The URL can be used to link to this page

Home My WebLink About2014 02 27 Other - Handout provided by LBC Credit Partners 1 / S 1 f 1 1 1 1 1 ■ 1 1 1 1 / ■ 1 ■ 1 I , 1 1 r , ► I I A a . l i l II LBC Credit Partners p, '''',.. '''''''.... .......,,,,:::' I. '- it,'" 'III ' : . 4 ilio. ... , . ,, .. . ..' ' „ • • t sr j a 710 N- ::,.. � as .w., • ,. „. „. ... , . - . . . ‘ ..„.4, ...Jai( ., . .__ .. Ar, , +..,,. a I \ \ ,,, , 3 * s kP . „,._ __ ,. . .. ... . ,. LBC Credit Partners III, L. P. CONFIDENTIAL Credit Opportunities Fund Presentation prepared for: The City of Winter Springs General Employees' Retirement Trust Fund February 2014 Disclaimer: This report contains certain financial information related to the performance of specific investments in LBC Credit Partners I,L.P.("Fund I"). LBC Credit Partners II, L.P.("Fund II")and LBC Credit Partners III, L.P.("Fund 111"), such as capital commitments,contributions,distributions, net cash flows, investment capitalization, project cost,exit timing and return metrics,including return on cost,equity multiple and internal rate of return("IRR").All of this financial information is projected based on assumptions that LBC Credit Management, L.P.believes is reasonable under current market conditions with respect to future events and financial performance. No assurance can be given that these assumptions/events will occur or that these projections will be achieved.The actual results of these investments and of the financial information presented,could differ materially from these projected results. I M MN MI r r I I III1 NM MN r r MB MN MI MB NM NM W Confidentiality & Disclaimer • This presentation is for informational purposes only and is not intended to recommend any investment discussed in this presentation. • This presentation is not an offer to sell or the solicitation of an offer to purchase an interest in any private equity fund managed or sponsored by LBC Credit Management, L.P. ("LBC" or the "Management Company"), including LBC Credit Partners III, L.P. ("Fund III"). • All information with respect to portfolio companies and industry data have been obtained from sources believed to be reliable and current, but accuracy cannot be guaranteed. • The projections contained in this presentation are only estimates of future results that are based on assumptions made at the time such projections were developed. There can be no assurance that the results set forth in the projections will be attained and actual results may be significantly different from the projections. Also, general economic factors, which are not predictable, can have a material impact on the reliability of projections. • In considering any performance information contained in this presentation, you should bear in mind that past performance is no guarantee of future results and there can be no assurance that future investments will achieve comparable results or that target returns, if any, will be met. • Certain statements may constitute "forward-looking" statements, which generally are not historical in nature. Generally, the use of words such as "expect," "may," "will," "plan," "estimate," "projected," "future," "targeted" and other similar terminology identify forward-looking statements. Forward-looking statements reflect the current views, plans, estimates and expectations of the Management Company with respect to, among other things, the estimated capital contributions into funds, future events and financial performance, strategies and expectations, including but not limited to LBC's ability to generate positive returns, preserve capital and identify investment opportunities. • This presentation is intended for authorized recipients only and must be held strictly confidential. This presentation includes confidential, proprietary and trade secret information of LBC and its affiliates. By accepting this information, each recipient agrees that (i) no portion of this presentation may be reproduced or distributed to any person or party, in whole or in part in any format, without the prior express written consent of the Management Company and (ii) it will keep permanently confidential all information contained herein that is not already public. If you have any questions on the information contained herein or Fund III specifically, please contact Amy Miller, Vice President of Investor Relations, at 215-609-3363 (amiller @lbccrediLcom) or John Brignola, Managing Partner, at 215-972-8901 (jbrignola @Ibccredit.com). ( LBCCrethtP.irtners Confidentiality & Disclaimer February 2014 2 . a 4 4 Overview • Who are we? • Fixed income manager co-founded by John Brignola, Chris Calabrese, Nate Cohen and Ira Lubert in 2005 • Headquartered in Philadelphia with national footprint • Managed by mid-market veterans with deep industry relationships • As of December 31, 2013, approximately $1.5 billion of total committed capital and over $2.4 billion invested through three Funds • Fund I: $300 million of total commitments (vintage 2005) • Fund II: $642 million of total commitments (vintage 2008) • Fund Ill: $650 million target, final closing projected on or before Q2 2014 (vintage 2013) • What do we do? • Provide transitional capital to fund acquisitions, refinancings, growth, recapitalizations and turnarounds on a sponsored or unsponsored basis • Focus on originating high yielding loans to diverse middle market companies across the U.S. at 300 to 900 basis point premiums to the single B institutional markets • Generate consistent current income to investors from net operating cash flow (interest and fee income) to significantly help reduce the J-curve effect • What are our competitive advantages? • Stable, highly experienced team with strong origination, credit, execution and portfolio management skills • Firm reputation supports deal flow, while active portfolio management creates and preserves value • Ability to utilize a variety of investment structures tailoring loans to credit profiles and market conditions • This supports downside protection • Strong risk-adjusted returns with a history of consistent distributions and low volatility • Diversification (credit and industrial), credit standards and modest leverage underpin historical performance LBC Credit Partners Overview February 2014 3 1 r 1 r 1 MIN M M i I OM Mill Mill lad Ma NW II IMO MI sr Investment Team • Partners, Managing Directors, Directors and Vice Presidents comprise over 50% of the investment team • Senior team (VP and above) experience averages more than 21 years Investment Sourcing Industry Committee Responsibilities Age LBC Tenure Experience Experience Partners John J.Brignola x x 52 9 27 Citadel Investments,PPM America,Meridian Bank Christopher J.Calabrese x x 50 9 25 Congress Financial,First Union Bank,Meridian Bank Nathaniel R.Cohen x x 50 9 25 LLR Partners,Comcast Corporation Ira M.Lubert 63 9 34 Independence Capital Partners,TL Ventures,IBM Managing Directors,Directors&Vice Presidents Allan Allweiss x x 58 5 30 Bank of America,Fleet Bank,CIT John Capperella 53 4 19 GE Capital,American Capital,Heller Financial Homyar Choksi x x 46 7 20 GE Capital Kevin Doogan 38 3 17 BlackRock,PricewaterhouseCoopers,BNY Mellon David E.Fraimow x 59 9 32 Murray,Devine&Co.,First Union Bank,Meridian Bank Fridolf Hanson x 47 2 19 RBS,GE Capital Michael Hertz 28 6 7 Duff&Phelps,LLC John Jadach x 42 4 18 JPMorgan Chase,Wachovia Stefanie Langer 47 2 25 Pegasus Capital Advisors,Hamilton Lane Advisors,Ernst&Young,L.P. Amy Miller 38 2 14 Camden Private Capital,Celerant Consulting,City of Philadelphia Ryan Rassin x 40 2 19 Orchard First Source Capital,Bank of America Andrew Thornton 35 6 13 American Capital,FTI Consulting/PwC Tod Trabocco x 44 8 18 Moody's Investors Service,HypoVereinsbank Senior Associates,Associates&Analysts Jonathan Adler 28 1 3 PNC Bank,NA Matthew Alles 34 8 11 Credit Suisse Jenna Bonczewski 29 1 7 Morgan Stanley,Woodlawn Partners Anthony DeAngelis 31 3 6 HSBC Bank Brian Einfeldt 24 1 2 TowerBridge Advisors Joseph Elsabee 33 1 9 Ernst and Young,FTI Consulting,Moody's Investors Service Michael Gordon 26 2 4 Citigroup Kevin Lindberg 22 1 1 UBS Wealth Mangement Jonathan Schor 32 6 9 Wachovia Corporation Adam Slager 35 4 10 GMAC/Capmark Administration and back office includes 6 FTEs il LBC Credit Partners Team Overview February 2014 4 11 11111 NW N — — — NM NM NM Ir INN MI I N — r MI IN! LBC's Structural "Sweet Spot" • LBC has the flexibility to utilize a variety of investment structures, tailoring loans to each credit profile • This enables LBC to provide creative credit solutions to borrowers on a disciplined basis • The Firm's range of options and downside protection exceeds that of traditional mezzanine as a result Loan Type Cumulative Multiple of EBITDA Lien/Claim Risk Level 1, Position 1x 2x 3x 4x 5x F Revolvers Senior Lowest Cash Flow Term Loan -,,,, Low Bifurcated Term Loan Unitranche Loan Moderate 2nd Lien Term Loan Junior Moderate Mezzanine Junior/ High / Unsecured LBC Structural Range Typical Mezzanine Structural Range VLBC Credit Partners Investment Strategy February 2014 5 x r r M r r - - - r r r r MN NM MN r it I E Investment Structure and Lien Position • About 25% of our positions are in traditional senior secured loans • In almost all loan structures, we secured either a first or second lien Based on Fair Value as of December 31, 2013, Fund Ill Investment Type Lien Position Secured Equity Equity Mezzanine 2% 1% 6% Junior Secured Second 13% Bifurcated 20% 39% Unitranche First 19% 79% Senior Secured 21% Please refer to disclaimers noted on page 2 and definitions on pages 25—27; December 31,2013 values are unaudited and subject to change 411F1 LBC Credit Partners Portfolio Metrics February 2014 6 I II r 1 s M r - MI OM i r M MO N MN I II W- r Senior Lender & Equity Sponsor Partners • LBC has national brand awareness in middle market lending and equity sponsor communities • Repetitive referral sources are key to both sponsored and non-sponsored transactions Senior Lending Partners Private Equity Sponsors American Securities Lake Capital Bank of America Arsenal Capital Partners Larsen MacColl Partners Bank of Montreal Atlas Holdings Littlejohn & Company Capital One Audax Group Longroad Asset Management Beecken Petty O'Keefe Marlin Equity Partners Fifth Third Bluepoint Capital Partners Milestone Partners First Niagara Bolder Capital Monomoy Capital Partners GE Brazos MVP Capital Partners Castle Harlan Pamlico Capital Harris Chicago Growth Partners Parthenon Capital Partners J.P. Morgan Clarion Steel Partners Dewberry Capital Stephens Capital Partners PNC Enhanced Equity Partners Sun Capital Partners RBS/Citizens Falconhead Capital The Riverside Company Regions Frontenac Company Tenex Capital Management Gridiron Capital Vantage Point SunTrust Gores Capital Partners Water Street Wells Fargo GTCR Webster Capital Union Guard Hill Holdings Wellspring Capital Management Insight Equity Wind Point Partners US Bank KPS Capital Partners Wynnchurch Capital Partners II LBC Credit Partners Deal Flow February 2014 7 r MN 1111 awl 64 Rail Ma IWO SW rmv ill I I i MI I NM MI MS I.. Summary Performance Data (as of December 31, 2013) • Fund Level Highlights • Inception to date net IRRs are 10.7% for Fund I, 14.3% for Fund II and 19.6% for Fund III • For the fourth quarter of 2013, the distribution yields generated by Fund I, Fund II, & Fund III were 13.1%, 14.1%, and 17.2%, respectively • Fund I has returned all investor capital • Net investor exposure in Fund I and Fund II is averaging less than 35% of commitments, Fund III is expected to be the same Net Multiple Net IRR Targeted Vehicle Realization(DPI) Investment(TVPI) Inception to Date YTD Net IRRs Fund I 1.21 1.37 10.7% 28.3% 10.5%-11.0% Fund II 0.84 1.24 14.3% 20.0% 14%-16% Fund III 0.08 1.06 19.6% 19.6% 14%-16% • Portfolio Level Highlights • Total investments are more than double the respective commitment amount for Fund I and Fund II • Realized investments as a percentage of total number of investments are over 75% in Fund I and over 64% in Fund II Total Investments Full Realizations Unlevered Vehicle # Invested (MM) # Realized (MM) Gross IRR Fund I 57 $623.6 43 $585.4 9.2% Fund II 73 $1,336.4 47 $775.3 12.2% Fund III 20 $497.2 1 $19.9 9.5% Please refer to disclaimers noted on page 2 and definitions on pages 25—27; December 31,2013 performance numbers are unaudited and subject to change co LBC Credit Partners Track Record February 2014 8 a t t f I fI T w MN M ! M IIIIIIII M — — M — M !!s Portfolio Diversity by Industry • No end market exceeds 30% • Invested in 16 different industries • Average industry exposure is less than 6.25%; anticipate greater diversification as portfolio matures Based on Fair Value as of December 31, 2013, Fund 111 End Market Industry Healthcare Financial 7% 9% Technology Consumer Staples 10% 30/0 Consumer Discretionary Industrials 21% 23% Top 10 Industries(4 Digit NAICS code) 3363-Motor Vehicle Parts Manufacturing 13.1% 5415-Computer Systems Design and Related Services 10.0% 3327-Machine Shops;Turned Product;and Screw,Nut,and Bolt Manufacturi 9.1% 5619-Other Support Services(Specialty Labels) 9.1% 3131-Fiber,Yarn,and Thread Mils 7.5% 3372-Office Furniture(including Fixtures)Manufacturing 7.5% 3221-Pulp,Paper,and Paperboard Mills 7.5% 5242-Agencies,Brokerages,and Other Insurance Related Activities 6.7% 6211-Offices of Physicians 6.4% 3322-Cutlery and Handtool Manufacturing 4.7% Total 81.7% Please refer to disclaimers noted on page 2 and definitions on pages 25—27; December 31,2013 values are unaudited and subject to change 411' LBC Credit Partners Portfolio Metrics February 2014 9 r t t i t 1 MI NW MR — — R i f. I M — — MI NS • f• !F ' Defaulted Loans — Actual/Forecasted Realizations • Through the fourth quarter of 2013, Fund I and Fund II had 12 defaulted loans (shown below) out of a total of 123, representing an average annual default rate of less than 1.29% per year • Annual net credit losses for predecessor funds since inception are estimated at less than 0.10% • There have been no defaults in Fund Ill to date Loan# Default Quarter Description Actual/Forecasted Realization as a Percent of Amount Funded for Defaulted Loans 34 Q1 -2011 Collections 33 Q1 -2010 Supply Vessels Ave: 112.4% 26 Q1 -2009 Window Manufacturer 14 Q4-2008 Supply Chain Manager 22 Q4-2008 RV Parts Manufacturer 27 Q2-2010 Casual Restaurant 17 Q4-2008 Tableware Designer 35 Q3-2010 Bridge Contractor 8 Q1 -2013 Engine Tubing Manufacturer 15 Q4-2009 Steel Service Center 5 Q2-2010 Envelope Manufacturer 30 Q1 -2009 Sand Proppants 0% 50% 100% 150% As of 12/31/2013. •Received To Date •Forecasted To Be Received Please refer to disclaimers noted on page 2 and definitions on pages 25—27; December 31,2013 values are unaudited and subject to change LBC Credit Partners Track Record February 2014 10 1 1 — — — — — — — — — — — — — r — — — V 3 Fund III Current Portfolio Report (as of December 31, 2013) I At Closing Loan# Investment Description Funded Fair Lien Floating Current Projected EBITDA Leverage Amount(1) Value(2) Position Rate Coupon YTM (In$000s) (4) (In$000s) (In$000s) Y/N 104 Designer and producer of consumer product labels 34,525 38,283 First Y 10.50% 11.85% 9,100 4.34x 105 Underwriter of extended automobile warranties(6) 29,625 29,000 First Y 7.75% 8.78% 12,660 2.37x 106 Pain management physician practices 16,667 15,821 First Y 7.25% 8.97% 9,044 3.32x 107 Manufacturer of precision parts for automobiles 35,000 35.700 Second Y 10.00% 11.39% 18,942 3.10x 108 Supplier of woodworking and metalworking tools 34,000 21,780 First Y 8.00% 9.00% 10,943 3.63x 109 Provider of retail merchandising solutions 35,000 34,950 First Y 8.00% 9.14% 20,861 3.71x 110 Distributor of specialty chemicals 15,000 14,850 First Y 6.50% 7.39% 26,122 4.06x 111 Cleaning/sanitation products and services(6) 12,500 12,920 Second N 13.00% 14.60% 9,100 3.35x 112 Manufacturer of specialty chemicals 14,500 14,353 First Y 8.75% 9.47% 20,023 3.82x 113 Investment advisory services 12,500 12,152 Second Y 9.25% 10.27% 33,296 5.26x 114 Manufacturer of colorants(6) 18,750 0 First Y 6.50% 7.20% 31,490 3.97x 115 Directory and search advertising publishers 15,000 14,455 First Y 10.00% 11.93% 28,645 0.87x 116 Endoscopic ambulatory surgery centers(6) 10,000 9,900 First Y 7.00% 8.11% 13,889 4.32x 117 Manufacturer of tissue paper 35,000 34,300 First Y 7.25% 9.14% 17,221 2.71x 118 Heating and cooling equipment supplier for heavy-duty engines 11,000 11.000 First Y 6.25% 7.30% 31,367 3.03x 119 Private label pharmaceutical products 15,500 15,000 Second Y 10.00% 11.70% 43,197 4.10x 120 Provider of information and data mangement services(6) 65,000 65,000 First Y 8.50% 10.17% 13,852 4.48x 121 Producer of spun yarns 30,000 30,000 First Y 7.50% 9.09% 43,460 3.22x 122 Provider of complex stamping and tooling for safety critical auto parts 14,000 14,000 Second Y 12.50% 13.68% 17,535 4.04x 123 Manufacturer of fastening tools and fasteners 42,500 42,500 First Y 7.75% 9.17% 15,391 3.40x Total Debt Positions 496,067 465,964 Total Equity Positions(3) 6,500 6,623 Total 502,567 472,587 Average(5) 8.72% 10.06% 20,771 3.53x Wt.Average 8.62% 10.02% 19,183 3.56x Notes: (1) Funded amount at closing through December 31,2013 (2) Fair Value represents mark-to-market for loans closed prior to September 30,2013 and at cost for loans closed after September 30,2013 (3) Material differences between Funded Amount and Fair Value are due to loan syndications, revolver changes,amortization and full repayment (4) Leverage represents total debt through Fund III's position divided by trailing 12 months of EBITDA (5) Averages based on Fair Value amounts (6) Loan#111 Current Coupon includes 1.00%PIK;LBC holds equity positions in loan#105, 116 and 120;Loan#114 has been repaid in full LBC Credit Partners Fund III Current Portfolio Report February 2014 11 i 1 1 1 1 1 1 i 1 1 1 1 1 1 t i It 1 t 1 I I l i $ I I i Il 1 i 1 1 1 1 I Fund III Key Terms Strategy Middle market lending, structured credit origination Target Fund Size $650 million; $616 million committed as of January 31, 2014 Minimum Commitment $5 million for institutions and $1 million for individuals Co-investment GP may provide in its discretion to Partners who commit at least$25 million Term of Fund 8 year fund term subject to 2 one year extensions Investment Period Ending on June 30, 2016 subject to a 6 month extension G.P. Commitment At least 2.5% of commitments Preferred Return 8% annualized on funded capital, targeted to be paid quarterly During the investment period, 1.25% of commitments for partners who commit$200 million or Management Fee more; 1.50%for Partners who commit$10-$199 million and 1.75%for partners who commit less than$10 million; After investment period,the same percentages will be applied to the lower of cost or fair value The Management Fee will be reduced by 100% of all fees derived from the fund's portfolio companies including but not limited to closing, syndication, and amendment fees Leverage Up to 50% of total assets (up to 1:1 debt to equity ratio) GP Carried Interest at 18%for Partners who commit$200 million or more; 18.50%for Partners Distribution who commit$125-$199 million; 19%for Partners who commit$50-$124 million and 20%for Partners who commit less than$50 million. Priority of Distributions From Income or Gain: From Return of Capital: (i) Partners' preferred return (i) Accrued Partners' preferred return (ii) Partners' prior realized losses (ii) Partners' contributed capital (iii)GP catch-up on preferred return (iii) GP catch-up on preferred return (iv) Partners' contributed capital (iv) Partners/GP (v) Partners/GP LBC Credit Partners Terms February 2014 12 MI N OM M MI -1 Irma S w M S O I I ad S M ■ Appendix ❑ Structure, Borrower and Pricing Comparatives ❑ Return Components ❑ Distribution Yield History ❑ Pipeline Summary ❑ Investment Process ❑ Fund II and Fund III Current Portfolio Summary ❑ Fund I and Fund II Historic Contribution and Distribution Snapshot ❑ Market Fundamentals ❑ Pricing Spreads & Indicative Ratings ❑ Credit Selectivity & Rating Equivalents ❑ Definitions and Footnotes LBC Credit Partners February 2014 13 Mil i i ® i i i i III I i ■ l IL I • i i i i i Structure, Borrower and Pricing Comparatives A Types of Loans I B I Borrower Landscape Market Characteristics 130 Revenues and EBITDA for Credit Markets Large Corporate Middle Market Lien Position Risk Level 120 X120 Large Corporate Borrowers « y 5100 Broadly Syndicated Institutional o 90 Loans and High Yield Bonds II LBC _ a 80 : t y� c 70 • , Q ° 80 • ♦ Loan Type Moderate' - 50 "i—_®V___41'-_1 tm 40 LBC M�dle Market] 1 Institutional Loans 2"a Lien Term Junior Moderate i m 30 (Senior Unsecured) 1 d. 20 4. • Privately- 10 , • . I Negotiated Loans HYS > *AL*= Mezzanine ' ° Unsecured High 0 ti 0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300 1400 1500 •Current LBC Portfolio Company Revenues ($Millions) Equity Equity Equity Claim Highest •LBC Average (LBC Definition:$50M-$750M) C Premium Pricing 20% Senior and Junior New Coupons • Unlike their larger counterparts, middle market companies tend 20% to rely on privately negotiated loans and face greater difficulty 18% in accessing more junior capital 16% • Moving down the capital structure in the middle market, the 140/0 universe of lenders declines, competition recedes and 12% inefficiencies arise 10% • LBC has exploited these inefficiencies by securing pricing 8% - --- ---- ---- - -- above the broad institutional markets by an average of 25%- 6% ---- -- --- 30% 4% ---- -- --- -- --- -- --- -- • The Fund also receives 100-300 bps in closing fees for 2% --- -- - -- -- - originating its loans. The Fund may also earn up to 300 bps in 0% fees over the life of a loan for syndications, amendments and 2006 2007 2008 2009 2010 2011 2012 YTD 2013 mommiInstitutionalLoans-Senior lamsInstitutionalLoans-Junior —a■-LBC Senior tLBCJunior waivers and in certain instances, equity upside (a feature that Source:LSTA/LCD Index does not exist in the broader institutional markets) Please refer to disclaimers noted on page 2 and definitions on pages 25-27 411" LBC Credit Partners Investment Strategy February 2014 14 1 1 1 1 1 1 t I 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 I . L . . Return Components • The cash-pay coupon is the primary component of the overall return on an LBC investment • 90% of LBC loans are structured with floating-rate coupons Based on Fair Value as of December 31, 2013, Fund I & II Fund I Fund II Net Realized Gains PIK Interest (Equity) Dividend Income Net Realized Gains Dividend Income 4%_\ r 3% (Equity) 3i° 1% PIK Interest I 7% 5% Fee Income Fee Income 8% N 14% Cash Interest Cash Interest 75% 83% Typical Loan Metrics Average Size: $15-$20 Million Closing Fees: Up to 3% Coupon Range: Libor+ 600— 1200 Miscellaneous Fees: Up to 2% Libor Floors: 100 bps—450 bps Equity Upside 0% - 3% Please refer to disclaimers noted on page 2; December 31,2013 values are unaudited and subject to change I LBC Credit Partners Investment Strategy February 2014 15 Distribution Yield History (as of December 31, 2013) • LBC distributes the vast majority of operating cash flow generated net of management fees and expenses each quarter • This cash flow generation shortens and reduces the J-curve profile relative to a typical private equity fund LBC Quarterly Distribution Yield History 30.0% Fund I Average : 14.5% Actual 105% Fund ll Average: 15.4% Fund III Average: 44.4% 25.0% 20.0% 15.0% 10.0% 5.0% 11111111111 -% r LO CO (O CO ' CO ti ti t- N- CO CO CO CO O 0) 0) 0) O O O O N r a- N N N N CO co co co O O O O O O O co O O O O O O co co O O C) O O O C) O O O O O O O O O O O O O O O O O O O O O O O C) O O O N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N CO - - N CO V' N CO - N CO d - N CO - N CO d- N CO r- N CO V 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 •Fund I QTD Distribution Yield •Fund II QTD Distribution Yield •Fund Ill QTD Distribution Yield Please refer to disclaimers noted on page 2; December 31,2013 performance numbers are unaudited and subject to change II LBC Credit Partners Track Record February 2014 16 [ 1 M N MU _ i — MI Mid r M II I Mil Mid — Mal ILA I Indicative Investment Pipeline (LTM ended December 31, 2013) • Opportunities are generally relationship based where certainty of execution and experience are leading selection factors • Investment pace averaging $125 million per quarter • New deal activity of$8.3 billion over last 12 months Amount Number $8,330 326 Review $1 ,419 (17.0%) 60 (18.4%) $1 ,336 (16.0%) Term Sheet 55 (16.9%) $550 (6.6%) Diligence 24 (7.4%) $460 (5.5%) Commit 19 (5.8%) • $460 (5.5%) 19 (5.8%) Please refer to disclaimers noted on page 2. Dollar amounts are in millions;number of deals does not count add-ons to existing portfolio investments 411 LBC Credit Partners Deal Flow February 2014 17 r t r 1 NM I M M E 1 M M M M M M M M I I M I l s Disciplined , Credit Driven Investment Process •Incoming prospect from known sponsor, lender or other validated source •Investment professional review •Internal discussion/structuring Preliminary •Investment committee pre-screen review Evaluation •Term sheet issued •Management meetings •Site visits •Internal research/analysis •3rd party reports and diligence Research •Modeling Underwriting •Standardized investment report •7-person constitution, 5 affirmatives for approval •In-person meeting (Chicago/NY via phone), voting conducted electronically •Initial meeting: business drivers, thesis, risks, industry dynamics and absolute/ Investment relative returns Committee •Final meeting to analyze sensitivities, valuations and follow-ups Detailed Documentation and Active Portfolio Management LBC Credit Partners Deal Flow & Process February 2014 18 I 1 t 1 1 f 1 1 1 1 1 1 t l 1 1 1 r t / t I 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Fund II Positions at the end of Investment Period Based on Fair Value as of December 31, 2013 Fund II Investment Type Lien Position Investment Purposes Secured Mezzanine Mezzanine Unsecured JuniorSecured� 3Q/0 1% 1% 6% 1 Recapitalization 7% 1 Second Bifurcated 9% Refinance Equity 33% Equity 15% 13% 13% Unitranche First 16% 77% Senior Secured 28% Acquisition 78% Industry End Market LBC Position in Deal Other , Energy 7% -.I Healthcare 7% Participant .. 9% Industrials 22°l0 39% LBC Credit Materials Partners ti, 13% Club 49% 0 ° Consumer 29/° Discretionary 25% Too 9D 1ndOStriesl4°IgitNNOS CO del ��"°- _... 3uz-conPenea Paper Proapa Manmacturmg 14.2x .....,,. 4 Mb 5616-Management,SCientifie,and Techniral Consultin„,,,—, 9.1% 2123-Nonmetallic Mineral Mining anti Quarrying 6.996 3336 Other General PuroseeMchiner Manufacturing antl Processing 6.•3339QAer General Purpose Machinery Manufanuring 5.8% 9232 Furniture and Home Furnishing MerAAant Wholesalers MN 3152 Cot and Sew Apparel Manufacturing 5.2% 5242•Agencies,Brokerages,and Other Insurance Related Activities 5.2% 3221•Pulp,Paper,and Paperboard Mills 4.2% 3118 Bakeries and Tortilla Manufacturing Total 63.3% Please refer to disclaimers noted on page 2 and definitions on pages 25—27;Fund I metrics available upon request; December 31,2013 values are unaudited and subject to change 411 LBC Credit Partners Fund II Positions February 2014 19 I 1 1 1 11 t I 1 1 1 . . Fund III Positions Based on Fair Value as of December 31, 2013 Fund Ill Investment Type Lien Position Investment Purposes Secured Equity Mezzanine 2% Equity 6% 1 1 1%- Recapitalization Junior Secured Second 12% 13% Bifurcated 20% 39% Refinance 26% Unitranche First Acquisition 19% 79% 62% Senior Secured , 21% Industry End Market LBC Position in Deal Participation ' Healthcare p 60/e Financial 7% 9% Technology Consumer Staples Tec ogy hnol 30% Club 16% ., 1nz�• ' Consumer LBC Credit Discretionary Industrials Partners 21% 23% 78% Top 10 Industries(4 Digit NAGS code) 3363-Motor Vetucle Parts Manufacturing 13.1% 5415-Computer Systems Design and Related Services 15.0% "^-� 3327-Machine Shops,Turned Product,and Screw,Nut,and Bolt Manufacture 9.1% 5619-Other Support Services(Specially Labels) 9.1% 333;12-Fiber,Yarn,and Thread Mils 7.5% -Office Furniture(inclutling Features)Manufacturing 7.5% 3221-Pulp,Paper,and Paperboard Mils 7.5% 5242-Agencies,Brokerages,and Other Insurance Related Pcfivifies 6.7% 6211-Offices of Physicians 6.4% 3322-Cutlery and Handtool Manufacturing 4.7% Total 81.7% Please refer to disclaimers noted on page 2 and definitions on pages 25—27; Fund I metrics available upon request; December 31,2013 values are unaudited and subject to change LBC Credit Partners Fund III Positions February 2014 20 Ili t 1 t 1 Fund I & Fund II History of Contributions and Distributions Fund I Contributions vs Distributions($) Fund II Contributions vs Distributions($) i$350,000,000 ...-.._— —_ ._ _._...-.._..__...._....._...-_............_.................................._...___..___-.................._. 120% $600,000,000 120% I'I$300,000,000 I!, 100% $500,000,000 100% $250,004000 / 80% $400,000,000 ----- ---- --- 5200,000,000 60% $300,000,000 - ::: $150,000,000 q0% $200,000,000 - $100,000,000 i l $50,000,000 20%I $100,000,000 - 20% i $- 0% 5- 0% s§§ §§§.1 "s's's"a a'0. 1 0,rq1 s11AAIA0, 000 o o voev0000AA oa000 8 S 0 0 0 s "s 0 0 00 00 1 ??????3?a>3.p. 333?????3 a?3?a 3>33,??a 3??a 3??3??????£ i g- o 's - Z- s' s 's -s s- � aaaaaoSaaaaoSaaam ��ae�aSaaaaoSaaa� ��a�,,,,a,�,o —TotaI Distributions($) —Contributions/Total Contributions(%) Total Distributions(0) —Contributions/Total Contributions(%) Fund I Net Exposure as a%of Commitment Fund II Net Exposure as a%of Commitment $50 - 100% - 100% $80 $40 80% - 80% $30 60% $60 - 60% $20 • '--- ._ ._ . - — ' 40% $40 -40% l ' c$10 III 111111, , 1 • 20% r2° ,� 0% - 0% ID ti a0 W OD 1,1 : : : 0 : 11, ; ; " 0000000 N N M M M M so O O O 0 0 0 l l O M M M_ M N N N N N N N N N N N N N N N N N N N N N N N N ' - -2O% ($t0 - O O O O O O r 0 0 0 0 O O -2D% N N N N M M M M M M M M M M M M M M M M M M M M M M M _ _ t� b ,- Vf M 1p Of •- M f0 Or N M b M f0 T '- M d A N M 40 Oi ' ($20) M M M M M M is M M $20 -40% T ,- M 10 01 t� M b pra OI a ($40) ($30) -60% - -60% ($40) -80% ($60) -80% ($50) 100% mow Net Cash Flow —Net Cash Outstanding As a%of Committed Capital -100% ($80) me Net Cash Flow —Net Cash Outstanding As a%of Committed Capital - Please refer to disclaimers noted on page 2 and definitions on pages 25—27; December 31,2013 values are unaudited and subject to change ( LBC Credit Partners I History of Contributions & Distributions February 2014 21 i t t r ! $ t i — MN W W = ;: i M I i !" Favorable Investing Environment A North America PE Buyout Fundraising and Dry Powder • U.S. private equity (PE) funds have almost $200 billion in 350 unspent capital that may be leveraged to make 300 acquisitions 250 200 • More than 50% of investments (by number) made by PE 0 firms since 2005 are between 5 and 8 years old, 150 suggesting that they are approaching or past the end of 100 the typical 5 to 7 year holding period 50 0 • Demand for debt capital will therefore come from PE 2005 2006 2007 2008 2009 2010 2011 2012 2013 YTD activity and refinancing •Aggregate Capital Raised ■Dry Powder 2014 Source:Progin B PE Portfolio Inventory (#of deals) by Investment Year 7,000 6,000 5,000 Year of Investment 4,000 I . U . • •2005-2008 •2005-2008 3,000 ■ ■2009-2012 2,000 . 111111 1,000 0 E 2005 2006 2007 2008 2009 2010 2011 2012 Source:PitchBook Please refer to disclaimers noted on page 2 LBC Credit Partners Market Fundamentals February 2014 22 II I I 11 11 II f I! NM M MS MI = r M MI MI 110111 MI it IF Comparative Pricing Spreads • LBC captures spreads (meant to compensate lenders for default risk) far in excess of the similarly rated borrowers in the larger markets • Part of this premium over other markets relates to liquidity risk, but LBC follows a buy-and-hold strategy Comparative Quarterly Spreads Over Relevant Risk Free Rates - 2006 to Q3 2013 18.00% (LBC average excludes fee income and equity upside) 16.00% 14.00% ( LBC 5 year average 12.00% = 9.54% 10.00% -------------------------------------- HY B Index 5 year average 8.00% _. tl = 7.31% 6.00% ---- Institutional B Loans EPTiH or° Or° or° Off° O'\ O'\ O'\ o'\ O o> O'b b @ e e 00 ,�O ,�O ,`O ,�O ,�� NN NN \-11 <II 1\1/ \l/ �O ^o P■o NMI Institutional B/B- rated Loans HY B Rated Index —Iir—LBC Please refer to disclaimers noted on page 2 411 LBC Credit Partners Track Record February 2014 j 23 I ! 1 1 I 1 1 1 1 1 1 1 1 1 . - , LBC Credit Selectivity & Indicative Rating Equivalents • Aggregate defaults have averaged 1 .29% per year • LBC's cumulative default rate, inclusive of "Great Recession", approximates a rating equivalent of B or B2 LBC Aggregate LBC Cumulative Default Rate vs. B2 and B3 Corporate Family Rated Credits (Inception to Q4 2013, Fund I, H & III) 45.00% - 40.00% - 35.00% - 9% 30.00% - 25.00% 20.00% 91% 15.00% 10.00% 5.00% 0.00% 1 2 3 4 5 6 7 •# of Loans: 123 Years -LBC (2006-2012) -B2 (1983-2012) -B3 (1983-2012) •# of Defaults: 12 Source: LBC, Moody's Investors Service Please refer to disclaimers noted on page 2 and definitions on pages 25—27; December 31.2013 values are unaudited and subject to change 411 LBC Credit Partners Credit Selectivity February 2014 24 Definitions Investment Structures • Senior Secured — LBC provides a senior term loan typically secured by a first lien on all assets • Unitranche — LBC provides a single facility that includes a revolver, and senior and junior term debt and is typically secured by a first lien on all assets • Bifurcated — LBC provides a senior term loan typically secured by a first lien on the fixed assets • Junior Secured — LBC provides a junior term loan typically secured by a second lien on all assets and documentation includes second lien holder intercreditor terms • Secured Mezzanine — LBC provides a junior term loan typically secured by a second lien on all assets and documentation includes traditional mezzanine intercreditor terms • Mezzanine — LBC provides a junior term loan typically unsecured and documentation includes traditional mezzanine intercreditor terms Performance Metrics • Investment Multiple (TVPI) — Net Asset Value plus Cumulative Distributions divided by Cumulative Contributions. The Investment Multiple is equivalent to the sum of the Realization Multiple and the Unrealized Multiple • Realization Multiple (DPI) — Cumulative Distributions divided by Cumulative Contributions. The Realization multiple attributes how much of the Net-Of-Fees Total Return has actually been returned to Limited Partners • Unrealized Multiple (RVPI) — Net Asset Value divided by Cumulative Contributions. The Unrealized Multiple attributes how much of the Net-Of-Fees Total Return is comprised of investments not yet realized • Contribution Multiple (PIC) — Cumulative Contributions divided by Committed Capital. The Contribution Multiple illustrates how much Committed Capital has been called LBC Credit Partners Definitions February 2014 25 1 1 1 1 Il 1 1 1 1 1 I f 1 1 t Definitions (continued) • Internal Rate of Return (IRR) — The Internal Rate of Return is the implied discount rate or effective compounded rate of return that equates the present value of all cash flows (Capital Contributions and Distributions) with the period-end Net Asset Value. The IRR is always annualized except when the reporting period is less than one year, in which case the IRR is not annualized • Gross of Fees — Returns reflect the reduction of all Partnership expenses, except for management fees and carried interest/performance allocations, if any • Net of Fees — Net returns reflect the reduction of all Partnership expenses, including management fees and carried interest/performance allocations, if any • Annual Distribution Yield — The Annual Distribution Yield is computed by summing the trailing twelve month Net Income Distributions and dividing by the weighted average Net Asset Value during the same period • Quarter to Date (QTD) Distribution Yield — The QTD Distribution Yield is computed by annualizing the quarter to date income Distributions and dividing by the weighted average Net Asset Value during the same period • Annual Net Credit Loss — The average annual default rate multiplied by average estimated realization Deal Positions • LBC Credit Partners Led — The LBC team sourced, structured and negotiated all facets of the deal. LBC was the sole investor or agent • Club — The LBC team partnered with one or two other lenders to execute the deal. LBC maintains material voting rights • Participation — The LBC team participated in a loan syndication LBC Credit Partners Definitions February 2014 26 I ) ! I II 11 I I 1 M 1 1 1 l i Footnotes • Multiples and IRRs are shown net of fees, carry and other partnership expenses, unless otherwise noted, and are reflective of fund level leverage and are calculated for Limited Partners as a whole • The following metrics may vary for each Limited Partner due to management fee arrangements and/or differences in the timing of capital transactions: • Multiples and IRRs • Income Capital and Total Returns • Distribution Yields — Distribution Yield is calculated by summing the inception to date net income distributions and dividing by the weighted average net asset value during the same time period. Net income refers to the investment income earned on all investments during the measurement period, net of all partnership expenses, including management fees and carried interest/performance allocations, if any. Net income distributions may vary from actual net income due to timing differences in the recognition of income and expenses, and the use of estimates. • Targeted IRRs include assumptions for loan maturities, interest and fee income, gains, losses, loan amortization, and future LIBOR rates • Committed Capital calculation excludes the General Partner's commitment • Forecasted realizations include interest income, equity gains and principal repayments Ji LBC Credit Partners Footnotes ! February 2014 27