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0000000 Bank Loans are Trading Cheap to Historic Levels Average - PowerPoint PPT Presentation

Dec 07, 2022 •227 likes •334 views

I nvescos Senior Loan Platform May 2 0 1 2 Presented by: Scott Baskind Senior Portfolio Manager 0000000 Bank Loans are Trading Cheap to Historic Levels Average Bank Loan Bid % Par Source: Standard & Poors LCD and S&P/ LSTA

  1. I nvesco’s Senior Loan Platform May 2 0 1 2 Presented by: Scott Baskind Senior Portfolio Manager 0000000

  2. Bank Loans are Trading Cheap to Historic Levels Average Bank Loan Bid % Par Source: Standard & Poor’s LCD and S&P/ LSTA Leveraged Loan I ndex. I ncludes all loans. Jan. 1997 through May 1, 2012. Historical Price Data Discount Date Price Market is attractive vs. historic norms, Margin especially when “normalized” for Average 95.18 L+ 437 Oct’08-Mar’09 High 3/ 2005 101.01 L+ 251 • Current STM: L+ 563 Low 12/ 2008 63.08 L+ 1641 • Historical STM: L+ 402 1 Current 4/ 2012 95.48 L+ 563 Source: S&P LCD January 1997- April 2012 1 Excludes Oct. 2008-Mar.2009 2

  3. Technicals and Headline Risk Creating Mini Cycles S&P 5 0 0 vs. S&P/ LSTA I ndex Source: Standard & Poor’s LCD and Bloomberg, April 2012. Headline Supply and Dem and • Q1’11: Japanese Earthquake/ Tsunami • Q1’11: $15.4bn of inflows • Q2’11: US Fed Pledges to Keep Rates Low • Q2’11: Neutral Q3: Risk on / Risk off • Q3’11: Escalation European/ US Debt • Q3’11: $6.9bn of outflows • Q4’11: European Credit Crisis Continues • Q4’11: Lack of new issue Q1: Risk on • Q1’12: $5.8bn of CLO issuance 1 Q1’12: Europe Fears Subside • Correlation pre-Lehman of 0.21 has increased to 0.59 post-Lehman 2 because of a broader investor base • – Decline in CLO participation from 60% of the market in 2007 to 40% in 2011 3 • Creating opportunity around full cycle bottom up value driven security selection 1 S&P LCD 4/ 1/ 2012 2 J.P. Morgan. Pre-Lehman includes Jan 1997- Sept 1997, Post-Lehman includes Oct 2008-Oct 2011 3 LCD Quarterly Q4 2011 and Q2 2007 3

  4. Loan Market Technicals I nstitutional Loan Market Size Source: Standard & Poor’s LCD Sources of I nflow s 1 Relative Yield At CLO Issuance $5.42bn Yield to Spread to Duration Forw ard Maturity W orst ( Years) Libor Retail Inflows $0.29bn 5 Year Treasuries 0.83% 4.90 Estimated Institutional Inflows 2 $6.5bn 10 Year Treasuries 1.95% 8.90 Total Inflows $12.21bn Barclays US Agg 2.07% T + 1.24% 5.07 Net New Issue Supply $-3.66bn ML US HY I ndex 7.56% T + 6.16% 4.29 4 5 -6 0 Inflows Net of Available Supply $15.87bn S&P LSTA I ndex L + 5 .6 3 % T + 5 .9 0 % 6 .5 6 % Days 1 Source: S&P’s LCD 3/ 29/ 2012 2 Estimated based on I SSM’s year to date institutional inflows. 4

  5. Solid Fundam ental Credit Perform ance I m proving Fundam entals 1 • Good earnings performance going back to Q3’09. Issuers with public Revenue Growth EBITDA Growth filings have demonstrated 10 Q1 2011 5.99% 8.16% consecutive quarters of EBITDA Q2 2011 7.27% 8.14% growth 2 Q3 2011 6.62% 5.83% • Average quarterly EBITDA growth of Q4 2011 4.59% 8.07% 15.5% from Q3’09 to Q4’11 may be difficult to sustain, but with 2012 GDP Bank Loan Default Rate growth forecasted to be 2% 3 , we expect trends to remain positive Long-term average default rate • Corporate issuers in the senior Leveraged loans: 3.8% secured loan market have benefited from robust capital markets during the last two years and have strengthened their balance sheets, improved liquidity and addressed near term maturities Bank Loan Maturity Schedule • No catalyst for a liquidity event: limited near term maturities support our 2% default outlook • Low growth environment favors debt vs. equity 1 Source: I SSM issuer database- median year over year growth stats 2 Source: LCD, April 1, 2012 3 Source: JPM 2011 HY Annual Review — December 2011 5

  6. Attractive Risk Return Equation Senior Secured Loan New I ssue Market I m plied Default Rate • New deals coming at premiums to historic Historical STM 1 L+ 331 levels Less Credit Loss 108 • Good blend of current income and yield Historical Risk Prem ium L+ 2 2 3 • Mostly proven issuers with above average credit profiles • US$18.5 billion of New Issue Activity over the STM April 2012 L+ 563 past 30 days Less Historical Risk Premium L+ 223 • New Issue Economics Attractive • Spread = L + 482.5 bp Excess Spread 3 4 0 bps • LIBOR Floor = 137.2 bp • OID = 133 bp Implied Default Rate (30% LGD) 11.33% • Current Forward Calendar at US$31.8 billion 4 Peak Default Rate 2 10.81% Est. 2012 Default Rate 3 2.00% This should not be considered a recommendation to buy or sell any particular holding. 1 Historical spread, price and yield reflect pre-credit crisis average from Jan. 31, 1997-Dec. 28, 2007 2 Date: 11/30/2009 3 Estimated Default: JP Morgan 2011 HY Annual Review- Dec. 2011 4 Source: S&P LCD April 30, 2012 6

  7. I nvesco’s Senior Loan Capabilities Invesco Senior Secured Management, Inc. (“ISSM”), with US$16.5 billion of senior loan assets under management, is one of the largest institutional and retail managers in the asset class. Invesco’s “full cycle” approach to managing senior loan credit risk is grounded in active, bottom-up research and has enabled our strategies to add value over the long term. Our senior loan platform is also supported by global resources of Invesco, Ltd., one of the world’s largest asset management companies. Size Product Scope Tenure/ Experience I nvestm ent Style • US$16.5 billion • Global platform with • Team of 39 professionals • Disciplined, Attribute senior U.S. and European including 29 investment fundamental loan assets under senior loan expertise professionals approach to management investing • Ability to deliver • Five-person Senior • One of the largest customized Investment Committee • Focused on credit retail and opportunities with average 23 years selection institutional experience • Top position in all 3 • Designed to optimize managers of senior major sectors- Retail, • Experience spans portfolio return and loans 1 Institutional, CLO multiple credit cycles minimize downside • Manage 30+ funds, risk through full cycle encompassing a variety of strategies Benefit • ACCESS, • ACTIVE MANAGEMENT • LARGE CREDIT TEAM • DEDICATED LOAN EXECUTION AND THROUGHOUT ALL MONITORING SENIOR PLATFORM ALLOCATION MARKET CYCLES LOANS TO MINIMIZE SINGULARLY DOWNSIDE RISK FOCUSED ON THE UNIQUE ASSET CLASS 1 Based on eVestment assets under management as of Dec. 1, 2011. Source: I nvesco. Data as of March 31, 2012. 7

  8. Senior Loans at I nvesco One of the largest managers of senior secured bank loans for both retail and institutional senior loan investors US$16.5 billion in bank loan assets under management I nvesco Bank Loan Key Strategies : • US CLOs • European CLOs • Cross-over CLOs • Separate Accounts • Commingled Institutional • Opportunistic Offerings • Retail • ETF Based on assets under management on 3/ 31/ 2012 Source: I nvesco as of December 31, 2011. Strategies listed are not all available in all jurisdictions or to all investors. Please consult your local I nvesco representative for more information. 8

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