Current Conditions in Global Credit Markets - NYU Stern School of ...

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Leveraged Buy-Outs Fueling Loan Growth Current European Environment LBO Transaction Volume €90 Annual Leveraged Loan Volume € 120 250 €75 € 100 200 €60 € 80 € in Billions € 60 € 40 150 100 € in Billions €45 €30 € 20 50 €15 € 0 1999 2000 2001 2002 2003 2004 2005 1H 2006 0 €0 1999 2000 2001 2002 2003 2004 2005 1H 2006 Annual Leveraged Loan Volume Deal Count ( a) Sr + 2nd Lien Bank Debt Other Sources (a) Deal Count counts First and Second Lien portions of a single transaction as one event; Deal Count also excludes any amendments. Source: Standard & Poor’s Source: Standard & Poor’s • Leveraged buy-outs continue to grow in size and number • Leveraged loan volume continues to grow correspondingly 20
Leverage Continues to Increase Current European Environment 5.8 Leverage Multiples for European LBOs 5.6 5.4 Gross Debt/Current EBITDA 5.2 5 4.8 4.6 4.4 4.2 4 2002 2003 2004 2005 2006 Source: Standard & Poor’s LCD; Thomson Datastream • In 2002 the average leverage multiple on European LBOs was 4.2x earnings • By June 2006, average leverage multiples were 5.4, and in the third quarter, leverage multiples on European LBOs were expected to approach 6.0x earnings 21
Page 1 and 2: Current Conditions in Global Credit
Page 3 and 4: Changes in the Credit Environment:
Page 5 and 6: Factors Affecting the Transformatio
Page 7 and 8: Changes in the Credit Environment:
Page 9 and 10: Historical Default Rates Straight B
Page 11 and 12: New Issues Rated B- or Below as Per
Page 13 and 14: Historical Default Rates and Recess
Page 15 and 16: Leveraged Loan Market U.S. Distress
Page 17 and 18: Recent Large Bankruptcies U.S. Dist
Page 19: Private Equity Fundraising and Leve
Page 23 and 24: Default Rates and Losses a 1978 - 2
Page 25 and 26: Source: Authors' Compilations from
Page 27 and 28: Asset Class Returns (%) 2003 - 2006
Page 29 and 30: Distressed And Defaulted Debt as a
Page 31 and 32: SIZE OF THE US DEFAULTED AND DISTRE
Page 33 and 34: SIZE OF THE ALTMAN-NYU SALOMON CENT
Page 35 and 36: ALTMAN-NYU SALOMON CENTER DEFAULTED
Page 37 and 38: SIZE OF THE ALTMAN-NYU SALOMON CENT
Page 39 and 40: CORRELATION OF ALTMAN NYU-SALOMON C
Page 41 and 42: CORRELATION OF ALTMAN NYU-SALOMON C
Page 43 and 44: U.S. Distressed Debt Managers 2007
Page 45 and 46: U.S. Distressed Funds with European
Page 47 and 48: Investment Styles and Target Return
Page 49 and 50: Forecasting Defaults and the Defaul
Page 51 and 52: Mortality Rate Concept (Illustrativ
Page 53 and 54: Mortality Losses by Original Rating
Page 55 and 56: US Bond Rating Equivalent Based on

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