTD Bloomberg League Tables
CIBC offers full-service business banking solutions that help clients pursue opportunities in the market. Our clients benefit from our proven ability to combine capital and advisory products into creative and practical financing solutions.
Whatever your business needs, we can help through:
Dedicated business expertise from a relationship manager who understands you, your business, and the industry you work in
A premiere Asset-Based Lending offer, supporting underwritings between $10 million and $500 million
A competitive leveraged loan capability including subordinated and/or mezzanine debt instruments
Investment Banking support to assist with value creating ideas
A dedicated Private Equity Coverage Team
Recognized as the Best Commercial Bank in Canada by World Finance Magazine (2012)
Michael MahoneyDirectorInvestment Banking,Financial Sponsors416.594.7429 / [email protected]
Blair CowanVice PresidentLeveraged Finance and Asset‐Based Lending416.980.3394 / [email protected]
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Committed and knowledgeable
relationshipmanagement
Human CapitalFinancial CapitalCore of financial
products and servicesAccess GE
At GE Capital we're not just bankers, we're builders. GE Capital is an extension of GE's rich heritage of building and supporting growth. Investing in the sectors we know best, we can provide more than just financing: We bring insight, knowledge and expertise to every loan. And as a result, businesses that finance with GE Capital benefit from the global know-how and expertise of GE. Around the world, we're helping our customers to invent more, to make more, to sell more and to do it all with greater efficiency. We're helping companies in ways that no other bank can.
Industry Specializations:
Aerospace & DefenseAutomotive & TransportationChemicals & PlasticsConstructionEnergyFood, Beverage & AgribusinessHealthcareManufacturingMarineMedia, Communications & EntertainmentMetals & MiningPaper, Packaging & Forestry RetailTechnology & Electronics
Corporate Finance, a lending unit of GE Capital• Focus on working with a wide variety of mid-size businesses, corporate borrowers and private
equity sponsors. • Product offerings include asset-based, cash flow and structured loans $25 million+.• Significant financial commitments leveraging GE’s domain expertise. • Ranking 1H12 (by # of deals), Thomson Reuters League Tables (Bookrunner):
• LBO Market #1, Mid Market Sponsor #1, Traditional Mid Market #2, Leverage loan Market #2, Large Cap Sponsor Market #2
Deep industry knowledge and expertise
Intellectual Capital
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Corporate & Asset Finance
Macquarie DCM will structure & arrange financing on our client’s behalf, using our deep expertise and extensive network of banking relationships to achieve the best deal
UNDERWRITE & DISTRIBUTE
STRUCTURE & ARRANGE
Leveraged Finance
Credit Sales & Trading
Distributes new issues to institutional clients
Provides liquidity
Underwritten over
$45bn in bonds and loans since Aug 2009 (1)
Direct relationships
with 300+financial institutions from debt raising activities since 2005
100+dedicated debt financing professionals in key global financial centers
Services
Products Leasing ProjectFinance
Loans:Corporate &Leveraged
Debt PrivatePlacements
Bonds:High Yield &InvestmentGrade
Mezzanine
Underwriting Arranging Structuring& Docs
CapitalStructureAdvisory
RatingsAdvisory
LoanAmendments
Macquarie provides advice across the full range of debt market products and services
Principal lending arm of Macquarie Bank Limited
Financial strength of an A rated, APRA regulated bank
Actively making significant lending commitments on a hold to maturity basis
Ability to act as cornerstone for underwritten syndicated financings
Capability to structure and provide customized bilateral financing solutions
Full bank back-office capability to administer loans including revolving credit
+60 dedicated lending professionals with offices in Australasia, North America and Europe
+$12 billion in new lending commitments to more than 150 global clients since 2009
+$25-75 million typical loan amount with up to five year commitments
Macquarie Lending Capabilities
Macquarie is both an active lender and buyer of loans in the secondary market
Can provide significant principal holds for Macquarie arranged or issued deals
HOLD
Corporate & Asset Finance
1. Includes loans and bonds on which Macquarie acted as bookrunner, co-manager, or agent since August 2009
Macquarie Group
Royal Bank of Canada We are Canada’s largest bank as measured by assets and market capitalization, and among the largest
banks in the world, based on market capitalization. We are one of North America’s leading diversified financial service companies, and provide personal and commercial banking, wealth management services, insurance, corporate and investment banking and transaction processing services on a global basis. We employ approximately 79,000 full- and part-time employees who serve more than 18 million personal, business, public sector and institutional clients through offices in Canada, the U.S. and 53 countries.
National Client Group Dedicated to the "mid-market", a team of senior relationship managers, specializing in delivering a complete
range of sophisticated financial solutions and core banking services to mid-market Canadian-headquartered companies and subsidiaries of foreign multinationals in Canada. Located across Canada, there are Relationship Managers available to deliver RBC Royal Bank’s innovative financial strategies – whether you need to raise capital, reduce operating costs, mitigate risk, or realize value from your business.
Dedicated team from RBC’s platform as a leading global provider of fixed income, FX, commodities and interest rate swaps
Derivatives
National group of people to provide tailored solutions for your employees banking needs
Group Solutions
Dedicated treasury management and trade specialist available to work with you to solve cash management needs
Dedicated person for your Company to handle day-to-day transactions
Credit structuring professionals working directly with you to document and close agreements
Operating and Term Loans
Equipment Financing Asset Based Lending Sub Debt
Global Transaction Services
Global Banking Service CenterCredit StructuringCredit Coverage
Dedicated team from RBC’s platform as a leading global provider of fixed income, FX, commodities and interest rate swaps
Derivatives
National group of people to provide tailored solutions for your employees banking needs
Group Solutions
Dedicated treasury management and trade specialist available to work with you to solve cash management needs
Dedicated person for your Company to handle day-to-day transactions
Credit structuring professionals working directly with you to document and close agreements
Operating and Term Loans
Equipment Financing Asset Based Lending Sub Debt
Global Transaction Services
Global Banking Service CenterCredit StructuringCredit Coverage
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TD Bank Group
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Top 10 bank in North America by market cap and deposits; one of the few banks in the world rated AAA by Moody’s
A strong North American presence with over 1,150 branches in Canada and 1,280 in the U.S.
Ranked #1 or #2 in terms of market share in most retail products1
TD Canada Trust ranked highest in Canada for Customer Satisfaction by J.D. Power for the 7th year in a row and named the best of the Big Five banks for Customer Service Excellence by Synovate for the 7th year in a row
#1 Lead Arranger in 2012 in the Canadian Corporate Loan Syndication Market by volume 2
TD Commercial National Accounts
Product Expertise Geographic Footprint
Loan Products
ABL Solutions through TD Asset Finance
Cash Management
Loan Syndications
In coordination with TD Securities :
Foreign Exchange and Derivatives
Investment Banking & Capital Markets
Global Trade Finance
VancouverCalgary
Edmonton
Winnipeg
Toronto
MontrealHalifax
(1) Source: Canadian Banking Association (Canada), as at December 31, 2011.(2) Source: Bloomberg for period of Jan. 1, 2012 to June 30, 2012. Deal volume
awarded proportionately to the Lead Arrangers.
Automotive
Construction & Engineering
Diversified Industries
Energy
Financial Institutions
Food & Beverage
Oil Field Services
Public Private Partnerships
Corporate Finance / Relationship Management
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2010 Credit environment conservative
– Low hold levels– Short maturities
Pricing spreads high Default rates high Loan volumes improving from
2009 lows Small number of active lenders High yield market reasonably
active
2012 Credit environment buoyant
– Aggressive bank hold levels– More liberal terms
Pricing spreads low Loan volumes below 2011
– More supply than demand
Canadian high yield markets buoyant
The Debt Environment: Big Changes In 2 Years
(Issuers with EBITDA of $50 Million or Less) (U.S. Credit Market Data)
Sponsored middle-market loan volumes
$14.8
$23.7 $24.2
$20.6
$5.0
$7.6 $6.7
$20.9
$25.1 $22.5
$20.9
$5.0
$2.2
$8.8
$12.8 $11.2
$5.9
$0
$10
$20
$30
In B
illio
ns
Source: Standard & Poor's
Mid-Market leveraged loan volumes erratic
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(Issuers with EBITDA of $50 Million or Less) (U.S. Credit Market Data)Average Mid-Market purchase price and equity contribution
7.6x7.5x7.1x6.9x5.9x
6.7x7.2x
8.5x8.1x
9.3x8.3x
6.6x
8.4x8.2x7.6x
7.0x
0.0x
6.0x
12.0x
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
1Q-3
Q12
Senior Debt/EBITDA Sub Debt/EBITDA Equity/EBITDA Others
42.5%
10%
20%
30%
40%
50%
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
3Q12
Equity ContributionPurchase Price Breakdown
Source: Standard & Poor's
Senior/total leverage as high as 3.75x / 4.75x Equity requirements in 40% range
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Cash Flow Lending: Mid-Market (BB/BB-)
Canada
Loan Amount Senior 3.25 x to 3.75x EBITDA
Total Up to 4.75x EBITDA
Pricing Spread (Senior)
BA + 3.25% to 3.75%
Deleveraging Grid
Term to Maturity 48 – 60 Months
Amortization 8% - 10% per year + sweep
Up Front Fees 0.75%
Commitment/ Standby Fee 20 - 25% of Spread
Average Bank Hold Levels Up to $75 million
Front End Fees: 2% All-in Return Targets 12%-17% Equity Co-invest Usually
Not Available Call Protection No Call Period 1-2 years Prepayment Penalties 7%, 5%, 3% Total Debt Leverage Up to 4.75 X
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Sub Debt/Mezzanine Market
Nineteen C$ high yield issues raised C$4.8bn in the past 12 months
Canadian high yield market witnessed a record 21 bond offerings totaling C$4.3 billion in 2011, up from 14 offerings totaling C$3.4 billion issued in 2010
Canadian high yield fund flows remain strong with $258 million in September and $2.5 billion year-to-date
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C$ High Yield Volume (Monthly) C$ High Yield Fund Flows (Monthly)
Figures current as of October 31, 2012Source: IFIC, Prospect News, Advantage Data, Macquarie Research
Canadian High Yield Market
691
–
358
500
–
300 400
75
875
375 500
565
0
1
2
3
4
5
$0$100$200$300$400$500$600$700$800$900
$1,000
Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12
Num
ber o
f issu
es
Tota
l Am
ount
Issu
ed (C
$m)
$ / month # / month
($100)
$0
$100
$200
$300
$400
$500
Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12
$258
Market OutlookPanel Discussion