Greenwich IATA Presentation 7 Oct 2008 Final Website

2 0 0 8May You Live in Interesting Times

7 October, 2008

Confidential 2

AGENDA

Living in Interesting Times

• Liquidity Crunch and the Corporate Treasurer

• Liquidity Crunch and the Investor

• Current Operational Topics

• Thinking Forward

• Appendix: Greenwich Associates

Confidential 3

May you live in interesting times: a curse come true?

• Commodity prices up, or down again?

• Inflation spiking, or moderating again?

• EOS, Silverjet, Zoom, XL

• Alitalia, BA/Iberia, LH/SAS

• Bear Stearns, Northern Rock, Lehman, ML

• ?

Confidential 4

63%

60%

60%

53%

39%

34%

30%

26%

23%

11%

12%

65%

42%

61%

43%

40%

20%

23%

22%

24%

7%

4%

8%

67%

47%

60%

49%

41%

22%

32%

26%

18%

7%

9%

73%

60%

57%

37%

45%

30%

26%

26%

15%

14%

59%

OverallAsia PacificEuropeNorth America

Responsible for Current Market Turmoil in the United States

Government Institutions and Regulators* (471)

The U.S. Federal Reserve/Central Bank (341)

* U.S. Congress, U.S. Securities and Exchange Commission and U.S. Treasury DepartmentNote: Based off responses from 900 respondents globally

Consumers (303)

Accounting Regulations (266)

The Housing Construction Industry (100)

Investment Banks (555)

Mortgage Underwriters (533)

Rating Agencies (533)

Hedge Funds (226)

Sellers of Credit Default Industry (203)

Nobody is Responsible (5)

Other (103)

Confidential 5

Responsible for Current Market Turmoil in the United States

Other Mentions:

• “All of the parties that bought poorly written securities or changed their underwriting/risk taking standards.” – Asset Manager, North America

• “Bush's economic policies.” – Asset Manager, North America

• “Government policy encouraging lending to low income people and lax lending standards overall.” –Asset Manager, North America

• “Greed of homebuilders, banks and consumers.” – Asset Manager, Europe

• “Lack of understanding of underlying risk.” – Asset Manager, Europe

• “Loose credit policy across the board; free money thanks to Alan and cheap lending by banks based more on asset valuation then credit scoring. Also, consumer desire for goods that led them to borrow to spend so lets blame advertising at the same time.” – Asset Manager, Europe

• “Many are responsible. We have had low interest rates and low spread for too long. We ended up with all the same positions which were too leveraged.” – Corporate, Europe

• “Mr. Greenspan, due to his period of easy money and low interest rates.” – Corporate, Europe

• “Real estate speculators.” - Asset Manager, North America

• “The cheap money over the last 15years and clearly a misunderstanding in modeling risk this was compounded by rates being keep extremely low and a housing market worldwide that contributed too large a percentage to everyone's GDP.” – Asset Manager, North America

• “Wrong Compensation Incentives of IB [Investment Banks].” – Asset Manager, Europe

Confidential 6

32%

31%

19%

18%

30%

32%

18%

20%

33%

35%

13%

19%

32%

28%

23%

17%

The U.S. FederalReserve/ Central

Bank

U.S. Governmentinstitutions and

regulators

The "free market"

None of the above

Global

Asia Pacific

Europe

North America

Entity that Inspires Most Confidence in Addressing Current Market Turmoil

Note: Based off responses from 882 respondents globally

Confidential 7

Not at all confident

24%

Uncertain16%

Very/ Somewhat confident

61%

Level of confidence in the U.S. Federal Reserve’s $700 Billion Bailout Plan


92%

58%

64%

61%

0% 25% 50% 75% 100%

Europe

Asia Pacific

North America

Latin America

Confidential 8

No20%

Uncertain14%

Yes65%

Short Selling of Financial Services Firms


Do you think short selling of financial services firms should be allowed?

Yes32%

Uncertain14%

No55%

No39%

Uncertain14%

Yes47%

Asset Managers Corporates Pensions

Confidential 9

A clear majority of companies expect their economies to deteriorate over the next six months, with a positive turn not until 12-18 months out.

No Change18%

Deteriorate Significantly/Deteriorate

71%

Improve Significantly/

Improve11%

Expected Length of Time BeforePositive Economic Turn

6 Months

2 Years

18 Months

12 Months

Note: Based on interviews with 100 U.S. companies in February, and 291 U.S. companies in September of 2008.

16%

49%

28%

7%

0%

4%

50%

32%

11%

4%

February 08

September 08

Longer than 2 years

U.S. Companies – September 2008

Confidential 10

52%

47%

52%

69%

53%

24%

23%

22%

5%

27%

22%

25%

24%

15%

20%

2%

0%

0%

0%

1%

1 - 2 years12 Months or lessMore than 2 yearsUncertain

Expected Length of Time Before Positive Economic Turn

Latin America (13)

North America (492)


Global (889)

Asia Pacific (84)

Europe (310)

Confidential 11

23%

21%

22%

15%

24%

67%

70%

70%

77%

66%

6%

9%

5%

0%

6%

3%

1%

4%

8%

3%

1 - 2 years12 Months or lessMore than 2 yearsUncertain

Amount of Time Before Equity Markets Hit Bottom

Latin America (13)

North America (490)


Global (887)

Asia Pacific (84)

Europe (310)

Confidential 12

Corporate Bond Spreads only match those of 2002/2003 while FI spreads exceed them, highlighting how difficulties in the Financial System will extend the current difficult environment

Confidential 13

Note: Based on interviews with 291 companies in the United States in September 2008.

The strongest increase in demand for financial products is for hedging products and funding products.

-15

-16

-12

-9

-6

14

13

15

24

22

-50 -25 0 25 50

Expected Change in Need for Funding (% of Companies)

Funding forOngoing Operations

Funding for Capital Expenditures

Acquisition Finance

Structured Finance

Hedging Products

Increase/Increase SignificantlyDecrease/Decrease Significantly Companies’expected change in

need for funding shows only

relatively modest shifts, with expected

increases and decreases nearly netting to zero.

Need for funding for ongoing operations

is up, while need for funding capital expenditures or

acquisition finance is flat to down

slightly.

Confidential 14

The Short View: Credit squeeze outlook

Lending officers said they were continuing to tighten standards, whether on credit cards, prime mortgages, consumer or business loans, even though a strong majority of banks had done this in the second quarter. That implies a squeeze on consumption, and lower investment, as the year goes on.

Polling lenders in the eurozone, seemed a little less gloomy, but only on the surface. There were slight decreases in the proportion of banks planning to tighten standards for corporate loans. Furthermore, lending officers said demand for company loans was decreasing and economic risks were putting pressure on them to tighten.

In Europe and the US, the cost of insuring against default for investment-grade companies has risen but stayed well below recent highs, while the default risk for high-yield or lower-quality credits has shot up, almost regaining its highs. Spreads payable on speculative-grade credits are at their highest in four months.

Financial Times PUBLISHED: AUGUST 14 2008

Confidential 15

Tightening of Credit Standards is expected to continue in the USA and Europe

0

10

20

30

40

50

60

1st Qtr 2nd Qtr 3rd Qtr

EuropeUSA

Note: Third quarter values are expectedSource: ECB and FRB Quarterly Lending Conditions surveys

Confidential 16

Both in Europe and the US banks expect loan demand to weaken, but in the US more than before and in Europe less than before

-20

-15

-10

-5

0

5

10

15

20

1st Qtr 2nd Qtr 3rd Qtr

EuropeUSA

Note: Third quarter values are expectedSource: ECB and FRB Quarterly Lending Conditions surveys

Confidential 17

AGENDA







Confidential 18

5%

66%

69%

67%

0%

51%

69%

76%

0%

58%

74%

66%

2%

58%

70%

71%

70% of Investors Expect a Recession in the United StatesFebruary 2008

Limited borrowing capacity for corporates

Recession in the United States

Global economic downturn

Note: Based on responses from 234 global institutions.

Total Institutions

Asia (ex Japan)

Europe

North America

None of the above

Confidential 19

Performance of CDOs and Structured Credit Products has Made morethan One Half of Investors Reluctant to Invest in themFebruary 2008

Uncertain, 22%

No, 19%

Yes, 58%


Yes, 50%

No, 29%

Uncertain, 21%

Yes, 56%

No, 13%

Uncertain, 31%

Asia (ex Japan) Europe North America

Has the performance of CDOs/ structured products made you less likely to invest in these products in the future?

Confidential 20

But a Meaningful Minority Plan to Invest in Illiquid InstrumentsFebruary 2008

Yes, 37%No, 63%

Asset-backed commercial paper

Agency securities

High-yield credit bonds

50%

48%

46%

41%

33%

28%

26%

24%

24%

24%

22%

17%

Mortgage-backed securities


Asset-backed securities

Commercial mortgage-backed securities

High-yield CDS

Distressed debt

Leveraged loans

Emerging markets bonds

Covered bonds

Collateralized debt obligations

Which illiquid instruments did you or do you plan to invest in?

Did you or do you plan to invest in illiquid instruments due to the turmoil in the credit markets?

Confidential 21

33%

27%

14%

15%

60%

83%

38%

47%

54%

60%

56%

60%

76%

56%

64%

65%

Systemic and Counterparty Risk Have Become Bigger ConcernsFebruary 2008

United States (Q1 2007)

Europe (Q2 2007)

Global (Q3 2007)

Note: Asked of 1,007 U.S. investors from 2/12 – 4/12/07; asked of 1,106 European investors from 5/21 – 7/27/07; asked globally of 251 fixed-income and equity derivative investors from 8/30 – 9/7/07 and 214 from 1/22-2/6/08.

Systemic/market risk

Credit/default risk

Liquidity

Counterparty risk

Global (Q1 2008)

Proportion of Investors Citing Each Factor as a Top Risk

Confidential 22

AGENDA







Confidential 23

Return expectations for cash investment have declined in the United States following declining interest rates and more conservative portfolio allocations.

7.1%

3.8%

4.9%

6.7%

5.5%

3.7%

Note: Based on responses from 95 companies in the United States, 99 in Europe, and 66 in Asia from February 2008 and 678 in the United States from April through June 2007, 100 in Europe and 174 in Asia from August through November 2007.

United States

Europe

Asia

February 2008

February 2008

February 2008

October 2007

October 2007

May 2007

Target Annual Return on Cash Investments

Confidential 24

U.S. companies are shifting more cash investment into higher-rated securities.

4%

0%

1%

8%

17%

71%

0%

0%

0%

5%

16%

78%

Note: Based on responses from 65 companies the United States from February 2008 and 617 from April through June 2007.

AAA/Aaa

AA/Aa

No Ratings/Other

February 2008May 2007

A/A

BBB/Baa

BB/BA or below

Cash Portfolio Allocation US companies

Confidential 25

European companies have shifted cash investments toward lower-rated/higher-yielding securities.

21%

0%

3%

15%

28%

32%

4%

0%

4%

22%

47%

22%

Note: Based on responses from 53 companies in Europe from February 2008 and 110 from August through November 2006.

AAA/Aaa

AA/Aa

No Ratings/Other

February 2008October 2007

A/A

BBB/Baa

BB/BA or below

Cash Portfolio Allocation European companies

Confidential 26

Similar to U.S. companies, Asian firms have moved toward higher-rated securities for cash investments.

26%

1%

3%

8%

17%

45%

6%

3%

5%

16%

31%

49%

Note: Based on responses from 36 companies in Asia from February 2008 and 247 from August through November 2006.

AAA/Aaa

AA/Aa

No Ratings/Other

A/A

BBB/Baa

BB/BA or below

February 2008October 2007

Cash Portfolio Allocation Asian companies

Confidential 27

3.4

5.1

4.34.7

4.7

4.8

4

4.2

3.9

3.93.83.7

3.3

5.2

5.8

5.255.4

4.8

4.4

2004 2005 2006 2007

Top Tier Europe

European Airlines

Asia

Asian Airlines

U.S.

U.S. A irlines

Banks used

Average number of banks used for Cash Management Services by airlines declines unlike in the wider market

Confidential 28

55%

56%

61%

63%

59%

63%

Share of Wallet to the Lead PCM Bank

Total Asia

Top Tier Europe

United States

AirlinesOverall

Distribution of PCM wallet to the lead PCM bank virtually unchanged

Confidential 29

SEPA and electronic payments are catalysts for consolidation but not main drivers

Yes, 30%No, 70%

Anticipate consolidating cash management service needs among fewer providers? Reasons

28%

6%

32%

58%

Greater use of electronic payments & receipts

Pressure from large credit provider

The effects of SEPA being introduced

Other

Confidential 30

Companies still do not anticipate meaningful changes from SEPA and half have not made detailed plans to take advantage of its benefits

Expected Impact of SEPA:

27%

7%

12%

11%

12%

61%

31%

11%

18%

10%

14%

60%

Reduction of the number of accounts used in different European countries for

the purpose of payments and collections

Reduction of the number of finance/treasury centers within Europe

Reduction of the number of cash management providers used

Reduction in the amount of working capital required for your European

operations

More accurate cash flow forecasting

No significant change

When will you have necessary payment data for clients in order to take advantage of SEPA?

38%

15%

47%

36%

19%

44%

Already mostly in place

In place by the end of 2007

No detailed plans yet

20062007

Confidential 31

75%

91%

69%

84%

97%

90%

Fraud Prevention Extremely Important in Selecting Providers*

Total Asia

Top Tier Europe

United States

* Based on ratings of “4” or “5” on the 5-point scale.

20072006

Fraud prevention is becoming more important in Europe in selecting cash management providers

Confidential 32

Key Sources of Fraud Monitored and Controlled: Internal sources of fraud are becoming a greater concern

Top Tier Europe

40%

50%

46%

42%

39%

16%

56%

57%

39%

30%

30%

11%

Total Asia

58%

42%

42%

45%

37%

7%

63%

43%

50%

43%

37%

4%

Check Processing (for receivables or payables)

Internet-based or other electronic forms of payments (receivables or payables)

Illicit use of company funds for payments to third parties by your employees

Misappropriation of funds by employees or your company

Protection of financial data of customers or suppliers (e.g. customer credit card details

stored in your databases)

Other

20072006

Confidential 33

A meaningful minority of companies expects to move to direct access to SWIFT shortly

Yes, 28%No, 72%

Plans to move company to direct access to SWIFT

When do you expect company to begin using SWIFT?

* Includes liquidity management, supply chain management, trade finance, cash management, and foreign exchange.

0-3 months

4-6 months

7-12 months

1-2 years

2-3 years

3+ years

44%

10%

16%

8%

4%

18%

Confidential 34

AGENDA







Confidential 35

• Funding cost has soared and access is getting harder

• Companies will need to change the way in which they manage their bank relationships

• More consistent access to capital markets requires a different approach to debt capital markets providers and investors

• New tools and payments options coming on-stream

• Increasing concerns about fraud in operations

• What you should think about next……

Changes in availability and cost of external funding will trigger fundamental changes in companies’ funding strategies

Confidential 36

Thinking Forward: Are You Prepared?

Funding Costs and RisksHow to demonstrate credit qualityMarketing the company to InvestorsMore limited funding options (sources and structures of capital)Nervous intermediariesHas the ability of our business to generate funds internally deteriorated relative to the competition. Do we have better or worse access to funding than competitors?Which banks demonstrate a consistent and ongoing commitment to corporate clients despite the credit crisis?How do I need to adapt my communication with bond holders to improve access to public markets?Risks to the asset side of my balance sheet from bank counterparty risk?

Operational ChallengesSurprisingly modest preparedness for SEPAHow can your banks help in fraud prevention?

Confidential 37

AGENDA







Confidential 38

Provide decision-makers in institutional financial markets with market intelligence and expert advice - based on proprietary, comprehensive market research and in-depth analysis

Provide consistent quantitative and qualitative metrics to improve customer/provider relationship management and promote greater efficiency in the markets

Corporate Banking, Investment Banking, Cash Management, Foreign Exchange, Derivatives, Fixed Income, Brokerage, Asset Management

Offices in Stamford (USA), Tokyo, Singapore, London and Toronto

Standardized ongoing programs as well as tailored studies

The Greenwich Associates Mission

Confidential 39

Corporate Finance

Commercial Banking

Treasury Services

Investment Management

Fixed IncomeBrokerage

Buy-Side Services Sell-Side Services

• Over 30 years of experience• 40,000 Research Partner relationships in over 70 countries• Provide consulting advisory solutions to over 250 clients globally• Over 100 research programs underwritten by Greenwich annually

Our Business ModelGreenwich Associates’ principal focus is monitoring and analyzing the relationship dynamics between buyers and sellers of financial services.

• Peer-Based Compensation

• Greenwich Rankings

• Market Trends Analysis

• Peer Benchmarks/Best Practices

• “Hot Topic” Research

• Customized Research

• Consulting Services

• Consulting Services

• Competitive Positioning

• Customer Behavior

• Customer Satisfaction

• Best Practices

• Market Trends Analysis

• Account-level Reporting

• Custom Research

Greenwich Associates

Confidential 40

Value ExchangeGreenwich produces high quality, relevant, and actionable financial industry intelligence. Market-driven feedback results in confident business decision-making based on objective information.

Professional Interviews

Value Delivered

• Greenwich Report

• Online access to extensive research library

• Customized research

• Direct feedback to service providers

• Relevant questions

• Experienced Executive Interviewers

• Flexible interviewing methods• In-person• Telephone• Internet

• Institutional and individual focus

• Continuous market feedback sets research agenda

• Research Partner support:• Executive Interviewer• Customer Service• Community Manager• Lead Consultant

Relationship Management

Greenwich IATA Presentation 7 Oct 2008 Final Website

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