Rudolph Tanzi Professor of Neurology,

Harvard Medical School; Vice

Chair, Neurology Research,

Massachusetts General

Hospital

The Art and Science of Capital Structure

Mark Attanasio Co-Founder and

Managing Partner, Crescent Capital

Group

Michael Milken

Chairman, Milken Institute

Emanuel Friedman CEO, EJF Capital

Mitchell Julis

Co-Founder, Co-Chairman and

Co-CEO, Canyon Partners, LLC

Jonathan Sokoloff

Managing Partner, Leonard Green &

Partners

#MIGlobal

Important Disclosures

Manny Friedman slides

#MIGlobal Source: EJF Capital LLC.

Public Non-Bank Landscape (1)

Europe United States

Business Development

Companies (6)(1)

0 ~60

Specialty Finance Companies (1)

~10 ~180

Property Real Estate

Investment Trust (8)(1)

~80 ~150

European Bank Environment (5)

(Stated in Trillions $)

GDP Bank Assets

United States (4) (5) 17.7 15.52

Europe 27+2 (2) (3)

16.3 45.50

(1) EJF Estimates ; (2) GDP is 2014 Estimate of the EU-27 countries provided by Bloomberg

Financial /Eurosource; (3) Total Bank Assets are as of 2013 which are the last available numbers

from the European Bank Authority. Added Norway and Switzerland (2013) Eurostat; (4) GDP is

2014, http://bea.gov/newsreleases/national/GDP/ GDPnewsrelease.htm. March 27, 2015;

European specialty finance opportunity: a virtual desert

#MIGlobal

European specialty finance opportunity: a virtual desert

Source: International Monetary Fund.

European Bank Environment (5)

Largest Institutions Total Assets (Bn$)

TCE/TA

Deposits / Loans + Securities

GDP (Bn$)

Germany 3,165.1 Deutsche Bank Commerzbank

1,862.49 607.79

3.15% 4.10%

29.42% 53.63%

France 2,334.8 BNP Paribas Credit Agricole Group BPCE Societe Generale

2,264.76 1,732.09 1,333.39 1,425.91

3.36% 1.99% 3.88% 3.09%

35.96% 44.41% 48.53% 32.15%

Italy 1,761.5 Unicredit Intesa Sanpaolo

920.20 704.61

5.00% 5.86%

55.11% 38.28%

Spain 1,153.7 Banco Santander BBVA

1,380.26 688.82

4.06% 6.67%

62.09% 58.75%

Netherlands 714.4 ING Group Rabobank Group

1,082.21 742.38

4.92% 3.36%

68.22% 57.23%

Ireland 202.1 Allied Irish Banks (AIB) Bank of Ireland

117.13 141.48

7.54% 5.44%

59.60% 61.99%

United Kingdom 2,422.4 HSBC Barclays RBS

2,634.14 2,064.02 1,597.16

5.75% 3.49% 4.25%

62.06% 34.96% 46.25%

Switzerland (GDP, 2013) (7) 685.4 UBS Credit Suisse

1,115.60 967.54

4.15% 3.84%

45.72% 51.94%

Average Average U.S. (Top 25)

1,230.63 569.16

4.42% 8.58%

49.81% 85.75%

#MIGlobal

New subdebt rules: catalyst for major consolidation of small banks

Source: World Bank.

#MIGlobal

Important Disclosures

Institute/Milken slides

#MIGlobal

Company

#MIGlobal

Credit cycles: growth rate of U.S. nonfinancial corporate debt

-10%

-5%

0%

5%

10%

15%

20%

1952 1962 1972 1982 1992 2002 2012

Percent change year-over-year

Source: Federal Reserve.

#MIGlobal

Tobin’s q at highest level since tech bubble Market value of non-financial corporate equities divided by replacement cost

0

1

2

1951 1958 1965 1972 1979 1986 1993 2000 2007 2014

Price / replacement cost ratio

Median: 0.72 2014 Q4: 1.10

Source: Federal Reserve.

#MIGlobal

Falling leverage for public U.S. and U.K. companies

0

1

2

3

4

5

6

7

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Net debt to EBITDA ratio

U.K. (FTSE 100)

U.S. (S&P 500)

Source: Bloomberg.

#MIGlobal

Global corporate bond issuance

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015YTD

Investment grade High yieldUS$ trillions

Source: Bloomberg.

#MIGlobal

U.S. corporate bond issuance

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015YTD

Investment grade High yieldUS$ trillions

Source: Bloomberg.

#MIGlobal

U.S. leveraged loan volume

0.0

0.2

0.4

0.6

0.8

1.0

1.2

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015YTD

US$ trillions

Source: Bloomberg.

#MIGlobal

U.S. loan volume

0.0

0.5

1.0

1.5

2.0

2.5

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015YTD

US$ trillions

Leveraged loans

Source: Bloomberg.

#MIGlobal

Median leverage ratio by debt rating

0

0.5

1

1.5

2

2.5

3

3.5

4

AA to AAA A BBB High yield

Debt to EBITDA

Source: World Bank.

#MIGlobal

High yield maturity dates by year

0

200

400

600

800

1000

1200

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Number of issues

Source: Bloomberg.

#MIGlobal

Leverage: U.S. and European banks

0 5 10 15 20 25 30

HSBC

Royal Bank of Scotland

BNP Paribas

Barclays

Deutsche Bank

Citigroup

Bank of America

Wells Fargo

JP Morgan Chase

Goldman Sachs

Source: Bloomberg 4/17/2015.

#MIGlobal

Tier 1 capital ratio: U.S. and European banks

0 2 4 6 8 10 12 14 16 18

BNP Paribas

HSBC

Barclays

Royal Bank of Scotland

Deutsche Bank

JP Morgan Chase

Wells Fargo

Citigroup

Bank of America

Goldman Sachs

Source: Bloomberg 4/17/2015.

#MIGlobal

Investment grade maturity dates by year

0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

3,000.0

3,500.0

4,000.0

4,500.0

5,000.0

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Number of issues

Source: Bloomberg.

#MIGlobal

S&P 500 company buybacks and dividends

0

50

100

150

200

250

300

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Buybacks DividendsUS$ billions

Source: Bloomberg.

#MIGlobal

Buybacks account for significant portion of returns of capital

0%

1%

2%

3%

4%

5%

6%

7%

8%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Buyback yield Dividend yieldPercent

Source: Bloomberg.

#MIGlobal

Corporate tax rates

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

U.S. Asia average U.K. Europe average

Percent

Source: KPMG.

#MIGlobal

Record low 10-year Treasury yields

0

2

4

6

8

10

12

14

16

18

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Percent

Average: 6.5%

Source: Bloomberg.

#MIGlobal

Real interest rates trending downward US Federal Funds rate minus year-over-year core inflation

-4

-2

0

2

4

6

8

10

12

1980 1985 1990 1995 2000 2005 2010 2015

Percent

Source: Thomson Reuters.

#MIGlobal

Corporate cash balances

Source: Bloomberg

15

61

23 15

22 7

25

8 8

155

138

90

65 52

45 33

14 14

0

20

40

60

80

100

120

140

160

Apple+909%

GE+126%

Microsoft+285%

Google+323%

Cisco+134%

Oracle+537%

Pfizer+31%

Chevron+79%

Merck+74%

Q4 2007 Q4 2014US$ billions

#MIGlobal

Corporate cash balances

Source: Bloomberg

17%

6% 7% 8% 6%

4%

13%

9%

42%

37%

30%

21%

16% 15% 13% 12%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Japan China U.K. France Korea Spain Canada U.S.

Q4 2005 Q4 2014Percent of GDP

#MIGlobal

Market cap to assets ratio of largest five U.S. banks

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Bank of America JP Morgan Citigroup Wells Fargo US Bancorp

Market cap to assets ratio

Source: Bloomberg.

#MIGlobal

U.S. monthly CLO issuance

0

2

4

6

8

10

12

14

16US$ billions

Source: Bloomberg.

#MIGlobal

Bank failures throughout U.S. history

0

100

200

300

400

500

600

1934 1944 1954 1964 1974 1984 1994 2004 2014

Failures

Source: FDIC.

#MIGlobal

Dividend payout ratios around the world

20

30

40

50

60

70

80

90

1975 1980 1985 1990 1995 2000 2005 2010 2015

Europe ex U.K. U.S. Japan U.K.Percent of net income

Source: Thomson Reuters.

#MIGlobal

Growing peer-to-peer lending on Lending Club and Prosper

0

0.5

1

1.5

2

2.5

Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014

Loan issuance, US$ billions

Sources: Lending Club, Prosper.

#MIGlobal

American and British households deleveraging

100

110

120

130

140

150

160

170

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Percent of disposable income

U.S.

U.K.

Source: Thomson Reuters.

#MIGlobal

Public debt offsetting private deleveraging

-10

0

10

20

30

40

50

60

70

80

90

100

1991 1995 1999 2003 2007 2011 2015

Net debt, percent of GDP

U.K.

Euro area

U.S.

Source: Thomson Reuters.

#MIGlobal

Emerging market corporates raise international debt

0

100

200

300

400

500

600

'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

Europe Latin America & Caribbean Asia & Pacific Africa & Middle East

US$ billions outstanding

Source: BIS.

Note: Non-financial corporate international debt securities outstanding.

#MIGlobal

U.S. covenant-lite leveraged loans

0

10

20

30

40

50

60

70

80

90

100

Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014 Q4 2014

Issuance, US$ billions

Source: S&P / LCD.

#MIGlobal

Aaa, Baa spreads over 10-year Treasuries

0

100

200

300

400

500

600

700

2000 2002 2004 2006 2008 2010 2012 2014

Basis points

Aaa

Baa

Source Bloomberg.

“A country does not go bankrupt.”

Source: New York Times, September 14, 1982.

—Walter Wriston

Former CEO of Citibank

A Greek History of Default

“In the 4th century BC, the Temple of Delos had to take an 80% haircut on loans extended to 13 Greek city-states.”

Source: Financial Times 11/4/11

— Kenneth Rogoff and Carmen Reinhart

“Greece has been in default for roughly one out of every two years

since it gained independence (1829).”

Source: Financial Times 11/4/11

A Greek History of Default

Kenneth Rogoff and Carmen Reinhart

Sovereign Debt Defaults

Sources: This Time is Different Chartbook: Country Histories on Debt, Default, and Financial Crises, Carmen M. Reinhart / Milken Institute

• 1828

• 1898

• 1902

• 1914

• 1931

• 1937

• 1961

• 1964

• 1983

• 1986

• 1990

• 1832

• 1868

• 1911

• 1914

• 1931

• 1982

• 1999

• 2008

•1876

•1915

•1931

•1940

•1959

•1965

•1978

•1982

•2000

• 1826

• 1848

• 1860

• 1865

• 1892

• 1898

• 1983

• 1990

• 1995

• 1998

• 2004

Brazil Ecuador

• 1839

• 1885

• 1917

• 1918

• 1947

• 1957

• 1991

• 1998

Russia

•1826

•1843

•1852

•1893

•1932

•2011

Greece Turkey Venezuela

• 1982

• 1986

• 1992

• 2001

• 2004

Nigeria

Sovereign Loans:

Historically the Riskiest Debt

Argentina’s Defaults

1830 1890 1915

1930s 1982 1989

1951 1956 2001 2007 2014

Source: Reinhart and Rogoff. Note: Includes external, domestic, and provincial defaults.