Credit Suisse Investment Banking Pitch Book
Selected Osprey management commentary on Osprey's
recent financial performance and market outlook
Higher leverage & looser covenants
We do think the market is frothy. We have seen sort of a floor on pricing in terms
of where nonbanks will go in the middle market, so we think we are bottom out in
terms of the pricing we are able to get... What we are seeing is a lot of transactions
that may look, the numbers look okay but the details in the transactions include lots of
add backs to EBITDA and very loose covenants and things like that. I think it is a time
to be very careful. We are going to continue to be selective. We will sit on some cash if
we have to, and I think we will be able to with that kind of an approach, maintain our
yields and avoid the kind of risky or poorly underwritten deals that are getting done a
lot in the marketplace"
Middle market risk / return on first-lien institutional deals (1)
■ Leverage at its highest level post-crisis
Totalleverage (x1)
6.5
6.0
5.5
5.0
4.0
3.5
3.0
2.5
2.0
600
Total leverage
Tim Conway, August 2, 2017
Yield
Source: Osprey earnings call transcripts, Thomson Reuters
Q1 2010
02 2010
03 2010
04 2010
Q1 2011
02 2011
03 2011
Q4 2011
Q1 2012
02 2012
03 2012
04 2012
01 2013
02 2013
03 2013
04 2013
Q1 2014
02 2014
03 2014
Q4 2014
Q1 2015
02 2015
03 2015
Q4 2015
Q1 2016
02 2016
Q3 2016
04 2016
Q1 2017
02 2017
03 2017
LPC.
Based on selected middle market deals with available leverage and yield data.
9.5%
9.0%
8.5%
8.0%
7.5%
7.0%
6.5%
6.0%
5.5%
5.0%
Yield (three-year)
Lower pricing
Overall, market conditions have led to tighter spreads and an erosion in the
quality of some transactions over the past year or more...our selectivity enabled us to
originate senior middle market loans with average yields of 6.8% in the second
quarter, which clearly reflects significant value relative to the liquid loan markets and
other fixed income [alternatives]. Currently, we estimate that we are earning a 200
basis point premium to comparably rated large-cap loans, which on average yields [sic]
of about 4.75% in the second quarter.39
All-in-yield (three-year)
Quarterly middle-market term loan yields (three-year)
■ Quarterly middle market institutional yields below 6% for first time since
Q2'15
■ Spreads down to 443bps on average, the lowest level post-crisis
LIB/LIB Floor LIB Spread Spread due to OID
14%
12%
10%
8%
6%
PRELIMINARY | SUBJECT TO FURTHER REVIEW & REVISION
4%
2%
0%
01 2002
04 2002
03 2003
02 2004
2005
04 2005
03 2006
02 2007
2008
Q1 2010
Q1
Tim Conway, August 2, 2017
04 2010
03 2011
02 2012
Q1 2013
04 2013
03 2014
02 2015
Q1 2016
04 2016
3Q17TD
Confidential
19
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