Eclipse Capital PartnersSpecial Situations Discussion

Presentation

June 2015

Confidential – For Discussion Purposes Only

Ronald Hoplamazian

312.560.1003

ron.hoplamazian@eclipsecappartners.com

Executive Summary Growing Special Situations Market Opportunities

Historical distressed precursors are present today indicating near term

growth in the number of distressed investment opportunities

Over $100B pool of lower rated loans executed at high leverage levels

will produce substantial opportunities

Eclipse Capital Partners believes the current market offers significant

opportunities and that this market will grow materially over the short

term providing attractive high yielding, risk-adjusted returns

Investment Characteristics and Strategies to Deploy Capital

Investing in companies with strong core competencies and leading

market positions that are experiencing distress due to over-leveraged

balance sheets, poor operating performance and/or are apart of out-of-

favor industries (ex. Oil & Gas)

Target dislocated and stressed special situation secured debt in middle

market companies (revenues of $100MM to $750MM) trading at a

discount in the secondary market

Direct origination of rescue financing and DIP lending solutions

Opportunistic debt-for-control acquisitions

2

Executive Summary

3

Key Market Drivers

Regulatory Changes creating opportunity and restricting typical buyers

– Dodd-Frank Act and Basel III Accords are restricting typical buyers and

will create more forced selling due to onerous capital requirements

– 2015 regulatory implementation is reshaping systemically important

financial institutions’ (SIFI) portfolios and traditional capabilities

Market Volatility leading to dislocation and forced selling

– Increased volatility as dealers hold smaller amounts of credit asset

inventories

– Oil & Gas commodity price declines have exposed BDC and other

institutional credit portfolio weaknesses

Growing Illiquidity coupled with specialized fund investor exposure is setting

up “perfect storm”

– Low trading desk inventories creating headwinds for market execution

– Specialized managers (CLOs, loan & HY funds), holding ~75% of loans, will

not be able to liquidate in a normal fashion without severe discounts

Distressed Indicators are present today

– Energy market distress preceded general market declines in the 2007

crisis

– Leverage levels have reached 2007-crisis and 1997-dotcom levels

– B rated loans are now 21.3% of the total market vs 17.1% in 2007

Regulatory Changes…Leading to

Opportunity

4

Timeline Overview Impact

Leveraged

Lending Guidance

Guidance Effective May 2013

Annual reviews expected to

begin in May 2014

Wider definition of leveraged loan

Establishes minimum lending standards

"No exceptions policy" on new issuances

Risk Retention

RulesExpected in end of 2015

Requires CLO managers to retain a 5% interest without selling or

hedging for the life of the securitization

Risk-based

Capital Ratios 2015-2019

Higher risk weightings on non-investment grade securities

Capital surcharge for SIFI's

The Volcker RuleJuly 2017

Implementation

Prohibits banks from sponsoring and conducting certain activities with

a covered fund (e.g., private equity fund)

Restricts banks' fund ownership and lowers returns on investment

Supplementary

Leverage Ratio

January 2018

Implementation

Focuses on capturing many off balance sheet exposures including

unfunded commitments and derivatives

Capital surcharge for U.S. globally systemically important banks and

their U.S. insured depository institutions

Higher loan pricing

Reduced bank lending and higher pricing

Reduced bank lending and higher pricing

Reduced bank lending and higher pricing

Reduce CLO issuance and higher pricing

CLO's comprise 58% of the non-bank leveraged loan

market

Growing Illiquidity…

5

…Creating Market

Volatility

6

Energy Market Distress

As of March 2015, a record 25 U.S. energy firms, accounting for 13.6%, made

Moody’s watch list of 184 companies with the lowest debt ratings (<B3/B-),

which has increased 16% Y/Y

Oil-and-gas issuers make up 4.5% of the S&P/LSTA Index vs 16% for the BAML

HY index. The share of oil-and-gas index loans trading below 90 has jumped

to 39%, from just under 1% with 0.95% of energy loans trading at 80 or less

(Avg. secondary bid for oil-and-gas loans is ~92 cents)

Subsector

'

YTW

(%)

Avg Price

($)

% Trading at

Distressed

Levels

Services & Equip. 12.0 79.18 48.9

E & P 11.3 78.25 35.4

Midstream/Pipeline 6.1 97.86 0.4

Refining 7.0 88.13 0.0

All Energy 10.0 85.86 29.8

Market Opportunity…Today

Market Opportunity…Coming

7

Source: S&P Capital IQ

Leverage levels have now reached 2007 (pre-crisis) and 1997 (pre-

dotcom) levels – Historical distress precursor

Source: S&P Capital IQ

Market Opportunity

Specialized vehicles, fueling activity back to 2007 levels, are less

suited to or restricted from holding stressed debt

8

Source: S&P Capital IQ – 4Q14

Market Opportunity

Lower rated loans make up a greater part of the market today than

in 2007 when B rated assets were only 17.1%

9

Source: S&P Capital IQSource: S&P Capital IQ – 4Q14

$832.4 billion

Source: S&P Capital IQ

Market Opportunity

$105B pool of lower rated loans executed at high leverage levels will

produce substantial distressed targets during soft economic times

10

Source: S&P Capital IQSource: S&P Capital IQ – 4Q14

$105 billion

Source: S&P Capital IQ

Market Opportunity

11

$832B Leveraged

Loan Market

$339B B/B+ Rated

Assets

$105B >=6x,B/B+

Rated Assets

$21B Special

Situation Universe

20% conversion of the $105B highly levered loans = $21 Billion

special situations investment universe

($s in MM) 3-Year 2015 2016 2017

Total 20% 35% 45%

Market Share

1% $210 $42 $74 $95

2% $420 $84 $147 $189

3% $630 $126 $221 $284

Avg. Cash Yield* 14.3% 14.3% 14.3% 14.3%

Avg. Discount** 10.0% 10.0% 10.0% 10.0%

Total Annual Yield 24.3% 24.3% 24.3% 24.3%

Net Income***

1% 47.9 9.6 16.8 21.5

2% 95.7 19.1 33.5 43.1

3% 143.6 28.7 50.3 64.6

*implied yield based on purchasing 10% interest rate loans for 70% of Par

**30% purchase discount accretion over a 3 year duration

***assumes 1.5% of expenses (origination/asset management)

in the $21B Special Situations Universe

36-Month Special Situations Investment Cycle

12

Competitive Landscape

Banking and

Financial Service

Institutions have

reduced traditional

distressed investing

due to regulations

and capital

requirements

Market “Sweet Spot” for special

Situations Investors seeking dislocated or stressed (over-

levered, good companies) assets

Distressed Hedge

Funds and Loan-to-

Own Institutions

focused only on

debt-for-control

investing

Historical Paradigm Shifting as Onerous Regulations Reduce Traditional Investor Appetite, Creating a Large Opportunity for a

Relationship-Based Approach

Exhibit 1:

Transaction and

Performance Summaries

13

Project Star – Eclipse Capital Partners acted as an advisor to the buyer and seller in the sale of a special

situations corporate portfolio. The transaction closed in 2013.

Eclipse Capital Partners Transaction

%

Energy and Energy Svcs 25%

Financial Services 17%

Business Services 18%

Media 17%

Pharmaceuticals 7%

manufacturing 9%

Food & Beverage 3%

Leisure 3%

Real Estate 1%

Construction 1%

Telecom 1%

100%

Portfolio Breakdown by Industry

Commitment Outstanding

% of Debt

Assets All-in rate

First Lien $175,966,478 $172,866,478 39% 11.1%

Second Lien 181,073,360 180,319,947 40% 14.9%

Unsecured 94,083,532 94,083,532 21% 15.4%

Total Debt $451,123,369 $447,269,956 100% 13.5%

Warrants $8,286 $8,286

Current Yield Pref. Stock 10,005,000 10,005,000

Equity Co-Invests 17,454,735 17,454,735

Preferred Stock 86,097,028 81,069,528

Common Stock 131,503,345 131,503,345

Total Equity $245,068,394 $240,040,894

Total $696,191,764 $687,310,851

Portfolio Summary

14

2008-2011 Portfolio Statistics ($’s MM’s)

Mr. Hoplamazian served as the head of GE Capital’s Special Situations / Portfolio Acquisition Group, a 6

member team started in 2007 which grew to over $900 million in assets under management generating a 30%

return on equity. During his tenure he was responsible for originating, trading, underwriting and asset

management functions and sourced opportunities from a broad range of clients including hedge funds, private

equity sponsors, asset managers, banking institutions and financial services companies. Prior to that, he was

part of GE Capital’s Private Equity Sponsor Finance Restructuring Group and Global Energy Business investing

in structured equity investments and other corporate finance transactions. He has served as a board member

in GE Capital's portfolio companies and partnered with management teams and operating partners in a

variety of industries to assist with value creation activities, operational and financial restructuring and

refocusing business strategies.

Performance Record

30%

$922

94 / $9.8

$289

$10.0 / 27 bps

$22.9 / 250 bps

Weighted Average ROE

AUM

# of Investments / Average Size

Cumulative Income

Cumulative Losses / Annual Avg.

Average Annual Defaults

15

Exhibit 2:

Transaction Watchlists

16

17

Energy Loans Watchlist

18

Issuer Industry Action pending Details

21st Century Oncology RTSX Healthcare services distressed securitiesJuly 21, 2014: Bonds plumb low at 55 on reports of a

capital raise to avoid a covenant breach.

Allen Systems / ASG Software Software services skips coupon May 16, 2014: Skips May 15 bond coupon, cut to D.

American Apparel Retail seeks default waiver June 19, 2014: Co. seeks default waiver after firing CEO.

Caesars Entertainment Gaming restructuring negotiations July 29, 2014: TL slides despite cutting 2015 maturities.

Deluxe Entertainment Svcs. Movie production services downgradesSept. 2, 2014: Co cut to CCC, from B, on concerns about

a near-term covenant breach; TL slips to 88.

Dex Media Marketing downgrades May 13, 2014: Co. cut to CCC+ on tight covenants.

Education Management For-profit education restructuring negotiations Aug. 27, 2014: Co. unveils restructuring plan.

Endeavour International Energy E&P skips couponSept. 2, 2014: Co. skips Aug. 30, Sept. 1 coupon amid

restructuring negotiations. 2L notes fall to 45.

EveryWare Consumer products in forbearance July 16, 2014: TL lenders extend forbearance to July 22.

FleetPride/FPC Holdings Wholesale distributor downgrades Nov. 26, 2013: Loan cut to B3 on weak performance.

Getty Images Multimedia distressed securitiesJuly 21, 2014: Bonds recover to 90 since reaching record

lows at 72 after 3Q’13 report in November.

Gymboree Retail distressed securities July 14, 2014: Bonds fall to 62 after CFO quits.

iPayment Business services downgradesJune 13, 2014: Co. cut to CCC, from B-, on possible

covenant violation. Outlook is negative.

J.C. Penney Company Retail distressed securities May 15, 2014: Long bonds still in 80s despite 1Q gains.

Logan’s Roadhouse Restaurants downgradesAug. 1, 2014: Bonds trade at 73 after downgrade to

Caa3.

MidWest Vanadium Mining skipped coupon Feb. 15, 2014: Enters 30-day grace after skipped coupon.

Milagro Oil & Gas Energy E&P in default Dec. 30, 2013: Cut to D after skipping 2nd-lien interest.

NII Holdings Wireless telecom skipped coupon Aug. 16, 2014: Bonds fall after co skips Aug. 15 coupon.

Preferred Sands Energy services in default Dec. 12, 2013: Cut to D, tripping default rate.

RAAM Global Energy Energy E&P in forbearance Aug. 4, 2014: Enters forbearance through Sept. 30.

RadioShack Retail distressed securities June 23, 2014: Bonds trade at record low 33.82.

Rue 21 Retail distressed securities

June 11, 2014: Buyout bonds recover to 80 after results

meet expectations, following test of record low 59 in

May.

Sotera Defense Solutions Security technology covenant violations Nov. 26, 2013: Loan cut to CCC on covenant breach.

UniTek Global Services IT services hires advisors June 6, 2013: Co. hires Miller Buckfire amid forbearance.

Walter Energy Coal mining downgrades Aug. 14, 2014: Co. cut to SD after distressed exchange.

Waterford Gaming Gaming downgrades Apr. 23, 2014: Co. cut to CC on weakened cash flow.

Xinergy Coal mining hires advisors Nov. 13, 2013: DB is advisor for strategic alternatives.

Verso Paper Paper products distressed securitiesJuly 17, 2014: Bonds fall after co. reveals inadequate

participation in debt swap. Final deadline is July 30.Source: S&P Capital IQ LCD

LCD Loans & Bonds Watchlist