Global Capital Markets Perspective - Deloitte Capital Markets Perspective Issue 5 4 Executive...

Issue 5

March 2014

Global Capital Markets Perspective

Table of contents

3 Foreword

4 Executive summary

5 Timeline of events affecting capital markets

6 Investment Grade debt markets

9 Leveraged debt markets

13 Equity markets

16 Private Equity

19 Outlook

20 Deloitte Debt and Capital Advisory

22 Acknowledgement

23 End Notes

Global Capital Markets Perspective Issue 5 3

ForewordWelcome to the fifth issue of DTTL’s “Global Capital Markets Perspective”.

Issuance across most capital market instruments improved in 2013 over 2012, despite enduring global spells of volatility. The year witnessed persistent efforts toward economic recovery of developed markets, with the U.S. sustaining its principal contribution to global issuance across most instruments, reaffirming what its improving macroeconomic indicators suggested. Europe showed promising signs of economic recovery with issuance across most assets reaching pre crisis levels. Asia Pacific witnessed a year of volatility, with equity markets faring better than their debt equivalents in the region.

Retrenchment in bank lending appears to have led many corporates to look for alternative sources of funding. Issuer preference for bonds over loans continued to be the trend in the global markets, with even Europe—being traditionally inclined toward loans—witnessing record issuance of High Yield (HY) bonds. Refinancing remained a theme for issuance, with companies taking advantage of low interest rates to raise cheaper capital and extend maturities of their existing debt. In debt markets, issuance in HY securities reached record levels, mirroring investor preference for yields over safety of capital.

Analysts expect the recovery in capital markets to continue in 2014, with a possibility of uneven growth trajectories across geographies and asset classes. The appointment of a new Federal Reserve (Fed) chairman is expected to play a critical role in charting the course for capital markets in 2014. European capital issuance is most likely expected to continue growing in 2014, with improved liquidity and renewed investor interest bolstering its performance. In Asia Pacific, capital markets can be correlated to the Chinese economic indicators and also those of the developed markets.

Mega-sized deals emerged as the key theme in the latter half of the year, mainly indicating recovering depth of capital markets and a pronounced boost in investor confidence. While economic reforms have lent some stability to the capital markets, they continue to be complex and dynamic in nature, making it essential to keep a constant watch on developments in order to gain insight into some of the most important trends shaping these markets.

Enjoy the read!

Robert Olsen Partner National Leader — Corporate Finance Deloitte Canada

James Douglas Partner Leader — Debt Advisory Deloitte UK


Executive summary

Exhibit 1: Performance of various capital market instruments in 2013 and growth over 2012

Issuance across most capital market instruments improved globally in 2013 over 2012 (refer to Exhibit 1). Major trends that emerged in 2013 are listed below:

• Investor confidence increased on account of improved macro economic conditions, low volatility, low interest rates, and reduced political uncertainty.

• Factors such as slowdown in economic growth, high market volatility, and depreciating currencies led to issuers and investors shifting their focus from emerging nations to more developed economies such as the U.S. and Europe.

• The debt market saw a wave of refinancing and recapitalization activity throughout the year, with some mega-sized deals being inked, as issuers took advantage of low borrowing rates. Furthermore, an increased investor risk appetite made leveraged debt more popular than the safer IG options, with Collateralized Loan Obligations (CLOs) witnessing record issuance in the U.S. and Europe.

• Equity markets witnessed an improvement due to rebound in credit availability, strong and consistent after market performance, and a surge in PE backed IPO deals. Healthcare, especially biotech, and financial sector were particularly robust for public launches.

While it has been observed that most capital market instruments showed signs of recovery, the outlook globally is expected to remain uneven, with high yielding assets poised to outperform low yielding safer assets. However, the decision about tapering and tightening is likely to create a challenging environment globally for issuers as well as investors in 2014.

Investment Grade (IG) Bonds

US$1,612 B

-2%

IG Loans

US$954 B

-28%

High Yield (HY) Bonds

US$420 B 7%

Leverage Loan

US$693 B 38%

Equity

37%

Private Equity (PE)

26%

US$921 B

US$485 B

Rest of the WorldU.S. Europe Asia Pacific

The report discusses the impact of global events on key instruments and geographies in 2013, from our take on issuer’s perspective. It also highlights the trends recorded in capital market instruments across major world economies.

2013 witnessed a surge in issuance, with companies taking advantage of low interest rates and renewed investor confidence to raise capital. While the Fed’s indecision over withdrawing monetary stimulus created a certain level of uncertainty in the market in 1H13, its announcement in 2H13, with respect to the timing of the tapering, gave better insight to issuers. The European Central Bank’s (ECB) efforts to improve growth prospects by reducing interest rates saw positive outcomes in the form of improved issuances over 2012. Asia Pacific and other emerging markets were negatively impacted by the Fed’s “taper-tantrum”, with a major selloff of financial assets in the regions.

Sources: Preqin, Bloomberg LP, S&P LCD


Timeline of events affecting capital marketsExhibit 2: Significant events that impacted capital markets in 2H13

11 SEP

19

SEP

01 OC

T

07N

OV

21 NO

V

25

NO

V

30 NO

V

18

DEC

Verizon issues record bond offeringVerizon Communications issued IG bonds worth US$49B to buy-out Vodafone’s stake in its wireless operations, surpassing Apple’s US$17B bond issue in 1H13, which was the former largest corporate bond deal.5a

The Fed refrains from altering its bond buying program Post the September Federal Open Market Committee (FOMC) meeting, Ben S. Bernanke announced that the Fed will continue its bond buying program, as it was of the opinion that the tightening of monetary policy could affect the U.S. economy.5e

The U.S. federal government enters a shutdown The U.S. government entered into a 16-day shutdown after the Congress could not pass a legislation regarding allocation of funds for 2014. The halt disrupted private sector lending, loans to small businesses, delay in Food and Drug Administration (FDA) approvals etc. affecting investor confidence and in turn overall capital markets.5b

ECB cuts interest rates to a record lowEuropean capital markets soared after ECB cut its main refinancing rate by 25 basis points to 0.25% from 0.5% and its emergency borrowing rate to 0.75% from 1.00% in an attempt to drag the Eurozone out of recession.5f

Ukraine suspends preparations for signing trade agreementUkraine rejected attempts at closer integration with the European Union (EU) by refusing to sign the EU Association Agreement. The stand-off between Ukraine and the EU is expected to deter Europe’s efforts at economic recovery.5c

Singapore Exchange (SGX) and China Securities Regulatory Commission (CSRC) establish a Direct Listing FrameworkA new framework was incorporated enabling Chinese companies to efficiently tap the capital markets in Singapore and reach out to the global investor base, offering the latter more choices and access to the growing Chinese economy.5g

Chinese regulator unveils improved Initial Public Offerings (IPOs) reform planCSRS introduced a system of registration for IPO issuances which will be more transparent and market oriented. The new guidelines aim at simplifying and fast-tracking the IPO approval process.5d

The Fed announces a US$10B reduction in its bond buyingAfter the last Federal Open Market Committee meeting of 2013, the Fed chairman announced its plans to scale back its bond buying program from US$85B to US$75B.5h


Investment Grade debt marketsExhibit 3: IG Issuance fell during the year, with loans underperforming as compared to bonds

Exhibit 4: IG yield spreads are tightening post the “summer sell-off”

IG debt issuance reduced globally on account of a substantial decline in loan issuance, in spite of record sized new bond offerings.

276 457

1332 1320 954

1078 1079

1137 1653

1612

$0B

$1000B

$2000B

$3000B

$4000B

2009 2010 2011 2012 2013

Loans Bonds

198

231

224

302

482

392

381

405

1Q13 2Q13 3Q13 4Q13

60

80

100

120

140

160

180

Jan-1

3

Feb-

13

Mar-

13

Apr-1

3

May

-13

Jun-

13

Jul-1

3

Aug-1

3

Sep-

13

Oct-13

Nov-1

3

Dec-1

3

U.S. IG Bond Index Europe IG Bond Index Global IG Index

• In 2013, IG debt issuance saw a decline of 8% globally (refer to Exhibit 3). This was primarily because of a pronounced investor preference for higher yields. The decline was partially offset by an increased issuance in the U.S. The year saw some record deals being inked mainly due to IG issuers taking advantage of low interest rates to lower their borrowing costs.

• Out of the total term loans issued in 2013, IG loans accounted for 33% of volume, decreasing considerably from previous year’s issuance figures, when it accounted for 55% of global term loans.6a

• Global IG loan issuance decreased by 28% in 2013 from the previous year. This could be explained, in part, by regulatory pressure on banks to deleverage their balance sheets.

• In 2H13, IG corporate bond spreads shrunk considerably (refer to Exhibit 4), following the spike that had been caused by the Fed’s announcement regarding the withdrawal of monetary stimulus back in May 2013. It is expected that the spreads will widen once the Fed implements its tapering program in 2014.

• Refinancing was amongst the primary reasons for issuance by IG companies. Some issuers used the proceeds to fund share buybacks and dividend payouts to enhance shareholder value. 6b

• The year saw more companies being upgraded to investment grade (“rising stars”) rather than being downgraded to high yield (“fallen angels”). With an increased number of “rising stars” keen to retain their higher rating, lower IG issuance is expected in 2014. 6c

Source: Bloomberg LP, February 2014


Exhibit 5: Most of the global mega-sized deals in 2013 were issued by U.S. IG companies

Top five IG Loan issuances in 2013 — Global

Top five IG Bonds issuances in 2013 — Global

Date IssuerAmount ($M)

Sector Region

9/2/2013 Verizon Communication Inc. 61,000 Telecommunication U.S.

5/31/2013 Thermo Fisher Scientific Inc. 17,500 Laboratory Equipment U.S.

6/5/2013 Wal-Mart Stores Inc. 17,353 Retail U.S.

6/13/2013 Glencore Xstrata 17,340 Mining Europe

2/14/2013Freeport-McMoRan Copper & Gold Inc.

16,500 Minerals, Oil and Gas Exploration U.S.

Date IssuerAmount ($M)

Sector Region

9/11/2013 Verizon Communication Inc. 49,000 Telecommunication U.S.4/30/2013 Apple Inc. 17,000 Consumer Electronics U.S.5/14/2013 Petrobras 11,000 Oil and Gas Production U.S.5/15/2013 Merck Inc. 6,500 Pharmaceutical U.S.6/17/2013 Chevron Corp 6,000 Oil and Gas Exploration U.S.

Source: Standard & Poor’s LCD


Investment Grade debt markets (cont.)

• The only region that exhibited positive growth figures for IG debt issuance in 2013 was the U.S. which saw a growth of 20% over 2012 in total IG debt issuance. Issuers took advantage of low interest rates—high enough to attract investors and reasonable enough for the issuers—to raise cheaper capital for refinancing their debts and acquisitions, before the Fed implements its tapering program.

• IG bond issuance in the U.S. reached record levels in 2013, reflecting increased investor confidence in corporate America, which is showing signs of recovery. Low absolute yield spreads proved to be an incentive for IG issuers to raise capital during the year.7a 2013 saw record breaking IG bond issues by companies such as Verizon Communications Inc. and Apple Inc. amounting to US$49B7b and US$17B7c respectively.

• While HY bonds generated better returns than IG bonds in 2013, the January 2014 data for bond returns exhibits better performance of IG bonds over their HY equivalents. Global concerns, like the poor performance of emerging markets, appears to have caused investors to opt for safer assets such as IG bonds—warranted by their higher returns as compared to HY bonds in Jan 2014.7e

United StatesExhibit 6: High value bond offerings were the highlight of the IG debt market in the U.S.

12 82

569 383 468 342 328

379 582

687

$0B

$500B

$1000B

$1500B

2009 2010 2011 2012 2013

Loans Bonds

79

127

96

166

196

156

179

156

1Q13 2Q13 3Q13 4Q13


• In 2013, there was a dip in total IG debt issuance in Europe mainly because IG companies are on a deleveraging spree. This, along with increased financial regulations in the region, is expected to hinder the growth of IG debt in 2014.7f

• The European IG bond markets fared better in terms of returns to investors as compared to their American counterparts, which generated negative returns to investors.7g

• The European hybrid bond market doubled in size, with bonds worth US$32B7h issued during the year. These instruments seem to have helped companies raise capital without incurring the risk of a downgrade. Hybrid bonds were able to outperform the IG markets, continuing this favorable trend even during the summer sell-off. The year saw insurers and reinsurers issue innovative versions of hybrid bonds to meet the Solvency II capital requirements.

• Another important factor contributing to the slump in IG issuance in Europe is the shift in investor preference to HY bonds given their low default rates and better yields. The trend was evidenced by the fact that HY bonds saw record issuance during the year.

Europe

Exhibit 7: Europe witnessed a decline in issuance on account of deleveraging efforts by companies

205 286 485 508 391

593 615

625 887

750

$0B

$500B

$1000B

$1500B

2009 2010 2011 2012 2013

Loans Bonds

80

84

111

116

232

201

155

210

1Q13 2Q13 3Q13 4Q13


Key trends and outlook- by Deloitte practitioner

Karel KnollSenior Manager Corporate Finance (NL—Amsterdam)

The only region that exhibited positive growth figures for IG debt issuance in 2013 was the U.S. which saw a growth of 20% in total IG debt issuance. This strong return of IG issuance could be an indication of investor apprehension regarding increased economic volatility. The markets may still have concerns about the pace of economic recovery in the U.S.

In 2013, there was a dip in the total IG debt issuance in Europe mainly because the investment grade companies in Europe are on a deleveraging spree. This, along with increased financial regulations in the region, is expected to hinder the growth of IG debt in 2014.


Investment Grade debt markets (cont.)

The timing of the Fed’s tapering program could be the primary factor influencing the fate of the global IG debt markets in 2014. If tapering does materialize during the year, the chances are that yields may rise leading to a fall in bond prices. Some analysts expect that interest rates will continue to be low which will be utilized by companies looking to reduce borrowing costs. However, others are of the opinion that interest rates could increase post the tapering, resulting in higher borrowing costs and hence reduced issuance. Due to higher borrowing costs, the probability of defaults on debt repayment will also be greater. Without a notable increase in M&A activity in 2014, growth in IG debt issuance seems improbable.

• In the U.S., IG issuers will try to issue debt before the Fed implements its tapering plans, making use of the low interest rates while they last. An example of this trend is Cisco Systems, which issued bonds worth US$8B in February 2014 to refinance its existing debt.8a

• European corporate IG bond markets could be at risk due to a possible rise in government bond yields. Within IG securities, hybrid bonds are expected to continue their positive run and outperform the rest of the IG bond markets.

• In Asia Pacific, about 88% of bonds maturing between 2014 and 2017 are IG.8b This implies that there is no pressing need for refinancing in the near future, thus limiting the scope for new issuance in 2014. In light of rising yields on U.S. treasuries, returns on Asian IG debt are expected to be lower than in 2012.

• IG loan issuance in Asia Pacific Declined by 83% in 2013 (refer to Exhibit 8). Rising borrowing costs and an increasing number of bad loans have forced banks to minimize lending.

• There was a major sell-off of Asian financial assets following the Fed’s announcement in May regarding its Quantitative Easing (QE) plans. Higher global interest rates and depreciation of Asian currencies have increased borrowing costs for corporates in the region.

Asia Pacific

Outlook

Regional Spotlight — Benelux

Refinancing was the principal driver of activity in the Benelux debt market, with transactions typically being structured in club-deals. Given relatively limited lending activity, banks are keen on doing business. Competition for good quality assets is high. In the mid-market, more than a dozen banks (both foreign and domestic) appears to be using aggressive terms to compete for deals in the corporate and private equity segments.

For 2014, the markets are anticipated to remain borrower friendly. Also mid-market liquidity is expected to improve through increased activity of overseas bank, driven by the lack of international coverage by Benelux banks

Disintermediation & Asset based lendingTraditionally, the Benelux debt market is strongly bank-oriented. In the Benelux, like in the rest of continental Europe, an estimated 80% of corporate financing comes from banks, compared to an estimated 20% in the United States. Recent years have seen a gathering move away from bank lending. The USPP market and the European private placement market are expected to grow, accelerated by the disintermediation of bank finance.

As a consequence of differing legal systems and legislation on necessary collateral and possible exit strategies, the required structure for an ABL transaction varies between European jurisdictions. Thanks to more supportive bank legislation, asset based lending in the Benelux market is more established than in other countries in continental Europe. Driven by Basel III, asset based lending has become the single most important funding alternative for companies, next to bank financing.

39 73

252 221

37

137 127

127 173

170

$0B

$200B

$400B

2009 2010 2011 2012 2013

Loans Bonds

1Q13 2Q13 3Q13 4Q13

24 10 1

2

53 34

45 39

Exhibit 8: Meagre loan issuance in Asia Pacific considerably pulled down the IG debt market during the year



Leveraged debt markets

Exhibit 11: Global leveraged debt issuance crossed the US$1.1T mark, with 2H13 underperforming 1H13

Exhibit 9: Refinancing accounted for 58% of the lending activity globally in 2013

Exhibit 10: Majority of the leveraged loans issued were rated below B+ in 2013

BBB-5 BB+

6

BB11

BB-17

B+21

B21

B-7

Other8

NR3

• Annual global leveraged debt issuance crossed the US$1.1T mark in 2013, growing by 24% as compared to 2012 (refer to Exhibit 11). The surge may be explained by low borrowing rates and an increased demand for loans. With timing uncertainty around Fed interest rate changes and the apprehension that rates may increase in the foreseeable future, markets supported the demand for leveraged loan products.9a The issuance environment may change following the appointment of the new Fed chief, Ms. Janet Yellen, who is expected to taper the QE program without overt tightening of monetary policy.9b

• Recapitalization and refinancing were the major reasons for increased issuance globally due to availability of cheaper financing options (refer to Exhibit 9). HY bonds were issued to refinance other forms of debt and also support Leveraged Buy-outs (LBOs).9c There was a noted slowdown in Merger and Acquisition (M&A) activity across the major markets leading to a 6% decrease in the share of M&A linked issuance.

• Globally, there was a surge in leveraged loan issuance due to low interest rates, shrinking loan spreads, and increasing liquidity in the leveraged loan investor markets. After a slight increase of 7% in global HY bond issuance in 2013, bond sales have been weak in the beginning of 2014. This has been attributed to the acceleration of funding plans by borrowers in the latter part of 2013.9d

Exhibit 12: Most of the global mega-sized deals in 2013 were issued in the U.S.

Top five Leveraged Loans issuances in 2013 — Global

Date Issuer Amount ($M) Sector Region

1/24/2013 Valeant Pharmaceuticals 13,723 Pharmaceuticals U.S.

6/6/2013 HJ Heinz Co 11,500 Processed Foods U.S.

10/25/2013 Hilton Worldwide Fin 8,600 Hospitality U.S.

3/31/2013 Ally Financial Inc. 8,500 Financial Services U.S.

6/21/2013 Chrysler Group LLC 7,180 Automotive U.S.

Date Issuer Amount ($M) Sector Region

9/4/2013 Sprint Corp. 6,500 Telecommunication U.S.

3/13/2013 HJ Heinz Co. 3,100 Processed Foods U.S.

9/13/2013 Tenet Healthcare Corp 2,800 Healthcare U.S.

9/30/2013 Caesar's Entertainment 2,100 Gaming Corporation U.S.

2/18/2013 ThyssenKrupp AG 1,670 Steel Manufacturer Europe

Top five HY Bonds issuances in 2013 — Global

26

55

19

2009

38

58

4

2010

35

61

4

2011

33

61

5

2012

31

58

11

2013 0

25

50

75

100

M&A Recapitalization/Refinancing Others

$0B

$400B

$800B

$1200B

97 200

2009

290

346

2010

435

264

2011

502

393

2012

693

420

2013

Leveraged Loans HY Bonds

1Q13

206119

2Q13

199

106

3Q13

145103

4Q13

14393





Leveraged debt issuance reached record levels in 2013 due to globally prevalent low interest rates, recovery in the U.S. and European economies, and renewed investor confidence. Imminent implementation of regulations and tightening of monetary policies globally is likely to affect issuance in the second half of 2014.


Leveraged debt markets (cont.)Exhibit 13: Leveraged lending in the U.S. declined gradually during 2013

Exhibit 14: European index delivered higher returns than the U.S. index, though hindered by higher default rates

• Leveraged loan issuance in the U.S. increased by 30% in 2013 over 2012, reaching US$605B largely due to low interest rates and strong investor confidence (refer to Exhibit 13). These loans appears to have been primarily issued to refinance debt and a few high profile LBOs by companies such as Heinz and Dell, supported by leveraged loans amounting to US$9.5B and US$7.2B.10a

• Covenant-lite loans accounted for 57% of the total loans issued in the U.S. in 2013, which was an increase of 182% compared to 2012.10b This increase can be seen as an indicator of growing investor confidence, aggressive capital market activity, and an increased demand for leveraged loans.

• 2013 saw a 6% decrease in HY bond issuance over 2012 in the U.S. which has been attributed to the “taper tantrum” by the Fed. Speculations about a possible tapering of bond buying by the Fed and its direct impact on the prices of HY bonds reduced the attractiveness of these securities.

• In 2013, the U.S. federal bank regulatory agencies issued a set of guidelines, termed the Leveraged Lending Guidance, for financial institutions that are involved in leveraged lending activities. These guidelines were issued to identify and reduce systemic risk in the financial system. As per the Guidance, 42% of leveraged loans fell into the “criticized” category.10c This negative regulatory outlook could deter banks from participating in leveraged lending.

• European debt markets saw an increase of 104% in HY bond issuance in 2013, with the value being close to U$96B. In the last few years, corporate financing has seen a shift from bank lending in Europe to a U.S. style model, which is mostly bond-centric.10d

• The European leveraged loan market reached a five year high, with refinancing and recapitalization accounting for 59% of the total issuance.10e

• The European HY bond volume rose by 104% as opposed to a 6% decrease in the U.S. principally because of the economic recovery in the European region (refer to Exhibit 13 & 15).

75 165 234

287

374

218

465

346

605

324

$0B

$400B

$800B

$1200B

1Q13 2Q13 3Q13 4Q13 2009 2010 2011 2012 2013


18590

16882

12582

14393

0

25

50

2009 2010 2011 2012 2013

U.S. LSTA returns Europe LLI Euro returns

United States

EuropeExhibit 15: Europe witnessed a record year for leveraged issuances

0

5

10

15

2009 2010 2011 2012 2013

U.S. (S&P/LSTA Loan Index)

Europe (S&P European Loan Index)

$0B

$50B

$100B

$150B

$200B

22

35

2009

56

59

2010

61

46

2011

37

47

2012

88

96

2013

20

31

20

16

28

24

21

23

1Q13 2Q13 3Q13 4Q13




Source: Standard & Poor’s LCD Source: Standard & Poor’s LCD


Leveraged debt markets (cont.)EuropeExhibit 16: Debt multiples increased in 2H13 for

both the U.S. and Europe.

U.S. Europe

Europe (cont.)

Asia Pacific

• The S&P European Leveraged Loan Index (ELLI) offered better returns of 9% to its investors as compared to the 5% returns by its U.S. counterpart. The higher returns were mainly because of a 4% market-value gain by the European loan index.11a

• Even though the default rate for the European Loan Index was higher than for the LSTA Loan Index, it has been following a declining trend over the year, with a 56% drop11b, unlike its U.S. equivalent, which registered an increase of 66%.

• Europe’s debt multiples have been consistently increasing in the last five years, but are still below the 2007 high levels. The current leverage multiples of about 4.75x are expected to increase in 2014.11c

• Asia Pacific leveraged debt markets witnessed a year of volatility in 2013, with issuance reducing in 2H13 predominantly it seems because of improving economic conditions in the U.S. as well as Europe, that led to market outflows.

• There was a flurry of HY issuance amounting to a record US$39B,11d most of which was issued during 1H13. This issuance was supported by higher yields at a time when global interest rates were low. However, in 2H13 there was a slump in issuance because of the deferral of the QE tapering by the Fed to 2014.

• The year also saw scores of Asian borrowers turn to Singapore for HY bond issues as it turned out to be a viable alternative for relatively small issues, with many of them being for amounts less than US$100M. The issuers have been drawn to the ability to sell bonds at lower coupons than in their home markets. Since 2012, investors in Singapore have become noted for embracing perpetual securities and chasing yields.11e

• Asian bond markets mirrored global trends when it came to the purpose of issuance, with refinancing being the principal reason. In addition, M&A debt financing also gained momentum with companies such as Alibaba and CP ALL completing acquisitions. Excluding Japan, M&A activity in Asia Pacific increased by 63% to US$46B in 2013 over 2012. Leveraged loans backing PE buyouts increased by 20% to around US$8.5B from US$7B in 2012.11f

Exhibit 18: CLO markets saw the highest issuance since 2007

In 2013, CLO market saw the highest issuance since 2007 keeping in tune with the rest of the leveraged debt markets. However, if the January figures

are an indicator, CLO issuance numbers for 2014 look far from encouraging. This may be because of the elimination of bond buckets from the list of securities for CLOs to invest in, as per the Volcker rule. Even the European CLO markets kick started during the year and the issuance for 2014 is expected to be in the €8-15 billion range.11f Some of the factors that could affect the CLO issuance in 2014 are the regulations governing this particular security, amortization and redemption of existing CLOs during the year, and the potential for new managers to enter the market.

U.S. Europe

1 1 12

54

82

1 2 1

10

$0B

$25B

$50B

$75B

$100B

2009 2010 2011 2012 2013

Exhibit 17: Weighted Average New-Issue Institutional Spreads tightened

3x

4x

5x

2009 2010 2011 2012 2013

Total Debt/EBITDA Senior Debt/EBITDA

3x

4x

5x

2009 2010 2011 2012 2013

Total Debt/EBITDA Senior Debt/EBITDA

3x

4x

5x

2009 2010 2011 2012 2013 Total Debt/EBITDA Senior Debt/EBITDA

L/E+250

L/E+350

L/E+450

L/E+550

L/E+650

L/E+750

L/E+850

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

U.S. (LIBOR+) Europe (Euribor +)





Leveraged debt markets (cont.)

Outlook

It is expected that global leveraged debt issuance in 2014 may not reach the record issuance of 2013, mainly because the majority of refinancing has already been undertaken in the last two years, ensuring record total issuances in 2012 and 2013. Consequently, the demand for leveraged debt in 2014 largely depends on the volume of M&A activity across economies. The timing of the Fed’s QE tapering plans is expected to affect the amount of leveraged debt issued globally. Analysts are divided in their opinion of the leveraged debt market, with some citing post-credit crisis record issuances of covenant-lite loans and PIK (payment-in-kind) debt as a cause of worry.12c Others are of the opinion that investor risk appetite has increased and there is still scope for issuers to raise capital in these markets.

• The predicted drop in issuance could be supported by the 9% decrease in leveraged debt issuance in the U.S. for the month of January 2014 over the

same period last year, with HY bonds faring worse than leveraged loans with a 20% decrease.12d

• While issuance in the U.S. is expected to reduce, the European leveraged debt markets are expected to perform better, mirroring the slow but steady improvement in the economic environment in the region.

• In Asia, China will continue to dominate the Asian leveraged loan market in 2014. However, leveraged lending will be directly impacted by China’s economic growth in the year and the proposed QE tapering. HY bond issuance in Asia Pacific is expected to be driven by tighter liquidity in the region, since banks are deleveraging. Consequently, bond issuers will have to incur higher costs to attract investors for raising capital.

In 2013, a major contributor to the growth in the European leveraged debt markets was the UK HY bond market, with five of the largest European issuances coming from there. The UK became the top issuer in Europe for the first time, with 20% of total issuance, surpassing Germany's 18%.12a

Low interest rates in the region drove money into the debt markets and led demand to outweigh supply through most part of the year. The issuance surge may also be accounted for by a shift in focus from loans to bonds, as capital deficient banks seek to cut their balance sheets and their traditional customers increasingly turning towards the capital markets for financing.

Investor risk appetite also appears to have increased in the region. Many investors have invested for the long-term in return for premium yields, which is giving companies the option to extend maturities and increase leverage.

There was growth in available liquidity because of increased participation by non-bank sources of funding, the kick-start of the CLO market in Europe, and introduction of specialist debt funds. As a result, companies may now be able to embark on transactions that might not have been possible in the recent years.

Attractive loan conditions are being offered to mid-market companies that are relatively isolated from macroeconomic factors that impact the larger capitalization companies more adversely. Institutional investors such as insurance companies are moving into the middle-market segment, with longer duration loans being their competitive offering.12b

Regional Spotlight — United KingdomKey trends and outlook- by Deloitte practitioner

The end of 2013 points to a strong 2014 for the European leveraged debt markets. Lack of big ticket M&A, persistence of low interest rates and inflow of new institutional money is expected to keep the markets borrower friendly in 2014.

For 2014 we expect that alternative non-bank lenders will continue their move into the mainstream, as Europe shifts more towards a U.S. model for leveraged loans. Over the last 24 months many new debt funds have been raised that are looking to deploy capital in Europe.

Companies and shareholder sponsors are finding the combination of greater flexibility, higher speed of doing deals and large hold levels a compelling proposition. We envisage that Unitranche structures will play an increasingly important role in part of the market when the M&A environment improves.

In 2014 we may also see a further increase in the hold size of loans and comeback of the “hard” underwrite option.

Nedim Music Manager | Debt Advisory (UK — London)


Equity marketsExhibit 19: Global IPO issuance in 2013 outperformed 2012 by 37%

• Improving macro-economic conditions in developed economies, rising investor confidence, low interest rates, reduced political uncertainty, and low volatility contributed toward the surge in IPOs in 2013.

• New listings in 2013 exhibited strong and consistent after-market performance (refer to Exhibit 21), on average, with average returns increasing to 20% from 10% in 2012. This surge contributed to an increase in issuer and investor confidence, thereby accelerating offerings.

• 2H13 proceeds in the U.S. surpassed the activity in 1H13. October proved to be an exception with the volatility index (refer to Exhibit 22) spiking in response to the Fed’s announcement to taper QE.

• PE backed IPO deals bolstered global IPO activity, with the U.S. being the principal contributor to this trend. Europe saw increased IPO issuance on account of rising investor confidence, recovering financial markets, rebound in refinancing, and the U.S. investors returning to Europe.13a

• On the other hand, activity in Asia Pacific was more subdued due to the regulatory ban imposed by China on new listings. Falling valuations continued to be a deterrent for the IPO market in Asia Pacific, considering that PE firms in the region usually prefer stock market listings to exit their investments. Despite a slowdown in the Asia Pacific IPO markets, the companies that did go public performed well.13a

Exhibit 20: Financial services sector led IPO volume globally

1H13

703 Deals

US$108B Capital raised

2H13

843 Deals

US$118B Capital raised

Healthcare, especially biotech, and the financial sector were particularly robust for public launches—supported by the JOBS Act—with a notable lack of tech IPOs.

119 271 175 140 192

739

1387 1488

1129 1105

0

500

1000

1500

0

100

200

300

0

100

200

300

2009

Aggregate capital raised (US$B) Number of funds

2010 2011 2012 2013

41 66 64 54

309 394 369

474

0

500

1000

1500

1Q13 2Q13 3Q13 4Q13

31%

15%

13%

13%

10%

9% 3%

2% 1% 1%

Financial

Consumer Ncycl

Energy

Consumer Cycl

Industrial

Communications

Utilities

Technology

Basic Materials

Diversified

Global IPO proceeds in 2H13 increased by 10% over 1H13 driven by improving economic conditions, low volatility levels, and strengthening valuations, particularly in the U.S. and Europe.


Exhibit 22: U.S. Volatility Index (VIX)

0

10

20

30

Jan-

13

Feb-

13

Mar

-13

Apr

-13

May

-13

Jun-

13

Jul-1

3

Aug

-13

Sep-

13

Oct

-13

Nov

-13

Dec

-13

VIX Close

Source: Chicago Board Options Exchange (CBOE)


Exhibit 21: FTSE Renaissance Global IPO Index

0

100

200

Jan-

13

Feb-

13M

ar-1

3

Apr

-13

May

-13

Jun-

13

Jul-1

3

Aug

-13

Sep-

13

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Feb-

14

Last Price

Source: Bloomberg LP, August 2013

Bloomberg LP, February 2014


Equity markets (cont.)

• A buoyant stock market, increased demand for high yielding assets, low interest rates, and a robust risk appetite, all helped raise US$36B taking the number of IPO deals in the U.S. to 125 in 2H13 from 108 in 1H13. A resurgence in PE backed IPO exits further boosted issuance.14a

• A significant number of foreign companies returned to the U.S. for public launches, some among them were from China, the UK, Bermuda, Canada, and the Netherlands. This appears to be mainly due to favorable rules pertaining to U.S. exchanges, buoyant stock markets, and impact of the JOBS Act 2012—providing improved flexibility to start-ups in terms of listing requirements and greater confidentiality.

• In 2013, healthcare IPOs performed the best, particularly biotech companies. An upswing in new drug approvals, strong after-market performance by already listed biotech firms, and success of the JOBS Act contributed toward boosting the investor interest.14b

• NASDAQ and NYSE accounted for approximately 45% of global IPO activity, raising a total of US$50B, primarily due to a surge in listings from energy, financial, and healthcare companies (refer to exhibit 24).

United States

• Europe’s IPO market bounced back in 2H13, raising US$25B, a 111% increase over 1H13. The rise was primarily driven by PE backed IPOs that accounted for more than half of total issuance. Several high-profile privatizations such as Royal Mail further augmented deal activity.14c

• Additionally, improved macro-economic factors, resurgence in investor confidence, low volatility, strong after-market performance, and cheaper valuations in Europe aided seem to have the rise.

• Technology, real estate, and financial services were the major sectors contributing to IPOs in the region.14d

• The London Stock Exchange (LSE) dominated IPO issuance in Europe, raising US$12B, primarily due to the resurgence in listings by PE backed companies, capital inflows by institutional investors into equity funds, attractive valuations, and renewed U.S. investors’ confidence in the region.14e

Europe

Exhibit 24: NYSE represented 47 % of global IPO capital raised

Exhibit 25: Stock market performance

36%

17% 11%

9%

7%

6%

4% 4%

4% 3%

NYSE

Hong Kong Exchange

LSE Main

NASDAQ

Bovespa

Tokyo Stock Exchange

Singapore Exchange

Frankfurt Stock Exchange

Australian Securities Exchange

New Zealand Stock Exchange

FTSE 100 Index S&P 500 Index MSCI Europe TOPIX 100 Index Hang Seng Index

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

Jan-0

1-201

3

Feb-14

-2013

Apr-01

-2013

May-15

-2013

Jun-2

8-201

3

Aug-13

-2013

Sep-26

-2013

Nov-11

-2013

Dec-25

-2013

Exhibit 23: U.S. dominated the issuance in 2H13

5 1

12

25

1H12

2H12

1H13

2H13

Europe

34

2

20

1

35

2

36

1

1H12

2H12

1H13

2H13

1H12

2H12

1H13

2H13

U.S.

22

31

25

34

1H12

2H12

1H13

2H13

Asia Pacific Middle East & Africa

0

10

20

30

40


Source: Renaissance Capital, Greenwich, CT (www.renaissancecapital.com)Note: Global statistics include IPOs with a deal size of at least US$100M and exclude closed-end funds and special purpose acquisition companies (SPACs).

Source: S&P capital IQ


Equity markets (cont.)

Outlook

IPO market is expected to continue the momentum gathered in 2H13, supported by the pipeline of upcoming IPOs15i, low interest rates in the U.S. and Europe, and encouraging economic conditions globally. Particularly, healthcare and technology IPOs are expected to drive IPO issuance in 2014.

• PE firms are expected to continue to play a pivotal role in the U.S. IPO market. Despite a positive year for healthcare IPOs in the U.S., there is widespread apprehension regarding a potential bubble in the sector.15j It is also expected that IPOs by foreign issuers on U.S. exchanges will increase, particularly from China due to better track record by Chinese companies to comply with U.S. regulations and ensure greater transparency. However, fears around pull back in QE by the Fed may prove to be a challenge.

• IPO optimism in Europe—particularly in the UK—is expected to accelerate in 2014 due to continued improvement in the global equity markets, low volatility levels, and attractive valuations.

• Issuance in Asia Pacific is expected to improve with the lifting of the ban on new stock market listings by CSRC, streamlining the application process, and increasing the role of market forces in pricing. The REITs IPO pipeline looks strong with many companies in Singapore, Japan, and Australia expected to list in 2014.15k However, the Fed’s decision to scale back the monetary stimulus is expected to impact emerging economies in Asia Pacific, as investors may opt for “safer” assets back in the U.S. This could lead to outflows from the stock market and depreciation of local currencies.

2013 was a record-breaking year for Hong Kong’s IPO market, with 39 listings raising US$2B, an improvement of 64% over 2012. The reason for this trend was the surge in listing of Chinese companies—particularly mid-sized banks—15e following the shutdown of their domestic IPO market. The exchange ranked second globally, raising US$18B, trailing NYSE, which raised US$40B.

The outlook for 2014 remains strong due to ample liquidity in the region and a significant number of prospective spin-offs by local companies.15f

With the resumption of China’s A-share market, it is expected that many companies may list in their domestic IPO market due to lower borrowing costs and multiples being generally high. However, the huge backlog of IPOs may force firms with urgent financing needs to list overseas, with Hong Kong being the most favored destination.

Despite a new Direct Listing Framework, which allows Chinese companies to list directly in Singapore, Hong Kong will continue to be a popular destination given its better valuations and multiples compared to Singapore.15g

Hong Kong’s IPO market is set to flourish with major listings expected from companies in retail, consumer goods, internet, and technological services sectors.15h

Regional Spotlight — Hong Kong


In US$B

# of funds5.3

31

2009

22.1

25

2010

8.2

39

2011

0.7

21

2012

1.9

39

2013

• Issuance in Asia Pacific saw an increase of 38% in 2H13—particularly in the fourth quarter—over the previous half due to the economic recovery in the U.S. and Europe that boosted investor confidence globally.15a

• Hong Kong, Japan, and Southeast Asia saw an increase in the number of deals and capital raised despite the ongoing suspension of new listings on mainland China exchanges.

• The growth can be explained by Chinese companies tapping Hong Kong’s IPO market.15b Issuance in Singapore increased due to listings by Real Estate Investment Trusts (REITs) and business trusts.

• In 2013, Japan witnessed a boom in IPOs which was driven by relaxed monetary policies, increased fiscal stimulus, and a host of venture capital-backed companies that went public.15c

• The year also saw government privatization in New Zealand, which drove new listings such as that of Meridian Energy which was the country’s biggest IPO to date.15d

Asia Pacific


Private EquityExhibit 26: Global PE firms raised highest capital since 2009

• In 2013, 973 PE funds raised a total of US$485B, which was 26% higher than the capital raised in the previous year (refer to Exhibit 26). Despite a drop in deal volumes, the overall fund raising improved due to a rise in mega-sized deals such as investments in Dell Inc. and H.J. Heinz Company worth US$24B and US$23B respectively.16a

• Slower economic growth, volatile market conditions as well as time consuming regulations appears to have accelerated the shift of risk averse investors from emerging economies to developed nations. Furthermore, continued improvement in the North American debt market, increasing investor confidence, and positive macro-economic factors made the U.S. market more attractive.

• Improvement in the exit environment due to resurgence in the IPO market globally (refer to Exhibit 27) has allowed buyout groups to provide attractive and immediate returns, renewing investor confidence.

• A weaker M&A environment, lack of quality targets, and rising asset valuations in 2013, made it difficult for PE firms to deploy capital resulting in the accumulation of US$1.1T of dry powder, increasing by 12% over the previous year. This will pressurize PE firms to look for suitable investment avenues before the capital matures.16b

• Regulations and due diligence requirements such as Dodd-Frank Act, Foreign Account Tax Compliance Act (FATCA), and Alternative Investment Funds Manager Directive (AIFMD), have contributed to an increase in the average time taken to close a fund.16c

Exhibit 27: Global PE-Backed IPO exits increased in 2013 over 2012

Exhibit 28: Majority of the capital raised in 2013 was through buyout deals

85 146 99 153 223

262 235

252

200

250

300

0

100

200

Q1 Q2 Q3 Q4

320 294 332 383 485

953 954 1035

1062 973

800

900

1000

1100

0

200

400

600

2009 2010 2011 2012 2013

Aggregate Capital Raised (bn USD) No. of Funds

49

33 33

15 9 9 7 8

3 7

14 6

28 19

4 10

3 3 5 0

7 4

0

10

20

30

40

50

60

Vent

ure C

apita

l

Buyo

ut

Real

Estat

e

Growth

Distres

sed

Fund

of Fu

nds

Infras

tructu

re

Mez

zanin

e

Natural

Reso

urce

s

Seco

ndari

es

Other

No. of Funds Closed Aggregate Capital Raised (US$B)

Private Equity Dry Powder (US$ B)

Average Time Taken for Funds to Achieve a Final

Close by (in months)

Private Equity Funds in Market (US$B)

2012 9412013 1051

2012 17.92013 18.2

2012 7442013 795

Globally, 2013 saw the highest aggregate of capital raised by PE firms since 2009, due to improvement in the U.S. and European economies, rebound in the availability of credit, and a surge in IPOs.

Source: Preqin, February 2014



93 188 177 162 25510453 52 46

4797

266 357 384356284

485624 707

690

0

350

700

2009 2010 2011 2012 2013

70 78 32 7516 16

10567 80 93

116160 170

158202

0

500

1Q13 2Q13 3Q13 4Q13

IPO Restructuring Sales to GP Trade sale



Private Equity (cont.)United States

• PE firms closed 272 funds totaling US$159.3 B in 2H13, a rise of approximately 9% over 1H13, mainly due to an increase in distributions encouraged by soaring stock markets and a favorable exit environment.17a

• The investment environment remained challenging due to rising purchase price multiples of both public and private companies, a high level of competition amongst General Partners (GPs), and a declining number of attractive targets. This compelled U.S. PE firms to shift their focus toward the UK markets in search of deals.17b

• Investors seem to be focusing on placing their capital with established fund managers who have a proven track record and wider access to markets, vis-à-vis start-ups that are struggling in the face of increased registration requirements.

• In a bid to raise fresh capital, PE firms are considering diversifying into individual 401(k) pension funds by lowering their investment threshold, which currently requires clients to commit at least US$5M. However, Securities and Exchange Commission (SEC) limits the availability of such funds only to accredited investors—with a net worth of US$1M or annual earnings of more than US$0.2M.17c

• After the financial meltdown of 2008, regulations such as the Volcker Rule of the Dodd-Frank Act and the Consumer Protection Act prohibited banking entities from investing in PE funds, thus compounding fundraising challenges.

Europe

• Resurgence in the European IPO market, abundant availability of funding from the debt market, growing investor confidence, and bullish markets contributed towards a recovery of the European PE market.

• Germany and the UK led the European buyout market in 2013, representing 55% of total capital raised. Deal activity also improved on account of U.S. and Asian investors turning to the UK for new opportunities.17d Also, PE firms returned to Southern Europe on account of fundamental improvements in these markets.

• Secondary buyouts were a dominant source of deal activity in 2013, accounting for 61% of the PE backed transactions due to a dearth of M&A activity.17e

• Despite the recovery of the European PE market, only four mega deals took place during the year as compared to eight in 2012.

Exhibit 29: PE fundraising by region (US$B)

Exhibit 31: Top five funds to hold a final close in 2H13

Fund Firm TypeFinal size (US$B)

Firm country

Fund focus

CVC European Equity Partners VI

CVC Capital Partners Buyout 13.7 UK Europe

Carlyle Partners VI Carlyle Group Buyout 13 U.S.North America

Brookfield Infrastructure Fund II

Brookfield Asset Management

Infrastructure 7 Canada Global

Lone Star Real Estate Fund III

Lone Star Funds Real Estate 7 U.S. Global

EIG Energy Fund XVI

EIG Global Energy Partners

Infrastructure 6 U.S. Global

Exhibit 30: Aggregate value of PE-backed buyout deals were highest in North America region

51

123 128 156 171

29

74 96

70 74

22

19 25 27

19

4

14

17 11 9

0

100

200

300

2009 2010 2011 2012 2013

North America Europe Asia Rest of World

109

42

25

124

42 30

147

61

19

159

55

18

1H12 2H12 1H13 2H13 1H12 2H12 1H13 2H13 1H12 2H12 1H13 2H13

U.S. Europe Asia Pacific

0

50

100

150

200





Private Equity (cont.)Asia PacificOutlook

The PE market is expected to sustain the momentum gathered in 2H13, supported by ample liquidity, resilience to market volatility, strong investor confidence, and soaring stock markets. Additionally, the record amount of dry powder accumulated in 2013 is expected to force PE players to deploy capital or request for an extension from LPs, accordingly impacting fundraising. In anticipation of the Fed’s tapering plans, equity markets could be potentially disrupted, resulting in a challenging exit scenario for PE funds.

• The U.S. is expected to witness an increase in deals from the oil and gas sector mainly due to resurgence in the energy sector on account of technological advancements and large shale gas discoveries.18c

• The outlook for the European PE market appears to be promising due to improving economic conditions and availability of attractive acquisition targets. Germany and the UK PE markets are expected to continue to witness a growth in buyout transactions. Fundraising will continue to be challenging for PE firms mainly due to regulatory concerns posed by Solvency II, Basel III norms, and the AIFMD.18d

• Fundraising in Asia Pacific is expected to improve due to a favorable exit environment created by the reopening of the Chinese IPO market.

• PE fundraising declined in terms of both value and volume, mainly on account of a difficult exit environment that forced investors to shift their focus back to developed markets. Choppy market conditions in China and rising asset valuation in Indonesia have compounded fund managers’ challenges in Asia.

• Limited Partners (LPs) are increasingly focusing on past performance of funds rather than strategy before committing capital to GPs, thus making fundraising more challenging for first time fund managers.18a

• In China, GPs are generally minority stakeholders in portfolio companies, with little influence over exit strategies. Accordingly, the shutdown in Chinese IPO markets made GPs hold their investments for a longer than planned duration, negatively impacting distributions.

• Despite a decline in PE investments in Asia, South Korea emerged as an attractive destination with deals worth US$3.5B taking place in 2013. This was primarily due to robust economic fundamentals and resilient markets in the country.18b

Key trends and outlook- by Deloitte practitioner

Thomas Spivey Managing Director | Deloitte Corporate Finance LLC (US-Dallas)

Private equity funds continue to play a critical role in M&A processes both domestically and internationally. With U.S. private equity firms sitting on about one trillion dollars of dry powder, the volume and quantity of private equity deals closed annually should remain steady if not increase over the next few years.

Over the past twelve months, we have seen bidding activity from private equity firms increase on sell-side M&A processes. The amount of committed, but unfunded, private equity capital available for investment, combined with a recovering economy and historically favorable terms and leverage multiples available in the public and private debt markets, have created an environment enabling private equity funds to be very competitive in sell-side M&A auction processes relative to strategic buyers.


Outlook

Issuance across global capital markets is expected to remain uneven, with high yielding assets poised to outperform low yielding safer assets. Fears over the Fed’s decision about tapering and tightening is likely to be a primary source of challenge for issuers as well as investors in 2014. Issuers are expected to favor fixed income securities to raise capital while the interest rates remain low. Since a lot of companies seem to have refinanced their debt in the preceding two years, total debt issuance in 2014 may pale in comparison. Equity markets seem promising, supported by recovery in the developed economies. PE fundraising is expected to improve mainly due to rise in credit availability as well as a promising M&A environment.19a Additionally, record amount of dry powder accumulated in 2013 is expected to buoy up competition and keep asset prices high.19b

In the short term, it will be important to observe the impact of the following on capital markets:

• China reopening its A-share market19c

• Appointment of Janet Yellen as the next U.S. Federal Reserve chief and timing of Fed’s winding down monetary stimulus19d

• Elections in the five large emerging economies in 201419e — Brazil, India, Indonesia, Turkey and South Africa• Russia-Ukraine political standoff19f

Exhibit 32 provides possible options—financial instruments and geographies—for companies to consider when raising capital based on growth rates and the short-term outlook.

Note: Definition of Emerging Markets/Asia Pacific differs across instruments

Sources: Preqin, Bloomberg LP, S&O LCD

Exhibit 32: Potential instruments and geographies in which to raise capital in the short-term

Growth 2H12 to 1H13 Forecast 1H14

Financial Instrument

United States

EuropeEmerging Markets/

Asia Pacific

United States

EuropeEmerging

Markets/Asia Pacific

IG bonds

HY bonds

IG loans

Leveraged loans

Equity

Private equity

Legend

Market Range Symbol

High-growth

market30% and higher

Low- to

moderate-

growth market

5% to 30%

Neutral -5% to 5%

Declining market Below -5%

Insignificant

market-


Deloitte Debt and Capital AdvisoryGlobal debt financing expertise

Autogrill/WDFSpin-off and Refinancing

€1.25bn

Italy

GEMS EducationRefinancing

US$545m

UAE

Garda World SecurityRefinance & HY bond issue

C$700m

Canada

ENVIEM/GulfRefinancing

€200m

Netherlands

ShanksRefinancing & bond issue

€280m

UK

Tanga CementGrowth debt capital

$161m

S.Africa/Tanzania

KNV GroupDevelopment financing

€200m

Germany

Virutex IlkoHY private placement

US$25m

Chile

TTPCBond refinancing

MYR1.375bn

China

Cathay/Emirates Aircraft backed lease

$25m

S.Korea

Hatco Stetson ResistolRefinancing

$NDm

US

PT BUMALT debt rescheduling

US$800m

Singapore

Cone ArtuDevelopment financing

R$270m

Brazil

FargaDebt advisory restructuring

€87m

Spain

Manx TelecomUnitranche finance

£127m

UK

Australian Rail TrackDebt raising CAPEX facility

A$500m

Australia

Deloitte Debt Advisory has advised on over $100bn of debt financing over the last 5 years


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• The Deloitte Debt Advisory group is an network of 130 debt advisory professionals in over 25 countries

• We provide independent advice and world-class execution resource to a wide range of public, private and institutional borrowers across the full spectrum of debt markets

• Our expertise ranges from the provision of strategic advice on the optimum capital structure and available sources of finance through to the provision of highly experienced execution resources

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AcknowledgementThis report is a joint effort of the Debt & Capital Advisory practices of the Deloitte member firms. This edition relies on the client experience and marketplace insight of Nedim X Music, Thomas Spivey, and Karel Knoll, Satyajit Saha, Purti Trehan, Nikita Nijhawan, and Aditi Kaul were instrumental in the research, analysis, designing, and writing of this report. The leaders of the Debt & Capital Advisory practices of the member firms and their affiliates wish to thank all who have contributed to the development of Global Capital Markets Perspective, Issue 5.


End Notes5a The Wall Street Journal—Companies Sell Record $1.111 Trillion of Bonds in 2013—31 December 20135b Whitehouse.gov—Impacts and Costs of the October 2013 Federal Government Shutdown—November 20135c BBC—Ukraine suspends preparations for EU trade agreement—21 November 20135d English News—China securities regulator unveils IPO reform plan—30 November 20135e Bloomberg—Fed Refrains From QE Taper, Keeps Bond Buying at $85 Bln—19 September 20135f Reuters—ECB cuts rates to new low, ready to do more if needed—7 November 20135g Market Watch—SGX and China Securities Regulatory Commission Establishing Direct Listing Framework—25 November 20135h Financier Worldwide—Fed To Trim Monthly Asset Purchases To $75 Billion As Economy Picks Up—18 December 20136a Dealogic—Loans Statshot—February 20146b Financial Times—Bondholders pay price of share buybacks—26 February 20146c Aviva Investors—Credit Review and Outlook 2014—February 20147a Bloomberg—U.S. Investment-Grade Bond Sales Reach Record $1.125 Trillion—11 December 20137b Bloomberg—Verizon Raises $49 Billion in Largest Corporate-Bond Sale—11 September 20137c WSJ—Apple's Record Plunge Into Debt Pool—30 April 20137d Schwab—Schwab Bond Insights: Possible Tapering Pause; Puerto Rico Bonds; Corporate Credit; Why Own Bonds—24 February 20147e Bloomberg—A Tale of Two Markets—September 20137f WSJ—European Bonds Could Be M&A Winners—9 September 20137g The Economist—The rating game—2 November 20138a Bloomberg-Cisco Borrows $8 Billion in Bond Sale to Help Finance Buybacks-25 February 20148b Moody’s—Asia Pacific companies can refinance debt through to 2017—11 December 20149a Reuters—RLPC: U.S. leveraged loan market set for another $1trln year—13 January 20149b Forbes—The Fed After Ben: Janet Yellen, The Challenge Of Tapering And A Bloated $3.6 Trillion Balance Sheet—12 February 20149c Forbes—Global Leveraged Loan Volumes Rise While European Returns Outrun U.S.—30 January 20149d Forbes—Global Leveraged Loan Volumes Rise While European Returns Outrun U.S.—30 January 201410a Forbes—Leveraged Loan Market Finishes 2013 With Record $605B Issuance—20 December 201310b S&P LCD—Leveraged Lending Review —4Q1310c FIASI—Credit Implications of Current Events—14 October 201310d WSJ—Junk Bond Issuance Slows in Europe—30 January 201410e S&P LCD—European Leveraged Lending Review—4Q1311a Forbes—Global Leveraged Loan Volumes Rise While European Returns Outrun U.S.—1 January 201411b S&P LCD—LCD Weekly Topical—4Q1411c S&P Ratings—European Corporate Credit Outlook 2014—11 December 201311d SIFMA-AFME Leveraged Loan and High Yield Report, 2013 Q4-10 February 2014: converted as of 12/31/2013 at an exchange rate of 1.3776 11e Reuters—Singapore becomes a destination for junk—4 October 201311f Reuters—Asia Pac syndicated loans hit record $462 bln—30 December 201311g S&P LCD—Outlook 2014: CLO market sets scene for future growth—20 December 201312a Forbes—European High Yield Bond Issuance Hits Record €70.4B—1 February 201412b Financial Times—UK leads in European ‘junk’ bond issues—5 December 201312c Financial Times—2014 Outlook:Sugar High—1 January 2014


12d S&P LCD—S&P Pipeline—January 201413a Financer Worldwide—Private Equity Backed IPOs—February 201414a BDO-2014 BDO IPO Outlook14b Forbes—What's Behind The Booming Biotech IPO Market—22 September 201314c Business Line—UK Govt begins privatization of Royal Mail—11 October 201314d Financial Times—Europe primed for fresh wave of IPOs—23 January 201314e Reuters—London IPO market enjoys best year since financial crisis—15 November 201315a Bloomberg LP- 17 February 201415b The Wall Street Journal—An Eventful Year in Hong Kong IPOs—30 December 201315c Asian Venture Capital Journal—Japan IPOs: Rising sun—8 January 201415d The Wall Street Journal—New Zealand’s Privatization Effort Propels IPO Market—23 January 201315e Today-Cinda prices biggest 2013 Asia-Pacific IPO at top, raising S$3.1 bln-5 December 201315f Yahoo Small Business Advisor—Hong Kong IPO Market Predicted to Boom in 2014—31 December 201315g HKTDC Research—HK to stay as top IPO venue for China firms, BDO says—20 December 201315h Channel News Asia—Positive outlook for HK’s IPO market this year—3 January 201415i CNBC—Here's what the 2014 tech IPO pipeline looks like—12 December 201315j Irish Times—Bubble fears grow amid glut of IPOs in the U.S. by early-stage biotechs—6 March 201415k Prudential Real Estate Investors—Asia Pacific Quarterly Outlook—January 201416a Pitchbook — 2013 in review: 5 Biggest Buyouts of the year — 18 December 201316b Preqin—Private Equity Industry Ends 2013 with Record $1.074 trillion of Dry Powder—19 December 201316c Who’s Who Legal—Research Trends and Conclusions: Private Funds 2014—December 201317a Pensions & Investments—Private equity deal volume likely to rise; investor power may wane—6 January 201417b Wall Street Journal—U.S. Private Equity Firms Rush to Enter UK Market—8 November 201317c CNBC—The billionaire play coming to your 401(k)—11 November 201317d GrowthBusiness.co.uk—Surge in IPOs helps boost value of exits by European private equity—3 January 201417e Unquote.com—The secondary buyout “selfie”—25 November 201318a Private Equity International—LPs flock to Asia's proven GPs—24 October 201318b The Wall Street Journal—Korean Private-Equity Activity Picks Up—18 September 201318c Financial News—The winds are shifting for private equity energy investment—19 November 201318d Preqin—Key Issues Private Equity Investors Face in 2014—February 201419a Wharton—Private Equity Expects Better Times in 2014—4 February 201419b Bain & Company—Private Equity market poised for uptick in ‘pricey’ deals in 2014, finds fifth annual release of Bain & Company’s ‘Global Private Equity Report’—3 March 201419c Financial Times—China Reopened IPO highway proves a bumpy ride—20 January 201419d The Guardian—Why the Federal Reserve must taper quantitative easing before Christmas—15 December 201319e The Wall Street Journal—Emerging Markets Go to the Polls—1 January 201419f Los Angeles Times—Russia denies calling shots in Ukraine's Crimea standoff—5 March 2014

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