GLOBAL LOAN STRATEGIES │ CONFIDENTIAL
9 July 2015
Senior Secured Corporate Loans
Predictable Income and Global Diversification
Global Loan Strategies │ Confidential
Senior secured corporate loans
Agenda
1. Key features of the loan asset class
2. Economic outlook and market opportunity
Appendix:
Our investment management platform & Credit selection track record
Proposed investment portfolio of senior secured corporate loans and its SCR ratio
| 2 |
Global Loan Strategies │ Confidential
What are corporate loans?
The most senior instrument within the capital structure of a firm
Corporate loans areSenior
senior secured,
floating-rate
Corporate
Loans debt instruments
Key characteristics
Loans granted to corporate borrowers (usually rated below BBB-)
Highest ranking in the capital structure of a corporate
Aimed at providing long term financing to corporates
Benefiting from top seniority in the capital structure of corporate issuers
and secured by the assets of the borrowing company (strong recoveries)
Seniority
Senior Secured Loans
•
•
•
•
Top seniority
Secured by assets
Floating rate
Reimbursable
Bonds /
Subordinated Debt
•
•
•
•
Subordinated
Unsecured
Fixed rate (bonds)
Reimbursable
Public / Private Equity
•
•
•
•
Lowest seniority
Unsecured
No fixed income stream
Non reimbursable
Paying floating rate = base rate (Euribor / Libor) + fixed interest margin
Protected by maintenance/ incurrence covenants (e.g. maximum leverage)
Syndicated debt instruments governed by standardized legal terms
OTC instruments negotiated in the primary and secondary markets
through dealing desks from large banks and brokerage firms
Strong recoveries in case of default
(around 60-65% for loans vs. approximately 40-45% for bonds*)
*Source : Computed by BNP Paribas Asset Management based on annual default rate of US and Western
European loans and High Yield bonds.
| 3 |
Global Loan Strategies │ Confidential
What are the components underlying the income stream of Corporate Loans?
Blending stable income generation with an embedded hedge against interest rate risk
Corporate Loans: Coupon decomposition
Base Rate
● Originally aimed at covering funding cost of lenders
● Europe: 3m EURIBOR / US: 3m LIBOR
● Reset periodically (i.e. every 3 months)
Additional Interest Margin
● Additional compensation for:
–
–
Credit risk
Liquidity risk
● Provides a hedge against interest rate risk
● Depends on the credit risk profile of the loan issuer
● Usually subject to base rate floors (notably in the US)
● Provides cash-flow stability
Floating Component
Total contractual
cash coupon
Fixed Component
| 4 |
Global Loan Strategies │ Confidential
Syndicated debt instruments
Standardized OTC market infrastructure supporting the participation of institutional investors
Arranging bank(s)
Underwriting
process
Co-arranger bank(s) or sub-underwriter
Syndication
process
Syndicated Loan Facility
Corporate loan
issuer
Loan admin.
process
Banks
Financing
Investment
Institutional
investors
Administrative
agent
Security
agent
Loan admin.
process
| 5 |
Global Loan Strategies │ Confidential
Key highlights of the corporate loan market
An established segment in corporate credit offering significant diversification opportunities
USA
Europe
Market size comparison: High Yield Bond and Loans in the US and Europe*
Market size
(Large pool for asset selection)
European loan market: EUR 423 billion
(about the same size as WE HY market)
US loan market: USD 1.9 trillion
(bigger than the US HY market)
Characteristics
● Driven by institutional investors
● Growing participation of retail mutual funds
● Higher liquidity backed by a wide investor base
● More transparent (external ratings)
● More efficient price formation (due to market depth)
● LIBOR floors quite standard
● Standardized legal / bankruptcy framework
● Legal documentation based on LSTA standards**
● Trade settlement: T+7 days
● Historically driven by banks
● Growing role of institutional investors
● Less liquid than the US market (in relative terms)
● Growing transparency (external ratings on the increase)
● Price formation efficiency mainly in the high-end of the market
● EURIBOR floors rarely used
● Multiple legal / bankruptcy frameworks (UK, France, etc)
● Legal documentation based on LMA standards***
● Trade settlement: T+ 10 days
* Source: Credit Suisse, January 2015 / ** LSTA = Loan Syndication and Trading Association / *** LMA = Loan Market Association)
| 6 |
Global Loan Strategies │ Confidential
Historical default rates of corporate loans
Lower defaults than bonds on the back of tighter financial contracting provisions
Annual default rates of sub-investment grade corporate bonds and loans in the US and Europe
Avge. default rates US (1995-2014)
Avge. default rates Western Europe (2003-2014)
HY Bonds: 3.6%
HY Bonds: 5.6%
Corporate Loans: 2.8%
Corporate Loans: 6.6%
Source: Credit Suisse, January 2015
Source: Credit Suisse, January 2015
| 7 |
Global Loan Strategies │ Confidential
Historical recovery rates of corporate loans
Strong recoveries derived from the top seniority ranking of loans in the capital structure
Annual recovery rates of sub-investment grade corporate bonds and loans in the US and Europe
Source: Credit Suisse, January 2015
Source: Credit Suisse, January 2015
Avge. recovery rates US (1995-2014)
Avge. recovery rates Western Europe (2003-2014)
HY Bonds: 45%
HY Bonds: 38%
Corporate Loans: 66%
Corporate Loans: 60%
Default loss rate differential: 103 bps in favor of loans
Default loss rate differential: 83 bps in favor of loans
| 8 |
Global Loan Strategies │ Confidential
Positioning versus other asset classes in the corporate credit spectrum
An attractive “middle-ground” between IG and HY credit
Key comparative dimensions
Structuring
considerations
Investment grade bonds (HGB)
Corporate loans (CL)
High yield bonds (HYB)
Ranking
Senior
Senior
Contractually/ structurally subord.
Security
Unsecured
Secured − 1st ranking
Unsecured
Covenants
Incurrence based
Repayment
Bullet
Amortizing/ Bullet
Term
5-30 years
5-9 years
Duration
Return & liquidity
considerations
Credit risk
considerations
Maintenance / Incurrence covenants
Medium to long
Coupon
Fixed
Very short
Floating
Incurrence based
Callable/ Bullet
7-10 years
Medium
Fixed
Liquidity
Medium to high
Low to high
Facility rating
AAA to BBB-
BB+ and below
BB+ and below
Historical default rate
Very low
Low-medium
Low-medium
Recovery rate
Medium
High
Medium
Medium to high
Source: BNP Paribas Asset Management Fixed Income, Global Loans
The above views represent our judgment as at the date of this presentation and may subject to change without notice
| 9 |
Global Loan Strategies │ Confidential
Asset class snapshot
Compelling attributes supporting portfolio allocation into the asset class
Core attributes of senior secured corporate loans
Provides access to a significant
sub-set of the corporate credit market
Offers an attractive cash yield in
a low interest rate environment
EU and US :
EU: E+ 375-475 bps
US: L+ 350-450 bps / LIBOR Floor
about the same size as HY market
Balanced risk profile
Portfolio
diversification
Senior secured
instrument
Stable cash
income generation
Floating rate
instrument
Embeds a hedge against
Top seniority in the capital structure
inflation and interest rate risk
Priority over cash flows and strong recoveries
Plausible scenario in the mid-term
| 10 |
Global Loan Strategies │ Confidential
Profile of market participants
Sample of issuers currently active in the loan market
Trademark, copyright, and other intellectual property rights are and remain the property of their respective owners
| 11 |
Global Loan Strategies │ Confidential
Senior secured corporate loans
Agenda
1. Key features of the loan asset class
2. Economic outlook and market opportunity
Appendix:
Our investment management platform & Credit selection track record
Proposed investment portfolio of senior secured corporate loans and its SCR ratio
| 12 |
BNP Paribas Global Senior Corporate Loans
│ CONFIDENTIAL
MARKET UPDATE│ Strong market activity levels (1/2)
Significant volume recorded in the Global loan market in 2014
● Strong market momentum in terms of new issue loan volume
 European new loan volume stood at EUR 78 billion in 2014, the highest reading since 2008.
 Global new loan volume stood at EUR 469 billion in 2014. Out of this volume, nearly 85% came from the US market.
● Comparable volumes across the global loan and high yield bond (HYB) markets  During Q1 2015 saw EUR 96 billion new issuance in the
global loan market and EUR 108 billion in the global HYB market.
Global institutional loan market: New issue volume (in EUR billion)
Global high yield bond market: New issue volume (in EUR billion)
| 13 |
Source: LCD/S&P, April 2015
BNP Paribas Global Senior Corporate Loans
│ CONFIDENTIAL
MARKET UPDATE│ Strong market activity levels (2/2)
M&A activity fuels loan market in U.S. and Europe
● Deal purpose diversification  Volume of M&A continues to pick up in both the European and US markets (60-70% total volume), while refinancing
transactions dropped to about 1/5 of the total volume till the end of Q1 2015 (compared to the 50/50 split between M&A / Refinancing seen in Q1 2014).
US loan market: Institutional New issue breakdown by deal purpose (based on volume in Q1 2015)
European loan market: New issue breakdown by deal purpose (based on volume in Q1 2015)
Institutional ($56.39B)
Other, 1%
100%
Spinoff, 1%
Recap/Genera
l Recap, 2%
80%
Acquisition,
34%
Recap/Dividen
d, 4%
60%
Merger, 8%
40%
20%
Refinancing,
16%
0%
1999
2000
2001
2002
2003
Acquisition Related
2004
2005
2006
2007
2008
Recapitalization
Source: S&P/LCD, April 2015
2009
2010
Refinancing
2011
2012
2013
Other
2014
1Q15
LBO, 32%
| 14 |
BNP Paribas Global Senior Corporate Loans
│ CONFIDENTIAL
MARKET UPDATE│ Different technicals for loans in US and EU market (1/3)
US market: Strong demand for loans driven by CLOs
US loan market: Cash Inflow into Institutional Accounts(in USD billion)
US loan market: Estimated cash inflows versus change in outstandings (in USD billion)
CLO issuances dominates the inflow
Demands > Supply in Q1 2015, reversed vs. 2014
Source: S&P/LCD, April 2015
| 15 |
│ CONFIDENTIAL
BNP Paribas Global Senior Corporate Loans
MARKET UPDATE│ Different technicals for loans in US and EU market (2/3)
European market: Strong inflow from non-CLO money and continuous recovery in CLO issuance supporting momentum & market depth
European loan market: Annual arbitrage CLO volume based on transaction size (in EUR billion)
European loam market: Primary market volume by institutional investor type (% of total)
€40B
100%
€ 35.5
€35B
€ 32.2
75%
€30B
€25B
50%
€20B
€ 14.5
€15B
€ 11.1
€ 7.4
€ 5.2
€5B
€ 3.1
€ 1.4
€0B
25%
€ 9.6
€10B
€ 3.7
€ 5.9
€ 3.1
€ 0.4
€ 1.4
€ 0.9
€ 0.0
0%
2005
2006
2007
2008
2010
2011
2012
2013
LTM
31/5/15
2014
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 1Q15
European Banks
Source: S&P/LCD, April 2015
Non-European Banks
Institutional Investors
Securities Firms
| 16 |
BNP Paribas Global Senior Corporate Loans
│ CONFIDENTIAL
MARKET UPDATE│ Different technicals for loans in US and EU market (3/3)
Secondary market sell-off in H2 2014 in the US, while Primary market sweetens new issue spreads. EU loans remains well bid.
● A sell-off in H2 2014 in the US  Secondary market prices dropped by about 250 bps in the H2 in the US market due to weaker energy sector and concerns with
regards to the low oil price. A sudden over-supply of loans has been witnessed by the the primary market in Q3, due to outflows from mutual loan funds (in the US) and the
relatively illiquid secondary market conditions during the summer period. Good trading opportunities seen by the beginning of Q3 2014 in the market.
● Price rebounds in Q1 2015 while spreads of new issuance remains attractive  US market has rebounded in Q1 2015 while European market stays wellbid in the secondary market. The primary market has also seen somewhat tightening but remains within 400-450bps range.
Global loan market: credit spread of the new issuances
Global loan market: Weighted average bid
Jan 2014 March 2015
104.0
Structurally higher spreads 350-450 bps
99.0
94.0
89.0
84.0
100.0
79.0
99.0
74.0
98.0
97.0
69.0
96.0
64.0
Spreads peaked out in 4Q 2014
95.0
US (S&P LSTA Loan Index)
ar
-1
5
M
Ja
n15
Fe
b15
De
c14
14
No
v14
O
ct-
Se
p14
Ju
l-1
4
Au
g14
ay
-1
4
Ju
n14
M
ar
-1
4
Ap
r- 1
4
M
Ja
n14
De
c13
Fe
b14
94.0
59.0
Europe (S&P European Loan Index)
Se
p
De - 05
c
M -0 5
ar
Ju - 06
n
Se -0 6
p
De - 06
cM 06
ar
Ju 07
n
Se -0 7
p
De - 07
cM 07
ar
Ju 08
n
Se -0 8
p
De - 08
c
M -0 8
ar
Ju 09
n
Se -0 9
p
De - 09
c
M -0 9
ar
Ju 10
n
Se -1 0
p
De - 10
cM 10
ar
Ju 11
n
Se -1 1
p
De - 11
cM 11
ar
Ju - 12
n
Se -1 2
p
De - 12
c
M -1 2
ar
Ju - 13
n
Se -1 3
pDe 13
c
M -1 3
ar
Ju - 14
n
Se -1 4
p
De - 14
cM 14
ar
-1
5
54.0
US (S&P LSTA Loan Index)
Europe (S&P European Loan Index)
Source: S&P/LCD, April 2015
| 17 |
BNP Paribas Global Senior Corporate Loans
│ CONFIDENTIAL
MARKET UPDATE│ Moderate default rates and limited refinancing risk (1/5)
Credit metrics remain reasonable on an absolute basis and compared to historical levels
Global loan market: Average senior debt to EBITDA ratio of new issue loans (US / Europe)
Global loan market: Average (EBITDA-Capex/Cash Interests) ratio of new issue loans (US / Europe)
While cash coverage ratio remained healthy
Leverage ratio stabilized in both markets
Source: S&P/LCD, April 2015
| 18 |
BNP Paribas Global Senior Corporate Loans
│ CONFIDENTIAL
MARKET UPDATE│ Moderate default rates and limited refinancing risk (2/5)
Credit metrics remain reasonable on an absolute basis and compared to historical levels
European loan market: Average Debt / EBITDA Ratios
US loan market: Average Debt / EBITDA Ratios
7.0x
7x
6.0x
6x
5.0x
5x
4.0x
4x
3.0x
3x
2.0x
3.4
3.4
3.5
3.6
3.9
4.3
4.6
4.2
3.8
3.3
3.2
3.6
3.5
4.2
3.7
2x
3.5 3.3
3.1 2.9
1x
1.0x
Senior 1st lien leverage remains below 4.2x in European market
2.3 2.4 2.3
2.7
3.1 3.3
3.6
2.8 2.9 2.9
3.8 3.8 3.8
3.3 3.4 3.6
Senior 1st lien leverage remains below 4.0x in US market
0x
0.0x
First Lien/EBITDA
Second Lien/EBITDA
Other Debt/EBITDA
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
1Q
14
1Q
15
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 1Q15
FLD/EBITDA
Source: S&P/LCD, April 2015
SLD/EBITDA
Other Sr Debt/EBITDA
Sub Debt/EBITDA
| 19 |
BNP Paribas Global Senior Corporate Loans
│ CONFIDENTIAL
MARKET UPDATE│ Moderate default rates and limited refinancing risk (4/5)
The overall refinancing risk of the loan market remains under control
Global Leveraged Loan Outstandings Maturity Profile
€160B
€140B
133.7
13.1
€120B
103.8
99.1
€100B
20.2
€80B
73.7
€60B
19.3
161.8
120.6
87.9
83.6
€40B
31.3
12.7
€20B
€0B
11.2
1.8
0.9
6.8
4.3
2.5
18.6
2014
2015
2016
54.4
8.8
2.6
6.2
2017
US (S&P/LSTA Loan Index)
2018
2019
2020
2021
2022
1.9
1.9
0.0
2023
Europe (S&P European Loan Index)
Source: S&P/LCD, April 2015
| 20 |
BNP Paribas Global Senior Corporate Loans
│ CONFIDENTIAL
MARKET UPDATE│ Moderate default rates and limited refinancing risk (5/5)
Credit quality parameters are prone to suffer some deterioration, default rates rises in Europe
● Default rates in the US market remain below its historical average  During LTM Q3 2014, the overall default rate in the US loan market was
around 3.4% which is higher than the historical average. Average default rate increased significantly in Q2 2014 due to the default of TXU.
● Defaults rate showed a slight improvement in Europe but remain relatively high  Default rates in the European loan market has raised to
5.4% during LTM Q3 2014, mostly driven by a few large defaults. (e.g., Vivarte EUR 3.4 billion, and Camaieu EUR 1.2 billion)
● Default expectations for 2015  2-4% for the European market and 1-3% for US market
Default rate - Global loan market (Based upon Principal Amount)
US : 3.79%
Europe :3.61%
Source: S&P/LCD April 2015
| 21 |
BNP Paribas Global Senior Corporate Loans
│ CONFIDENTIAL
MARKET UPDATE│ Risk/ reward conditions remain attractive
Attractive risk-adjusted investment opportunities
● Structural credit risk re-pricing  Current spreads per unit of leverage in the US
Spread per Unit of Leverage (SPL) of new issue loans
and European loan markets:
 US market: 92 bps (1.8x higher than the pre financial crisis level which was around 50 bps)
 European market: 92 bps (2.3x higher than the pre financial crisis level which was around
40 bps)
● Relative value vs. HYB, risk/reward looks more attractive on the loan side
 Current yield of loans and HY bonds in the EU markets (66bps differences, with
Loans yield more than HYB):
 Leveraged Loans: 5.10% (Assume 3-yr Refi) & High yield Bonds: 4.44% (Yield-to-worst)
Leveraged Loans vs, high Yield Bond Yield (Yield) in European market
Leveraged Loans vs, high Yield Bond Yield (Volatility)
April 2015
| 22 |
Global Loan Strategies │ Confidential
Track Record of Global Loans team
Global Credit Loan Funds (since Inception to March 2015)
NAV Return (net of fees) of the portfolios (1) (2)
Global Credit Loan Global Credit Loan
Fund 1 (EUR) (3)
Fund 2 (EUR) (3)
Annualized Return Since Inception
6.08%
4.42%
Annualized Standard Deviation
2.80%
2.51%
1.92
1.51
2.70%
2.67%
Sharpe Ratio (4)
One Year Return (5)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Annualized Return 3 years (5)
3.87%
3.99%
Annualized Return 5 years (5)
4.52%
n/a
The return figures for the Global Credit Loan Fund 1 &Global Credit Fund 2 are calculated using the NAV provided by the custodian.
Inception Dates are the following: Global Credit Loan Fund 1 – August 2008, Global Credit Loan Fund 2 – July 2009. Please refer to
Appendix for further track record.
Returns based on NAVs per share time-weighted performance.
Risk-free returns are Euribor for Global Credit Loan Fund 1 and Global Credit Loan Fund 2.
One Year and annualized return is the return over a respective period ending in March 2015
As calculated by the dividend paid divided by the initial committed capital of the investors
Default rate is based upon principal amount
Credit Suisse (i.e. leveraged loan default rates for both the Western European and US markets)
Cash Dividend Return (net of fees) of the portfolios(6)
Year
Global Credit Loan
Fund 1 (EUR) (3)
Global Credit Loan
Fund 2 (EUR) (3)
2009
2010
2011
2012
2013
2014
3.8%
8.1%
10.2%
6.3%
5.1%
5.4%
N.A.
4.5%
6.4%
5.6%
3.7%
4.4%
Default Rate of the portfolios(7)
Year
Global Loans
Team
EU Market
Index(8)
US Market
Index(8)
2008
2009
2010
2011
2012
2013
2014
0.0%
0.7%
0.0%
0.0%
0.0%
0.0%
0.0%
2.2%
6.8%
4.6%
1.0%
7.7%
3.2%
5.4%
2.9%
9.6%
2.5%
0.7%
1.9%
1.5%
3.3%
Past performance is not indicative of future results which may vary. There can be no assurance that the investment objectives of any portfolio will be achieved.
Please see additional disclosures for further information.
| 23 |
Global Loan Strategies │ Confidential
Senior secured corporate loans
Agenda
1. Key features of the loan asset class
2. Economic outlook and market opportunity
Appendix:
Our investment management platform & Credit selection track record
Proposed investment portfolio of senior secured corporate loans and its SCR ratio
| 24 |
Global Loan Strategies │ Confidential
Leveraging on a Comprehensive Fixed Income Platform
Part of a broader credit set up in Paris and New York
HEAD OF FIXED
INCOME
INVESTMENT RISK &
PERFORMANCE TEAM
GLOBAL CIO
FIXED INCOME
CREDIT RESEARCH
PORTFOLIO MANAGEMENT TEAMS
GLOBAL MULTI-SECTOR
FIXED INCOME
GLOBAL SOVEREIGN
FIXED INCOME
ABSOLUTE RETURN
FIXED INCOME
SHORT DURATION
FIXED INCOME
ALPHA TEAMS
GLOBAL LOANS
MONEY MARKETS
STRUCTURED
SECURITIES
EMERGING MARKETS
CURRENCIES
SECTOR ROTATION
QUANTITATIVE
STRATEGIES AND
RESEARCH
GLOBAL RATES
GLOBAL CORPORATES
| 25 |
1
Investment Strategy Group includes CIO, heads of all product teams and alpha teams.
Global Loan Strategies │ Confidential
Leveraging on a Comprehensive Fixed Income Platform
Part of a broader credit set up in Paris and New York
Global Loan AUM¹ as of March 2015: EUR 3.7 billion
Global CIO
Front Office Risk Management
Guy Williams
Global Corporates (IG, HY)
Global Loans
Vanessa Ritter
Credit Research (US / Europe)
US Loans
Vanessa Ritter (Lead )
Heather Knox
Adrian de Lagarde
Tony Simoes
Emeric Chenebaux
Global Loans organizational perimeter
(¹) Including
investment commitments that have not yet been drawn
European Loans
Javier Peres Diaz (Lead)
Dennis Tian
Sofia Nevrokoplis-Marois
Eric Lagoutte
Bettina Boccadifuoco
Business Manager
Yuko Igarashi
Back / Middle Office
Nicholas Man, Jesse Randel
Jan van Sande, Ryan Mcgraw
Sinem Keleman
Source : BNP Paribas Asset Management, May 2015
| 26 |
Global Loan Strategies │ Confidential
A Growing Dedicated Loan Business *
With a diversified client base
Key Highlights
AUM Growth
(In million €)
●
AUM increases 5x from 2009 till December 2014
●
Insurance companies & pension funds represent
our core investor base
●
Offering multiple fund vehicles (LuxSIF, FCP, FCT,
US CLO, Dutch SPV)
* Including EUR 887MM in investment commitments that have not yet been drawn.
Source : BNP Paribas Asset Management, as of December 2014
●
12 portfolios under management
●
Investing globally (c. 50/50 in US/Europe market)
| 27 |
Global Loan Strategies │ Confidential
Investment Process
Over 4,000 deals reviewed – less than 330 best selection credits approved for investment
Investment process
Deal screening
c. 4,000 deals
Loan Universe
2752 deals
Lead review
100%
1026 deals
Pre-wash
51%
466 deals
Investment
committee
Approved
24%
We are selective - c. 12% of leads
have been approved by the
committee (324/2752 names)
324 deals
12%
Buy/Sell decisions depend on
the asset’s price and liquidity
relative to its risk profile and
other investment alternatives
Source: BNP Paribas Investment Partners, (over 2007-2013 period)
| 28 |
Global Loan Strategies │ Confidential
Senior secured corporate loans
Agenda
1. Key features of the loan asset class
2. Economic outlook and market opportunity
Appendix:
Our investment management platform & Credit selection track record
Proposed investment portfolio of senior secured corporate loans and its SCR ratio
| 29 |
Global Loan Strategies │ Confidential
Model Portfolio Overview *
Indicative key parameters of the portfolio
● Portfolio Size
EUR 100-200 Mln Target
● No of Credits
70-90
● Seniority
100% Senior Secured Loans
● Assets’ Weighted Average Life
5.0 years
● Country of issuers
50% North America, 50% Western European countries, 25% leeway
● Sector of issuers
Well diversified
● Target Annual Return
Euribor 3M + [400] bps for I Plus share class
● Credit Facility Rating
BB-/B+
● Portfolio Duration
Very small, close to zero due to floating rate nature of the product
● Maximum annual fees
0.50% (management fee for I Plus share class), 0.20% max (Administration, custody &
taxe d’abonnement)
*Note: the slides under this section contain information to provide an illustration of a potential portfolio construction for a given investor. There is no guarantee that these examples will be achieved.
Source:BNP Paribas Asset Management
| 30 |
Global Loan Strategies │ Confidential
Model Portfolio Overview *
Well-diversified portfolio in terms of region, sector and facility ratings
● Well-diversified regional allocation  Almost 50/50 split between the US and Europe, with a sound country sub-diversification in the European
compartment of the portfolio
● Balanced industry allocation  Diversified/Conglomerate Service (16%), Retail stores (11%), and Beverage, Food & Tobacco (9%) are the largest 3
sectors in the portfolio.
● Rating profile  On average BB-/B+, no CCC names in the portfolio, >90% have public credit ratings.
● Single issuer concentration In total 60 credits in the portfolio, with top 10 positions represents c. 27% of the portfolio.
Model Portfolio│Split per jurisdiction, per sector and per facility rating (Moody’s)
Source: BNP Paribas Investment Partners as of 31/3/2015
*Note: the slides under this section contain information to provide an illustration of a potential portfolio construction for a given investor. There is no guarantee that these examples will be achieved.
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Global Loan Strategies │ Confidential
SCR associated to the proposed investment portfolio
Ad-hoc assessment performed to price the specific capital requirements of our offer in loans
● As per the analysis performed by BNPP IP Solvency II team, the SCR of the proposed investment
portfolio of senior secured loans is estimated to be c. 21% (with FX risk fully hedged)
Source:BNP Paribas Asset Management Fixed Income, Global Loans
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Global Loan Strategies │ Confidential
SCR associated to the proposed investment portfolio
The proposed loan portfolio has an attractive expected excess return per unit of SCR
PROPOSED INVESTMENT PORTFOLIO OF
SENIOR SECURED CORPORQTE LOANS
Expected average excess return adjusted by SCR per asset class
(in %)
0.25
0.20
0.20
0.19
0.20
Average excess returns / SCR
"Smartbenchmark" excess returns / SCR
0.17
0.14
0.15
0.13
0.12
0.10
0.10
0.10
●
Active portfolio management
●
Assumes FX risk is fully hedged
●
Based on an SCR of c. 21%
●
Net excess return of the portfolio over
euribor is expected to be about 450
bps
0.05
0.04
●
Leading to an expected excess
return / SCR ratio of 0.21
0.00
GOVIES
HIGH YIELD
INV GRADE
EQ OECD
EQ OTHER
Source:BNP Paribas Asset Management Fixed Income, Global Loans
●
The chart reflects the specific views of BNPP IP MAS (Multi Asset Solutions) team at one particular point in time in regards to
different asset classes
●
Please bear in mind that ranking different asset classes should not be done solely based on a risk measure (SCR or VAR) but
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by comparing their expected return with their respective capital charge
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Global Loan Strategies │ Confidential
Risk Profile
The Fund is classified as “Diversified.” The investor is therefore exposed to the following direct and indirect :
Credit risk associated with investing in securities that are speculative (high yield) or not (Investment Grade) whether or not they are rated by ratings agencies: credit risk
is the risk of deterioration in the credit quality of an issuer or the assets underlying an issue, where this drop in quality could lead to a default. Any manifestation of this
risk is likely to affect to a variable extent the value of the instruments or of the debt securities in which the fund is invested, and could lead to a significant fall in its net
asset value. The Fund may be directly or indirectly exposed to credit risk particularly in terms of unrated Corporate Loans or those Corporate Loans rated below BBB("speculative").
Liquidity risk: for most instruments held in the Fund's assets, the liquidity risk is based primarily on the size and format of the issue, on the issuer category, the nature of
the instrument and the quality of the underlying assets. If these risks were to materialise, the net asset value of the Fund could fall.
Capital risk: the attention of investors is drawn to the fact that the Fund’s performance, which does not have any guarantee, may not be in line with its objective and that
the capital invested (after deduction of subscription fees) may not be recovered in full.
Discretionary management risk: the discretionary management style is based on anticipating trends in the various markets of the investment universe. However, there is
a risk that the Fund may not at all times be invested in the best-performing securities.
Counterparty risk: this risk relates to striking agreements involving forward financial instruments (see the section on “Derivative Instruments” above) when one of the
counterparties with whom an agreement has been reached fails to respect its commitments (for example: payment, repayment), which may lead to a fall in the Fund’s net
asset value.
Currency risk: It concerns unitholders in the eurozone and relates to a drop in the exchange rate of the currency of the financial instruments in the Fund, which may result
in a drop in the NAV. Since foreign exchange hedging can never be perfect, a residual risk of maximum 5% of assets may appear.
Residual interest-rate fluctuation risk: the interest rate markets move in the opposite direction to that of the interest rates. The Fund uses "sensitivity" criteria to measure
the impact of a variation in rates. In times of rising (positive sensitivity) or declining (negative sensitivity) interest rates, the net asset value may fall significantly.
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Global Loan Strategies │ Confidential
Disclaimer
This material is issued and has been prepared by BNP Paribas Asset Management S.A.S. (BNPP AM)* a member of BNP Paribas Investment Partners (BNPP IP)**.
This material is produced for information purposes only and does not constitute:
1. an offer to buy nor a solicitation to sell, nor shall it form the basis of or be relied upon in connection with any contract or commitment whatsoever or
2. any investment advicetian.
This material makes reference to certain financial instruments (the “Financial Instrument(s)”) authorised and regulated in its/their jurisdiction(s) of incorporation.
No action has been taken which would permit the public offering of the Financial Instrument(s) in any other jurisdiction, except as indicated in the most recent prospectus, offering document or any other
information material, as applicable, of the relevant Financial Instrument(s) where such action would be required, in particular, in the United States, to US persons (as such term is defined in Regulation S of the
United States Securities Act of 1933). Prior to any subscription in a country in which such Financial Instrument(s) is/are registered, investors should verify any legal constraints or restrictions there may be in
connection with the subscription, purchase, possession or sale of the Financial Instrument(s).
Investors considering subscribing for the Financial Instrument(s) should read carefully the most recent prospectus, offering document or other information material and consult the Financial Instrument(s)’ most
recent financial reports. The prospectus, offering document or other information of the Financial Instrument(s) are available from your local BNPP IP correspondents, if any, or from the entities marketing the
Financial Instrument(s).
Opinions included in this material constitute the judgment of BNPP AM at the time specified and may be subject to change without notice. BNPP AM is not obliged to update or alter the information or opinions
contained within this material. Investors should consult their own legal and tax advisors in respect of legal, accounting, domicile and tax advice prior to investing in the Financial Instrument(s) in order to make an
independent determination of the suitability and consequences of an investment therein, if permitted. Please note that different types of investments, if contained within this material, involve varying degrees of risk
and there can be no assurance that any specific investment may either be suitable, appropriate or profitable for a client or prospective client’s investment portfolio.
Given the economic and market risks, there can be no assurance that the Financial Instrument(s) will achieve its/their investment objectives. Returns may be affected by, amongst other things, investment
strategies or objectives of the Financial Instrument(s) and material market and economic conditions, including interest rates, market terms and general market conditions. The different strategies applied to the
Financial Instruments may have a significant effect on the results portrayed in this material. Past performance is not a guide to future performance and the value of the investments in Financial Instrument(s) may
go down as well as up. Investors may not get back the amount they originally invested.
The performance data, as applicable, reflected in this material, do not take into account the commissions, costs incurred on the issue and redemption and taxes.
*BNPP AM is an investment manager registered with the “Autorité des marchés financiers” in France under number 96002, a simplified joint stock company with a capital of 67,373,920 euros with its registered
office at 1, boulevard Haussmann 75009 Paris, France, RCS Paris 319 378 832. www.bnpparibas-am.com.]
** “BNP Paribas Investment Partners” is the global brand name of the BNP Paribas group’s asset management services. The individual asset management entities within BNP Paribas Investment Partners if
specified herein, are specified for information only and do not necessarily carry on business in your jurisdiction. For further information, please contact your locally licensed Investment Partner.
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