1. 2 years after Lehman
The turning point for restructuring
FT Business Restructuring Conference
September 21st , 2010


2. The base scenario in the fall of 2008
 All LBO s would fail and go bust
 CLO s and institutional players would have to be liquidated
 Distressed debt market would be flooded with paper
 Lenders would get hold of assets from Private Equity owners
 Corporates would massively resort to rights issues
1

3. 9.5
12.1
2.22.10.4 0.6 1.3
0.6 0.8 1.2 0.7
5.8
38.7
5.3
--
10
20
30
40
50
2004 2005 2006 2007 2008 2009 H1-
2010
Defaults Restructurings
Source S&P
An unprecedented surge in restructuring situations
Global Default RatesDistressed debt market in Europe (€bn)
Source S&P
The facts
0.3%
9.2%
4.0%
--
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
1985 1989 1993 1997 2001 2005 2009
Investment grade
Speculative grade
Overall
2

4.  1 out of 4 LBO existing loans was restructured (in the S&P sense)
 c.40% including covenant reset
 LBO structures proved extremely resistant and efficient:
– 1 single documentation
– 1 single pool of security
 Processes became rapidly “industrialised” thanks to a pan
European benchmarking of practices
 The brutality of the economic shock meant immediate operational
restructuring measures
The reality test in Europe
Restructuring processes actually worked
3

5.  Some flagship cases
– Monier (total debt: €650m post restructuring)
– IMO Car Wash (total debt: „185m post restructuring)
– CPI (€123m senior debt post restructuring)
 However private equity sponsors had to take their due: 2% to 6%
of debt in new equity
 Harsh for mezzanine holders to defend their positions
Lenders’ attitudes
Only a few transactions where they took control
4

6. Rights issues for corporates
Shareholders paid their share
Rights issues by European corporates‚ since 2000 (€ bn)
17 21 19
34
15
23 24 24 27
112
22
149
334
95
129
94
125
108
91
92
67
84
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
YTD
Total # deals
Note
1 Excluding FIG
Source Thomson One
5

7. Outstanding maturity profile of European Leverage Buyouts (in €bn)
The refinancing wall
Significant refinancing risk ahead
Outstanding maturity profile of total European debt (in €bn)
In total
c.€1035bn to be
refinanced in
2012 (against
new bond
primary activity
so far in 2009 of
€394bn and
loan activity of
€543bn)
Source S&P
Source Thomson
--
250
500
750
1,000
1,250
2010 2011 2012 2013 2014 2015 2016 2017
Loans Bonds
--
50
100
150
2010 2011 2012 2013 2014 2015 2016 2017
LBO
6

8. The “New Normal”
More conservative pro-forma Debt/ EBITDA ratios
Rolling avg. 3-month pro forma Debt/EBITDA ratio of primary LBO s
Source S&P
--
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
Jun-98 Jun-00 Jun-02 Jun-04 Jun-06 Jun-08 Jun-10
1st Lien/EBITDA 2nd Lien/EBITDA Other Debt/EBITDA
7

9. Appetite for risk
Leverage double as costly as any time in past decade
Spread unit of leverage: Europe & US
Source S&P
--
20bps
40bps
60bps
80bps
100bps
120bps
140bps
160bps
180bps
200bps
2Q99 2Q00 2Q01 2Q02 2Q03 2Q04 2Q05 2Q06 2Q07 2Q08 2Q09 2Q10
Europe U.S.
8

10. New issue spreads Europe & U.S.
New issue spreads of B+/B Credits: Europe & U.S.New issue spreads of BB/BB- Credits: Europe & U.S.
Source LCD Source LCD
150bps
200bps
250bps
300bps
350bps
400bps
450bps
500bps
2H00 2H02 2H04 2H06 2H08 2H10
EUROPE US
200bps
250bps
300bps
350bps
400bps
450bps
500bps
550bps
600bps
2H00 2H02 2H04 2H06 2H08 2H10
EUROPE US
9

11. Voting rights
 Restructurings in 2008/2009 were mainly covenant restructurings where
more flexibility was given to the credit. Maturity extensions were rare. Thus
only a 2/3 votes was required
 Upcoming restructurings will be near the maturity date (2012 wall for
corporate loans and 2014 for LBOs)
 Full refinancings
 Maturity extension with current lenders -> need 100pct approval
Towards harder restructuring negotiations
10

12. Primary market investors
Weighted average proportion of institutional investors in primary markets
CLO/CDO activity is not dead
Source S&P
20% 20%
25%
40%
49%
57%
25%
N/A
32%
--
10%
20%
30%
40%
50%
60%
2002 2003 2004 2005 2006 2007 2008 2009 LTM
30/06/10
11

13.  NXP, after its restructuring process, taps high-yield for $1bn to finance sub par debt buybacks
 Ineos and Seat Pagine Gialle tapped the high-yield market to take out senior debt at par at the end of
restructuring processes
 A pattern soon to be followed by Gala Coral
 Conti recently refinanced €1bn at 7.25%
Debt capital markets will be key for refinancings
Debt capital markets
European High Yield bond issuance since 2007 (€bn)
Source S&P
2
4
20
27
3
23
--
5
10
15
20
25
30
H1-07 H2-07 H1-08 H2-08 H1-09 H2-09 H1-10
12

14. Long term volatility of stock prices (Vstoxx)
--
25
50
75
100
Sep-
07
Mar-
08
Sep-
08
Mar-
09
Sep-
09
Mar-
10
Sep-
10
Sustained volatility
Itraxx index
Source Bloomberg Source Bloomberg
--
300
600
900
1,200
Sep-
07
Mar-
08
Sep-
08
Mar-
09
Sep-
09
Mar-
10
Sep-
10
13
Capital markets will remain fragile

15. Sustained volatility
Banks CDS prices
Source Bloomberg
--
50bps
100bps
150bps
200bps
250bps
300bps
sept-07 mars-08 sept-08 mars-09 sept-09 mars-10 sept-10
BNP 5yr CDS DB 5yr CDS Barclays 5yr CDS Santander 5yr CDS
14
The environment for banks’ refinancing will also be key

16. Focus on Basel III
 Min. common equity requirement up from 2% to 4.5% in phases beginning January
1st, 2013
 New capital conservation buffer of 2.5% Introduced in phases beginning January 1st,
2016
 Possible countercyclical capital buffer of 0%-2.5% (supervisor’s option). No dates
 Limits/phase-in for certain deductions, grandfathering of public sector capital injections
 Test and implement Leverage Ratio by January 1st, 2018
– In essence: no more than 33 times Tier 1 capital
 Test and implement Liquidity Coverage Ratio by January 1st, 2015. This is the most
fundamental item of regulation which aims at ensuring bank liquidity
– In essence:
 Test and implement Net Stable Funding Ratio by January 1st, 2018
– In essence:
New regulation to be gradually implemented with likely impact on
banks starting in 2012/2013
>= 100%
Stock of high liquid assets (mainly government paper)
Net cash outflows over a 30-day time period
> 100%
Available amount of stable funding (capital + <1 yr liability + <1 yr deposit)
Required amount of stable funding (assets <1 yr)
15

17. Germany
France
Italy
Italy Italy
UK
UK
UK
Spain
Spain
Spain
GermanyGermany
France France
(6.0%)
(5.0%)
(4.0%)
(3.0%)
(2.0%)
(1.0%)
--
1.0%
2.0%
3.0%
2009a 2010e 2011e
Germany
France
France
Italy UK
UK
Spain
Spain
Germany
Italy
(6.0%)
(5.0%)
(4.0%)
(3.0%)
(2.0%)
(1.0%)
--
1.0%
2009e 2010e
Macro-economic scenarios
Mid-2009 GDP growth forecasts
Mid-2010 GDP growth forecasts
The shape of recovery will also be key
Source IMF
Source IMF
16

18. Harmonisation of insolvency laws in Europe still not there
Insolvency laws
Spain: Latest amendment
dated 27 March 2009
France: Safeguard law,
latest amendment dated
8th April 2010. “Express
safeguard” law in
discussion.
UK: Insolvency law 1986
and Company Act 2006
Germany: New political
coalition in October 2009
announced new
insolvency law soon to
be implemented
Italy: Latest
amendment 31
May 2010
EU regulation
on cross border
regulation is
dated 29th May
2000
17

19. Conclusion
 Debt is still high and will be costly
 Refinancing risk will only be addressed if debt capital markets play
their role
 Markets will be volatile and subject to shocks
 Anticipation will be necessary
The turning point
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conclusion or opinion contained herein.
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