10% leveraged finance default review - credit suisse

ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES ARE IN THE DISCLOSURE APPENDIX. FOR OTHER

IMPORTANT DISCLOSURES, PLEASE REFER TO https://firesearchdisclosure.credit-suisse.com.

CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION™

Client-Driven Solutions, Insights, and Access

Leveraged Finance Default Review

1Q13 High Yield and Leveraged Loan Default Review

High Yield: The U.S. high yield default rate decreased 37 bp to 1.35% for the

12-month period ended March 2013 from 1.72% at the end of the prior quarter.

Leveraged Loans: The U.S. institutional leveraged loan default rate decreased

1 bp to 1.87% for the 12-month period ended March 2013 from 1.88% at the

end of the prior quarter. (Note: the prior quarter’s default rate was restated from

1.73% because additional information became available from public sources.)

Exhibit 1: US High Yield Bond vs. Leveraged Loan Default Rates: 1986 – LTM March 2013

0.5%1.3%

0.5%0.9%

2.5%

5.3%

6.8%

8.1%

3.8%

1.0%1.6%

0.4%0.2%

2.9%

9.6%

2.6%

0.7%

1.9% 1.9%

2.9%

4.8%

1.6%

3.8%

7.9%

8.8%

3.3%

1.8%

0.9%

2.3%

1.4% 0.9% 1.4%

4.1%4.5%

9.2%

15.5%

4.3%

1.3%

2.6%

0.7%0.5%

5.5%

9.4%

1.6% 1.8% 1.7%1.3%

0%

2%

4%

6%

8%

10%

12%

14%

16%

Defa

ult

Rate

Institutional Leveraged Loans High Yield BondsDefaults defined as missed coupon, missed principal, filed chapter 11, distressed exchange, or cross-defaults. Source: Credit Suisse

Western European High Yield: The Western European high yield default rate

decreased 70 bp to 0.27% for the 12 months ending March 2013 from 0.97% at

the end of the prior quarter.

Western European Leveraged Loans: The Western European institutional

leveraged loan default rate decreased 243 bp to 4.26% for the 12 months

ending March 2013 from 6.69% at the end of the prior quarter. (Note: the prior

quarter’s default rate was restated from 5.23% because additional information

became available from public sources.)

Table of Contents

U.S. High Yield Default Review ............................................................................ 2

U.S. Institutional Leveraged Loan Default Review ............................................. 36

European High Yield Default Review ................................................................. 57

European Institutional Leveraged Loan Default Review .................................... 66

Visit our website at: http://research-and-analytics.csfb.com/R2Action.do

04 April 2013

Fixed Income Research

http://www.credit-suisse.com/researchandanalytics

Research Analysts

Jonathan Blau

Managing Director

212 538 3533

[email protected]

Daniel Sweeney

Director

+1 212 538 8213

[email protected]

Karen Friedlander

Associate

+1 212 325 8459

[email protected]

http://research-and-analytics.csfb.com/R2Action.do

04 April 2013

Leveraged Finance Default Review 2

High Yield Default Rate Methodology

We define default to be a violation of covenants that results in principal impairment. Therefore a missed

coupon payment or a distressed exchange are considered to be defaults, but a change in net worth

requirements or other such covenants are not. An issue enters default upon the expiration of the grace

period following a missed coupon payment (usually 30 days), upon the filing of Chapter 11 bankruptcy, or

on the date of a distressed exchange. The issue emerges from default upon payment of interest or

principal due the bondholder, or restructuring and subsequent emergence from Chapter 11 protection.

Defaulted issues remain in the Credit Suisse High Yield and Leveraged Loan indices until they are taken

out of the market (however, note that there are sub-indices that exclude defaults).

The default rate is calculated by summing the par amount of high yield debt that has gone into default over

a 12-month period, and dividing this numerator by the average size of the high yield market over the same

period of time. We define this market size as the average of the beginning and ending total high yield

market sizes for the time period. Similar calculations can be done for any period of time.

The principal loss rate is calculated by taking the difference between the issue’s default price and issue

price and dividing this result by the issue price, yielding the principal loss rate – a figure that represents the

percentage of capital that is lost at the time of default, assuming that the issue has been owned since

issuance. By multiplying this percentage by the total amount of debt outstanding at the time of default we

are able to determine the total principal loss due to default.

The recovery rate is the difference between 100% and the principal loss rate (difference between the

issue’s default price and issue price divided by the issue price), and represents the amount of an investor’s

original investment that survives the average default event.

The default loss takes into account that over the course of the default and emergence from default

process, the equivalent of about one-half of an annual coupon payment is lost. Default loss is therefore

defined as the sum of principal loss and the coupon loss, and the default loss rate is defined as the total

high yield bond market default loss divided by the same average market size denominator that goes into

the default rate equation.

Loan Default Rate Methodology

Because of the private nature of the leveraged loan asset class, the universe studied in our analysis is

limited to information on institutional leveraged loan tranches that could be sourced in the public domain

with an initial issuance size greater than $25 million. The majority of these institutional loans had public

debt or equity. As institutional tranches of the leveraged loan market are generally the actively traded

portions, consistent pricing and greater information are more readily available. Therefore, only institutional

loans are considered in this study, both in terms of defaults and market size.

A loan is considered to be in default if it has either missed a coupon or principal payment (including a

cross-default provision with other debt) or filed for Chapter 11 under the bankruptcy code. The default rate

is calculated by summing the amount of institutional leveraged loans that have gone into default over a 12-

month period, and dividing this by the average size of the institutional loan market over the same period of

time. The defaulted amount is determined based on the initial amount of institutional debt issued. If there

have been significant paydowns since issuance, we adjust the initial issuance size if public information is

available. We define the institutional loan market size as the average of the beginning and ending total

institutional leveraged loan market sizes for the time period, as both new issuance and retirement of loans

can significantly affect market size. Similar calculations can be done for any time period.

The recovery rate is calculated from the issue’s default price and issuance price. This represents the

amount of an investor’s original investment that survives the average default event.

The default loss rate is defined as the total institutional leveraged loan market default rate multiplied by

the difference between 100% and the recovery rate.

Although post-petition interest can occur in the defaulted loan market, significantly affecting returns, issuers

can be prohibited from making payment to their creditors during the restructuring process. After the

restructuring process, loans that have emerged may have certain term changes, and thus can be

considered new issues.

04 April 2013


1Q13 U.S. High Yield Defaults The U.S. high yield default rate decreased 37 bp to 1.35% for the 12-month period ended

March 2013 from 1.72% at the end of the prior quarter. The average recovery rate

(defined as price at the time of default) dropped 51 bp to 54.90% for the 12-month period

ended March 2013 from 55.41% at the end of the prior quarter.

There were five high yield companies that defaulted in 1Q for a total of $1,435 million face

value. This makes the quarterly default rate 0.12%, which is an annualized rate of 0.47%.

The five companies that defaulted each had one bond outstanding, so there was no

meaningful concentration in any one industry.

As has been the case since 2011, the recovery rate is well above the long-term average of

42.8% because 42% of LTM defaults were secured bonds. The elevated percentage of

secured defaults is due in part to the growth of secured bonds in the high yield market,

though this explains only about half the growth of secured defaults.

Exhibit 2: Secured Bonds as a Percentage of All High Yield Defaults and as a Percentage of the Credit Suisse High Yield Index

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

LTM

Mar

13

Secu

red

Bo

nd

s %

of

Hig

h Y

ield

Secured Bonds as a % of all HY Defaults

Secured Bonds Par Weight in CS HY Index 42.23%

24.32%

Source: Credit Suisse

Our default rate projection for high yield bonds in 2013 remains unchanged at 1%-2%. Our

bottom-up forecast comes to 1.4%, and we weight the risk to the upside. For 2014 we are

projecting an increase to 2.1%.

Exhibit 3: Historical and Projected High Yield Default Rates

2.9%

4.8%

1.6%

3.8%

7.9%8.8%

3.3%

1.8%0.9%

2.3%1.4%

0.9%1.4%

4.1%4.5%

9.2%

15.5%

4.3%

1.3%

2.6%

0.7%0.5%

5.5%

9.4%

1.6%1.8%

1.7%1.3%1.4%

2.1%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Default Rate


04 April 2013


Exhibit 4: Historical and Projected Default Rates: Credit Suisse and Moody’s

Default Rate Summary Actual

2012

Credit Suisse US High Yield Default Rate 1.72% 1-2% 2-3%

Credit Suisse US Leveraged Loan Default Rate 1.88% 1-4% 3-6%

Credit Suisse Western European HY Default Rate 0.97% 1-2% 1-3%

Credit Suisse Western European LL Default Rate 6.69% 2-4% 2-6%

Projected 2013 Projected 2014


Exhibit 5: Annual High Yield Default Rates: 1980 – LTM March 2013

1.56%

0.09%

2.22%

1.08%1.01%

3.45%2.89%

4.78%

1.59%

3.78%

7.88%8.80%

3.34%

1.83%0.86%

2.33%1.37%

0.90%1.38%

4.08%4.54%

9.20%

15.45%

4.32%

1.26%

2.64%

0.73%0.49%

5.46%

9.37%

1.56%1.82%1.72%

1.35%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Defa

ult

Rat

e

Cumulative Default Rate

1989 - 1992: 23.80%

Cumulative Default Rate

1999 - 2003: 37.59%


Exhibit 6: Annual High Yield Recovery Rates: 1986 – LTM March 2013

40.05%

53.71%

35.93%38.55%

31.08%

41.49%

48.47%

44.51%44.90%

42.44%46.64%

53.71%

37.69%

31.27%

26.47%27.99%

29.96%

44.30%

52.94%50.54%

66.20%

59.64%

34.83%

27.36%

58.37%54.07%

55.41%54.90%

0%

10%

20%

30%

40%

50%

60%

70%

Recove

ry R

ate


04 April 2013


Exhibit 7: High Yield Default and Recovery Rates: 1986 – LTM March 2013

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

19961997

1998

19992000

2001

2002

2003

2004

2005

20062007

2008

2009

20102011 2012

LTM Mar 13

R² = 0.57

0%

2%

4%

6%

8%

10%

12%

14%

16%

20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70%

HY

Def

ault

Rat

e

HY Recovery Rate


Exhibit 8: Average Price of Stressed U.S. High Yield Bonds vs. Recovery Rates of High Yield Defaults: 1990 – March 2013

12/31/199024.83%

1/31/199482.94%

10/31/200227.71%

5/31/200794.62%

1/31/199444.41%

2/28/200929.90%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jan

-90

Jan-9

1

Jan

-92

Jan

-93

Jan

-94

Jan

-95

Jan

-96

Jan-9

7

Jan

-98

Jan

-99

Jan

-00

Jan

-01

Jan

-02

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Lower Tier Average Price Recovery RateLower Tier: Rated CCC, CC, C, and Default

3/31/13 93.07%

3/31/13 54.90%


Exhibit 9: High Yield Default Rate vs. GDP Growth: 1980 – March 2013

1.6%

0.1%

2.2%1.1%

1.0%

3.5%

2.9%

4.8%

1.6%

3.8%

7.9%8.8%

3.3%

1.8%

0.9%

2.3%1.4%

0.9%1.4%

4.1%4.5%

9.2%

15.5%

4.3%

1.3%

2.6%

0.7%0.5%

5.5%

9.4%

1.6%

1.8% 1.7%1.3%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

-8.0%

-4.0%

0.0%

4.0%

8.0%

12.0%

16.0%

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

LTM

Mar

13

GD

P G

row

th (Y

oY

)

Def

ault

Rat

e

Default Rate GDP Growth*GDP Growth as of

4Q12


There were three high yield companies that defaulted in March for a total of $940 million

face value.

04 April 2013


Exhibit 10: Monthly High Yield Defaults: Dec 1980 – March 2013 Jul 200227,499 Mar 2009

25,794

0

5,000

10,000

15,000

20,000

25,000

30,000

De

c-8

0

De

c-8

2

De

c-8

4

De

c-8

6

De

c-8

8

De

c-9

0

Dec-9

2

De

c-9

4

De

c-9

6

De

c-9

8

De

c-0

0

De

c-0

2

De

c-0

4

De

c-0

6

De

c-0

8

De

c-1

0

De

c-1

2

Hig

h Y

ield

Bo

nd D

efa

ults (

$M

illio

ns)

Mar-13 940


The quarterly annualized default rate was 0.47% in 1Q13, the tenth lowest quarterly rate

since 1986.

Exhibit 11: Quarterly High Yield Default Rates, Annualized: 1Q80 – 1Q13

18.79%

17.42%

16.08%

0.47%0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

20.00%

Qu

arte

rly

Def

ault

Rat

e (A

nn

ual

ized

)

Average (1980-1991): 3.2%

Average (1992-4Q12): 3.5%


04 April 2013


Exhibit 12: High Yield Default Rate vs. Spread to Worst: 1986 – March 2013

1079 bp12/31/90

1080 bp10/31/02

200 bp

400 bp

600 bp

800 bp

1000 bp

1200 bp

1400 bp

1600 bp

1800 bp

STW

& D

efa

ult

Rate

Spread to Worst HY Default Rate (7-Months Later)

3/31/13 508 bp

3/31/13 1.35%


High yield spreads are strongly correlated with the level of default loss seven months later.

Historically, the difference between spread and forward default loss has averaged 290 bp.

However, this difference has averaged 535 bp since January 2009.

Exhibit 13: High Yield Default Loss Rate vs. Spread to Worst: 1986 – March 2013

12/31/19901079 bp

10/31/20021080 bp

200 bp

400 bp

600 bp

800 bp

1000 bp

1200 bp

1400 bp

1600 bp

1800 bp

ST

W &

De

fau

lt L

os

s R

ate

Spread to Worst HY Default Loss Rate (7-Months Later)

Correlation = .82

Average Difference: 1986-2008: 290 bp Average Difference: 2009-2012: 535 bp

0.67%

3/31/13 508 bp


04 April 2013


There are $197.1 billion of high yield bonds maturing by the end of 2016. $16.0 billion of

these are currently priced below 90.

Exhibit 14: High Yield Bonds Maturing by Year (Par Amount): as of March 2013

8 7 3 11 6 6 61531

62 73

126

157152

196

120

15

32

7080

129

168158

202

126

0

50

100

150

200

250

2013 2014 2015 2016 2017 2018 2019 2020 2021

$B

illio

ns

High Yield Bonds Price < 90 Maturing by Year (As of 3/28/13)

High Yield Bonds Price >= 90 Maturing by Year (As of 3/28/13)


Exhibit 15: Growth of the U.S. Distressed Debt Markets (by Price Break): 1986 – March 2013

1 1 317

3117 8 1

9 6 7 1131

53

134

169

226

89

3037

10 19

324

79

49 4127

211 2 211 22

33 2911 12 6 5 19

689

126

63 67 4239

0

100

200

300

400

500

600

700

Ma

rke

t S

ize

-P

ar

Am

ou

nt

($B

illi

on

s) Distressed HY Bonds (Priced <60)

Distressed Institutional Loans (Priced <80)


Exhibit 16: Returns of Distressed Debt* and Equity 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1Q13

Credit Suisse Leveraged Equity Index:

Distressed Sector 31.66% 51.81% 20.42% 5.23% -6.44% -62.86% 3.11% 23.83% 275.59%

Credit Suisse High Yield Index: Distressed

Sector* 40.48% 60.23% 10.85% 6.12% 5.20% -10.13% -4.92% -1.61% 4.12%

Credit Suisse Leveraged Loan Index:

Distressed Sector* 13.67% 26.65% 2.91% 6.87% 4.23% -6.84% 9.86% 20.13% 2.58%

*Rated CC, C or default Source: Credit Suisse

04 April 2013


Exhibit 17: Percentage of the High Yield Market with Current Yield > 16%: Sep 1986 – March 2013

10/31/199047.34%

11/30/200025.37%

11/28/200835.31%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Sep

-86

Sep

-87

Sep

-88

Sep

-89

Sep

-90

Sep

-91

Sep

-92

Sep

-93

Sep

-94

Sep

-95

Sep

-96

Sep

-97

Sep-9

8

Sep

-99

Sep

-00

Sep

-01

Sep

-02

Sep

-03

Sep

-04

Sep

-05

Sep

-06

Sep

-07

Sep

-08

Sep

-09

Sep

-10

Sep

-11

Sep

-12C

S H

igh

Yie

ld Ind

ex: C

urr

ent

Yie

ld >

16%

Current Yield > 16%

3/28/13 0.75%


Exhibit 18: Number of Issues in the Credit Suisse High Yield Index: Distressed Sector* 1986 – March 2013

0

50

100

150

200

250

300

350

*Bonds rated CC, C or default

Average 1994 - 1999: 38.6

Average 2005 - 2007: 92.7

36


Exhibit 19: CS HY Index: Distressed Sector* as a Percentage of the U.S. HY Bond Market

13.01%

10.78%

9.59%

6.98%

14.14%

19.28%

10.74%

1.46%1.96%

3.04%2.49%

2.24%2.57%

6.24%

10.51%

18.55%

21.71%

16.24%

8.81%

7.40%

5.18%

3.31%

10.55%

11.15%

5.21%

3.56%2.64%

2.40%

0%

5%

10%

15%

20%

25%

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Mar13

% o

f M

ark

et

Dis

tre

ss

ed

Average 1986-1992: 12.07%

Average 1993-1998: 2.29%

Average 2000-2006: 11.83%

Source: Credit Suisse; Distressed includes bonds rated CC, C and default

04 April 2013


Exhibit 20: Annual Default Loss, Principal Loss, and Recovery Rates

Year

Defaulted Amount

($Billion)

Avg Default Loss

Rate

Avg Principal Loss

Rate

Avg Recovery

Rate Default Rate

1977 0.034 0.14% 62.75% 37.25% 0.21%

1978 0.013 0.05% 40.00% 60.00% 0.12%

1979 0.027 0.10% 69.00% 31.00% 0.14%

1980 0.232 1.33% 80.56% 19.44% 1.56%

1981 0.027 0.08% 88.00% 12.00% 0.09%

1982 0.736 1.50% 62.66% 37.34% 2.22%

1983 0.403 0.58% 48.43% 51.57% 1.08%

1984 0.478 0.50% 43.72% 56.28% 1.01%

1985 2.292 2.15% 56.19% 43.81% 3.45%

1986 3.006 1.90% 59.95% 40.05% 2.89%

1987 7.285 2.47% 46.29% 53.71% 4.78%

1988 3.005 1.11% 64.07% 35.93% 1.59%

1989 8.313 2.56% 61.45% 38.55% 3.78%

1990 17.914 5.91% 68.92% 31.08% 7.88%

1991 18.614 5.66% 58.51% 41.49% 8.80%

1992 6.858 1.91% 51.53% 48.47% 3.34%

1993 4.097 1.13% 55.49% 44.51% 1.83%

1994 2.236 0.52% 55.10% 44.90% 0.86%

1995 6.800 1.48% 57.56% 42.44% 2.33%

1996 4.526 0.80% 53.36% 46.64% 1.37%

1997 3.653 0.47% 46.29% 53.71% 0.90%

1998 7.061 0.92% 62.31% 37.69% 1.38%

1999 24.947 3.01% 68.73% 31.27% 4.08%

2000 29.969 3.55% 73.53% 26.47% 4.54%

2001 64.609 7.04% 72.01% 27.99% 9.20%

2002 122.861 11.51% 70.04% 29.96% 15.45%

2003 37.434 2.60% 55.70% 44.30% 4.32%

2004 10.871 0.65% 47.06% 52.94% 1.26%

2005 22.758 1.43% 49.46% 50.54% 2.64%

2006 6.426 0.28% 33.80% 66.20% 0.73%

2007 4.339 0.22% 40.36% 59.64% 0.49%

2008 49.588 3.78% 65.17% 34.83% 5.46%

2009 90.901 7.22% 72.64% 27.36% 9.37%

2010 16.267 0.73% 41.63% 58.37% 1.56%

2011 19.614 0.92% 45.93% 54.07% 1.82%

2012 19.771 0.85% 44.59% 55.41% 1.72%

LTM Mar 13 15.945 0.67% 45.10% 54.90% 1.35%

Average 17.133 2.10% 57.24% 42.76% 3.12% Source: Credit Suisse

04 April 2013


Exhibit 21: Quarterly 12-Month Rolling Default Rate

Year Quarter

12-mth

Rolling

Amount MktSize

MktSize

Midpoint

12-mth

Rolling

Default Rate Year Quarter

12-mth

Rolling

Amount MktSize

MktSize

Midpoint

12-mth

Rolling

Default Rate

1980 1Q 28.3 1996 4Q 4.5 356.2 330.3 1.37%

1980 2Q 28.8 1997 1Q 5.2 376.1 345.3 1.50%

1980 3Q 29.3 1997 2Q 5.1 402.2 365.3 1.40%

1980 4Q 0.2 29.8 29.0 0.80% 1997 3Q 5.3 428.3 385.3 1.38%

1981 1Q 0.1 30.3 29.3 0.39% 1997 4Q 3.7 454.3 405.2 0.90%

1981 2Q 0.1 30.8 29.8 0.38% 1998 1Q 3.8 516.3 446.2 0.86%

1981 3Q 0.0 31.3 30.3 0.00% 1998 2Q 5.1 546.5 474.4 1.07%

1981 4Q 0.0 31.8 30.8 0.09% 1998 3Q 5.8 560.0 494.1 1.17%

1982 1Q 0.1 32.4 31.3 0.28% 1998 4Q 7.1 571.0 512.7 1.38%

1982 2Q 0.5 33.1 31.9 1.62% 1999 1Q 10.7 595.9 556.1 1.93%

1982 3Q 0.5 33.9 32.6 1.63% 1999 2Q 17.1 621.7 584.1 2.93%

1982 4Q 0.7 34.6 33.2 2.22% 1999 3Q 21.2 643.2 601.6 3.52%

1983 1Q 0.7 35.7 34.1 1.98% 1999 4Q 24.9 651.7 611.4 4.08%

1983 2Q 0.3 37.2 35.2 0.81% 2000 1Q 24.7 668.2 632.1 3.91%

1983 3Q 0.6 38.8 36.3 1.70% 2000 2Q 26.3 668.9 645.3 4.08%

1983 4Q 0.4 40.3 37.4 1.08% 2000 3Q 25.6 673.5 658.4 3.88%

1984 1Q 0.5 43.0 39.3 1.17% 2000 4Q 30.0 667.9 659.8 4.54%

1984 2Q 0.5 46.8 42.0 1.14% 2001 1Q 39.1 703.6 685.9 5.70%

1984 3Q 0.3 50.7 44.7 0.58% 2001 2Q 51.5 731.2 700.1 7.35%

1984 4Q 0.5 54.6 47.4 1.01% 2001 3Q 61.5 730.2 701.8 8.76%

1985 1Q 0.6 59.6 51.3 1.07% 2001 4Q 64.6 737.3 702.6 9.20%

1985 2Q 1.1 65.8 56.3 2.00% 2002 1Q 78.5 732.8 718.2 10.93%

1985 3Q 1.9 72.1 61.4 3.14% 2002 2Q 90.1 807.6 769.4 11.71%

1985 4Q 2.3 78.3 66.4 3.45% 2002 3Q 108.3 825.8 778.0 13.92%

1986 1Q 2.4 88.2 73.9 3.27% 2002 4Q 122.9 852.8 795.0 15.45%

1986 2Q 2.2 102.0 83.9 2.57% 2003 1Q 102.8 857.2 795.0 12.93%

1986 3Q 3.4 115.7 93.9 3.66% 2003 2Q 83.4 876.3 841.9 9.91%

1986 4Q 3.0 129.4 103.8 2.89% 2003 3Q 62.3 872.8 849.3 7.33%

1987 1Q 3.1 141.9 115.0 2.73% 2003 4Q 37.4 881.3 867.0 4.32%

1987 2Q 7.3 153.1 127.5 5.74% 2004 1Q 32.6 879.6 868.4 3.75%

1987 3Q 5.6 164.3 140.0 4.01% 2004 2Q 20.4 843.7 860.0 2.37%

1987 4Q 7.3 175.6 152.5 4.78% 2004 3Q 10.0 849.9 861.4 1.16%

1988 1Q 7.4 184.3 163.1 4.53% 2004 4Q 10.9 847.8 864.6 1.26%

1988 2Q 4.4 190.5 171.8 2.54% 2005 1Q 8.7 851.9 865.8 1.00%

1988 3Q 4.5 196.7 180.5 2.48% 2005 2Q 8.1 938.0 890.9 0.91%

1988 4Q 3.0 202.9 189.2 1.59% 2005 3Q 18.6 904.5 877.2 2.12%

1989 1Q 3.4 210.5 197.4 1.74% 2005 4Q 22.8 878.0 862.9 2.64%

1989 2Q 3.4 219.4 205.0 1.65% 2006 1Q 24.3 854.2 853.1 2.85%

1989 3Q 6.3 228.4 212.5 2.94% 2006 2Q 23.1 856.5 897.3 2.58%

1989 4Q 8.3 237.3 220.1 3.78% 2006 3Q 11.9 855.8 880.1 1.35%

1990 1Q 11.9 238.3 224.4 5.31% 2006 4Q 6.4 875.9 877.0 0.73%

1990 2Q 15.4 231.3 225.4 6.85% 2007 1Q 3.7 873.2 863.7 0.43%

1990 3Q 13.8 224.3 226.3 6.11% 2007 2Q 6.4 866.4 861.4 0.74%

1990 4Q 17.9 217.2 227.3 7.88% 2007 3Q 5.8 863.6 859.7 0.67%

1991 1Q 23.5 212.6 225.5 10.42% 2007 4Q 4.3 888.0 881.9 0.49%

1991 2Q 21.8 210.4 220.9 9.88% 2008 1Q 7.9 870.7 872.0 0.91%

1991 3Q 22.7 208.2 216.2 10.51% 2008 2Q 12.2 902.0 884.2 1.38%

1991 4Q 18.6 206.0 211.6 8.80% 2008 3Q 23.2 925.1 894.4 2.59%

1992 1Q 12.2 204.9 208.8 5.86% 2008 4Q 49.6 928.0 908.0 5.46%

1992 2Q 10.3 204.9 207.7 4.96% 2009 1Q 83.1 933.1 901.9 9.22%

1992 3Q 8.5 204.9 206.6 4.12% 2009 2Q 110.1 980.0 941.0 11.70%

1992 4Q 6.9 204.9 205.5 3.34% 2009 3Q 104.9 1003.2 964.1 10.88%

1993 1Q 4.1 210.2 207.5 1.96% 2009 4Q 90.9 1011.8 969.9 9.37%

1993 2Q 4.8 220.7 212.8 2.25% 2010 1Q 54.9 1026.1 979.6 5.60%

1993 3Q 3.9 231.2 218.1 1.80% 2010 2Q 22.0 1029.0 1004.5 2.19%

1993 4Q 4.1 241.7 223.3 1.83% 2010 3Q 20.4 1061.3 1032.2 1.98%

1994 1Q 4.1 251.4 230.8 1.76% 2010 4Q 16.3 1068.4 1040.1 1.56%

1994 2Q 2.0 260.3 240.5 0.83% 2011 1Q 18.4 1089.1 1057.6 1.74%

1994 3Q 2.4 269.3 250.2 0.95% 2011 2Q 18.7 1115.2 1072.1 1.74%

1994 4Q 2.2 278.2 259.9 0.86% 2011 3Q 19.7 1091.1 1076.2 1.83%

1995 1Q 3.6 285.7 268.6 1.35% 2011 4Q 19.6 1088.6 1078.5 1.82%

1995 2Q 4.9 292.0 276.2 1.78% 2012 1Q 21.4 1110.9 1100.0 1.94%

1995 3Q 5.5 298.2 283.7 1.93% 2012 2Q 24.2 1112.0 1113.6 2.17%

1995 4Q 6.8 304.5 291.3 2.33% 2012 3Q 21.6 1177.9 1134.5 1.90%

1996 1Q 5.6 314.6 300.1 1.87% 2012 4Q 19.8 1211.6 1150.1 1.72%

1996 2Q 4.8 328.4 310.2 1.55% 2013 1Q 15.9 1256.0 1183.4 1.35%

1996 3Q 4.7 342.3 320.3 1.47% Source: Credit Suisse

04 April 2013


Exhibit 22: Credit Suisse Quarterly Default Rates, Annualized

Year Q1 Q2 Q3 Q4

1980 1.68% 0.00% 1.56% 0.00%

1981 0.00% 0.00% 0.00% 0.34%

1982 0.76% 5.24% 0.16% 2.73%

1983 0.00% 0.42% 3.65% 0.18%

1984 0.55% 0.70% 1.04% 1.79%

1985 4.29% 4.04% 5.76% 0.64%

1986 1.24% 1.55% 8.58% 0.55%

1987 1.17% 12.31% 1.29% 4.33%

1988 1.11% 3.23% 1.28% 0.75%

1989 1.80% 2.70% 6.26% 4.17%

1990 7.62% 8.43% 3.33% 11.80%

1991 18.79% 6.24% 5.28% 4.65%

1992 7.25% 2.65% 2.02% 1.48%

1993 1.81% 3.85% 0.29% 1.56%

1994 1.46% 0.00% 0.83% 1.15%

1995 3.23% 1.82% 1.50% 2.85%

1996 1.42% 0.64% 1.18% 2.20%

1997 1.93% 0.56% 1.03% 0.56%

1998 1.01% 1.77% 1.16% 1.09%

1999 3.83% 5.30% 3.78% 3.29%

2000 3.25% 5.77% 3.00% 5.64%

2001 8.47% 12.08% 8.34% 7.02%

2002 15.56% 17.35% 16.38% 12.99%

2003 3.20% 6.10% 6.01% 1.18%

2004 1.62% 0.88% 1.00% 1.62%

2005 0.65% 0.60% 5.41% 3.41%

2006 1.36% 0.06% 0.56% 1.00%

2007 0.12% 1.27% 0.18% 0.34%

2008 1.76% 3.18% 5.04% 11.72%

2009 16.08% 14.22% 2.54% 5.24%

2010 0.54% 0.46% 1.79% 3.40%

2011 1.30% 0.54% 2.04% 3.30%

2012 1.91% 1.55% 1.05% 2.41%

2013 0.47%

Average 3.45% 3.80% 3.13% 3.19%

Quarterly High Yield Bond Default Rate, Annualized


04 April 2013


Exhibit 23: Distribution of High Yield Default Recovery Rates: 1986 – March 2013

0

50

100

150

200

250

300

350

400

450

10% 20% 30% 40% 50% 60% 70% 80% 90% >90%

Fre

qu

en

cy

High Yield Bond Recovery Rate Bins


Exhibit 24: Distribution of High Yield Default Recovery Rates: LTM March 2013

0

1

2

3

4

5

6

7

8

9

10

10% 20% 30% 40% 50% 60% 70% 80% 90% >90%

Fre

qu

en

cy



Exhibit 25: Distribution of High Yield Default Recovery Rates: 1Q13

0

1

2

3

10% 20% 30% 40% 50% 60% 70% 80% 90% >90%

Fre

qu

en

cy



04

Ap

ril 20

13

Le

ve

rage

d F

ina

nce D

efa

ult R

evie

w

1

4

Industry

Exhibit 26: Default Rates Over Time by Industry: 1986 – March 2013

Aero

space

Chem

icals

Consum

er

Dura

ble

s

Consum

er

Non-D

ura

ble

s

Energ

y

Fin

ancia

l

Food a

nd D

rug

Food/T

obacco

Fore

st P

rod/C

onta

iners

Gam

ing/L

eis

ure

Health

care

Housin

g

Info

rmatio

n T

echnolo

gy

Manufa

ctu

ring

Media

/Tele

com

Meta

ls/M

inera

ls

Reta

il

Serv

ice

Tra

nsport

atio

n

Util

ity

Overa

ll

1986 0.45% 0.00% 0.00% 0.00% 4.70% 0.00% 0.00% 0.36% 0.00% 0.16% 0.00% 0.00% 0.00% 20.02% 0.00% 32.55% 0.66% 0.00% 0.00% 0.00% 2.89%

1987 0.00% 0.00% 0.00% 0.24% 28.19% 0.30% 0.00% 0.00% 0.00% 0.00% 28.19% 1.82% 2.05% 0.25% 1.45% 0.00% 0.00% 4.03% 0.69% 21.15% 4.78%

1988 1.06% 3.80% 0.00% 0.23% 0.48% 8.37% 0.28% 0.17% 0.00% 1.37% 3.42% 0.89% 0.00% 0.14% 2.14% 2.11% 5.59% 0.53% 0.32% 0.00% 1.59%

1989 6.76% 0.00% 0.00% 0.15% 0.00% 39.37% 5.44% 0.00% 0.00% 10.30% 0.87% 8.23% 1.02% 1.62% 3.40% 0.00% 1.13% 0.00% 1.29% 0.00% 3.78%

1990 19.71% 3.39% 35.49% 3.68% 0.75% 9.98% 1.33% 0.24% 0.64% 23.56% 0.37% 4.19% 16.73% 7.44% 2.53% 20.57% 33.44% 15.32% 2.39% 0.00% 7.88%

1991 17.47% 0.00% 9.93% 12.92% 19.13% 23.51% 0.96% 0.31% 5.31% 15.95% 14.74% 2.05% 18.79% 12.91% 3.72% 13.48% 19.79% 14.14% 1.75% 3.19% 8.80%

1992 0.00% 0.00% 0.00% 1.24% 2.19% 0.49% 2.83% 1.68% 0.00% 7.36% 4.96% 0.55% 7.21% 2.59% 2.93% 2.03% 14.66% 7.21% 0.00% 11.17% 3.34%

1993 0.00% 0.00% 0.00% 0.00% 4.30% 2.03% 0.43% 2.58% 0.43% 0.32% 0.72% 0.00% 18.19% 8.91% 0.62% 3.83% 0.41% 9.19% 0.00% 0.00% 1.83%

1994 5.75% 0.00% 0.00% 0.00% 0.49% 1.26% 2.10% 0.00% 1.12% 1.27% 0.00% 0.00% 1.70% 0.02% 0.66% 0.00% 2.25% 1.76% 0.00% 0.00% 0.86%

1995 0.00% 1.08% 0.00% 2.71% 0.44% 5.63% 12.89% 2.77% 0.00% 3.73% 0.80% 4.23% 4.22% 0.00% 0.85% 0.00% 7.67% 0.00% 0.78% 0.00% 2.33%

1996 0.00% 0.00% 0.00% 1.63% 0.49% 0.00% 0.45% 4.14% 1.47% 1.47% 0.00% 0.00% 0.00% 1.59% 1.63% 0.00% 1.01% 3.17% 2.77% 3.99% 1.37%

1997 0.00% 0.00% 0.00% 1.19% 0.00% 1.85% 1.34% 8.27% 0.00% 0.00% 0.00% 0.00% 0.00% 1.26% 0.62% 0.00% 3.63% 0.00% 1.72% 1.16% 0.90%

1998 0.00% 1.98% 0.00% 4.79% 0.49% 4.85% 7.55% 0.47% 0.51% 1.14% 0.57% 0.00% 0.00% 0.00% 1.40% 1.05% 0.00% 0.00% 0.79% 0.00% 1.38%

1999 0.00% 1.33% 24.91% 5.13% 11.04% 1.59% 13.15% 3.36% 0.59% 1.96% 10.43% 0.48% 2.45% 4.41% 2.17% 7.01% 7.26% 8.51% 4.43% 1.17% 4.08%

2000 0.83% 2.03% 2.12% 6.81% 0.60% 5.57% 11.77% 11.90% 3.76% 3.88% 4.23% 12.79% 10.01% 3.32% 2.65% 5.99% 6.64% 4.81% 10.90% 1.23% 4.54%

2001 5.58% 7.89% 8.08% 7.29% 0.00% 14.12% 2.59% 10.62% 12.16% 1.46% 1.97% 2.38% 14.09% 7.17% 11.25% 9.49% 2.18% 3.48% 11.68% 30.20% 9.20%

2002 21.87% 3.92% 0.00% 3.15% 2.66% 13.10% 1.85% 4.34% 4.51% 0.39% 0.32% 3.52% 3.20% 3.38% 37.49% 12.52% 11.32% 4.13% 2.99% 13.61% 15.45%

2003 3.58% 3.26% 0.00% 4.42% 3.40% 0.97% 10.72% 2.18% 1.02% 0.43% 10.54% 0.80% 5.50% 2.77% 5.28% 5.00% 2.40% 2.99% 3.19% 7.97% 4.32%

2004 9.93% 0.29% 0.00% 1.58% 0.48% 0.00% 0.00% 2.05% 1.20% 3.41% 0.00% 0.00% 0.00% 1.61% 1.57% 0.53% 0.68% 1.52% 1.41% 0.00% 1.26%

2005 19.23% 0.00% 8.73% 0.13% 0.00% 3.30% 1.92% 0.00% 1.14% 0.00% 0.71% 0.00% 0.00% 2.62% 3.95% 1.14% 0.71% 0.00% 5.21% 5.54% 2.64%

2006 0.00% 0.00% 3.62% 1.07% 0.00% 0.19% 0.00% 0.51% 2.00% 0.35% 0.00% 0.67% 0.00% 0.44% 0.72% 0.00% 0.00% 0.74% 3.81% 0.00% 0.73%

2007 0.00% 0.00% 5.53% 0.65% 0.00% 3.29% 0.23% 0.46% 0.56% 1.27% 0.35% 0.00% 0.00% 0.00% 0.32% 0.00% 1.38% 0.00% 0.91% 0.00% 0.49%

2008 0.00% 0.00% 0.00% 1.61% 0.99% 54.19% 0.00% 4.26% 5.29% 10.63% 0.00% 7.48% 0.00% 0.63% 2.40% 0.00% 0.62% 0.45% 1.97% 0.00% 5.46%

2009 0.00% 16.32% 13.23% 5.98% 1.68% 13.37% 0.00% 1.16% 18.81% 19.92% 0.00% 4.46% 12.95% 1.36% 16.33% 4.69% 5.12% 0.00% 26.34% 0.55% 9.37%

2010 0.00% 0.00% 0.00% 0.00% 0.74% 1.10% 2.02% 0.00% 0.62% 0.00% 0.50% 1.05% 0.00% 1.27% 1.15% 1.23% 1.48% 11.68% 0.00% 6.05% 1.56%

2011 6.46% 0.00% 0.00% 0.00% 2.51% 1.01% 0.00% 1.52% 5.84% 0.73% 0.18% 7.11% 0.00% 0.00% 0.41% 0.00% 1.41% 0.44% 1.13% 7.77% 1.82%

2012 2.62% 0.61% 0.00% 4.16% 1.95% 4.62% 0.00% 1.11% 1.79% 1.66% 0.37% 0.00% 0.00% 0.00% 0.44% 0.41% 0.84% 0.37% 0.99% 11.21% 1.72%

LTM Mar 13 1.98% 0.00% 0.00% 0.00% 1.07% 4.95% 0.00% 1.02% 0.34% 0.68% 0.38% 0.00% 0.00% 0.00% 0.54% 0.40% 0.00% 0.57% 0.95% 11.02% 1.35%

Average: 4.40% 1.64% 3.99% 2.53% 3.17% 7.82% 2.85% 2.34% 2.47% 4.05% 3.02% 2.24% 4.22% 3.06% 3.88% 4.43% 4.72% 3.39% 3.16% 4.89% 3.78% Source: Credit Suisse

04

Ap

ril 20

13

Le

ve

rage

d F

ina

nce D

efa

ult R

evie

w

1

5

Exhibit 27: Default Loss Rates Over Time by Industry: 1986 – March 2013

Aero

space

Chem

icals

Consum

er

Dura

ble

s

Consum

er

Non-D

ura

ble

s

Energ

y

Fin

ancia

l

Food a

nd D

rug

Food/T

obacco

Fore

st P

rod/C

onta

iners

Gam

ing/L

eis

ure

Health

care

Housin

g

Info

rmatio

n T

echnolo

gy

Manufa

ctu

ring

Media

/Tele

com

Meta

ls/M

inera

ls

Reta

il

Serv

ice

Tra

nsport

atio

n

Util

ity

Overa

ll

1986 0.33% 0.00% 0.00% 0.00% 3.21% 0.00% 0.00% 0.11% 0.00% 0.00% 0.00% 0.00% 0.00% 10.82% 0.00% 21.04% 0.00% 0.00% 0.00% 0.00% 1.90%

1987 0.00% 0.00% 0.00% 0.17% 10.94% 0.21% 0.00% 0.00% 0.00% 0.00% 22.07% 0.00% 0.43% 0.00% 1.16% 0.00% 0.00% 3.83% 0.41% 9.44% 2.47%

1988 0.83% 2.66% 0.00% 0.20% 0.29% 6.88% 0.19% 0.07% 0.00% 0.32% 2.49% 0.77% 0.00% 0.00% 1.56% 1.21% 2.99% 0.42% 0.22% 0.00% 1.11%

1989 0.95% 0.00% 0.00% 0.10% 0.00% 30.38% 3.53% 0.00% 0.00% 3.62% 0.86% 6.31% 0.00% 1.45% 1.88% 0.00% 0.82% 0.00% 1.14% 0.00% 2.56%

1990 15.05% 1.61% 28.55% 2.31% 0.00% 7.80% 1.02% 0.22% 0.33% 19.57% 0.28% 3.93% 13.98% 5.46% 1.23% 14.06% 24.91% 11.83% 1.62% 0.00% 5.91%

1991 13.81% 0.00% 8.95% 10.52% 5.05% 19.01% 0.74% 0.20% 3.80% 9.54% 12.08% 1.06% 10.98% 7.12% 2.86% 7.82% 13.57% 11.38% 1.18% 1.70% 5.66%

1992 0.00% 0.00% 0.00% 0.80% 0.90% 0.25% 1.78% 0.40% 0.00% 4.03% 3.13% 0.40% 5.08% 1.37% 1.55% 1.34% 11.13% 4.16% 0.00% 4.62% 1.91%

1993 0.00% 0.00% 0.00% 0.00% 0.06% 1.41% 0.29% 1.59% 0.34% 0.21% 0.52% 0.00% 13.16% 4.50% 0.39% 2.98% 0.40% 5.99% 0.00% 0.00% 1.13%

1994 3.27% 0.00% 0.00% 0.00% 0.43% 0.00% 1.62% 0.00% 0.55% 0.68% 0.00% 0.00% 1.14% 0.01% 0.36% 0.00% 1.13% 1.16% 0.00% 0.00% 0.52%

1995 0.00% 0.38% 0.00% 1.92% 0.16% 2.83% 8.51% 1.13% 0.00% 2.44% 0.56% 2.80% 1.73% 0.00% 0.64% 0.00% 5.83% 0.00% 0.69% 0.00% 1.48%

1996 0.00% 0.00% 0.00% 1.34% 0.35% 0.00% 0.27% 2.40% 1.14% 0.64% 0.00% 0.00% 0.00% 1.05% 0.94% 0.00% 0.74% 1.15% 0.96% 1.90% 0.80%

1997 0.00% 0.00% 0.00% 0.73% 0.00% 1.14% 0.21% 3.35% 0.00% 0.00% 0.00% 0.00% 0.00% 0.76% 0.61% 0.00% 2.05% 0.00% 1.23% 1.23% 0.47%

1998 0.00% 1.10% 0.00% 3.12% 0.34% 3.44% 5.21% 0.13% 0.39% 0.38% 0.29% 0.00% 0.00% 0.00% 1.01% 0.89% 0.00% 0.00% 0.66% 0.00% 0.92%

1999 0.00% 0.98% 19.46% 4.10% 7.06% 1.35% 9.36% 2.42% 0.31% 1.52% 9.59% 0.46% 2.12% 2.79% 1.54% 5.61% 5.52% 4.74% 3.44% 0.94% 3.01%

2000 0.45% 1.67% 1.60% 5.86% 0.25% 4.29% 7.70% 8.09% 2.77% 2.74% 3.69% 9.88% 8.56% 3.10% 2.01% 5.30% 5.95% 3.74% 8.63% 0.67% 3.55%

2001 4.09% 6.03% 6.52% 6.19% 0.00% 3.43% 1.86% 8.08% 10.63% 1.24% 1.49% 1.32% 5.84% 6.25% 10.10% 8.51% 1.93% 3.32% 10.59% 17.21% 7.04%

2002 14.24% 3.14% 0.00% 2.92% 1.28% 11.39% 1.02% 2.77% 1.61% 0.18% 0.19% 2.42% 2.68% 2.76% 29.58% 8.95% 6.14% 3.91% 2.04% 9.10% 11.51%

2003 3.03% 2.23% 0.00% 3.42% 1.54% 0.81% 9.34% 1.27% 0.67% 0.21% 6.12% 0.47% 3.66% 2.01% 3.38% 3.21% 1.63% 1.91% 2.07% 2.15% 2.60%

2004 5.84% 0.23% 0.00% 1.07% 0.26% 0.00% 0.00% 1.53% 0.56% 0.42% 0.00% 0.00% 0.00% 0.66% 0.72% 0.20% 0.00% 0.00% 0.69% 0.00% 0.65%

2005 16.08% 0.00% 5.78% 0.02% 0.00% 0.64% 0.91% 0.00% 0.53% 0.00% 0.38% 0.00% 0.00% 1.33% 0.88% 0.32% 0.62% 0.00% 2.82% 3.14% 1.43%

2006 0.00% 0.00% 3.10% 0.61% 0.00% 0.14% 0.00% 0.47% 1.05% 0.01% 0.00% 0.09% 0.00% 0.11% 0.15% 0.00% 0.00% 0.63% 1.53% 0.00% 0.28%

2007 0.00% 0.00% 4.84% 0.12% 0.00% 2.43% 0.04% 0.13% 0.28% 0.20% 0.26% 0.00% 0.00% 0.00% 0.13% 0.00% 1.07% 0.00% 0.43% 0.00% 0.22%

2008 0.00% 0.00% 0.00% 1.12% 0.52% 30.44% 0.00% 3.12% 3.66% 7.60% 0.00% 6.03% 0.00% 0.60% 1.87% 0.00% 0.58% 0.42% 1.89% 0.00% 3.78%

2009 0.00% 13.31% 11.68% 4.96% 1.08% 7.05% 0.00% 1.15% 15.84% 16.26% 0.00% 2.74% 9.84% 0.77% 13.40% 4.34% 3.84% 0.00% 22.50% 0.22% 7.22%

2010 0.00% 0.00% 0.00% 0.00% 0.12% 0.72% 0.49% 0.00% 0.10% 0.00% 0.32% 0.76% 0.00% 0.70% 0.53% 0.57% 0.87% 3.62% 0.00% 2.59% 0.73%

2011 3.91% 0.00% 0.00% 0.00% 0.64% 0.75% 0.00% 0.98% 4.10% 0.32% 0.08% 3.51% 0.00% 0.00% 0.19% 0.00% 1.11% 0.25% 0.78% 3.31% 0.92%

2012 2.03% 0.32% 0.00% 1.47% 1.42% 1.98% 0.00% 0.57% 0.94% 0.43% 0.26% 0.00% 0.00% 0.00% 0.26% 0.28% 0.70% 0.23% 0.70% 3.22% 0.85%

LTM Mar 13 1.88% 0.00% 0.00% 0.00% 0.69% 1.72% 0.00% 0.53% 0.13% 0.67% 0.26% 0.00% 0.00% 0.00% 0.32% 0.27% 0.00% 0.02% 0.67% 3.17% 0.67%


04

Ap

ril 20

13

Le

ve

rage

d F

ina

nce D

efa

ult R

evie

w

1

6

Exhibit 28: Recovery Rates Over Time by Industry: 1986 – March 2013

Aero

space

Chem

icals

Consum

er

Dura

ble

s

Consum

er

Non-D

ura

ble

s

Energ

y

Fin

ancia

l

Food a

nd D

rug

Food/T

obacco

Fore

st P

rod/C

onta

iners

Gam

ing/L

eis

ure

Health

care

Housin

g

Info

rmatio

n T

echnolo

gy

Manufa

ctu

ring

Media

/Tele

com

Meta

ls/M

inera

ls

Reta

il

Serv

ice

Tra

nsport

atio

n

Util

ity

Overa

ll

1986 29.44% 37.96% 76.19% 15.79% 52.22% 40.06% 12.00% 40.05%

1987 37.22% 66.50% 29.80% 28.70% 84.63% 25.74% 10.50% 44.31% 60.54% 53.71%

1988 28.12% 36.25% 17.50% 44.95% 23.19% 41.67% 66.00% 84.25% 32.75% 20.69% 32.80% 47.30% 52.86% 25.63% 36.89% 35.93%

1989 93.48% 36.49% 28.95% 40.08% 70.98% 6.75% 30.21% 16.50% 51.99% 33.13% 18.00% 38.55%

1990 29.87% 58.08% 25.94% 43.57% 26.76% 30.73% 14.57% 55.50% 23.45% 30.05% 12.91% 22.23% 33.42% 56.55% 37.92% 31.41% 29.46% 39.09% 31.08%

1991 27.97% 16.96% 26.14% 78.32% 24.54% 29.17% 41.79% 35.47% 42.09% 24.89% 54.59% 47.87% 50.80% 28.96% 46.84% 37.56% 25.22% 38.89% 55.42% 41.49%

1992 40.75% 64.83% 54.00% 43.71% 82.97% 52.44% 44.04% 34.85% 36.40% 53.98% 52.22% 41.04% 29.97% 48.50% 63.14% 48.47%

1993 105.00% 36.72% 40.69% 45.25% 23.00% 41.00% 34.00% 33.72% 55.90% 42.71% 28.85% 10.00% 41.08% 44.51%

1994 48.38% 17.75% 28.28% 56.09% 52.44% 38.90% 51.91% 50.31% 56.28% 40.00% 44.90%

1995 69.00% 35.50% 70.62% 55.23% 39.35% 65.05% 40.94% 36.00% 39.90% 66.59% 29.70% 29.30% 17.00% 42.44%

1996 20.67% 35.00% 45.00% 47.75% 27.50% 62.92% 39.72% 45.96% 31.76% 70.00% 69.83% 57.47% 46.64%

1997 45.00% 43.78% 90.63% 65.00% 46.33% 8.66% 48.88% 34.17% 0.00% 53.71%

1998 50.00% 40.27% 35.00% 34.21% 36.63% 77.66% 30.00% 72.50% 55.00% 31.08% 20.25% 22.84% 37.69%

1999 32.19% 23.50% 24.71% 41.24% 19.35% 34.03% 33.17% 53.50% 28.57% 12.70% 10.00% 16.74% 41.60% 34.69% 25.92% 29.05% 48.55% 27.96% 24.00% 31.27%

2000 50.00% 22.55% 30.00% 18.93% 63.29% 27.70% 39.11% 36.18% 30.75% 34.14% 17.10% 27.06% 18.40% 11.90% 28.52% 16.93% 14.81% 27.51% 25.27% 51.87% 26.47%

2001 32.14% 27.87% 24.50% 19.93% 79.41% 33.50% 29.14% 18.33% 19.16% 28.29% 49.56% 62.28% 16.78% 15.06% 15.71% 17.00% 8.29% 14.03% 46.64% 27.99%

2002 39.37% 24.72% 11.62% 57.74% 17.48% 49.54% 41.92% 69.46% 60.00% 44.50% 35.49% 21.11% 22.87% 25.19% 33.97% 50.29% 10.61% 37.27% 37.27% 29.96%

2003 20.35% 36.24% 26.93% 58.63% 21.44% 18.05% 47.30% 41.38% 58.71% 46.07% 46.49% 36.27% 32.66% 39.71% 40.83% 35.20% 41.28% 40.60% 77.21% 44.30%

2004 45.50% 25.00% 38.07% 50.41% 30.79% 58.88% 94.11% 64.76% 58.03% 67.79% 56.48% 52.94%

2005 20.92% 39.81% 90.25% 85.08% 57.00% 58.49% 51.37% 54.52% 81.41% 75.91% 19.50% 50.36% 47.75% 50.54%

2006 19.25% 47.83% 32.20% 12.00% 53.52% 102.98% 91.14% 79.00% 83.76% 20.36% 64.02% 66.20%

2007 17.54% 83.32% 29.79% 85.20% 74.00% 54.22% 89.13% 30.50% 64.50% 27.33% 58.05% 59.64%

2008 35.63% 52.58% 47.34% 31.66% 35.16% 32.82% 23.65% 10.00% 25.86% 11.00% 10.00% 8.60% 34.83%

2009 22.87% 13.67% 22.04% 41.60% 50.73% 6.06% 20.25% 22.33% 43.69% 28.54% 49.21% 22.97% 11.85% 27.16% 18.61% 65.47% 27.36%

2010 88.43% 38.83% 81.63% 87.66% 41.75% 32.75% 51.00% 59.42% 58.50% 47.15% 74.04% 62.66% 58.37%

2011 44.11% 78.80% 30.36% 41.96% 35.23% 61.42% 59.97% 54.93% 58.31% 23.25% 47.50% 36.42% 61.47% 54.07%

2012 27.74% 52.23% 69.30% 31.32% 61.94% 54.50% 52.98% 78.16% 35.34% 45.42% 36.77% 22.16% 42.21% 33.71% 75.18% 55.41%

LTM Mar 13 9.75% 41.12% 69.75% 54.50% 69.00% 7.18% 35.34% 44.93% 36.77% ###### 33.71% 75.18% 54.90%


04 April 2013


Exhibit 29: LTM March 2013 Defaults by Industry Summary Number of Average Average Average Defaulted Default Default Overall

Defaulted Years to Coupon Recovery Loss of Amount Default Loss of Loss of Default

Issues Industry Default Payment Rate Principal ($ millions) Rate Principal Coupon Loss Rate

3 Aerospace 5.1 9.04% 9.75% 90.25% 631 1.98% 1.79% 0.09% 1.88%

0 Chemicals 0 0.00% 0.00% 0.00% 0.00%

0 Consumer Durables 0 0.00% 0.00% 0.00% 0.00%

0 Consumer Non-Durables 0 0.00% 0.00% 0.00% 0.00%

2 Energy 2.7 10.81% 41.12% 58.88% 1,800 1.07% 0.63% 0.06% 0.69%

7 Financial 4.9 9.14% 69.75% 30.25% 3,781 4.95% 1.50% 0.23% 1.72%

0 Food And Drug 0 0.00% 0.00% 0.00% 0.00%

2 Food/Tobacco 2.1 12.25% 54.50% 45.50% 437 1.02% 0.46% 0.06% 0.53%

1 Forest Prod/Containers 5.8 11.38% 69.00% 31.00% 158 0.34% 0.11% 0.02% 0.13%

1 Gaming/Leisure 2.1 12.00% 7.18% 92.82% 366 0.68% 0.63% 0.04% 0.67%

2 Healthcare 4.3 10.63% 35.34% 64.66% 344 0.38% 0.24% 0.02% 0.26%

0 Housing 0 0.00% 0.00% 0.00% 0.00%

0 Information Technology 0 0.00% 0.00% 0.00% 0.00%

0 Manufacturing 0 0.00% 0.00% 0.00% 0.00%

5 Media/Telecom 5.0 10.68% 44.93% 55.07% 1,018 0.54% 0.30% 0.03% 0.32%

1 Metals/Minerals 2.2 8.25% 36.77% 63.23% 250 0.40% 0.25% 0.02% 0.27%

0 Retail 0 0.00% 0.00% 0.00% 0.00%

1 Service 6.8 8.75% 100.00% 0.00% 361 0.57% 0.00% 0.02% 0.02%

3 Transportation 10.1 8.13% 33.71% 66.29% 510 0.95% 0.63% 0.04% 0.67%

13 Utility 8.0 7.94% 75.18% 24.82% 6,290 11.02% 2.73% 0.44% 3.17%

41 Overall 5.9 9.26% 54.90% 45.10% 15,945 1.35% 0.61% 0.06% 0.67% Source: Credit Suisse

Exhibit 30: Recovery Rates by Industry: LTM March 2013

100.0%

75.2%69.7% 69.0%

54.5%

44.9%41.1%

36.8% 35.3% 33.7%

9.8%7.2%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

Rec

ove

ry R

ate


04 April 2013


Exhibit 31: Principal Loss Rates and Recovery Rates by Industry: 1986 – LTM March 2013

Average Average Average

Default Principal Recovery Default

Industry Rate Loss Rate Rate Loss Rate

Aerospace 4.40% 63.52% 36.48% 3.06%

Chemical 1.64% 61.92% 38.08% 1.20%

Consumer Durables 3.99% 76.54% 23.46% 3.23%

Consumer Non-Durables 2.53% 62.20% 37.80% 1.90%

Energy 3.17% 44.71% 55.29% 1.31%

Financial 7.82% 59.64% 40.36% 5.02%

Food and Drug 2.85% 54.53% 45.47% 1.93%

Food/Tobacco 2.34% 53.24% 46.76% 1.45%

Forest Prod/Containers 2.47% 53.98% 46.02% 1.78%

Gaming/Leisure 4.05% 48.02% 51.98% 2.62%

Healthcare 3.02% 65.24% 34.76% 2.32%

Housing 2.24% 62.01% 37.99% 1.53%

Information Technology 4.22% 60.49% 39.51% 2.83%

Manufacturing 3.06% 58.25% 41.75% 1.92%

Media/Telecom 3.88% 57.61% 42.39% 2.83%

Metals/Minerals 4.43% 62.04% 37.96% 3.10%

Retail 4.72% 69.69% 30.31% 3.34%

Service 3.39% 62.07% 37.93% 2.24%

Transportation 3.16% 64.08% 35.92% 2.39%

Utility 4.89% 46.17% 53.83% 2.31%

Unweighted Average 3.61% 59.30% 40.70% 2.42% Source: Credit Suisse

Exhibit 32: Defaulted Debt by Industry, Weighted by Par Amount

LTM March 2013 1980 –March 2013

Utility40%

Financial24%

Energy11%

Media/Telecom6%

Aerospace4%

Transportation3%

Food/Tobacco3%

Gaming/Leisure2%

Service2% Healthcare

2%

Metals/Minerals2%

Forest Prod/Containers1.0%

Aerospace3.3%

Chemical1.5%

Consumer Durables0.6%

Consumer Non-Durables2.5%

Energy4.3%

Financial11.2%

Food and Drug1.7%

Food/Tobacco2.4%


Gaming/Leisure4.6%

Healthcare2.1%

Housing2.6%

Information Technology2.9%

Manufacturing1.9%

Media/Telecom31.5%

Metals/Minerals2.9%

Retail3.7%

Service2.5%

Transportation6.0%

Utility7.4%


04 April 2013


Exhibit 33: Average Years to Default by Industry: LTM March 2013

2.1 2.1 2.22.7

4.34.9 5.0 5.1

5.8

6.8

8.0

10.1

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Ye

ars


Exhibit 34: Average Years to Default by Industry: 1980 – March 2013

3.1

3.8 3.94.1 4.2 4.2 4.2 4.3 4.5

4.75.0 5.0

5.2 5.2 5.35.6 5.7

6.06.4

6.7

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Ye

ars


04 April 2013


Ratings

Exhibit 35: Defaulted Debt by Original Issue Rating, Weighted by Par Amount

LTM March 2013 1980 – March 2013

A and above3%

BBB (incl. Split BBB)16%

BB (incl. Split BB)21%

B 18%

CCC (incl. Split B)38%

Not Rated / Distressed4%

A and above12.0%

BBB (incl. Split BBB)15.7%

BB (incl. Split BB)11.4%

B 39.9%

CCC (incl. Split B)13.3%

Not Rated / Distressed7.6%


Exhibit 36: LTM March 2013 Defaults by Original-Issue Rating Summary

Number of Average Average Average Defaulted Default Default Overall


Issues Rating Default Payment Rate Principal ($ millions) Rate Principal Coupon Loss Rate

2 A and above 10.0 6.97% 95.08% 4.92% 540 0.01% 0.00% 0.00% 0.00%

9 BBB (incl. Split BBB) 9.8 7.79% 75.85% 24.15% 2,566 0.09% 0.02% 0.00% 0.02%

6 BB (incl. Split BB) 5.2 8.33% 42.25% 57.75% 3,346 0.88% 0.51% 0.04% 0.54%

9 B 4.7 9.40% 49.97% 50.03% 2,793 0.65% 0.32% 0.03% 0.35%

12 CCC (incl. Split B) 4.1 10.52% 55.82% 44.18% 6,077 2.96% 1.31% 0.16% 1.46%

3 Not Rated / Distressed 4.3 11.67% 22.62% 77.38% 622 2.00% 1.55% 0.12% 1.67%


Exhibit 37: Share of Annual Defaults (Par Value): BB & Above vs. B & Below Securities: 1982 – March 2013

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Sha

re o

f A

nnua

l Def

aults

BB & Above


04 April 2013


Exhibit 38: Default and Default Loss Rates by Original-Issue Rating: 1980 – LTM March 2013

Default Rates by Rating Default Loss Rates by Rating

Year BBB BB B CCC Not Rated Year BBB BB B CCC Not Rated B vs. BB

1980 0.00% 0.85% 2.30% 0.00% 0.00% 1980 0.00% 0.66% 1.97% 0.00% 0.00% 1.31%

1981 0.00% 0.00% 0.00% 0.00% 2.01% 1981 0.00% 0.00% 0.00% 0.00% 2.26% 0.00%

1982 0.37% 0.90% 2.90% 0.00% 0.00% 1982 0.20% 0.55% 1.95% 0.00% 0.00% 1.40%

1983 0.58% 5.40% 3.52% 0.00% 0.00% 1983 0.25% 2.61% 1.87% 0.00% 0.00% -0.74%

1984 0.08% 0.55% 2.20% 0.00% 0.00% 1984 0.03% 0.24% 1.04% 0.00% 0.00% 0.80%

1985 0.70% 4.73% 2.80% 1.76% 2.92% 1985 0.36% 2.72% 1.76% 1.31% 2.16% -0.95%

1986 0.00% 1.48% 2.00% 32.61% 1.40% 1986 0.00% 0.89% 1.32% 25.41% 1.09% 0.43%

1987 0.43% 0.98% 3.50% 28.02% 0.17% 1987 0.19% 0.47% 1.84% 17.33% 0.11% 1.37%

1988 0.00% 1.08% 1.20% 26.78% 7.30% 1988 0.00% 0.67% 0.82% 21.73% 5.93% 0.15%

1989 0.36% 2.63% 5.50% 4.77% 0.57% 1989 0.19% 1.60% 3.68% 3.78% 0.45% 2.08%

1990 1.06% 5.03% 7.60% 53.40% 3.31% 1990 0.65% 3.41% 5.67% 47.12% 2.92% 2.26%

1991 0.60% 5.53% 10.50% 67.26% 15.51% 1991 0.31% 3.20% 6.69% 50.67% 11.69% 3.49%

1992 1.28% 5.16% 8.65% 59.35% 6.01% 1992 0.61% 2.73% 5.02% 40.52% 4.10% 2.29%

1993 0.00% 1.84% 2.40% 0.87% 1.24% 1993 0.00% 1.04% 1.49% 0.64% 0.91% 0.45%

1994 0.00% 1.16% 1.50% 0.84% 0.88% 1994 0.00% 0.65% 0.92% 0.61% 0.64% 0.28%

1995 0.00% 0.34% 1.87% 2.91% 3.70% 1995 0.00% 0.20% 1.20% 2.21% 2.81% 1.01%

1996 0.00% 1.28% 1.68% 1.49% 29.73% 1996 0.00% 0.67% 0.97% 1.02% 20.36% 0.30%

1997 0.27% 0.70% 1.40% 2.48% 1.04% 1997 0.11% 0.33% 0.72% 1.51% 0.63% 0.39%

1998 0.14% 0.51% 1.56% 2.84% 1.54% 1998 0.10% 0.36% 1.03% 1.75% 1.14% 0.66%

1999 0.30% 2.90% 4.90% 3.36% 3.89% 1999 0.21% 1.82% 3.71% 2.73% 3.28% 1.88%

2000 0.70% 1.89% 4.04% 5.01% 15.83% 2000 0.55% 1.48% 3.16% 3.62% 12.74% 1.68%

2001 1.96% 3.24% 7.89% 16.83% 19.12% 2001 1.04% 2.67% 6.74% 14.81% 16.34% 4.07%

2002 4.36% 8.03% 12.66% 11.06% 24.25% 2002 3.23% 6.09% 9.40% 8.64% 19.77% 3.31%

2003 1.82% 1.94% 3.87% 8.99% 6.82% 2003 0.76% 1.08% 2.80% 5.85% 4.52% 1.72%

2004 0.10% 0.83% 1.50% 1.90% 2.15% 2004 0.07% 0.46% 0.71% 1.10% 1.27% 0.25%

2005 0.64% 2.45% 3.36% 0.90% 0.54% 2005 0.34% 1.68% 1.44% 0.53% 0.46% -0.24%

2006 0.05% 0.23% 1.07% 0.52% 0.11% 2006 0.02% 0.06% 0.43% 0.25% 0.05% 0.36%

2007 0.00% 0.03% 0.69% 0.24% 12.78% 2007 0.00% 0.02% 0.27% 0.13% 5.30% 0.25%

2008 0.51% 1.89% 2.66% 3.05% 12.93% 2008 0.35% 1.02% 2.14% 1.93% 11.27% 1.12%

2009 0.67% 2.46% 9.95% 13.29% 8.68% 2009 0.55% 1.76% 8.20% 10.26% 6.44% 6.44%

2010 0.02% 0.29% 1.78% 2.61% 6.84% 2010 0.00% 0.09% 0.66% 1.85% 2.73% 0.57%

2011 0.08% 0.66% 1.99% 3.83% 2.05% 2011 0.05% 0.37% 0.87% 1.70% 0.77% 0.50%

2012 0.10% 1.89% 0.76% 3.11% 0.86% 2012 0.04% 0.98% 0.43% 1.47% 0.65% -0.55%

LTM Mar 13 0.09% 0.88% 0.65% 2.96% 2.00% LTM Mar 13 0.02% 0.54% 0.35% 1.46% 1.67% -0.19%

Average 0.51% 2.05% 3.55% 10.68% 5.77% Average 0.30% 1.27% 2.39% 8.00% 4.25% 1.12% Source: Credit Suisse

Exhibit 39: Default Rates by Original-Issue Rating: 1980 – March 2013

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

LT

M M

ar

13

B

BB

BBB

(1) Default rates represent the percentage defaulted in the year shown, of all bonds with the given issuance rating at the time of default


04 April 2013


Exhibit 40: Recovery Rates by Original-Issue Rating: 1998 – March 2013

Year BBB BB B CCC Not Rated B vs. BB

1998 33.50% 34.50% 39.75% 39.39% 30.99% 5.25%

1999 33.24% 41.58% 29.65% 24.84% 20.25% -11.93%

2000 24.60% 26.42% 26.91% 31.84% 22.94% 0.49%

2001 50.43% 22.69% 19.79% 15.92% 19.56% -2.89%

2002 30.00% 28.72% 30.54% 26.17% 22.47% 1.82%

2003 62.29% 49.57% 32.43% 38.40% 38.56% -17.14%

2004 27.00% 49.39% 57.00% 48.45% 45.05% 7.62%

2005 50.07% 35.76% 62.16% 46.96% 18.25% 26.41%

2006 58.91% 77.29% 64.99% 56.96% 65.50% -12.31%

2007 33.24% 38.19% 66.46% 46.73% 63.50% 28.27%

2008 35.44% 49.80% 24.43% 41.64% 17.88% -25.37%

2009 21.49% 32.23% 22.38% 27.92% 30.87% -9.85%

2010 102.54% 73.08% 67.56% 34.97% 65.79% -5.52%

2011 45.60% 48.10% 61.01% 61.14% 66.44% 12.91%

2012 69.18% 52.49% 48.81% 58.05% 30.34% -3.68%

LTM Mar 13 75.85% 42.25% 49.97% 55.82% 22.62% 7.71%

Average 47.09% 43.88% 43.99% 40.95% 36.31% 0.11% Source: Credit Suisse

Exhibit 41: Recovery Rates by Original-Issue Rating: LTM March 2013

95.1%

75.8%

42.3%

50.0%

55.8%

22.6%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

A and above BBB (incl. Split BBB) BB (incl. Split BB) B CCC (incl. Split B) Not Rated / Distressed

Rec

ove

ry R

ate


04 April 2013


Seniority

Exhibit 42: Defaulted Debt by Seniority, Weighted by Par Amount


Senior Secured42%

Senior Unsecured42%

Senior Subordinate14%

Junior Subordinate2%

Senior Secured12.6%

Senior Unsecured57.0%

Senior Subordinated19.8%

Jr Sub & Discount Nts10.6%


Exhibit 43: LTM March 2013 Defaults by Seniority Summary



Issues Seniority Default Payment Rate Principal ($ millions) Rate Principal Coupon Loss Rate

13 Senior Secured 5.1 10.74% 64.53% 35.47% 6,733 2.30% 0.82% 0.12% 0.94%

17 Senior Unsecured 6.3 8.10% 46.11% 53.89% 6,767 0.83% 0.45% 0.03% 0.48%

9 Senior Subordinate 6.4 8.84% 58.75% 41.25% 2,201 3.08% 1.27% 0.14% 1.40%

2 Junior Subordinate 6.2 11.50% 36.50% 63.50% 243 3.42% 2.17% 0.20% 2.37%


Exhibit 44: Default Rates by Seniority: 1980 – March 2013

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

Sr Sec Sr Unsec Sr Sub Jr Sub


04 April 2013


Exhibit 45: Default and Default Loss Rates by Seniority: 1980 – March 2013

Default Rates by Seniority Default Loss Rates by Seniority

Year Sr Sec Sr Unsec Sr Sub Jr Sub (1) Year Sr Sec Sr Unsec Sr Sub Jr Sub (1)

1980 0.00% 0.47% 2.62% 0.00% 1980 0.00% 0.38% 0.00% 0.00%

1981 0.00% 0.04% 0.34% 0.00% 1981 0.00% 0.03% 0.00% 0.00%

1982 0.00% 2.64% 2.19% 0.00% 1982 0.00% 1.69% 0.00% 0.00%

1983 1.21% 0.97% 1.92% 0.00% 1983 0.42% 0.34% 0.00% 0.00%

1984 1.36% 0.43% 3.02% 0.00% 1984 0.43% 0.23% 1.20% 0.00%

1985 0.00% 0.41% 15.84% 1.00% 1985 0.00% 0.25% 10.71% 0.61%

1986 1.45% 12.29% 6.42% 0.00% 1986 0.89% 7.51% 4.43% 0.00%

1987 5.91% 18.28% 2.26% 0.00% 1987 2.63% 7.72% 1.22% 0.00%

1988 0.98% 1.08% 2.58% 0.00% 1988 0.23% 0.78% 1.75% 0.00%

1989 6.58% 3.53% 4.61% 7.50% 1989 2.10% 2.37% 3.59% 5.14%

1990 4.65% 4.94% 7.78% 8.71% 1990 3.44% 3.59% 5.82% 7.02%

1991 8.98% 7.46% 12.02% 13.10% 1991 5.56% 3.95% 8.52% 9.84%

1992 3.31% 0.89% 3.80% 4.58% 1992 1.47% 0.58% 2.25% 3.11%

1993 0.52% 1.52% 2.14% 3.16% 1993 0.36% 0.87% 1.50% 1.95%

1994 1.38% 0.47% 0.54% 1.32% 1994 0.79% 0.23% 0.38% 0.92%

1995 2.03% 2.00% 2.65% 2.52% 1995 1.23% 1.25% 1.67% 0.00%

1996 2.58% 0.61% 1.35% 2.07% 1996 1.32% 0.34% 0.95% 0.97%

1997 0.67% 0.81% 1.18% 1.19% 1997 0.24% 0.34% 0.78% 0.52%

1998 2.51% 1.60% 0.40% 1.97% 1998 1.27% 1.09% 0.32% 1.43%

1999 7.02% 4.22% 3.66% 2.97% 1999 5.36% 2.87% 2.98% 2.34%

2000 4.42% 3.90% 4.99% 5.61% 2000 2.62% 3.11% 3.93% 4.79%

2001 14.30% 11.19% 4.92% 8.18% 2001 7.48% 8.61% 4.13% 6.80%

2002 9.88% 20.28% 3.08% 26.50% 2002 5.39% 15.35% 2.45% 20.41%

2003 6.07% 4.17% 2.51% 9.54% 2003 2.23% 2.49% 1.96% 6.08%

2004 4.82% 0.78% 0.56% 2.89% 2004 2.19% 0.44% 0.35% 1.17%

2005 1.89% 3.02% 0.93% 8.71% 2005 0.79% 1.79% 0.53% 1.97%

2006 1.26% 0.63% 0.75% 0.94% 2006 0.09% 0.23% 0.48% 0.25%

2007 0.71% 0.46% 0.55% 0.15% 2007 0.23% 0.21% 0.30% 0.03%

2008 4.85% 5.13% 7.28% 2.87% 2008 2.42% 3.23% 6.24% 2.78%

2009 7.86% 9.43% 8.27% 32.67% 2009 6.26% 6.88% 6.93% 30.24%

2010 0.94% 1.78% 1.28% 1.86% 2010 0.30% 0.79% 0.68% 1.97%

2011 3.67% 1.22% 1.40% 4.97% 2011 1.39% 0.66% 0.89% 4.73%

2012 2.88% 1.13% 3.72% 0.43% 2012 0.99% 0.75% 1.52% 0.33%

LTM Mar 13 2.30% 0.83% 3.08% 3.42% LTM Mar 13 0.94% 0.48% 1.40% 2.37%

Average 3.44% 3.78% 3.55% 4.67% Average 1.80% 2.40% 2.35% 3.46%(1) Includes Jr Sub, Zeros and Discount Nts Source: Credit Suisse

Exhibit 46: Recovery Rates by Seniority: 1980 – March 2013

49.0%

36.6%

32.7%

28.4%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Senior Secured Senior Unsecured Senior Subordinated Jr Sub & Discount Nts

Re

co

ve

ry R

ate


04 April 2013


Exhibit 47: Recovery Rates by Seniority: 1980 – March 2013

Year Sr Sec Sr Unsec Sr Sub Jr Sub (1) Overall

1980 24.93% 11.20% 19.44%

1981 12.00% 12.00%

1982 40.41% 32.75% 37.34%

1983 71.00% 71.17% 35.93% 51.57%

1984 73.07% 52.09% 66.75% 46.85% 56.28%

1985 44.15% 39.23% 45.10% 43.81%

1986 43.33% 44.26% 37.71% 38.10% 40.05%

1987 59.42% 63.24% 52.80% 31.81% 53.71%

1988 84.25% 33.33% 37.98% 34.25% 35.93%

1989 75.20% 38.52% 28.60% 37.74% 38.55%

1990 32.11% 32.95% 31.77% 25.69% 31.08%

1991 45.13% 52.13% 35.73% 31.09% 41.49%

1992 60.52% 40.52% 47.77% 38.00% 48.47%

1993 35.25% 48.81% 36.23% 44.42% 44.51%

1994 47.82% 56.90% 35.61% 37.51% 44.90%

1995 45.31% 42.75% 42.94% 42.44%

1996 54.80% 49.08% 33.97% 58.72% 46.64%

1997 70.00% 63.75% 39.87% 62.17% 53.71%

1998 55.27% 37.43% 25.43% 27.14% 37.69%

1999 29.46% 37.35% 23.92% 21.26% 31.27%

2000 46.43% 24.84% 26.33% 16.46% 26.47%

2001 52.61% 28.02% 21.15% 18.02% 27.99%

2002 50.60% 29.15% 25.84% 24.26% 29.96%

2003 68.45% 45.26% 27.42% 36.27% 44.30%

2004 59.00% 49.02% 44.00% 59.38% 52.94%

2005 63.67% 45.18% 48.56% 79.53% 50.54%

2006 98.85% 67.46% 41.55% 78.38% 66.20%

2007 72.91% 58.75% 49.24% 80.64% 59.64%

2008 55.40% 40.92% 18.85% 3.16% 34.83%

2009 25.46% 31.22% 20.63% 12.77% 27.36%

2010 74.04% 60.58% 51.26% 1.50% 58.37%

2011 67.10% 50.71% 41.80% 7.50% 54.07%

2012 70.87% 38.00% 63.35% 30.00% 55.41%

LTM Mar 13 64.53% 46.11% 58.75% 36.50% 54.90%

Average 58.39% 44.15% 38.50% 35.75% 42.76%(1) Includes Jr Sub, Zeros and Discount Nts

Recovery Rates by Seniority


04 April 2013


Reason for Default

Distressed exchanges comprised 20% of all defaults in the last 12 months compared to

the average of 17% since 1999. There were two issuers with high yield debt that

performed a distressed exchange in 1Q13, with an average recovery rate of 96.6%.

Exhibit 48: Defaulted Debt by Reason for Default, Weighted by Par Amount


Filed Bankruptcy68.6%

Distressed Exchange19.6%

Missed Coupon Pymt11.9%

Filed Bankruptcy58.0%

Missed Coupon Pymt22.1%

Distressed Exchange16.9%

Cross Default1.4%

Missed Principal Pymt1.4%

Ch. 7 / Liquidation0.1%


Exhibit 49: High Yield Default Rates with and without Distressed Exchanges: 1999 – LTM March 2013

4.08%4.54%

9.20%

15.45%

4.32%

1.26%

2.64%

0.73% 0.49%

5.46%

9.37%

1.56%1.82% 1.72%

1.35%

3.88%4.51%

8.90%

14.01%

3.76%

1.10%

1.85%

0.64% 0.46%

2.44%

8.18%

0.49%

1.41% 1.43%1.08%

0%

2%

4%

6%

8%

10%

12%

14%

16%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 LTM

Mar 13

Defa

ult

Rate

HY Default Rate HY Default Rate Excluding Distressed Exchanges


04 April 2013


Exhibit 50: Distressed Exchanges as a Percentage of All High Yield Defaults: 1999 – LTM March 2013

68.76%

0%

10%

20%

30%

40%

50%

60%

70%

80%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 LTMMar 13

% o

f H

igh

Yie

ld D

efa

ult

s

Distressed Exchanges as a % of HY Defaults

19.59%


Exhibit 51: LTM March 2013 Defaults by Reason for Default Summary

Number of Average Average Average Defaulted

Defaulted Years to Coupon Recovery Loss of Amount

Issues Reason Default Payment Rate Principal ($ millions)

22 Filed Bankruptcy 5.3 9.46% 52.64% 47.36% 10,931

8 Missed Coupon Pymt 6.9 9.44% 44.81% 55.19% 1,890

0 Missed Principal Pymt 0

11 Distressed Exchange 6.5 8.76% 66.15% 33.85% 3,124

0 Cross Default 0

0 Ch. 7 / Liquidation 0

41 Overall 5.9 9.26% 54.90% 45.10% 15,945 Source: Credit Suisse

Exhibit 52: Recovery Rates by Reason for Default: 1999 – March 2013

Year Filed Bankruptcy Missed cpn pymt Missed prin pymt Distressed Exchange Cross Default Ch. 7 / Liquidation

1999 33.35% 28.03% 35.56%

2000 20.91% 31.36% 7.25% 65.26% 45.00%

2001 31.43% 20.83% 56.59% 29.64% 69.33%

2002 30.06% 24.01% 30.90% 54.31% 21.78%

2003 47.22% 32.25% 83.53% 58.33% 42.80% 50.00%

2004 51.20% 49.57% 76.22%

2005 40.94% 56.73% 55.46% 81.41%

2006 64.68% 30.79% 82.85% 12.00%

2007 44.13% 67.24% 80.71%

2008 26.87% 30.11% 46.39%

2009 25.25% 16.95% 31.48% 45.10% 17.15%

2010 40.17% 49.96% 86.94%

2011 52.05% 50.46% 62.85% 59.93%

2012 53.50% 46.92% 73.28% 65.54%

LTM Mar 13 52.64% 44.81% 66.15%

Average 40.96% 38.67% 50.17% 62.29% 37.77% 35.67%

Recovery Rates by Reason for Default


04 April 2013


Exhibit 53: Default Percentage by Reason for Default: 1999 – March 2013

Year Filed Bankruptcy Missed cpn pymt Missed prin pymt Distressed Exchange Cross Default Ch. 7 / Liquidation

1999 56.79% 38.41% 0.00% 4.80% 0.00% 0.00%

2000 57.26% 40.10% 1.58% 0.70% 0.00% 0.36%

2001 66.64% 27.27% 2.51% 3.31% 0.26% 0.00%

2002 63.41% 25.40% 0.58% 9.50% 1.10% 0.00%

2003 47.40% 28.24% 3.66% 13.03% 7.02% 0.64%

2004 53.53% 34.08% 0.00% 12.39% 0.00% 0.00%

2005 60.64% 5.14% 4.30% 29.91% 0.00% 0.00%

2006 79.56% 5.79% 0.00% 12.31% 0.00% 2.33%

2007 57.41% 35.71% 0.00% 6.88% 0.00% 0.00%

2008 37.69% 6.90% 0.12% 55.29% 0.00% 0.00%

2009 64.67% 17.13% 2.01% 12.73% 3.47% 0.00%

2010 17.89% 13.35% 0.00% 68.76% 0.00% 0.00%

2011 57.36% 19.28% 1.02% 22.34% 0.00% 0.00%

2012 68.60% 13.83% 0.72% 16.84% 0.00% 0.00%

LTM Mar 13 68.56% 11.85% 0.00% 19.59% 0.00% 0.00%

Average 57.16% 21.50% 1.10% 19.23% 0.79% 0.22%

% of Defaults by Reason for Default


04 April 2013


Security Type

Exhibit 54: Defaulted Debt by Security Type, Weighted by Par Amount


Cash100.0%

Cash91.9%

Deferred8.1%


Exhibit 55: Cash Versus Deferred Default Rates: 1980 – March 2013 Deferred Deferred

Year Cash Deferred vs. Cash Year Cash Deferred vs. Cash

1980 0.80% 0.00% NA 1997 0.99% 0.43% -0.57%

1981 0.09% 0.00% NA 1998 1.25% 2.03% NA

1982 2.22% 0.00% NA 1999 4.25% 3.22% -1.03%

1983 1.08% 0.00% NA 2000 4.34% 5.49% 1.15%

1984 1.02% 0.00% NA 2001 9.23% 8.94% -0.28%

1985 3.42% 5.26% 1.84% 2002 14.16% 32.91% 18.75%

1986 2.91% 0.00% NA 2003 3.74% 19.10% 15.36%

1987 5.18% 0.97% -4.21% 2004 1.10% 5.00% 3.90%

1988 1.93% 0.11% -1.82% 2005 2.54% 5.57% 3.03%

1989 4.94% 0.32% -4.63% 2006 0.75% 0.09% -0.66%

1990 10.81% 0.57% -10.24% 2007 0.50% 0.30% -0.19%

1991 10.97% 1.80% -9.17% 2008 5.49% 3.58% -1.91%

1992 3.76% 0.71% -3.04% 2009 9.36% 10.21% 0.85%

1993 2.04% 0.23% -1.81% 2010 1.57% 0.86% -0.71%

1994 0.98% 0.26% -0.71% 2011 1.79% 7.86% 6.07%

1995 2.51% 1.49% -1.02% 2012 1.73% 0.00% -1.73%

1996 1.37% 1.38% 0.01% LTM Mar 13 1.35% 0.00% -1.35%

Average 3.53% 3.49% 0.22% Source: Credit Suisse

Exhibit 56: Cash Versus Deferred Default Rates: 1980 – March 2013

0%

5%

10%

15%

20%

25%

30%

35%

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

LTM

Mar

13

Defa

ult

Rate

Cash

Deferred


04 April 2013


Issue Size

Exhibit 57: Defaulted Debt by Size, Weighted by Par Amount


$300 MM and Over72%

$101 MM to $299 MM26%

$0 MM to $100 MM2%

$0 MM to $100 MM6.1%

$101 MM to $299 MM39.3%

$300 MM and Over54.6%


Exhibit 58: Issue Size Default Summary: LTM March 2013



Issues Size Default Payment Rate Principal ($ millions) Rate Principal Coupon Loss Rate

4 $0 MM to $100 MM 9.6 9.78% 51.12% 48.88% 269 7.54% 3.68% 0.37% 4.05%

20 $101 MM to $299 MM 5.0 9.59% 48.67% 51.33% 4,165 2.70% 1.38% 0.13% 1.51%

17 $300 MM and Over 6.2 8.76% 63.01% 36.99% 11,511 1.12% 0.42% 0.05% 0.46%


04 April 2013


Exhibit 59: Default Rates by Size: 1980 – March 2013

Default Rates by Size of Issue Recovery Rates by Size of Issue

Year $0 MM to $100 MM $101 MM to $299 MM $300 MM and Over

1980 3.88% 1.05% 0.00%

1981 0.75% 0.00% 0.00%

1982 12.91% 2.14% 0.00%

1983 6.90% 0.81% 0.00%

1984 6.80% 0.64% 0.00%

1985 16.61% 2.62% 1.16%

1986 9.46% 3.53% 0.00%

1987 9.63% 6.63% 2.83%

1988 12.25% 1.43% 0.36%

1989 16.46% 6.43% 0.96%

1990 23.21% 10.19% 4.96%

1991 30.05% 12.91% 3.23%

1992 11.04% 2.92% 2.40%

1993 4.40% 2.13% 0.61%

1994 2.24% 0.88% 0.33%

1995 2.75% 2.40% 2.12%

1996 1.27% 2.14% 0.41%

1997 0.98% 1.20% 0.48%

1998 0.51% 1.97% 0.87%

1999 2.48% 6.16% 2.13%

2000 3.31% 6.43% 2.90%

2001 5.42% 11.86% 7.51%

2002 3.31% 12.29% 18.89%

2003 3.62% 5.50% 3.68%

2004 2.79% 2.68% 0.43%

2005 1.59% 2.79% 2.60%

2006 4.65% 1.28% 0.40%

2007 2.74% 1.03% 0.27%

2008 12.51% 4.94% 5.53%

2009 34.81% 8.95% 9.28%

2010 5.90% 1.57% 1.53%

2011 16.65% 3.39% 1.43%

2012 8.61% 4.00% 1.33%

LTM Mar 13 7.54% 2.70% 1.12%


04 April 2013


Exhibit 60: Recovery Rates by Size: 1980 – March 2013

Recovery Rates by Size of Issue

Year $0 MM to $100 MM $101 MM to $299 MM $300 MM and Over

1980 19.44%

1981 12.00%

1982 36.13% 45.20%

1983 51.57%

1984 56.76% 50.50%

1985 42.93% 52.01% 32.00%

1986 40.35% 38.62%

1987 47.07% 63.07% 77.85%

1988 35.09% 38.79% 53.00%

1989 34.91% 47.91% 22.58%

1990 30.17% 35.52% 18.11%

1991 44.63% 37.28% 30.62%

1992 46.82% 53.21% 44.71%

1993 37.10% 66.86% 43.17%

1994 38.56% 54.41% 38.57%

1995 44.63% 41.51% 39.09%

1996 41.70% 49.97% 31.05%

1997 63.18% 47.11% 44.75%

1998 43.14% 37.84% 26.94%

1999 34.36% 32.35% 15.43%

2000 31.77% 24.70% 29.91%

2001 21.65% 29.53% 26.10%

2002 36.36% 32.88% 23.88%

2003 44.48% 41.93% 49.76%

2004 58.23% 50.89% 61.67%

2005 55.31% 45.32% 59.20%

2006 74.81% 62.77% 58.67%

2007 59.32% 64.52% 28.56%

2008 26.06% 29.53% 42.47%

2009 35.26% 22.44% 29.15%

2010 55.68% 42.07% 75.50%

2011 39.75% 52.42% 72.43%

2012 51.12% 54.02% 58.21%

LTM Mar 13 51.12% 48.67% 63.01%


04 April 2013


Fallen Angel Impact on High Yield Default Rates

Exhibit 61: Original-Issue Investment Grade Defaults as a % of High Yield Defaults: 1982 – March 2013

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

10.79%


Exhibit 62: Default Rate and Default Rate Excl. Original Issue Investment-Grade, 1988 – March 2013

1.59%

3.78%

7.88%8.80%

3.34%

1.83%

0.86%

2.33% 1.37%

0.90%

1.38%

4.08%4.54%

9.20%

15.45%

4.32%

1.26%

2.64%

0.73% 0.49%

5.46%

9.37%

1.56% 1.82% 1.72% 1.35%1.37%

3.34%

7.44%7.61%

3.12%

1.91%

0.90%

2.40%

1.16% 1.03% 1.25%

3.99%4.17%

7.61%

11.77%

3.87%

1.30%2.56%

0.74% 0.60%

2.66%

8.13%

1.73% 1.81%

1.65%1.28%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

De

fau

lt R

ate

Credit Suisse Default Rate

Credit Suisse Default Rate (w/o Investment Grade Defaults)


04

Ap

ril 20

13

Le

ve

rage

d F

ina

nce D

efa

ult R

evie

w

3

4

Exhibit 63: LTM March 2013 High Yield Defaults

Dat

e o

f D

efau

lt

Issu

er

Co

up

on

Mat

uri

ty

Bo

nd

Typ

e

Ind

ust

ry

Ori

gin

al R

atin

g

Def

ault

ed A

mo

un

t ($

MM

)

Off

er P

rice

Pri

ce a

t D

efau

lt

Co

up

on

Lo

ss (

$MM

)

Pri

nci

pal

Lo

ss (

$MM

)

Rec

ove

ry R

ate

5/14/2012 Residential Capital 8.875 6/30/2015 Sr Nts FINANCIAL BBB 112.227 99.385



5/14/2012 Residential Capital 9.625 5/15/2015 Jr Sec 3rd Lien Nts FINANCIAL CCC/Split CCC 2120.452 65.000 96.250 102 -1,019 148.08%

5/21/2012 Houghton Mifflin Harcourt Publishers 10.500 6/1/2019 Sr Sec Nts MEDIA/TELECOM CCC/Split CCC 300.000 100.000 60.000 16 120 60.00%

7/9/2012 Patriot Coal 8.250 4/30/2018 Sr Nts METALS/MINERALS B 250.000 99.279 36.500 10 158 36.77%

8/4/2012 K-V Pharmaceutical 12.000 3/15/2015 Sr Sec Nts HEALTHCARE Not Rated 225.000 97.000 29.750 14 156 30.67%

8/17/2012 ATP Oil & Gas 11.875 5/1/2015 Sr Sec 2nd Lien Nts ENERGY Split B 1500.000 99.531 31.625 89 1,023 31.77%

8/22/2012 Broadview Networks Holdings 11.375 9/1/2012 Sr Sec Nts MEDIA/TELECOM B 300.000 100.000 66.000 17 102 66.00%

9/11/2012 Marsico Holdings 10.625 1/15/2020 Sr Nts FINANCIAL CCC/Split CCC 600.000 62.500 10.000 32 504 16.00%

9/15/2012 LifeCare Holdings 9.250 8/15/2013 Sr Sub Nts HEALTHCARE CCC/Split CCC 119.299 100.000 40.000 6 72 40.00%

11/1/2012 Homer City Funding 8.137 10/1/2019 Sr Sec Nts UTILITY BBB 174.000 100.000 107.500 7 -13 107.50%

11/1/2012 Homer City Funding 8.734 10/1/2026 Sr Sec Nts UTILITY BBB 465.976 100.000 109.500 20 -44 109.50%

11/14/2012 Overseas Shipholding Group 8.750 12/1/2013 Debs TRANSPORTATION Split BBB 63.603 99.678 31.250 3 44 31.35%

11/14/2012 Overseas Shipholding Group 7.500 2/15/2024 Sr Nts TRANSPORTATION BB 146.000 100.000 33.000 5 98 33.00%

11/14/2012 Overseas Shipholding Group 8.125 3/30/2018 Sr Nts TRANSPORTATION BB 300.000 98.563 36.250 12 190 36.78%

12/5/2012 Energy Future Holdings 10.875 11/1/2017 Sr Nts UTILITY Split B 94.263 100.000 92.000 5 8 92.00%

12/5/2012 Energy Future Holdings 11.250 11/1/2017 Sr PIK Election Nts UTILITY Split B 313.000 97.815 93.000 18 15 95.08%

12/5/2012 TXU 5.550 11/15/2014 Nts UTILITY Split BBB 234.000 99.798 87.000 6 30 87.18%



12/17/2012 Edison Mission Energy 7.500 6/15/2013 Sr Nts UTILITY B 500.000 100.000 53.750 19 231 53.75%

12/17/2012 Edison Mission Energy 7.750 6/15/2016 Sr Nts UTILITY B 500.000 100.000 53.750 19 231 53.75%

12/17/2012 Edison Mission Energy 7.000 5/15/2017 Sr Nts UTILITY Split BB 1200.000 100.000 54.000 42 552 54.00%



12/17/2012 Midwest Generation 8.560 1/2/2016 P-T Certs UTILITY Split A 345.170 100.000 97.000 15 10 97.00%

12/28/2012 LBI Media 8.500 8/1/2017 Sr Sub Nts MEDIA/TELECOM Split B 174.600 98.350 25.250 7 130 25.67%

12/28/2012 LBI Media Holdings 11.000 10/15/2013 Sr Disc Nts MEDIA/TELECOM Not Rated 30.900 58.456 30.000 2 22 30.00% Source: Credit Suisse

04

Ap

ril 20

13

Le

ve

rage

d F

ina

nce D

efa

ult R

evie

w

3

5

Exhibit 64: LTM March 2013 High Yield Defaults D

ate

of

Def

ault

Issu

er

Co

up

on

Mat

uri

ty

Bo

nd

Typ

e

Ind

ust

ry

Ori

gin

al R

atin

g

Def

ault

ed A

mo

un

t ($

MM

)

Off

er P

rice

Pri

ce a

t D

efau

lt

Co

up

on

Lo

ss (

$MM

)

Pri

nci

pal

Lo

ss (

$MM

)

Rec

ove

ry R

ate

1/4/2013 Radian Group 5.375 6/15/2015 Sr Nts FINANCIAL A 195.176 99.822 93.000 5 13 93.17%

1/15/2013 Geokinetics Holdings USA 9.750 12/15/2014 Sr Sec Nts ENERGY B 300.000 98.093 49.500 15 149 50.46%

3/1/2013 Education Management 8.750 6/1/2014 Sr Nts SERVICE Split B 361.293 100.000 100.000 16 0 100.00%

3/18/2013 Dex One 12.000 1/29/2017 Sr PIK Election Nts MEDIA/TELECOM CCC/Split CCC 212.500 100.000 43.000 13 121 43.00%

3/25/2013 Revel AC 12.000 3/15/2018 Sr Sec 2nd Lien PIK Election NtsGAMING/LEISURE Not Rated 365.738 97.500 7.000 22 339 7.18% Source: Credit Suisse

04 April 2013


1Q13 U.S. Institutional Leveraged Loan Defaults The U.S. institutional leveraged loan default rate decreased 1 bp to 1.87% for the 12-

month period ended March 2013 from 1.88% at the end of the prior quarter. (Note: the

prior quarter’s default rate was restated from 1.73% because additional information

became available from public sources.) Defaults in the 12-month period ended March

2013 were concentrated in media/telecom, gaming/leisure, and financials.

There were three issuers with leveraged loan debt that defaulted in the first quarter, with a

total face value of $4,825 million. This makes the quarterly leveraged loan default rate

0.7%, which is an annualized rate of 3.0%. Defaults in 1Q13 were concentrated

exclusively in media/telecom and gaming/leisure.

The average recovery rate (defined as price at the time of default) rose 712 bp to 59.97%

for the 12-month period ended March 2013 from 52.85% in 2012. This rise was caused by

the very high 61.5% second lien recovery rate, which was actually higher than the first lien

rate at 59.60%. This is the first time since 2004 that second lien recoveries were higher

than first lien recoveries. Both time periods had relatively small sample sizes, with just 21

facilities defaulting over the LTM period (and four of those facilities second liens).

Exhibit 65: Leveraged Loan Recovery Rates by Seniority

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

110%

Re

co

ve

ry R

ate Second

Lien

Overall

First Lien

59.60%

61.53%59.97%


04 April 2013


Exhibit 66: Historical and Projected Default Rates: Credit Suisse and Moody’s

Default Rate Summary Actual

2012

Credit Suisse US High Yield Default Rate 1.72% 1-2% 2-3%

Credit Suisse US Leveraged Loan Default Rate 1.88% 1-4% 3-6%

Credit Suisse Western European HY Default Rate 0.97% 1-2% 1-3%

Credit Suisse Western European LL Default Rate 6.69% 2-4% 2-6%

Projected 2013 Projected 2014

Source: Credit Suisse, Moody's

Exhibit 67: Leveraged Loan Default Rate: 1992 – LTM March 2013

0.45%

1.32%

0.55%0.85%

2.50%

5.29%

6.84%

8.10%

3.82%

1.01%1.55%

0.37%0.23%

2.91%

9.57%

2.61%

0.66%

1.88% 1.87%

0%

2%

4%

6%

8%

10%

12%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 LTM

Mar

'13

Lo

an

De

fau

lt R

ate

Defaulted loans defined as missed coupon, filed chapter 11, distressed exchange, or cross-defaults.


Exhibit 68: Dollar amount of Defaulted Institutional Loans, Default and Recovery Rate Defaulted Amount

($mm)

Market Size

($mm)

Market Size Midpoint

($mm)

Annual Default

Rate

Average Recovery

Rate

Average Default Loss

Rate

1995 104 23,038 23,038 0.45% 94.00% 0.03%

1996 375 33,748 28,393 1.32% 56.92% 0.57%

1997 238 52,642 43,195 0.55% 78.00% 0.12%

1998 599 88,004 70,323 0.85% 73.58% 0.23%

1999 2,678 126,088 107,046 2.50% 51.17% 1.22%

2000 7,160 144,803 135,445 5.29% 56.75% 2.29%

2001 9,773 141,040 142,921 6.84% 57.09% 2.93%

2002 11,412 140,695 140,867 8.10% 62.59% 3.03%

2003 6,285 188,229 164,462 3.82% 66.97% 1.26%

2004 2,506 307,222 247,725 1.01% 83.41% 0.17%

2005 5,550 407,742 357,482 1.55% 86.09% 0.22%

2006 1,886 617,292 512,517 0.37% 66.08% 0.12%

2007 1,699 840,571 728,931 0.23% 88.63% 0.03%

2008 24,652 855,918 848,245 2.91% 53.65% 1.35%

2009 78,194 778,860 817,389 9.57% 43.18% 5.44%

2010 18,575 642,299 710,579 2.61% 50.54% 1.29%

2011 4,138 612,166 627,232 0.66% 55.44% 0.29%

2012 11,669 631,546 621,856 1.88% 52.85% 0.88%

LTM Mar '13 11,773 652,695 629,544 1.87% 59.97% 0.75% Source: Credit Suisse

04 April 2013


Exhibit 69: Annual Leveraged Loan Recovery Rates: 1995 – LTM March 2013

94.0%

56.9%

78.0%73.6%

51.2%56.8% 57.1%

62.6%67.0%

83.4%86.1%

66.1%

88.6%

53.6%

43.2%50.5%

55.4%52.8%

60.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 LTM

Mar

'13

Lo

an R

eco

very

Rate



Second liens accounted for 19% of defaults by count (5% by face value) over the last 12

months. During this time period, first lien recovery rates averaged 59.6%, while second

lien recoveries averaged 61.5%. This is the first time since 2004 that second lien

recoveries were higher than first lien recoveries. Both time periods had relatively small

sample sizes, with just 21 facilities defaulting over the LTM period (and four of those

facilities’ second liens). This has raised the overall recovery rate to 60.0%, from 52.8%

last quarter, which is more in line with the long-run average of 65%.

Exhibit 70: First Lien Leveraged Loan Recovery Rates: 1995 – LTM March 2013

94.0%

56.9%

78.0%73.6%

51.2%56.8% 57.1%

62.7% 66.0%

82.3%

90.3%83.6%

94.5%

59.8%

50.8%

70.9%68.4%

59.2% 59.6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 LTM

Mar

'13

Fir

st

Lie

n L

oan

Re

co

ve

ry R

ate



04 April 2013


Exhibit 71: Leveraged Loan Default and Recovery Rates: 1995 – LTM March 2013

1995

1996

19971998

1999

2000

2001

2002

2003

2004

2005

2006 2007

2008

2009

2010

2011

2012LTM Mar '13

R² = 0.43

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

40% 50% 60% 70% 80% 90% 100%

Levera

ged

Lo

an D

efa

ult

Rate

Leveraged Loan Recovery Rate


Exhibit 72: Average Price of U.S. Stressed Loans vs. Recovery Rates of Loan Defaults: 1995 – March 2013

3/31/200345.51% 2/28/2009

45.63%

0%

20%

40%

60%

80%

100%

120%

Loans: Current Yield > 7% Average Price Recovery Rate

3/28/13 91.68%

3/28/13 59.97%


04 April 2013


There were three loan issuers that defaulted in March for a total of $4,825 million face

value. This was the highest monthly total since March 2010.

Exhibit 73: Monthly Institutional Leveraged Loan Defaults: 1995 – March 2013

6/30/20022,215

3/31/200914,341

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Jan-9

5

Jan-9

6

Jan-9

7

Jan-9

8

Jan-9

9

Jan-0

0

Jan-0

1

Jan-0

2

Jan-0

3

Jan-0

4

Jan-0

5

Jan-0

6

Jan-0

7

Jan-0

8

Jan-0

9

Jan-1

0

Jan-1

1

Jan-1

2

Jan-1

3

Mo

nth

ly L

oan D

efa

ult

s (

Par

Am

ou

nt

$M

illio

ns)


3/31/13 $4,825


The quarterly annualized default rate increased to 3.0% in the first quarter from 2.1% in

the fourth quarter.

Exhibit 74: Quarterly Leveraged Loan Default Rates, Annualized: 1Q95 – 1Q13

15.29%

13.97%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

De

fau

lt R

ate

2.96%


04 April 2013


Exhibit 75: Quarterly Leveraged Loan Default Rates, Annualized: 1Q95 – 1Q13

Year Q1 Q2 Q3 Q4

1995 1.04% 0.76% 0.00% 0.00%

1996 2.96% 0.77% 1.67% 0.00%

1997 1.43% 0.00% 0.83% 0.00%

1998 1.98% 0.00% 1.14% 0.32%

1999 0.78% 0.00% 5.10% 3.17%

2000 7.13% 7.03% 2.45% 4.40%

2001 5.18% 8.94% 2.69% 10.66%

2002 7.55% 15.29% 2.22% 7.36%

2003 5.98% 5.90% 4.30% 0.95%

2004 0.45% 1.56% 1.39% 0.59%

2005 0.63% 1.16% 2.37% 1.77%

2006 0.83% 0.27% 0.12% 0.29%

2007 0.10% 0.00% 0.10% 0.62%

2008 3.00% 2.35% 1.38% 4.97%

2009 13.97% 11.10% 4.60% 8.71%

2010 5.92% 1.16% 2.30% 1.32%

2011 0.53% 0.87% 0.80% 0.44%

2012 3.11% 1.08% 1.30% 2.07%

2013 2.96%

Average 3.48% 3.24% 1.93% 2.65%

Quarterly Leveraged Loan Default Rate, Annualized


Exhibit 76: Leveraged Loan Default Rates vs. 3-Year Loan Discount Margin

10/31/2002632 bp

12/31/20081842 bp

10/31/20029.47%

0%

4%

8%

12%

16%

20%

0 bp

400 bp

800 bp

1200 bp

1600 bp

2000 bp

3-Yr Discount Margin TTM Loan Default Rate

1.87%

499 bp


04 April 2013


Exhibit 77: Leveraged Loan Default Loss Rate vs. 3-Year Loan Discount Margin

10/31/2002632 bp

12/31/20081842 bp

0 bp

400 bp

800 bp

1200 bp

1600 bp

2000 bp

3-Yr Discount Margin Loan Default Loss Rate (9-Months Later)

Correlation = .85

Average Difference: 1996-2008: 264 bp

Average Difference: 2009-Jun 2012: 606 bp

3/31/2013 499 bp

75 bp


There are $69.8 billion of leveraged loans maturing by the end of 2015. $19.1 billion of

these have a price below 90.

Exhibit 78: Institutional Leveraged Loans Maturing by Year

114

4 10 181

03

2226

87

171

153125

63

5

3530

97

189

154

125

63

0

20

40

60

80

100

120

140

160

180

200

2013 2014 2015 2016 2017 2018 2019 2020

$ B

illio

ns

Leveraged Loans Price < 90 Maturing by Year (As of 3/28/13)

Leveraged Loans Price >= 90 Maturing by Year (As of 3/28/13)


04 April 2013


Exhibit 79: Lower Tier Par Weight of the CS Leveraged Loan Index

5/31/200217.61%

8/31/20072.24%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Pa

r W

eig

ht

CS

LL

In

de

x

CCC+ and Lower

Lower Tier: CCC/Split CCC, CC, C and Default

3/28/13 7.98%


Exhibit 80: Distribution of Leveraged Loan Recovery Rates, 1995 – March 2013

0

10

20

30

40

50

60

70

80

90

10% 20% 30% 40% 50% 60% 70% 80% 90% > 90%

Fre

qu

en

cy

Leveraged Loan Recovery Rate Bins


Exhibit 81: Distribution of Leveraged Loan Recovery Rates, April 2012 – March 2013

0

1

2

3

4

5

6

10% 20% 30% 40% 50% 60% 70% 80% 90% > 90%

Fre

qu

en

cy



04 April 2013


Exhibit 82: High Yield Bonds vs. Leveraged Loans: Loss, Recovery and Default Rates

Avg Principal

Loss Rate Default Rate Avg Recovery Rate Avg Recovery Rate

Year Bonds Loans Bonds Loans Bonds Loans First Lien Loans Second Lien Loans

1995 57.56% 6.00% 2.33% 0.45% 42.44% 94.00% 94.00%

1996 53.36% 43.08% 1.37% 1.32% 46.64% 56.92% 56.92%

1997 46.29% 22.00% 0.90% 0.55% 53.71% 78.00% 78.00%

1998 62.31% 26.42% 1.38% 0.85% 37.69% 73.58% 73.58%

1999 68.73% 48.83% 4.08% 2.50% 31.27% 51.17% 51.17%

2000 73.53% 43.25% 4.54% 5.29% 26.47% 56.75% 56.75%

2001 72.01% 42.91% 9.20% 6.84% 27.99% 57.09% 57.09%

2002 70.04% 37.41% 15.45% 8.10% 29.96% 62.59% 62.67% 59.56%

2003 55.70% 33.03% 4.32% 3.82% 44.30% 66.97% 65.96% 100.25%

2004 47.37% 16.59% 1.26% 1.01% 52.94% 83.41% 82.30% 97.87%

2005 49.46% 13.91% 2.64% 1.55% 50.54% 86.09% 90.31% 74.27%

2006 33.80% 33.92% 0.73% 0.37% 66.20% 66.08% 83.64% 49.41%

2007 40.36% 11.37% 0.49% 0.23% 59.64% 88.63% 94.52% 72.91%

2008 65.17% 46.35% 5.46% 2.91% 34.83% 53.65% 59.78% 40.07%

2009 72.64% 56.82% 9.37% 9.57% 27.36% 43.18% 50.75% 20.07%

2010 41.63% 49.46% 1.56% 2.61% 58.37% 50.54% 70.95% 17.16%

2011 45.93% 44.56% 1.82% 0.66% 54.07% 55.44% 68.41% 23.38%

2012 44.59% 47.15% 1.72% 1.88% 55.41% 52.85% 59.24% 32.89%

LTM Mar '13 45.10% 40.03% 1.35% 1.87% 54.90% 59.97% 59.60% 61.53%

Average 55.03% 34.90% 3.68% 2.76% 44.99% 65.10% 69.24% 54.11%

** In both 2003 and 2004 there was just one second lien loan that defaulted for which we had recovery rate information. Source: Credit Suisse

Exhibit 83: High Yield Bond vs. Leveraged Loan Default Rates: 1992 – LTM March 2013

0.45%

1.32%0.55%

0.85%

2.50%

5.29%

6.84%

8.10%

3.82%

1.01%1.55%

0.37% 0.23%

2.91%

9.57%

2.61%

0.66%

1.88%1.87%2.33%

1.37%

0.90%1.38%

4.08%4.54%

9.20%

15.45%

4.32%

1.26%

2.64%

0.73% 0.49%

5.46%

9.37%

1.56%1.82%

1.72%1.35%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 LTM

Mar

'13

Defa

ult R

ate

Institutional Loans High Yield Bonds

Defaulted loans defined as missed coupon, filed chapter 11, distressed exchange, or cross-defaults.*Institutional includes TL-b, TL-c, TL-d, delayed-draw and other tranches generally held by institutional investors


04 April 2013


Exhibit 84: Institutional Leveraged Loan vs. High Yield Bond Recovery Rates

94%

57%

78%74%

51%

57% 57%

63%

67%

83%86%

66%

89%

54%

43%

51%

55%53%

60%

42%47%

54%

38%

31%

26% 28% 30%

44%

53%51%

66%

60%

35%

27%

58%

54% 55% 55%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 LTM

Mar

'13

Ave

rag

e R

eco

ve

ry R

ate

s

Loan Recovery Rate Bond Recovery Rate*Institutional loans includes TL-b, TL-c, TL-d, delayed-draw and other

tranches generally held by institutional investors


Exhibit 85: First Lien Leveraged Loan vs. High Yield Bond Recovery Rates

94%

57%

78%74%

51%57% 57%

63%66%

82%

90%

84%

95%

60%

51%

71%68%

59% 60%

42%47%

54%

38%

31%26% 28% 30%

44%

53%51%

66%

60%

35%

27%

58%54% 55% 55%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 LTM

Mar

'13

Ave

rag

e R

eco

ve

ry R

ate

s

First Lien Loans Bonds

*Institutional includes TL-b, TL-c, TL-d, delayed-draw and

other tranches generally held by institutional investors


Exhibit 86: Institutional Leveraged Loan vs. High Yield Bond Default Loss Rates

0.03%0.57%

0.12% 0.23%

1.22%

2.29%2.93% 3.03%

1.26%

0.17% 0.22% 0.12% 0.03%

1.35%

5.44%

1.29%

0.29%

0.88% 0.75%1.48% 0.80%0.47%0.92%

3.01%

3.55%

7.04%

11.51%

2.60%

0.65%1.43%

0.28%0.22%

3.78%

7.22%

0.73%0.92% 0.85% 0.67%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 LTM

Mar

'13

Ave

rag

e D

efa

ult

Lo

ss R

ate

s

Loan Default Loss Rate Bond Default Loss Rate*Institutional loans includes TL-b, TL-c, TL-d, delayed-draw and

other tranches generally held by institutional investors


04 April 2013


Industry

Exhibit 87: Leveraged Loan Defaults by Industry, Par Weight Distribution


Media/Telecom51.8%

Gaming/Leisure16.8%

Financial10.2%

Aerospace7.5%

Consumer Non-Durables

4.8%

Service3.3%

Retail2.4%

Energy1.7%

Manufacturing1.6%

Aerospace

2.1% Chemicals

5.0%

Consumer Durables

0.7%Consumer Non-

Durables

4.7%

Energy

2.5%Financial

4.3%

Food and Drug

0.9%

Food/Tobacco

2.5%

Forest

Prod/Containers

1.9%

Gaming/Leisure

7.0%

Healthcare

3.4%

Housing

5.3%

Information Technology

1.4%Manufacturing

2.9%

Media/Telecom

33.8%

Metals/Minerals

1.2%

Retail

2.3%

Service

3.2%

Transportation

12.1%

Utility

2.7%


Exhibit 88: Leveraged Loan Default Rate vs. 8-Month Price Volatility by Industry: March 2013

Aerospace


Energy

Financial

Gaming/Leisure

Manufacturing

Media/Telecom

Retail

Service0.5%

1.5%

2.5%

3.5%

4.5%

5.5%

6.5%

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6

De

fau

lt R

ate

8-Month Price Volatility


04

Ap

ril 20

13

Le

ve

rage

d F

ina

nce D

efa

ult R

evie

w

4

7

Exhibit 89: Annual Leveraged Loan Default Rates by Industry

Aero

space

Chem

icals

Consum

er

Dura

ble

s

Consum

er

Non-D

ura

ble

s

Energ

y

Fin

ancia

l

Food a

nd D

rug

Food/T

obacco

Fore

st P

rod/C

onta

iners

Gam

ing/L

eis

ure

Health

care

Housin

g

Info

rmatio

n T

echnolo

gy

Manufa

ctu

ring

Media

/Tele

com

Meta

ls/M

inera

ls

Reta

il

Serv

ice

Tra

nsport

atio

n

Util

ity

Overa

ll

1995 0.00% 0.00% 0.00% 2.61% 0.00% 0.00% 0.00% 0.00% 29.77% 0.00% 0.00% 0.00% 0.00% 0.00% 0.45%

1996 0.00% 0.00% 48.41% 0.00% 3.58% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 2.18% 0.00% 4.45% 0.00% 0.00% 1.32%

1997 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 1.55% 0.00% 2.76% 0.00% 0.00% 0.55%

1998 0.00% 0.00% 0.00% 0.00% 8.18% 0.00% 0.00% 0.00% 0.69% 0.00% 0.00% 0.00% 0.00% 11.19% 0.00% 0.00% 0.00% 0.85%

1999 0.00% 0.00% 0.00% 3.18% 0.00% 0.00% 4.54% 0.00% 0.00% 8.39% 0.00% 0.00% 0.00% 3.10% 0.00% 0.00% 0.47% 2.93% 0.00% 2.50%

2000 5.36% 0.90% 0.00% 7.67% 0.00% 0.00% 13.66% 0.00% 1.24% 6.76% 11.19% 4.47% 9.95% 4.07% 1.82% 13.60% 3.62% 9.90% 5.52% 0.00% 5.29%

2001 1.82% 4.77% 13.22% 23.55% 0.00% 0.00% 0.00% 3.03% 0.30% 8.14% 5.08% 1.31% 17.92% 8.19% 6.91% 1.68% 5.95% 6.97% 9.09% 0.00% 6.84%

2002 0.00% 3.37% 0.00% 13.60% 0.00% 46.29% 0.00% 1.93% 0.00% 1.30% 2.85% 7.72% 6.61% 11.05% 12.75% 8.27% 0.00% 5.37% 5.79% 39.75% 8.10%

2003 3.62% 0.00% 0.00% 2.79% 0.00% 0.00% 15.03% 4.48% 0.00% 0.00% 4.33% 6.55% 15.01% 7.91% 2.71% 0.00% 7.71% 5.89% 5.58% 4.66% 3.82%

2004 2.58% 0.78% 0.00% 1.20% 0.00% 0.00% 0.00% 2.67% 0.38% 0.00% 0.00% 1.34% 0.00% 0.00% 1.33% 3.50% 0.00% 2.39% 1.90% 0.00% 1.01%

2005 9.01% 0.00% 0.00% 0.26% 0.00% 14.41% 0.00% 1.43% 0.00% 0.00% 0.00% 0.00% 0.00% 1.82% 0.00% 0.00% 0.00% 0.00% 9.61% 4.18% 1.55%

2006 0.00% 0.00% 9.51% 0.38% 0.00% 0.00% 0.00% 2.24% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.15% 0.00% 0.00% 0.00% 2.12% 0.00% 0.37%

2007 0.00% 0.00% 0.00% 0.00% 0.30% 0.00% 0.00% 0.00% 0.87% 0.78% 0.00% 0.00% 0.00% 0.00% 0.02% 0.00% 3.12% 0.00% 0.72% 0.00% 0.23%

2008 0.00% 1.31% 6.57% 2.48% 4.29% 0.00% 0.00% 2.04% 0.00% 14.57% 0.00% 10.67% 0.00% 3.06% 4.84% 0.00% 1.49% 0.16% 4.01% 0.00% 2.91%

2009 1.39% 19.56% 15.43% 9.75% 9.98% 27.43% 4.05% 0.53% 10.65% 6.02% 0.84% 21.03% 0.00% 4.63% 16.00% 16.49% 1.00% 0.92% 26.67% 0.00% 9.57%

2010 0.00% 1.47% 0.00% 7.97% 0.00% 2.30% 2.25% 0.05% 1.76% 6.11% 0.90% 1.95% 0.71% 4.04% 4.81% 0.00% 5.09% 1.19% 0.00% 4.62% 2.61%

2011 0.00% 0.00% 0.00% 5.92% 0.00% 0.00% 0.00% 1.12% 1.32% 1.79% 0.69% 0.00% 0.00% 0.61% 0.38% 0.00% 3.89% 0.00% 0.00% 0.00% 0.66%

2012 11.15% 0.00% 0.00% 3.95% 1.17% 5.60% 0.00% 3.10% 0.00% 3.29% 0.00% 4.64% 0.00% 0.92% 2.09% 0.00% 1.05% 1.39% 1.24% 1.30% 1.88%

LTM Mar 13 4.49% 0.00% 0.00% 3.80% 1.04% 5.46% 0.00% 0.00% 0.00% 5.96% 0.00% 0.00% 0.00% 0.89% 5.17% 0.00% 1.02% 0.53% 0.00% 0.00% 1.87%


04

Ap

ril 20

13

Le

ve

rage

d F

ina

nce D

efa

ult R

evie

w

4

8

Exhibit 90: Annual Leveraged Loan Recovery Rates by Industry

Aero

space

Chem

icals

Consum

er

Dura

ble

s

Consum

er

Non-D

ura

ble

s

Energ

y

Fin

ancia

l

Food a

nd D

rug

Food/T

obacco

Fore

st P

rod/C

onta

iners

Gam

ing/L

eis

ure

Health

care

Housin

g

Info

rmatio

n T

echnolo

gy

Manufa

ctu

ring

Media

/Tele

com

Meta

ls/M

inera

ls

Reta

il

Serv

ice

Tra

nsport

atio

n

Util

ity

Overa

ll

1995 94.00% 94.00%

1996 98.75% 36.00% 56.92%

1997 78.00% 78.00%

1998 86.49% 26.33% 95.00% 73.58%

1999 81.00% 43.90% 30.00% 49.00% 51.17%

2000 76.00% 83.00% 50.88% 75.65% 89.00% 63.89% 48.72% 22.00% 45.75% 72.00% 70.00% 33.17% 44.94% 62.13% 56.75%

2001 72.50% 38.50% 72.33% 64.49% 54.67% 76.56% 63.40% 11.40% 69.25% 41.84% 47.50% 84.57% 57.09%

2002 93.85% 74.57% 73.00% 93.37% 99.75% 79.00% 73.44% 60.75% 41.07% 52.36% 20.75% 70.33% 62.59%

2003 64.38% 82.13% 101.46% 49.17% 25.12% 40.00% 69.56% 71.20% 6.00% 61.17% 78.50% 100.25% 66.97%

2004 97.87% 91.00% 39.63% 93.67% 79.25% 82.53% 83.19% 83.41%

2005 100.46% 65.00% 94.13% 41.75% 80.25% 94.80% 94.08% 86.09%

2006 73.87% 60.75% 50.83% 70.06% 66.08%

2007 80.00% 99.00% 98.37% 98.50% 86.63% 81.69% 88.63%

2008 60.00% 7.00% 53.92% 52.33% 78.31% 56.20% 56.46% 53.50% 41.79% 59.19% 49.50% 56.44% 53.65%

2009 63.62% 48.36% 57.56% 52.09% 43.52% 62.00% 77.00% 39.06% 41.67% 32.38% 32.06% 31.59% 48.51% 15.67% 70.00% 36.27% 40.03% 43.18%

2010 56.67% 39.41% 34.12% 89.00% 48.73% 33.57% 22.20% 41.50% 70.02% 68.91% 28.12% 53.97% 59.21% 50.54%

2011 50.63% 72.62% 74.47% 42.00% 56.25% 89.63% 50.67% 46.12% 55.44%

2012 77.46% 83.38% 53.78% 28.75% 49.12% 69.60% 81.81% 25.50% 40.62% 78.00% 30.40% 18.29% 29.62% 52.85%

LTM Mar 13 78.09% 83.38% 53.78% 28.75% 69.60% 25.50% 50.99% 78.00% 46.60% 59.97%


04 April 2013


By Rating

Exhibit 91: Leveraged Loan Defaults by Rating, Par Weight Distribution


Split BB14%

B/Split B52%

CCC/Split CCC1%

NR33%

BB

18%

Split BB

18%

B/Split B

40%

CCC/Split CCC

5%

NR

19%


Exhibit 92: Annual Leveraged Loan Default Rates by Original Rating

BB Split BB B/Split B CCC/Split CCC Not Rated Overall

1995 0.00% 0.00% 0.00% 0.61% 0.45%

1996 0.00% 0.00% 2.42% 1.30% 1.32%

1997 0.00% 0.00% 1.62% 0.53% 0.55%

1998 0.00% 0.46% 4.01% 0.36% 0.85%

1999 1.78% 4.89% 4.57% 0.64% 2.50%

2000 5.63% 5.56% 7.16% 0.00% 3.25% 5.29%

2001 1.11% 7.65% 13.01% 58.37% 7.89% 6.84%

2002 4.48% 11.39% 12.25% 0.00% 12.90% 8.10%

2003 2.03% 0.94% 8.87% 0.00% 5.93% 3.82%

2004 0.24% 1.03% 1.84% 22.51% 0.61% 1.01%

2005 0.00% 4.15% 1.74% 0.00% 0.81% 1.55%

2006 0.19% 0.09% 0.44% 8.42% 0.61% 0.37%

2007 0.00% 0.00% 0.27% 4.87% 0.45% 0.23%

2008 3.92% 2.31% 1.94% 7.05% 3.51% 2.91%

2009 6.55% 9.58% 14.13% 23.27% 5.26% 9.57%

2010 0.76% 0.73% 5.05% 5.47% 3.65% 2.61%

2011 0.35% 0.00% 0.67% 0.00% 2.01% 0.66%

2012 0.92% 2.27% 2.15% 4.07% 2.64% 1.88%

LTM Mar 13 0.00% 1.41% 2.59% 0.61% 5.42% 1.87%

Average: 1.47% 2.76% 4.46% 9.62% 3.07% 2.76% Source: Credit Suisse

04 April 2013


Exhibit 93: Leveraged Loan Recovery Rates by Original Rating

BB Split BB B/Split B CCC/Split CCC Not Rated Overall

1995 94.00% 94.00%

1996 56.92% 56.92%

1997 78.00% 78.00%

1998 26.33% 89.32% 73.58%

1999 62.54% 36.11% 51.00% 51.17%

2000 48.22% 59.21% 63.68% 52.27% 56.75%

2001 86.64% 49.73% 64.72% 24.11% 27.91% 57.09%

2002 63.85% 73.98% 60.75% 53.60% 62.59%

2003 80.13% 42.00% 63.95% 69.47% 66.97%

2004 95.00% 92.58% 92.15% 60.19% 59.44% 83.41%

2005 93.81% 93.82% 42.83% 86.09%

2006 40.50% 99.25% 71.18% 59.74% 57.58% 66.08%

2007 95.64% 90.17% 83.19% 88.63%

2008 56.15% 43.32% 57.17% 50.47% 52.87% 53.65%

2009 52.77% 55.04% 41.29% 31.80% 35.53% 43.18%

2010 69.49% 46.95% 53.88% 7.26% 50.31% 50.54%

2011 67.63% 66.72% 49.12% 55.44%

2012 65.87% 60.60% 57.21% 28.53% 50.16% 52.85%

LTM Mar 13 68.75% 64.32% 29.88% 54.29% 59.97%

Average: 65.73% 60.55% 68.52% 42.46% 55.59% 65.10% Source: Credit Suisse

04 April 2013


By Loan Priority

Exhibit 94: Leveraged Loan Defaults by Loan Priority, Par Weight Distribution


First Lien

95%

Second Lien

5%

First Lien

88%

Second Lien

11%

Unsecured

1%


Exhibit 95: Annual Leveraged Loan Default Rates by Loan Priority

First Lien Second Lien Unsecured Overall

1995 0.45% 0.45%

1996 1.32% 1.32%

1997 0.55% 0.55%

1998 0.85% 0.85%

1999 2.50% 2.50%

2000 5.31% 5.29%

2001 6.91% 6.84%

2002 7.80% 81.83% 8.10%

2003 3.63% 13.97% 3.82%

2004 1.01% 1.26% 1.01%

2005 1.29% 5.73% 1.55%

2006 0.25% 1.78% 0.37%

2007 0.19% 0.74% 0.23%

2008 2.76% 4.93% 3.57% 2.91%

2009 9.50% 8.17% 25.19% 9.57%

2010 1.90% 14.88% 0.00% 2.61%

2011 0.56% 2.22% 2.08% 0.66%

2012 1.79% 4.16% 0.00% 1.88%

LTM Mar 13 1.89% 2.03% 0.00% 1.87%

Average: 2.66% 11.81% 5.14% 2.76% Source: Credit Suisse

04 April 2013


Exhibit 96: Leveraged Loan Recovery Rates by Loan Priority


1995 94.00% 94.00%

1996 56.92% 56.92%

1997 78.00% 78.00%

1998 73.58% 73.58%

1999 51.17% 51.17%

2000 56.75% 56.75%

2001 57.09% 57.09%

2002 62.67% 59.56% 62.59%

2003 65.96% 100.25% * 66.97%

2004 82.30% 97.87% * 83.41%

2005 90.31% 74.27% 86.09%

2006 83.64% 49.41% 66.08%

2007 94.52% 72.91% 88.63%

2008 59.78% 40.07% 20.00% 53.65%

2009 50.75% 20.07% 19.87% 43.18%

2010 70.95% 17.16% 50.54%

2011 68.41% 23.38% 55.44%

2012 59.24% 32.89% 52.85%

LTM Mar 13 59.60% 61.53% 59.97%

Wtd Average: 61.70% 32.45% 21.25% 55.71% Source: Credit Suisse

04 April 2013


By Size of Facility

Exhibit 97: Leveraged Loan Defaults by Size of Facility, Par Weight Distribution


$500MM and Over

74%

$300MM to $500MM

3%

Below $300MM

23%

$500MM and Over

49%

$300MM to $500MM

17%

Below $300MM

34%


Exhibit 98: Annual Leveraged Loan Default Rates by Size of Facility

$500MM and Over $300MM to $500MM Below $300MM Overall

1995 0.00% 0.00% 1.22% 0.45%

1996 0.00% 0.00% 2.41% 1.32%

1997 0.00% 0.00% 0.89% 0.55%

1998 0.00% 0.00% 1.57% 0.85%

1999 2.27% 0.00% 3.62% 2.50%

2000 4.13% 1.43% 7.84% 5.29%

2001 5.57% 6.39% 8.12% 6.84%

2002 5.67% 5.99% 11.98% 8.10%

2003 0.85% 3.51% 6.93% 3.82%

2004 0.00% 0.66% 2.42% 1.01%

2005 1.40% 1.55% 1.80% 1.55%

2006 0.00% 0.00% 1.48% 0.37%

2007 0.13% 0.00% 0.69% 0.23%

2008 1.90% 4.21% 5.34% 2.91%

2009 9.56% 11.98% 8.05% 9.57%

2010 1.66% 3.80% 4.90% 2.61%

2011 0.19% 1.29% 1.66% 0.66%

2012 1.41% 1.99% 3.36% 1.88%

LTM Mar 13 2.10% 0.34% 2.35% 1.87%


04 April 2013


Exhibit 99: Leveraged Loan Recovery Rates by Size of Facility

$500MM and Over $300MM to $500MM Below $300MM Overall

1995 94.00% 94.00%

1996 56.92% 56.92%

1997 78.00% 78.00%

1998 73.58% 73.58%

1999 30.00% 53.81% 51.17%

2000 43.42% 40.40% 58.57% 56.75%

2001 27.86% 31.69% 66.47% 57.09%

2002 53.88% 74.69% 61.94% 62.59%

2003 20.00% 75.01% 67.48% 66.97%

2004 97.50% 82.33% 83.41%

2005 91.75% 97.05% 82.26% 86.09%

2006 66.08% 66.08%

2007 91.27% 88.36% 88.63%

2008 59.62% 49.14% 54.07% 53.65%

2009 60.68% 46.67% 35.76% 43.18%

2010 58.07% 57.88% 47.47% 50.54%

2011 93.62% 51.25% 53.47% 55.44%

2012 60.13% 55.27% 50.31% 52.85%

LTM Mar 13 58.19% 77.13% 59.50% 59.97%


04 April 2013


By Covenant Package

Covenant-lite loans had higher recoveries than loans with maintenance covenants over

the last 12 months. This quarter nearly all of the cov-lite defaults were first lien – there

was only one second lien cov-lite default. This raised the cov-lite recovery rate.

Exhibit 100: Annual Leveraged Loan Default Rates by Covenant Package

Cov-Lite Full Covenants Overall

1995 0.45% 0.45%

1996 1.32% 1.32%

1997 0.55% 0.55%

1998 0.85% 0.85%

1999 2.50% 2.50%

2000 5.29% 5.29%

2001 6.84% 6.84%

2002 8.10% 8.10%

2003 0.00% 3.83% 3.82%

2004 0.00% 1.01% 1.01%

2005 0.00% 1.56% 1.55%

2006 0.00% 0.39% 0.37%

2007 0.00% 0.27% 0.23%

2008 0.61% 3.40% 2.91%

2009 5.48% 10.35% 9.57%

2010 1.70% 2.78% 2.61%

2011 0.00% 0.79% 0.66%

2012 2.33% 1.75% 1.88%

LTM Mar 13 0.55% 2.32% 1.87%

Average: 1.19% 2.62% 2.76% Source: Credit Suisse

Exhibit 101: Leveraged Loan Recovery Rates by Covenant Package

Cov-Lite Full Covenants Overall

1995 94.00%

1996 56.92%

1997 78.00%

1998 73.58%

1999 51.17%

2000 56.75% 56.75%

2001 57.09% 57.09%

2002 62.59% 62.59%

2003 66.97% 66.97%

2004 83.41% 83.41%

2005 86.09% 86.09%

2006 66.08% 66.08%

2007 88.63% 88.63%

2008 34.80% 54.44% 53.65%

2009 38.16% 43.74% 43.18%

2010 23.35% 54.28% 50.54%

2011 55.44% 55.44%

2012 43.79% 56.25% 52.85%

LTM Mar 13 67.58% 58.70% 59.97%

Average: 41.54% 62.63% 65.10% Source: Credit Suisse

04

Ap

ril 20

13

Le

ve

rage

d F

ina

nce D

efa

ult R

evie

w

5

6

Exhibit 102: Institutional Leveraged Loan Defaults: 12 Months Ending March 2013

Default Date Effective Date Issuer Facility Seniority Coupon Spread Default Amt Maturity Industry Original Rating Cov-Lite

4/16/2012 1/5/2007 Wastequip TLb FIRST LIEN 250 246.0 2/5/2013 SERVICE Split BB No

5/8/2012 9/6/2007 Barneys New York TLb FIRST LIEN 500 280.0 9/5/2014 RETAIL B No

6/21/2012 12/17/2009 ATI Enterprises TLb FIRST LIEN 600 140.0 12/17/2014 SERVICE B No

6/21/2012 7/17/2007 Klockner Pentaplast TLd SECOND LIEN 400 188.0 12/2/2016 MANUFACTURING NR No

6/25/2012 4/11/2011 Cinram International TLb FIRST LIEN 800 239.0 12/31/2013 MEDIA/TELECOM NR No

6/29/2012 5/24/2007 Culligan International TLb FIRST LIEN 225 563.0 10/31/2012 CONSUMER NON-DURABLES B Yes

7/31/2012 12/20/2010 Aventine Renew able Energy Holdings TLb FIRST LIEN 850 200.0 12/21/2015 ENERGY Split B No

7/31/2012 8/31/2009 Legends Gaming TLb FIRST LIEN 675 181.0 8/31/2014 GAMING/LEISURE B No

8/29/2012 7/28/2008 Contec Holdings TLb FIRST LIEN 475 185.0 7/28/2014 MEDIA/TELECOM NR No

9/11/2012 12/14/2007 Marsico Capital Management TLb FIRST LIEN 300 1200.0 12/5/2014 FINANCIAL Split BB No

9/28/2012 9/26/2007 Southern Air TLb FIRST LIEN 375 250.0 10/15/2013 AEROSPACE NR No

10/25/2012 5/17/2007 AMF Bow ling Worldw ide TLb FIRST LIEN 250 245.0 6/5/2013 GAMING/LEISURE Split BB Yes

10/25/2012 5/17/2007 AMF Bow ling Worldw ide TLc SECOND LIEN 625 80.0 11/15/2013 GAMING/LEISURE CCC/Split CCC Yes

10/25/2012 11/30/2009 Yell Group TLb FIRST LIEN 375 1496.0 7/31/2014 MEDIA/TELECOM B No

11/29/2012 12/22/2005 IAP Worldw ide Services TLb FIRST LIEN 300 330.0 12/30/2012 AEROSPACE B No

12/22/2012 10/13/2006 Merrill TLc SECOND LIEN 600 200.0 11/1/2013 MEDIA/TELECOM B No

12/31/2012 7/1/2011 Evergreen International Aviation TLb FIRST LIEN 1000 190.0 7/1/2015 AEROSPACE NR No

12/31/2012 6/30/2011 Evergreen International Aviation TLd SECOND LIEN 1200 110.0 7/1/2015 AEROSPACE NR No

12/31/2012 4/10/2007 LodgeNet Entertainment TLb FIRST LIEN 200 625.0 4/10/2014 GAMING/LEISURE B No

3/18/2013 1/29/2010 Dex One TLb FIRST LIEN 625 1225.0 10/24/2014 MEDIA/TELECOM B No

3/18/2013 1/4/2010 SuperMedia TLb FIRST LIEN 800 2750.0 1/4/2016 MEDIA/TELECOM NR No

3/25/2013 2/14/2011 Revel Entertainment TLb FIRST LIEN 750 850.0 2/16/2018 GAMING/LEISURE B No Source: Credit Suisse

04 April 2013


1Q13 European High Yield Defaults The Western European high yield default rate decreased 70 bps to 0.27% for the 12

months ending March 2013 from 0.97% at the end of the prior quarter. The average

recovery rate was 46.63%, below the 54.86% level for 2012. Three bonds in the

European high yield market defaulted during the first quarter.

Exhibit 103: US High Yield versus European High Yield Default Rates

European High Yield

Default Rate

US High Yield

Default Rate

1998 2.35% 1.38%

1999 2.60% 4.08%

2000 1.20% 4.54%

2001 17.28% 9.20%

2002 33.91% 15.45%

2003 12.43% 4.32%

2004 1.97% 1.26%

2005 0.97% 2.64%

2006 0.53% 0.73%

2007 1.00% 0.49%

2008 1.60% 5.46%

2009 6.56% 9.37%

2010 1.06% 1.56%

2011 3.20% 1.82%

2012 0.97% 1.72%

LTM Mar 13 0.27% 1.35% Source: Credit Suisse

Exhibit 104: Annual Western European High Yield Default Rates: 1998 – LTM March 2013

2.35% 2.60%

1.20%

17.28%

12.43%

1.97%0.97%

0.53%1.00%

1.60%

6.56%

1.06%

3.20%

0.97%0.27%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 LTMMar 13

Defa

ult R

ate

European High Yield Default Rate

33.91%


04 April 2013


Exhibit 105: Annual Western European High Yield Default Summary: 1998 – LTM March 2013

Year

Defaulted Amount

(€Billion)

Avg Default Loss

Rate

Avg Principal Loss

Rate

Avg Recovery

Rate Default Rate

1998 0.477 2.00% 81.92% 18.08% 2.35%

1999 0.939 1.88% 66.28% 33.72% 2.60%

2000 0.638 1.02% 80.00% 20.00% 1.20%

2001 11.288 16.29% 89.74% 10.26% 17.28%

2002 26.886 27.44% 76.02% 23.98% 33.91%

2003 10.757 8.00% 60.80% 39.20% 12.43%

2004 1.628 0.57% 25.13% 74.87% 1.97%

2005 0.780 0.51% 47.65% 52.35% 0.97%

2006 0.418 0.33% 57.14% 42.86% 0.53%

2007 0.785 0.58% 52.67% 47.33% 1.00%

2008 1.266 1.26% 74.86% 25.14% 1.60%

2009 6.219 5.25% 75.67% 24.33% 6.56%

2010 1.398 0.82% 72.55% 27.45% 1.06%

2011 5.567 2.37% 68.64% 31.36% 3.20%

2012 2.306 0.48% 45.14% 54.86% 0.97%

LTM Mar 13 0.738 0.15% 53.37% 46.63% 0.27%

Average 4.506 4.31% 64.22% 35.78% 5.49% Source: Credit Suisse

Exhibit 106: Annual Western European High Yield Default Rates: 1998 – LTM March 2013

2.35% 2.60%

1.20%

17.28%

12.43%

1.97%0.97%

0.53%1.00%

1.60%

6.56%

1.06%

3.20%

0.97%0.27%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 LTMMar 13

Defa

ult R

ate

European High Yield Default Rate

33.91%


04 April 2013


Exhibit 107: Size of the Western European Distressed Debt Markets (by Price Break): 1997 – March 2013

0 1 315

42 43

16 91

1 1

41

11 13 113 40 0 1 6

176 2 1 0 2

191

64

37

57

3225

0

50

100

150

200

250

Ma

rke

t S

ize

-P

ar

Am

ou

nt

(€B

illi

on

s)

Distressed WE HY Bonds (Priced <60)

Distressed WE Institutional Loans (Priced<80)


Exhibit 108: Western European High Yield Default Loss Rate vs. Spread to Worst: 1998 – March 2013

1250 bp

1799 bp

0 bp

500 bp

1000 bp

1500 bp

2000 bp

2500 bp

3000 bp

Oct-

98

Oct-

99

Oct-

00

Oct-

01

Oct-

02

Oct-

03

Oct-

04

Oct-

05

Oct-

06

Oct-

07

Oct-

08

Oct-

09

Oct-

10

Oct-

11

Oct-

12

ST

W &

De

fau

lt L

oss R

ate

Western European STW WE HY Default Loss Rate (8-Months Later)

Correlation = .63

Average Difference: 2003-2008: 331 bp Average Difference: 2009 -2013: 566 bp

15 bp

3/28/13 521 bp


04 April 2013


Industry

Exhibit 109: Default Rates Over Time by Industry: 1998 – March 2013 A

ero

spac

e

Ch

emic

al

Co

nsu

mer

Du

rab

les

Co

nsu

mer

No

n-D

ura

ble

s

En

erg

y

Fin

anci

al

Fo

od

an

d D

rug

Fo

od

/To

bac

co

Fo

rest

Pro

d/C

on

tain

ers

Gam

ing

/Lei

sure

Hea

lth

care

Ho

usi

ng

Info

rmat

ion

Tec

hn

olo

gy

Man

ufa

ctu

rin

g

Med

ia/T

elec

om

Met

als/

Min

eral

s

Ret

ail

Ser

vice

Tra

nsp

ort

atio

n

Uti

lity

Ove

rall

1998 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 3.3% 0.0% 0.0% 0.0% 0.0% 0.0% 2.3%

1999 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 2.3% 0.0% 0.0% 0.0% 13.3% 2.6%

2000 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 36.1% 0.0% 7.0% 0.0% 0.0% 0.0% 0.0% 8.5% 0.0% 1.2%

2001 82.2% 4.2% 55.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 7.3% 0.0% 21.7% 0.0% 0.0% 0.0% 3.3% 66.5% 17.3%

2002 0.0% 0.0% 0.0% 24.3% 0.0% 0.0% 0.0% 0.0% 0.0% 13.2% 0.0% 0.0% 0.0% 3.7% 70.7% 0.0% 0.0% 0.0% 4.4% 28.5% 33.9%

2003 7.6% 4.0% 0.0% 0.0% 35.1% 0.0% 0.0% 80.5% 0.0% 0.0% 0.0% 0.0% 34.6% 0.0% 10.6% 0.0% 0.0% 0.0% 9.0% 4.8% 12.4%

2004 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 1.3% 0.0% 0.0% 0.0% 0.0% 16.2% 2.0%

2005 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 9.5% 7.3% 1.0%

2006 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 5.9% 0.0% 0.0% 0.0% 0.0% 0.0% 6.2% 0.0% 0.5%

2007 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 5.2% 0.0% 0.0% 18.6% 0.0% 10.2% 0.0% 1.0%

2008 0.0% 0.0% 0.0% 0.0% 146.8% 0.0% 0.0% 2.3% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 3.3% 0.0% 1.6%

2009 0.0% 11.6% 40.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 5.2% 15.7% 0.0% 1.0% 0.0% 0.0% 0.0% 26.3% 0.0% 6.6%

2010 0.0% 0.0% 0.0% 0.0% 0.0% 4.3% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 2.6% 3.6% 0.0% 0.0% 0.0% 0.0% 0.0% 1.1%

2011 0.0% 0.0% 0.0% 0.0% 0.0% 20.0% 0.0% 0.0% 0.0% 4.3% 0.0% 0.0% 0.0% 4.0% 0.0% 0.0% 0.0% 0.0% 0.0% 3.2%

2012 0.0% 0.0% 0.0% 0.0% 18.9% 0.6% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 2.0% 0.0% 0.0% 0.0% 0.4% 0.0% 1.0%

LTM Mar 13 0.0% 0.0% 0.0% 0.0% 0.0% 1.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.0% 0.0% 0.0% 0.4% 0.0% 0.3%

Average 6.0% 1.2% 5.0% 4.0% 3.4% 12.3% 0.0% 5.0% 0.1% 0.8% 0.3% 2.6% 4.0% 1.2% 7.5% 0.0% 1.2% 0.0% 5.9% 8.2% 5.5% Source: Credit Suisse

Note: Financial industry default and default loss rates exceed 100% in 2008 because

these rates use the average of the par size of the financial sector on 12/31/2007 and

12/31/2008 in the denominator (see “Methodology” in the chapter High Yield Default

Review, earlier). The par size of the financial sector on 12/31/2007 was 0. GMAC and

Residential Capital were downgraded into the high yield universe in early 2008, comprising

the only bonds in the financial sector, and it was a portion of these bonds which defaulted

due to distressed exchanges. The denominator was half the face value of the

downgraded debt (averaging 0 with the face value). The numerator was the face value of

the distressed exchanges, which turned out to be larger than the denominator, resulting in

a rate greater than 100%.

Exhibit 110: Default Loss Rates Over Time by Industry: 1998 – March 2013

Aer

osp

ace

Ch

emic

al

Co

nsu

mer

Du

rab

les

Co

nsu

mer

No

n-D

ura

ble

s

En

erg

y

Fin

anci

al

Fo

od

an

d D

rug

Fo

od

/To

bac

co

Fo

rest

Pro

d/C

on

tain

ers

Gam

ing

/Lei

sure

Hea

lth

care

Ho

usi

ng

Info

rmat

ion

Tec

hn

olo

gy

Man

ufa

ctu

rin

g

Med

ia/T

elec

om

Met

als/

Min

eral

s

Ret

ail

Ser

vice

Tra

nsp

ort

atio

n

Uti

lity

Ove

rall

1998 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 2.8% 0.0% 0.0% 0.0% 0.0% 0.0% 2.0%

1999 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 2.0% 0.0% 0.0% 0.0% 8.3% 1.9%

2000 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 6.7% 0.0% 0.0% 0.0% 0.0% 6.4% 0.0% 1.0%

2001 72.4% 3.4% 41.8% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 21.0% 0.0% 0.0% 0.0% 3.4% 59.1% 16.3%

2002 0.0% 0.0% 0.0% 17.0% 0.0% 0.0% 0.0% 0.0% 0.0% 9.4% 0.0% 0.0% 0.0% 3.4% 59.1% 0.0% 0.0% 0.0% 3.8% 9.4% 27.4%

2003 6.2% 3.3% 0.0% 0.0% 14.1% 0.0% 0.0% 66.9% 0.0% 0.0% 0.0% 0.0% 28.1% 0.0% 5.9% 0.0% 0.0% 0.0% 4.0% 2.8% 8.0%

2004 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.4% 0.0% 0.0% 0.0% 0.0% 4.6% 0.6%

2005 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 4.9% 3.9% 0.5%

2006 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 3.6% 0.0% 0.0% 0.0% 0.0% 0.0% 3.9% 0.0% 0.3%

2007 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 13.9% 0.0% 5.0% 0.0% 0.6%

2008 0.0% 0.0% 0.0% 0.0% 102.5% 0.0% 0.0% 2.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 3.2% 0.0% 1.3%

2009 0.0% 10.5% 29.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 5.2% 12.6% 0.0% 0.7% 0.0% 0.0% 0.0% 20.5% 0.0% 5.3%

2010 0.0% 0.0% 0.0% 0.0% 0.0% 2.3% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 3.6% 0.0% 0.0% 0.0% 0.0% 0.0% 0.8%

2011 0.0% 0.0% 0.0% 0.0% 0.0% 15.3% 0.0% 0.0% 0.0% 1.9% 0.0% 0.0% 0.0% 3.7% 0.0% 0.0% 0.0% 0.0% 0.0% 2.4%

2012 0.0% 0.0% 0.0% 0.0% 13.7% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.8% 0.0% 0.0% 0.0% 0.1% 0.0% 0.5%

LTM Mar 13 0.0% 0.0% 0.0% 0.0% 0.0% 0.8% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.2%

Average 5.2% 1.1% 3.8% 2.9% 1.7% 8.6% 0.0% 4.2% 0.1% 0.6% 0.1% 0.3% 2.8% 0.7% 6.3% 0.0% 0.9% 0.0% 4.0% 5.3% 4.3% Source: Credit Suisse

04 April 2013


Exhibit 111: LTM March 2013 Defaults by Industry Summary Table



Issues Industry Default Payment Rate Principal (€ millions) Rate Principal Coupon Loss Rate

0 Aerospace 0 0.00% 0.00% 0.00% 0.00%

0 Chemicals 0 0.00% 0.00% 0.00% 0.00%

0 Consumer Durables 0 0.00%

0 Consumer Non-Durables 0 0.00% 0.00% 0.00% 0.00%

0 Energy 0 0.00% 0.00% 0.00% 0.00%

6 Financial 4.3 7.82% 37.60% 62.40% 576 1.17% 0.73% 0.05% 0.77%

0 Food And Drug

0 Food/Tobacco 0 0.00% 0.00% 0.00% 0.00%

0 Forest Prod/Containers 0 0.00% 0.00% 0.00% 0.00%

0 Gaming/Leisure 0 0.00% 0.00% 0.00% 0.00%

0 Healthcare 0 0.00% 0.00% 0.00% 0.00%

0 Housing 0 0.00% 0.00% 0.00% 0.00%

0 Information Technology 0 0.00% 0.00% 0.00% 0.00%

0 Manufacturing 0 0.00% 0.00% 0.00% 0.00%

1 Media/Telecom 0.4 10.50% 65 0.15% 0.00% 0.01% 0.01%

0 Metals/Minerals 0 0.00% 0.00% 0.00% 0.00%

0 Retail 0 0.00% 0.00% 0.00% 0.00%

0 Service 0 0.00% 0.00% 0.00% 0.00%

1 Transportation 3.0 9.13% 82.78% 17.22% 97 0.36% 0.06% 0.02% 0.08%

0 Utility 0 0.00% 0.00% 0.00% 0.00%

8 Overall 3.7 8.32% 46.63% 53.37% 738 0.27% 0.14% 0.01% 0.15% Source: Credit Suisse

Exhibit 112: Recovery Rates by Industry: LTM March 2013

82.8%

37.6%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

Transportation Financial

Re

co

ve

ry R

ate


04 April 2013


Exhibit 113: Principal Loss Rates and Recovery Rates by Industry: 1998 – March 2013

Average Average Average

Default Principal Recovery Default

Industry Rate Loss Rate Rate Loss Rate

Aerospace 5.99% 81.31% 18.69% 6.55%

Chemicals 1.24% 79.08% 20.92% 1.32%

Consumer Durables 5.02% 70.94% 29.06% 5.97%

Consumer Non-Durables 4.02% 66.40% 33.60% 3.54%

Energy 3.37% 36.65% 63.35% 1.09%

Financial 12.34% 64.27% 35.73% 9.39%

Food and Drug 0.00% 0.00%

Food/Tobacco 5.03% 80.63% 19.37% 5.15%

Forest Prod/Containers 0.14% 87.00% 13.00% 0.16%

Gaming/Leisure 0.82% 64.75% 35.25% 0.72%

Healthcare 0.27% 0.00%

Housing 2.58% 95.50% 4.50% 0.40%

Information Technology 3.97% 69.92% 30.08% 3.41%

Manufacturing 1.23% 87.50% 12.50% 0.84%

Media/Telecom 7.54% 68.01% 31.99% 7.07%

Metals/Minerals 0.00% 0.00%

Retail 1.16% 70.00% 30.00% 1.07%

Service 0.00% 0.00%

Transportation 5.93% 61.22% 38.78% 4.88%

Utility 8.22% 48.13% 51.87% 6.64%

Unweighted Average 3.44% 70.71% 29.29% 2.91% Source: Credit Suisse



Financial78%

Transportation13%

Media/Telecom9%

Media/Telecom57.1%

Transportation8.4%

Financial8.1%

Utility6.3%

Information Technology4.9%

Food/Tobacco3.5%

Energy3.5%

Chemicals2.3%

Aerospace2.1%

Consumer Non-Durables1.2%

Housing0.6% Manufacturing

0.6%

Healthcare0.5%


Consumer Durables0.2%

Retail0.2%

Gaming/Leisure0.1%


04 April 2013


Original Issue Rating

Exhibit 115: LTM March 2013 Defaults by Original Issue Rating Summary Table Number of Average Average Average Defaulted Default Default Overall


Issues Rating Default Payment Rate Principal (€ millions) Rate Principal Coupon Loss Rate

0 A and above 0 0 0.00% 0.00% 0.00%

3 BBB (incl. Split BBB) 5.6 8.46% 50.33% 49.67% 225 0.03% 0.02% 0.00% 0.02%

1 BB (incl. Split BB) 2.1 6.87% 82.00% 18.00% 13 0.01% 0.00% 0.00% 0.00%

1 B 3.0 9.13% 82.78% 17.22% 97 0.12% 0.02% 0.01% 0.03%

0 CCC (incl. Split B) 0 0.00% 0.00% 0.00% 0.00%

1 Not Rated / Distressed 0.4 10.50% 65 0.83% 0.00% 0.04% 0.04%

6 Overall 3.8 8.65% 71.70% 28.30% 401 0.15% 0.04% 0.01% 0.05% Source: Credit Suisse

Exhibit 116: Recovery Rates by Original Issue Rating: LTM March 2013

82.8% 82.0%

50.3%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

B BB (incl. Split BB) BBB (incl. Split BBB)

Rec

ove

ry R

ate


04 April 2013




BBB (incl. Split BBB)57%

B 24%

Not Rated / Distressed

16%

BB (incl. Split BB)3%

A and above10.3%

BBB (incl. Split BBB)18.9%

BB (incl. Split BB)9.8%

B 47.1%

CCC (incl. Split B)9.3%

Not Rated / Distressed

4.6%


04

Ap

ril 20

13

Le

ve

rage

d F

ina

nce D

efa

ult R

evie

w

6

5

Exhibit 118: LTM March 2013 Western European High Yield Defaults D

ate

of

Def

ault

Issu

er

Co

up

on

Mat

uri

ty

Bo

nd

Typ

e

Ind

ust

ry

Ori

gin

al R

atin

g

Cu

rren

cy

Def

ault

ed A

mo

un

t (€

MM

)

Off

er P

rice

Pri

ce a

t D

efau

lt

Pri

nci

pal

Lo

ss R

ate

Rec

ove

ry R

ate

5/14/2012 Residential Capital 7.125 5/17/2012 Sr Nts FINANCIAL BBB EUR 98.6 99.49

5/14/2012 Residential Capital 8.375 5/17/2013 Sr Nts FINANCIAL BBB GBP 46.2 99.34 50.000 49.67% 50.33%

5/14/2012 Residential Capital 9.875 7/1/2014 Sr Nts FINANCIAL BBB GBP 80.7 99.66

8/1/2012 Nobina Europe 9.125 8/1/2012 Sr Sec Nts TRANSPORTATION B EUR 97.2 99.66 82.500 17.22% 82.78%

12/12/2012 BPE Financiaciones 6.873 10/22/2020 Sr Sub Nts FINANCIAL Split BB EUR 13.1 100.00 82.000 18.00% 82.00%

2/7/2013 SEAT Pagine Gialle 10.500 1/31/2017 Sr Sec Nts MEDIA/TELECOM Not Rated EUR 65.0 70.00

2/20/2013 SNS REAAL 8.450 8/20/2018 Sr Sub Nts FINANCIAL Investment Grade USD 75.3 100.00 9.000 91.00% 9.00%

2/20/2013 SNS Bank 6.250 10/26/2020 Sr Sub Nts FINANCIAL Investment Grade EUR 262.3 99.43 9.000 90.95% 9.05% Source: Credit Suisse

04 April 2013


1Q13 European Institutional Leveraged Loan Defaults The Western European institutional leveraged loan default rate decreased 243 bp to

4.26% for the 12 months ending March 2013 from 6.69% at the end of the prior quarter.

(Note: the prior quarter’s default rate was restated from 5.23% because additional

information became available from public sources.) The average recovery rate (defined as

price at the time of default) fell 115 bp to 42.43% for the 12 months ending March 2013,

from 43.58% at the end of the fourth quarter.

Exhibit 119: European Leveraged Loan versus US Leveraged Loan Default Rates

West. Euro.

Leveraged Loan

Default Rate

US Leveraged

Loan Default

Rate

2000 1.43% 5.29%

2001 16.05% 6.84%

2002 47.00% 8.10%

2003 1.07% 3.82%

2004 2.32% 1.01%

2005 0.83% 1.55%

2006 1.81% 0.37%

2007 0.09% 0.23%

2008 2.15% 2.91%

2009 6.79% 9.57%

2010 4.57% 2.61%

2011 0.95% 0.66%

2012 6.69% 1.88%

LTM Mar 13 4.26% 1.87%

Average 6.86% 3.34% Source: Credit Suisse

Exhibit 120: Annual Western European Leveraged Loan Default Rates: 2000 – LTM March 2013

1.43%

16.05%

1.07%2.32%

0.83%1.81%

0.09%

2.15%

6.79%

4.57%

0.95%

6.69%

4.26%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 LTMMar 13

West

ern

Euro

pe L

oan D

efa

ult

Rate

Defaulted loans defined as missed coupon, filed for bankruptcy, entered administration, distressed exchange, or cross-defaults.*Institutional includes TL-b, TL-c, TL-d, delayed-draw and other tranches generally held by institutional investors

47.00%


04 April 2013


Exhibit 121: Annual Western European Leveraged Loan Default Rates: 2000 – LTM March 2013

Defaulted Amount

(€mm)

Market Size

(€mm)

Market Size Midpoint

(€mm)

Annual Default

Rate

Average Recovery

Rate

Average Default

Loss Rate

1999 7,198€

2000 133€ 11,430€ 9,314€ 1.43% 72.00% 0.40%

2001 2,206€ 16,058€ 13,744€ 16.05% 78.25% 3.49%

2002 8,822€ 21,478€ 18,768€ 47.00% 70.57% 13.84%

2003 255€ 26,400€ 23,939€ 1.07% 70.00% 0.32%

2004 759€ 39,020€ 32,710€ 2.32% 84.25% 0.37%

2005 495€ 80,600€ 59,810€ 0.83% 60.62% 0.33%

2006 1,986€ 138,303€ 109,452€ 1.81% 64.54% 0.64%

2007 155€ 206,978€ 172,641€ 0.09% 98.62% 0.00%

2008 4,621€ 223,197€ 215,088€ 2.15% 31.20% 1.48%

2009 14,820€ 213,343€ 218,270€ 6.79% 32.36% 4.59%

2010 9,197€ 188,859€ 201,101€ 4.57% 62.93% 1.70%

2011 1,703€ 168,320€ 178,589€ 0.95% 36.62% 0.60%

2012 10,549€ 147,235€ 157,778€ 6.69% 42.58% 3.84%

LTM Mar 13 6,708€ 144,812€ 157,493€ 4.26% 42.43% 2.45% Source: Credit Suisse

Exhibit 122: Distribution of Western Euro Lev Loan Default Recovery Rates, 2000 – March 2013

0

5

10

15

20

25

30

35

40

45

50

10% 20% 30% 40% 50% 60% 70% 80% 90% > 90%

Fre

qu

en

cy



04 April 2013


Exhibit 123: Distribution of Western Euro Lev Loan Default Recovery Rates, LTM March 2013

0

1

2

3

4

5

6

7

10% 20% 30% 40% 50% 60% 70% 80% 90% > 90%

Fre

qu

en

cy



Exhibit 124: Western European Leveraged Loan Default Loss Rate vs. 3-Year Discount Margin

4.59%

1973 bp

0 bp

200 bp

400 bp

600 bp

800 bp

1000 bp

1200 bp

1400 bp

1600 bp

1800 bp

2000 bp

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

3-Y

ear D

isco

unt M

arg

in

Defa

ult

Lo

ss R

ate

Loan Default Loss Rate (8 Months Later) West. Euro. Loan Discount Margin (3 years)

Correlation: 0.90

2.45%

Average Difference 2004 - 2008: 364 bpAverage Difference 2009 - 2012: 634 bp

3/31/13 588 bp


04 April 2013


Exhibit 125: Quarterly Western European Leveraged Loan Default Rates, Annualized: 4Q01 – 1Q13

3.0%

4.6%

0.0%0.0%

0.0%0.0%

6.1%

0.0%

3.1%

0.7%0.0%

2.5%

0.0%0.0%

0.4%

5.8%

0.6%0.4%0.0%0.0%0.0%

0.8%0.0%

6.2%

1.5%

7.9%

4.8%

8.3%

5.9%

2.2%

9.3%

3.8%3.4%

0.0%

2.1%

0.1%

1.7%

11.4%

2.9%

5.0%

6.8%

2.7%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Qu

art

erl

y A

nnu

alized

Defa

ult

Rate

Quarterly Annualized Default Rate


04 April 2013


Industry

Exhibit 126: Western European Leveraged Loan Defaults by Industry, Par Weight Distribution


Media/Telecom69%

Manufacturing15%

Gaming/Leisure5%

Service4%

Healthcare4%


3%

Aerospace1% Chemicals

5%

Consumer Durables3%


1%

Food/Tobacco1%

Forest Prod/Containers3%

Gaming/Leisure7%

Healthcare1%

Housing14%

Manufacturing4%

Media/Telecom37%

Metals/Minerals1%

Retail1%

Service3%

Transportation13%

Utility3%


04

Ap

ril 20

13

Le

ve

rage

d F

ina

nce D

efa

ult R

evie

w

7

1

Exhibit 127: Annual Western European Leveraged Loan Default Rates by Industry

Aero

space

Chem

icals

Consum

er

Dura

ble

s

Consum

er

Non-D

ura

ble

s

Energ

y

Fin

ancia

l

Food a

nd D

rug

Food/T

obacco

Fore

st P

rod/C

onta

iners

Gam

ing/L

eis

ure

Health

care

Housin

g

Info

rmatio

n T

echnolo

gy

Manufa

ctu

ring

Media

/Tele

com

Meta

ls/M

inera

ls

Reta

il

Serv

ice

Tra

nsport

atio

n

Util

ity

Overa

ll

2000 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 52.32% 0.00% 0.00% 0.00% 0.00% 1.43%

2001 51.42% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 2.88% 0.00% 99.86% 0.00% 100.00% 16.05%

2002 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 78.43% 0.00% 0.00% 0.00% 15.06% 47.00%

2003 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 58.15% 0.00% 0.00% 1.07%

2004 26.44% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 60.86% 0.00% 2.32%

2005 0.00% 0.00% 10.67% 0.00% 0.00% 0.00% 0.00% 0.00% 2.33% 0.00% 0.00% 6.46% 0.00% 0.00% 0.00% 0.00% 2.06% 0.00% 0.00% 0.00% 0.83%

2006 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.58% 0.00% 0.00% 0.00% 42.36% 0.00% 1.81%

2007 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 3.05% 0.00% 0.09%

2008 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 4.95% 0.00% 30.02% 0.00% 0.00% 0.30% 0.00% 0.00% 0.00% 22.66% 0.00% 2.15%

2009 4.81% 7.73% 60.55% 9.64% 0.00% 0.00% 0.00% 0.00% 9.02% 0.00% 0.00% 51.17% 0.00% 1.69% 2.11% 46.98% 1.40% 2.36% 105.46% 0.00% 6.79%

2010 0.00% 11.28% 3.61% 0.00% 0.00% 0.00% 0.00% 3.23% 16.87% 67.13% 1.43% 0.00% 0.00% 3.40% 3.58% 0.00% 2.67% 1.78% 5.51% 0.00% 4.57%

2011 0.00% 0.00% 35.22% 21.05% 0.00% 0.00% 4.93% 1.97% 0.00% 5.58% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.95%

2012 0.00% 1.89% 0.00% 15.18% 0.00% 0.00% 0.00% 0.00% 0.00% 14.67% 0.00% 0.00% 0.00% 8.90% 18.42% 1.40% 0.88% 0.70% 78.48% 6.69%

LTM Mar 13 0.00% 0.00% 0.00% 14.40% 0.00% 0.00% 0.00% 0.00% 0.00% 6.39% 2.20% 0.00% 0.00% 8.91% 11.25% 0.00% 1.68% 0.00% 0.00% 4.26%


04

Ap

ril 20

13

Le

ve

rage

d F

ina

nce D

efa

ult R

evie

w

7

2

Exhibit 128: Annual Western European Leveraged Loan Recovery Rates by Industry

Aero

space

Chem

icals

Consum

er

Dura

ble

s

Consum

er

Non-D

ura

ble

s

Energ

y

Fin

ancia

l

Food a

nd D

rug

Food/T

obacco

Fore

st P

rod/C

onta

iners

Gam

ing/L

eis

ure

Health

care

Housin

g

Info

rmatio

n T

echnolo

gy

Manufa

ctu

ring

Media

/Tele

com

Meta

ls/M

inera

ls

Reta

il

Serv

ice

Tra

nsport

atio

n

Util

ity

Overa

ll

2000 72.00% 72.00%

2001 57.00% 99.50% 78.25%

2002 70.57% 70.57%

2003 70.00% 70.00%

2004 97.87% 70.63% 84.25%

2005 50.00% 96.50% 18.00% 78.00% 60.62%

2006 51.56% 90.50% 64.54%

2007 98.62% 98.62%

2008 35.00% 30.28% 32.50% 29.31% 31.20%

2009 35.00% 22.91% 25.57% 49.50% 49.67% 33.68% 29.81% 38.10% 21.00% 36.80% 31.22% 32.36%

2010 64.14% 39.02% 58.13% 59.73% 77.65% 61.13% 86.07% 44.12% 50.00% 65.19% 24.00% 62.93%

2011 39.03% 70.50% 15.63% 5.93% 34.25% 36.62%

2012 20.00% 70.85% 49.12% 37.16% 31.31% 33.58% 35.00% 34.00% 42.58%

LTM Mar 13 20.00% 75.00% 83.16% 49.12% 33.12% 29.36% 42.43%

Average: 66.44% 48.02% 38.41% 40.00% 68.63% 58.55% 27.32% 57.23% 43.88% 21.00% 53.10% 46.99% 54.18% 66.75% 60.50% Source: Credit Suisse

04 April 2013


By Loan Priority

Exhibit 129: Western European Leveraged Loan Defaults by Loan Priority, Par Weight Distribution


First Lien74%

Second Lien14%

Unsecured12%

First Lien

90%

Second Lien

8%

Unsecured

2%


Exhibit 130: Annual Western European Leveraged Loan Default Rates by Loan Priority


2000 1.43% 1.43%

2001 16.05% 16.05%

2002 47.10% 47.00%

2003 1.08% 0.00% 1.07%

2004 2.00% 24.33% 2.32%

2005 0.87% 0.00% 0.83%

2006 1.97% 0.00% 1.81%

2007 0.00% 0.98% 0.09%

2008 2.24% 0.58% 73.63% 2.15%

2009 6.64% 7.80% 17.53% 6.79%

2010 4.67% 3.97% 4.57%

2011 1.02% 0.39% 0.95%

2012 6.03% 14.84% 6.69%

LTM Mar 13 3.98% 8.25% 4.26%


04 April 2013


Exhibit 131: Western European Leveraged Loan Recovery Rates by Loan Priority


2000 72.00% 72.00%

2001 78.25% 78.25%

2002 70.57% 70.57%

2003 70.00% 70.00%

2004 70.63% 97.87% * 84.25%

2005 60.62% 60.62%

2006 64.54% 64.54%

2007 98.62% * 98.62%

2008 37.96% 8.66% 31.20%

2009 37.09% 8.84% 25.25% 32.36%

2010 67.08% 42.18% 62.93%

2011 29.99% 102.86% * 36.62%

2012 50.21% 22.56% 42.58%

LTM Mar 13 50.04% 23.40% 42.43%

Wtd Average: 48.44% 26.33% 25.25% 44.54%

* In 2004, 2007, and 2011 there w as just one 2nd lien that defaulted for

w hich w e had recovery rate information Source: Credit Suisse

04 April 2013


By Country

Exhibit 132: Western European Leveraged Loan Defaults by Loan Priority, Par Weight Distribution


United Kingdom49.2%

France21.8%

Germany15.5%

Italy8.9%

United States2.6%

Netherlands2.0%

United Kingdom34.3%

Germany15.3%Netherlands

8.9%

Spain8.5%

France6.5%

Ireland6.4%

Italy4.7%

Switzerland4.5%

United States3.0%

Finland2.9%

Sweden2.6%

Hungary1.0%

Bermuda0.5%

Greece0.5%

Belgium0.3%

Canada0.1%

Norway0.1%


Exhibit 133: LTM March 2013 Western European Leveraged Loan Defaults Default Date Effective Date Issuer Facility Seniority Coupon Spread Default Amt Maturity Industry Original Rating Cov-Lite

6/21/2012 7/17/2007 Klockner Pentaplast TLd SECOND LIEN 400 188 12/2/2016 MANUFACTURING NR No

6/21/2012 7/17/2007 Klockner Pentaplast TLb FIRST LIEN 250 700 12/29/2015 MANUFACTURING NR Yes

6/21/2012 7/17/2007 Klockner Pentaplast TLd SECOND LIEN 400 188 12/2/2016 MANUFACTURING NR No

6/29/2012 5/24/2007 Culligan International TLd SECOND LIEN 475 175 5/24/2013 CONSUMER NON-DURABLES CCC/Split CCC No

8/16/2012 10/17/2006 Travelodge Hotels TLb FIRST LIEN 250 124 10/13/2014 GAMING/LEISURE NR No

8/16/2012 10/17/2006 Travelodge Hotels TLc FIRST LIEN 300 124 10/13/2015 GAMING/LEISURE NR No

8/16/2012 10/17/2006 Travelodge Hotels TLd SECOND LIEN 450 30 4/13/2016 GAMING/LEISURE NR No

9/10/2012 2/21/2007 PagesJaunes Groupe TLd SECOND LIEN 425 371 8/20/2016 MEDIA/TELECOM NR No

9/10/2012 2/21/2007 PagesJaunes Groupe TLb FIRST LIEN 225 389 2/20/2015 MEDIA/TELECOM NR No

9/10/2012 2/21/2007 PagesJaunes Groupe TLc FIRST LIEN 275 389 2/19/2016 MEDIA/TELECOM NR No

9/10/2012 3/29/2011 PagesJaunes Groupe TLb FIRST LIEN 275 316 10/12/2015 MEDIA/TELECOM NR No

9/18/2012 5/17/2006 Eurotax Glass TLd SECOND LIEN 525 23 5/17/2016 SERVICE NR No

9/18/2012 6/13/2006 Eurotax Glass TLc FIRST LIEN 300 78 5/29/2015 SERVICE NR No

9/18/2012 10/11/2010 Eurotax Glass TLb FIRST LIEN 450 47 6/22/2015 SERVICE NR No

10/25/2012 11/30/2009 Yell Group TLb FIRST LIEN 375 1496 7/31/2014 MEDIA/TELECOM B No

10/25/2012 11/30/2009 Yell Group TLb FIRST LIEN 375 467 7/31/2014 MEDIA/TELECOM B No

11/15/2012 9/17/2009 Incisive Media TLb FIRST LIEN 260 45 9/17/2013 MEDIA/TELECOM NR No

12/10/2012 12/10/2010 European Directories TL FIRST LIEN 250 830 12/10/2015 MEDIA/TELECOM NR No

1/2/2013 2/17/2010 Marken TLb FIRST LIEN 500 200 12/30/2016 HEALTHCARE NR No

1/23/2013 8/16/2010 Catalpa TLb FIRST LIEN 500 135 8/16/2017 SERVICE NR No

2/6/2013 9/6/2012 SEAT Pagine Gialle TLb FIRST LIEN 540 596 12/31/2016 MEDIA/TELECOM NR No Source: Credit Suisse

Disclosure Appendix

Analyst Certification The analysts identified in this report each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

Important Disclosures Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail, please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html Credit Suisse’s policy is to publish research reports as it deems appropriate, based on developments with the subject issuer, the sector or the market that may have a material impact on the research views or opinions stated herein. The analyst(s) involved in the preparation of this research report received compensation that is based upon various factors, including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's Investment Banking and Fixed Income Divisions. Credit Suisse may trade as principal in the securities or derivatives of the issuers that are the subject of this report. At any point in time, Credit Suisse is likely to have significant holdings in the securities mentioned in this report. As at the date of this report, Credit Suisse acts as a market maker or liquidity provider in the debt securities of the subject issuer(s) mentioned in this report. For important disclosure information on securities recommended in this report, please visit the website at https://firesearchdisclosure.credit-suisse.com or call +1-212-538-7625. For the history of any relative value trade ideas suggested by the Fixed Income research department as well as fundamental recommendations provided by the Emerging Markets Sovereign Strategy Group over the previous 12 months, please view the document at http://research-and-analytics.csfb.com/docpopup.asp?ctbdocid=330703_1_en. Credit Suisse clients with access to the Locus website may refer to http://www.credit-suisse.com/locus. For the history of recommendations provided by Technical Analysis, please visit the website at http://www.credit-suisse.com/techanalysis. Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.

Emerging Markets Bond Recommendation Definitions Buy: Indicates a recommended buy on our expectation that the issue will deliver a return higher than the risk-free rate. Sell: Indicates a recommended sell on our expectation that the issue will deliver a return lower than the risk-free rate.

Corporate Bond Fundamental Recommendation Definitions Buy: Indicates a recommended buy on our expectation that the issue will be a top performer in its sector. Outperform: Indicates an above-average total return performer within its sector. Bonds in this category have stable or improving credit profiles and are undervalued, or they may be weaker credits that, we believe, are cheap relative to the sector and are expected to outperform on a total-return basis. These bonds may possess price risk in a volatile environment. Market Perform: Indicates a bond that is expected to return average performance in its sector. Underperform: Indicates a below-average total-return performer within its sector. Bonds in this category have weak or worsening credit trends, or they may be stable credits that, we believe, are overvalued or rich relative to the sector. Sell: Indicates a recommended sell on the expectation that the issue will be among the poor performers in its sector. Restricted: In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Not Rated: Credit Suisse Global Credit Research or Global Leveraged Finance Research covers the issuer but currently does not offer an investment view on the subject issue. Not Covered: Neither Credit Suisse Global Credit Research nor Global Leveraged Finance Research covers the issuer or offers an investment view on the issuer or any securities related to it. Any communication from Research on securities or companies that Credit Suisse does not cover is factual or a reasonable, non-material deduction based on an analysis of publicly available information.

Corporate Bond Risk Category Definitions In addition to the recommendation, each issue may have a risk category indicating that it is an appropriate holding for an "average" high yield investor, designated as Market, or that it has a higher or lower risk profile, designated as Speculative and Conservative, respectively.

Credit Suisse Credit Rating Definitions Credit Suisse may assign rating opinions to investment-grade and crossover issuers. Ratings are based on our assessment of a company's creditworthiness and are not recommendations to buy or sell a security. The ratings scale (AAA, AA, A, BBB, BB, B) is dependent on our assessment of an issuer's ability to meet its financial commitments in a timely manner. Within each category, creditworthiness is further detailed with a scale of High, Mid, or Low – with High being the strongest sub-category rating: High AAA, Mid AAA, Low AAA – obligor's capacity to meet its financial commitments is extremely strong; High AA, Mid AA, Low AA – obligor's capacity to meet its financial commitments is very strong; High A, Mid A, Low A – obligor's capacity to meet its financial commitments is strong; High BBB, Mid BBB, Low BBB – obligor's capacity to meet its financial commitments is adequate, but adverse economic/operating/financial circumstances are more likely to lead to a weakened capacity to meet its obligations; High BB, Mid BB, Low BB – obligations have speculative characteristics and are subject to substantial credit risk; High B, Mid B, Low B – obligor's capacity to meet its financial commitments is very weak and highly vulnerable to adverse economic, operating, and financial circumstances; High CCC, Mid CCC, Low CCC – obligor's capacity to meet its financial commitments is extremely weak and is dependent on favorable economic, operating, and financial circumstances. Credit Suisse's rating opinions do not necessarily correlate with those of the rating agencies.

http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html

http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html

https://firesearchdisclosure.credit-suisse.com/

http://research-and-analytics.csfb.com/docpopup.asp?ctbdocid=330703_1_en

http://research-and-analytics.csfb.com/docpopup.asp?ctbdocid=330703_1_en

http://www.credit-suisse.com/locus

http://www.credit-suisse.com/locus

http://www.credit-suisse.com/techanalysis

Credit Suisse’s Distribution of Global Credit Research Recommendations* (and Banking Clients)

Global Recommendation Distribution**

Buy 6% (of which 86% are banking clients)

Outperform 26% (of which 70% are banking clients)

Market Perform 51% (of which 68% are banking clients)

Underperform 16% (of which 74% are banking clients)

Sell <1% (of which 100% are banking clients)

*Data are as at the end of the previous calendar quarter. **Percentages do not include securities on the firm’s Restricted List and might not total 100% as a result of rounding.

References in this report to Credit Suisse include all of the subsidiaries and affiliates of Credit Suisse operating under its investment banking division. For more information on our structure, please use the following link: https://www.credit-suisse.com/who_we_are/en/. This report may contain material that is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Credit Suisse AG or its affiliates ("CS") to any registration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to CS. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of CS. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of CS or its affiliates. The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. CS may not have taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. CS will not treat recipients of this report as its customers by virtue of their receiving this report. The investments and services contained or referred to in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about such investments or investment services. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. CS does not advise on the tax consequences of investments and you are advised to contact an independent tax adviser. Please note in particular that the bases and levels of taxation may change. Information and opinions presented in this report have been obtained or derived from sources believed by CS to be reliable, but CS makes no representation as to their accuracy or completeness. CS accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to CS. This report is not to be relied upon in substitution for the exercise of independent judgment. CS may have issued, and may in the future issue, other communications that are inconsistent with, and reach different conclusions from, the information presented in this report. Those communications reflect the different assumptions, views and analytical methods of the analysts who prepared them and CS is under no obligation to ensure that such other communications are brought to the attention of any recipient of this report. CS may, to the extent permitted by law, participate or invest in financing transactions with the issuer(s) of the securities referred to in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. CS may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment. Additional information is, subject to duties of confidentiality, available on request. Some investments referred to in this report will be offered solely by a single entity and in the case of some investments solely by CS, or an associate of CS or CS may be the only market maker in such investments. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication by CS and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments. Investors in securities such as ADR's, the values of which are influenced by currency volatility, effectively assume this risk. Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility, and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct their own investigation and analysis of the product and consult with their own professional advisers as to the risks involved in making such a purchase. Some investments discussed in this report may have a high level of volatility. High volatility investments may experience sudden and large falls in their value causing losses when that investment is realised. Those losses may equal your original investment. Indeed, in the case of some investments the potential losses may exceed the amount of initial investment and, in such circumstances, you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in consequence, initial capital paid to make the investment may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed. This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of CS, CS has not reviewed any such site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to CS's own website material) is provided solely for your convenience and information and the content of any such website does not in any way form part of this document. Accessing such website or following such link through this report or CS's website shall be at your own risk. This report is issued and distributed in Europe (except Switzerland) by Credit Suisse Securities (Europe) Limited, One Cabot Square, London E14 4QJ, England, which is regulated in the United Kingdom by The Financial Services Authority ("FSA"). This report is being distributed in Germany by Credit Suisse Securities (Europe) Limited Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuer Finanzdienstleistungsaufsicht ("BaFin"). This report is being distributed in the United States and Canada by Credit Suisse Securities (USA) LLC; in Switzerland by Credit Suisse AG; in Brazil by Banco de Investimentos Credit Suisse (Brasil) S.A or its affiliates; in Mexico by Banco Credit Suisse (México), S.A. (transactions related to the securities mentioned in this report will only be effected in compliance with applicable regulation); in Japan by Credit Suisse Securities (Japan) Limited, Financial Instruments Firm, Director-General of Kanto Local Finance Bureau (Kinsho) No. 66, a member of Japan Securities Dealers Association, The Financial Futures Association of Japan, Japan Investment Advisers Association, Type II Financial Instruments Firms Association; elsewhere in Asia/ Pacific by whichever of the following is the appropriately authorised entity in the relevant jurisdiction: Credit Suisse (Hong Kong) Limited, Credit Suisse Equities (Australia) Limited, Credit Suisse Securities (Thailand) Limited, Credit Suisse Securities (Malaysia) Sdn Bhd, Credit Suisse AG, Singapore Branch, Credit Suisse Securities (India) Private Limited regulated by the Securities and Exchange Board of India (registration Nos. INB230970637; INF230970637; INB010970631; INF010970631), having registered address at 9th Floor, Ceejay House,Dr.A.B. Road, Worli, Mumbai - 18, India, T- +91-22 6777 3777, Credit Suisse Securities (Europe) Limited, Seoul Branch, Credit Suisse AG, Taipei Securities Branch, PT Credit Suisse Securities Indonesia, Credit Suisse Securities (Philippines ) Inc., and elsewhere in the world by the relevant authorised affiliate of the above. Research on Taiwanese securities produced by Credit Suisse AG, Taipei Securities Branch has been prepared by a registered Senior Business Person. Research provided to residents of Malaysia is authorised by the Head of Research for Credit Suisse Securities (Malaysia) Sdn Bhd, to whom they should direct any queries on +603 2723 2020. This research may not conform to Canadian disclosure requirements. In jurisdictions where CS is not already registered or licensed to trade in securities, transactions will only be effected in accordance with applicable securities legislation, which will vary from jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or licensing requirements. Non-U.S. customers wishing to effect a transaction should contact a CS entity in their local jurisdiction unless governing law permits otherwise. U.S. customers wishing to effect a transaction should do so only by contacting a representative at Credit Suisse Securities (USA) LLC in the U.S. Please note that this research was originally prepared and issued by CS for distribution to their market professional and institutional investor customers. Recipients who are not market professional or institutional investor customers of CS should seek the advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents. This research may relate to investments or services of a person outside of the UK or to other matters which are not regulated by the FSA or in respect of which the protections of the FSA for private customers and/or the UK compensation scheme may not be available, and further details as to where this may be the case are available upon request in respect of this report. CS may provide various services to US municipal entities or obligated persons ("municipalities"), including suggesting individual transactions or trades and entering into such transactions. Any services CS provides to municipalities are not viewed as "advice" within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. CS is providing any such services and related information solely on an arm's length basis and not as an advisor or fiduciary to the municipality. In connection with the provision of the any such services, there is no agreement, direct or indirect, between any municipality (including the officials, management, employees or agents thereof) and CS for CS to provide advice to the municipality. Municipalities should consult with their financial, accounting and legal advisors regarding any such services provided by CS. In addition, CS is not acting for direct or indirect compensation to solicit the municipality on behalf of an unaffiliated broker, dealer, municipal securities dealer, municipal advisor, or investment adviser for the purpose of obtaining or retaining an engagement by the municipality for or in connection with Municipal Financial Products, the issuance of municipal securities, or of an investment adviser to provide investment advisory services to or on behalf of the municipality. If this report is being distributed by a financial institution other than Credit Suisse AG, or its affiliates, that financial institution is solely responsible for distribution. Clients of that institution should contact that institution to effect a transaction in the securities mentioned in this report or require further information. This report does not constitute investment advice by Credit Suisse to the clients of the distributing financial institution, and neither Credit Suisse AG, its affiliates, and their respective officers, directors and employees accept any liability whatsoever for any direct or consequential loss arising from their use of this report or its content. Principal is not guaranteed. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.

Copyright © 2013 CREDIT SUISSE AG and/or its affiliates. All rights reserved.

Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments. When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only.

https://www.credit-suisse.com/who_we_are/en/

Jonathan Blau Managing Director (212) 538-3533

Daniel Sweeney Director (212) 538-8213

Karen Friedlander Associate (212) 325-8459

Global Leveraged Finance StrategyJonathan Blau - Head of Global Leveraged Finance Strategy

10% leveraged finance default review - credit suisse

Documents