Syndicated Asset Based Lending Market Update
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A Confidential Presentation
Syndicated Asset Based Lending Market Update
April 2017Syndicated ABL Market Update – April 2017
Market Trends – Q1 2017 Quarterly Review Quarterly ABL Volume
Q1 2017 ABL issuance was $19.4 billion, marking a strong start for the year, up 11% from 35 120
Q1 2016, and 27% from the prior quarter
$30
• There were 66 ABL deals in Q1 versus 58 deals in Q4 2016, and average deal size 30
increased to $293 million (vs. $262 million in Q4 2016) 100
YTD deal count has picked up slightly with 66 deals in Q1’17 vs 64 deals in Q1’16 $24 $24
$26 $26
$24
M&A volume represents 5% of 2017 YTD volume, in line with broader trends in the 25 $24
$23 $22
leveraged loan space, which is on pace for the lowest level since 2009 $22 80
$20 $21 $22 $21 $20 $20 $21
Smaller deals in market generally consisted of refinancings and add-ons while larger $19 $19
credits were weighted towards repricings and opportunistic refinancings, with new money 20 $18 $17
representing 24% of the market $16 $15 60
Notable transactions that launched and/or were completed in Q1 included: 15 $14
• World Wide Technology's $1.50 billion facility, CDW’s $1.45 billion facility, Essendant's
$1.17 billion facility, Archrock’s $1.1 billion facility and William Scotsmans’ $1.1 billion 40
facility 10
• There were two debtor-in-possession financings in Q1 for Gander Mountain and Gregg
Appliances totaling $530 million, representing 3% of the ABL transactions 20
ABL and Leveraged Loan Outlook 5
• Due to the volume of refinancing activity, the maturity wall for ABL credits has been
pushed out to 2022 with limited maturities over the next 6 quarters totaling $41 billion 0
0
• The leverage loan market has experienced significant investor cash inflows to put to
work, resulting in record institutional issuance in Q1 2017 exceeding the prior record
set in Q1 2013, with repricing a significant component of the new issuance Volume ($Bils.) Deal Count
Forward Quarterly ABL Maturities Annual ABL Volume by Purpose
3% 4% 4% 5% 2% 3% 7% 3% 2% 4%
$25B 100%
8% 5% 9% 8% 10% 11% 5%
$22$22 7% 11% 3%
21% 3% 13% 3%
15% 9%
$20B $18 $19 80% 35%
33%
$16 12%
$15
$14 $14
$14 $14 60%
$15B $13 $14 $14
$10 $10 89% 89%
40% 80% 85% 85% 85%
$10B 78%
$8 65%
$7 $7 59% 62% 63% 62%
$6
$5 20%
$5B $3
0%
$0B
Gen. Corp. Purp. Amend & Extends DIP/Exit Fin. M&A Other
Source: Thomson Reuters
2
InternalSyndicated ABL Market Update – April 2017
Pricing Trends – Q1 2017 Quarterly Review Quarterly Average New Issue Pricing
On the pricing front, average spreads were relatively in line with Q4 at L+201 bps, maintaining their two year 500
highs. Q3 2016 continues to represent the lowest pricing in 9 years at L+176 bps
• 80% of Q1 2017 issuance on deals $75 million or larger priced below L+250 bps, 55% of issuance priced
400
below L+200 bps, and 14% priced below L+150 bps, representing the largest percentage since 2007
L+432 bps
Avg. Spread (bps)
• Unlike the prior quarter, there has been a drop in favorable pricing for retail deals, with only 67% of Q1
300
deals pricing below L+200 bps compared to 78% in Q4 2016
• Retail deals priced 10 bps lower on average than non-retail deals in Q1 versus being 16 bps lower than L+201 bps
non-retail deals for the full year 2016, as there has been little new issuance in the sector combined with 200
soft brick & mortar retail performance and 2 retail DIP facilities in Q1
Average undrawn fees were 35.0 bps in Q1 2017, up from 32.0 bps in Q4 2016 and above the 2016 average 41 bps
100
of 32.2 bps 35 bps
ABL represented 6% of total leveraged deals in Q1 2017, versus 13% in Q1 2016 and 9% for all of 2016
In the non-bank institutional arena, BB-rated Term Loan B’s are benefitting from strong investor demand for 0
the asset class and limited new issuer volume over the last 2 quarters. The result is BB-rated Term Loans
are averaging L+ 259 bps with LIBOR floors of 82 bps. This makes ABL an attractively priced source of
capital for all sub-investment grade issuers with current assets and working capital needs Undrawn Drawn
Deal Mix by Pricing (for Deals > $75MM) ABL Pricing vs. BB-Rated Institutional Loans
70% 1400
60% 1200
50% 1000
Percentage of Deals
40% Drawn Spread (bps)
800
30%
600
20%
400
10%
200
0%
0
ABL Pro Rata BB Inst.
2014 2015 2016 2017YTD
Source: Thomson Reuters and Leveraged Commentary & Data
3
InternalSyndicated ABL Market Update – April 2017
Size, Tenor and Other Market Trends Deal Size – Mix by Number of Deals
Longer dated deals continue to make up the majority of issuance 60%
• Facilities with tenors of five years represented 73% of total Q1 deal count and remain the
54%
standard tenor other than for debtor-in-possession financings 51% 50% 50%
50%
Smaller transactions continue to represent a majority of the transactions in the Q1 2017 ABL
market
40%
Percentage of Deals
• Deals less than $150 million represented 50% of transactions while deals less than $200
million represented 62% of transactions
• Deals greater than $500 million represented 15% of transactions, up from 13% of 30%
transactions for all of 2016
24% 23%23%
20%
• Deals greater than $1 billion represented 8% of transactions, up from 4% of transactions 20% 18% 15%
14%
for full year 2016 14% 12% 12% 13%
Retailers & supermarkets and wholesalers remain the largest borrowers in the market, 10% 7%
representing 50% of total Q1 2017 volume, while general manufacturing issuance decreased to
7% in Q1 2017 from 13% for full year 2016
0%
In Q1 new money issuance was $4.6 billion, slightly higher than the $4.3 billion figure in Q1’16
DIP / Exit financing accounted for 3% of volume, all of which was in the retail sector as some
$0 - $149MM $150 - $299MM $300 - $499MM ≥$500MM
retailers eliminate or reduce their brick & mortar footprint or change their business model 2014 2015 2016 2017TD
Quarterly ABL Issuance by Tenor 2017 YTD Issuance by Industry
100% Other Wholesale
14% 27%
80%
General
Percent of Total Issuance
Manufacturing
6%
60%
Oil and Gas
40% 7%
20%
Business Services
12%
0% Retail &
Supermarkets
Technology 22%
3-Year 4-Year 5-Year 12%
Source: Thomson Reuters
4
InternalTD Contacts
TD ABL Contacts
Jeffery Wacker Craig Goldstein Joe Griffeth
Head of ABL Business Development Business Development - Syndicated ABL Market Business Development
Senior Managing Director Managing Director Managing Director
40 Danbury Road 125 Park Avenue, 24th Floor 355 Pine Road
Wilton, CT 06897 New York, NY 10017 Davidson, NC 28026
(203) 761-3831 212 299-5766 (704) 650-9512
jeffery.wacker@td.com craig.goldstein@td.com joe.griffeth@td.com
Eric Hartman Richard Bochicchio
Business Development Business Development
Managing Director Managing Director
2130 Centrepark West Drive 40 Danbury Road
West Palm Beach, FL 33409 Wilton, CT 06897
(561) 570-3522 (203) 761-3827
eric.hartman@td.com richard.bochicchio@td.com
TD Securities Contacts
Glenn Stylides Alper Ilgar
Director of Syndications Director of Syndications
ABL & Leveraged Finance ABL & Leveraged Finance
31 W 52nd Street 31 W 52nd Street
New York, NY 10019 New York, NY 10019
(212) 827-7752 (212) 827-7546
glenn.stylides@tdsecurities.com alper.ilgar@tdsecurities.com
5
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Securities’ judgment and should be regarded as indicative, preliminary and for illustrative purposes only. In preparing the materials, TD Securities has relied upon documents and information prepared or
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