A stream of new money flowing into loan and credit funds overwhelmed new issue supply, providing issuers (and their agents) the opportunity to run robust offering processes and gamer attractive economic and structural terms. The recent tightening in monetary policy and strong macroeconomic conditions notwithstanding, all-in-cost of leverage has, thus far, remained near recent lows.

1. I N D U S T R Y I N S I G H T S :
Capital Markets
S p r i n g 2 0 1 7 R e v i e w

2. Capital Markets Industry Insights | Spring 2017
Highlights
Following strong economic data
reports, investors expected the Fed to
announce a fourth rate hike in its
forecast for 2017. Unchanged
guidance led to a Treasury rally in late
March.
A stream of new money flowing into
loan and credit funds overwhelmed
new issue supply, driving pricing and
spreads toward new lows.
Loan issuance surged to recent highs
driven by refinancing, dividend recap
issuance and strong demand from
credit sources across the spectrum.
2
Compelling market conditions this quarter drove non-investment grade
and middle-market loan issuance volumes to the highest levels in several
years. Volume was dominated by refinancing and dividend recap
transactions.
New issuance terms – pricing, call protection and covenants – moved
further in favor of issuers as an expanding universe of credit providers
struggled to deploy capital. We noted particularly aggressive bidding
among credit providers newly empowered with multi-strategy investment
mandates.
Equity markets rallied strongly, reflecting a solid, if unspectacular,
macroeconomic backdrop, as well as optimism regarding regulatory and
fiscal policy under the Trump administration. Despite the setback on the
American Health Care Act in late March, the rally weathered a shift in
fiscal policy expectations as economic data and earnings forecasts
continued to support higher valuations.
Following the Fed’s rate hike in March, Treasurys rallied, driven by the
waning prospect that economic conditions would warrant a fourth rate
hike in 2017. The Fed, while still hawkish, left in place expectations for
two additional quarter-point rate hikes for the remainder of the year.
Finally, we observed a marked increase in market participation by
commercial banks, BDCs and, to a lesser extent, life insurance
companies this quarter. Banks benefitted from a generally rising rate
environment. BDCs, having largely worked through portfolio challenges,
are again trading above net asset value.

3. Capital Markets Industry Insights | Spring 2017
Executive Summary
U.S. monetary policy garnered the attention of market participants this quarter,
especially as fiscal policy ceded center stage. The Fed maintained a moderately
hawkish posture in announcing a rate hike in March and a data dependent plan to
raise rates two more times by year end and three times in 2018 (each hike to be
25 basis points). The market reaction has, thus far, been muted, with Treasury
rates generally rallying in relief that policy makers did not adopt a more
accelerated pace of rate increases.
In spite of the modest pace of rate hikes in the Fed’s guidance, and an inflation
rate consistent with the Fed’s 2% target (2.1% in February), the Treasury market is
not without downside risk as a function of monetary policy. Of particular concern is
how well the market will absorb a selling down, as soon as the third quarter, of
Treasury and mortgage securities accumulated during quantitative easing
initiatives in 2008 and 2009. In addition, a selling down of inventory held by the
Chinese government (and related sovereign funds) could trigger a correction.
Conversely, U.S. Treasury yields remain an attractive safe haven, with yields
significantly greater than those of European and Japanese sovereign debt.
Inflow to middle-market credit providers was substantial, which drove pricing
downward and enhanced structural flexibility. In response to robust demand for
issuance, we observed a move by credit providers toward multi-strategy initiatives
in order to be relevant to a broader range of opportunities. We also noted growing
appetite for second lien debt, as traditional first lien buyers reached for yield.
Equities continued the rally begun in the fourth quarter with the S&P 500 having
increased 10% from Election Day and 5% since the beginning of the quarter.
Contributing to the rally were an array of positive economic indicators and
expectations for roughly 9% S&P 500 earnings growth in the first quarter (the
highest since 2011). Equities also continued to be buoyed by optimism that
corporate profits will increase due to the White House’s agenda of deregulation
and tax reform. Despite the setback on new healthcare policy, the rally has
weathered a shift in fiscal policy expectations.
Prevailing market conditions are compelling for middle-market issuers. In the first
quarter, issuers drove the highest quarterly non-investment-grade loan issuance
volume since 2014, fostered primarily by refinancing and dividend recap
transactions. Sponsors took advantage of robust market conditions, paying out
approximately $6 billion in dividends from loan issuance and pushing volume
toward recent highs.
3

4. Capital Markets Industry Insights | Spring 2017
LEVERAGE MULTIPLES
SENIOR
EBITDA OF $10MM – $20MM
2.50x – 3.50x
EBITDA OF $20MM – $50MM
3.00x – 4.00x
TOTAL DEBT
EBITDA OF $10MM – $20MM
3.50x – 4.50x
EBITDA OF $20MM – $50MM
4.00x – 5.50x
Indicative Middle-Market
Credit Parameters
4

5. Capital Markets Industry Insights | Spring 2017
INFORMATION IN RED REPRESENTS PRIOR QUARTER VIEW
SECOND LIEN
LIBOR + 6.00% – 9.00%
LIBOR + 6.50% – 9.50%
LIBOR + 5.50% – 8.50%
LIBOR + 6.00% – 9.00%
SUBORDINATED
DEBT
11.00% – 13.00%
11.50% – 13.50%
10.00% – 12.00%
10.50% – 12.50%
UNITRANCHE
LIBOR + 6.00% – 8.50%
LIBOR + 6.50% – 9.00%
LIBOR + 5.50% – 8.00%
LIBOR + 6.00% – 8.50%
Indicative Middle-Market
Credit Parameters
FIRST LIEN
LIBOR + 2.75% – 3.50% (bank)
LIBOR + 3.75% – 5.75% (nonbank)
LIBOR + 4.00% – 6.00% (nonbank)
LIBOR + 2.50% – 3.25% (bank)
LIBOR + 3.75% – 5.75% (nonbank)
LIBOR + 4.00% – 6.00% (nonbank)
FIRST LIEN
5
PRICING EBITDA OF $10MM – $20MM EBITDA OF $20MM – $50MM

6. Capital Markets Industry Insights | Spring 2017
High-yield volume increased in the first quarter of 2017 as companies sought to obtain
favorable deal terms in advance of anticipated interest rate hikes. Issuance was driven
disproportionately by refinancing activity. Dollar volume increased by 73.6% and deal
volume increased by 60.7% versus the fourth quarter of 2016.
Total High-Yield Bond Issuance
Source: LCD Comps
82.5 82.1
68.6
74.9
105.1
68.9
64.5
91.3 94.1
39.8
36.3 36.1
83.4
62.7
47.1
81.7
176
155
146 146
178
123
112
129
163
61 53 55
112 107
89
143
0
50
100
150
200
250
300
2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17
$0
$25
$50
$75
$100
$125
THOUSANDS
Total Bond Volume ($B) Number of Tranches
New
Issuance
6

7. Capital Markets Industry Insights | Spring 2017
596.4
547.8
606.7
481.5
621.8
508.0
671.7
436.9
662.7
602.5 604.8
397.4
693.7
501.0
715.4
644.2
1,103
1,054
1,211
1,026 1,214
1,142
1,190 896
1,248
1,026
1,152 879 1,155
1,007
1,129
999
500
1,000
1,500
2,000
2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17
$0
$200
$400
$600
$800
THOUSANDS
Total Loan Volume ($B) Number of Deals
Total dollar volume of new loan issuance remained strong in the first quarter of 2017,
having experienced a modest decrease from the recent high of Q4 2016. Volume was
driven largely by refinancing and, to a lesser extent, dividend recap transactions.
Total Loan Issuance
New
Issuance
7
Source: SDC Platinum
Volume data includes deals reported as of 4/7/2017

8. Capital Markets Industry Insights | Spring 2017
Total middle-market loan issuance reached a record high in the first quarter of 2017.
The pace of issuance reflected heavy M&A volume as well as a flurry of refinancings
and recaps.
Total Loan Issuance (EBITDA < $50MM)
294.2
217.0
275.9 266.8
306.1
231.3
256.2
174.3
303.0
245.6
269.6
169.7
321.7
256.4
341.4
380.2
854
796
915
800
952
897
895
675
939
805
886
685
905
812
902
779
500
750
1,000
1,250
2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17-$20
$50
$120
$190
$260
$330
$400
THOUSANDS
Total Loan Volume ($B) Number of Deals
New
Issuance
8
Source: SDC Platinum
Volume data includes deals reported as of 4/7/2017

9. Capital Markets Industry Insights | Spring 2017
Fund
Flows
After a sluggish start to the year, collateralized loan obligation (CLO) managers ramped
up issuance late in the quarter. While less than that experienced in the previous three
quarters (averaging $21.2 billion), CLO issuance was still strong relative to the
comparable period last year and consistent with its share of the institutional market in
the fourth quarter.
Total CLO Issuance
Source: LCD Comps
16.0 17.0
24.6
22.6
38.3
32.4
30.7 30.8
28.6
18.9 19.6
8.2
18.0
19.9
26.2
17.4
34
36
53
45
69
58
63
57
55
36
40
20
42 41
52
32
0
20
40
60
80
2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17
$0
$10
$20
$30
$40
$50
$60
Total Fund Flows ($B) Number of Deals
9

10. Capital Markets Industry Insights | Spring 2017
Net leveraged loan fund inflows were approximately $2.6 billion in each month of the
first quarter. Investors fled bond funds in the five weeks following the election – a
relative blip, as investors returned emphatically in the first quarter.
Mutual Fund Flows
Source: Investment Company Institute; Lipper FMI
Fund
Flows
10
Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17
($20)
($15)
($10)
($5)
$0
$5
$10
$15
MILLIONS
High-Yield Bond Fund Flows Leveraged Loan Fund Flows
Total Net Fund Flows ($B)

11. Capital Markets Industry Insights | Spring 2017
Leverage Second lien loan volume increased as loan providers pressed for incremental yield.
Average purchase price multiples declined slightly to just below 10x, with sponsors, on
average, continuing to provide approximately 35% to 40% equity.
Leverage Multiple (EBITDA < $50MM)
Source: LCD Comps
11
4.7x
5.3x
4.5x
4.7x
5.1x 5.2x
4.8x 4.8x
4.4x
5.6x 5.7x
4.9x 5.0x 5.0x
4.8x 4.7x
2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
First Lien Second Lien SubordinatedDebt/EBITDA Multiple

12. Capital Markets Industry Insights | Spring 2017
A record number of middle-market M&A deals were transacted in the first quarter of 2017.
Although dollar volume declined, M&A transaction activity expanded.
Middle-Market M&A Volume (Target EBITDA < $50MM)
126.5
264.0
181.5
135.7
207.3
199.5
166.4
194.3
164.7
262.5
174.5
132.7
207.4 208.9
230.8
152.1
2.1
2.5 2.6 2.5 2.6 2.6
2.7 2.8 2.8
2.7
2.5
2.7
2.9
2.8
3.1 3.2
1.0
1.8
2.6
3.4
4.2
5.0
2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17
$0
$50
$100
$150
$200
$250
$300
THOUSANDS
THOUSANDS
Total M&A Volume ($B) Number of Deals
(thousands)
Transaction
Volume
12
Source: SDC Platinum
Volume data includes deals reported as of 4/7/2017

13. Capital Markets Industry Insights | Spring 2017
Dividend recap volume was driven by an abundance of credit availability. Terms – yield,
call protection and covenant structure – continued to move in favor of borrowers. In
contrast, fourth quarter recap volume was propelled by the specter of unfavorable
economic policy under an anticipated Clinton administration, with the majority of volume
taking place in the five weeks leading up to the election.
Loan Issuance for Dividend Recapitalizations
Source: LCD Comps
$27.3
$14.0
$10.7
$17.0
$18.3
$13.4
$4.1
$6.5
$15.2
$12.8
$3.1
$0.2
$14.2
$11.9
$21.6
$18.7
2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17
$0
$5
$10
$15
$20
$25
$30
Total Loan Volume ($B)
Transaction
Volume
13

14. Capital Markets Industry Insights | Spring 2017
Yields Yields on widely traded leveraged loans fell approximately 28bps this quarter while
yields on high-yield bonds decreased by 19bps. The supply-demand imbalance,
particularly for loans, drove rates down. This rally proceeded in spite of the Fed’s rate
hike.
U.S. Corporate High-Yield Bonds and Leveraged Loans
Source: Bloomberg; LCD Comps
Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17
4.5%
5.5%
6.5%
7.5%
8.5%
9.5%
10.5%
HUNDREDS
Barclays U.S. Corporate High Yield S&P/LSDA U.S. Leveraged Loan 100 All LoansYields (%)
14

15. Capital Markets Industry Insights | Spring 2017
Spreads between the Barclays U.S. Corporate High Yield index and the 10-year
Treasury yield decreased by approximately 22bps during the quarter. Demand for assets
drove rates and spreads downward.
Source: Bloomberg; LCD Comps
Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17
0
200
400
600
800
1,000
U.S. Corporate High-Yield Bond vs. 10-Year Treasury Spread
Spread (bps)
Yields
15

16. Capital Markets Industry Insights | Spring 2017
Treasury yields remained roughly flat this quarter, with the 10-year yield decreasing by
approximately 6bps. The Fed’s rate hike this quarter and continued guidance for two
subsequent increases in 2017 had a nominal impact on Treasury yields, suggesting that
the market had already priced in the Fed’s actions.
Source: Bloomberg
2-, 5- and 10-Year Treasury Yields
Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17
0.0%
1.0%
2.0%
3.0%
4.0%
2 Year 5 Year 10 YearYield (%)
Yields
16

17. Capital Markets Industry Insights | Spring 2017
Spreads between 2- and 10-year Treasury yields decreased by approximately 12bps
during the quarter, reflecting modestly greater sensitivity to monetary policy on the
longer end of the curve.
Source: Bloomberg
Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17
0
50
100
150
200
250
300
2-Year vs. 10-Year Treasury Spread
Spread (bps)
Yields
17

18. Capital Markets Industry Insights | Spring 2017
Macroeconomic
Update
U.S. economic data was generally encouraging in the first quarter.
Projected GDP growth was positive, though less than that of the fourth
quarter. The unemployment rate fell to 4.5% in March, while the labor
force participation rate remained around 63.0%.
U.S. Real GDP Growth
Source: Federal Reserve
First quarter data represents Atlanta Fed GDPNow Projection as of 4/18/17
Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
GDP Growth Rate
18

19. Capital Markets Industry Insights | Spring 2017
Macroeconomic
Update
U.S. dollar exchange rates, while volatile throughout the first quarter,
ended the period largely unchanged versus major foreign currencies.
Although the Fed raised the discount rate another quarter point, further
increasing the disparity between U.S. monetary policy and those of Europe
and Japan, the Treasury rally at quarter end dampened the dollar’s rally.
U.S. Dollar Foreign
Exchange Rates
Source: Federal Reserve
Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
EURUSD GBPUSD JPYUSD
Foreign Currencies vs. USD
19

20. Capital Markets Industry Insights | Spring 2017
Contact Us
Michael Brill
Managing Director, U.S. Private Capital Markets
+1 212 871 5179
michael.brill@duffandphelps.com
Bob Bartell, CFA
Global Head of Corporate Finance
+1 312 697 4654
bob.bartell@duffandphelps.com
Steve Burt
Global Head of M&A
+1 312 697 4620
steve.burt@duffandphelps.com
Dave Althoff
Global Co-Head of Industrials M&A
+1 312 697 4625
david.althoff@duffandphelps.com
Josh Benn
Global Head of Consumer, Retail,
Food & Restaurants
+1 212 450 2840
josh.benn@duffandphelps.com
Brian Cullen
Head of U.S. Restructuring
+1 424 249 1645
brian.cullen@duffandphelps.com
Brooks Dexter
Global Head of Healthcare M&A
+1 424 249 1646
brooks.dexter@duffandphelps.com
Ken Goldsbrough
Managing Director, European Debt Advisory
+44 (0)20 7089 4890
ken.goldsbrough@duffandphelps.com
Howard Johnson
Managing Director, Canada M&A
+1 416 597 4500
howard.johnson@duffandphelps.com
Ross Fletcher
Managing Director, Canada M&A
+1 416 361 2588
ross.fletcher@duffandphelps.com
Kevin Iudicello
Managing Director, Technology M&A
+1 650 354 4065
kiudicello@pmib.com
Jon Melzer
Global Co-Head of Industrials M&A
+1 212 450 2866
jon.melzer@duffandphelps.com
Brian Pawluck
Managing Director, Canada Restructuring
+1 416 364 9756
brian.pawluck@duffandphelps.com
Jim Rebello
Global Head of Energy M&A
+1 713 986 9318
james.rebello@duffandphelps.com
20

21. Capital Markets Industry Insights | Spring 2017
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