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KeyBanc Capital Market’s Private Capital Group

The Private Capital Group at KeyBanc Capital Markets (“KBCM”) is a dedicated private capital effort

responsible for the private placement of debt and equity securities with substantial expertise across industries

and investment stages. Primarily, we place minority equity investments and junior / subordinated debt for

middle market companies with institutional investors. Through extensive transaction experience, deep

expertise in focused KBCM verticals and industry established relationships with institutional and private

investors, the Private Capital Group helps clients raise capital for growth, liquidity events, ownership

transitions, recapitalizations and acquisitions.

For additional information regarding KBCM's Private Capital Group or

this newsletter, please contact the individuals listed below:

Andrew Frawley

216.689.4288

[email protected]

Ante N. Turcinov

216.689.3749

[email protected]

Junior Debt Market Analysis Q2 2011 – Q2 2013

Junior Debt Market Analysis

2

KeyBanc Capital Markets (“KeyBanc” or “KBCM”) is a trade name under which corporate and investment banking products and services of KeyCorp

and its subsidiaries, KeyBanc Capital Markets Inc., Member NYSE/FINRA/SIPC, and KeyBank National Association (“KeyBank N.A.”), are

marketed. Securities products and services are offered by KeyBanc Capital Markets Inc. and by its licensed securities representatives. Banking

products and services are offered by KeyBank N.A.

A number of our corporate and institutional team members are employed by both KeyBanc Capital Markets Inc. and KeyBank N.A. These “dual

employees” are licensed securities representatives of KeyBanc Capital Markets Inc., and they are there to better serve your needs, by making

available both securities and banking products and services.

Further, in connection with our effort to deliver a comprehensive array of banking and securities products and services to you in a seamless manner,

from time to time KeyBank N.A. and KeyBanc Capital Markets Inc. will share with each other certain non-public information that you provide to us.

Of course, as always, this information will not be shared or otherwise disclosed outside of the KeyCorp organization without your express

permission. Please also be assured that, as with other banks and broker-dealers, KeyBank N.A. and KeyBanc Capital Markets Inc. adhere to

established internal procedures to safeguard your corporate information from areas within our organization that trade in or advise clients with

respect to the purchase and sale of securities.

KEYBANC CAPITAL MARKETS INC. IS NOT A BANK OR TRUST COMPANY AND IT DOES NOT ACCEPT DEPOSITS. THE OBLIGATIONS

OF KEYBANC CAPITAL MARKETS INC. ARE NOT OBLIGATIONS OF KEYBANK N.A. OR ANY OF ITS AFFILIATE BANKS, AND NONE OF

KEYCORP’S BANKS ARE RESPONSIBLE FOR, OR GUARANTEE, THE SECURITIES OR SECURITIES-RELATED PRODUCTS OR

SERVICES SOLD, OFFERED OR RECOMMENDED BY KEYBANC CAPITAL MARKETS INC. OR ITS EMPLOYEES. SECURITIES AND

OTHER INVESTMENT PRODUCTS SOLD, OFFERED OR RECOMMENDED BY KEYBANC CAPITAL MARKETS INC., IF ANY, ARE NOT

BANK DEPOSITS OR OBLIGATIONS AND ARE NOT INSURED BY THE FDIC.

This information is provided in confidentiality and is not to be shared by the principals with third parties.

Disclosure


3

has acquired the Supply Chain Operation of

Sole Lead Arranger,

Sole Bookrunner &

Administrative Agent

March 2013

$110,000,000

Senior Secured Credit Facilities

KeyBanc Capital Markets and Private Capital Group Overview

Corporate and Investment bank focused on the middle market

Capital Markets Products and Services:

– Mergers & Acquisitions

– Debt and Equity Capital Markets

Over 550 bankers in 10 offices: Atlanta, Boston, Charlotte, Chicago, Cleveland,

Dallas, Houston, New York, San Francisco and Seattle

Over 60 senior and associate equity research analysts, tracking more than 500

companies across four major industry sectors

The Private Capital Group (“PCG”) is a dedicated private capital effort

responsible for the private placement of debt and equity securities

– Substantial expertise across industries and investment stages

Place minority equity investments and junior / junior / subordinated debt for

middle market companies with institutional investors

Sole Community Banking Offices (11 States)

Sole Corporate Banking Offices (14 States)

Headquarters: Cleveland, OH

Combined Corporate and Community Banking Offices (3 States)

KeyBanc Capital Markets and Private Capital Group Select Transactions

December 2012

Exclusive Financial Advisor

$16,000,000

Private Placement

March 2013

Sole Placement Agent

$25,000,000

Private Placement

has received funding from

November 2011

Exclusive Financial Advisor and


$75,000,000

Private Placement

June 2013

Joint Lead Arranger,

Joint Bookrunner &


$237,000,000


October 2011

Co Sell-Side Advisor

has been acquired by

a portfolio company of

I. Executive Summary

April 2013

Joint Lead Arranger,

Joint Bookrunner &


$180,000,000

Senior Secured Credit Facility

September 2010



has received funding in the form

of $6,000,000 Series A

Convertible Preferred Stock from

August 2009

Financial Advisor


Common Stock Offering

September 2010

Co Sell-Side Advisor

$65,000,000

Senior Secured Credit Facility


September 2010

Exclusive Financial Advisor

$15,000,000

Private Placement

Mezzanine Debt


has received a minority investment from

January 2012



– Debt Capital Markets

– Private Capital


4

Executive Summary

Since Q2 of 2011, KeyBanc Capital Markets has conducted a quarterly survey of mezzanine and junior debt

participants to measure market conditions and transaction terms

The junior debt capital markets (including mezzanine, subordinated, second lien structures, etc.) are not as well documented or

organized as the senior debt markets or the equity or venture capital markets

– This challenge is even more pronounced in the lower end of the middle market; typically companies less than $50 million of EBITDA

Our survey and resulting newsletter is an attempt to address the lack of market information noted above

We have been conducting our survey for the last eight quarters and have aggregated the data for review and analysis

– In this study, we share with you the results of our survey from the past two years and provide other anecdotal observations to bring you our

state-of-the-market perspective



5

Executive Summary (cont’d)

In a typical quarter, junior capital providers who respond to our survey:

Have $210.3 million

available to invest

A typical investment size of

$16.7 million per transaction

May or may not need to

begin fundraising in the next

twelve months, but expect

that process to take 11.3

months

Generally speaking, funds

are getting larger and capital

providers are looking to put

larger amounts of capital in

each transaction

Transaction Flow /

Closed Transactions

Transaction

Structure Terms and Conditions Fund Overview

See opportunities from a

range of sources, with 63.8%

involving a sponsor

Look at 36.6 opportunities

across a broad range of

industries

Submit 4.8 LOIs

Close 1.8 transactions

Of note, on average, ~30%

of funds do not close any

transactions during a given

quarter

For completed transactions

– Senior debt to EBITDA

multiple is 3.1x

– Total debt to EBITDA

multiple is 4.1x

The typical capital structure

includes

– 16.9% of junior debt

– 34.5% of equity

The average

– Cash pay rate is 12.9%

– Average PIK rate is 3.1%

– Total expected IRR is

16.5%

61.2% of transactions have

warrants equal to 4.9% of

the fully-diluted equity

The average no call period

(or lack thereof) is highly

negotiated on a transaction-

to-transaction basis

The average prepayment

penalty is 3.0% (in the first

year)



6

KBCM Junior Debt Market Analysis Debt providers continue to consider a broad range of industries and many continue to be industry generalists

– Almost half of our respondents do not have any industry focus

There is general consistency over the last four quarters

Industries of Interest

Transportation & Logistics

Consumer

Business Services

Healthcare

Professional, Scientific, and Technical Services

Information Services

Education

Technology

Construction, Eng. and Infrastructure Services

Basic Materials

Energy and Utilities

Industrial Manufacturing

Finance & Insurance

Hospitality

Real Estate

Other

Do not have any industry specialization

Media & Telecom

Q3 2012

37%

35%

57%

33%

22%

37%

33%

18%

12%

12%

14%

41%

12%

2%

-

4%

39%

-

Q1 2013

39%

46%

57%

41%

33%

33%

33%

20%

13%

22%

17%

43%

28%

15%

2%

4%

48%

2%

Q2 2013

19%

14%

24%

19%

14%

14%

14%

19%

10%

5%

10%

24%

10%

5%

-

-

71%

-

Q4 2012

45%

45%

55%

43%

33%

34%

28%

16%

21%

33%

26%

45%

10%

5%

2%

2%

41%

-

II. Fund Profiles


7

KBCM Junior Debt Market Analysis

Capital for Deployment

Typical Investment Size

Significant capital remains available as debt providers flush with

cash continue to seek investment opportunities

59.3% of funds reported having more than $100 million of capital

available

Funds with more than $100 million to invest have become a

larger part of the overall market

Increased competition for opportunities / lack of companies

seeking capital may be driving increased levels of capital

available

72.0% of respondents indicated having a typical investment size

of $5 - $25 million

Debt providers seeking to place at least $25 million per

investment have almost tripled since Q2 2012

– Larger funds seeking to deploy capital efficiently, i.e. in larger

amounts

– In our experience (and supported by this data), there are

essentially two primary junior debt markets

• One for companies with >$10 million of EBITDA

• One for companies with <$10 million of EBITDA

Investments of <$5 million have decreased significantly over the

past eight quarters

II. Fund Profiles

21%30%

23%34%

24%16% 21% 22%

10%

32%28%

25% 7%

10% 20% 16% 15%

14%

22%26%

30% 40%

37%40% 42% 46%

43%

13%9% 15% 10%

17% 12% 5%14%

12% 9% 8% 9% 12% 12% 16% 15% 19%

0%

25%

50%

75%

100%

Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013

% o

f R

es

po

nd

en

ts

<$50M $50M - $99M $100M - $250M $251M - $500M >$500M

23% 19% 15%8% 5% 4% 5% 7% 5%

36% 46%

38%42%

33% 33% 35% 33%24%

31% 23%

31% 34%50%

38% 37% 42%

43%

9% 10% 16% 16% 10%25% 23% 18%

29%

0%

25%

50%

75%

100%

Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013

% o

f R

es

po

nd

en

ts

<$5M $5M - $10M $11M - $25M $26M - $50M >$50M


8


Commentary

Given current capital availability and competition among

providers, anticipated fundraising activity remains modest

As expected, ~50% of respondents do not anticipate fundraising

in the next 12 months, with the remainder anticipating

fundraising more than 12 months out or undecided

The majority of respondents believe it would take substantially

longer than 6 months to raise a new fund

– 50% believe fundraising would take more than a year

II. Fund Profiles

New Fund Raises in the Next Twelve Months

Time Needed to Raise a New Fund

49% 45% 49%42% 41% 41% 46% 46%

29%

43% 45%44%

48% 51% 49% 36% 39%

48%

9% 11% 7% 10% 7% 10%18% 15%

24%

0%

25%

50%

75%

100%

Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013

% o

f R

es

po

nd

en

ts

Yes No Undecided

24%37%

5%

24% 20% 15% 19%

33%

33%

43%

23%45% 58%

38%

50%

33%17%

38% 41%20%

23%

29%50%

10% 13% 14% 12% 15%4%

14%

0%

25%

50%

75%

100%

Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013

% o

f R

es

po

nd

en

ts

<6 months 6 - 12 months 13 - 18 months >18 months


9


Commentary Portfolio Investment Sources

Sponsors continue to be an important avenue for opportunities

– They typically represent 40% to 50% of leads

– They represent ~60% of closed transactions

III. Transaction Flow

Sponsored vs. Non-Sponsored Sources

21% 26% 21%27% 30% 24% 22% 26%

45%43%

45%45% 41% 48% 49%

54%

8% 8% 7%9% 10% 9% 9%

8%26% 23% 26%

19% 19% 19% 21%12%

0%

25%

50%

75%

100%

Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013

% o

f R

es

po

nd

en

ts

Investment Banks PE Sponsor Groups Other Mezzanine Funds Other

64% 59% 62% 63% 64% 62% 66% 61%72%

37% 41% 38% 37% 36% 38% 34% 39%28%

0%

25%

50%

75%

100%

Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013

% o

f R

es

po

nd

en

ts

Sponsored Non-Sponsored


10


Commentary

LOIs Submitted

Transactions Reviewed

The number of participants closing at least one transaction

increased from 50% in Q1 2013 to 81% in Q2 2013

Significantly more respondents executed at least one

transaction in 2011 vs. 2012, a result of current market

conditions which include:

– Substantial capital (both senior and junior) chasing too few

opportunities

– More aggressive transaction structures

Seasonality

– Although we have a limited sample set, there seems to be an

indications that Q1is a slow quarter for closed transactions

– In both Q1 2012 and 2013, 50% or more of respondents did

not close a transaction


Transactions Closed

7%7%8% 15% 15%

10%

15%18%

22%31%

26%35%

10%

37%33%

34% 23%

28%22%

43%

37% 33% 37% 40%24% 22%

38%

0%

25%

50%

75%

100%

Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013

% o

f R

es

po

nd

en

ts

0 transactions 1 - 5 transactions 6 - 10 transactions

11 - 25 transactions 26 - 50 transactions >50 transactions

8% 13% 11%

59%

30%

60%

69%

57%71%

63% 65%

62%

21%

30%

29%

18%

26%

23% 15% 17%

29%

18%

38%

9% 4%14%

4% 9% 7% 10%

0%

25%

50%

75%

100%

Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013

% o

f R

es

po

nd

en

ts

0 LOIs 1 - 5 LOIs 6 - 10 LOIs >10 LOIs

23%

4%

21%

53%

24%37% 31%

50%

19%

34%

21%

38%

21%

27%

25%

20%

28%

38%

18%

13%

19%

16%

20%

17%

20%

11%

24%

8%

28%

12%

6%

12%

13%15%

9%

5%7%

6% 14%13%26%

5% 10% 7%

0%

25%

50%

75%

100%

Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013

% o

f R

es

po

nd

en

ts

0 1 2 3 4 ≥5


11


Total Debt/

EBITDA Ratios <1.5x 1.5x – 1.9x 2.0x – 2.5x 2.6x – 3.0x 3.1x – 3.5x 3.6x – 4.0x 4.1x – 4.5x 4.6x – 5.0x >5.0x

Q4 2011 1.6% 1.9% - 3.2% 13.3% 40.0% 28.3% 6.7% 5.0%

Q1 2012 3.9% 2.1% 2.5% 3.7% 4.0% 42.0% 24.0% 14.0% 3.8%

Q2 2012 - - - 2.7% 7.3% 22.5% 45.0% 15.0% 7.5%

Q3 2012 - - - - 14.3% 18.4% 34.7% 28.5% 4.1%

Q4 2012 - 5.6% - 7.4% 18.5% 20.4% 29.6% 16.7% 1.9%

Q1 2013 - - 2.2% 2.2% 4.3% 21.7% 32.6% 26.1% 10.9%

Q2 2013 - - - 9.5% 14.3% 23.8% 23.8% 23.8% 4.8%

Senior Debt/

EBITDA Ratios <1.5x 1.5x – 1.9x 2.0x – 2.5x 2.6x – 3.0x 3.1x – 3.5x 3.6x – 4.0x 4.1x – 4.5x 4.6x – 5.0x >5.0x

Q4 2011 1.9% 3.3% 25.0% 33.3% 25.0% 10.0% - 1.5% -

Q1 2012 - 8.0% 12.0% 44.0% 26.0% 10.0% - - -

Q2 2012 2.5% - 15.0% 25.0% 52.5% 5.0% - - -

Q3 2012 - - 14.3% 26.5% 32.7% 20.4% 4.1% 2.0% -

Q4 2012 5.6% 7.4% 25.9% 22.2% 37.0% 1.9% - - -

Q1 2013 - 2.2% 17.4% 21.7% 41.3% 15.2% 2.2% - -

Q2 2013 - - 28.6% 28.6% 33.3% 4.8% 4.8% - -

Senior Debt

Total Debt

The majority of transactions are being completed at 2.0x – 3.5x senior leverage

Over the past several quarters, most completed transactions had 3.1x – 5.0x total leverage



12

KBCM Junior Debt Market Analysis IV. Transaction Specifics

Cash Payment Requirement

Total IRR Requirement

PIK Rate Requirement

Cash pay has remained consistent in the 11% - 13% range, with

12% remaining (by far) the most common coupon

In our experience, the combination of cash pay plus PIK plus

other elements of return is remarkably consistent from quarter-

to-quarter and year-to-year

The majority of respondents aim for a base-case total IRR

requirement of 15% - 17% with a smaller percentage targeting

total returns greater than 18%

– The consistency in absolute return expectation is surprising,

i.e., why does it not contract in strong credit markets and

expand in weak credit markets?

– I have heard the joke that mezz has been 12 plus 2 since the

Kennedy administration (referring to 12% cash pay and 2%

PIK)

– Junior lenders prefer to differentiate themselves on other

transaction terms, i.e. prepayment penalties, no call periods,

etc.

The average expected IRR over the past eight quarters has

been 16.5%

Currently, most PIK rates are 2%

– Average PIK rate over the past eight quarters has been 3.0%

– Increasing occurrence of no PIK rate over the past five

quarters

– There appears to be some (limited) elasticity in pricing as it

relates to PIK rates

Commentary

6% 6% 5%5% 14% 12% 10% 16%

5%29%

67% 68%64% 55% 63% 62% 55%

64%

43%

16% 11%17%

8%17% 15% 17% 14%11%

7%6%

6% 7% 10%7% 5% 8%

0%

25%

50%

75%

100%

Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013

% o

f R

es

po

nd

en

ts

<10% 10% 11% 12% 13% 14% 15% >15%

5% 6% 8% 9% 5%7%

7% 6%7%

38%20% 19% 17% 27%28%

20%

10%34%18%

24% 17%20%

34%

19%10%

20% 10% 17%11% 10%

10%5% 16% 20% 19% 6% 5%10%7%

6% 7% 6% 9% 7%10% 5% 6% 10%

0%

25%

50%

75%

100%

Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013

% o

f R

es

po

nd

en

ts

≤12% 13% 14% 15% 16% 17% 18% 19% 20% >20%

10% 5% 13% 11% 7% 10%7% 7% 8%

15%9%

14%18%

58% 50% 41%66% 50%

46% 59%67%

13%

19% 31% 35%17% 25%

26% 16%

10%

13%

9%10% 8% 7% 9%

15%

33%

7% 6%

0%

25%

50%

75%

100%

Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013

% o

f R

es

po

nd

en

ts

Rarely or Never Have PIK Rate ≤1% 2% 3% 4% 5% >5%


13


Percentage of Transactions with Warrants / Equity Upside

Warrant Positions as Percentage of Fully-Diluted Equity

IV. Transaction Specifics

Over the past eight quarters, approximately 85% of respondents

indicated that their transactions have either warrants or equity

upside

– Has remained fairly consistent across the past eight quarters

The amount of warrants / equity upside as noted in survey

responses is substantially higher than we have seen

(anecdotally) in the market

We have recently begun to distinguish “purchased equity”

versus “not purchased equity” in our survey to help us refine our

analysis going forward

Approximately 55% of the respondents reported warrant

positions that represented 5% or more of fully diluted equity

Average of 4.9% of fully-diluted equity

Not only is the incidence of equity upside more commonly noted

in our survey results (as noted above), the amount of the

position as a percent of fully diluted equity as reported is much

higher than we typically see in the limited instances we observe

it in the market

5%12% 16% 12% 12% 10%

19% 16% 13%19%7%

9% 11% 14% 20% 6% 13%9%

10%18% 9% 12%12%

13%

6%7% 16%

10%

38%30%

39%41% 30%

38%36%

40% 33%

25%36%

26% 20%28% 31% 27% 22% 24%

0%

25%

50%

75%

100%

Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013

% o

f R

es

po

nd

en

ts

Never ≤10% 11% - 25% 26% - 50% 51% - 99% 100%

7% 7% 5% 6% 11%

18%

9%9%

13%18% 17% 6%

15%10%

13%27%

28%20%

23%13% 21% 24%

20%

13% 7%

19%

13% 6% 8%10%

15%

15% 21%

19%

20%23%

11% 11%

17% 30%

34% 34%

18%

35%28%

47% 43%32%

25%

0%

25%

50%

75%

100%

Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013

% o

f R

es

po

nd

en

ts

≤1% 2% 3% 4% 5% >5%


14


Percentage of Transactions with No-Call Periods

Percentage of Transactions with Prepayment Penalties

The vast majority of transactions (>90%) have some form of

prepayment penalty

Interestingly, a small but consistent percentage of respondents

(5% - 7%) report having no prepayment penalty in place for

transactions that occurred over the past eight quarters

IV. Transaction Specifics

Most respondents reported having some form of call protection

over the past eight quarters

On average, 34.6% of respondents indicated that they have no

call protection in place (across past eight quarters), while 23.1%

indicated they have it in all cases

Clearly a highly negotiated point that differs from transaction to

transaction 42% 40% 37%27% 32% 29%

36% 33%

9% 11%

8%9%

7%

9%

7% 9%

8%5%

9%

14%

7% 7%

6% 23%6% 7%

11%

5%

20%5%

18%17%

21% 20%

14%

38%

16%28% 27%

20%28% 27%

16%24%

0%

25%

50%

75%

100%

Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013

% o

f R

es

po

nd

en

ts

0% 1% - 10% 11% - 25% 26% - 50% 51% - 99% 100%

5% 7% 6% 6% 6% 6% 5%5%

5% 5%9%

7%5% 8% 6%

9%27%

12% 11%22%

15%20%

16% 29%

66% 69% 68% 68% 67%59%

66% 62%

0%

25%

50%

75%

100%

Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013

% o

f R

es

po

nd

en

ts

0% 1% - 10% 11% - 25% 26% - 50% 51% - 99% 100%


15

KBCM Junior Debt Market Analysis V. Second Lien

Commentary

Second Lien Providers are Active Market Participants

Willingness to Complete a Second Lien Deal

The majority of respondents are willing to consider a second lien

structure

– Of note, we see junior capital providers consistently ask for a

second lien (even if a company has a limited asset base, etc.)

– We believe this is a logical request for capital providers to

pursue, and typically not a logical request for the issuer to

grant

More respondents (~67%) would consider a unitranche structure

in a transaction

– We have seen a willingness to do a unitranche structure as a

competitive differentiator among capital providers

Willingness to Provide a Unitranche Structure

78%68% 69% 72% 75% 74% 73%

81%

22%32% 31% 28% 25% 26% 27%

19%

0%

25%

50%

75%

100%

Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013

% o

f R

es

po

nd

en

ts

Yes No

33%45%

53% 51%44% 39%

62% 62%

67%55%

47% 49%56% 61%

38% 38%

0%

25%

50%

75%

100%

Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013

% o

f R

es

po

nd

en

ts

Yes No

37% 43% 39% 37% 40% 42%56%

67%

63% 57% 61% 63% 60% 58%44%

33%

0%

25%

50%

75%

100%

Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013

% o

f R

es

po

nd

en

ts

Yes No


16


Biggest Challenge Facing Junior Debt Providers

VI. Conclusion

Respondents have remained consistently and evenly split

regarding market challenges facing the junior debt market over

the past five quarters

Given the current interest rate environment, increased

competition from other debt providers is a major challenge,

which may persist as more market participants try to put capital

to work in the short-term

18%25% 23% 20% 19% 21% 22% 22%

22% 21% 22% 23% 21%44%

18% 28%

21% 21% 21% 22% 23%

36%

26%21%

16% 18% 17% 16% 15%19%

15% 15% 14% 12% 12%31%

9% 6% 6% 5% 5% 6%

0%

25%

50%

75%

100%

Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013

% o

f R

es

po

nd

en

ts

Debt Market Unitranche Structure Capital Provider Competition

Company Uncertainty Economy Other

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